EX-10.(K) 3 a2153763zex-10_k.htm EXHIBIT 10(K)
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Exhibit 10(k)

18 March 2005

STRATEGIC RAIL AUTHORITY

and

GREAT NORTH EASTERN RAILWAY LIMITED

INTERCITY EAST COAST
FRANCHISE AGREEMENT

Contents

CLAUSE
   PAGE
1.    Interpretation and Definitions   1

2.    Commencement
 
1

3.    Term
 
2

4.    Franchisee's Obligations
 
2

5.    Arm's Length Dealings
 
2

6.    Compliance with Laws
 
2

7.    Entire Agreement
 
3

8.    Governing Law
 
3

SCHEDULE 1
 
6
  Passenger Service Obligations   6

SCHEDULE 1.1
 
8
  Service Development   8

APPENDIX 1 TO SCHEDULE 1.1
 
20
  The Train Fleet   20

APPENDIX 2 TO SCHEDULE 1.1
 
24
  Service Development Additional Factors   24

SCHEDULE 1.2
 
26
  Operating Obligations   26

SCHEDULE 1.3
 
34
  Additional Service Specifications   34

SCHEDULE 1.4
 
38
  Passenger Facing Obligations   38

APPENDIX 1 TO SCHEDULE 1.4
 
48
  Form of Passenger's Charter   48

APPENDIX 2 TO SCHEDULE 1.4
 
66
  Alternative Transport   66

SCHEDULE 1.5
 
68
  Information about Passengers   68

SCHEDULE 1.6
 
70
  Committed Obligations   70

APPENDIX 1 TO SCHEDULE 1.6
 
98
  Programme of Committed Obligations   98

APPENDIX 2 TO SCHEDULE 1.6
 
102
  Liquidated Damages for Late Completion of Committed Obligations   102

APPENDIX 3 TO SCHEDULE 1.6
 
106

GNER HST Refurbishment
 
106
     

i


SCHEDULE 1.7
 
110
  Franchise Services   110

SCHEDULE 1.8
 
116
  Major Projects   116

SCHEDULE 2
 
118
  Assets, Leases, Third Parties, Other Franchise Operations and Schemes   118

SCHEDULE 2.1
 
119
  Asset Vesting and Transfer   119

SCHEDULE 2.2
 
121
  Security of Access Assets, Rolling Stock Leases, Station and Depot Leases   121

SCHEDULE 2.3
 
125
  Third Party Delivery of Passenger Services and Other Franchisees   125

SCHEDULE 2.4
 
127
  Other Franchise Operations   127

SCHEDULE 2.5
 
129
  Transport, Travel and Other Schemes   129

APPENDIX TO SCHEDULE 2.5
 
133
  List of Transport, Travel and Other Schemes   133

SCHEDULE 3
 
136
  Priced Options   136

SCHEDULE 4
 
138
  Maintaining and Enhancing Stations, Depots and Trains   138

SCHEDULE 4.1
 
140
  Franchise Facilities   140

APPENDIX TO SCHEDULE 4.1
 
146
  Station Surveys   146

SCHEDULE 4.2
 
148
  Persons with Disabilities and Disability Discrimination   148

APPENDIX TO SCHEDULE 4.2
 
154
  Minor Works   154

SCHEDULE 5
 
156
  Fares   156

SCHEDULE 5.1
 
158
  Purpose, Structure and Construction   158

SCHEDULE 5.2
 
162
  Franchisee's Obligation to Create Fares   162

SCHEDULE 5.3
 
164
  Allocation of Fares to Fares Baskets   164

SCHEDULE 5.4
 
166
  Regulation of Fares Basket Values   166
     

ii


SCHEDULE 5.5
 
168
  Regulation of Individual Fares   168

SCHEDULE 5.6
 
170
  Exceeding the Regulated Value, Regulated Price or Regulated Child Price   170

SCHEDULE 5.7
 
172
  Changes to Fares and Fares Regulation   172

SCHEDULE 5.8
 
176
  Fares Regulation Information and Monitoring   176

SCHEDULE 6
 
178
  Farebox Securitisation   178

SCHEDULE 7
 
180
  Performance Benchmarks/Key Performance Indicators   180

SCHEDULE 7.1
 
182
  Performance Benchmarks   182

APPENDIX 1 TO SCHEDULE 7.1
 
190
  Cancellations Benchmark Table   190

APPENDIX 2 TO SCHEDULE 7.1
 
192
  Capacity Benchmark Table   192

APPENDIX 3 TO SCHEDULE 7.1
 
194
  Network Rail Benchmark Table   194

APPENDIX 4 TO SCHEDULE 7.1
 
197
  Service Delivery Benchmark Table   197

SCHEDULE 7.2
 
200
  Key Performance Indicators   200

APPENDIX TO SCHEDULE 7.2
 
218
  Average Profit Table   218

SCHEDULE 8
 
223
  Payments   223

SCHEDULE 8.1
 
225
  Franchise Payments   225

SCHEDULE 8.2
 
233
  Annual Franchise Payments   233

APPENDIX 1 TO SCHEDULE 8.2
 
236
  Target Revenue (expressed in real terms)   236

APPENDIX 2 TO SCHEDULE 8.2
 
239
  Figures for Calculation of Annual Franchise Payments   239

APPENDIX 3 TO SCHEDULE 8.2
 
241
  (HRO scheme 1 only)   241

SCHEDULE 8.3
 
244
  Miscellaneous Payment Provisions   244
     

iii


SCHEDULE 8.4
 
246
  Track Access Adjustments and Station Charge Adjustments   246

SCHEDULE 9
 
250
  Changes   250

SCHEDULE 9.1
 
252
  Financial Consequences of Change   252

SCHEDULE 9.2
 
256
  Identity of the Financial Model etc.   256

SCHEDULE 9.3
 
258
  Runs of the Financial Model   258

APPENDIX TO SCHEDULE 9.3
 
264
  Incentivising Long-Term Investment   264

SCHEDULE 9.4
 
266
  Authority Risk Assumptions   266

SCHEDULE 10
 
268
  Remedies, Termination and Expiry   268

SCHEDULE 10.1
 
270
  Remedial Plans and Remedial Agreements   270

SCHEDULE 10.2
 
272
  Termination and Expiry   272

SCHEDULE 10.3
 
274
  Events of Default and Termination Event   274

SCHEDULE 10.4
 
280
  Force Majeure   280

SCHEDULE 10.5
 
285
  Liability   285

SCHEDULE 11
 
287
  Agreement Management Provisions   287

SCHEDULE 12
 
291
  Financial Obligations and Covenants   291

APPENDIX 1 TO SCHEDULE 12
 
299
  Form of Performance Bond   299

APPENDIX 2 TO SCHEDULE 12
 
305
  Form of Season Ticket Bond   305

SCHEDULE 13
 
314
  Franchise Management and Information Obligations   314

SCHEDULE 13.1
 
316
  Franchise Management   316

SCHEDULE 13.2
 
320
  Information   320
     

iv


APPENDIX 1 TO SCHEDULE 13.2
 
332
  Efficient Franchisee   332

APPENDIX 2 TO SCHEDULE 13.2
 
240
  Key Assets   340

APPENDIX 3 TO SCHEDULE 13.2
 
342
  Operational Information   342

APPENDIX 4 TO SCHEDULE 13.2
 
348
  Passenger Journeys, Miles and Earnings Information   348

SCHEDULE 14
 
350
  Preservation of Assets   350

SCHEDULE 14.1
 
352
  Maintenance of Franchise   352

SCHEDULE 14.2
 
354
  Maintenance of Operating Assets   354

SCHEDULE 14.3
 
358
  Key Contracts   358

APPENDIX TO SCHEDULE 14.3
 
362
  List of Key Contracts   362

SCHEDULE 14.4
 
364
  Designation of Franchise Assets   364

APPENDIX TO SCHEDULE 14.4
 
368
  List of Primary Franchise Assets   368

SCHEDULE 14.5
 
370
  Dealing with Franchise Assets   370

SCHEDULE 15
 
372
  Obligations Associated with Termination   372

SCHEDULE 15.1
 
374
  Reletting Provisions   374

SCHEDULE 15.2
 
376
  Last 12 or 13 Months of Franchise Period   376

SCHEDULE 15.3
 
382
  Handover Package   382

APPENDIX TO SCHEDULE 15.3
 
384
  Form of Handover Package   384

SCHEDULE 15.4
 
386
  Provisions Applying on and after Termination   386

APPENDIX 1 TO SCHEDULE 15.4
 
392
  Form of Transfer Scheme   392

APPENDIX 2 TO SCHEDULE 15.4
 
396
  Form of Supplemental Agreement   396
     

v


SCHEDULE 16
 
410
  Pensions   410

SCHEDULE 17
 
414
  Confidentiality   414

SCHEDULE 18
 
418
  Franchise Continuation Criteria   418

SCHEDULE 19
 
420
  Other Provisions   420

[Schedules omitted from this copy]

vi

THIS AGREEMENT is dated eighteenth March 2005

BETWEEN

(1)
STRATEGIC RAIL AUTHORITY, whose principal place of business is at 55 Victoria Street, London, SW1H 0EU (the Authority); and

(2)
GREAT NORTH EASTERN RAILWAY LIMITED, whose registered office is at Sea Containers House, 20 Upper Ground, London SE1 9PF (the Franchisee).

WHEREAS

        (A)  The Authority wishes to appoint a franchisee to provide railway passenger services within its InterCity East Coast franchise and expects its franchisee, on the terms of this Agreement, actively to seek, in all reasonable business ways, greatly improved performance over the Franchise Term from its employees, its Train Fleet and other assets, and from Network Rail and its other suppliers, so as to deliver to the passenger the best railway passenger service that can be obtained from the resources that are available to it.

        (B)  The Franchisee wishes to be appointed as the Authority's franchisee for its InterCity East Coast franchise and intends, on the terms of this Agreement, actively to seek, in all reasonable business ways, greatly improved performance over the Franchise Term from its employees, its Train Fleet and other assets, and from Network Rail and its other suppliers, so as to deliver to the passenger the best railway passenger service that can be obtained from the resources that are available to it.

        (C)  The following provisions of this Agreement are intended to reflect and give effect to the matters referred to in Recitals (A) and (B).

1.     INTERPRETATION AND DEFINITIONS

        1.1   In this Agreement:

      Conditions Precedent Agreement means the agreement between the Authority and the Franchisee of even date herewith specifying certain conditions to be satisfied prior to issue of a Franchise Commencement Certificate.

      Definitions Agreement means the agreement between the Authority and the Franchisee of even date herewith relating to the interpretation of this Agreement and the Conditions Precedent Agreement.

        1.2   This Agreement, the Conditions Precedent Agreement and the Definitions Agreement together constitute a single agreement, which is a "franchise agreement" for the purposes of the Act, and shall be interpreted in accordance with the Definitions Agreement.

2.     COMMENCEMENT

        2.1   The clauses of this Agreement and the provisions listed in clauses 2.1(a) to 2.1(r) (inclusive) shall take effect and be binding upon each of the Authority and the Franchisee immediately upon signature of this Agreement:

    (a)
    paragraph 5.3 of Schedule 1.4 (Passenger Facing Obligations);

    (b)
    appropriate provisions (if any) of Schedule 1.6 (Committed Obligations);

    (c)
    paragraph 1 of Schedule 2.1 (Asset Vesting and Transfer);

    (d)
    paragraph 2 of Schedule 2.2 (Security of Access Assets, Rolling Stock Leases, Station and Depot Leases);

1

    (e)
    paragraph 2 of Schedule 2.3 (Third Party Delivery of Passenger Services and Other Franchisees);

    (f)
    paragraphs 1 and 2 of Schedule 4.1 (Franchise Facilities);

    (g)
    Schedule 5.1 (Purpose, Structure and Construction);

    (h)
    Schedule 5.3 (Allocation of Fares to Fares Baskets);

    (i)
    Schedule 5.7 (Changes to Fares and Fares Regulation);

    (j)
    Schedule 9 (Changes);

    (k)
    Schedule 10 (Remedies, Termination and Expiry);

    (l)
    paragraphs 1 to 3 (inclusive) of Schedule 11 (Agreement Management Provisions);

    (m)
    paragraph 4 of Schedule 12 (Financial Obligations and Covenants);

    (n)
    Schedule 13.1 (Franchise Management);

    (o)
    paragraphs 1, 2, 5, 6, 7 and 8 of Schedule 13.2 (Information);

    (p)
    Schedule 14.3 (Key Contracts);

    (q)
    Schedule 17 (Confidentiality); and

    (r)
    Schedule 19 (Other Provisions).

        2.2   The other provisions of this Agreement shall take effect and become binding upon the parties on the Franchise Commencement Date.

3.     TERM

        This Agreement shall terminate on the Expiry Date or on the date of any earlier termination pursuant to clause 2.2(a) of the Conditions Precedent Agreement or pursuant to Schedule 10 (Remedies and Termination).

4.     FRANCHISEE'S OBLIGATIONS

        4.1   The Franchisee shall perform its obligations under this Agreement in accordance with their terms and with that degree of skill, diligence, prudence and foresight which would be exercised by a skilled and experienced Train Operator of the InterCity East Coast franchise.

        4.2   Any obligation on the part of the Franchisee to use all reasonable endeavours shall extend to consequent obligations adequately to plan and resource its activities, and to implement those plans and resources, with all due efficiency and economy.

        4.3   The Franchisee shall co-operate with the Authority and act reasonably and in good faith in and about the performance of its obligations and the exercise of its rights pursuant to this Agreement.

5.     ARM'S LENGTH DEALINGS

        The Franchisee shall ensure that every contract or other arrangement or transaction to which it may become party in connection with this Agreement with any person is on bona fide arm's length terms.

6.     COMPLIANCE WITH LAWS

        The Franchisee shall at all times during the Franchise Term perform the Franchise Services and all its other obligations under this Agreement in accordance with all applicable Laws.

2


7.     ENTIRE AGREEMENT

        7.1   This Agreement, the Definitions Agreement and the Conditions Precedent Agreement contain the entire agreement between the parties in relation to the subject matter of this Agreement and supersede all prior agreements and arrangements between the parties other than any confidentiality agreements or undertakings which the Franchisee may have entered into with the Authority in connection with its proposal to secure the provision of the Passenger Services under this Agreement.

        7.2   The Franchisee hereby acknowledges that it is not entering into this Agreement in reliance on any warranties, representations or undertakings howsoever or to whomsoever made except in so far as such are:

    (a)
    contained in this Agreement; or

    (b)
    embodied in any warranties, representations or undertakings contained in the long form report provided by the Reporting Accountants in respect of Great North Eastern Railway, dated 22 July 2004.

        7.3   The Franchisee hereby acknowledges and agrees with the Authority (for itself and as trustee for each of the other persons referred to therein) to the disclaimer of liability which is contained in the section entitled "Important Notice" contained in any document supplied by or on behalf of the Authority in connection with this Agreement, the process leading to the entering into of this Agreement, or the Franchise Services (including any "Invitation to Tender" issued in connection therewith).

        7.4   The Franchisee irrevocably and unconditionally waives any right which it may otherwise have to claim damages in respect of and/or to rescind this Agreement on the basis of any warranty, representation (whether negligent or otherwise, and whether made prior to and/or in this Agreement) or undertaking howsoever or to whomsoever made unless and to the extent that such warranty, representation or undertaking was made fraudulently.

8.     GOVERNING LAW

        This Agreement shall be governed by and construed in accordance with the Laws of England and Wales and the parties irrevocably agree that the courts of England and Wales are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Agreement, except as expressly set out in this Agreement.

3


IN WITNESS whereof the parties hereto have executed this Agreement the day and year first before written.

THE CORPORATE SEAL
OF THE STRATEGIC RAIL
AUTHORITY
HEREUNTO AFFIXED IS

AUTHENTICATED BY:
 ROBERT PLAMPLIN		   }    

SIGNED FOR AND ON
BEHALF OF THE
 FRANCHISEE

DIRECTOR:

DIRECTOR:
 
}
 
  



 CHRISTOPHER GARNETT

SHAUN MILLS

4



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