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POST OFFICE LIMITED
(company no..2154540)
Minutes of the meeting of the Board of Directors
held at Gavrelle House, London, on 24 May 2002
Present:
Allan Leighton Chairman
David Mills Chief Executive:
Peter Corbett Finance. Director
David Operations D Director
“Marisa Gassoni Greg Ps we Gereaky, Contre Ny i s
John Roberts Clic S Cyn Fre, Cratyam
=n attendance:
James Dean Emst.& Young
Dan ‘Hamilton CMS Cameron. McKenna
David Day CMS:Cameron McKenna
Catherine Churchard Head. of Legal Services, Consignia-ple
Jeff Triggs Slaughter and-May
Jonathan Evaris Conipatiy Secretary
Anna Malley. Notes
foL6 ozlolq — NFRoBUETION- foST OFFILG CIMITE) AecoUNTT Zeso(- O2.
The Chmtiman
Ci Jt-was explained to. the meeting that the Company’s. ultimate parent company,
Consignia Holdings ple (“Holdings”) proposed to. make a_préliminary
announcement of the results of the Consignia group for the financial year 2001/2,
on a.going concem basis. The meeting had been convened to consider whether, in
the context‘ of: that proposed.announcement, the Directors were able to conclude
that the ‘accounts of the Cotiipany for that period.should be:prepared on a,going
concern.basis;
¢ ay ) For the purposes of Article 89-of the Company's Articles of Association and
pursuant'to.section 317 Companies Act 1985, it was‘noted that Allan Leighton,
Marisa:Cassoni, John Roberts.and, David Mills, were:directors of Consignia
Holdings-PLC and Consignia plciand that accordingly they. were-to be:regarded as
having.an-interest:in:any:transaction or arrangement between the:Company: aid
either of such:other companies;
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) There were produced to:the:meeting copies.of the following:-
(it t
&) a draft letter from the Secretary:of State dated 21 May 2002 setting: out, inter
alia, the Government’s intentions for funding the Consignia group over the
foreséeable future;
b a further draft letter from‘the, DTI dated 21 May 2002;
(Gi) a group cashflow: analysis dated'23, May'2002;
Q
& a draft “comfort” letter to be addressed to the Directorsfrom Holdings in relation
to Holdings” intention to: provide financial support to, the:'Company;
4) ‘the current strategic plan of:the Company;jand
hip the draft accounts:foF 200125
)
3 _THEDISCUSSION
The Direeters carefully considered the documents produced to the meeting, 4p.
particular? a pola Oo Anish, 7
(1) @
(y)
(vi) (iy the Directers-diseussed the extent of the-comfort to be. derived: fromthe draft
letter from the Secretary of Staté {having regard, in particular, to: the. various
conditions referred to in'the’letterf and thedraft letter. from thé DTI. It-was:noted
in addition that’ personal assurances. had been given to the Groiip Finarice
Director, the Consignia ‘plc Chief Executive, and the Chief. Exécutive of the
* Company, from the Treasury, DTI-and the Prime Minister’s ‘private office, that
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the current Government could not foresee circumstances in'‘which.the Compariy
would be allowed to.become insolvent;
(vii}e there-was-discussion-of-certain-i Jation-to_the-current strategie-plarrof
the-Company-and it-avas‘neted that ‘the Company had agreed to produce a‘revised
strategic plan.by Ist:September 2002: It was‘noted thatthe Company had taken
a:prudent decision ‘to remove funding for the Social 'Network.Payment:and Your
Guide from the plan, in‘the:absence.of-any financial.support;
vie] the ‘projected future cash flows: of the, Consignia. group, wvere—earefully
considered, including the headroom :contained in them and. the. sensitivities to
which they were potentially:subject. Furtheimore, the Horizon rinning costs, the
removal of benefit. agency’ pre-payments and. the. move to aiitérnated credit
transfer would mean that‘thée Company remained logé-paking throughout the
duration of the plan, and were dependant on continued support from the parent
company; sd,
(ix) Gi) ) the-Directors-carefulty consideredthe.draftiletter from Holdingstandithe‘extent of.
the financial.support contained therein, noting that it'was (amongst other things)
subject to certain.coriditioris and constraints:imposed by the Secretary:of State’s
letter: It would be important to keep the financial position. of: Consignia
Holdings ple and Consigria ple under réview, given the dependence of the
Company on the support of. iteparent
( x -ltewascnotet thatthe Secretary. of State’s letter did ‘not amount'to a legally binding
obliga ion to: advance the ‘necessary ‘funding ‘for the Consignia group and ‘was
subject to‘the'following:conditions:-
a) approval by the Holdings Board. of the corporate governance, structure and
performance management: arrangements proposed in it (it being noted that the
- Holdings Board had indicated its intention:to give this approval);
b). any ‘necessary state aid.clearances;
c) the:NLF approving the funding where nécessary; and
d) the Company producing a revised strategic plan by 1 September 2002, as
referred to inthe Secretary of State’s letter;
&i ) Jt-was-also-neted thatithe nt’ of Postcomm.maybe.necessary to.deal with the
gilts Gurtently held by €o1 ‘ignia plcrin the:manner‘envisaged by the Secretary of
State’s letter.
C this notwithstanding, it-was-agreed_that the letter (together with the-further letter
from the DTI) constituted evidence of the Secretary of State’s commitment to
funding.the Consignia‘group, including the post office network.
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After careful consideration of the, uncertainties inherent in the Sécretary-of Staté’s
letter-and the possible: risks jnvolved in the delivery of the’ Company’s ‘strategic
i S, ed having regard to:
)# the Government’s publicly expressed.commitment to funding the network;
Go the intentions: expressed in the Secretary of State’s letter and the
a supplemental letter,from'the DTI;
(fi). _ the personal assurances’provided to-certain Directors by the Treasury; the
4 DTI aid the Prime:Minister’s: private:office;
(mi) the tetms ofte'letter oficom fort from Holdings;
G&) the Cornpany’s iifiderstanding, of the financial position of Holdings and of
@ Consignia ple;
(@) the Company’s'cash flow forecasts as produced to. the meeting; and
™, the recommendation of the Holdings audit committee that. the Consignia
group’s accounts‘should be prepared on a going concern basis;
and,subject:to the:Secretary.of:State’s letter, the: DTI letter andthe comfort letter
from: Holdingsibeing:signgd jn:the form tabled, (gr Ubigrt te amendments'agreed
by the:Company’s Board), the Comparly was likely eet.its liabilities as they
fell due for the foreseeable fature and that:the Company’s.accounts for the
financial yeat 2001/02.shoil the efore be.prepared-on a going concer basis.
ie-Di 6-ag the accounts be signed off:as presented, subject'to
résolution of those outstanding issues presented to the:meeting.
Gciv) The Directors also noted,. however, that the’ margins! contained in. thé ¢ash flow
forecasts were.not great’ and that there were iincertainties inhereiit-in the.delivery
of both:the Company’s strategic plan to be prepared’ by 1 September-2002 and the
strategic plan of Consignia plc, on whose performance the ability of Holdings to
support. the Company was dependent and that the finance available tg the
Company was subject to a number of conditions: Accordingly jt Was ‘that
the Company's financial’ position should be kept under regular review by the
Board.
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