Cross Oak Inns plc - The Tax Shelter Report
Cross Oak Inns plc - The Tax Shelter Report
Cross Oak Inns plc - The Tax Shelter Report
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<strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong><br />
Offer for subscription<br />
A <strong>Tax</strong> Efficient Investment under<br />
the Enterprise Investment Scheme
This document is important and requires your immediate attention. If you are in any doubt about the contents of this document,<br />
you should consult a person authorised under the Financial Services and Markets Act 2000 who specialises in advising on the<br />
acquisition of shares and other securities.<br />
This document has been drawn up in accordance with <strong>The</strong> Public Offers of Securities Regulations 1995 (as amended). A copy<br />
of this document has been delivered for registration to the Registrar of Companies in England and Wales in accordance with<br />
Paragraph 4(2) of those Regulations. It is not intended that this Document be issued otherwise than in the United Kingdom.<br />
<strong>The</strong> Directors of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong>, whose names are set out on page 7 of this document, accept responsibility for the<br />
information contained in this document. To the best of the knowledge and belief of the Directors, who have taken all reasonable<br />
care to ensure that such is the case, the information contained in this document is in accordance with the facts and does not<br />
omit anything likely to affect the import of such information. All of the Directors accept responsibility accordingly.<br />
<strong>The</strong> share capital of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> is not presently listed, quoted or dealt in on any recognised investment exchange and<br />
no application for admission of the share capital to listing or dealing has been made or is currently intended to be made. It is<br />
intended that a facility will be made available for the shares to be traded on a matched bargain basis by J P Jenkins Limited.<br />
<strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong><br />
(Incorporated in England and Wales under the Companies Act 1985 with registered number 5144171)<br />
Offer for subscription of up to 3,000,000 New Ordinary Shares of 50p each at £1 per share<br />
Financial adviser<br />
Vantis Corporate Finance Limited<br />
<strong>The</strong>re is no sponsor of the Offer and all advisers to <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> named in this Document are acting exclusively as advisers<br />
to <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> in connection with the Offer and such advisers owe no responsibility to any person other than the Company<br />
and do not provide the protection afforded to clients for providing advice in connection with the arrangements described in this<br />
Document or any investment in the Company unless by virtue of a separate arrangement. <strong>The</strong> Directors are the only persons<br />
responsible for this Document including the information or opinions contained in it.<br />
<strong>The</strong> Offer is conditional upon a minimum subscription of £500,000 being raised.<br />
Share capital immediately following the Offer<br />
Authorised<br />
Issued and to be issued fully paid<br />
Nominal Value Number Ordinary shares of 50p each Nominal Value Number<br />
£ £<br />
10,000,000 20,000,000 Currently in issue 312,897 625,794<br />
10,000,000 20,000,000 Assuming subscription of 3,000,000 1,812,897 3,625,794<br />
Ordinary Shares<br />
<strong>The</strong> Shares which are the subject of this Offer will rank pari passu in all respects with all other shares in the Company, which<br />
will be in issue on completion of the Offer.<br />
<strong>The</strong> subscription list for the Shares, all of which are being offered to the public under the Offer, will open at 10 am on 5 October<br />
2004 and will be closed either on 12 November 2004 if the minimum subscription has not been achieved or on 31 December<br />
2004 if the minimum subscription is achieved by 12 November 2004. <strong>The</strong> Directors may at their discretion extend the closing<br />
date for the Offer, but in any event will not do so beyond 28 February 2005. <strong>The</strong> Directors may also at their discretion increase<br />
the number of shares offered. Allotment of the Shares to applicants in respect of the Offer will be as soon as practicable after<br />
the Minimum Subscription is exceeded and monthly thereafter. <strong>The</strong> terms and conditions of the Offer and procedure for<br />
application are set out in Parts VIII and IX of this document, which is followed by an Application Form for use in connection with<br />
the Offer.<br />
<strong>The</strong> whole of this Document should be read. An investment in <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong>, which had not commenced trading<br />
as at the date of this Document, is speculative and involves a higher degree of risk than an investment in an established<br />
and/or quoted company and your attention is in particular drawn to the “Risk Factors” set out in Part IV of this<br />
Document.<br />
2
Contents<br />
Page No.<br />
Statistics of the Offer and Expected timetable of principal events 4<br />
Definitions 5<br />
Directors, Secretary and Advisers 7<br />
Part I Executive summary 8<br />
Part II Information on the Company 9<br />
Part III Information about the Offer 16<br />
Part IV Risk factors 18<br />
Part V Financial information on the Company 19<br />
Part VI Information on EIS taxation reliefs 22<br />
Part VII Statutory and general information 24<br />
Part VIII General terms and conditions of the Offer 35<br />
Part IX Application procedure 39<br />
Application Form 40<br />
3
Statistics of the Offer<br />
Assuming subscription of 3,000,000 shares<br />
Offer price per New Ordinary share £1<br />
Number of Ordinary Shares of 50p being offered 3,000,000<br />
Ordinary shares in issue immediately following the Offer 3,625,794<br />
Estimated gross proceeds of the Offer £3,000,000<br />
Estimated net proceeds of the Offer £2,760,000<br />
Minimum individual investment £5,000<br />
(5,000 shares)<br />
Expected timetable of principal events<br />
Offer opens 5 October 2004<br />
Closing date for the Offer<br />
Allotment and issue of new shares<br />
Expected date of despatch of share<br />
certificates<br />
EIS 3 certificates dispatched to new<br />
investors<br />
31 December 2004 (assuming Minimum Subscription of<br />
£500,000 is achieved by 12 November 2004)<br />
As soon as practicable after the Minimum Subscription of<br />
£500,000 is achieved and monthly thereafter.<br />
Seven business days after allotment<br />
Within 5 months of the Company starting to trade in<br />
accordance with Inland Revenue practice<br />
<strong>The</strong> Directors may at their discretion extend the closing date for the Offer, but in any event, will not do<br />
so beyond 28 February 2005. <strong>The</strong> Directors may also at their discretion increase the number of shares<br />
offered.<br />
4
Definitions<br />
<strong>The</strong> following terms used throughout this Document have the following meanings save where the<br />
context requires otherwise:<br />
“the Act”<br />
“Application Form”<br />
“CGT”<br />
“Closing Date”<br />
the Companies Act 1985, as amended<br />
the application form for acceptance of the Offer set out at the end<br />
of this Document<br />
capital gains tax<br />
the closing date of the Offer (subject to any extension agreed by<br />
the Directors)<br />
“the Company” or “<strong>Cross</strong> <strong>Oak</strong> <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong>, registered number 5144171<br />
<strong>Inns</strong>”<br />
“Corporate Venturer”<br />
“CVS”<br />
“<strong>The</strong> Directors” or “the Board”<br />
“EIS”, “Enterprise Investment<br />
Scheme”<br />
“flotation”<br />
“FSA”<br />
“Inn”<br />
“Investors”<br />
“Management Agreement”<br />
a company investing in <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> under the Corporate<br />
Venturing Scheme<br />
Corporate Venturing Scheme and related reliefs as detailed in<br />
Schedule 15 Finance Act 2000<br />
the Directors of the Company<br />
<strong>The</strong> Enterprise Investment Scheme and related reliefs as<br />
detailed in Chapter III, Part VII of the Income and Corporation<br />
<strong>Tax</strong>es Act 1988 and in Sections 150A to 150D and Schedule 5B<br />
and 5BA of the <strong>Tax</strong>ation of Chargeable Gains Act (1992) as<br />
amended<br />
admission of securities to trading on a recognised investment<br />
exchange<br />
<strong>The</strong> Financial Services Authority<br />
a licensed public house with limited bedrooms for let to the public<br />
persons acquiring Shares pursuant to the Offer<br />
the Management Agreement entered into between <strong>Cross</strong> <strong>Oak</strong><br />
<strong>Inns</strong> <strong>plc</strong> and <strong>Cross</strong> <strong>Oak</strong> Limited on 30 September 2004<br />
“the Manager” <strong>Cross</strong> <strong>Oak</strong> Limited, registered number 2448091<br />
“Maximum Subscription”<br />
“Minimum Subscription”<br />
“New Ordinary Shares”<br />
“Offer”<br />
“Offer Price”<br />
the sum of £3,000,000, unless increased at the discretion of the<br />
Board<br />
the Minimum Subscription of £500,000 required to be achieved<br />
within 40 days of the issue of the Prospectus<br />
3,000,000 ordinary shares to be issued pursuant to the Offer<br />
the Offer for subscription made by the Company as set out in this<br />
Document<br />
£1 per share<br />
5
“Opening Date”<br />
“POS Regulations”<br />
“Pub”<br />
“Pub restaurant”<br />
“Receiving Agents” or<br />
“Registrars”<br />
“Shareholders”<br />
“Shares” or “Ordinary Shares”<br />
“Three Year Period”<br />
“Vantis”<br />
“VCT”<br />
“UK”<br />
the opening date of the Offer<br />
<strong>The</strong> Public Offers of Securities Regulations 1995, as amended<br />
a licensed public house<br />
a pub or inn which derives a substantial proportion of its sales<br />
from food<br />
SLC Registrars Limited, trading as Gateway Registrars<br />
holders of Shares in the Company<br />
ordinary shares of 50p each in nominal value in the capital of the<br />
Company<br />
the period beginning on the date on which the Shares are issued<br />
and ending three years after that date, or three years after the<br />
qualifying trade of the Company starts, if later<br />
Vantis Corporate Finance Limited, a firm authorised and regulated<br />
by the Financial Services Authority<br />
venture capital trust as defined in s842AA Income and<br />
Corporation <strong>Tax</strong>es Act 1988<br />
United Kingdom of Great Britain and Northern Ireland<br />
6
Directors, Secretary and Advisers<br />
Directors Anthony Euan Richmond-Watson, CA (Non-executive Chairman)<br />
Peter George Eyles<br />
(Director)<br />
Dinah Joy Young<br />
(Director)<br />
Peter Loring Drown, FCA<br />
(Non-executive Finance)<br />
Robin Jarrard Campbell Privett (Non-executive)<br />
Hugh William Whitbread<br />
(Non-executive)<br />
all of 82 St John Street,<br />
London EC1M 4JN<br />
Registered office<br />
Company Secretary<br />
Financial Advisers<br />
Auditors and <strong>Report</strong>ing<br />
Accountants<br />
82 St John Street<br />
London EC1M 4JN<br />
Jeremy Rogers, ACIS<br />
Vantis Corporate Finance Limited<br />
82 St John Street<br />
London EC1M 4JN<br />
Wilkins Kennedy<br />
Gladstone House<br />
77-79 High Street<br />
Egham<br />
Surrey TW20 9HY<br />
Solicitors to the Company Russell-Cooke<br />
2 Putney Hill<br />
London SW15 6AB<br />
Receiving Agents and<br />
Registrars<br />
Bankers<br />
Surveyors and valuers<br />
Gateway Registrars<br />
42-46 High Street<br />
Esher<br />
Surrey KT10 9QY<br />
Bank of Scotland<br />
38 St Andrews Square<br />
Edinburgh<br />
EH2 2YR<br />
Christie & Co<br />
Vaughan Chambers<br />
4 Tonbridge Rd<br />
Maidstone<br />
Kent ME16 8RP<br />
7
Part I – Executive summary<br />
<strong>The</strong> Company<br />
<strong>The</strong> Company was incorporated in June 2004 to use the capital raised under the Offer, together with<br />
bank borrowings, to acquire, refurbish and operate a portfolio of pub restaurants in Southern England,<br />
predominantly in Berkshire, Hampshire, Kent, Surrey and Sussex.<br />
<strong>The</strong> Offer<br />
<strong>The</strong> Company proposes to raise £3 million by way of the Offer. With gearing, this should allow<br />
approximately 5 to 10 pubs to be acquired. <strong>The</strong> minimum total subscription under the Offer is £500,000.<br />
In addition, two of the Directors, Peter Eyles and Dinah Young, have already invested £300,000 in the<br />
Company and the non-executive directors have invested in total a further £177,500. <strong>The</strong> investments<br />
by Peter Eyles and Dinah Young do not qualify for all of the EIS reliefs available to subscribers to the<br />
Offer. <strong>The</strong> minimum individual investment under the Offer is £5,000.<br />
Management<br />
<strong>The</strong> executive directors are Peter Eyles (age 58), who will lead the management team, and Dinah<br />
Young (age 44). Both have many years experience at senior level in the hospitality and food and drink<br />
retailing industry. Peter was previously chief executive of Norfolk Capital Group <strong>plc</strong> and executive<br />
chairman of Hanover International PLC, two listed hotel companies. Dinah has over 14 years’<br />
experience at senior levels within the food and drink retailing industry. She has recently resigned from<br />
the position of operations director of Brewster Pub Restaurants, a division of Whitbread, to found the<br />
Company with Peter. <strong>The</strong> non-executive directors are Anthony Richmond-Watson, Peter Drown, Robin<br />
Privett and Billy Whitbread.<br />
<strong>The</strong> Business<br />
<strong>The</strong> pub restaurants will have a strong food element. <strong>The</strong>y will not be branded or themed, but will cater<br />
specifically for their local markets and will aim at the 25 plus age group. Quality of both food and<br />
service will be key to the Company’s success.<br />
EIS Qualifying Investment<br />
Provisional clearance has been received from the Inland Revenue that the Company will qualify for the<br />
taxation advantages offered under the Enterprise Investment Scheme, and that it is also a qualifying<br />
investment for Venture Capital Trusts and under the Corporate Venturing Scheme. Further information<br />
on the various tax reliefs available is given in Part VI of this document.<br />
Financial strategy<br />
<strong>The</strong> use of commercially sensible levels of borrowing, in addition to the Offer proceeds, should enable<br />
the Company to enhance the level of return to shareholders. In any event, borrowings are not expected<br />
to exceed 70% of the gross asset value of the Company. Indicative borrowing terms on the basis of<br />
full subscription have been agreed with Bank of Scotland.<br />
Possible exit routes for investors<br />
Potential for uplift in the value of the investment lies, primarily, in improved profit performance of the<br />
pubs acquired thereby enhancing their underlying capital value. In the longer term, the Company may<br />
be attractive either to new investors by way of a stock market flotation or to other operators in the event<br />
of a trade sale, after the three year qualifying period.<br />
Matched Bargain Trading Facility<br />
It is intended that shareholders in <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> will have access to the matched bargain share<br />
trading facility operated by J P Jenkins Limited, who specialise in unlisted and unquoted securities. This<br />
facility has been provided to shareholders in case they need to realise their investment before the end<br />
of the Three Year Period during which shares are required to be held to retain the tax reliefs under the<br />
Enterprise Investment Scheme.<br />
Enquiries<br />
Enquiries or requests for further copies of this document can be made by contacting Vantis Corporate<br />
Finance Limited on 020 7417 0417.<br />
8
Part II – Information on the Company<br />
Introduction<br />
<strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> was incorporated on 3 June 2004 with the intention of developing and operating a<br />
group of pub restaurants in Southern England, predominantly in Berkshire, Hampshire, Kent, Surrey<br />
and Sussex. <strong>The</strong> Company intends to use the capital raised under the Offer to invest mainly in freehold<br />
free-of-tie premises.<br />
<strong>The</strong> pub restaurants will have a strong food element. <strong>The</strong>y will not be branded or themed, but will cater<br />
specifically for their local markets. <strong>The</strong> Board believes strongly in the commercial advantages of<br />
owning pub restaurants of this type.<br />
<strong>The</strong> Board proposes to ensure that the Company and its trade meet the Enterprise Investment Scheme<br />
(“EIS”) qualifying conditions so that investors may take advantage of the tax reliefs available under the<br />
EIS.<br />
Assuming full subscription for the Offer, the net proceeds will be about £2.76 million, which, together<br />
with bank borrowings and existing cash resources of £477,500, should allow approximately 5 to 10<br />
pubs to be acquired. <strong>The</strong> Company will then refurbish the units where necessary with a view to having<br />
all of the pub restaurants developed and operating fully under the Company’s template within 2 years<br />
of their purchase.<br />
Through the Management Agreement in place between <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> and <strong>Cross</strong> <strong>Oak</strong> Limited, the<br />
Board will be able to draw upon the experience and knowledge of the Directors of <strong>Cross</strong> <strong>Oak</strong> Limited.<br />
Under this agreement <strong>Cross</strong> <strong>Oak</strong> Limited will provide management services to the Company on the<br />
basis of an agreed fee structure. Further details of this agreement are set out on in Part VII, paragraph<br />
8.1.<br />
<strong>The</strong> Management Agreement has been specifically designed to keep the Company’s fixed costs to a<br />
minimum during its formative period whilst giving a strong incentive to <strong>Cross</strong> <strong>Oak</strong> Limited to achieve a<br />
high level of operating profit from the pub restaurants developed by the Company. Higher profits should<br />
enhance the likely capital value of the Company’s assets, the benefit of which will accrue exclusively<br />
to shareholders. By taking this approach the interests of <strong>Cross</strong> <strong>Oak</strong> Limited are closely aligned to the<br />
interests of the shareholders of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> Plc.<br />
<strong>The</strong> Concept<br />
<strong>The</strong> Directors believe that there is an excellent opportunity to provide non-branded and un-themed pub<br />
restaurants, which cater for their own local market. It is intended that the properties to be purchased,<br />
once developed, will offer a menu for the more discerning customer with good quality wines from<br />
around the world, traditional ales, and premium brand beers. <strong>The</strong> intention is to give restaurant style<br />
food and service in more relaxed surroundings. To build good local relations the pub restaurants will<br />
use, wherever possible, local suppliers for meat, game, fish and other fresh produce. To maintain the<br />
vitality of each pub restaurant and increase customer loyalty and repeat business the menu and wine<br />
lists will be reviewed on a regular basis. This regular updating will also enable popular dishes and wines<br />
to be further exploited and seasonal specialities introduced.<br />
In those pub restaurants close by major commercial conurbations, lunchtime trade will be targeted at<br />
business, office workers and leisure eaters. It is expected that the evening trade will comprise mostly<br />
leisure eaters and drinkers of an age group of 25 years and upwards who are looking for a quality, well<br />
priced relaxing experience. <strong>The</strong> Directors believe that this age group will increasingly prefer a friendly,<br />
relaxed atmosphere in a pub restaurant that offers a good quality and value eating and drinking<br />
experience. <strong>The</strong> individual appeal and quality offering of these pub restaurants should, in the Directors’<br />
opinion, provide opportunities for successful commercial operations.<br />
It is expected that the majority of sites acquired will require refurbishment in order to achieve the<br />
ambience and quality of presentation that the Board intends to pursue. It is expected that each pub<br />
restaurant purchased will take up to two years from the date of refurbishment to contribute fully to<br />
earnings which allows time for each new acquisition to be redesigned, refurbished or redeveloped as<br />
required.<br />
9
Acquisition Strategy<br />
<strong>The</strong> sites that the Company intends to acquire will be licensed pubs and inns, which have the potential<br />
to have a bias towards food sales. <strong>The</strong> sites will be in Southern England, located predominantly in<br />
Berkshire, Hampshire, Kent, Surrey and Sussex. Keeping the estate in a well-defined area of operation<br />
should assist the management in achieving tight operational control. It is the Board’s intention to invest<br />
mainly in freehold sites. Prior to the acquisition of any unit an independent valuation by a firm of<br />
surveyors who specialise in pubs and inns will be obtained.<br />
<strong>The</strong> acquisition programme will focus on building a quality portfolio of pub restaurants generating good<br />
returns on capital. <strong>The</strong> target size of each pub restaurant is approximately 3,000 sq feet of trading<br />
area. Several potential sites have already been identified as possible acquisitions for the Company. <strong>The</strong><br />
Directors believe that the benefits of developing pub restaurants in the specified areas will offer the<br />
following advantages:<br />
• access to an affluent and substantial market with a customer base that displays the correct<br />
demographics matching those of the Company’s target market;<br />
• the ability to maintain tight operational control over the estate;<br />
• an established eating and drinking out culture which favours good value, quality outlets already<br />
established in the specified areas.<br />
This should result in a business that has both the benefit of improving performance and growing asset<br />
value and should make the Company, in the medium term, attractive either to new investors by way of<br />
a flotation or to other operators in a trade sale.<br />
Christie & Co have been engaged, subject to their normal commercial terms and conditions, to assist<br />
in the identification and acquisition of suitable pubs and inns for the Company.<br />
<strong>The</strong> Company is in negotiations, but has not yet reached a binding agreement, for the purchase of an<br />
inn closely matching the Company’s acquisition criteria.<br />
<strong>The</strong> Market<br />
<strong>The</strong>re are approximately 70,000 pubs in the United Kingdom with an estimated worth of £23.3 billion,<br />
a rise of 4% since 1999. Food sales are estimated to be a major contributor at an average of almost<br />
26% of turnover and will increase in importance over the next decade as beer sales continue to fall.<br />
Just over 1 billion meals are currently served by pubs each year.<br />
Recent research indicates that the amount spent by consumers on food in pubs is set to grow from<br />
£6.0 billion this year to £7.4 billion in 2009. By contrast, spending on drinks in pubs will see modest<br />
growth.<br />
In the South East (excluding London) there are believed to be some five million potential customers<br />
over the age of 25.<br />
Christie & Co recently reported in their Business Outlook 2004 publication that pub values once again<br />
rose strongly in 2003 with prices increasing by 6.2%.<br />
Increasing numbers of consumers are recognising that pubs can be a realistic alternative to<br />
restaurants for eating out. Pub food as a percentage of the total pub market has risen from 21% in 1999<br />
to an estimated 25.8% in 2004. Several of the reasons behind this are:-<br />
• An 11% increase in real terms in the value of personal disposable income from 1997-2001 with<br />
regular annual increases averaging 2.4% since 2002.<br />
• <strong>The</strong> overall population is becoming more affluent and achieving a higher standard of living, resulting<br />
in more consumers being classified within the AB and C1 categories.<br />
• Demographic growth in the key consumer brackets of mid twenties and grey and third age<br />
consumers.<br />
• <strong>The</strong> steady increase in the numbers of working women in the past two decades, making many<br />
households “cash rich/time poor”, is increasing the propensity to eat out more frequently.<br />
10
This consistently above average growth in food sales is one reason why major pub operators continue<br />
to invest heavily in developing food-led pub businesses. However in their efforts to develop consistency<br />
of offer and product quality, the large companies have standardised their menus and dishes to such an<br />
extent that there is little scope for individuality from pub to pub. This has led to a consumer perception<br />
of homogenised food.<br />
<strong>The</strong>refore, with the positive demographic and economic factors expected to continue during the next<br />
five years, there is nothing to suggest that the pub restaurant trade will need to brace itself for a decline<br />
in consumer demand. It is forecast that the pub food market will grow by a further 22% over the period<br />
2004-9. <strong>The</strong>refore, the operator that works on a strategy to provide a varied menu of freshly cooked<br />
dishes to a high standard of quality and presentation, in an individual pub environment, should be set<br />
to succeed.<br />
<strong>The</strong> prosperous pub of the future is expected to have the following features:<br />
• Contemporary style and focus in line with local market<br />
• Well targeted investment<br />
• Minimal price discounting<br />
• High food turnover<br />
• Table service<br />
• Non-smoking restaurant areas<br />
In planning its development strategy, the Company has been mindful of the above list of requirements,<br />
all of which will feature in the re-developed pubs of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong>.<br />
Sources for the above section “<strong>The</strong> Market”:<br />
Christie & Co: Business Outlook 2004<br />
Mintel: Pub Catering, Leisure Intelligence 2004<br />
11
<strong>The</strong> Company’s management<br />
<strong>The</strong> Company’s success will depend primarily on the ability of its management to purchase pubs at the<br />
right price and in the right locations, develop the premises acquired in line with the template identified<br />
and then operate the sites profitably. <strong>The</strong> Board believes that it has assembled a team with the<br />
necessary track record and the specific skills required to achieve the Company’s stated objectives.<br />
Anthony Richmond-Watson (63), non-executive Chairman of the Company, is Chairman of Yule<br />
Catto & Co <strong>plc</strong>, a listed chemicals company, and Deputy Chairman of Melrose Resources <strong>plc</strong>, a listed<br />
oil and gas exploration and development company. For many years he was a director of the merchant<br />
bank, Morgan Grenfell & Co Limited, becoming Deputy Chairman of Morgan Grenfell Group <strong>plc</strong> until<br />
retirement in 1996. He was also a director and subsequently Chairman of Norfolk Capital Group <strong>plc</strong>, a<br />
listed hotels group with public house interests. He is a member of the Institute of Chartered<br />
Accountants of Scotland. He has invested £148,500 in the Company’s shares prior to the Offer at a<br />
price of 90p per share.<br />
Peter Eyles (58) has held many senior posts in the hospitality industry. From 1995 to 2003 he was<br />
Executive Chairman of Hanover International PLC a fully listed hotel group that he founded. Prior to<br />
that he was Executive Chairman of Pavilion Leisure Plc, a fully listed hotels, leisure and property group,<br />
Chief Executive of Norfolk Capital Group <strong>plc</strong>, and Chairman and Chief Executive of several private<br />
companies involved in property and marketing activities. He has invested £200,000 in the Company’s<br />
shares prior to the Offer at a price of 70p per share.<br />
Dinah Young (44) has over 14 years’ experience at senior levels within the food and drink retailing<br />
industry. She has recently resigned from the position of operations director of Brewster Pub<br />
Restaurants, a division of Whitbread, to found the Company. Prior to that she was a regional general<br />
manager of Beefeater Restaurants, regional director of Pizza Hut UK Limited and an independent<br />
management consultant working on several new food concepts in the UK. She has invested £100,000<br />
in the Company’s shares prior to the Offer at a price of 70p per share.<br />
Peter Drown (54) is non-executive Director of the Company with responsibility for finance. Since April<br />
2003, Peter, a Chartered Accountant, has been a partner with the AIM-listed accountants, Vantis <strong>plc</strong>,<br />
specialising in corporate finance and advisory work to a wide range of quoted and family owned<br />
businesses. Prior to that he had been, since 1978, a partner in Beavis Walker, a central London<br />
accountancy practice acquired by Vantis <strong>plc</strong>. He has invested £10,000 in the Company’s shares prior<br />
to the Offer at a price of 90p per share.<br />
Robin Privett (63), non-executive Director of the Company, is a solicitor and former partner in Herbert<br />
Smith, where he spent many years in corporate and commercial practice serving a range of different<br />
industries. Since retiring from full-time legal practice in 1994, he has been Chairman of Lec<br />
Refrigeration <strong>plc</strong> and a director of other companies, including Hanover International PLC until its<br />
takeover in 2003. From his experience with Hanover he brings seven year’s knowledge of the leisure<br />
industry. He has invested £9,000 in the Company’s shares prior to the Offer at a price of 90p per share.<br />
Billy Whitbread (62), non-executive Director of the Company, is Consultant to Taverners Trust PLC,<br />
an investment trust, which specialises in pub and restaurant businesses and which is managed by<br />
Aberdeen Asset Managers Limited. Previous positions include Director and Investment Manager of<br />
<strong>The</strong> Whitbread Investment Company PLC, Managing Director of Thomas Wethered and Sons Limited<br />
and non-executive Director of Hanover International PLC. He has over 30 years’ experience of the<br />
brewing and drink retailing industry and has invested £10,000 in the Company’s shares prior to the<br />
Offer at a price of 90p per share.<br />
Once the Company has started trading the Board intends to take out an appropriate level of keyman<br />
insurance on the lives of Peter Eyles and Dinah Young.<br />
<strong>The</strong> Board intends to implement a share option scheme, if approved by shareholders, following the<br />
Close of the Offer whereby up to a maximum of 5 per cent of the enlarged share capital of the<br />
Company (after exercise of all options) will be put under option at the Offer price to Peter Eyles and<br />
Dinah Young. Such share options will be subject to challenging performance criteria reflecting the<br />
Company’s objectives.<br />
12
Management Agreement<br />
<strong>The</strong> Manager of the business will be <strong>Cross</strong> <strong>Oak</strong> Limited, of which Peter Eyles and Dinah Young are<br />
directors and which is controlled by Peter Eyles. <strong>The</strong> fee structure of the Management Agreement has<br />
been designed to keep the fixed costs to a minimum and to assist the Company during its formative<br />
period whilst at the same time giving the Manager a strong incentive to develop the concept and make<br />
the Company a success. <strong>The</strong> only significant central overhead costs projected to be incurred by the<br />
Company, in addition to the management fee, are Directors’ remuneration, keyman and directors’ and<br />
officers’ insurance, stocktaking costs, health and safety consultancy fees and the audit fee.<br />
Without prejudice to the Company’s Articles of Association, the Board has adopted the policy that in<br />
any Board meeting of the Company where the Management Agreement, and more particularly the<br />
performance of the Manager, is discussed, Peter Eyles and Dinah Young will abstain from taking part<br />
in the discussion or voting, in order to avoid any conflict of interest in relation to their position as<br />
directors and shareholders of the Manager.<br />
<strong>The</strong> Management Agreement is exclusive and continues until 30 September 2008. <strong>The</strong> agreement is<br />
then automatically renewable but may be terminated by either party on 12 months’ notice to be given no<br />
earlier than 30 September 2007.<br />
<strong>The</strong> principal responsibilities of the Manager under the Management Agreement are as follows:<br />
(i)<br />
(ii)<br />
(iii)<br />
(iv)<br />
(v)<br />
(vi)<br />
(vii)<br />
(viii)<br />
identifying, appraising and recommending to the Company suitable premises for acquisition,<br />
supported by an independent report and valuation;<br />
day to day management, supervision, control and operation of the pub restaurants, including<br />
arrangements with suppliers;<br />
maintaining financial, accounting, maintenance and operating systems and records relating to<br />
the pub restaurants and meeting all costs relating thereto;<br />
organising repairs and refurbishment;<br />
recruitment, training and supervision of all employees;<br />
organising marketing and advertising activities;<br />
arranging for the grant or renewal of licences as appropriate and arranging suitable insurance<br />
cover;<br />
supervision of health and safety procedures.<br />
<strong>The</strong> Manager will be remunerated for its services by way of an incentive payment to be paid monthly.<br />
<strong>The</strong> management fee is calculated in accordance with a formula relating to the net sales of each pub<br />
restaurant and the total net operating profit of the Company. Further details are set out in Part VII<br />
paragraph 8.1.<br />
<strong>The</strong> Directors and Vantis have given much consideration to the structure of the incentive payments with<br />
a view to establishing arrangements that should work in the best interests of the shareholders and be<br />
fair to the Manager. <strong>The</strong> Directors believe that the arrangements between the Manager and the<br />
Company:<br />
• will assist the Company to minimize management costs in its formative years;<br />
• are straightforward and transparent;<br />
• are linked directly to the trading performance of the pub restaurants;<br />
• will incentivise the Manager to improve the profitability of the pub restaurants, hence the capital<br />
value of the Company’s assets and thus the level of return to shareholders;<br />
• will assist the Company in complying with its banking covenants in its formative years.<br />
Furthermore, there is no supply agreement whereby the Company might in effect agree to share with<br />
the Manager discounts obtained by the Manager from the price lists of third party drinks suppliers. In<br />
the absence of such an agreement, the Company will benefit from 100% of any such discounts, which<br />
might otherwise have been shared by the Company and the Manager. <strong>The</strong> Directors believe that such<br />
discounts could represent a significant component of the Company’s gross margin.<br />
13
<strong>The</strong> Manager has, until recently, been a dormant company.<br />
A full summary of the Management Agreement is provided below in paragraph 8.1 of Part VII.<br />
Dividends<br />
Dividend income is taxable in the hands of Shareholders and it is, therefore, the Directors’ intention to<br />
pursue capital growth in order to maximize tax free growth for EIS shareholders. Under EIS rules, any<br />
capital gain on a sale of the Shares should be free of tax to qualifying investors who hold the Shares<br />
for the Three Year Period and comply with the other EIS rules. <strong>The</strong>refore, the Directors do not intend<br />
to distribute dividends during the Three Year Period.<br />
Financial strategy<br />
<strong>The</strong> Board believes that through the use of efficient and commercially sensible gearing in addition to<br />
the Offer proceeds, it should be possible to enhance the level of return to shareholders. It is intended<br />
that the debt will not exceed 70 per cent of the gross asset value of the Company. Indicative terms for<br />
borrowing facilities on the basis of full subscription have been agreed with Bank of Scotland.<br />
Corporate Governance<br />
Although the Combined Code on Corporate Governance does not apply to the Company, as it is not<br />
listed, the Directors intend nonetheless to have regard to certain key aspects of the Code as a means<br />
of reflecting best practice, while at the same time having regard to the Company’s size and resources,<br />
as follows:<br />
(i)<br />
(ii)<br />
(iii)<br />
(iv)<br />
At present the Company has four non-executive directors.<br />
<strong>The</strong> roles of chairman and chief executive are split.<br />
<strong>The</strong> Directors intend to hold board meetings regularly throughout the year. <strong>The</strong> Board will be<br />
responsible for formulating, reviewing and approving strategy, budgets, acquisitions, capital<br />
expenditure and senior personnel appointments. <strong>The</strong> Directors will be in regular contact with the<br />
Manager to consider operational matters.<br />
An audit committee consisting of Anthony Richmond-Watson and Robin Privett will meet at least<br />
twice a year and will be responsible for ensuring that the financial performance, position and<br />
prospects of the Company are properly monitored and reported on, and for meeting the auditors<br />
and reviewing their reports relating to accounts and internal controls.<br />
Return on Investment<br />
<strong>The</strong> Directors believe that an investment in the Company offers an asset backed, and therefore more<br />
secure, type of EIS investment in a market with attractive returns and the potential for capital growth.<br />
EIS and VCT Qualifying Investment<br />
Provisional clearance has been received from the Inland Revenue that the Company will qualify for the<br />
taxation advantages offered under the Enterprise Investment Scheme, and that it is also a qualifying<br />
investment for Venture Capital Trusts (VCTs). For example, an individual subscribing for 10,000 shares<br />
at £1 per share would pay £10,000 for the shares. This gross cost would be reduced, for an investor<br />
who obtained income tax relief under the Enterprise Investment Scheme, to a net cost of £8,000, after<br />
EIS relief at 20%. Further information on the EIS tax reliefs available is given in Part VI of this<br />
document.<br />
Corporate Venturing Scheme<br />
<strong>The</strong> Company has received provisional assurance from the Inland Revenue that it will qualify for the tax<br />
advantages offered under the Corporate Venturing Scheme. Further details of these advantages are<br />
set out in paragraph 7 to Part VI to this document.<br />
14
Possible Exit Routes for Investors<br />
To qualify for certain reliefs under the EIS the Shares will have to be held for a minimum period of three<br />
years from the date upon which the Shares are issued. <strong>The</strong> Board therefore considers the following to<br />
be possible alternatives, which they expect to put to shareholders at the end of the Three Year Period:<br />
• A trade sale either of the Company’s shares or of its assets. In the case of an offer being made for<br />
the shares, shareholders would be able to realise their investment. If the Company sold all of its<br />
assets leaving it with cash the Company could then be liquidated, enabling funds to be returned to<br />
shareholders.<br />
• A flotation on a public stock market such as the Alternative Investment Market of the London Stock<br />
Exchange, the Official List of the UK Listing Authority or perhaps on Ofex, providing an opportunity<br />
for shareholders to realise investments through a public market in the Shares.<br />
• A share “buy-back” if there were sufficient distributable reserves in the Company to achieve this.<br />
Matched Bargain Trading Facility<br />
It is intended that shareholders in <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> will have access to the matched bargain share<br />
trading facility operated by J P Jenkins Limited, who specialise in unlisted and unquoted securities.<br />
JPJL operates the facility on a “matched bargain” basis by taking orders and expressions of interest<br />
from participating stockbrokers who must (like J P Jenkins) be members of the London Stock<br />
Exchange. Any individual wishing to buy or sell shares must complete the trade through his or her<br />
stockbroker, as J P Jenkins cannot deal directly with the public. Shareholders are reminded that they<br />
may forfeit all or part of their tax reliefs under the Enterprise Investment Scheme if their shares are<br />
sold before the end of the Three Year Period. <strong>The</strong> JPJL trading facility can be accessed via:<br />
www.jpjl.co.uk<br />
Investors’ attention is drawn to the Risk Factors contained in Part IV below.<br />
15
Part III – Information about the Offer<br />
<strong>The</strong> Offer<br />
It is the Directors’ intention to raise up to £3 million by the issue of up to 3,000,000 Shares at a price<br />
of £1 per Share by way of the Offer. After allowing for all expenses including commissions paid to<br />
intermediaries, it is estimated that the net proceeds, assuming subscription for the maximum number<br />
of Shares under the Offer, will be approximately £2,760,000.<br />
<strong>The</strong> subscription list for the Offer will open at 10 am on 5 October 2004, with a closing date of 31<br />
December 2004. <strong>The</strong> Directors may at their discretion extend the closing date for the Offer, but in any<br />
event, not beyond 28 February 2005. <strong>The</strong> Directors may also at their discretion increase the number<br />
of shares offered. Allotment of the Shares to applicants in respect of the Offer will be as soon as<br />
practicable after the Minimum Subscription is exceeded and monthly thereafter. A minimum of<br />
£500,000 must be raised by 12 November 2004, being forty days from the date of this Prospectus. If<br />
the Minimum Subscription has not been raised by this date the Offer will be withdrawn.<br />
<strong>The</strong> subscription monies will be kept in a separate bank account and, if the Minimum Subscription has<br />
not been achieved by 12 November 2004, the subscription monies will be refunded without interest<br />
within 14 days of the Offer closing or being withdrawn and no commission will be payable to introducers<br />
of potential investors.<br />
<strong>The</strong> minimum investment per applicant is 5,000 Shares at an aggregate price of £5,000. <strong>The</strong> maximum<br />
investment per applicant is limited to £200,000 in the tax year 2004/05 under current legislation, if the<br />
investor wishes to take full advantage of EIS taxation relief. However, capital gains tax deferral relief<br />
would also be available on investments in excess of £200,000 for each tax year.<br />
<strong>The</strong> Board reserves the right to exercise discretion in the allocation of successful applications although<br />
allocation will usually be on a first come first served basis. Applicants are encouraged to submit their<br />
Application Forms early in order to be confident that their application will be successful.<br />
<strong>The</strong> Offer is only being made to persons resident in the United Kingdom. No aspect of this document<br />
constitutes an offer in any other territory or jurisdiction and has not been made directly or indirectly in,<br />
and this document is not being and must not be mailed or otherwise distributed and sent into, any such<br />
territory. Where an application appears to be made by an applicant not so resident, the Directors may<br />
request the applicant to prove that he or she is entitled to apply and, if they are not satisfied, the<br />
Directors may reject the application. Further details of the procedure for application under the Offer are<br />
contained in Part IX of this document.<br />
An investment in the Company involves a significant degree of risk and may not be suitable for all<br />
recipients of this document. Applicants should consider carefully whether an investment in the<br />
Company is suitable for them in the light of their personal circumstances and the financial resources<br />
available to them. Attention is drawn to the section entitled “Risk Factors” contained in Part IV of this<br />
document.<br />
Introductory Commission.<br />
Financial advisers authorised and regulated by the Financial Services Authority will qualify for<br />
commission, at a rate of 3 per cent, on the level of investment made by their clients and which will be<br />
met out of the proceeds of the Offer.<br />
16
EIS <strong>Tax</strong>ation Advantages<br />
<strong>The</strong> Company has received provisional tax clearance confirming that it will qualify for the taxation<br />
advantages offered under the Enterprise Investment Scheme. <strong>The</strong> main tax advantages of investing in<br />
an EIS company are summarized as follows and should be read in the context of Part VI, which sets<br />
out the tax information in more detail:<br />
i. Depending on their personal circumstances, tax-paying investors can claim income tax relief of<br />
20 per cent. on the amount invested up to a maximum investment of £200,000 in each tax year<br />
under current legislation. If the Shares are held for the Three Year Period and the Company<br />
continues to qualify, this would reduce the effective net cost of the investment to 80 pence for<br />
each £1 invested.<br />
ii.<br />
iii.<br />
iv.<br />
Investment in an EIS qualifying company will also enable an investor (depending on his or her<br />
personal circumstances) to claim capital gains tax deferral relief. <strong>The</strong>re is no limit to the level of<br />
investment and, therefore, to the amount of taxable gains which may be deferred in this way and<br />
capital gains made as far back as three years from the date of issue of the Shares may be<br />
eligible. In addition, gains realised in the year after may be deferred. <strong>The</strong> deferred gain<br />
crystallises on the disposal of the Shares or an earlier breach of the EIS rules.<br />
<strong>The</strong>re is no tax on capital gains made on a disposal after the Three Year Period of Shares in the<br />
Company (for investments of up to £200,000 in each tax year under current legislation).<br />
After allowing for any income tax relief obtained at the time of subscription, any loss made on<br />
disposal of the Shares can be set against the individual’s capital gains in the year in which the<br />
disposal occurs and any unused element of the loss can be set against capital gains in future<br />
years. Alternatively, the loss can be set against taxable income either in the tax year or the<br />
preceding year to the tax year in which the disposal occurs.<br />
v. Provided a shareholder has owned shares in a qualifying unquoted trading company for at least<br />
two years and certain conditions are met at the time of transfer, 100 per cent business property<br />
relief is available. This reduces the inheritance tax liability on a transfer to nil.<br />
Corporate Venturing Scheme<br />
<strong>The</strong> Corporate Venturing Scheme is designed to enable one company to invest in another in a tax<br />
efficient manner in order to develop and broaden its business and improve its use of resources. <strong>The</strong><br />
investing company can obtain corporation tax relief at 20% on amounts invested in New Ordinary<br />
Shares and held for at least 3 years from the date on which the Company begins to trade; claim loss<br />
relief, net of investment relief, against income and chargeable gains; claim deferral of corporation tax<br />
from the disposal of CVS qualifying shares where the gain is reinvested in a new CVS investment. <strong>The</strong><br />
Company has received provisional assurance from the Inland Revenue that it will qualify under the<br />
Corporate Venturing Scheme.<br />
17
Part IV – Risk factors<br />
Prospective investors should be aware that the value of an investment in the Company may go<br />
down as well as up, the Shares are not readily realisable and there is no certainty that they will<br />
get back the full amount which they invest. In particular, the following risk factors should be<br />
considered prior to an investment in the Company:<br />
• <strong>The</strong> Company does not have an established trading record and its prospects should be considered<br />
in the light of the risks associated with companies in their formative years.<br />
• <strong>The</strong> loss to the business of either Peter Eyles or Dinah Young could have an adverse effect on the<br />
Company’s trading performance.<br />
• <strong>The</strong> Company may not be able to source a sufficient number of premises for acquisition.<br />
• <strong>The</strong> Investors’ Compensation Scheme operated by the FSA or by any other compensation scheme<br />
will not cover the acquisition or performance of the Shares.<br />
• <strong>The</strong>re are circumstances in which an investor could cease to qualify for the taxation advantages<br />
offered by the EIS.<br />
• If the Company ceases to carry on the business outlined in this document during the Three Year<br />
Period, this could prejudice the qualifying status of the Company under the EIS.<br />
• <strong>The</strong> information in this document is based upon current tax law and practice and other legislation<br />
and any changes in the legislation or in the levels and bases of, and reliefs from, taxation may affect<br />
the value of an investment in the Company.<br />
• Circumstances may arise where the Directors believe that the interests of the Company are not best<br />
served by acting in a way that preserves the EIS status of the Company. In such circumstances, the<br />
Company cannot undertake to conduct its activities in a way designed to preserve any such relief or<br />
status.<br />
• Opportunities to achieve the possible exit routes of trade sale, flotation or share buyback may not<br />
coincide with the timing of the highest valuation of the Company.<br />
<strong>The</strong> investment described in this document may not be suitable for all recipients. Accordingly,<br />
investors are recommended to consult an investment adviser authorised under the Financial<br />
Services and Markets Act 2000, and an appropriately qualified taxation adviser, prior to<br />
investing.<br />
18
Part V– Financial information on the Company<br />
Wilkins Kennedy<br />
Chartered Accountants<br />
Gladstone House<br />
77-79 High Street<br />
Egham<br />
Surrey TW20 9HY<br />
4 October 2004<br />
<strong>The</strong> Directors<br />
<strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong><br />
82 St John Street<br />
London<br />
EC1M 4JN<br />
Dear Sirs<br />
CROSS OAK INNS PLC (“CROSS OAK INNS” or “THE COMPANY”)<br />
Introduction<br />
We report on the financial information on <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> (“<strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong>”) set out below. This<br />
financial information has been prepared for inclusion in the prospectus (the “Prospectus”) dated<br />
4 October 2004 of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong>.<br />
Basis of preparation<br />
<strong>The</strong> financial information set out below is based on financial information for the company for the period<br />
from its date of incorporation on 3 June 2004 to 17 September 2004 and shows its state of affairs as<br />
at 17 September 2004. This financial information has been extracted from the financial records of the<br />
Company with no adjustments being considered necessary. No audited financial statements have been<br />
prepared for submission to members in respect of any period since incorporation.<br />
Responsibility<br />
<strong>The</strong> financial information in relation to <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> as set out below is the responsibility of the<br />
Directors of the Company (the “Directors”). <strong>The</strong> Directors of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> are responsible for the<br />
contents of the Prospectus in which this report is included.<br />
It is our responsibility to compile the financial information set out in our report, to form an opinion on<br />
the financial information and to report our opinion to you.<br />
Basis of opinion<br />
We conducted our work in accordance with the Statements of Investment Circular <strong>Report</strong>ing Standards<br />
issued by the Auditing Practices Board. Our work included an assessment of evidence relevant to the<br />
amounts and disclosures in the financial information.<br />
We planned and performed our work so as to obtain all the information and explanations which we<br />
consider necessary in order to provide us with sufficient evidence to give reasonable assurance that<br />
the financial information is free from material misstatement whether caused by fraud or other<br />
irregularity or error.<br />
Opinion<br />
In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view<br />
of the state of affairs of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> as at 17 September 2004.<br />
Consent<br />
We consent to the inclusion in the Prospectus of this report and accept responsibility for the purposes<br />
of paragraphs 45(8)(b) of Schedule 1 to the Public Offers of Securities Regulations 1995.<br />
19
Financial information<br />
<strong>The</strong> Company was incorporated and registered in England on 3 June 2004 with registered number<br />
5144171 as a public company limited by shares with the name <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong>. On 14 September<br />
2004, the Registrar of Companies issued a certificate under section 117 of the Companies Act 1985,<br />
entitling the Company to commence business.<br />
<strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> has not completed its first accounting period. No statutory financial statements have<br />
been prepared, audited or filed with the Registrar of Companies since incorporation.<br />
Accounting policies<br />
<strong>The</strong> financial information has been prepared under the historical cost convention and in accordance<br />
with applicable accounting standards.<br />
Balance sheet of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> at 17 September 2004<br />
Notes £<br />
Current assets<br />
Cash at bank and in hand 300,000<br />
Net assets 300,000<br />
Capital and reserves<br />
Called up share capital 2 214,286<br />
Share premium account 3 85,714<br />
Shareholders’ funds 300,000<br />
Notes to the financial information<br />
1. Trading activity<br />
<strong>The</strong> Company has not traded, prepared any financial statements for presentation to members, incurred<br />
neither profit nor loss, and has neither declared nor paid any dividends since the date of incorporation.<br />
<strong>The</strong>re have been no transactions other than the allotment of shares described below and the execution<br />
of the material contracts referred to in paragraph 8 of Part VII of the Prospectus. Accordingly no profit<br />
and loss account information is presented in this report.<br />
2. Share capital<br />
At 17<br />
September<br />
2004<br />
Authorised: Number £<br />
20,000,000 ordinary shares of 50 pence each 20,000,000 10,000,000<br />
Allotted, called up and fully/partly paid:<br />
On incorporation – issue of 2 ordinary shares of 50p each nil paid 2 -<br />
Immediately following incorporation – proceeds for shares issued<br />
nil paid 1<br />
On 13 September 2004 – issue of 428,570 ordinary shares at 70p,<br />
fully paid up 428,570 214,285<br />
Total shares in issue at 17 September 2004 428,572 214,286<br />
<strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> was incorporated with an authorised share capital of £10,000,000, divided into<br />
20,000,000 Ordinary Shares of 50 pence each, of which 2 shares were issued, nil paid on<br />
incorporation. Immediately following incorporation proceeds of £1 were received in respect of these<br />
shares. On 13 September 2004 a further 428,570 ordinary shares were allotted at 70p per share, all<br />
fully paid up.<br />
20
3. Share premium account<br />
<strong>The</strong>re was a transfer to the share premium account of £85,714 as a result of the issue of the 428,570<br />
ordinary shares of 50p each at a price of 70p per share, which represents a share premium of 20p per<br />
share.<br />
4. Post Balance Sheet Event<br />
On 21 September 2004, a further 197,222 shares were allotted at 90p per share, all fully paid.<br />
Yours faithfully<br />
Wilkins Kennedy<br />
Chartered Accountants<br />
21
Part VI – Information on EIS taxation reliefs<br />
Introduction<br />
To obtain the tax reliefs described below it is necessary to subscribe for ordinary shares in a qualifying<br />
company and claim the relief. <strong>The</strong> summary below gives only a brief outline of how the tax reliefs are<br />
given assuming the investor is a 40 per cent taxpayer. It does not set out all the rules which must be<br />
met for periods of between three and five years by the Company and the investor. <strong>The</strong> tax reliefs will<br />
only be relevant to investors who pay income tax and/or wish to defer a capital gain. This summary is<br />
not a substitute for the investor obtaining professional advice before applying for Shares.<br />
EIS Relief<br />
EIS relief has four elements: -<br />
1. Income <strong>Tax</strong> Relief<br />
Individuals can obtain income tax relief on the amount subscribed for Shares (up to £200,000 in each<br />
tax year) in one or more qualifying companies provided they are not connected with the issuing<br />
company. Husbands and wives can each subscribe up to £200,000. However, when considering<br />
whether an individual’s shareholding exceeds the maximum proportion of the Company allowed under<br />
the EIS (30%), that individual’s shareholdings will be aggregated with shares held by his spouse, lineal<br />
ancestors and lineal descendants. To calculate the relief, the lower rate of tax (currently 20 per cent.)<br />
is multiplied by the amount subscribed. <strong>The</strong> relief, is given against and cannot exceed the individual’s<br />
income tax liability for the tax year in which the Shares are issued unless the individual makes a carry<br />
back claim.<br />
Example<br />
£<br />
Gross investment in Shares 10,000<br />
Less income tax relief at 20 per cent. (2,000)<br />
Net cost of investment 8,000<br />
2. Exemption from Capital Gains <strong>Tax</strong><br />
Any capital gains realised on disposal after the Three Year Period of the Shares on which EIS income<br />
tax relief has been given and not withdrawn, are tax-free.<br />
Example<br />
£<br />
Realised value of Shares after the Three<br />
Year Period 20,000<br />
less original gross investment in Shares (10,000)<br />
<strong>Tax</strong> free gain 10,000<br />
This relief is in addition to the initial income tax relief of £2,000 described in 1 above<br />
3. Loss Relief against Income or Gains<br />
<strong>Tax</strong> relief is available where there is a loss on a disposal at any time of Shares on which EIS income<br />
tax relief (see 1 above) or CGT deferral relief (see 4 below) has been given. <strong>The</strong> amount of the loss<br />
(after taking account of any income tax relief initially obtained) can be set against the individual’s gains<br />
or taxable income in the tax year in which disposal occurs.<br />
Example<br />
£<br />
Realised value of Shares<br />
Nil<br />
Gross investment in Shares (10,000)<br />
Less income tax relief at 20 per cent. 2,000<br />
Deemed net cost of investment and also loss<br />
before tax relief (8,000)<br />
<strong>Tax</strong> relief at 40 per cent. maximum 3,200<br />
Net cash loss (4,800)<br />
22
4 CGT Deferral Relief<br />
To the extent to which a UK resident investor (including individuals and certain trustees) subscribes for<br />
qualifying shares, he or she can claim to defer paying tax on all or part of a chargeable gain. <strong>The</strong> gain<br />
may have arisen on the disposal of any asset or a previously deferred gain may have become<br />
chargeable to tax. Although under current legislation there is a limit of £200,000 for income tax relief<br />
and the exemption from CGT (see 1 and 2 above), there is no limit on the amount of gain which can<br />
be deferred. <strong>The</strong> subscription must be made and the shares issued within one year before or three<br />
years after the date of the disposal which gives rise to the gain or the date when a previously deferred<br />
gain crystallises. <strong>The</strong> gain is deferred until there is a chargeable event such as a disposal of shares or<br />
an earlier breach of the EIS rules.<br />
5. Inheritance <strong>Tax</strong><br />
Provided a shareholder has owned shares in a qualifying unquoted trading company such as <strong>Cross</strong><br />
<strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> for at least two years and certain conditions are met at the time of the transfer, 100 per<br />
cent business property relief is available, which reduces the potential inheritance tax liability on such<br />
an investment to nil.<br />
6. Provisional EIS Clearance<br />
Provisional EIS clearance in respect of the Offer has been received from the Inland Revenue. <strong>The</strong><br />
Directors anticipate that the EIS 3 certificates, which investors need to claim the tax relief, should be<br />
available within five months from the date the Company begins trading, subject to Inland Revenue<br />
working practices.<br />
7. Corporate Venturing Scheme (“CVS”)<br />
<strong>The</strong> CVS is designed to incentivise established companies to invest in the (full-risk) ordinary shares of<br />
companies of the kind which qualify under the EIS rules, and to encourage the two companies to form<br />
mutually beneficial corporate venturing relationships. <strong>The</strong>re is no limit to the value of investments for<br />
which a company may claim CVS relief. Companies investing through the CVS may obtain the following<br />
reliefs:<br />
• Corporation tax relief (at 20%) on the amount invested up to the amount of investor’s corporation<br />
tax liability for the year.<br />
• Relief for most allowable losses (net of investment relief) on the shares (against either income or<br />
chargeable gains).<br />
• Deferral of corporation tax on a chargeable gain from the disposal of CVS qualifying shares where<br />
that gain is reinvested in a new CVS investment.<br />
8. Dividends<br />
No ACT is payable on dividends paid by the Company. Shareholders receive a notional tax credit, such<br />
that basic rate taxpayers have no further tax to pay on the dividend received and higher rate taxpayers<br />
have a liability to pay higher rate tax equivalent to 25 per cent of the amount of the dividend received.<br />
<strong>The</strong> notional tax credit is no longer repayable.<br />
<strong>The</strong> figures in this section are examples only. <strong>The</strong>y are not, and should not be construed as,<br />
forecasts or projections of the likely performance of the investment described in this<br />
document. Please note that this is only a condensed summary and should not be construed as<br />
constituting advice which a potential investor should obtain from his or her own investment or<br />
taxation adviser before applying for Shares. <strong>The</strong> value of any tax reliefs will depend on the<br />
individual circumstances of investors.<br />
23
Part VII – Statutory and general information<br />
1. <strong>The</strong> Company<br />
1.1 <strong>The</strong> Company was incorporated and registered in England and Wales on 3 June 2004 with<br />
number 5144171 under the name <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> as a public company limited by shares<br />
under the Act. <strong>The</strong> Company’s registered office is 82 St John Street, London EC1M 4JN.<br />
1.2 <strong>The</strong> Company has no subsidiary companies (as defined in section 736 of the Act).<br />
1.3 <strong>The</strong> principal activity of the Company is to be the ownership and management of pub restaurants.<br />
1.4 On 14 September 2004, the Registrar of Companies issued the Company with a certificate under<br />
section 117 of the Act entitling it to commence business and to exercise its borrowing powers.<br />
2. Share Capital<br />
2.1 Set out below are details of the authorised and issued share capital of the Company as at 29<br />
September 2004 (the latest practicable date prior to the publication of this document) and the<br />
authorised and issued share capital of the Company as it will be following Close of the Offer:<br />
As at 29 September 2004<br />
Ordinary Shares Authorised Issued and paid up<br />
Number 20,000,000 625,794<br />
Nominal value £10,000,000 £312,897<br />
Following Close of the Offer (assuming Minimum Subscription)<br />
Ordinary Shares Authorised Issued and paid up<br />
Number 20,000,000 1,125,794<br />
Nominal value £10,000,000 £562,897<br />
Following Close of the Offer (assuming Maximum Subscription)<br />
Ordinary Shares Authorised Issued and paid up<br />
Number 20,000,000 3,625,794<br />
Nominal value £10,000,000 £1,812,897<br />
2.2 <strong>The</strong> Company was incorporated with an authorised share capital of £10,000,000 comprising<br />
20,000,000 ordinary shares of 50p each. On incorporation two ordinary shares of 50p were<br />
issued to the subscribers to the Memorandum of Association. On 3 June 2004, these ordinary<br />
shares were transferred to Peter Eyles and Dinah Young, in consideration of their undertaking<br />
to pay up such shares in full.<br />
2.3 On 13 September 2004 the Company also allotted, in aggregate, 428,570 ordinary shares of<br />
50p each in the capital of the Company at 70p per share, all fully paid up as follows:<br />
Name<br />
Number of<br />
Ordinary Shares<br />
Peter George Eyles 285,713<br />
Dinah Joy Young 142,857<br />
2.4 On 21 September 2004 the Company made a further allotment of 197,222 ordinary shares of<br />
50p each in the capital of the Company fully paid up at 90p per share as follows:<br />
Name<br />
Number of<br />
Ordinary Shares<br />
Anthony Euan Richmond-Watson 165,000<br />
Peter Loring Drown 11,111<br />
Robin Jarrard Campbell Privett 10,000<br />
Hugh William Whitbread 11,111<br />
24
2.5 <strong>The</strong> Directors are authorised in accordance with Section 80 of the Act to allot ordinary shares<br />
pursuant to the Offer and otherwise up to an aggregate nominal amount of £10,000,000 until<br />
3 June 2009.<br />
2.6 <strong>The</strong> Directors are also empowered pursuant to Section 89 of the Act to allot ordinary shares<br />
pursuant to such authority as if Section 89(1) of the Act did not apply, both in connection with a<br />
rights issue and pursuant to the Offer and otherwise up to an aggregate nominal amount of<br />
£10,000,000 until 28 February 2005.<br />
2.7 No shares of the Company are currently in issue with a fixed date on which entitlement to a<br />
dividend arises and there are no arrangements in force whereby future dividends are waived or<br />
have been agreed to be waived.<br />
3. Accounting Reference Date<br />
<strong>The</strong> accounting reference date of the Company is 31 December in each year and the first<br />
accounting reference period of the Company will be from 3 June 2004 to 31 December 2004.<br />
4. Memorandum and Articles of Association<br />
4.1 Memorandum<br />
<strong>The</strong> principal objects of the Company are set out in full in clause 4 of its Memorandum of<br />
Association and provide that the Company shall carry on business as a general commercial<br />
company, including but not limited to the ownership and management of public houses.<br />
4.2 Articles of Association<br />
<strong>The</strong> Articles of Association of the Company (“the Articles”) were adopted at incorporation on<br />
3 June 2004. <strong>The</strong> Articles contain provisions, amongst other things, having the following effect:<br />
4.2.1 Voting<br />
(a) Subject to any special terms or restrictions as to voting upon which any shares may be<br />
issued or may for the time being be held, at a general meeting every member who (being<br />
an individual) is present in person or (being a corporation) is present by a duly authorised<br />
representative not being himself a member) has one vote, and in the case of a poll every<br />
member present in person or by proxy shall have one vote for every share of which he or<br />
she is the holder.<br />
(b) No member may vote at a general meeting either personally or by proxy in respect of any<br />
share held by him or her unless all monies payable by him or her to the Company in respect<br />
of that share have been paid.<br />
4.2.2 Dividends<br />
(a) Subject to the provisions of the Act and of the Articles, the Company may by ordinary<br />
resolution declare dividends to be paid to members according to their respective rights in the<br />
profits of the Company. However, no dividend shall exceed the amount recommended by the<br />
Board.<br />
(b) Subject to the provisions of the Act, the Board may declare or pay such interim dividends<br />
(including any dividend payable at a fixed rate) as appears to the Board to be justified by the<br />
profits of the Company available for distribution.<br />
(c) Except as otherwise provided by any rights attached to or terms of issue of any shares, all<br />
dividends shall be declared and paid according to the amounts paid up on the shares in<br />
respect of which the dividend is paid. Subject as aforesaid, all dividends shall be<br />
apportioned and paid proportionately to the amount paid up on the shares during any<br />
portion or portions of that period in respect of which the dividend is paid.<br />
(d) No dividends or other monies payable in respect of any share shall bear interest unless<br />
otherwise provided by the rights attached to the share.<br />
25
(e) Any dividend remaining unclaimed for a period of 12 years from the date of being declared<br />
or having become due for payment shall be forfeited and cease to remain owing by the<br />
Company.<br />
4.2.3 Distribution of assets on a winding-up<br />
If the Company is wound up the liquidator may, with the authority of an extraordinary resolution<br />
of the Company and any other sanction required by the Act, divide among the members in kind<br />
the whole or any part of the assets of the Company and may, for that purpose, value any assets<br />
and determine how the assets are to be divided as between the holders of shares or classes of<br />
shares. <strong>The</strong> liquidator may, with the same authority and sanction, transfer the whole or any part<br />
of the assets to trustees on such trusts for the benefit of members as he or she thinks fit, but<br />
no member shall be compelled to accept any assets upon which there is a liability.<br />
4.2.4 Changes in capital<br />
(a) Any shares in the capital of the Company for the time being may be allotted with such<br />
special rights or restrictions as the Company may by ordinary resolution determine.<br />
(b) Subject to the provisions of the Act, the Company may from time to time by ordinary<br />
resolution increase its capital by the creation of shares or consolidate and/or divide all or<br />
any of its share capital into shares of a larger amount than its existing shares or subdivide<br />
all or any of its share capital into shares of a smaller amount than its existing shares or<br />
cancel any shares which at the date of the passing of the relevant resolution have not been<br />
taken or agreed to be taken and diminish the amount of its share capital by the amount of<br />
shares cancelled.<br />
(c) Subject to the provisions of the Act, the Company may by special resolution reduce its<br />
authorised and issued share capital, any capital redemption reserve and any share premium<br />
account in any way.<br />
(d) Subject to the provisions of the Act, the Company may from time to time purchase its own<br />
shares provided that the terms of any contract under which the Company will be or may<br />
become entitled or obliged to purchase its own shares shall be authorised by special<br />
resolution in advance of the Company entering into the contract.<br />
4.2.5 Transfer of Shares<br />
(a) A transfer of a share must be effected by an instrument of transfer in writing in any usual<br />
form or in any other form approved by the Board. Any instrument of transfer shall be<br />
executed by or on behalf of the transferor and, except in the case of a fully paid share, by<br />
or on behalf of the transferee.<br />
(b) <strong>The</strong> Board may refuse to register any transfer of a share unless it is:<br />
(i) in respect of a share which is fully paid up;<br />
(ii) in respect of only one class of share;<br />
(iii) in favour of not more than four transferees; and<br />
(iv) delivered to the registered office or such other place as the Board may determine<br />
together with the relevant share certificate(s) and such other evidence as the Board<br />
may reasonably require to show the right of the transferor to make the transfer.<br />
(c) If the Board refuses to register a transfer of a share it shall within two months after the date<br />
on which the transfer was lodged with the Company, send notice of the refusal to the<br />
transferee.<br />
(d) <strong>The</strong> register of transfers may be suspended at such times and for such periods (not<br />
exceeding 30 days in any year) as the Board may determine.<br />
4.2.6 Pre-emption<br />
<strong>The</strong>re are no pre-emption rights or restrictions on the transfer of shares. <strong>The</strong> statutory regime<br />
contained in Sections 89 to 96 of the Act requiring certain offers of equity securities of the<br />
Company to be made on a pre-emptive basis applies to the Company’s equity share capital save<br />
to the extent specified in paragraph 2.6 of this Part VII.<br />
26
4.2.7 Redemption<br />
Subject to the provisions of the Act, shares may be issued which are to be redeemed or are<br />
liable to be redeemed at the option of the Company or the holder on such terms and in such<br />
manner as may be prescribed in the Articles.<br />
4.2.8 Directors<br />
(a) Subject to the provisions of the Act and provided that he or she has disclosed to the Board<br />
the nature and extent of any material interest of his or hers, a director:<br />
i. may enter into or otherwise be interested in any arrangement or transaction with the<br />
Company or in which the Company is interested;<br />
ii.<br />
iii.<br />
may be or become a director or other officer of or be employed by or hold any other<br />
office or be a party to any transaction or arrangement with or otherwise interested in any<br />
company promoted by the Company or in which the Company is otherwise interested;<br />
and<br />
shall not be liable to account to the Company for any profit, remuneration or other<br />
benefit realised by any such arrangement or transaction or from any interest in any body<br />
corporate and no such arrangement or transaction shall be avoided on the grounds of<br />
any such interest or benefit.<br />
(b) Save as provided below and under the Act, a director shall not vote on, or be counted in the<br />
quorum in relation to, any resolution of the Board or any committee of the Board in respect<br />
of any matter in which he or she has, directly or indirectly, an interest or duty which is<br />
material and which conflicts or may conflict with the interest of the Company. A director shall<br />
be entitled to vote (and be counted in the quorum) in respect of any resolution at such<br />
meeting if such resolution relates to one of the following matters:<br />
i. the giving to him or her of a guarantee, security or indemnity in respect of money lent<br />
to, or obligations incurred by him or her for the benefit of, the Company or any of its<br />
subsidiaries;<br />
ii.<br />
iii.<br />
iv.<br />
the giving to a third party of any guarantee, security or indemnity in respect of an<br />
obligation of the Company for which he himself has assumed responsibility in whole or<br />
in part, either alone or jointly with others, under a guarantee or indemnity or by the giving<br />
of security;<br />
any issue or offers of shares, debentures or other securities of the Company or any of<br />
its subsidiaries in respect of which he or she is or may be entitled to participate in his<br />
or her capacity as a holder of any securities or in the underwriting or subwriting of which<br />
the director is to participate;<br />
a retirement benefits scheme which has been approved or is conditional upon approval<br />
by the Inland Revenue for taxation purposes.<br />
(c) <strong>The</strong> Board may delegate any of its powers to a committee consisting of one or more<br />
directors.<br />
(d) <strong>The</strong> remuneration and other terms and conditions of appointment of a director to any<br />
executive office or employment of the Company shall be such as the Board may from time<br />
to time by ordinary resolution determine and remuneration shall be deemed to accrue from<br />
day to day.<br />
4.2.9 Borrowing powers<br />
(a) Subject to the provisions of the Articles, the Board may exercise all the powers of the<br />
Company to borrow money and to mortgage or charge its undertaking, property, assets and<br />
uncalled capital or any part thereof and, subject to the provisions of the Act, to issue<br />
debentures and other securities, whether outright or as security for any debt, liability or<br />
obligation of the Company or any third party.<br />
27
(b) <strong>The</strong> Board shall restrict the borrowings of the Company so as to secure that the aggregate<br />
principal amount outstanding in respect of borrowings by the Company shall not at any time,<br />
without the previous sanction of any ordinary resolution of the Company, exceed<br />
£20,000,000.<br />
5. Directors<br />
5.1 Other than their directorships of the Company, the current UK directorships and partnerships of<br />
the Directors and those held during the previous five years are set out below. Where the<br />
company name is marked with an asterisk, the Director concerned is no longer at the date of<br />
this document a director or partner as the case may be of the relevant company or partnership:<br />
Name of director<br />
Anthony Euan Richmond-<br />
Watson<br />
Peter George Eyles<br />
Dinah Joy Young<br />
Peter Loring Drown<br />
Robin Jarrard Campbell<br />
Privett<br />
Company<br />
Gazelle Corporate Finance Limited<br />
Melrose Resources <strong>plc</strong><br />
Yule Catto & Co <strong>plc</strong><br />
<strong>The</strong> AERW and RFMA Consultancy<br />
<strong>Cross</strong> <strong>Oak</strong> Limited<br />
Basingstoke Country Club Limited *<br />
Basingstoke Country Hotel Limited *<br />
Cardiff Bay Hotel Limited *<br />
Hanover Hotels No.2 Limited *<br />
Hanover International Club Limited *<br />
Hanover International Hotels Limited *<br />
Hanover International Hotels Management (Daventry) Limited *<br />
Hanover International Hotels Management (Reading) Limited *<br />
Hanover International <strong>plc</strong> *<br />
Hartford Entertainments Limited *<br />
Midmint Limited *<br />
Sundridge Park Management Centre Limited *<br />
Tweed Investments Limited *<br />
Tyne Limited *<br />
<strong>Cross</strong> <strong>Oak</strong> Limited<br />
Famous Moe’s Food Service Limited *<br />
London Wrap Company Limited *<br />
Hospice of Hope Romania Limited<br />
Leadley Limited<br />
Morrison McConnell Limited<br />
Questscope<br />
Royal Cinque Ports Golf Club Limited<br />
<strong>The</strong> Volubilis Foundation<br />
Beavis Walker *<br />
Beavis Walker Limited *<br />
BWL Corporate Finance Limited *<br />
GSB (Holdings) <strong>plc</strong> *<br />
Otherqueue Limited *<br />
Southwell Motor Co Limited*<br />
SPAM Limited*<br />
Lancing College Limited<br />
Lec Refrigeration <strong>plc</strong><br />
Woodard Schools (Southern Division) Limited<br />
Hanover International <strong>plc</strong>*<br />
Strathcarron Sports Cars <strong>plc</strong>*<br />
28
Hugh William Whitbread<br />
Epicurean Brasseries Limited<br />
Epicurean Brasseries (Whitacre Heath) Limited<br />
Aldenham School Enterprises Limited*<br />
Hanover International <strong>plc</strong>*<br />
Hanover International Hotels Limited*<br />
Smiles Brewing Company Limited*<br />
Smiles Trustees Limited*<br />
Smiles Holdings Limited*<br />
<strong>The</strong> Aldenham School Company*<br />
<strong>The</strong> Taverners Trust <strong>plc</strong>*<br />
5.2 <strong>The</strong> following agreements have been entered into between the Company and the Directors:<br />
5.2.1 By an appointment letter dated 3 June 2004 between the Company and Peter Eyles, Peter Eyles<br />
was appointed as a Director with an entitlement to receive director’s fees at a rate of £1,500 per<br />
annum, payable quarterly in arrears, exclusive of VAT. This fee is subject to review on 1 January<br />
each year. <strong>The</strong> appointment is for an initial period of 4 years and is terminable (i) by resignation;<br />
(ii) by ordinary resolution of the Company; (iii) in the event that the Management Agreement is<br />
terminated for any reason; or (iv) if Peter Eyles ceases to be a director of <strong>Cross</strong> <strong>Oak</strong> Limited.<br />
5.2.2 By an appointment letter dated 3 June 2004 between the Company and Dinah Young, Dinah<br />
Young was appointed as a Director with an entitlement to receive director’s fees at a rate of<br />
£1,500 per annum, payable quarterly in arrears, exclusive of VAT. This fee is subject to review<br />
on 1 January each year. <strong>The</strong> appointment is for an initial period of 4 years and is terminable (i)<br />
by resignation; (ii) by ordinary resolution of the Company; (iii) in the event that the Management<br />
Agreement is terminated for any reason; or (iv) if Dinah Young ceases to be a director of <strong>Cross</strong><br />
<strong>Oak</strong> Limited.<br />
5.2.3 By an appointment letter dated 24 September 2004 between the Company and Anthony<br />
Richmond-Watson, Anthony Richmond-Watson was appointed as non-executive Chairman with<br />
an entitlement to receive director’s fees at a rate of £12,500 per annum exclusive of VAT. This<br />
director’s fee is subject to review on 1 January each year. This agreement is for an initial period<br />
of 12 months and is terminable on 3 months’ written notice by either side.<br />
5.2.4 By an appointment letter dated 24 September 2004 between the Company, Peter Drown and<br />
Vantis, Peter Drown was appointed as non-executive Director. His services are being provided<br />
by Vantis who will invoice the Company at a rate of £15,000 per annum exclusive of VAT. This<br />
fee is subject to review on 1 January each year. This agreement is for an initial period of 12<br />
months and is terminable on 3 months’ written notice by either side.<br />
5.2.5 By an appointment letter dated 24 September 2004 between the Company and Robin Privett,<br />
Robin Privett was appointed as non-executive Director with an entitlement to receive director’s<br />
fees at a rate of £5,000 per annum exclusive of VAT. This director’s fee is subject to review on<br />
1 January each year. This agreement is for an initial period of 12 months and is terminable on<br />
3 months’ written notice by either side.<br />
5.2.6 By an appointment letter dated 24 September 2004 between the Company and Billy Whitbread,<br />
Billy Whitbread was appointed as non-executive Director with an entitlement to receive director’s<br />
fees at a rate of £5,000 per annum exclusive of VAT. This director’s fee is subject to review on<br />
1 January each year. This agreement is for an initial period of 12 months and is terminable on<br />
3 months’ written notice by either side.<br />
5.3 <strong>The</strong> aggregate remuneration and benefits in kind payable to the Directors in respect of the<br />
period ended 17 September 2004 was £nil. <strong>The</strong> aggregate amount of remuneration and benefits<br />
in kind payable to the Directors is estimated at £10,125 in respect of the financial period of the<br />
Company ending 31 December 2004 and £40,500 in respect of the financial year of the<br />
Company ending 31 December 2005.<br />
5.4 None of the Directors has any unspent convictions.<br />
5.5 None of the Directors has been the subject of any public criticism by any statutory or regulatory<br />
authority.<br />
29
5.6 Peter Eyles was executive chairman of Pavilion Leisure <strong>plc</strong> from 21 September 1990 until 8<br />
March 1991. Pavilion Leisure <strong>plc</strong> was placed into receivership on 7 March 1991.<br />
5.7 Peter Drown was a non-executive director of GSB (Holdings) <strong>plc</strong>, which was wound up on 11<br />
March 1999 under a creditors’ voluntary liquidation and dissolved on 3 January 2003.<br />
5.8 Peter Drown was a non-executive director of Netica <strong>plc</strong> from 9th April 1997 until 16 October<br />
1998. Subsequent to his resignation, on 2 December 1998, Netica <strong>plc</strong> was placed into<br />
receivership. Netica <strong>plc</strong> was dissolved on 4 December 2001.<br />
5.9 Robin Privett was a non-executive director and chairman of Strathcarron Sports Cars <strong>plc</strong>, a<br />
fledgling manufacturer of sports cars, from 31st January 1996 until 3 August 2001. This<br />
company went into creditors voluntary liquidation on 21 November 2001.<br />
5.10 Save as stated in paragraphs 5.6 to 5.9 above, none of the Directors has been a director of a<br />
company at the time of, or within the preceding 12 months of that company being the subject of<br />
a receivership, compulsory liquidation, creditors voluntary liquidation, administration, company<br />
voluntary arrangement or where it is has made any composition or arrangement with its creditors<br />
generally or any class of its creditors.<br />
5.11 None of the Directors has been a partner of a partnership at the time of, or within the preceding<br />
12 months of the partnership being the subject of a compulsory liquidation, administration or<br />
partnership voluntary arrangement nor in that time have the assets of any such partnership<br />
been the subject of a receivership.<br />
5.12 No asset of any Director has at any time been the subject of a receivership.<br />
5.13 None of the Directors is or has been bankrupt or has made at any time an individual voluntary<br />
arrangement.<br />
5.14 None of the Directors is or has ever been disqualified by a court from acting as a director of a<br />
company or from acting in the management or conduct of the affairs of any company.<br />
5.15 <strong>The</strong>re are no outstanding loans granted by the Company to any of the Directors nor has any<br />
guarantee been provided by the Company for their benefits.<br />
5.16 At the date of this document no options had been granted to the Directors to subscribe for<br />
Ordinary Shares in the Company. It is intended that following the close of the Offer and subject<br />
to the approval by ordinary resolution of the Company’s shareholders, the Company shall<br />
establish a share option scheme whereby up to a maximum of 5 per cent of the enlarged share<br />
capital of the Company (after exercise of all options) will be put under option at the Offer price<br />
to Peter Eyles and Dinah Young. Such share options will be subject to challenging performance<br />
criteria reflecting the Company’s objectives.<br />
6. Shareholdings in the Company<br />
<strong>The</strong> present interests of the Directors in the share capital of the Company, both beneficial and nonbeneficial,<br />
and following Close of the Offer (assuming the Maximum Subscription is achieved), are<br />
expected to be as follows:<br />
At 29 September 2004<br />
At Close of the Offer<br />
Director No. of % of No. of % of<br />
Ordinary existing Ordinary existing<br />
Shares Shares Shares Shares<br />
held held held held<br />
Anthony Euan Richmond-Watson 165,000 26.3% 165,000 4.55%<br />
Peter George Eyles 285,714 45.7% 285,714 7.88%<br />
Dinah Joy Young 142,858 22.8% 142,858 3.94%<br />
Peter Loring Drown 11,111 1.8% 11,111 0.31%<br />
Robin Jarrard Campbell Privett 10,000 1.6% 10,000 0.28%<br />
Hugh William Whitbread 11,111 1.8% 11,111 0.31%<br />
30
Peter Eyles and Dinah Young are directors of <strong>Cross</strong> <strong>Oak</strong> Limited, a company controlled by Peter Eyles.<br />
Both Peter Eyles and Dinah Young are therefore interested in the Management Agreement. Save for<br />
the above and the foregoing shareholdings, the Directors have no other interests in the Company. <strong>The</strong><br />
Directors are not aware of any persons who, directly or indirectly, jointly or severally, exercise or could<br />
exercise control over the Company.<br />
7. Litigation<br />
So far as the Directors are aware, there are no legal or arbitration proceedings, active, pending or<br />
threatened against, or being brought by, the Company which are having, or may have, a significant<br />
effect on the financial position of the Company.<br />
8. Material Contracts<br />
<strong>The</strong> following contracts have been entered into by the Company since incorporation, and are, or may<br />
be material:<br />
8.1 A Management Agreement dated 30 September 2004 between the Company and <strong>Cross</strong> <strong>Oak</strong><br />
Limited (“the Manager”) whereby, with effect from the date on which formal legal contracts are<br />
exchanged for the purchase by the Company of its first premises (“the Commencement Date”), the<br />
Manager will manage and operate the pubs acquired by the Company and developed into pub<br />
restaurants, in accordance with good commercial practice. <strong>The</strong> services to be provided by the<br />
Manager include (i) identifying, appraising and recommending to the Company suitable premises for<br />
acquisition, (ii) day to day management, supervision, control and operation of the pub restaurants,<br />
including arrangements with suppliers; (iii) maintaining financial, accounting, maintenance and<br />
operating systems and records relating to the pub restaurants; (iv) organising repairs and<br />
refurbishment; (v) recruitment, training and supervision of staff; (vi) organising marketing and<br />
advertising activities; (vii) arranging for the grant or renewal of licences as appropriate and arranging<br />
suitable insurance cover; (viii) supervision of health and safety procedures.<br />
Without prejudice to the Company’s Articles of Association, the Board has adopted the policy<br />
that, in any Board meeting of the Company where the Management Agreement, and more<br />
particularly the performance of the Manager is to be discussed, Dinah Young and Peter Eyles<br />
will abstain from taking part in any such discussion or voting, in order to avoid a conflict of<br />
interest in relation to their position as directors and shareholders of the Manager.<br />
All monies received directly by the Manager on behalf of the Company in connection with the<br />
Company’s premises will be received by the Manager as the Company’s agent and paid into a<br />
bank account opened in the name of the Company.<br />
<strong>The</strong> Manager will be remunerated for its services by way of a monthly payment calculated as<br />
follows:<br />
(i)<br />
a sum equal to 3.5% of the net sales achieved by the Company; and<br />
(ii) a profit share payment equal to 35% of the net operating profit of each of the pub<br />
restaurants owned by the Company after deduction of (i) above.<br />
<strong>The</strong> operating expenses of the pub restaurants will be met by the Company. <strong>The</strong> Manager will<br />
meet the cost of maintaining financial, accounting, maintenance and operating systems and<br />
records relating to the pub restaurants and the Company.<br />
In the event that payment of the management fee would lead to a breach of any bank covenants<br />
given by the Company, the above percentages will be reduced to an amount which does not<br />
cause a breach of any such covenants.<br />
Payment of the management fee in full is also conditional on the Company achieving an<br />
earnings per share of at least the previous year’s earnings per share plus the growth in the retail<br />
prices index for the corresponding period (the “Target EPS”). If the Target EPS, calculated after<br />
the deduction from profits of the total management fee, is not achieved, the total management<br />
fee shall be reduced to a level that would allow the Target EPS to be achieved. Earnings for this<br />
purpose are taken to mean net profits before tax.<br />
31
In the event that the management fee is reduced as set out above, the amount of such reduction<br />
is not capable of being deferred beyond the end of the relevant operating year, and nor is the<br />
Manager entitled to recover such reduction under any other mechanism.<br />
<strong>The</strong> Management Agreement may be terminated by the Company (i) in the event of liquidation<br />
of the Manager; (ii) if the Manager commits a material breach and does not remedy the breach<br />
within 60 days; (iii) if the Company or the relevant group company of the Company sells the<br />
entire share capital of the relevant group company of the company or the Company which owns<br />
the public houses or <strong>Inns</strong>; (iv) if all the shares of the Manager are acquired by a third party; or<br />
(v) if both Peter Eyles and Dinah Young cease to be directors of the Manager or principally<br />
involved in the operation of the Management Agreement.<br />
<strong>The</strong> Manager may terminate (i) in the event of liquidation by the Company; (ii) if the Company<br />
commits a material breach which is not remedied within 60 days; (iii) if the Company is subject<br />
to a change of control; or (iv) if the Company fails to provide the amount of working capital<br />
provided for in the agreed annual budget for the management of the pub restaurants and such<br />
failure is prejudicial to the Manager’s ability to comply with its obligations under the Management<br />
Agreement.<br />
On termination as a result of (i) sale of the entire share capital of the relevant group company<br />
of the Company or the company which owns the public houses or inns; or (ii) compulsory<br />
purchase, expropriation or similar proceedings in relation to all the sites, the Manager is entitled<br />
to receive a fee equal to the forecasted fee for the following twelve months.<br />
Either party may terminate the Management Agreement if the Company does not reinstate a<br />
particular pub restaurant following destruction or damage or if the Company elects to withdraw<br />
a particular pub restaurant from the scope of the Management Agreement.<br />
On such termination in relation to a particular pub restaurant, the Manager is entitled to a sum<br />
equal to the higher of (i) the average annual management fee accrued and paid or due to the<br />
Manager on net sales in relation to that particular site and a proportion of operating profit earned<br />
by that site for the period from the Commencement Date to the date of termination divided by the<br />
number of days in such period, multiplied by x, where x is the number of days in the unexpired<br />
period of the first three years of the agreement; and (ii) the annual management fee that would<br />
have become payable for the operating year in which termination occurs, based on an independent<br />
auditor’s best estimate of net sales in relation to a particular site and a proportion of operating<br />
profit earned by that site for that complete operating year.<br />
On termination of the Management Agreement for any reason, the Company must cease using<br />
the names “<strong>Cross</strong>”, “<strong>Oak</strong>” or “<strong>Cross</strong> <strong>Oak</strong>” or “<strong>Cross</strong> <strong>Oak</strong> Limited”. In the event that the<br />
Management Agreement is terminated by the Manager, and as a pre-condition to any<br />
termination of the Management Agreement by the Company, the Company must change the<br />
name of the Company to a name which includes neither the word “cross” nor the word “oak” nor<br />
anything similar to avoid association between the two companies in the future.<br />
<strong>The</strong> Manager is prevented from entering into material contracts with a value in excess of<br />
£50,000 or for a duration greater than 12 months without the prior consent of the Company.<br />
<strong>The</strong> Management Agreement may be assigned to the group companies of either party provided<br />
that each party procures that their respective group companies reassign the Management<br />
Agreement to the relevant party in the event that such group company leaves the respective<br />
group. No other assignment of the Management Agreement is permitted without the consent of<br />
the other party.<br />
8.2 On 17 June 2004 the Company signed an engagement letter with Vantis Corporate Finance<br />
Limited in relation to the provision of corporate finance advice and fundraising services in<br />
relation to the Offer. Under this letter the Company has agreed to pay Vantis a fee of £15,000<br />
plus 2 per cent. of all monies raised but limited to 1 per cent. of monies raised from certain<br />
potential investors introduced by Peter Eyles. <strong>The</strong> Company undertakes to Vantis that they are<br />
authorised to enter into the engagement and will maintain all necessary consents and<br />
authorisations for Vantis to carry out the engagement. <strong>The</strong> Company also undertakes to provide<br />
all information to Vantis that it may require to allow it to carry out the engagement, not disclose<br />
32
any information in relation to the Offer without the consent of Vantis, to reimburse any out of<br />
pocket expenses incurred by Vantis and also to indemnify Vantis against any loss suffered by<br />
Vantis arising directly or indirectly out of the engagement.<br />
9. <strong>Tax</strong>ation<br />
<strong>The</strong> statements below are intended only as a general guide to the current law and practice in relation<br />
to UK taxation and may not apply to certain persons who hold shares in the Company or who are not<br />
resident or ordinarily resident in the UK. Any persons who are in any doubt about their tax position are<br />
strongly advised to consult their own professional adviser.<br />
9.1 <strong>Tax</strong>ation of Dividends<br />
9.1.1 Under UK taxation legislation, no tax is withheld at source from dividend payments made by the<br />
Company. <strong>The</strong> requirement for companies to pay advance corporation tax (“ACT”) on making<br />
dividend payments was abolished with effect from 5 April 1999 and does not apply to dividend<br />
payments after that date.<br />
9.1.2 Dividends paid on or after 6 April 1999 carry an associated notional tax credit of one-ninth of<br />
the net dividend. Basic rate taxpayers have no further tax to pay on the dividend but nontaxpayers<br />
will not be entitled to any repayment of the associated tax credit. Higher rate<br />
taxpayers will have an additional liability, after taking account of the associated tax credit, which<br />
will put them in the same after-tax position as with a dividend under the previous rules.<br />
9.1.3 Trustees of discretionary trusts, liable to account for income tax at the rate applicable to trusts,<br />
will be liable to tax at the Schedule F Trust rate of 32.5 per cent.<br />
9.1.4 UK resident corporate Shareholders will not normally be liable to UK corporation tax or income<br />
tax on any dividends received from the Company.<br />
9.1.5 Shareholders who are resident in countries other than the UK may be entitled to a credit for all<br />
or a proportion of the associated tax credit. Shareholders not resident in the UK should consult<br />
their own tax adviser on the application of such provisions and the procedure for claiming relief.<br />
9.2 <strong>Tax</strong>ation of Chargeable Gains. A subsequent disposal of Shares may result in a liability to<br />
United Kingdom taxation of chargeable gains, depending upon individual circumstances.<br />
9.3 Stamp Duty and Stamp Duty Reserve <strong>Tax</strong> (“SDRT”)<br />
9.3.1 No liability to stamp duty or SDRT should arise on the allotment of the Shares by the Company<br />
under the Offer.<br />
9.3.2 Subsequent sales of Shares (outside CREST) will generally be liable to ad valorem stamp duty,<br />
at the rate of 50p per £100 (or part thereof) on the amount or value of the consideration.<br />
However, where an instrument of transfer which completes an unconditional agreement to<br />
transfer shares is duly stamped within six years after the agreement was entered into (or it<br />
became unconditional) the stamp duty paid will cancel the SDRT liability and any SDRT paid can<br />
be recovered. <strong>The</strong> information above is a general summary of certain tax provisions and should<br />
not be construed as constituting advice. Potential investors should obtain advice from their own<br />
investment or taxation adviser.<br />
9.4 Enterprise Investment Scheme<br />
Information on the tax reliefs available is set out in Part VI to this document.<br />
10. Working Capital<br />
<strong>The</strong> Directors are of the opinion, having made due and careful enquiry, that, after taking into<br />
account the net proceeds of the Offer, and the indicative banking terms, the working capital of<br />
the Company is sufficient for its present requirements, that is, for at least a period of 12 months<br />
from the date on which this document was issued.<br />
33
11. General<br />
11.1 Wilkins Kennedy accepts responsibility for its report and letter set out in Part V of this document<br />
and has given and not withdrawn its written consent to the issue of this document with the<br />
inclusion in it of its report and the references thereto and to its name in the form and context in<br />
which they appear.<br />
11.2 Vantis, <strong>Cross</strong> <strong>Oak</strong> Limited and Christie & Co have each given and not withdrawn their consent<br />
to the issue of this document with the inclusion of their names in such form and context as they<br />
appear.<br />
11.3 <strong>The</strong> Offer is not underwritten.<br />
11.4 <strong>The</strong> expenses of and incidental to the Offer and all registration fees, printing, advertising and<br />
distribution costs, legal and accounting fees and expenses (which include an estimate for the<br />
3% commission payable to introducers), will (assuming Maximum Subscription) amount to 8 per<br />
cent. of the gross proceeds of the Offer (including Value Added <strong>Tax</strong> where applicable) and are<br />
payable by the Company. If the maximum of £3,000,000 is raised under the Offer, the net<br />
proceeds will amount to approximately £2,760,000.<br />
11.5 If the minimum of £500,000 is raised the net proceeds will amount to approximately £388,000.<br />
<strong>The</strong> net proceeds will be applied in accordance with the Company’s investment strategy as<br />
described in this document. <strong>The</strong> minimum amount which, in the opinion of the Directors, must<br />
be raised by the Offer to provide the sums required in respect of the matters specified in<br />
paragraph 21 to Schedule 1 of the POS Regulations is £500,000 and, together with the<br />
Company’s existing resources, will be applied as follows:<br />
a) <strong>The</strong> purchase price of any property purchased or to be purchased in whole or part out of<br />
any proceeds of the Offer – £388,000;<br />
b) Any preliminary expenses payable by the Company and commissions so payable to any<br />
person in consideration of his or her agreeing to subscribe for, or of his or her procuring or<br />
agreeing to procure subscriptions for, Shares – £112,000;<br />
c) <strong>The</strong> repayment of any money borrowed by the Company in respect of any of the foregoing<br />
matters – £nil; and<br />
d) Working capital – £nil.<br />
11.6 <strong>The</strong> financial information set out in this document relating to the Company does not constitute<br />
statutory accounts within the meaning of section 240 of the Act. No statutory accounts have<br />
been delivered to the Registrar of Companies in respect of the Company and no auditors’ report<br />
under section 235 of the Act has been made in respect of any financial year or period.<br />
12. Documents available for inspection<br />
Copies of the following documents will be available for inspection free of charge during normal<br />
business hours on any weekday (Saturday and public holidays excepted) at the offices of Vantis<br />
Corporate Finance Limited at 82 St John Street, London EC1M 4JN and shall remain available<br />
until the Close of the Offer:<br />
(a) the Prospectus<br />
(b) the Memorandum and Articles of Association of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong><br />
(c) the Accountants’ <strong>Report</strong> on <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> for the period ended 17 September 2004<br />
(d) the Management Agreement referred to in 8.1 above<br />
(e) the letters of appointment of the Directors referred to in paragraph 5.2 above.<br />
Dated: 4 October 2004<br />
34
Part VIII – General terms and conditions of the Offer<br />
<strong>The</strong> Offer is being made by the Company. Applications must be made on the accompanying application<br />
form. No Application will be accepted unless it is made on an original Application Form.<br />
Terms and Conditions of Application<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
<strong>The</strong> contract created by the acceptance of applications under the Offer will be conditional upon<br />
the Minimum Subscription being received by 12 November 2004.<br />
<strong>The</strong> right is reserved by the Company to present all cheques and bankers’ drafts for payment on<br />
receipt and to retain surplus application monies pending clearance of successful applicants’<br />
cheques. <strong>The</strong> Company reserves the right to reject, in whole or in part, or to scale down, any<br />
application. If any application is not accepted in full, or is accepted for fewer Shares than the<br />
number applied for, or if any contract created by acceptance does not become unconditional,<br />
the application monies or, as the case may be, the balance thereof will be returned (without<br />
interest) by crossed cheque in favour of the applicant, through the post to the applicant’s<br />
address set out on the Application Form at the risk of the person(s) entitled thereto within seven<br />
days of the Closing of the Offer. <strong>The</strong> Company reserves the right to treat as valid and binding<br />
upon the applicant any application, even if the accompanying Application Form is not completed<br />
in all respects in accordance with the instructions or is not accompanied by the power of<br />
attorney where necessary. <strong>The</strong> right is reserved to reject any application in respect of which the<br />
applicant’s cheque or banker’s draft has not been cleared on first presentation. Notifications of<br />
acceptance or non-acceptance will not be issued pending issue of definitive certificates for the<br />
Shares or return of application monies (as the case may be).<br />
<strong>The</strong> Company reserves the right to allot and arrange for the issuing of Shares under the Offer<br />
prior to the stated closing.<br />
By completing and delivering an Application Form each applicant:<br />
i. offers to subscribe for the number of Shares specified in his or her Application Form (or<br />
such lesser number for which his or her application is accepted) at the Offer Price on the<br />
terms of and subject to this document, including these terms and conditions, and the<br />
Memorandum and Articles of Association of the Company;<br />
ii.<br />
iii.<br />
iv.<br />
agrees that, in consideration of the Company agreeing that it will not after 31 December<br />
2004 (or such later date if the Offer is extended) issue or allot any Share which is subject<br />
to the Offer to any person other than by means of the procedures referred to in this<br />
document, his or her application shall not be revoked and this paragraph shall constitute a<br />
collateral contract between him or her and the Company which will become binding upon<br />
despatch by post to, or (in the case of delivery by hand) on receipt by, Gateway Registrars<br />
of his or her Application Form;<br />
warrants that his or her remittance will be honoured on first presentation and agrees that if<br />
such remittance is not so honoured, he or she will not be entitled to receive a share<br />
certificate in respect of the Shares applied for or to enjoy or receive any rights or<br />
distributions in respect of any Shares unless and until he or she makes payment in cleared<br />
funds for such Shares and such payment is accepted by the Company (which acceptance<br />
shall be in its absolute discretion and may be on the basis that he or she indemnifies the<br />
Company against all costs, damages, losses, expenses and liabilities arising out of or in<br />
connection with the failure of his or her remittance to be honoured in first presentation) and<br />
that, at any time prior to unconditional acceptance by the Company of such late payment in<br />
respect of such Shares, the Company (without prejudice to any other rights) may avoid the<br />
agreement to allocate such Shares to him or her and may re-allocate Shares to some other<br />
person, in which case he or she will not be entitled to any refund or payment in respect of<br />
such Shares (other than the refund to him or her at his or her risk of any proceeds of the<br />
cheque or bankers’ draft accompanying this application, without interest);<br />
agrees that any monies returnable to him or her may be retained by the Company pending<br />
clearance of his or her remittance and that such monies will not bear interest;<br />
35
v. agrees that applications to the value of approximately £9,000 or more which are settled by<br />
way of a third party payment, e.g. bankers’ draft, building society cheque or a cheque drawn<br />
by someone other than the applicant, will be subject to the UK’s verification of identity<br />
requirements which are contained in the Proceeds of Crime Act 2002 and Money<br />
Laundering Regulations 2003 as amended, updated, replaced or superseded from time to<br />
time;<br />
vi.<br />
agrees with the Company promptly, on request, to disclose in writing any information which<br />
it may request in connection with his or her application and authorises the Company to<br />
disclose any information relating to his or her application it may consider appropriate;<br />
vii. agrees that any definitive share certificate to which he or she might become entitled and<br />
monies to be returned to him or her may be retained pending clearance of his or her<br />
remittance or pending investigation of any suspected breach of the warranties of this Part<br />
VIII and that such monies will not bear interest;<br />
viii. agrees that all applications, acceptance of applications and contracts resulting there from<br />
under the Offer shall be governed by and construed in accordance with English law, and that<br />
he or she submits to the jurisdiction of the English Courts and agrees that nothing shall limit<br />
the right of the Company to bring any action, suit or proceedings arising out of it in<br />
connection with any such applications, acceptances of applications and contracts in any<br />
other manner permitted by law or in any court of competent jurisdiction;<br />
ix.<br />
confirms that in making such application he or she is not relying on any information or<br />
representation in relation to the Company other than the information contained in this<br />
document and accordingly he or she agrees that no person responsible solely or jointly for<br />
this document or any part thereof or involved in the preparation thereof shall have any<br />
liability for any such other information or representation;<br />
x. agrees that, having had the opportunity to read this document, he or she shall be deemed<br />
to have had notice of all information and representations concerning the Company<br />
contained therein;<br />
xi.<br />
confirms and warrants that he or she has read and complied with paragraph (e) below;<br />
xii. warrants that he or she is not under the age of 18;<br />
xiii. agrees that all certificates, documents, monies and cheques sent by post to, by or on behalf<br />
of the Company or Gateway Registrars will be sent at the risk of the person(s) entitled<br />
thereto to the address specified in the Application Form (or in the case of multiple applicants<br />
the first named);<br />
xiv. warrants that, if an Application Form is signed on behalf of somebody else, the signatory<br />
has the authority to do so and such person will be bound accordingly and will be deemed<br />
also to have given the confirmations, warranties and undertakings contained in these terms<br />
and conditions;<br />
xv. warrants that no other application (not being an application under the terms of the<br />
Application Form) is being made by him or her for his or her own account or by another on<br />
his or her behalf or for benefit and with his or her knowledge for such purpose or, if he or<br />
she is applying as agent or nominee of another, that no other application is being made by<br />
him or her (not being an application as aforesaid) as an agent or nominee for that other<br />
person and that other person is not, to his or her knowledge, acting in concert with any other<br />
person or persons as aforesaid;<br />
xvi. warrants that, in connection with the application he or she has observed the laws of all<br />
relevant territories, obtained any requisite governmental or other consents which may be<br />
required, complied with all requisite formalities and paid any issue, transfer or other taxes<br />
due in connection with your application in any territory, other than stamp duty or SDRT, and<br />
that he or she has not taken any action which will or may result in the Company or any of<br />
its directors, officers, agents or employees acting in breach of the regulatory or legal<br />
requirements of any territory in connection with the Offer or the application; and<br />
36
xvii.authorises the Company or its agents to do all things necessary to effect registration into<br />
the applicant’s name(s) of any Shares for which his or her application is accepted and<br />
authorise any representative of the Company to execute and/or complete any document of<br />
title required therefore.<br />
(e)<br />
(f)<br />
No person receiving a copy of this document or an Application Form in any territory other than<br />
the United Kingdom may treat the same as constituting an invitation or offer to him or her, nor<br />
should he or she in any event use such Application Form unless, in the relevant territory, such<br />
an invitation or offer could lawfully be made to him or her or such Application Form could lawfully<br />
be used without contravention of any registration or other legal requirements. It is the<br />
responsibility of any person outside the United Kingdom wishing to make an application<br />
hereunder to satisfy himself or herself as to full observance of the laws of any relevant territory<br />
in connection therewith, including obtaining any requisite governmental or other consents,<br />
observing any other formalities requiring to be observed in such territory and paying any issue,<br />
transfer or other taxes required to be paid in such territory.<br />
Save where the context otherwise requires, words and expressions defined in this document<br />
have the same meaning when used in the Application Form and any explanatory notes in<br />
relation thereto.<br />
Documents of Title<br />
Application Forms must be sent by post or delivered by hand to Gateway Registrars, together with the<br />
appropriate remittance, so as to be received not later than 3.00 pm on 31 December 2004 (unless<br />
extended prior to that date), at 42-46 High Street, Esher, Surrey KT10 9QY. <strong>The</strong> subscription list will<br />
open at 10.00 am on 5 October 2004 and will close on 12 November 2004 if the Minimum Subscription<br />
has not been received, or if the Minimum Subscription is received by 12 November 2004, at 3.00 pm<br />
on 31 December 2004, unless extended or the Maximum Subscription has been achieved prior to that<br />
date. Temporary documents of title will not be issued. Definitive share certificates will be despatched<br />
by first class post within 7 days of the allotment and issue of Shares under the Offer, pending which,<br />
transfers will be certified against the register. Allotments of Shares will be made at the discretion of the<br />
Board.<br />
Money Laundering Regulations<br />
It is a term of the Offer that, to ensure compliance with the Proceeds of Crime Act 2002 and Money<br />
Laundering Regulations 2003 as amended, updated, replaced or superseded from time to time,<br />
Gateway Registrars may at its absolute discretion require verification of identity from any person<br />
lodging an Application Form (the “Applicant”) and, without prejudice to the generality of the foregoing,<br />
in particular any person who either (a) tenders payment by way of cheque or bankers’ draft drawn on<br />
an account in the name of a person or persons other than the Applicant or (b) appears to be acting on<br />
behalf of some other person. In the former case, verification of the identity of the Applicant may be<br />
required. In the latter case, verification of the identity of any person on whose behalf the Applicant<br />
appears to be acting may be required. If within a reasonable period of time following a request for<br />
verification of identity and in any case by no later than 3.00 pm on the relevant date of allotment<br />
Gateway Registrars has not received evidence satisfactory to it as aforesaid, the Company with the<br />
agreement of Gateway Registrars may, at its absolute discretion, reject any such application in which<br />
event the remittance submitted in respect of that application will be returned to the Applicant (without<br />
prejudice to the rights of the Company to undertake proceedings to recover any loss suffered by it as<br />
a result of the failure to produce satisfactory evidence of identity). Where possible applicants should<br />
make payment by their own cheque. If a third party cheque, bankers’ draft or building society cheque<br />
is used, the Applicant should:<br />
a. write his/her name and address on the back of the draft or cheque and, in the case of an<br />
individual, record his/her date of birth against his/her name; and<br />
b. ask the bank or building society (if relevant) to endorse on the reverse of the draft or cheque<br />
the full name and account of the person whose account is being debited and stamp such<br />
endorsement. In any event, if it appears to Gateway Registrars, that an Applicant is acting on<br />
behalf of some other person, further verification of the identity of any person on whose behalf<br />
the Applicant appears to be acting will be required. In relation to any application in respect of<br />
37
which the necessary verification of the identity of the Application or the person on whose behalf<br />
any Applicant appears to be acting has not been received on or before 3.00 pm on the relevant<br />
date of allotment, the Company will treat the relevant application as invalid and application<br />
monies will be returned (without interest). <strong>The</strong> above information is provided by way of guidance<br />
to reduce the likelihood of difficulties, delays and potential rejection of an Application Form (but<br />
without limiting Gateway Registrars the right to require verification of identity as indicated<br />
above).<br />
38
Part IX – Application procedure<br />
<strong>The</strong> following instructions should be read in conjunction with the Application Form:<br />
1. Insert your full name, address, date of birth and National Insurance number in block<br />
capitals in Box 1. Applications may only be made by persons aged 18 or over.<br />
2. Insert in Box 2 (in figures) the number of Shares for which you are applying. Your<br />
application in respect of the Offer must be for a minimum of 5,000 Shares and above that in<br />
multiples of 1,000 Shares.<br />
3. Insert in Box 3 (in figures) the amount of your payment. Your cheque or bankers’ draft<br />
should be for the amount, which represents £1 multiplied by the number of Shares inserted in<br />
Box 2.<br />
4. You must affix to the completed Application Form cheques or bankers’ drafts for the full<br />
amount payable. Your cheque or bankers’ draft must be payable to <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> for the<br />
amount payable on application inserted in Box 3 and should be crossed “A/C Payee”. No receipt<br />
will be issued for this payment which must be solely for this application. Your cheque or bankers’<br />
draft must be drawn in sterling on an account at a branch (which must be in the UK, the Channel<br />
Islands or the Isle of Man) of a bank which is either a settlement member of the Cheque &<br />
Credit Clearing Company Limited or the CHAPS Town Clearing Company Limited or a member<br />
of either of the Committees of the Scottish or Belfast Clearing Houses or which has arranged<br />
for its cheques or bankers’ drafts to be presented for payment through the clearing facilities<br />
provided for the members of any of those companies or committees, and must bear the<br />
appropriate sort code number in the top right hand corner. <strong>The</strong> right is reserved to reject any<br />
application in respect of which the applicant’s cheques or bankers’ drafts have not been cleared<br />
on first presentation. Applications may be accompanied by a cheque or bankers’ draft drawn by<br />
someone other than the applicant(s), but any monies to be returned will be sent by crossed<br />
cheque in favour of the person(s) named in Box 1.<br />
5. Share Certificates. A share certificate will be sent to you incorporating the details included in<br />
Box 1 following the allotment and issue of Shares under the Offer.<br />
6. Sign and date the Application Form.<br />
7. Agents who are entitled to receive commission should stamp and complete Box 6 on the<br />
Application Form, giving their full name and address, telephone number and details of their<br />
authorisation under the Financial Services and Markets Act 2000. <strong>The</strong> right is reserved to<br />
withhold payment of any commission if Gateway Registrars is not, in its sole discretion, satisfied<br />
that the agent is so authorised.<br />
8. If you have any queries on the procedure for application and payment, you should contact<br />
Gateway Registrars on 01372 478178 or Vantis Corporate Finance Limited on 020 7417 0417,<br />
or your financial adviser.<br />
9. Delivery of Application Form. Send the completed Application Form together with the cheque<br />
or bankers’ draft by post, or deliver it by hand, to Gateway Registrars at 42-46 High Street,<br />
Esher, Surrey KT10 9QY so as to be received no later than 3.00 pm on 31 December 2004<br />
(unless extended prior to that date). In the event that applications are received for an amount in<br />
excess of the Maximum Subscription, Shares will be allocated on a first come first served basis.<br />
If you post your Application Form you are recommended to use first class post and to allow at<br />
least two working days for delivery. Photocopied or faxed copies of the Application Form will not<br />
be accepted. Your attention is drawn to the warranties set out in the paragraph headed “Terms<br />
and Conditions of Application” in Part VIII of this document.<br />
39
<strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> – Application Form<br />
please use block capitals<br />
1.<br />
Mr, Mrs, Miss, Ms or title<br />
Forename(s) (in full)<br />
Surname<br />
Address (in full)<br />
Postcode<br />
Telephone<br />
Number<br />
Permanent address (if<br />
different from above<br />
Postcode<br />
Date of Birth<br />
National Insurance Number<br />
2. I apply for (a minimum of 5,000 shares, thereafter in multiples of 1,000):<br />
New Ordinary Shares<br />
(or any smaller number of New Ordinary Shares for which the application is accepted) at the Offer Price of £1 per New<br />
Ordinary Share, payable in full on application, on the terms and conditions set out in this Application Form and the<br />
Prospectus dated 4 October 2004 and subject to the Memorandum and Articles of Association of <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong><br />
<strong>plc</strong>.<br />
3. I attach a cheque or bankers’ draft for the following amount payable to “<strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong>”.<br />
(minimum £5,000)<br />
Please send me certificate confirming my entitlement to EIS tax relief in respect of my subscription for the above.<br />
4. Affix here your cheque or bankers’ draft for the amount in Box 3 made payable to “<strong>Cross</strong><br />
<strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong>” and crossed “A/C Payee” (please pin, staple or clip; do not glue or tape your<br />
cheque or bankers’s draft to this form).<br />
5. By signing this form I HEREBY DECLARE THAT:<br />
(i)<br />
(ii)<br />
I have received the Prospectus dated 4 October 2004 and have read the terms and conditions of application<br />
contained therein and agree to be bound by them; and<br />
to the best of my knowledge and belief, the particulars I have given to <strong>Cross</strong> <strong>Oak</strong> <strong>Inns</strong> <strong>plc</strong> are correct.<br />
<strong>The</strong> Inland Revenue may inspect this declaration. It is a serious offence to make a false declaration.<br />
Signature<br />
Date<br />
DELIVERY OF APPLICATION FORM<br />
Send completed Application Form, together with the cheque or bankers’ draft by post or deliver by hand to Gateway<br />
Registrars, 42-46 High Street, Esher, Surrey KT10 9QY.<br />
6. Due completion of the agent’s box indicates that the agent is duly<br />
authorised to transact investments of this type under the Financial<br />
Services and Markets Act 2000 and confirms that the requirements<br />
of the applicable Money Laundering Regulations as amended have<br />
been complied with regarding the identification and verification of<br />
the applicant. Commission usually at a rate of 3% of the funds<br />
invested, will be paid to authorised financial intermediaries.<br />
Stamp of authorised financial<br />
intermediary<br />
(if applicable)<br />
✄<br />
Authorised Ref No<br />
40