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IN STRICTEST CONFIDENCE
To Bruce McNiven ! Copy Mena Rego
Chris French Kevin Corrigan
Andy Radka Jerome Brice
John Meagher Liz Blackburn
Douglas Craik
Copy (letter only): John Cook
From Keith Baines . 11 June 1999
Letter and Heads of Agreement
We have now agreed an amended Letter and Heads of Agreement with ICL
Pathway which will form the basis of changes to the contracts in order to
produce the codified agreement to be signed on 16th July.
Tenclose a copy for your personal use. Parts of it may be shared with other
programme staff on a need to know basis only. Please note the
confidentiality clauses on page 4 of the Heads of Agreement document.
The document needs to be read alongside the existing contract - where there
are differences this document takes precedence.
Keith Baines
_Head of Horizon Commercial
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(ON POCL LETTERHEAD]
Keith Todd Esq.,
ICL ple,
26 Finsbury Square,
London,
EC2A 1DS.
24 May 1999
Dear Mr. Todd,
POCL AUTOMATION PROJECT
POCL, ICL Pathway, ICL and DSS have been negotiating, with the assistance of HM
Treasury, the withdrawal of DSS from further involvement in the Project and certain
material amendments to the existing contracts between the parties.
Most recently, negotiations have proceeded on the basis that the Project will be
amended to introduce a new service, the Benefits Payment Service or BPS, and the
draft Heads of Agreement dated May 1999 between POCL, ICL Pathway and ICL
+ (document reference 207738/10582 CA991020027 JRT 060599.2352) (the “Heads")
reflect that position.
Ministers have decided that the Project will be scaled down and completed on the basis
that the claims of each party against the others will be settled on the following terms:
1. The Heads as.amended by Schedule 1 to this letter take effect from the date
hereof.
2. ICL Pathway will complete its obligations under the Related Agreements, as the
same are amended by the Heads, and as the Related Agreements and the Heads
are further amended by this letter.
3. POCL will pay ICL Pathway the sums set out in Schedule 2 to this letter in the
manner and at the times set out in Schedule 2.
4. ICL Pathway will provide services under the Related Agreements (as amended)
until 31st March 2005 (notwithstanding any later date that may appear in the
Related Agreements or the Heads). On cessation of the services, POCL will
have the option, subject to due payment of all sums payable up to that date, to
purchase from ICL Pathway for the sum of £1 the Project Assets (using the
definition of that term in the Heads which is expressed to be ‘ICs view’), such
Project Assets to be sold “as is”, free of encumbrances including perpetual
royalty free licences of all IPRs in accordance with the Related Agreements but
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with all express or implied warranties and conditions excluded to the full extent
permitted by law.
5. In parallel with performance of ICL Pathway’s obligations under 2 above, and
following our discussions with you, we wish to confirm our desire to use the
Core System for network banking and the provision of services (via smart
cards) for Modern Government. We will therefore work with you to revive and
continue the discussions on the Public Private Partnership which we have
previously considered. It is hoped that we can together develop a business
strategy in these areas which we can deliver through appropriate arrangements
under a Public Private Partnership in order to leverage the use of the Core
System and develop to the full its potential for the delivery of electronic
business services.
6. ICL Pathway shall provide such services as may be agreed by ICL Pathway and
POCL for Royal Mail, DVLA, NAS, Girobank and the Co-op (and other POCL
clients as may be agreed) at marginal running costs.
7. This letter agreement will come into effect on signature and will remain
binding on all parties unless and until replaced by a comprehensive codification
of the relevant terms of the Related Agreements, the Heads and this letter (a
“Codified Agreement”) which is agreed between all the parties thereto. The
parties will use reasonable endeavours to produce and agree such a codification
by 16 July, 1999. This provision shall be without prejudice to any change to
this letter, the Heads or the Related Agreements which is agreed between the
relevant parties in accordance with the terms of the document in question.
8. In the event of any disagreement concerning the terms to be included in the
Codified Agreement, POCL and ICL Pathway will negotiate in good faith to
reach a resolution of the matter in question. If the Managing Director of POCL
(or any equivalent executive) and the Commercial Director of ICL are unable to
reach resolution of the matter at their initial meeting to discuss the same they
shall invite an expert to give guidance and act as a facilitator. Where the matter
in question is of a programme or technical nature, the expert shall be Peter
Copping of PA Consulting Group (or, if he is not available, a person chosen in
accordance with paras. 6.2 and 6.3 of Schedule 6 to the Heads). Where the
matter is of any other nature the expert shall be an independent City solicitor to
be agreed between ICL Pathway and’POCL within 7 days of the date of this
letter or, in default of agreement, to be appointed at the request of either of
them by the President for the time being of the Law Society. ICL Pathway and
POCL do not expect that the identification and notification of the disagreement,
reference of the disagreement to the expert and obtaining his guidance should
take longer than 7 days.
If the parties have used all reasonable endeavours to agree the terms of the
Codified Agreement, including pursuing the dispute resolution procedure
'207738/10S82 CA991460.044 PKYL 090699:1021
above, but by 16 July, 1999 material issues still remain unresolved, POCL shall
have the right (to be exercised by a written notice served on ICL Pathway by 30
July, 1999) to terminate the agreement contained in this letter including, for
the avoidance of doubt, the Heads and the Related Agreements as amended.
Where POCL does not exercise this right of termination this letter shall continue
in force. However, this shall not prevent POCL and ICL Pathway from agreeing
to replace this letter in its entirety with an incomplete Codified Agreement
which incorporates those matters which have been agreed and, as regards
matters which have not been agreed, carries forward the relevant parts of the
agreement contained in this letter. In the event that POCL does exercise its
right of termination pursuant to this paragraph, it will make a payment of £150
million to ICL Pathway less the sum of £68 million referred to in Schedule 2,
paragraph 1 if, at the date of such termination, the sum of £68 million has
already been paid to ICL Pathway.
9. The terms of this letter shall be in full and final settlement of all claims and
counterclaims which any of POCL, ICL and ICL Pathway (the “Parties”) may
have against any other of them under or in connection with the Related
Agreements arising from or in connection with acts or events which occurred or
should have occurred, or statements that were made on or prior to the date of
this letter (whether or not such have been made the subject of a claim or
counterclaim at the date hereof). Each of the Parties hereby waives any rights
whatsoever which it might have against any other Party arising from or in
‘connection with such acts, events or statements.
Words defined directly or by reference in the Heads bear the same meaning in this
letter, unless the context otherwise requires. In the event of any conflict between the
terms of this letter (including its schedules), the Heads, and any of the Related
Agreements, the order of precedence shall be as follows (and so that the document
listed earlier prevails over the document listed later):
This letter (including its schedules)
The Heads
The Related Agreements.
Any amendment to this letter shall, to be valid, be made in writing under the hands of
the signatories hereto or persons holding equivalent positions in the department,
agency or company in question.
In the event of any disagreement concerning the terms of, or arising under, this letter
the Heads or the Related Agreements, the Parties or such of them as are in
disagreement shall negotiate in good faith to reach an amicable resolution of the
matter in question, but in default of resolution within a reasonable period any relevant
Party (that is a Party having a direct interest in the matter in question) may apply to
the courts of England & Wales for the matter to be resolved in accordance with English .
law. This provision shall be without prejudice to the specific provision for the
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——
resolution of disputes relating to Acceptance which is contained in the Heads and the
provision in paragraph 8 as to the resolution of disagreements concerning terms to be
included in the Codified Agreement.
For the sake of completeness please confirm your agreement to the above matters by
signing the attached photocopy.
Yours sincerely,
On original:
Signed for and on behalf of the
Post Office Counters Ltd.
By S.J. Sweetman (signed)
Name S. J. Sweetman
Title Managing Director
- On photocopy:
We hereby agree the terms of the above letter
R. Christou (signed)
for and on behalf of ICL ple
R. Christou (signed)
for and on behalf of ICL Pathway Limite:
207738/10582 CA991460.044 PKYL 090699:1021
SCHEDULE 1
[The amendments in Schedule 1 have been incorporated into the POCL/ICL Heads (ref:
CA991450103 (note: this is a copy of the document referred to in paragraph 2 of this
letter)] “
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SCHEDULE 2
Payment Schedule
1. Capital Sum Payments
1.1 ICL Pathway shall be paid a Capital Sum of £480 million. The Capital Sum is to
be paid in four equal Progress Payments, subject to retention described below,
each to be paid upon the later to occur of (i) achieving the Completion of Roll-
Out to the cumulative number of Post Offices set out below and (ii) the date set
out opposite the cumulative number of Post Offices:
Cumulative number of Post Offices Date
completed
1,800 1/11/1999
6,000 1/5/2000
12,000 1/11/2000
The number of post offices to achieve 1/3/2001
CS Completion Date
A further £68 million (in addition to the £480 million described above) will be
paid to ICL Pathway on Acceptance of the Core System.
Retention of 25% shall be withheld from each Progress Payment.
Upon achieving approval by the Release Authorisation Board of CSR+ (as
referred to in Schedule 5 of the Heads), the sums retained on the first two
Progress Payments (“the First Retention Sum”) shall be converted into an
availability fee (“the First Availability Fee") to be paid as described below.
At the end of each-calendar month following the later to occur of (i) conversion
of the First Retention Sum or (ii) 1 January 2001, POCL shall pay to ICL
Pathway in respect thereof an amount equal to the First Retention Sum divided
by the lesser of 48 and the number of months from the date of such conversion
to 31 March 2005 until the full amount of the First Retention Sum is paid.
Following the first period of three consecutive months occurring after CS
Completion Date during which in each month ICL Pathway shall have achieved
service levels which relate to the performance of (as opposed to the operation
of) the Core System which exceed the Termination Review Thresholds (as
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1.2
1.3
1.4
15
1.6
17
referred to in Schedule A8 of the Authorities Agreement) the sums retained on
the third and fourth Progress Payments (the “Second Retention Sum”) shall be
converted into a further availability fee (“the Second Availability Fee”).
At the end of each calendar month following such conversion of the Second
Retention Sum, POCL shall pay to ICL Pathway in respect thereof an amount
equal to the Second Retention Sum divided by the lower of 48 and the number
of months from the date of such conversion to 31 March 2005 until the full
amount of the Second Retention Sum is paid.
If in the event that after nine months following the CS Completion Date,
completion of Roll Out (by reference to Annex 3 to Schedule 4 of the Heads as
the same may have been amended through change control) has not been
achieved, then retentions from the Second Availability Fee will be made toa
maximum sum of £4m and will be released in full upon completion of Roll Out.
All Progress Payments to ICL Pathway will be made within 30 days of the date
on which the Progress Payment becomes payable.
Subject to Clause 2.6 of this Schedule all payments to be made without set off
or deduction whatsoever.
In the event that Acceptance of the Core System is delayed then payment of the
next Progress Payment following the delay will be adjusted in accordance with
paragraph 3.1 of Schedule 7 of the Heads as amended in accordance with
Schedule 1 of this letter.
The final Progress Payment will be due on the date of completion of National
Roll-Out or, if National Roll-Out has not been completed by 31/3/2001, on the
CS Completion Date.
In the event that the Roll-Out program changes from the program set out in
Annex 3 to Schedule 4 of the Heads then the relevant Progress Payments will be
adjusted in accordance with paragraph 3.1 of Schedule 7 of the Heads as
amended in accordance with Schedule 1 of this letter.
The payments assume that the following paragraphs of Schedule 7 of the Heads
shall apply: . .
- Paragraphs 1.1, 1.2, 1.3 and 1.5 (Infrastructure program in Post Offices)
- Paragraph 2.1 (Training)
- Paragraph 4.1 (In Office migration)
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1.8 For the avoidance of doubt, the transition costs associated with converting
existing Benefits Agency customers with cards back to order books as referred
to in paragraph 7 of this letter have not been taken into account in calculating
the payments.
2. Operating Payments
2.0 ‘In addition, payments with respect to operating the Core System shall be made
ona monthly basis from 1/4/2001 in accordance with the table below
(“Monthly Operating Fee”). The Monthly Operating Fee shall be calculated by
taking the periodic payment figure and dividing by the number of months in
the period.
2.1 If the CS Completion Date has not been achieved by 31/3/01 the Monthly
Operating Fee shall be adjusted pro rata to the number of Post Offices installed
relative to the number planned to be installed at the CS Completion Date
provided however that Roll-Out has taken place in at least 90% of those
planned to be installed. For the avoidance of doubt amounts paid pursuant to
the Capital Sum include operating and maintenance costs incurred prior to 1
Period Periodic Payment
1/4/2001 - 31/12/2001
1/1/2002 - 31/12/2002
1/1/2003 - 31/12/2003
1/1/2004 - 31/12/2004
1/1/2005 - 31/3/2005
April 2001.
2.2 The payments assume an RPI of 2.5% from the date of this letter until
31/3/2005. In the event that RPI is not equal to 2.5% over this period, the
£63m
£85m
£87m
£81m
£21m
payments will be adjusted to take into account the actual rate.
2.3 The parties acknowledge that the Monthly Operating Fees include:
@
a Transaction volume cost element of 7% of the amount in the table
above, which is based upon the Transaction volume forecast as set out in
Annex 4 to Schedule 4 of the Heads for the period up to 31/03/2005;
and
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oA
2.4
25
2.6
(ii) an Outlet cost element of 32% of the amount in the table above, which
is based upon the parties’ intention that Pathway will roll out the Core
System to 18,573 Outlets. .
The amount of the Transaction volume cost element shall be adjusted for each
month by the proportion of the actual Transaction volume (calculated in
accordance with Annex 1 to Schedule 4 of the Heads) to the Transaction
volume forecast in the month in question, and the Outlet cost element will be
adjusted for each month by the proportion which the actual number of Outlets
to which services are being provided during such month bears to 18,573.
In addition, POCL shall pay for the cost of Pathway carrying out operational
business change in excess of the limits set out in the Related Agreements on an
incremental basis at marginal cost plus 10%.
The payments are based on the services comprised in the Core System Release.
For the avoidance of doubt the payments assume costs relating to all aspects of
the system including maintenance of the Post Office and data centre
infrastructure including help desk support, all telecoms charges including line
costs and usage charges, and Management Information Systems.
ICL Pathway will be subject to service level commitments and liquidated
damages according to the Related Agreements and that these will be set off
against payment. The service level commitments and liquidated damages
relating to Counter Transaction Times will need to be adjusted to take
reasonable account of the exclusion of BES.
POCLs rights to set off any sum against payments to Pathway shall be as set out
by Clause 804 of the Authorities Agreement, save that POCL shall not be ©
entitled to set off any sum due other than under this letter agreement.
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rg
24th May, 1999
POCL
and
ICL Pathway Limited
and
ICL ple
HEADS OF AGREEMENT
€A991450.103,
w
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Subject to Contract
Without Prejudice
THESE HEADS OF AGREEMENT are made the 24th day of May, 1999
BETWEEN:
qq) Post Office Counters Ltd., whose‘registered office is situated at King Edward
Building, King Edward Street, London EC1A 1AA;
(2) ICL Pathway Limited whose registered office is at 26 Finsbury Square,
London EC2A 1DS (“Pathway”); and
(3) ICL ple, whose registered office is at 26 Finsbury Square, London EC2A 1DS
CIcr).
RECITALS:
WHEREAS
le
By Agreements each dated 15 May 1996 made between:
@) Pathway, POCL and DSS (the “Authorities Agreement”);
(ii) I Pathway and the DSS (the “DSS Agreement”); and
(iii) Pathway and POCL (the “POCL Agreement”)
as amended through change control (together “the Related Agreements”), Pathway
agreed to design, develop and implement an automated system for the provision of,
inter alia, benefit payment, automated payment and point of sale services at Post
Offices, together with reconciliation and transaction information services for the DSS
and POCL, and thereafter to operate and support such services until expiry of the
Related Agreements in 2005 (the “Project”).
Disputes arose between Pathway, DSS and POCL in relation to the Project.
Whilst work continued on the Project, the parties conducted frequent negotiations in
relation to such disputes throughout 1998 and up to the date of these Heads, with
the active involvement of HM Treasury acting as mediator and/or facilitator.
The parties agree to enter into these Heads with a view to resolving [to resolve]
such disputes and continuing [to continue] with the Project on the basis hereinafter
appearing (the “Updated Project”).
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2.1
2.2
2.3
51
5.2
5.3
Status of Agreement
These Heads are intended to be legally enforceable.
Interpretation
Words and expressions used in these Heads shall unless the context otherwise
requires, bear the meanings ascribed to them in Schedule 1.
Unless otherwise defined herein, terms defined in the Related Agreements shall have
the same meanings in these Heads.
Unless otherwise stated herein, references to paragraphs and Schedules shall mean
the paragraphs and Schedules of these Heads.
[not used]
Full and Final Settlement
The Effective Date shall be the date that this letter agreement is countersigned by
ICL and ICL Pathway.
Benefit Payment Service
(Not used]
(Not used]
As soon as reasonably practicable ICL, Pathway and POCL shall negotiate in good
faith a comprehensive agreement (the “Updated POCL Agreement”) which sets out
all the parties’ rights and obligations in relation to the Core System, includingtesting,
acceptance, implementation and pricing thereof and the detailed timetable
applicable thereto.
To the extent not amended by these Heads, the provisions of the Authorities
Agreement and the POCL Agreement shall apply (save that POCL and Pathway
release all obligations and waive all rights they may have in respect of each other
under the Authorities Agreement and the POCL Agreement in respect of BES, PAS
and CMS) until the Codified Agreement is entered into and shall be incorporated in
the Updated POCL Agreement save as agreed by the parties.
Pricing
The terms as to pricing in the Updated POCL Agreement shall be in accordance with
the commercial agreement set out in this letter agreement.
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10.
11.
13.2
Timetable
The timetable to be contained in the Updated POCL Agreement shall be in
accordance with Schedule 5.
Acceptance Provisions
The provisions as to Acceptance to be contained in the Updated POCL Agreement
shall be in accordance with Schedule 6.
Commercial Matters
The Updated POCL Agreement shall make provision for certain commercial matters
in accordance with Schedule 7.
{Not used]
Fujitsu Guarantee
ICL shall procure that Fujitsu shall upon the Effective Date provide to POCL:
11.1.1 a legally binding and enforceable guarantee in the form contained in
Schedule 10; and a
11.1.2 a legal opinion by a Japanese law firm in the form contained in Schedule 11.
In addition, ICL shall upon the Effective Date enter into such documentation as shall
be necessary to ensure that its existing guarantees under the Related Agreements
continue in force in respect of the Updated POCL Agreement.
[Not used]
Future Work
POCL and Pathway agree to identify and prioritise any outstanding CCNs and to raise
and/or approve new CCNs, all as required to cover Outstanding Agreements to Agree
and other matters, in each case relevant to the Core System Release. The parties
shall use all reasonable endeavours to achieve approval of all such CCNs so as not to
delay Acceptance of the Core System Release.
POCL shall, in a timely fashion, discharge any outstanding Contracting Authorities
obligations as referred to in Schedule BOS of the Authorities Agreement and
Schedule A16 of the POCL Agreement (“CARS”), including “ongoing” CARs relevant
to the Core System Release and the Updated POCL Agreement.
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14.
14.1
14.2
14.3
15..
16.
16.1
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{Tripartite Agreement
{Not used]
The parties hereto shall use all reasonable endeavours to enter into the Updated
POCL Agreement as soon as reasonably practicable.
The Updated POCL Agreement will replace the Authorities Agreement and the POCL
Agreement in their entirety.
[[Not used]
Miscellaneous
Confidentiality
Each party agrees to keep confidential and not to disclose to anyone else the
existence or the terms of this document or the negotiations relating thereto (together
. “Confidential Information”).
Notwithstanding the above, any party may disclose Confidential Information
(A) _ if and to the extent required by law;
(B) _ ifand to the extent that the other parties have given prior written consent to
the disclosure;
(C) to its professional advisers;
(D) to the extent requested by H.M. Government;
(E) _ if and to the extent that the Confidential Information is in the public domain
or falls into the public domain without breach of any applicable
confidentiality obligation (including this paragraph);
(F) to the Post Office;
(G) to Fujitsu;
(H) _ potential arrangers of funding for the Project or the Updated Project; or
43) if and to the extent reasonably necessary to be disclosed for the purpose of
arranging and maintaining funding generally for ICL and/or Pathway.
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16.3
16.4
16.5
16.6
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In the event that Confidential Information is disclosed by any party to its professional
advisers, that party shall procure that its professional advisers comply with the
restrictions contained in this paragraph, mutatis mutandis.
[Announcements and Publicity
[No public announcement or public circular (including a media release) relating to
the subject matter of these Heads will be made unless it has first been agreed
between the parties in writing. This restriction shall not apply to any announcement
intended solely for internal distribution by the party in question or any disclosure
required by any legal, accounting or regulatory requirement.)
[to be confirmed by HMT.]
No Representation
Each of the parties acknowledges that in entering into these Heads it has not relied
on any representation warranty, promise or assurance, whether or not in writing, and
whether or not negligent, given or made by any other party as an inducement to
enter into these Heads. Accordingly no party shall have any right of action (except
in the case of fraud) against any other party arising out of any such representation,
warranty, promise or assurance.
{Severability
If any of the provisions of these Heads is judged to be invalid, illegal or
unenforceable, the continuation in full force and effect of the remainder of them will
not be prejudiced but such provision shall be deemed modified to the extent
necessary in the court’s opinion to render such term or provision enforceable, and
the rights and obligations of the parties shall be construed and enforced accordingly,
preserving to the fullest permissible extent the intent and agreements of the parties
herein set forth.]
(Waiver
No forbearance or delay by any party in enforcing its rights will prejudice or restrict
the rights of that party, subject to the express timescales set out herein, and no
waiver of any such rights or of any breach of any contractual term will be deemed to
be a-waiver of any other right or of any later breach.)
(Governing Law and Jurisdiction
These Heads are governed by and shall be interpreted in accordance with English
Law and the parties submit to the exclusive jurisdiction of the English Courts.]
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16.7
16.8
16.9
Headings
The headings in these Heads shall not affect its interpretation.
Singular/Plural
Throughout these Heads, whenever required by the context, the use of the singular
shall be construed to include the plural, the use of the plural shall be construed to
include the singular and the use of any gender shall include all genders.
Schedules
‘The Schedules to these Heads and the annexes to the Schedules constitute an
integral part hereof.
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°
Signed for and on behalf of POST OFFICE COUNTERS LTD
Date:,
Signed for and on behalf of ICL PLC
Date....,
Signed for and on behalf of ICL PATHWAY LIMITED
Date...
Name:..
Title:
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Acceptance
BA
Banking Act
Benefit Payment
Service or BPS
Commercial Director
of ICL
Core Observation
Period ,
Core System and Core
System Release
Counter Equipment
CS Completion Date
Development Phase
DSS
Effective Date
FSA
Managing Director of
POCL
Modern Government
SCHEDULE 1
Definitions
the meaning given to it in paragraph 2.1 of Schedule 6
the Benefits Agency
the Banking Act 1987
the benefit payment service described in Schedule 3
means the Director, Commercial and Legal Affairs of ICL or his
successor from time to time
the meaning given to it in paragraph 1.2(a) of Schedule 5
the meanings given to them in paragraph 1.1 of Schedule 5
the PCs, printers, screens, local area network and other equipment
installed by Pathway in Post Offices for the provision of the POCL
Services, OBCS, LFS and BPS
the meaning given to it in paragraph 5 of Schedule 8
the phase specified in paragraph 2.2.3 of Schedule 5
The Secretary of State for Social Security, acting through and on
behalf of the Departmént of Social Security and on behalf of the
Department of Health and Social Security for Northern Ireland
the meaning given to it in paragraph 4 of these Heads
the Financial Services Authority
the meaning given to it in Schedule 9
(the government services as described in the White Paper dated
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Network Banking
Service
PIN
POCL
Post Office
PPP Heads
Release
Release Authorisation
Board
Scorecard
SSA
Tripartite Agreement
Updated POCL
Agreement
[ ] entitled: [ a]
the meaning given to it in paragraph 4 of Schedule 5
personal identification number
(except in Schedule 9, where it bears the definition contained in
that Schedule) Post Office Counters Ltd., whose registered office is
situated at King Edward Building, King Edward Street, London
EC1A 1AA, or such other subsidiary of the Post Office as may be
nominated from time to time to take over the rights and obligations
of Post Office Counters Ltd. under the Updated POCL Agreement
the statutory corporation so named and formed under the Post
Office Act 1969 (as amended)
the heads set out in Schedule 9
any of the software releases referred to in Schedule 5
in relation to any Release, a meeting of Pathway and POCL chaired
by the POCL Horizon Programme Director to review readiness
reports and decide whether that Release should go into live
operation
the meaning given to it in paragraph 4.2 of Schedule 4
Social Security Agency of the Northern Ireland Office
the meaning given to it in paragraph 14.1 of these Heads
the meaning given to it in paragraph 5.3 of these Heads
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SCHEDULE 2
[INTENTIONALLY LEFT BLANK.]
[This schedule of conditions has been deleted but not blacklined.]
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@
SCHEDULE 3
[INTENTIONALLY LEFT BLANK.]
[Schedule 3 and its annexures which related to the Benefit Payment Service have been
deleted but, for ease of reading, not blacklined.]
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SCHEDULE 4
Pricing
[Schedule 4 (excluding annexes) has been deleted but not blacklined. Wording is based
on Schedule 2 of the Letter Agreement to be inserted.]
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ANNEX 1 TO SCHEDULE 4
Transaction Metrics for Charges
It is proposed that transactions should be counted for charging purposes according to the
following rules. The default is that 1 customer-facing transaction in reference data = 1
chargeable transaction. The following are the main exceptions:
Transaction items: 1 chargeable transaction per transcash item. For the avoidance of doubt,
there will be no chargeable transaction associated with the fee payable on the transcash
item.
Postal orders: i chargeable transaction per customer session, regardless of number of postal
orders sold. For the avoidance of doubt, there will be no chargeable transaction associated
with the fee(s) payable on the postal order(s). Where postal stamps are sold to make up the
odd amount of a postal order value (e.g. the 27p of a postal order of value £35.27), these
stamps will be counted as a chargeable transaction in accordance with the metrics for postal
stamps (see below).
Phone cards: Sales of phone cards of the same denomination to be rolled up within a
customer session. For example, if a customer buys 2 x £2.00 cards this would be 1
chargeable transaction; however if the customer buys 1 x £2.00 and 1 x £5.00 cards this
would be 2 chargeable transactions.
Saving stamps: 1 chargeable transaction per client, per customer session regardless of the
quantity and combination of saving stamp values sold. For example, if a customer buys 1 x
£2.00 and 2 x £5.00 British Gas saving stamps and 2 x £2.00 BBC licence stamps this would
result in 2 chargeable transactions.
Postage stamps: Sales of postage stamps within a customer session to be rolled up into 1
chargeable transaction regardless of quantity and combinations of stamps sold. For the
avoidance of doubt, postage stamps includes definitive and special issue stamps of all
values, stamp books and postage-paid stationery. It does not include other postal products
such as datapost or special delivery. For example, if a customer buys 2 x 1st class, 42p of
other postage, 3 x stamp books (10 x 2nd class) and a book of 10 x 1st class stamps, this
would be 1 chargeable transaction.
Because it is recognised that the volumes of postage stamp sales in the Workload Brief is
subject to statistical uncertainty in deriving the average value of transactions, the charges
will if necessary be adjusted retrospectively as follows:
. The actual average value of stamp sales per transaction will be calculated by dividing
the total value of stamp sales recorded on Horizon by the number of customer
sessions in which stamp sales were recorded.
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. The intended average value of stamp sales will be calculated as £2.51 multiplied by
the average RPI for the relevant invoicing year and divided by the average RPI for
the year ending February 1996.
. The adjusted amount payable for postage stamp sale transactions will be calculated
by multiplying the charges by the actual average value and dividing by the intended
average value, any under or over payment will be included as an adjustment to the
next monthly invoice.
. This adjustment will be calculated annually during the roll-out, and a final
adjustment factor, to apply in all subsequent years, will be calculated at the end of
the first full irivoicing year following completion of roll-out.
Retail items sold over the post office counter: Charged as 1 transaction per line, i.e. 1 item
of each of 2 different lines = 2 transactions, 2 of the same line = 1 transaction.
Entry of sales not transacted through Horizon: i.e. postshop, vending, lottery etc. Charged
as 1 transaction per batch entry for each product (e.g. 60 lottery ticket sales and 60 vending
items = 2 transactions).
Reversals: Where transactions are subsequently reversed, the transaction itself will be
chargeable as usual, the reversal will not be chargeable, and any related fresh transaction
will be chargeable.
Use of scales: Each price look-up for postage items using the scales link or by manually
keyed input will incur a transaction charge for the EPOS Scales transaction in the Day 1
scorecard (scoring under Terminal, EPOS, Scales, SIS batch and no other columns) unless
the counter clerk aborts the transaction without proceeding to a subsequent stamp sale
transaction. These scales transactions will only be initiated by the clerk selecting them from
the screen or keyboard, and will not be initiated by customers placing items on the scales
without clerk intervention.
Premium Mails Services: Each item requiring separate entry will count as 1 transaction (e.g.
posting 3 datapost packages which require separate recording). Where items are entered as
multiples (e.g. posting 2 parcels of the same weight with recorded delivery to the same
zone) these will count as a single transaction.
Scales, premium services, and postal order transactions are additional to any related sale of
postage stamps, but no more than 1 postage stamp sale will be recorded per customer
session regardless of the use of those stamps.
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ANNEX 2 TO SCHEDULE 4
[INTENTIONALLY LEFT BLANK.]
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ANNEX 3 TO SCHEDULE 4
Rollout Profile
Dates Number of Post Offices
23/08/99 20
30/08/99 40
06/09/99 60
13/09/99 90
20/09/99 160
27/09/99 180
04/10/99 200
11/10/99 200
18/10/99 200
25/10/99 200
01/11/99 200
08/11/99 200
15/11/99 200
22/11/99 200
29/11/99 0
06/12/99 [)
13/12/99 0
20/12/99 t)
27/12/99 tt)
03/01/00 )
10/01/00 180
17/01/00 250
24/01/00 301
31/01/00 334
07/02/00 334
14/02/00 334
21/02/00 334
28/02/00 334
06/03/00 334
13/03/00 334
20/03/00 334
27/03/00 334
03/04/00 334
10/04/00 334
17/04/00 334
24/04/00 334
01/05/00 334
08/05/00 -334
15/05/00 334
22/05/00 334
29/05/00 334
05/06/00 334
12/06/00 334
19/06/00 334
26/06/00 334
03/07/00 334
10/07/00 334
17/07/00 334
24/07/00 334
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31/07/00 334
07/08/00 334
14/08/00 334
21/08/00 334
28/08/00 334
04/09/00 334
11/09/00 334
18/09/00 334
25/09/00 334
02/10/00 334
09/10/00 334
16/10/00 334
23/10/00 334
30/10/00 334
06/11/00 334
13/11/00 334
20/11/00 334
27/11/00 255
04/12/00 0
11/12/00 0
18/12/00 0
25/12/00 0
01/01/01 0
08/01/01 195
15/01/01 220 t
22/01/01 220 A
29/01/01 220 A 7b
05/02/01 220
Total: . 18,573 ly
/ we
/ eC
V wo
0? wo.
a \\> a
~ wl ’
ur
re*
4
ha
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®
Annex 4 to Schedule 4
Transaction Volumes
Year
Commencing .
Millions April 1 1998 1999 2000S 2001S 2002S «2003S 2004 «= 2005 = «2006 += 2007'S 2008 += 2009
Orderbook Transactions 789.4 775.8 749.8 696.8 611.6 251.9 73 0.0 0.0 0.0 0.0 0.0
Girocheque Transactions 52.0 52.0 52.0 48.9 43.9 18.4 os 0.0 0.0 0.0 0.0 0.0
oBcs . 79 184.0 353.0 627.0 $88.1 242.1 7.0 0.0 0.0 0.0 0.0 0.0
EPOSS C 1
APS : C ]
[Forecast transaction volumes for EPOSS and APS to be inserted as set out in the Workload Compendium adjusted to reflect reduced footfall in post offices resulting from
the élimination of the Benefit Payment Card]
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1.1
1.2
3.1
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SCHEDULE 5
Timetable
Core System Release
Definitions
1.1.1 The Core System means the core POCL services for the POCL Infrastructure,
EPOSS, OBCS and APS, each as defined in the Release Contents Description
for NR2 (CCN 251). It does not cover APS for Post Office Smartcards. The
POCL services for BES and the BA services for CMS and PAS required to
support the benefit payment card, originally in NR2, are not used in the Core
System and the BES software code shall be stripped out of NR2 at no
additional cost to POCL. .
1.1.2 The Core System Release means the release of the Core System.
. Key Dates for Core System Release
The dates are:
(a) Core Observation Period to commence 31.5.99 and last for 8 weeks.
(b) Acceptance Phase to be completed by 16.8.9
(c) Release authorisation to take place by 23.8.99
(a) National rollout to commence by 23.8.99
(e) National rollout to be completed by 30.4.2001
() Final deadline for Acceptance to be 15.11.99
(Not used]
Pathway Release Plan Summary
Core System Release (CSR)
As described above this Release is subject to Acceptance and Release authorisation
(as referred to in paragraph 4(ii) of Schedule 6) prior to commencement of national
Roll-out.
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3.5
3.6
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CSR+
CSR+ will contain the POCL Services for APS (Smart) for Quantum and Watercard
(each as defined in Requirements 543(b) and 543(f) in Schedule A15 of the POCL
Agreement and the related solution in Schedule A16 of the POCL Agreement) and
the Logistics Feeder Service (LFS) (as defined in CCN249a). This release is subject to
Release authorisation only and is currently planned for April 2000.
(Not used]
(Not used]
[Not used].
Further Releases
Further releases of Core System software shall be provided by Pathway (by way of
upgrades to CSR and/or CSR+) either:
- on the basis of appropriate time and material charges (as set out in paragraph
20.1 of Schedule A06 of the Authorities Agreement which shall be expanded
to include Pathway’s rates for senior management and consultants and to
clarify that all expenses directly incurred by Pathway in connection with such
further releases shall be paid by POCL) which shall be invoiced monthly in
arrears; or
- for a fixed price to be agreed (on payment terms to be agreed), which shall
not be audited
as elected by POCL provided that payment is made by POCL within 30 days of
receipt of invoice and any such further releases are introduced through the change
control process set out in the Related Agreements.
[Not used]
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1.2
1.3
2.
2.1
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SCHEDULE 6
Acceptance
Acceptance Testing
There will be an acceptance procedure in respect of the Core System Release (the
“Acceptance Phase”).
In respect of the Acceptance Phase there will be agreed:-
(i) a set of acceptance criteria;
(ii) a set of acceptance specifications;
(iii) a set of acceptance tests;
(iv) an acceptance timetable including, inter alia, a Core Observation Period;
(v) a Final Deadline for Acceptance; and
(vi) an Operational Trial Review Period (being the three week’ period immediately
following the end of the Core Observation Period)
The timetable and dates referred to in this paragraph shall be consistent with those
in Schedule 5.
[Not used]
Requirements for Acceptance
Subject to any extension pursuant to paragraph 2.4 of Schedule 6, acceptance
(‘Acceptance”) will occur in respect of the Acceptance Phase once:-
i) the acceptance tests referred to in paragraphs 1.2(iii) and 2.3 of Schedule 6
have been carried out successfully;
(ii) the Core Observation Period and the Operational Trial Review Period have
expired;
(iii) the thresholds referred to in paragraph 2.2 of Schedule 6 have been met as at
the end of the Core Observation Period taking into account all substantive
faults raised by POCL beyond those defined in the Acceptance Specifications,
as described in Paragraph 2.9 of Schedule A7 of the Authorities Agreement
(6.1(d) faults); and
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2.3
2.4
25
3.1
22
(iv) a timetable has been agreed between the parties to resolve all outstanding
category B faults
in each case in respect of the Acceptance Phase.
The thresholds will not be met if in respect of the Acceptance Phase there are:
(i) one or more high severity deficiencies (also known as category A faults);
(ii) more than 20 medium severity deficiencies (also known as category B faults);
or :
(iii) more than 10 medium severity deficiencies in respect of any one Acceptance
Specification
provided always that it is acknowledgéd that if an acceptance test is repeated
following corrective work by Pathway, POCL shall have the right to test for and
raise new faults which may be caused by that corrective work or may‘come to light
only as a result of that corrective work.
It is agreed that, notwithstanding the provisions of paragraph 2.1 of Schedule 6, if at
the end of the Core Observation Period all Acceptance Tests have been carried out
and the thresholds referred to in paragraph 2.2 of Schedule 6 have not all been met, .
POCL shall permit Pathway to repeat the relevant Acceptance Tests in the two week
period following the énd of the Core Observation Period provided that POCL is given
sufficient opportunity to review the results of such Acceptance Tests to its reasonable
satisfaction prior to the end of the Operational Trial Review Period. .
Subject to paragraph 2.2 of Schedule 6, once all Acceptance Tests have been
successfully carried out and the Core Observation Period has expired in relation to
any Acceptance Phase, no new faults may be raised for that Acceptance Phase. For
this purpose, a “new fault” is a fault which had not occurred before the end of the
relevant Core Observation Period and does not include faults which occurred before
the end of the Core Observation Period but were not reported until after that date,
POCL shall report to Pathway a an Acceptance incident within seven days of the
relevant POCL test manager identifying or being notified of the same. 7
If, at the end of the Acceptance Phase the parties do not agree as to whether the Core
System Release should be accepted, the provisions of paragraph 7 of Schedule 6 shall
apply.
Consequences of failure to Achieve Acceptance
If Acceptance is not achieved in respect of the Acceptance Phase at the end of the
Operational Trial Review Period Pathway shall be entitled to a period of three
‘months in which to remedy the defaults, which (subject to paragraph 7.7 of Schedule
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6) it shall do at its own expense. Upon the expiry of that period, or at such earlier
date as the parties shall agree; the relevant Release shall be re-submitted in its
entirety for acceptance testing (the “Second Acceptance Test”).
If Acceptance is not successfully achieved at the end of the Second Acceptance Test
then POCL shall have the right to terminate the Updated POCL Agreement, but
without prejudice to all other remedies available to POCL under the Updated POCL
Agreement and otherwise and without prejudice to paragraph 3.4 of Schedule 6.
[Not used]
Schedule C5 of the Authorities Agreement (liquidated damages to a maximum of 13
weeks of delay) shall apply on failure to achieve Acceptance of the Core System
Release by 30th September, 1999 or failure to achieve the CS Completion Date by
31st March, 2001 (as such date is adjusted to reflect any delay in Acceptance),
where either such failure is due to Default by Pathway (save that all such liquidated
damages shall be payable to POCL).
_ If Acceptance of the Core System Release has not been achieved by the Final
Deadline-for Acceptance in respect. of the Acceptance Phase then POCL shall be
entitled to serve a notice upon Pathway under this paragraph, whereupon Pathway
shall be deemed to have failed the Second Acceptance Test in respect of that
Acceptance Phase in accordance with paragraph 3.2 of Schedule 6.
Consequences of Achieving Acceptance in Respect of Core System Release
Upon Acceptance of the Core System Release the Release authorisation Board’ shall
decide whether or not to authorise national rollout of the Core System:
[Not used]
Appointment of Expert
The parties have agreed to appoint an expert (the “Expert”) as soon as reasonably
practicable to assist in resolving disputes relating to acceptance.
The Expert shall be Peter Copping of PA Consulting or, if-he has a conflict of interest
or is unavailable, such other partner of PA Consulting as shall be:
a) qualified to resolve such disputes; ©
ii) independent of both parties; and
(iii) approved by both parties, such approval not to be unreasonably withheld.
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6.4
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74
75
7.6
24
In the event that no other partners of PA Consulting shall be available and meet the
criteria in paragraphs 6.2(i) and (ii) of Schedule 6, the Expert shall be appointed at
the request of POCL or Pathway by the President for the time being of the Institute of
Electrical Engineers so long as such appointee shall meet the criteria in paragraphs
6.2(i) and (ii) of Schedule 6.
The Expert shall act as an expert and not an arbitrator and his fees shall be.borne by
the parties in equal shares.
Acceptance Disputes
If paragraph 2.6 of Schedule 6 applies and/or POCL and Pathway do not agree.on:
i) the Acceptance Specifications for the Core System Release;
(ii) whether an‘event or occurrence is an Acceptance Incident; or
(iii) the assigned severity of an Acceptance Incident;
the parties will refer such dispute (the “Dispute”) to the Expert to obtain initial
guidance. The parties do not expect that the identification and notification of the
Dispute, reference of the Dispute to the Expert and obtaining his initial guidance
should take longer than seven days.
Once the Expert has given to the parties his initial guidance on the Dispute, the
Managing Director of POCL and the Commercial Director of ICL shall meet and
attempt to resolve the Dispute with the advice and guidance of the Expert.
If the Dispute is not resolved during the meeting pursuant to paragraph 7.2 of
Schedule 6, then the Expert shall be required to make a decision (the “Decision”) as
to how the Dispute should be resolved.
Once the Decision has been made, the Managing Director of POCL.and the
Commercial Director of ICL shall meet to review and respond to the Decision.
The Decision shall be binding unless vetoed by POCL in accordance with paragraph
7.6 of Schedule 6.
POCL may veto the Decision if:
(a) POCL disagrees with the Decision and provides to Pathway written reasons
for such disagreement; and
(b) asserts a Veto Ground (as defined in paragraph 7.8 of Schedule 6).
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If POCL vetoes the Decision, the Managing Director of POCL and the Commercial
Director of ICL shall meet and attempt to resolve the Dispute. If they fail to resolve
the Dispute within three working days of either party requesting a meeting for that
purpose then the Chief Executives of the Post Office and of ICL shall meet and
attempt to resolve the Dispute. However, unless and until otherwise agreed, the veto
will stand. ,
Each of the following shall be a Veto Ground, namely if the issue:-
(i) materially affects POCLs ability to settle with clients in a timely and accurate
way;
(ii) materially affects POCUs ability to transact with sub-postmasters in a timely
and accurate way; .
(iii) » is likely to materially and adversely affect POCL customers in areas covered
by service level agreements;
(iv) "materially affects critical operational processes necessary for the running of
POCL;
(v) materially compromises the integrity of Post Office accounting systems; or
(vi). is likely to lead to the qualification of Post Office Accounts or those of its
subsidiary companies.
If POCL vetoes a Decision and that Decision was in favour of Pathway then sub-
paragraph 3.1 of Schedule 6 shall apply.save that the direct costs of and associated
with such extra work as shall be required.as a consequence of the exercise of the veto
shall be dealt with in accordance with paragraph 7.10 of Schedule 6. If, but for POCL
vetoing a Decision in favour of Pathway, acceptance would have been achieved, and
the acceptance test in question was the Second Acceptance Test, it shall be deemed
to have been the first. :
The direct costs of and associated with the extra work referred to in paragraph 7.9 of
Schedule 6 shall initially be borne by POCL. However, POCL shall be entitled to refer
the Expert’s decision in relation to the Dispute to an arbitrator in accordance with
paragraphs 7.11 and 7.12 of Schedule 6. If the arbitrator rules in favour of POCL in
respect of the Dispute then Pathway shall, within seven days of the arbitrator's
decision, refund to POCL the amount so borne by POCL, together with interest
thereon from the date when the Dispute was referred to the arbitrator until the date
of payment thereof at a commercial rate determined by the arbitrator.
Any matter referred to arbitration by POCL pursuant to paragraph 7.9 of Schedule 6
shall be finally settled under the Rules of Arbitration of the International Chamber of
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Commerce (“ICC”) by one arbitrator appointed in accordance with the said rules (or
under such other arbitration procedure as the parties shall agree). .
7.12 . The place of arbitration shall be London, the governing law of the arbitration shall be .
English and the language of the arbitration shall be English.
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1.4
1.5
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SCHEDULE 7
Commercial Matters
Infrastructure programme in post offices
In respect of the cost of site preparations in and modifications to post offices Pathway
and POCL have agreed (i) a budget and contributions thereto and (ii) the allocation
of responsibility as to. which party is to bear the cost of actual costs exceeding budget
costs as set out in Annex 1 to this Schedule.
. In addition Pathway will provide flat screens in all non-crown post offices for no
additional charge.
- The reasonable costs of maintaining power supply at t National Lottery node post
offices are to be borne by Pathway.
(Not used]
POCL shall use its reasonable endeavours to assign to Pathway its rights and
obligations under the contract with BT in relation to ISDN lines.
- Training
Pathway shall provide training for POCL staff and sub-postmasters in the use of the
Core System in accordance with CCN 286(c), as modified to take account of the
* removal of the benefit payment card and to provide POCL with training to a value
equivalent to the costs saved under CCN 286(c) as a result of the removal of the
Benefit Payment Card.
[Not used]
Rollout delays
If Acceptance or Rollout of either the Core System or the Benefit Payment Service is
changed or delayed from the agreed procedure and/or timetable:
3.1.1 to the extent that such change or delay is caused by
@ the Default of POCL;
. Gi) [Not used]
(iii), [Not used]
(iv) [Not used]
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Pathway will be entitled to a time and cost adjustment to compensate for
such change or delay.
3.1.2 [Not used]
3.1.3 to the extent that compensation is not payable by POCL under paragraphs _
3.1.1 of Schedule 7 or liquidated damages are not payable by Pathway under
paragraph 3.4 of Schedule 6, such costs will lie where they fall.
* In the event of any such change or delay as referred to in paragraph 3.1 of Schedule
7 then for the purpose of determining and resolving to what extent each party is at '
fault (if at all) and the time and cost adjustment applicable the following procedure
will apply:
3.2. 1 ‘within seven 1 days of a request by either of ‘them, the Managing Director of
POCL (or any equivalent executive) and the Commercial Director of ICL shall
. Meet to resolve these issues. In the event that these issues are not resolved to
the satisfaction of both parties in so meeting then;
3.2.2 . within seven days of a request by either of them, the Chief Executive of the
Post Office and the Chief Executive Officer of ICL shall meet to resolve these
issues. In the event that these issues are not resolved to the satisfaction of
both parties in so meeting then;
3.2.3 the Chief Executive of the Post Office and the Chief Executive Officer of ICL
shall together decide how any remaining dispute should be resolved, whether
by reference to binding expert determination, mediation, arbitration, or such
other means as agreed upon by both parties.
In office data migration
POCL will be responsible for delivery of in office data migration and the parties shall
work together in good faith and use all reasonable endeavours to complete-by 30th
June, 1999 the specification for such delivery (such specification to be based on the
existing draft sub-contract) and service levels associated with such delivery. In
return Pathway will grant to POCL an aggregate discount of £5 million from its fees,
phased over time in proportion to the number of post offices in which the Core
System is installed. :
[Parties to consider issue relating to provision of laptops and training.]
[Not used]
[Not used]
[Not used]
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]
7. [Not used]
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2.2
2.3
2.4
2.5
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ANNEX A TO SCHEDULE 7
Management of Site Preparation and Modification Costs
Pathway Responsibilities
Pathway will be responsible for all site preparation and modification costs (the
“infrastructure programme”) other than those covered by the POCL contributions
pursuant to paragraph 2 of this Annex and for which POCL is to be responsible
pursuant to paragraph 3 of this Annex.
In this Annex, “Modified Total Infrastructure Costs” means the total costs incurred
under the infrastructure programme (excluding payments made or to be made by
POCL pursuant to paragraph 3 of this Annex).
Contributions
Of the first £34 million of the Modified Total Infrastructure Costs, Pathway will pay
£29 million and POCL will pay £5 million. .
The £5 million which POCL is required to pay pursuant to paragraph 2.1 of this
Annex is to be phased over time in proportion to the number of post offices made
ready for installation. Pathway and POCL acknowledge that of this £5 million,
£512,267 has been allocated. to meeting the costs of aborts, suspends and revisits, ©
relating to site preparation and surveys at any post office, and £39,147 has been
allocated to meeting the costs of out of hours work for standard sub-post offices
(excluding the 100 largest standard sub-post offices) relating to site preparation and
modifications, together totalling £551,414.00.
If the agreed forecasts of the Modified Total Infrastructure Costs exceed £34 million,
POCL will pay.the next £4 million, such payment to be phased pro rata to the
number of post offices installed.
If the Modified Total Infrastructure Costs exceed £38 million POCL and Pathway will
determine the approximate number of weeks which will be required to complete the
infrastructure programme, and POCL will pay a further £1-million on a weekly basis
evenly over the period so determined for the forecast completion of the
infrastructure programme.
If, on the CS Completion Date, the Modified Total Infrastructure Costs are:
2.5.1 less than or equal to £34 million, Pathway will pay POCL by way of refund £4
million;
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2.5.2 greater than £34 million but less than or equal to £38 million, Pathway will
pay POCL by way of refund an amount equal to £38 million less the Modified
Total Infrastructure Costs;
‘2.5.3 greater than £38 million but less than or equal to £39 million, Pathway will
pay to POCL by way of refund an amount equal to £39 million less the
Modified Total Infrastructure Costs; and "
2.5.4 greater than £39 million, Pathway will not be obliged to make a payment to
POCL by way of refund in respect of the Modifi ied Total Infrastructure Costs.
Any payment to be made by Pathway to POCL pursuant to this paragraph shall be
made within 30 days of the CS Completion Date.
POCL Excess Costs
Pathway shall keep and make available appropriate records to verify:
(a those costs of the infrastructure programme which are to be borne by POCL;
and
(b) . Pathway’s forecasts of the Modified Total Infrastructure Costs referred to in
paragraph 2.3 of this Annex.
Electrical work I
- In accordance with Annex 4 to Schedule A06 of the Authorities Agreement, Pathway
shall bear the costs of the electrical work for new distribution boards and earthing in
post.offices in the first 10,000 post offices in which there is a requirement for such
distribution board or earthing work to be carried out. Thereafter POCL shall bear
such costs. [Without prejudice to POCIs obligation to bear such costs, an estimated
“cost to POCL of £1.1 million for such work has been derived from an estimate that
such work will be required in altogether 14,273 post offices and that such work in
the final 4,273 of such post offices will cost on average £257 per post office.]
Also in accordance with Annex 4 to Schedule A06 of the Authorities Agreement,
. POCL shall be liable to reimburse Pathway any payments made to regional electricity
boards to carry out final connections to the power supply at any post offices.
Cost thresholds
3.2.1 In respect of any post office to be modified, where the estimated cost of
modification work (excluding site preparation work) does not exceed the
threshold (the “Cost Threshold”) for that post office set out below based on
the number of counter positions in that post office:
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(i) one counter position - £2,500 per counter;
(ii) two counter positions - £1,800.per counter; and
(iii) three or more counter positions - £1,200 per counter
then Pathway shall carry out the modification work in accordance with the
timetable set out in Annex 3 to Schedule 4.
In respect of any post office to be modified, where the estimated cost of
modification work (excluding site preparation, survey and re-survey work)
exceeds the Cost Threshold for that post office then:
(a) Pathway shall promptly notify in writing to POCL of the Financial __
Accounting Division (“FAD”) code, the name and the location of that
post Office, the number of counter positions at that post office and the
estimated cost of modification work and a scope of the proposed
works; and .
(b) Pathway shall not carry out any modification work for that post office
without the prior written consent of POCL pursuant to paragraph
3.2.3 of this Annex and on receipt of such consent shall carry out the
type of modification specified by POCL.
Following receipt by POCL of a written notice from Pathway pursuant to
paragraph 3.2.2(a) of this Annex, POCL shall, in respect of a post office with:
(a) four or more counter positions, determine whether or not to modify
that post office, and what modifications are to be carried out within
the scope of modifications to which the estimated costs relate;
(b) exactly three counter positions, determine whether that post office is
to:
(i) be relocated to new premises which or refurbished by POCL or
its sub-contractors so that such refurbished premises, shall
require no modifications and not more than standard site
preparation;
(ii). have its number of counter- positions reduced to two; or
(ii) - be modified as is; and
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33
exactly one or two counter positions, determine whether that post
office is to be:
(i) closed;
(ii) relocated to new premises or refurbished by POCL or its sub-
contractors so that such refurbished premises, shall require no
modification and not more than standard site preparation; or
(iii), modified as is
and notify Pathway of such decision i in accordance with paragraph 3.2.4 of
this Annex.
In the case of a post office which POCL wishes to be dealt with in accordance
with:
(a)
(b)
paragraphs 3.2.3(a), 3.2.3(b) (ii), 3.2.3(b) (iii) or 3.2.3(c) (iii) of this
Annex, POCL shall use ‘its reasonable endeavours to notify Pathway of
such decision within four working days of the date of receipt by POCL
of the notice relating to that post office from Pathway pursuant to
paragraph 3.2.2(a) of this Annex. If POCL does not notify Pathway
within such notice period, POCL shall be liable to Pathway for the
additional costs which Pathway shall have incurred:solely as a result of
modification work at that post office being done later than had been
originally scheduled but excluding all costs arising out of Pathway
failing to notify promptly POCL pursuant to paragraph 3.2.2(a) of this
Annex; and
paragraphs 3.2.3(b)(i), 3.2.3(c)(i) or 3.2.3(¢) (ii) of this Annex, POCL
shall provide Pathway with [sufficient notice as is consistent with the
operational requirements of the infrastructure programme].
In respect of post offices to which paragraph 3.2.2 of this Annex applies, the
parties have assumed that: , .
(@)
(b) < the numbers of three counter position post offices modified pursuant
(©)
all four counter-position post offices will be modified;
to each sub-paragraph of of paragraph 3.2. 3(b) of this Annex shall be,
equal; and
the numbers of one or two counter position post offices modified
pursuant to each sub-paragraph of paragraph 3.2.3(c) of this Annex
shall be equal.
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POCL shall bear those reasonable costs in respect of the post offices to be
modified which exceed the Cost Threshold. POCL shall also bear those
reasonable costs that may arise and shall benefit from any savings that may
arise as a result of any of the assumptions in paragraph 3.2.4 of this Annex
being incorrect. Any such benefit shall be credited to-POCL in the invoice for
the calendar month in which the POCL decision giving rise to that benefit
shall have been made.
Aborts, Suspends and Revisits and Out of Hours Work at Standard Sub-Post Offices
3.3.1
3.3.2,
3.4
Of the costs of site preparation aborts, suspends and revisits at any post
office, and the costs of out-of-hours work at standard (i.e. non-franchise)
sub-post offices (excluding the 100 largest standard sub-post offices), which
exceed £551,414 as referred.to in paragraph 2.2 POCL shall bear such of
those costs as are specified in paragraph 3.3.2 of this Annex.
The costs referred to in paragraph 3.3.1 of this Annex which are to be borne
by POCL are:
(a) the costs of aborts, suspends or revisits which are caused by POCLor -
its sub-postmasters or franchisees and are recorded as such on the
implementation programme database;
(b) © that proportion of the cost of aborts, suspends or revisits based on the
extent of responsibility of POCL to the overall responsibility as agreed
by POCL and Pathway, or failing such agreement as agreed by the
Programme directors of POCL and Pathway, or failing such agreement
POCL and Pathway will bear such costs equally. POCL will not be
responsible for the costs of the suspension of offices that are classified
as no fixed counters (“NFC”); and
(c) the cost of out-of-hours work due to any standard sub-post office
(other than the 100 largest standard sub-post offices) not permitting
continuous access between 8.00 a.m. and 6.00 p.m. on weekdays
(excluding bank holidays) or does not permit work to be done in
accordance with the document “Mitigating Disruption in Post Offices
During Preparation Activities”, ref IM/STR/05S7 version 1.0 dated
19.04.99. . 7
Other excess site preparation costs
POCL shall bear those costs of out of hours work and revised (at POCLs
request) processes as compared with what is stated in the document
“Mitigating Disruption in Post Offices During Preparation Activities”,
ref IM/STR/057 version 1.0 dated 19.04.99 [copy to be initialed for
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identification]) for site preparation for the 100 largest standard sub-post
offices, all branch offices.and franchise offices, which exceed £715,876.
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SCHEDULE 8
Termination and Related Matters
[Not used]
[Not used]
[Not used]
[Not used]
[Untitled]
“CS Completion Date” means the date by which Roll Out of the Core System has
been completed to at least 99% of post offices in number and at least 99% of forecast
transaction volumes as set out in Annex 4 to Schedule 4...
“Project Assets” means:
w the hardware which POCL has the option to purchase under Clause 904.1.1 of
~ the POCL Agreement; the non-exclusive licence which POCL has the right to
acquire under Clause 904.1.2 of the POCL Agreement; the rights in respect of
non-employment agreements which POCL is entitled to exercise under Clause
904.1.3 of the POCL Agreement; and the rights in respect of software and
other items which POCL is entitled to exercise under Clause 904.1.4 of the
- POCL Agreement; and Es
(ii) I the equivalent hardware, licence and rights which DSS has the option to
purchase, acquire or exercise under the ie equivalent terms of the pss
Agreement
in each case, to the extent that the same apply to, and are required for the operation
of, the Core System.
{Not used]
[Not used]
[Not used]
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SCHEDULE 9
[INTENTIONALLY LEFT BLANK.]
, [This schedule has been deleted but not blacklined.]
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SCHEDULE 10
Form of Fujitsu Guarantee
THIS DEED OF GUARANTEE AND INDEMNITY is made
on 1999
BETWEEN
1. FUJITSU LIMITED of [ ] (registered in Japan no. [ 1) (the
“Guarantor”)
AND
2; POST OFFICE COUNTERS LTD of King Edward Building, King Edward Street,
London EC1A 1AA (registered in England no. 2154540) (“POCL”, which
expression includes POCIs successors and assigns).
WHEREAS
1. By various agreements dated 15. May 1996 made between ICL Pathway Limited
(“Pathway”).POCL and the Secretary of State for Social Security (“DSS”)
Pathway agreed to provide certain services for the DSS and POCL (“the
Project”)
2. Disputes arose between Pathway, the DSS and POCL in relation to the Project.
3. By a letter agreement-(the “Agreement”) dated 24 May 1999 the parties have ©
agreed to resolve their disputes and continue with the Project on condition that
Pathway procured a guarantee from the Guarantor in the terms of this Deed.
NOW THIS DEED WITNESSES AS.FOLLOWS
1,
1.2
The Guarantor unconditionally and irrevocably guarantees to POCL the due and
punctual performance by Pathway of the Agreement and undertakes that upon
demand by POCL it shall-indemnify and keep POCL indemnified against all
losses, damages, costs and expenses (including court costs and legal fees) which
may be incurred by POCL arising out of all and any breach of the Agreement
and provided always that the liability of the Guarantor shall be no greater than
the liability of Pathway under the Agreement, without prejudice to Clause 10.
On the date of execution of the Codified Agreement, the Guarantor shall
execute a guarantee in the same form as this Deed, mutatis mutandis, relating
to the obligations of Pathway and shall deliver the same to POCL on that date
together with a legal opinion of a Japanese law firm in a form reasonably
acceptable to POCL confirming that such guarantee has been duly authorised
and validly executed and that the Guarantor has the capacity to enter into an
agreement governed by English law. :
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The Guarantor shall not be discharged or released from this Deed of Guarantee _
by any arrangement made between Pathway and/or POCL without the assent of
the Guarantor or by any amendment to or termination of the Agreement or by
any forbearance, waiver or indulgence whether as to payment, time,
performance or otherwise granted by POCL in relation thereto and the
Guarantor hereby expressly consents to any and all such arrangements,
amendments, terminations, forbearances or indulgences."
“The indemnity set out in Clause 1 of this Deed of Guarantee is irrevocable and
. absolute and-shall be a.continuing security and accordingly it shall:
- 3.1 not be discharged by any partial performance (except to the extent of
such partial performance) by Pathway of its obligations under the
+ Agreement; and
3.2 extend to cover the unperformed part of thé obligations of Pathway from
time to time under the Agreement.
“The obligations of the Guarantor under this Deed of Guarantee are those of
primary obligor and such obligations exist irrespective of any invalidity,
illegality or unenforceability of any provision of the Agreement. POCL shall not
be obliged before taking steps to enforce this Deed of Guarantee against the
, Guarantor to obtain judgment against Pathway or the Guarantor or any third
party in any Court, or to make or file any claim in a bankruptcy or liquidation
of Pathway or any third party, or to take any action whatsoever against Pathway
or the Guarantor or any third party.
‘The Guarantor warrants that it is a body corporate duly organised and validly
existing under the laws of Japan, with limited liability and has all power and
authority to enter into and perform the obligations contemplated by this Deed
of Guarantee to be performed by it and that this Deed of Guarantee constitutes
its legal, valid and binding obligations.
All sums payable by the Guarantor under this Deed of Guarantee shall be paid
without any set-off, lien or counterclaim, deduction or withholding, howsoever
arising. The parties agree that payment in accordance with this Clause 6 shall
not constitute a waiver of any rights or remedies that the Guarantor may have
as-against POCL. oO .
None of the liabilities or obligations of the Guarantor under this Deed of
Guarantee shall be impaired or discharged by:
7.1 the insolvency, administration, receivership, dissolution, winding-up,
~ amalgamation, reconstruction or reorganisation of the Guarantor,
Pathway or any other person (or the commencement of any of the
foregoing), or any equivalent or analogous proceedings in whatever
jurisdiction;
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7.2 any change in the constitution of Pathway or the Guarantor; or
7.3 any other matter-which but for this provision might operate to discharge
or exonerate the Guarantor.
If any payment or other benefit received by POCL in relation to the obligations
of Pathway pursuant to the Agreement are avoided, reduced or invalidated by
virtue of any applicable law then pro tanto the Guarantor’s obligations shall not
be released or affected.
Until the obligations of Pathway pursuant to the Agreement have been fully
performed: :
(a) the Guarantor shall not without the consent of POCL be subrogated to
any rights of POCL arising under the Agreement or seek to enforce
repayment from Pathway by way of indemnity, or otherwise; and
(b). the Guarantor shall not prove or claim a dividend in the insolvency of
Pathway without the consent of POCL but shall do so if directed by
POCL and will hold any benefit in trust for POCL.
If any provision of this Deed of Guarantee is invalid, illegal or unenforceable for
any reason, such provision shall be severed and the remainder of the provisions
hereof shall continue in full force and effect as if this Deed of Guarantee had
been executed with the invalid, illegal or unenforceable provision eliminated.
The Guarantor shall reimburse to POCL all costs and expenses incurred by
POCL in connection with the enforcement and administration, (excluding, for
the avoidance of doubt, any enforcement and administration costs incurred by
POCL in enforcing or administering the Agreement as between Pathway and
POCL ), of all or any part of the obligations described herein, including without
limitation all legal costs and disbursements and court costs.
Uf the Agreement lapses in accordance with paragraph 3.2 or 14.4 thereof then
this Deed of Guarantee shall also lapse, save that:
11.1. this Deed of Guarantee shall not lapse in respect of any breach of the
Agreement occurring on or prior to the date of lapse of the Agreement,
provided that no demand may be made under this Guarantee unless
notice of the proposed demand is given to the Guarantor within six
: months following the date of lapse; and
11.2 ‘if the parties to the Agreement agree that, notwithstanding the
provisions of paragraph 3.2 or 14.4 of the Agreement, the Agreement
shall not lapse but shall continue, then the Guarantor agrees that this
Guarantee shall also continue and not lapse.]
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14:
15."
16.
17.
18.
41
Except as otherwise expressly provided herein, any notice or other
communication affecting this Deed of Guarantee from one party to the other
shall be made in writing and signed by or on behalf of the other party making
the notice or communication.
Any notice or other communication which either party is required or authorised
by this Deed of Guarantee to give or make to the other shall be given or made
by leaving it at, or by posting by ordinary prepaid first class post (airmail if
overseas) or by facsimile transmission to the address of the other party-in the
manner referred to in the following provisions of this Clause 13. Such notice or
communication shall be deemed for the purposes of this Deed of Guarantee to
have been given or made on the fifth Business Day after the date of posting (for
a letter), or on the Business Day following the date of transmission (for a
facsimile). For the purposes of this Clause, “Business Day” shall mean any day
(excluding Saturdays and Sundays) when clearing banks in the City of London-
are open for normal banking business.
The Guarantor irrevocably appoints ICL ple of 26 Finsbury Square, London,
EC2A 1DS to be its agent for the receipt of service of process in England. It
agrees that any document may be effectively served on it in connection with
proceedings in England and Wales by service on its agent, and clause-13 applies
with respect to such service.
For the purposes of Clause 13 above the address of each party shall be:-
For the GUARANTOR:
“Address: [e]
Attention: [eo]
Fax: [ej
For POCL: © .
Address: King Edward Building, King Edward Street, London EC1A 1AA
Attention: [eo]
Fax: te]
Either party may change its address for service, or the person nominated to
receive any such notices or communication, by notice given in accordance with
Clause 12-above.
The single or partial exercise by POCL of any right, power or remedy provided
by law or under this Deed of Guarantee shall not preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
This Deed of Guarantee shall be governed by and construed in all respects in
accordance with the laws of England. Any dispute which may arise between
the parties concerning this Deed of Guarantee shall be determined by the courts
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of England and the parties hereby submit to the non-exclusive jurisdiction of
the courts of England for such purposes. :
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IN WITNESS WHEREOF the Guarantor has executed this document as a deed by the
day and year first before written.
Executed as a deed
By FUJITSU LIMITED
acting by [authorised signatory(ies)
under its authority]
The common seal of
POST OFFICE COUNTERS LTD
was affixed in the presence of:-
* DHECtOT .s. sce ste coe sre coe ces ens caecuecn ces enesneee
Director/Secretary....+. +000 see eee
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) [Authorised signatory]
) .
)
[Authorised signatory]
-
wy
2
To:
44
SCHEDULE 11
Form of Legal Opinion
[On headed paper of foreign legal advisers}
Post Office Counters Ltd,
King Edward Building,
King Edward Street,
London EC1A 1AA
[Date]
Dear Sirs,
Introduction
We refer to the deed of guarantee (the “Guarantee”) dated [ @ ], 1999 and
made between Fujitsu Limited (the “Guarantor”) and Post Office Counters Ltd
(“POCL”). Under the Guarantee the Guarantor has agreed to guarantee the
obligations of ICL Pathway Limited under certain agreements between ICL
Pathway Limited and POCL.
Terms and expressions defined in the Guarantee have the same meanings when
used in this letter. . :
We have acted as Japanese legal advisers to [the Guarantor/POCL] in’
connection with the Guarantee.
This letter sets out our opinion on certain’ matters of Japanese law as at today’s
date. We have not made any investigation of, and do riot express any opinion
on, any other law. . .
For the purposes of this letter, we have examined:
(A) _ asigned copy of the Guarantee;
(B) — acopy of the [constitutional documents] of the Guarantor, certified as
true, complete and up-to-date by [an authorised representative of the
Guarantor] {name of certifying officer];
(C) _ acopy of the minutes of a meeting of the [Board of Directors] of the
Guarantor held on [ j, 1999 certified to be a true copy and
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as being in full force and effect by [an authorised representative of the
Guarantor) (name of certifying officer];
@) the [commercial register], including the [commercial register] files, 5 1
relating to the Guarantor maintained by [court or administrative agency
located at the place of legal domicile or incorporation of the Guarantor for
maintaining the commercial register and the commercial files for the
Guarantor] for the Guarantor; and
(([E]) any government or other public authority clearances, consents, licences, .
registrations or authorisations required under the relevant foreign law
which are being delivered as conditions precedent documents.)
Assumptions
6. For the purposes of this letter, we have assumed each of the following:
(A) , POCL has the capacity and power: .
(i) to sign and deliver the Guarantee; and
_Gi) to exercise its rights and perform its obligations under the
Guarantee.
(B) POCL has taken all necessary corporate action to authorise:
(i) signing and delivery of the Guarantee; and
(ii) _ the exercise of its rights and performance of its obligations under
the Guarantee.
(C) The Guarantee has been duly signed by POCL.
(D) The Guarantee has been signed on behalf of the Guarantor by {name of
signatory] [and [name of second signatory].
(E)- The Guarantee has been unconditionally delivered by each party to it.
(F) All signatures are genuine.
<(G) ‘The copy documents referred to in sub-paragraphs (B) and (c) of
paragraph 5 are complete and accurate as at today's date and conform
to the originals. ©
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The information disclosed by the extract from the [commercial register]
referred to in sub-paragraph (D) of paragraph 5 was, when obtained,
accurate and has not since then been altered or added to.
(i) The minutes referred to in sub-paragraph (C) of paragraph 5
* truly record the proceedings of a duly convened, constituted and
conducted-meeting of the [Board of Directors] of the Guarantor.
(ii) The resolutions passed and authorisations given at that meeting
have not subsequently been amended, revoked or superseded.
The obligations of the Guarantor under the Guarantee are valid and
binding under English law (by which they are expressed to be
governed). .
7. We are of the opinion that:
(A)
(B).
(C)
()
@)
The Guarantor is a [description of entity, eg. limited liability company]
which has been duly incorporated and is validly existing [for an
unlimited duration].
The Guarantor has the capacity and power to:
‘ (i) sign and deliver the Guarantee; and
; (ii) - exercise its rights and perform its obligations under the
Guarantee.
The signature and delivery of the Guarantee by the Guarantor and the
exercise of the Guarantor’s rights and the performance of its obligations
under the Guarantee have been authorised by all necessary corporate
action on the part of the Guarantor.
The Guarantee has been duly signed by the Guarantor.
The signature and delivery of the Guarantee by the Guarantor and the
exercise of the Guarantor’s rights and the performance of its obligations
under the Guarantee: .
(i) are not prohibited by law, regulation or order or by the ;
[constitutional documents] of the Guarantor; and
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(G)
(®)
q@)
@)
(K)
a)
(M)
. 47
Gi)’ [save for [any clearances, consents, licences, registrations or
authorisations referred to in sub-paragraph ([E]) of paragraph 5]
which have been obtained on an unrestricted and unconditional
basis,] do not require any governmental or other consent or
authorisation, approval, filing, registration or exemption.
The obligations of the Guarantor under the Guarantee rank at least
equally with all its other present and future unsecured and
unsubordinated obligations {other than [here insert reference to any.
obligations which will be preferred by virtue of mandatory provisions of
statute]]. .*
No procedure has been commenced in Japan with a view to the winding I
up or reorganisation of the Guarantor, or with a view to the
appointment of an administrator, receiver, administrative receiver,
trustee in bankruptcy or similar officer in relation to the Guarantor or
any of its assets or revenues. :
No stamp, registration or similar tax is payable, and no filing or
registration is required, in connection with the execution, performance
or enforcement of the Guarantee. The reference to enforcement
includes the enforcement of an English judgment against the Guarantor. .
The irrevocable submission by the Guarantor under the Guarantee to the
jurisdiction of the courts of England and the appointment ofthe agent
for the service of process contained in the Guarantee are valid and
binding on the Guarantor under Japanese law.
A final and conclusive judgment entered against the Guarantor by an.
English court in any suit, action or. proceedings arising out of or in
connection with the Guarantee would be enforced by the Japanese
courts without re-examination or re-litigation of the matters adjudicated
upon. i
The courts of Japan would accept jurisdiction in any suit, action or -
proceedings against the Guarantor arising out of or in connection with
the Guarantee.
The courts of Japan would accept and give effect to the choice of law
provisions of the Guarantee. Japanese law would not prevent any
provisions of the Guarantee from being a valid and binding obligation of
the Guarantor. :
A judgment against the Guarantor. in the Japanese courts, including a
judgment on the enforcement of an English judgment, in respect of a
sum due under the Guarantee would be expressed in the currency in
which the obligation under the Guarantee is payable.
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(N) Payments to POCL under the Guarantee will not be subject to
withholding tax in Japan or any deduction or withholding for or on
account of any taxes or duties of whatever nature imposed or levied by
or on behalf of Japan or any authority of or in Japan having power to
tax. :
(O) Under the laws of Japan POCL will not be deemed to be resident,
domiciled, carrying on business or subject to taxation in Japan by reason
only of the execution, delivery, performance or enforcement of the
Guarantee or any other document referred to in the Guarantee.
Reservations
8. Our opinion is qualified by the following reservation[s] and any matter of fact
not disclosed to us:
(A) Laws relating to [here insert description of laws e.g. “liquidation”,
“liquidation or administration” or “insolvency"] or other laws or
procedures affecting generally the enforcement of creditors’ rights may
affect the remedies available.
(B) [Any other reservations particular to Japan].
Yours faithfully,
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