Execution Version
Apr 21, 2022
2022
THE SECRETARY OF STATE FOR BUSINESS, ENERGY AND INDUSTRIAL
STRATEGY
AND
POST OFFICE LIMITED
FUNDING AGREEMENT
POL00363148
POL00363148
Execution Version
Apr 21, 2022
THIS AGREEMENT is made on 2022.
BETWEEN:
qd) THE SECRETARY OF STATE FOR BUSINESS, ENERGY AND INDUSTRIAL
STRATEGY of I Victoria Street, London SW1H OET, (the Secretary of State); and
(2) POST OFFICE LIMITED, a company incorporated in England and Wales (registered
number 2154540), and whose registered address is 20 Finsbury Street, London EC2Y
9AQ (POL).
WHEREAS:
(A) The Parties entered into the 2021 Funding Agreement (as defined below) in respect of
funding for certain post office services during the 2021-22 Funding Period.
(B) The Secretary of State has requested that POL continues to provide a national network
of post offices across the United Kingdom and Services of Public Economic Interest (as defined
below) across that network.
(C) The Secretary of State has agreed to enter into this Agreement in order to provide
funding to POL to enable it to continue to provide the Services of Public Economic Interest
across that national network in respect of the Financial Years 2022/23, 2023/24 and 2024/25.
The Secretary of State makes this funding available to POL under the Post Office Network
Subsidy Scheme Order 2007 (SI 2007/962).
NOW THIS AGREEMENT WITNESSES as follows:
1. INTERPRETATION
1.1 In this Agreement, including the recitals, Schedules and Appendices, unless the context
requires otherwise:
2021 Funding Agreement means the funding agreement entered between the Parties dated 18
March 2021.
2021-22 Funding Period means the period commencing on or around I April 2021 and ending
31 March 2022.
Actual SPEI Cost is defined in Schedule 3 (Calculation of Actual SPEI Cost).
Annual Plan has the meaning given to it in Schedule 4 (Milestones).
Articles of Association means the Articles of Association of POL adopted by a written
resolution passed on 19 March 2020.
Board means the board of directors of POL.
Branch means any Outlet of POL that makes it possible for customers to access the Services
of Public Economic Interest set out in row 1 of Schedule 6 (SPEI Services).
POL00363148
POL00363148
Execution Version
Business Day means a day (not being a Saturday or a Sunday) on which banks are open for
general non-automated banking business in the City of London.
Civil Claims means the claims arising out of historic prosecutions as summarised in the
document titled Annual Report Insert - Civil Claims Arising Out of Historic Prosecutions dated
1 February 2021.
Cumulative SPEI Cost has the meaning given to it in clause 5.9 (SPEI Government Funding
for the SPEI Purpose).
Cumulative SPEI Network Subsidy Payment means the total aggregate amount of all SPEI
Network Subsidy Payments made by the Secretary of State under clause 5.5 (SPEI Government
Funding for the SPEI Purpose).
Cumulative SPEI Subsidy Statement has the meaning given to it in clause 5.9 (SPEI
Government Funding for the SPEI Purpose).
Deprived Urban Areas means:
(a) the most deprived fifteen per cent. (15%) of super output areas in England;
(b) the most deprived fifteen per cent. (15%) of data zones in Scotland; and
(c) the most deprived thirty per cent. (30%) of super output areas in Wales and Northern
Treland,
based upon each country’s then current index of multiple deprivation.
Effective Date means I April 2022.
Financial Counterparties means National Westminster Bank plc, Santander UK ple, Barclays
Bank ple, Lloyds Bank ple, The Bank of England or any other financial counterparty as notified
by POL to BEIS from time to time.
Financial Quarter means the period commencing on one Quarter Date and ending on the day
before the next Quarter Date.
Financial Year means an accounting period of POL commencing on or around 1 April in any
calendar year and ending on or around 31 March in the following calendar year.
Framework Document means the document entitled ‘Post Office Limited: Shareholder
Relationship Framework Document’ between the Secretary of State, UK Government
Investments Limited and POL dated March 2020 (as amended from time to time).
Fundamental Change means the occurrence of any of the events listed in Part A of Schedule 2
(Fundamental Change).
Funding Period means the period commencing on or around I April 2022 and ending on 31
March 2025.
Government means Her Majesty’s Government.
Group Litigation Protocol means the information sharing protocol in respect of the Postmaster
Complaints (as defined therein) between POL and UK Government Investments Limited (on
POL00363148
POL00363148
Execution Version
behalf of the Secretary of State) dated 20 May 2020 (as the same may be amended from time
to time by written agreement between the parties to it).
Letter of Support is any letter provided by the Secretary of State to POL from time to time
confirming that the Secretary of State places a high priority on POL’s ability to continue
delivering the vital public services and has committed to provide funding to POL.
Milestone means, in respect of each Financial Year in the Funding Period, the requirements set
out in Schedule 4 (Milestones).
Milestone Test Date means, in respect of each Financial Year in the Funding Period, the date
specified in Schedule 4 (Milestones) for the achievement of that Milestone.
Network Access Criteria means the criteria set out in Schedule 5 (Network Access Criteria).
Network Investment means a payment by the Secretary of State made pursuant to clause 5.6
(Government Funding for SPEI Funding Purpose).
Network Investment Payment Date means each I April and 1 October during the Funding
Period.
Outlet means any post office counter or any means of transacting one, some or all of the
Services of Public Economic Interest (or such equivalent products or services as agreed between
POL and the Secretary of State from time to time) at a third party premises and any other facility
designated for the transaction of business with members of the public by or on behalf of POL.
Parties means the parties to this Agreement.
PO Group means POL and its subsidiaries from time to time.
Potential Fundamental Change has the meaning given to it in Part B of Schedule 2 (Potential
Fundamental Change).
Principles of Community Engagement means the Principles of Community Engagement on
changes to the Post Office Network published in June 2018 and agreed with Citizens Advice,
Citizens Advice Scotland and the General Consumer Council for Northern Ireland as amended,
varied, supplemented or changed from time to time.
PSA2000 means the Postal Services Act 2000.
PSA2011 means the Postal Services Act 2011.
Quarter Date means each of I April, 1 July, 1 October and 1 January.
Relevant Payment has the meaning given to it in clause 4 (Delayed payment).
Remedy Period has the meaning given to it in clause 4 (Delayed payment).
Required Payment Date has the meaning given to it in clause 4 (Delayed payment).
Rural Areas means those areas which are not Urban Areas.
POL00363148
POL00363148
Execution Version
Services of Public Economic Interest means the provision of access to the services listed in
Schedule 6 (SPEI Services) across the network of Outlets in accordance with the Network
Access Criteria as set out in Schedule 5.
Shareholder Approved Budget means POL’s annual budget that has been approved by the
Secretary of State in accordance with the Framework Document.
SPEI Funding Purpose means: (i) maintaining a network of Outlets in accordance with the
Network Access Criteria; and (ii) ensuring the provision of SPEI Services over that network, in
each case during the Funding Period.
SPEI Network Subsidy Payment means a payment by the Secretary of State of an amount
calculated to provide compensation to POL in respect of costs associated with maintaining a
network of Outlets beyond its optimal size. That network must meet the minimum access
requirements as set out in Schedule 5 (Network Access Criteria).
SPEI Services means some or all of the Services of Public Economic Interest.
SPEI Subsidy Statement has the meaning given to it in clause 5.9 (SPET Government Funding
for the SPEI Purpose).
Starling Litigation Protocol means the information sharing protocol in respect of the Starling
Litigation (as defined therein) between POL and UK Government Investments Limited (on
behalf of the Secretary of State) dated 8 July 2019 (as the same may be amended from time to
time by written agreement between the parties to it).
Strategic Plan means POL’s strategic plan agreed between the Parties covering the period from
1 April 2022 to 31 March 2025 in a form and substance satisfactory to the Secretary of State
(acting reasonably), including any variation of such document as agreed between the Parties
from time to time, which:
(a) for the period from 1 April 2022 to 31 March 2023 will align with the Annual Plan
(which has been approved by POL’s board subject to Secretary of State approval); and
(b) for the period from 1 April 2023 to 31 March 2025 will be agreed between the Parties
prior to 1 April 2023 and subsequently amended and approved prior to 1 April 2024.
Urban Areas means communities with ten thousand (10,000) or more inhabitants in a
continuous built up area.
VAT Amount has the meaning given to it in clause 5.13 (SPEI Government Funding for the
SPEI Purpose).
1.2 In this Agreement, except where the context otherwise requires:
(a) a reference to a person (which shall include any individual, firm, company,
corporation or other body corporate, government, state or agency or any
association, trust, fund or partnership (whether or not having separate legal
personality) shall include, as appropriate, its successors, permitted assignees or
transferees and, in the case of the Secretary of State, persons appointed to act on
his behalf;
(b) a reference to an enactment or statutory provision shall include a reference to any
subordinate legislation made under that enactment or statutory provision and is
POL00363148
POL00363148
(c)
(d)
(e)
(e9)
(g)
(h)
0)
@
Execution Version
a reference to that enactment, statutory provision or subordinate legislation as
from time to time amended, consolidated, modified, or re-enacted;
words in the singular shall include the plural and vice versa;
references to one gender include other genders;
a reference to any agreement or other instrument (other than an enactment or
statutory provision) shall be deemed to be a reference to that agreement or
instrument as from time to time amended, varied, supplemented, substituted,
novated, assigned or restated;
a reference to a clause, Schedule or Appendix shall be a reference to a clause of,
or Schedule or Appendix to, this Agreement;
a reference to “includes” or “including” shall be construed without limitation to
any events, circumstances, conditions, acts or matters specified afier those
words;
references to dates which do not fall on a Business Day shall be construed as
references to the immediately subsequent Business Day;
the headings are for convenience only and shall not affect its interpretation; and
references to this Agreement include this Agreement as amended or
supplemented.
1.3 The Schedules and Appendices form part of this Agreement and shall have the same
force and effect as if expressly set out in this Agreement, and any reference to this Agreement
shall include the Schedules and Appendices.
2. EFFECTIVE DATE
2.1 This Agreement takes effect from the Effective Date.
3. CONDITIONS
3.1 The obligation of the Secretary of State under this Agreement to make any SPEI
Network Subsidy Payment or provide the Network Investment is conditional on the relevant
Milestone having been achieved.
3.2 The obligations of POL under clauses 5 (SPEI Government Funding for the SPEI
Purpose), 7 (Strategic Plan), 9 (Employee Incentive Arrangements) and 11 (Public
Consultation, Communication and Equality) during the Funding Period are conditional on:
(a)
(b)
the relevant Milestone having been achieved by the relevant Milestone Test
Date; and
the relevant SPEI Network Subsidy Payments or Network Investment having
been received.
POL00363148
POL00363148
Execution Version
Deliverables
3:3 On execution of this Agreement, POL shall deliver (or ensure that there is delivered)
all those documents listed in Schedule 1 (Deliverables) in a form and substance satisfactory to
the Secretary of State (acting reasonably).
Fundamental Change
3.4 Without prejudice to the accrued rights and remedies of the Parties, the obligations of
the Secretary of State to make or facilitate any payments in accordance with this Agreement
and the obligations of POL under clauses 5 (SPEI Government Funding for the SPEI Purpose),
7 (Strategic Plan), 9 (Employee Incentive Arrangements) and 11 (Public Consultation,
Communication and Equality), may be terminated with immediate effect by written notice of
the Secretary of State upon the occurrence of a Fundamental Change.
3.5 Ifon the date on which any payment is due to be made by the Secretary of State to POL
under this Agreement a Potential Fundamental Change exists, the Secretary of State shall be
entitled to withhold such payment until such time as:
(a) a Fundamental Change occurs, whereupon clause 3.4 shall apply and the
Secretary of State shall have no obligation to make that payment; or
(b) the Potential Fundamental Change ceases to exist, whereupon the payment shall
become immediately due and payable.
3.6 Until the date on which the last SPEI Network Subsidy Payment or Network Investment
is due to be made by the Secretary of State to POL under this Agreement, POL shall promptly
disclose to the Secretary of State any matter or thing of which its board of directors becomes
aware after entering into this Agreement which constitutes, or which in the reasonable opinion
of its board of directors is reasonably likely to give rise to, a Fundamental Change or a Potential
Fundamental Change.
4, DELAYED PAYMENT
If any SPEI Network Subsidy Payment or Network Investment to be made by the Secretary of
State to POL under this Agreement (a Relevant Payment) is not made on, or by the date on
which it is required by clauses 5.5 and 5.6 (SPEI Government Funding for the SPEI Purpose)
to be made (the Required Payment Date), then during the period between the Required
Payment Date and the end of the tenth (10"") Business Day thereafter (such period being the
Remedy Period), the Parties shall continue to comply with their respective obligations under
this Agreement and the Secretary of State shall make the Relevant Payment within the Remedy
Period.
5, SPEI GOVERNMENT FUNDING FOR THE SPEI PURPOSE
5.1 Subject to clauses 3.2 and 5.2, POL undertakes to the Secretary of State that it will for
the duration of the Funding Period: (i) maintain a network of Outlets in accordance with the
Network Access Criteria; and (ii) provide across that network the SPEI Services.
5.2 The Parties acknowledge and agree that:
(a) the Secretary of State requires, during the period 1 March — 31 March (the March
Test Period) in each Financial Year, POL will have a network of at least eleven
thousand five hundred (11,500) operational and trading Branches (the Branch
POL00363148
POL00363148
(b)
(©)
(d)
Execution Version
Target) which are operational and trading for a minimum of one day during the
March Test Period. Should the Branch Target not be achieved during a March
Test Period, POL, working with the Secretary of State (each acting reasonably
and co-operatively), shall within twenty (20) Business Days of 31 March in the
relevant Financial Year develop a plan to achieve the Branch Target as soon as
reasonably possible (the Branch Target Remedy Plan). The Branch Target
Remedy Plan shall be a plan which a competent business person (being a person
with the level of skill and knowledge which would reasonably be expected of the
executive management of a business of the size and complexity of POL) would
consider commercially reasonable for POL, and the Branch Target Remedy Plan
shall be subject to the Secretary of State’s approval (acting reasonably);
the Secretary of State requires, during each of (i) the March Test Period and (ii)
the period I September — 30 September (the September Test Period) in each
Financial Year, for a minimum of one day during the March Test Period and
September Test Period respectively, POL: (i) to make available for purchase
through its network of Outlets the SPEI Service set out in row 1 of Schedule 6
(SPEI Services); and (ii) to make available for transacting the SPEI Services set
out in rows 2 and 3 of Schedule 6 (SPEI Services), in accordance with the
Network Access Criteria (Schedule 5 (Network Access Criteria) (together, the
Access Target). Should the Access Target not be achieved during a March Test
Period or a September Test Period, POL, working with the Secretary of State
(each acting reasonably and co-operatively), shall within twenty (20) Business
Days of 31 March or 30 September (as appropriate) in the relevant Financial
Year develop a plan to achieve the Access Target as soon as reasonably possible
(the Access Target Remedy Plan). The Access Target Remedy Plan shall be a
plan which a competent business person (being a person with the level of skill
and knowledge which would reasonably be expected of the executive
management of a business of the size and complexity of POL) would consider
commercially reasonable for POL, and the Access Target Remedy Plan shall be
subject to the Secretary of State’s approval (acting reasonably);
the delivery of the SPEI Services by POL across its network will be governed in
accordance with contracts or other agreements under which the terms of the
provision of the individual SPEI Services are specified. The delivery of the SPEI
Services does not replace or change in any way any contracts or other agreements
under which the terms of the provision of the individual SPEI Services are
specified; and
to the extent the SPEI Network Subsidy Payments are, or the Network
Investment is, used for material project delivery spend related to strategic
platform modernisation, such amounts shall be used in the manner approved by
the Secretary of State (acting reasonably).
5.3 Subject to clause 3 (Conditions) and clause 6 (Withholding, Suspending or Repayment
of Government Funding), the Secretary of State agrees to make SPEI Network Subsidy
Payments and provide the Network Investment to POL during the Funding Period of the
amounts specified in clauses 5.5 and 5.6, to enable POL to meet its obligations in clause 5.1.
5.4 The SPEI Network Subsidy Payments for the Funding Period shall be made in a manner
or manners to be determined by the Secretary of State in his absolute discretion (but having
consulted with POL as to the impact thereof (if any) on their profit and loss accounts and the
tax treatment of such payments).
POL00363148
POL00363148
Execution Version
5.5 The SPEI Network Subsidy Payment payable in:
(a) the Financial Year 2022/23 shall be up to fifty million pounds (£50,000,000);
(b) the Financial Year 2023/24 shall be up to fifty million pounds (£50,000,000);
and
(c) the Financial Year 2024/25 shall be up to fifty million pounds (£50,000,000),
in each case made by way of payment to POL in equal instalments on: (i) in
respect of the Financial Year 2022/23, 2 May 2022, I July 2022, 3 October 2022
and 3 January 2023 and (ii) in respect of the Financial Years 2023/24 and
2024/25, each Quarter Date during the relevant Financial Year, or as otherwise
agreed between the Parties.
5.6 The Network Investment to be provided in:
(a) the Financial Year 2022/23 shall be seventy-five million pounds (£75,000,000);
(b) the Financial Year 2023/24 shall be up to ninety million pounds (£90,000,000);
and
(c) the Financial Year 2024/25 shall be up to twenty million pounds (£20,000,000),
in each case made in two equal instalments on: (i) in respect of the Financial
Year 2022/23, 1 June 2022 and 3 October 2022; and (ii) in respect of the
Financial Years 2023/24 and 2024/25, on each Network Investment Payment
Date during the relevant Financial Year, or as otherwise agreed between the
Parties.
5.7 Inascertaining for any purpose of this clause 5 the amount or maximum amount of any
SPEI Network Subsidy Payment no account shall be taken of: (i) any VAT Amount which may
be payable under clause 5.13; or (ii) the benefit of any interest receivable on any amount held
by POL prior to its expenditure.
5.8 It is acknowledged by the Parties that any part of the SPEI Network Subsidy Payments
received by POL under a network subsidy scheme pursuant to section 103 of the PSA2000
(currently expected to be the amounts specified in clause 5.5 above) would be treated as revenue
in POL’s accounts, which has an impact on POL’s operating profit. Should any SPEI Network
Subsidy Payment (or part thereof) be made in any Financial Year in any manner which would
result in it not being treated as revenue in POL’s accounts then any target operating profit
applicable for any purpose to POL, or the PO Group as a whole, in such Financial Year shall
be reduced by the amount of any SPEI Network Subsidy Payment (or part thereof) received in
any such manner in that Financial Year.
5.9 Within three months following the signature of POL’s accounts in respect of each of
the Financial Years 2022/23, 2023/24 and 2024/25, POL shall provide to the Secretary of State
a statement (the SPEI Subsidy Statement) setting out in writing the Actual SPEI Cost for the
relevant Financial Year and a cumulative statement (the Cumulative SPEI Subsidy Statement)
setting out the cumulative amount of all Actual SPEI Cost for the Funding Period up to and
including the relevant Financial Year (the Cumulative SPEI Cost), together with supporting
calculations properly prepared in accordance with the requirements in Schedule 3 (Calculation
of Actual SPEI Cost) and a clear explanation of how the amounts have been calculated. The
POL00363148
POL00363148
Execution Version
SPEI Subsidy Statement shall be accompanied by confirmation from POL that POL used the
SPEI Network Subsidy Payment in accordance with the terms of this Agreement.
5.10 If following the end of the Funding Period:
(a)
(b)
the Cumulative SPEI Subsidy Statement (for the entire Funding Period) shows
that the Cumulative SPEI Cost is less than the amount of the Cumulative SPEI
Network Subsidy Payment set out in clause 5.5; or
the amount of the total investment spend as set out in the Strategic Plan for the
Funding Period (excluding amounts used to pay external legal fees in connection
with any proceedings in relation to Postmaster Complaints (as defined in the
Group Litigation Protocol), the Starling Litigation (as defined in the Starling
Litigation Protocol) and the Civil Claims as disclosed (in written form) to the
Secretary of State) is lower than the Network Investment (in accordance with
clause 5.6),
POL shall, within ten (10) Business Days of a request by the Secretary of State,
reimburse to the Secretary of State, without deduction, an amount equal to the
difference.
5.11 POL shall use each SPEI Network Subsidy Payment and the Network Investment only
to meet the direct and indirect costs associated with: (i) maintaining a network of Outlets in
accordance with the Network Access Criteria; and (ii) ensuring the provision of SPEI Services
over that network, calculated in accordance with Schedule 3 (Calculation of Actual SPEI Cost)
(or to make any reimbursement required to be made by POL pursuant to clause 5.10).
§.12 POL shall not use the SPEI Network Subsidy Payment or the Network Investment for
the purposes set out in paragraphs (a) to (i) below. In so far as POL have additional resources,
from current or retained profits, then POL may undertake these activities (where permitted
under the Articles of Association):
(a)
(b)
(c)
(d)
(©)
co)
(g)
(hy
to fund lobbying (via an external firm or in-house staff) in order to undertake
activities intended to influence or attempt to influence Government or political
activity or attempting to influence legislative or regulatory action;
to directly enable one part of Government to challenge another on topics
unrelated to the SPEI Funding Purpose or SPEI Services;
to petition for additional funding;
for entertaining, in particular any entertainment aimed at exerting undue
influence to change Government policy;
payments for activities of a party political or exclusively religious nature;
for the giving of gifts;
to pay external legal fees in connection with any proceedings in relation to
Postmaster Complaints (as defined in the Group Litigation Protocol), the Starling
Litigation (as defined in the Starling Litigation Protocol) and the Civil Claims as
disclosed (in written form) to the Secretary of State;
to pay statutory fines, criminal fines or penalties; or
POL00363148
POL00363148
Execution Version
(i) for payments for unfair dismissal.
5.13 It is the mutual opinion of the Parties that any payment of an instalment of the SPEI
Network Subsidy Payment received by POL will not (and POL agrees not to take any steps
with the intention of procuring that they will) constitute, for VAT purposes, the consideration
for any taxable supply and that, accordingly, the receipt by POL of such instalment of the SPEI
Network Subsidy Payment should not give rise to any liability of POL (or any other member
of the PO Group) to account for VAT in respect of any such receipt. Notwithstanding the
foregoing opinion, if it should, at any time (whether or not a time falling within the duration of
this Agreement), be determined by Her Majesty’s Revenue and Customs that such instalment
of the SPEI Network Subsidy Payment must be treated as the consideration for taxable supplies
made by POL (or, as the case may be, by any other member of the PO Group) and that in
consequence POL (or such other member of the PO Group) is liable to account for VAT in
respect of the receipt of any of such instalment of the SPEI Network Subsidy Payment (the
VAT Amount), POL shall notify the Secretary of State of that determination within five (5)
Business Days of being so advised by Her Majesty’s Revenue and Customs and the Secretary
of State shall, as soon as reasonably practicable following notification of such determination,
make a payment to POL, in addition to all amounts otherwise payable by the Secretary of State
to POL under this Agreement, of a sum equal to the VAT Amount, against production of a valid
VAT invoice.
5.14 If Her Majesty’s Revenue and Customs issues a determination as referred to in clause
5.13 the Parties shall (acting reasonably) consult as to what action to take regarding such
determination. If the Secretary of State disagrees with the determination he may, within ten (10)
Business Days of being notified by POL of such determination, give written notice to POL that
he requires POL (or any other member of the PO Group) to obtain a review by Her Majesty’s
Revenue and Customs of that determination; and POL (or such other member of the PO Group,
as the case may be) shall promptly request (the form of that request being subject to reasonable
review by the Secretary of State) Her Majesty’s Revenue and Customs to undertake such
review. In the event that the review results in POL obtaining a refund of any VAT Amount, or
not being required to pay a VAT Amount, in each case in respect of which the Secretary of
State shall have made a corresponding payment under clause 5.13, POL shall promptly refund
to the Secretary of State the amount of such corresponding payment.
6. WITHHOLDING, SUSPENDING OR REPAYMENT OF GOVERNMENT FUNDING
6.1 Without prejudice to the Secretary of State’s other rights and remedies, the Secretary
of State may at his discretion (exercised acting reasonably) reduce, withhold or suspend
payment of any instalment of the SPEI Network Subsidy Payments or the Network Investment
due to POL and / or require POL to repay all or part of the SPEI Network Subsidy Payment or
the Network Investment if:
(a) subject to clause 5.12, POL uses the SPEI Network Subsidy Payment or the
Network Investment for a purpose other than the SPEI Funding Purpose or fails
to comply with any of its obligations under clauses 5 (SPEI Government Funding
for the SPEI Purpose), 7 (Strategic Plan), 9 (Employee Incentive Arrangements)
and 11 (Public Consultation, Communication and Equality) during the Funding
Period;
(b) POL receives funding from a third party for part or all of the same purposes as
the SPEI Funding Purpose (in which case, the Secretary of State’s recovery will
be limited to an amount equal to the third party funding for the relevant SPEI
Funding Purpose);
POL00363148
POL00363148
(d)
(e)
)
i)
(ii)
(iii)
(iv)
(v)
Execution Version
the Secretary of State has incorrectly paid money to POL as a result of an
administrative error or other reason;
POL fails to achieve any Milestone referred to in Schedule 4 (Milestones) by the
relevant Milestone Test Date, until such Milestone is achieved;
POL fails during the Funding Period or has failed prior to the Funding Period to
meet any requirement in relation to consent or approval pursuant to article 8 of
the Articles of Association; or
any of the following events arise:
POL is, in the reasonable opinion of the Secretary of State, delivering the SPEI
Funding Purpose in a negligent manner, provided that the Secretary of State
has given POL written notice that he believes that the SPEI Funding Purpose
has been provided negligently and POL has failed to remedy the provision of
the SPEI Funding Purpose within twenty (20) Business Days of such notice;
POL obtains debt funding from a third party which, in the reasonable opinion
of the Secretary of State, undertakes activities that are likely to bring the
reputation of the SPEI Funding Purpose or the SPEI Services or the Secretary
of State into disrepute, provided that the Secretary of State shall have no right
to reduce, withhold or suspend payment where POL has obtained such debt
funding from a third party which is regulated by any arm of the Government
or which has the right to do business in the United Kingdom by reason of the
European Union passporting system or other equivalent system enabling such
third party to trade freely in the United Kingdom. The Parties acknowledge that
any equity funding is likely to constitute a variation of rights attaching to the
special share in POL held by the Sccretary of State and therefore will require
prior written consent in accordance with the Articles of Association;
POL knowingly provides the Secretary of State with any material information
relating to the provision of the SPEI Funding Purpose that is materially
misleading or inaccurate;
POL is involved in any illegal activity in the provision of the SPEI Funding
Purpose; or
the Secretary of State is required to exercise its rights under this clause by an
order of a court.
6.2 If any of the events in clause 6.1 occur and the Secretary of State reduces the SPEI
Network Subsidy Payment or the Network Investment for the Funding Period then POL shall
perform such of its obligations under this Agreement as shall be correspondingly adjusted as
agreed by POL and the Secretary of State (acting reasonably).
6.3 The Secretary of State also has the right to impose reasonable additional terms and
conditions to the SPEI Network Subsidy Payments or the Network Investment if any of the
events set out in clause 6.1 occur, or if the Secretary of State has reasonable grounds to believe
that it is necessary to protect public money.
POL00363148
POL00363148
Execution Version
7. STRATEGIC PLAN
7.1 Unless otherwise agreed by the Sceretary of State, POL shall not apply the SPEI
Network Subsidy Payment or Network Investment for a purpose inconsistent with the Strategic
Plan or make any material deviation from the Annual Plan.
7.2 In order for the Secretary of State to monitor POL’s progress in delivering the Strategic
Plan:
(a) POL shall provide, in a form and substance satisfactory to the Secretary of State
(acting reasonably), a report or reports:
(i) no more than thirty (30) Business Days after each Quarter Date in the Funding
Period, setting out an overall assessment of POL’s activities during the
previous Financial Quarter (or the applicable period in relation to a report
provided to the board of directors during the Financial Year). Such report(s)
shall include:
(A) asummary of POL’s financial and change spend performance over the
Financial Quarter as compared to the Annual Plan;
(B) a summary of POL’s expected future financial and change spend
performance as compared to the Annual Plan; and
(C) information on expected drawings by POL on the cash provided to
POL pursuant to the Network Investment for the remaining duration
of the Annual Plan;
(ii) no more than thirty (30) Business Days following the end of each Financial
Year in the Funding Period, setting out a summary of POL’s expected future
financial and change spend performance over the Funding Period as compared
to the Strategic Plan; and
(b) the Secretary of State may request information on a routine and an ad hoc basis.
The Secretary of State will ensure that information requests are not overly
onerous and POL will use its reasonable endeavours to satisfy all information
requests.
8. FINAL CONTRIBUTION
POL acknowledges that the SPEI Network Subsidy Payment and Network Investment to be
provided by the Secretary of State pursuant to this Agreement represents the Secretary of State’s
final funding contribution in respect of POL’s obligations over the Funding Period to (subject
to any Branch Target Remedy Plan or Access Target Remedy Plan delivered under clause 5..
(i) maintain a network of Outlets in accordance with the Network Access Criteria; and (ii)
ensure the provision of SPEI Services over that network in accordance with the Strategic Plan.
9 EMPLOYEE INCENTIVE ARRANGEMENTS
9.1 POL may maintain an incentive scheme, approved by the Secretary of State, for its
senior executive team in a manner which is designed to ensure, and is consistent with ensuring,
the delivery of the Annual Plan.
POL00363148
POL00363148
Execution Version
9.2. POL confirms that accordingly, no such bonus arrangements will pay out in respect of
a Funding Period in which POL seeks and obtains funding in addition to the SPEI Network
Subsidy Payment or the Network Investment from the Secretary of State over and above that
anticipated in this Agreement, as a result of a failure by POL to perform in accordance with the
requirements of the Annual Plan (other than as a result of a change in Government policy or
other reasons beyond POL’s control including funding related to historical litigation matters).
10. JOINT VENTURES
10.1 Unless otherwise agreed with the Secretary of State, POL agrees that it shall only enter
into joint ventures with third parties for purposes consistent with the delivery of the Strategic
Plan and provided that the joint venture is structured on the basis that it would not (according
to Government advice) be classified as part of the public sector in accordance with a guidance
note for public sector bodies forming joint ventures with the private sector by Her Majesty’s
Treasury dated March 2010 or any subsequent replacements for this guidance note.
I. PUBLIC CONSULTATION, COMMUNICATION AND EQUALITY
11.1 POL shall at all times comply with the Principles of Community Engagement.
11.2 POL shall comply with all obligations it may have under section 149 of the Equality
Act 2010 and acknowledges that appropriate steps shall be taken to inform all people making
decisions or exercising functions on POL’s behalf of these equality duties. This is reflected in
POL’s Equality, Diversity and Inclusion Policy and POL shall ensure that this commitment is
maintained in the performance of its obligations under this Agreement.
12. CONSENTS
The Secretary of State hereby consents, for the purposes of the Articles of Association and any
other document or arrangement under which its consent or approval is required, to the execution
and performance by POL of this Agreement and the documents and arrangements to be entered
into pursuant to, or otherwise contemplated by, this Agreement (other than any agreement
contemplated in clause 10 (Joint Ventures)). The Secretary of State agrees that such consents
will take effect notwithstanding any failure to comply with any procedural requirements of such
articles or other documents in connection with the obtaining of such consents.
13. CONFIDENTIALITY
13.1 Each Party undertakes to the other Party that, subject to clause 13.2, it shall treat as
strictly confidential all confidential information. For the purposes of this clause 13, confidential
information shall mean:
(a) the provisions of this Agreement, the Strategic Plan and the Annual Plan; and
(b) the negotiations relating to this Agreement, the Strategic Plan and the Annual
Plan.
13.2 Clause 13.1 shall not prevent the disclosure by a Party of any confidential information:
(a) to those of its officers (including auditors), employees and agents as it considers
have a need for such information in the performance of their respective functions
and who shall in each case be made aware by such Party of its obligations under
this Agreement and shall be required by such Party to observe the same
POL00363148
POL00363148
Execution Version
restrictions on the use of the confidential information as are contained in this
clause 13;
(b) to its professional advisers who are bound to such Party by a duty of confidence
which applies to the confidential information disclosed;
(c) to the extent required by applicable law, legal contractual obligations with
Financial Counterparties or by the regulations of any regulatory or supervisory
authority to which such Party is subject or pursuant to any order of court or other
competent authority or tribunal;
(d) which shall have entered the public domain or ceased to be confidential other
than as a result of a breach by such Party of its obligations under this clause 13;
(e) where a Letter of Support is provided to third parties in which POL has a
contractual relationship having received consent to provide such third party with
that Letter of Support from the Secretary of State in writing (whether by way of
an email or letter);
(f) which was already known to such Party prior to its disclosure to such Party other
than as a result of a breach by such Party of an obligation of confidentiality;
(g) as such Party, acting reasonably, considers necessary in connection with any
investigations, inquiries, or actual or threatened proceedings in connection with
POL or any of its directors;
(h) in the case of POL, to the extent that its board of directors acting reasonably,
considers disclosure necessary from time to time in its statutory accounts;
(i) to the extent that the Secretary of State, acting reasonably, considers disclosure
necessary from time to time in the published accounts of the Department of
Business, Energy and Industrial Strategy or Her Majesty’s Treasury;
(0) to the extent required by any Parliamentary obligation;
(k) to the extent required for the purposes of any examination pursuant to section
6(1) of the National Audit Act 1983 of the economy, efficiency and effectiveness
with which the Secretary of State has used his resources; or
() with the prior written consent of the other Party.
13.3. Ifa Party becomes required, in circumstances contemplated by clause 13.2(c), (g), (h)
or (i) to disclose any confidential information, such Party shall, to the extent permitted by law,
give to the other Party such notice of such disclosure as is practicable in the circumstances and
shall, to the extent permitted by law and practicable in the circumstances, consult with the other
Party as to the extent of such disclosure.
14. NOTICES
14.1. A notice to be served pursuant to or in connection with this Agreement shall be in
writing and, unless otherwise stated, served in person or sent by pre-paid first class post, e-mail
or any other electronic method of communication as agreed by the Parties to the relevant Party
at its address or e-mail address set out below, or such other address in England or Wales or e-
POL00363148
POL00363148
Execution Version
mail address notified by it to the other Party and marked for the attention of the person or
department therein specified.
14.2 The address and addressee of each Party at the date of this Agreement are:
Name of Party Attention Address E-mail Address
Secretary of State Department for I 1 Victoria Street, I Carl.Creswell@beis.
Business, Energy I London SW1H OET I gov.uk
and Industrial
Strategy
POL Company Secretary I 20 Finsbury Street, I LegalNotices@posto
London EC2Y 9AQ_I ffice.co.uk
14.3. Notice shall be deemed to be received on the date and time specified below (save that
where such notice would otherwise be deemed to be received after 17:00 London time on a
particular day, it shall be deemed to have been received at 9:00 London time on the next
Business Day):
(a) in the case of a notice served in person, upon delivery at the address of the
addressee;
(b) in the case of a posted letter, on the second (2™) Business Day after posting; and
(c) in the case of e-mail or any other electronic method of communication agreed by
the Parties, when actually received in readable form.
14.4 Each Party undertakes to notify the other Party by notice served in accordance with this
clause 14 if the address specified by that Party herein is no longer an appropriate address for
the service of notice or if it is desired to substitute any individual addressee of that Party named
in clause 14.2.
14.5 In proving service of any notice under or in connection with this Agreement it will be
sufficient to prove:
(a) in the case of a letter, that such letter was properly stamped or franked, addressed
and placed in the post or in the case of personal delivery, was left at the correct
address; and
(b) in the case of an e-mail, that e-mail was duly transmitted to the e-mail address
of the addressee referred to in clause 14.2.
POL00363148
POL00363148
Execution Version
15. ENTIRE AGREEMENT
15.1. This Agreement and any documents referred to in it or annexed to it constitute the
whole and only agreement between the Parties relating to its subject matter and, for the
avoidance of doubt, supersedes any other prior arrangement, understanding or agreement
between the Parties relating to the subject matter of this Agreement.
15.2 Each Party acknowledges that in entering into this Agreement, it is not relying on any
pre-contractual statement, which is not set out in this Agreement.
15.3. Except in the case of fraud, neither Party shall have any right of action against the other
Party arising out of or in connection with any pre-contractual statement except to the extent that
it is expressly provided for in this Agreement.
15.4 For the purposes of this clause 15, pre-contractual statement means any draft,
agreement, undertaking, representation, warranty, promise, assurance, forecast, estimate or
arrangement of any nature whatsoever, whether or not in writing, relating to the subject matter
of this Agreement made or given by any person at any time prior to the date of this Agreement.
16. GENERAL
Secretary of State
16.1 Nothing in this Agreement fetters the powers conferred on the Secretary of State by the
PSA2000 and the PSA2011.
Costs
16.2 Save as expressly provided for elsewhere in this Agreement, each of the Parties shall
at its own expense do all such things as shall be necessary to give full effect to the obligations
imposed on it under this Agreement.
Third parties
16.3. For the purposes of the Contracts (Rights of Third Parties) Act 1999, no person other
than a Party shall have any rights in respect of this Agreement.
Counterparts
16.4 This Agreement may be executed in any number of counterparts and by the Parties on
separate counterparts, each of which when so executed and delivered shall be an original, but
all the counterparts shall together constitute one and the same instrument.
Partial invalidity
16.5 If any term or provision in this Agreement is held to be illegal or unenforceable in
whole or in part under any enactment or rule of law, such term or provision or part shall to that
extent be deemed not to form part of this Agreement but the enforceability of the remainder of
this Agreement shall not be affected.
Rights, variations and waivers
16.6 The rights and remedies of the Parties shall not be affected by any failure to exercise
or delay in exercising any right or remedy or by the giving of any indulgence by the other Party
POL00363148
POL00363148
Execution Version
or by anything whatsoever except a specific waiver or release in writing and any such waiver
or release shall not prejudice or affect any other rights or remedies of the Parties. No single or
partial exercise of any right or remedy prevents any further or other exercise thereof or the
exercise of any other right or remedy.
16.7 No variation of this Agreement shall be of any effect unless it is agreed in writing by
or on behalf of each Party.
16.8 I Any waiver of any right, power or remedy under this Agreement must be in writing
and may be given subject to any conditions thought fit by the grantor. The person seeking the
waiver shall disclose to the grantor all material facts then in that person’s knowledge relevant
to the subject matter of the waiver. Unless otherwise expressly stated, any waiver shall be
effective only in the instance and only for the purpose for which it is given.
Remedies
16.9 Without prejudice to any other rights or remedies that either Party may have, each Party
acknowledges and agrees that damages alone would not be an adequate remedy for any breach
by a Party of the provisions of this Agreement, and that the remedies of injunction and specific
performance as well as any other equitable relief for any threatened or actual breach of the
provisions of this Agreement by a Party may be more appropriate remedies and that no proof
of special damages shall be necessary for the enforcement of this Agreement.
Governing law and jurisdiction
16.10 This Agreement and any non-contractual obligations arising out of or in relation to this
Agreement shall be governed by and construed in accordance with the law of England and
Wales.
16.11 Each Party hereby submits to the exclusive jurisdiction of the courts of England.
EXECUTED by the Parties on the date first written above.
POL00363148
POL00363148
POL00363148
POL00363148
Execution Version
SIGNED by
for and on behalf of
THE SECRETARY OF STATE FOR BUSINESS, ENERGY AND INDUSTRIAL
STRATEGY
Signature: —
Name: Carl Creswell
Title: Director, Department for Business, Energy and Industrial Strategy
SIGNED by
for and on behalf of
POST OFFICE LIMITED
Signature:
Name: Nick Read
Title: Chief Executive Officer
Signature:
Name: Alisdair Cameron
Title: Chief Financial Officer
Execution Version
SCHEDULE 1
DELIVERABLES
A certified copy of a resolution of the board of POL:
(a) approving the terms of, and the transactions contemplated by this Agreement and
resolving that it execute and perform this Agreement;
(b) authorising a specific person or persons to execute this Agreement on its behalf; and
(c) authorising a specified person or persons, on its behalf, to sign and / or dispatch all
documents and notices to be signed and / or dispatched by it under or in connection
with this Agreement.
POL00363148
POL00363148
Execution Version
SCHEDULE 2
Part A
Fundamental Change
A Fundamental Change will have occurred if:
1.
an order has been made or resolution has been passed for the winding-up of, or a
provisional liquidator to be appointed in respect of, POL;
an administrator has been appointed in respect of POL;
a receiver (which expression shall include an administrative receiver) has been
appointed in respect of POL;
POL is unable to pay its debts as they fall due within the meaning of section 123 of the
Insolvency Act 1986;
a moratorium is declared in respect of the indebtedness of POL or POL enters into a
moratorium or a composition, assignment or similar arrangement with its creditors
generally;
a scheme of arrangement is approved, or proposed by POL, under Part 26 of the
Companies Act 2006 or under the Corporate Insolvency and Governance Act 2020 with
a view to rescheduling or restructuring POL’s indebtedness;
a voluntary arrangement has been proposed by POL under section I of the Insolvency
Act 1986 in respect of POL; or
an event analogous to the foregoing has occurred in relation to POL in any jurisdiction
outside England.
Part B
Potential Fundamental Change
A Potential Fundamental Change exists at any time if at that time a Fundamental Change shall
not have occurred but:
1.
a petition has been presented or a meeting has been convened for the purpose of
winding-up POL or appointing a provisional liquidator in respect of POL and such
petition has not been discharged or such meeting has not been held; or
POL is currently taking steps with a view to appointing an administrator or agreeing a
moratorium, composition, assignment or similar arrangement with its creditors
generally.
POL00363148
POL00363148
Execution Version
SCHEDULE 3
CALCULATION OF ACTUAL SPEI COST
The amount of the Actual SPEI Cost shall be the actual costs incurred by POL in
connection with the provision of the loss-making network of Outlets in accordance with
the terms of this Agreement.
Only Outlets that made a loss during the Funding Period are to be included in the
calculation of the Actual SPEI Cost. Subject to Schedule 3 paragraph 4, the Actual
SPEI Cost is to be calculated by the following equation:
Actual SPEI Cost = (B+C) — A (if positive) where:
A= Total revenue from loss-making Outlets;
B = Direct costs attributable to loss-making Outlets; and
C= Indirect costs attributable to loss-making Outlets.
For the purposes of calculating the Actual SPEI Cost, the costs shall include, without
limitation, all variable and fixed costs associated with the provision of the loss-making
network of Outlets including contributions to pension funds, interest costs, central
costs, depreciation and amortisation costs of any employee incentivisation
arrangements and the costs of transforming the network, in each case whether such
costs are recurring or exceptional and will be calculated on an annual basis.
The Secretary of State reserves the right to change the basis of the calculation of Actual
SPEI Cost in the event of a relevant change in the applicable subsidy rules.
POL00363148
POL00363148
Execution Version
SCHEDULE 4
MILESTONE TEST DATES
For the Financial Year 2022/23, the Milestone Test Date is: (a) each of 30 September 2022 and
31 March 2023 for the Milestone listed in Part 1 (Network Size) below and (b) 1 June 2022 (or
such earlier date as the Parties agree) for the Milestone listed in Part 2 (Annual Plan) below.
For the Financial Year 2023/24, the Milestone Test Date is: (a) each of 30 September 2023 and
31 March 2024 for the Milestone listed in Part 1 (Network Size) below and (b) 1 April 2023 for
the Milestone listed in Part 2 (Annual Plan) below.
For the Financial Year 2024/25, the Milestone Test Date is: (a) each of 30 September 2024 and
31 March 2025 for the Milestone listed in Part 1 (Network Size) below and (b) 1 April 2024 for
the Milestone listed in Part 2 (Annual Plan) below.
MILESTONES
Part 1 - Network Size
Subject to clause 5.2 (SPEI Government Funding for the SPEI Purpose), POL’s network meets
the Network Access Criteria as reported by POL in each report delivered in accordance with
clause 7.2(a).
Part 2 - Annual Plan
POL has provided a POL board-approved annual report to the Secretary of State prior to the
start of the relevant Financial Year, including the Shareholder Approved Budget, setting out the
steps that it will take in respect of the Strategic Plan (or any variation to it, agreed by the Parties
where material) during that forthcoming Funding Period (the Annual Plan).
Each year the Secretary of State (acting reasonably) will agree with POL a timetable for POL
to provide a draft and final version of the Annual Plan. This timetable will, among other things,
allow sufficient time for the Secretary of State to review the draft Annual Plan and to agree its
final form prior to the start of the relevant Financial Year.
This Annual Plan should include:
(a) the Shareholder Approved Budget;
(b) a reconciliation of any differences between POL’s annual budget and the projected
income statement, statement of cash flows and balance sheet in the Strategic Plan;
(c) information on the network of Outlets, including its planned size and confirmation of
POL’s intention to continue to comply with the Network Access Criteria and an impact
assessment of the network change plan with respect to POL’s public sector equality
duty responsibilities, as per clause 11.2;
(d) the proposed drawings by POL on the cash provided to POL pursuant to the Network
Investment;
(e) information on the investment activities that POL plans to undertake;
POL00363148
POL00363148
POL00363148
POL00363148
Execution Version
(fp an update on POL’s forecast financial performance for the current Financial Year; and
(g) information on any other outcomes set out in POL’s Strategic Plan that do not form
part of (a) to (f) above.
POL00363148
POL00363148
Execution Version
SCHEDULE 5
NETWORK ACCESS CRITERIA
1. POL’s network of Outlets must enable the following criteria to be met:
a. nationally, ninety per cent. (90%) of the UK population are within one (1) mile of the
nearest Outlet;
b. nationally, ninety-nine per cent. (99%) of the UK population are within three (3) miles
of the nearest Outlet;
c. in Urban Areas, ninety-five per cent. (95%) of the total population are within one (1)
mile of the nearest Outlet;
d. in Deprived Urban Areas, ninety-nine per cent. (99%) of the total population are
within one (1) mile of the nearest Outlet; and
e. in Rural Areas, ninety-five per cent. (95%) of the total population are within three (3)
miles of the nearest Outlet.
In addition, the following criterion will apply at the level of each and every individual
postcode district, establishing a minimum level of coverage at a very local level:
f. in each postcode district, ninety-five per cent. (95%) of the population to be within 6
miles of their nearest Outlet.
2. In applying the above criteria POL shall in addition take account of geographical
constraints such as rivers, mountains and valleys, motorways and sea crossings to islands,
and public transport infrastructure, so as not to impose undue hardship when considering
the appropriate Outlet network.
POL00363148
POL00363148
Execution Version
SCHEDULE 6
SPEI SERVICES
Post Office are required to provide some or all of each of the below SPEI Services in accordance
with clause 5.2:
SPEI Service SPEI Service Details
1. Access to postal I Provision of access to some or all of the postal services which the
services. universal service provider (Royal Mail Group Limited) is required to
provide under regulatory conditions and directions issued by Ofcom in
accordance with section 36 of the Postal Services Act 2011 and the
Designated Universal Service Provider Conditions issued by Ofcom on
27 March 2012, or alternative postal services agreed with the Secretary of
State.
2. Universal access to I Provision of basic cash and banking, principally for the benefit of
basic cash and I financially or socially excluded customers and businesses local to post
banking facilities. office branches, e.g. cash withdrawals, cash deposits, cash transmission
facilities (e.g. including postal orders) and cashing of cheques.
3. Universal payment I Provision of facilities for payment of electricity, gas, telecommunications
facilities for public I and water bills, Payment options include pre-payment and other budgeting
utility services. schemes (e.g. including savings stamps).
4. Provision of services I Provision of access to Government services as per separate contractual
on behalf of Central I agreements with Central and Local Government and public sector
and Local I agencies.
Government