(1) The Secretary of State for Transport (2) First …...Version 3.5x FOIA 2000 Public Register Copy Page 1 of 803 Dated 7 APRIL 2017 (1) The Secretary of State for Transport (2) First

Version 3.5x FOIA 2000 Public Register Copy

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Dated 7 APRIL 2017

(1) The Secretary of State for Transport

(2) First MTR South Western Trains Limited

SOUTH WESTERN FRANCHISE AGREEMENT

RAIL PUBLIC REGISTER COPY

REDACTED IN ACCORDANCE WITH FOIA 2000


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TABLE OF CONTENTS Clauses

1. INTERPRETATION ..................................................................................... 17 2. AGREED DOCUMENTS ............................................................................... 20 3. DEFINITIONS .......................................................................................... 21 4. COMMENCEMENT ................................................................................... 108 5. DURATION OF THE FRANCHISE AGREEMENT .............................................. 110 6. GENERAL OBLIGATIONS .......................................................................... 110 7. ASSIGNMENT ........................................................................................ 111 8. CHANGE OF CONTROL AND FACILITATION FEE ........................................... 111 9. COMPLIANCE WITH LAWS ....................................................................... 112 10. CUMULATIVE RIGHTS AND REMEDIES ....................................................... 112 11. DISPUTE RESOLUTION PROCEDURE .......................................................... 113 12. NOTICES .............................................................................................. 114 13. SET-OFF ............................................................................................... 115 14. MISCELLANEOUS PROVISIONS ................................................................. 116 15. COMPETITION ....................................................................................... 118 16. ENTIRE AGREEMENT ............................................................................... 120 17. GOVERNING LAW AND JURISDICTION ....................................................... 120 SCHEDULE 1 - PASSENGER SERVICE OBLIGATIONS ....................................... 122 SCHEDULE 1.1 ................................................................................................ 123 FRANCHISE SERVICES AND SERVICE DEVELOPMENT ..................................... 123 PART 1 - FRANCHISE SERVICES ......................................................................... 123 1. FRANCHISE SERVICES ............................................................................ 123 2. RESTRICTIONS RELATING TO FRANCHISE SERVICES .................................. 123 3. RESTRICTIONS ON CLOSURES OF RAILWAY PASSENGER SERVICES OR RAILWAY

FACILITIES ........................................................................................... 125 4. SUBCONTRACTING ANY PASSENGER SERVICES .......................................... 125 5. STATION SERVICES ................................................................................ 126 6. LIGHT MAINTENANCE SERVICES .............................................................. 126 7. ANCILLARY SERVICES ............................................................................. 127 8. ROYAL TRAIN ........................................................................................ 129 PART 2 - SERVICE DEVELOPMENT ...................................................................... 130 9. TRAIN SERVICE SPECIFICATION - PURPOSE AND RESPONSIBILITY ............... 130 10. TRAIN PLAN .......................................................................................... 130 11. CONSULTATION ON SIGNIFICANT ALTERATIONS TO THE TIMETABLE ............ 131 12. TIMETABLE DEVELOPMENT RIGHTS .......................................................... 133 13. CERTIFICATION AND NOTIFICATION BY FRANCHISEE OF EXERCISING TIMETABLE

DEVELOPMENT RIGHTS ........................................................................... 135 14. PLANNING TO MEET TARGET PASSENGER DEMAND ..................................... 136 15. CAPACITY MITIGATION PLAN ................................................................... 137 16. NEW OR AMENDED TRAIN SERVICE SPECIFICATION BY THE SECRETARY OF

STATE AND FRANCHISEE INFORMED OPINION ........................................... 139 17. PROCEDURAL ARRANGEMENTS AND TIMESCALES ....................................... 141


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18. OBLIGATIONS IN RELATION TO OTHER TRAIN OPERATORS.......................... 142 19. PROVISIONS RELATING TO ACCESS AGREEMENTS AND PROPERTY LEASES .... 142 20. THE TIMETABLE AND NETWORK RAIL'S WORKING TIMETABLE ...................... 143 SCHEDULE 1.2 ................................................................................................ 144 OPERATING OBLIGATIONS ............................................................................. 144 1. DAILY OPERATING OBLIGATIONS ............................................................. 144 2. TIMETABLING AND TRAIN PLANNING COMPLIANCE INVESTIGATION ............. 144 3. TIMETABLE CHANGES PROPOSED BY NETWORK RAIL .................................. 146 4. TIMETABLE CHANGES PROPOSED BY THE FRANCHISEE ............................... 146 5. TIMETABLE CHANGES REQUESTED BY THE SECRETARY OF STATE ................ 147 6. OBLIGATIONS OF THE FRANCHISEE IN THE EVENT OF DISRUPTION TO RAILWAY

PASSENGER SERVICES ........................................................................... 147 7. OBLIGATION TO USE ALL REASONABLE ENDEAVOURS UNDER THIS

SCHEDULE 1.2 ....................................................................................... 148 SCHEDULE 1.3 ................................................................................................ 152 NOT USED ....................................................................................................... 152 SCHEDULE 1.4 ................................................................................................ 153 PASSENGER FACING OBLIGATIONS ................................................................ 153 1. PUBLISHING THE TIMETABLE ................................................................... 153 2. COMMUNICATING LATE TIMETABLE CHANGES ............................................ 155 3. FARES SELLING RESTRICTIONS ............................................................... 155 4. PASSENGER'S CHARTER .......................................................................... 158 5. END TO END JOURNEYS AND CYCLES ....................................................... 159 6. STATUTORY NOTICES ............................................................................. 159 7. TRAIN AND STATION CLEANING ............................................................... 160 8. PUBLICATION OF PERFORMANCE DATA ..................................................... 160 9. PUBLICATION OF COMPLAINTS AND FAULTS HANDLING DATA ..................... 161 SCHEDULE 1.5 ................................................................................................ 163 INFORMATION ABOUT PASSENGERS .............................................................. 163 1. PASSENGER NUMBERS INFORMATION ....................................................... 163 2. MANUAL PASSENGER COUNTS ................................................................. 164 3. TECHNOLOGY FOR OBTAINING THE INFORMATION REFERRED TO IN

PARAGRAPH 1.2 ..................................................................................... 165 4. CRM DATA ............................................................................................ 165 5. YIELD MANAGEMENT DATA ...................................................................... 166 6. PERSONAL DATA - GENERAL PROVISIONS ................................................. 166 7. RAIL PASSENGER COUNTS DATABASE ...................................................... 168 8. INTELLECTUAL PROPERTY RIGHTS AND GENERAL PROVISIONS .................... 171 SCHEDULE 1.6 ................................................................................................ 173 THE ROLLING STOCK ...................................................................................... 173 1. PURPOSE .............................................................................................. 173 2. THE COMPOSITION OF THE TRAIN FLEET .................................................. 173 3. CHANGES TO THE TRAIN FLEET ............................................................... 173 4. ROLLING STOCK TESTING AND COMMISSIONING ....................................... 174 5. CONTROLLED EMISSION TOILETS ............................................................ 174


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6. BABY CHANGING FACILITIES ................................................................... 175 7. METERED TRAIN OPERATOR STATUS ........................................................ 175 APPENDIX 1 TO SCHEDULE 1.6 ....................................................................... 176 SCHEDULE 1.7 ................................................................................................ 179 STATIONS ...................................................................................................... 179 1. STATION ASSET MANAGEMENT ................................................................ 179 2. GREY ASSETS ........................................................................................ 182 3. STATION SOCIAL AND COMMERCIAL DEVELOPMENT PLAN ........................... 183 4. CONSULTATIONS ................................................................................... 184 5. NOT USED ............................................................................................ 184 6. SECURITY AT STATIONS ......................................................................... 184 7. INFORMATION ABOUT STATION IMPROVEMENT MEASURES ......................... 185 8. NOT USED ............................................................................................ 186 9. STATION INVESTMENT ........................................................................... 186 APPENDIX 1 TO SCHEDULE 1.7 ....................................................................... 187 LIST OF STATIONS AND CAR PARKS WITH SECURE STATIONS ACCREDITATION AND SECURE CAR PARKS ACCREDITATION ................................................................. 187 APPENDIX 2 TO SCHEDULE 1.7 ....................................................................... 193 INFORMATION ABOUT STATION IMPROVEMENT MEASURES ................................... 193 APPENDIX 3 TO SCHEDULE 1.7 ....................................................................... 196 NOT USED ....................................................................................................... 196 APPENDIX 4 TO SCHEDULE 1.7 ....................................................................... 197 NOT USED ....................................................................................................... 197 SCHEDULE 2 - ASSETS, LEASES, OTHER FRANCHISEES AND SCHEMES ........... 198 SCHEDULE 2.1 ................................................................................................ 199 ASSET VESTING AND TRANSFER ..................................................................... 199 1. NOT USED ............................................................................................ 199 2. VESTING OF PROPERTY LEASES DURING THE FRANCHISE TERM ................... 199 SCHEDULE 2.2 ................................................................................................ 201 SECURITY OF ACCESS AGREEMENTS, ROLLING STOCK LEASES, STATION AND DEPOT LEASES ............................................................................................... 201 1. NOVATION OF ACCESS AGREEMENTS DURING THE FRANCHISE TERM ........... 201 2. ROLLING STOCK RELATED CONTRACTS AND INSURANCE ARRANGEMENTS .... 202 3. CASCADED ROLLING STOCK AND DELAYED CASCADE MITIGATION PLAN ....... 203 4. ASSIGNMENT OF PROPERTY LEASES DURING THE FRANCHISE TERM ............ 205 5. STATION AND DEPOT LEASES .................................................................. 206 6. STATION SUBLEASES ............................................................................. 207 SCHEDULE 2.3 ................................................................................................ 208 OTHER FRANCHISEES ..................................................................................... 208 1. OTHER FRANCHISEES ............................................................................. 208 SCHEDULE 2.4 ................................................................................................ 209 NOT USED ....................................................................................................... 209 SCHEDULE 2.5 ................................................................................................ 210 TRANSPORT, TRAVEL AND OTHER SCHEMES................................................... 210 1. LOCAL AUTHORITY CONCESSIONARY TRAVEL SCHEMES .............................. 210


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2. MULTI-MODAL FARES SCHEMES ............................................................... 211 3. DISCOUNT FARE SCHEMES ...................................................................... 213 4. INTER-OPERATOR SCHEMES .................................................................... 213 APPENDIX 1 TO SCHEDULE 2.5 ....................................................................... 214 LIST OF TRANSPORT, TRAVEL AND OTHER SCHEMES ............................................ 214 SCHEDULE 3 ................................................................................................... 216 NOT USED ....................................................................................................... 216 SCHEDULE 4 ................................................................................................... 217 ACCESSIBILITY AND INCLUSIVITY ................................................................ 217 1. RELATIONSHIP WITH OTHER OBLIGATIONS RELATING TO PERSONS WITH

DISABILITIES ........................................................................................ 218 2. PHYSICAL ALTERATIONS AND ACCESSIBILITY OF STATIONS ........................ 218 3. DEALING WITH CLAIMS RELATING TO STATIONS ....................................... 221 4. SPECIFIC ADDITIONAL OBLIGATIONS RELATING TO PERSONS WITH

DISABILITIES ........................................................................................ 222 APPENDIX 1 TO SCHEDULE 4 .......................................................................... 224 MINOR WORKS ................................................................................................ 224 APPENDIX 2 TO SCHEDULE 4 .......................................................................... 225 ACCESSIBLE TRANSPORT ARRANGEMENTS .......................................................... 225 SCHEDULE 5 ................................................................................................... 226 FARES AND TICKETING .................................................................................. 226 SCHEDULE 5.1 ................................................................................................ 227 PURPOSE, STRUCTURE AND CONSTRUCTION ................................................. 227 1. PURPOSE OF SCHEDULE 5 ....................................................................... 227 2. STRUCTURE OF SCHEDULE 5 ................................................................... 228 3. CONSTRUCTION..................................................................................... 228 SCHEDULE 5.2 ................................................................................................ 230 FRANCHISEE'S OBLIGATION TO CREATE FARES ............................................. 230 1. CREATION OF COMMUTER FARES AND PROTECTED FARES ........................... 230 2. RESTRICTIONS ON CREATION OF FARES ................................................... 230 SCHEDULE 5.3 ................................................................................................ 231 ALLOCATION OF FARES TO FARES BASKETS ................................................... 231 1. ALLOCATION OF FARES TO FARES BASKETS .............................................. 231 2. DESIGNATION OF NON FARES BASKET FARES ............................................ 231 SCHEDULE 5.4 ................................................................................................ 233 REGULATION OF FARES BASKET VALUES ........................................................ 233 1. VALUE OF FARES BASKET NOT TO EXCEED REGULATED VALUE .................... 233 2. VALUE .................................................................................................. 233 3. PROJECTED REVENUE ............................................................................. 233 4. REGULATED VALUE ................................................................................ 233 SCHEDULE 5.5 ................................................................................................ 235 REGULATION OF INDIVIDUAL FARES ............................................................. 235 1. PRICE OR CHILD PRICE NOT TO EXCEED REGULATED PRICE OR REGULATED

CHILD PRICE ......................................................................................... 235 2. REGULATED PRICE ................................................................................. 235


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3. COMPULSORY INTER AVAILABLE FLOWS ................................................... 236 SCHEDULE 5.6 ................................................................................................ 237 EXCEEDING THE REGULATED VALUE, REGULATED PRICE OR REGULATED CHILD PRICE 237 1. EXCEEDING THE REGULATED VALUE ......................................................... 237 2. EXCEEDING THE REGULATED PRICE OR REGULATED CHILD PRICE ................ 238 SCHEDULE 5.7 ................................................................................................ 239 CHANGES TO FARES AND FARES REGULATION ............................................... 239 1. CHANGES TO FARES BASKETS ................................................................. 239 2. CHANGES TO THE 2010 NOMINAL TICKET SALES ....................................... 240 3. CHANGES TO THE REFERENCE REVENUE, GROSS REVENUE, 2010 NOMINAL

TICKET SALES AND/OR 2010 TICKET REVENUE .......................................... 240 4. CHANGES TO PRICES ............................................................................. 241 5. CHANGES TO FARES REGULATION ............................................................ 241 6. CHANGES TO COMPULSORY INTER AVAILABLE FLOWS ................................ 241 7. CHANGE OF LEAD OPERATOR/MAJOR FLOW OPERATOR ............................... 242 8. CHANGES TO FARES DOCUMENTS ............................................................ 242 SCHEDULE 5.8 ................................................................................................ 243 FARES REGULATION INFORMATION AND MONITORING ................................. 243 1. INFORMATION ....................................................................................... 243 2. MONITORING ........................................................................................ 243 SCHEDULE 5.9 ................................................................................................ 244 SMART TICKETING ......................................................................................... 244 1. SMART TICKETING ................................................................................. 244 SCHEDULE 6 ................................................................................................... 246 FRANCHISE SPECIFIC OBLIGATIONS AND COMMITTED OBLIGATIONS .......... 246 SCHEDULE 6.1 ................................................................................................ 247 FRANCHISE SPECIFIC OBLIGATIONS ............................................................. 247 1. CROSSRAIL ........................................................................................... 247 2. DIGITAL RAILWAY PROGRAMME ............................................................... 249 3. CROSSRAIL 2 ........................................................................................ 250 4. HEATHROW SOUTHERN ACCESS .............................................................. 250 5. CREATION OF AN ISLAND LINE BUSINESS UNIT AND COOPERATION ............. 250 6. ISLAND LINE CCI SCHEME ....................................................................... 252 7. STATION IMPROVEMENTS ....................................................................... 255 8. STATUS OF GUILDFORD AND CLAPHAM JUNCTION STATIONS ...................... 255 9. POTENTIAL DEVOLUTION TO TRANSPORT FOR LONDON .............................. 256 10. TRANSFER OF STATIONS FROM THE GREAT WESTERN FRANCHISE ............... 258 11. REPORT ON OPTIMISATION OF PASSENGER SERVICES ON SPECIFIED ROUTES

........................................................................................................... 259 12. AUTOMATIC SELECTIVE DOOR OPENING CAPABILITY OF THE TRAIN FLEET .... 260 13. TSS ENHANCEMENT SERVICES................................................................. 260 14. INFRASTRUCTURE PROJECTS ................................................................... 262 15. BOXING DAY SERVICES .......................................................................... 263 16. DEPOT AND STABLING WORKS AND WATERLOO INTERNATIONAL “FIT OUT” .. 264


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17. CO-OPERATION WITH NETWORK RAIL AND THE PREVIOUS FRANCHISEE IN RELATION TO THE DEPOT AND STABLING WORKS ...................................... 269

18. ACQUISITION OF CP5 ROLLING STOCK ..................................................... 270 19. INTRODUCTION INTO PASSENGER SERVICE OF CP5 ROLLING STOCK ........... 275 20. GAUGING RISK ...................................................................................... 278 21. PROJECT MANAGEMENT .......................................................................... 282 22. CLASS 158 UNIT .................................................................................... 284 23. WATERLOO INTERNATIONAL LEASE CHARGE FRANCHISE PAYMENT

ADJUSTMENTS ....................................................................................... 284 APPENDIX 1 TO SCHEDULE 6.1 ....................................................................... 288 PART 1 - SOUTH WEST CORE NETWORK ............................................................. 288 PART 2 - SOUTH WEST OUTER NETWORK ............................................................ 290 SCHEDULE 6.2 ................................................................................................ 291 COMMITTED OBLIGATIONS ............................................................................ 291 PART 1 - COMMITTED OBLIGATIONS .................................................................. 291 PART 2 - SPECIAL TERMS RELATED TO COMMITTED OBLIGATIONS ......................... 439 1. CONTINUATION OF AVAILABILITY ............................................................ 439 2. EXPENDITURE COMMITMENTS ................................................................. 439 3. LIAISON AND CO-OPERATION .................................................................. 440 4. NATURE OF COMMITMENT ....................................................................... 440 5. REVIEW OF COMPLIANCE ........................................................................ 441 6. REMEDY FOR LATE COMPLETION OR NON-DELIVERY OF COMMITTED

OBLIGATIONS ....................................................................................... 441 7. SPECIMEN SCHEMES .............................................................................. 441 8. THIRD PARTY CONSENTS, AGREEMENT AND CONDITIONS ........................... 441 9. DEFINITION OF “ALL REASONABLE ENDEAVOURS” OR “REASONABLE

ENDEAVOURS” ...................................................................................... 442 10. DESIGNATION OF ASSETS COMPRISED IN COS AS PRIMARY FRANCHISE ASSETS

........................................................................................................... 442 SCHEDULE 6.3 ................................................................................................ 444 NOT USED ....................................................................................................... 444 SCHEDULE 7 ................................................................................................... 445 PERFORMANCE BENCHMARKS ........................................................................ 445 SCHEDULE 7.1 ................................................................................................ 446 OPERATIONAL PERFORMANCE ....................................................................... 446 1. DEFINITIONS, CHANGES TO BENCHMARKS AND ANNUAL BENCHMARKS AND

NOTICE OF PERFORMANCE RESULTS ........................................................ 446 2. REPORTING REQUIREMENTS .................................................................... 452 PART A – NON-FINANCIAL ENFORCEMENT REGIME ............................................... 453 3. CANCELLATION CALCULATION: VALUE OF A .............................................. 453 4. CANCELLATION CALCULATIONS DURING THE INITIAL REPORTING STAGE ..... 453 5. CANCELLATION CALCULATION DURING THE BREACH REPORTING STAGE ....... 454 6. CANCELLATION CALCULATIONS DURING THE SUBSEQUENT REPORTING STAGE

........................................................................................................... 454 7. NOT USED. ........................................................................................... 454 8 NOT USED. ........................................................................................... 454


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9. NOT USED. ........................................................................................... 454 10. TOC MINUTE DELAY CALCULATIONS DURING THE INITIAL REPORTING STAGE 454 11. TOC MINUTE DELAY CALCULATIONS DURING THE BREACH REPORTING STAGE

........................................................................................................... 455 12. TOC MINUTE DELAY CALCULATIONS DURING THE SUBSEQUENT REPORTING

STAGE .................................................................................................. 455 13. NOT USED. ........................................................................................... 456 14. NOT USED. ........................................................................................... 456 15. SHORT FORMATIONS .............................................................................. 456 16. CALCULATIONS...................................................................................... 458 17. SERVICE RECOVERY PLANS AND FORCE MAJEURE ...................................... 458 18. CONSEQUENCES FOR POOR PERFORMANCE – BENCHMARKS ........................ 458 19. ANNUAL CANCELLATIONS CALCULATIONS ................................................. 460 20. ANNUAL TOC MINUTE DELAY CALCULATIONS ............................................. 460 21. ANNUAL SHORT FORMATION CALCULATIONS ............................................. 461 22. PERFORMANCE SUM PAYMENTS – ANNUAL BENCHMARKS AND ANNUAL

MEASURES ............................................................................................ 461 23. DETERMINATION OF THE ANNUAL BENCHMARKS AND ANNUAL MEASURES FOR

FRANCHISEE YEARS THAT ARE LESS THAN THIRTEEN REPORTING PERIODS BUT ARE SIX (6) REPORTING PERIODS OR MORE .............................................. 472

24. DETERMINATION OF THE ACTUAL CASL PERFORMANCE LEVEL AND THE ACTUAL PPM PERFORMANCE LEVEL FOR FRANCHISEE YEARS THAT ARE LESS THAN 13 REPORTING PERIODS BUT ARE SIX (6) REPORTING PERIODS OR MORE. ....... 476

25. NETWORK RAIL CLAIM ............................................................................ 477 26. CONSEQUENCES FOR POOR PERFORMANCE – ANNUAL BENCHMARKS AND

ANNUAL MEASURES ............................................................................... 477 27. PAYMENTS MADE BY SECRETARY OF STATE ............................................... 479 28. NOT USED ............................................................................................ 479 29. PAYMENTS IN RESPECT OF THE FINAL FRANCHISEE YEAR ........................... 479 30. ALLOCATION OF DISPUTED CANCELLATIONS/DISPUTED PARTIAL

CANCELLATIONS .................................................................................... 480 31. ALLOCATION OF DISPUTED MINUTES DELAY .............................................. 481 APPENDIX 1 TO SCHEDULE 7.1 ....................................................................... 483 CANCELLATIONS BENCHMARKS AND ANNUAL CANCELLATIONS BENCHMARKS ......... 483 PART 1 - CANCELLATIONS BENCHMARK TABLE .................................................... 483 PART 2 - ANNUAL CANCELLATIONS BENCHMARK TABLE ........................................ 486 PART 3 - ANNUAL CANCELLATIONS PAYMENT TABLE ............................................. 487 APPENDIX 2 TO SCHEDULE 7.1 ....................................................................... 488 TOC MINUTE DELAY BENCHMARKS AND ANNUAL TOC MINUTE DELAY BENCHMARKS . 488 PART 1 - TOC MINUTE DELAY BENCHMARK TABLE ................................................ 488 PART 2 - ANNUAL TOC MINUTE DELAY BENCHMARK TABLE .... ERROR! BOOKMARK NOT DEFINED. PART 3 - ANNUAL TOC MINUTE DELAY PAYMENT TABLE ......... ERROR! BOOKMARK NOT DEFINED. APPENDIX 3 TO SCHEDULE 7.1 ....................................................................... 494 SHORT FORMATION BENCHMARKS AND ANNUAL SHORT FORMATION BENCHMARKS . 494 PART 1 - SHORT FORMATION BENCHMARK TABLE ................................................ 494


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PART 2 - ANNUAL SHORT FORMATION BENCHMARK TABLE .... ERROR! BOOKMARK NOT DEFINED. PART 3 - ANNUAL SHORT FORMATION PAYMENT TABLE ......... ERROR! BOOKMARK NOT DEFINED. APPENDIX 4 TO SCHEDULE 7.1 ....................................................................... 500 CASL MEASURE ............................................................................................... 500 PART 1 - ANNUAL CASL TABLE ........................................................................... 500 PART 2 - ANNUAL CASL PAYMENT TABLE ............................................................. 501 APPENDIX 5 TO SCHEDULE 7.1 ....................................................................... 502 PPM MEASURE ................................................................................................. 502 PART 1 - ANNUAL PPM TABLE ............................................................................ 502 PART 2 - ANNUAL PPM PAYMENT TABLE .............................................................. 503 SCHEDULE 7.2 ................................................................................................ 504 NATIONAL RAIL PASSENGER SURVEYS, CUSTOMER REPORT AND CCI SCHEME 504 1. DEFINITIONS ........................................................................................ 504 2. CONDUCT OF NATIONAL RAIL PASSENGER SURVEYS .................................. 505 3. NRPS BENCHMARKS ............................................................................... 506 4. PERFORMANCE REVIEW .......................................................................... 506 5. REQUIRED IMPROVEMENT AND NRPS ACTION PLANS .................................. 507 6. ADDITIONAL EXPENDITURE ..................................................................... 507 7. PAYMENTS ON TERMINATION .................................................................. 508 8. CONSULTATIONS ................................................................................... 508 9. CUSTOMER AND STAKEHOLDER ENGAGEMENT STRATEGY ........................... 509 10. CUSTOMER REPORT ............................................................................... 509 11. CCI SCHEME ......................................................................................... 510 12. CUSTOMER SERVICE AND SATISFACTION DATA ......................................... 512 APPENDIX 1 TO SCHEDULE 7.2 ....................................................................... 514 NRPS BENCHMARK TABLE ................................................................................. 514 SCHEDULE 7.3 ................................................................................................ 517 NOT USED ....................................................................................................... 517 SCHEDULE 8 ................................................................................................... 518 PAYMENTS ...................................................................................................... 518 SCHEDULE 8.1 ................................................................................................ 519 FRANCHISE PAYMENTS .................................................................................. 519 1. FRANCHISE PAYMENTS ........................................................................... 519 2. PAYMENT OF FRANCHISE PAYMENTS ......................................................... 523 3. INTEREST ............................................................................................. 523 4. DISPUTES UNDER SCHEDULE 8 ................................................................ 523 5. INDUSTRIAL ACTION .............................................................................. 524 6. NO DOUBLE RECOVERY ........................................................................... 524 APPENDIX 1 TO SCHEDULE 8.1 ....................................................................... 525 ANNUAL FRANCHISE PAYMENTS ......................................................................... 525 APPENDIX 2 TO SCHEDULE 8.1 ....................................................................... 528 FIGURES FOR CALCULATION OF ANNUAL FRANCHISE PAYMENTS............................ 528


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SCHEDULE 8.2 ................................................................................................ 530 PROFIT SHARE MECHANISM ........................................................................... 530 1. PROFIT SHARE ....................................................................................... 530 2. ADDITIONAL COMPENSATION OR SETTLEMENT PAYMENTS .......................... 537 3. RELEVANT PROFIT REPORT ...................................................................... 538 4. PAYMENT OF PROFIT SHARE AND DETERMINATION BY THE SECRETARY OF STATE

........................................................................................................... 539 APPENDIX 1 TO SCHEDULE 8.2 ....................................................................... 540 PROFIT SHARE THRESHOLDS ............................................................................ 540 APPENDIX 2 TO SCHEDULE 8.2 ....................................................................... 544 COMPONENTS OF AFA AND DFR ......................................................................... 544 SCHEDULE 8.3 ................................................................................................ 546 TRACK ACCESS ADJUSTMENTS AND STATION CHARGE ADJUSTMENTS ........... 546 1. TRACK ACCESS ADJUSTMENTS ................................................................ 546 2. STATION CHARGE ADJUSTMENT ............................................................... 548 SCHEDULE 8.4 ................................................................................................ 550 GDP ADJUSTMENT PAYMENTS ........................................................................ 550 1. PURPOSE AND APPLICATION OF SCHEDULE ............................................... 550 2. DEFINITIONS ........................................................................................ 550 3. GDP ADJUSTMENT PAYMENT .................................................................... 551 4. GDP ADJUSTMENT PAYMENTS (GDPA) ....................................................... 552 5. GDP RECONCILIATION PAYMENTS (GDPR1 AND GDPR2) ............................... 554 6. FINAL ADJUSTMENTS/RECONCILIATIONS .................................................. 555 APPENDIX 1 TO SCHEDULE 8.4 ....................................................................... 557 DFTGDPRW ..................................................................................................... 557 APPENDIX 2 TO SCHEDULE 8.4 ....................................................................... 558 ADJUSTED TARGET GDP INDEX .......................................................................... 558 SCHEDULE 8.5 ................................................................................................ 559 CLE ADJUSTMENT PAYMENTS ......................................................................... 559 1. PURPOSE AND APPLICATION OF SCHEDULE ............................................... 559 2. DEFINITIONS ........................................................................................ 559 3. CLE ADJUSTMENT PAYMENT .................................................................... 560 4. CLE ADJUSTMENT PAYMENTS (CLEA) ........................................................ 561 5. CLE RECONCILIATION PAYMENT (CLER) .................................................... 563 6. FINAL ADJUSTMENTS/RECONCILIATIONS .................................................. 564 APPENDIX 1 TO SCHEDULE 8.5 ....................................................................... 565 DFTCLERW ..................................................................................................... 565 APPENDIX 2 TO SCHEDULE 8.5 ....................................................................... 566 ADJUSTED TARGET CLE INDEX .......................................................................... 566 SCHEDULE 9.1 ................................................................................................ 568 FINANCIAL AND OTHER CONSEQUENCES OF CHANGE .................................... 568 1. PURPOSE AND APPLICATION OF SCHEDULE ............................................... 568 2. TIMESCALES ......................................................................................... 569 3. HOW ANY ADJUSTMENTS TO FRANCHISE PAYMENTS WILL BE ESTABLISHED .. 569 4. HOW MODEL CHANGES AND/OR REVISED INPUTS WILL BE ESTABLISHED ..... 570


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5. CHANGES TO BENCHMARKS AND/OR ANNUAL BENCHMARKS ....................... 570 6. RUN OF THE FINANCIAL MODEL FOLLOWING AGREEMENT OR DETERMINATION

OF THE REVISED INPUTS AND MODEL CHANGES ........................................ 571 7. CERTIFICATION OR AUDIT OF THE NEW RESULTS ...................................... 571 8. COSTS OF AUDIT ................................................................................... 572 9. RESTATEMENT OF ANNUAL FRANCHISE PAYMENT COMPONENTS AND/OR

BENCHMARKS AND/OR ANNUAL BENCHMARKS AND/OR PROFIT SHARE COMPONENTS ....................................................................................... 573

10. ESTIMATED REVISIONS .......................................................................... 575 11. INFORMATION ....................................................................................... 578 APPENDIX 1 TO SCHEDULE 9.1 ....................................................................... 579 DEFINITION OF THRESHOLD AMOUNT ................................................................ 579 APPENDIX 2 TO SCHEDULE 9.1 ....................................................................... 580 AGREEMENT OR DETERMINATION OF REVISED INPUTS ......................................... 580 SCHEDULE 9.2 ................................................................................................ 585 IDENTITY OF THE FINANCIAL MODEL ............................................................ 585 1. FRANCHISEE'S OBLIGATIONS .................................................................. 585 2. SECRETARY OF STATE'S OBLIGATIONS ..................................................... 585 3. ERRORS IN ESCROW DOCUMENTS ........................................................... 587 SCHEDULE 9.3 ................................................................................................ 588 VARIATIONS TO THE FRANCHISE AGREEMENT AND INCENTIVISING BENEFICIAL CHANGES .................................................................................... 588 1. VARIATIONS ......................................................................................... 588 2. PROTECTED PROPOSALS ......................................................................... 589 3. CAPITAL EXPENDITURE ........................................................................... 590 SCHEDULE 9.4 ................................................................................................ 592 SECRETARY OF STATE RISK ASSUMPTIONS .................................................... 592 1. ISLAND LINE LEASE / RYDE PIER RENEWAL WORKS.................................... 592 2. DEPOT STABLING AND ANCILLARY WORKS ................................................ 592 SCHEDULE 9.5 ................................................................................................ 594 SPECIFIED INFRASTRUCTURE AND ROLLING STOCK CHANGE ........................ 594 1. BACKGROUND AND COMMERCIAL PRINCIPLES ........................................... 597 2. CHANGE TO BASE ASSUMPTIONS ............................................................. 598 3. INFRASTRUCTURE AND ROLLING STOCK ASSUMPTIONS REVIEWS ................ 599 4. USE OF RAIL INDUSTRY COMPENSATION MECHANISMS AND RIGHTS OF THE

SECRETARY OF STATE IN RELATION TO MULTIPLE OR EXCESSIVE COMPENSATION IN RELATION TO RELEVANT LOSSES ................................. 604

SCHEDULE 10 ................................................................................................. 606 REMEDIES, EVENTS OF DEFAULT AND TERMINATION EVENTS ....................... 606 SCHEDULE 10.1 .............................................................................................. 607 PROCEDURE FOR REMEDYING A CONTRAVENTION OF THE FRANCHISE AGREEMENT ................................................................................................... 607 1. CONTRAVENTIONS OF THE FRANCHISE AGREEMENT ................................... 607 2. REMEDIES FOR CONTRAVENTIONS OF THE FRANCHISE AGREEMENT ............. 607 3. REMEDIAL PLAN NOTICES ....................................................................... 607 4. REMEDIAL PLANS ................................................................................... 607


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5. REMEDIAL AGREEMENTS ......................................................................... 608 6. EFFECT OF FORCE MAJEURE EVENT ON A REMEDIAL AGREEMENT ................. 608 7. MONITORING BY THE SECRETARY OF STATE .............................................. 608 SCHEDULE 10.2 .............................................................................................. 610 EVENTS OF DEFAULT AND TERMINATION EVENTS .......................................... 610 1. DEFINITION OF EVENTS OF DEFAULT ........................................................ 610 2. DEFINITION OF TERMINATION EVENTS ..................................................... 614 3. CONSEQUENCES OF EVENTS OF DEFAULT ................................................. 614 4. NOTIFICATION OF EVENT OF DEFAULT ...................................................... 614 5. TERMINATION NOTICES .......................................................................... 614 6. CONSEQUENCES OF TERMINATION OR EXPIRY ........................................... 615 SCHEDULE 10.3 .............................................................................................. 616 FORCE MAJEURE AND BUSINESS CONTINUITY ............................................... 616 1. DEFINITION OF FORCE MAJEURE EVENTS .................................................. 616 2. CONDITIONS TO FORCE MAJEURE EVENTS ................................................ 618 3. CONSEQUENCES OF FORCE MAJEURE EVENTS ........................................... 619 4. BUSINESS CONTINUITY .......................................................................... 619 SCHEDULE 10.4 .............................................................................................. 620 LIABILITY ...................................................................................................... 620 1. EXCLUSION OF LIABILITY ........................................................................ 620 2. REVIEW OR MONITORING BY THE SECRETARY OF STATE ............................. 620 SCHEDULE 11 ................................................................................................. 622 FRANCHISE PERFORMANCE MEETINGS AND MANAGEMENT INFORMATION ... 622 SCHEDULE 11.1 .............................................................................................. 623 FRANCHISE PERFORMANCE MEETINGS .......................................................... 623 1. FRANCHISE PERFORMANCE MEETINGS ...................................................... 623 SCHEDULE 11.2 .............................................................................................. 624 MANAGEMENT INFORMATION ........................................................................ 624 1. CORPORATE INFORMATION ..................................................................... 624 2. INFORMATION ABOUT ASSETS USED IN THE FRANCHISE ............................ 624 3. IDENTIFICATION OF KEY PERSONNEL AND PROVISION OF ORGANISATION

CHART .................................................................................................. 625 4. OPERATIONAL AND PERFORMANCE RELATED INFORMATION TO BE PROVIDED BY

THE FRANCHISEE ................................................................................... 625 5. MAINTENANCE OF RECORDS ................................................................... 625 6. RIGHT TO INSPECT ................................................................................ 626 7. INFORMATION TO THE PASSENGERS' COUNCIL AND LOCAL AUTHORITIES ..... 626 8. PERIODIC UPDATE REPORTS ................................................................... 627 9. FINANCIAL AND OPERATIONAL INFORMATION ........................................... 627 10. BUSINESS PLANS ................................................................................... 631 11. SAFETY INFORMATION ............................................................................ 633 12. FURTHER INFORMATION ......................................................................... 633 13. INFORMATION FROM THIRD PARTIES ....................................................... 634 14. COMPATIBILITY OF INFORMATION ............................................................ 634 15. ENVIRONMENTAL INFORMATION .............................................................. 635


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16. ENVIRONMENTAL IMPACT TARGETS .......................................................... 637 APPENDIX 1 TO SCHEDULE 11.2 ..................................................................... 640 ENVIRONMENTAL INFORMATION ........................................................................ 640 APPENDIX 2 TO SCHEDULE 11.2 ..................................................................... 642 OPERATIONAL PERFORMANCE INFORMATION ...................................................... 642 APPENDIX 3 TO SCHEDULE 11.2 ..................................................................... 646 SUMMARY OF REPORTING AND OTHER REQUIREMENTS ........................................ 646 SCHEDULE 12 ................................................................................................. 660 FINANCIAL COVENANTS AND BONDS ............................................................. 660 1. OBLIGATIONS ....................................................................................... 661 2. FINANCIAL RATIOS ................................................................................ 661 3. BREACH OF FINANCIAL RATIOS ............................................................... 662 4. PERFORMANCE BOND ............................................................................. 663 5. SEASON TICKET BOND ........................................................................... 666 6. TAX COMPLIANCE .................................................................................. 669 APPENDIX 1 TO SCHEDULE 12 ........................................................................ 671 FORM OF PERFORMANCE BOND ......................................................................... 671 APPENDIX 2 TO SCHEDULE 12 ........................................................................ 677 FORM OF SEASON TICKET BOND ........................................................................ 677 SCHEDULE 13 ................................................................................................. 683 RAIL INDUSTRY INITIATIVES AND INNOVATION OBLIGATIONS ................... 683 SCHEDULE 13.1 .............................................................................................. 684 RAIL INDUSTRY INITIATIVES ........................................................................ 684 1. BRITISH TRANSPORT POLICE ................................................................... 684 2. COMMUNITY RAIL PARTNERSHIPS ............................................................ 685 3. DEVELOPMENT OF INDUSTRY SYSTEMS .................................................... 687 4. CO-OPERATION WITH INDUSTRY SCHEMES ............................................... 687 5. CO-OPERATION WITH LOCAL AUTHORITY SPONSORED PROJECTS ................ 687 6. CO-OPERATION WITH NETWORK RAIL AND ALLIANCING ............................. 687 7. ROUTE EFFICIENCY BENEFIT SHARE MECHANISM/REBS MECHANISM ............ 689 8. SMALL AND MEDIUM-SIZED ENTERPRISES ................................................ 690 9. APPRENTICESHIPS ................................................................................. 690 10. SUSTAINABILITY AND OTHER RELATED INITIATIVES .................................. 692 11. ERTMS PROGRAMME ............................................................................... 695 12. MINIMUM WI-FI SERVICE ON TRAINS ....................................................... 697 13. HS2 PROJECT ........................................................................................ 700 APPENDIX 1 TO SCHEDULE 13.1 ..................................................................... 702 COMMUNITY RAIL PARTNERSHIPS ...................................................................... 702 SCHEDULE 13.2 .............................................................................................. 703 INNOVATION OBLIGATIONS .......................................................................... 703 1. NOT USED ............................................................................................ 703 2. INNOVATION STRATEGY ......................................................................... 703 APPENDIX 1 TO SCHEDULE 13.2 ..................................................................... 704 NOT USED ....................................................................................................... 704 SCHEDULE 14 ................................................................................................. 705


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PRESERVATION OF ASSETS ............................................................................ 705 SCHEDULE 14.1 .............................................................................................. 706 1. MAINTENANCE AS A GOING CONCERN ...................................................... 706 2. POST-FRANCHISE TIMETABLES ................................................................ 706 SCHEDULE 14.2 .............................................................................................. 708 MAINTENANCE OF OPERATING ASSETS .......................................................... 708 1. OPERATING ASSETS ............................................................................... 708 2. BRAND LICENCE AND BRANDING ............................................................. 709 SCHEDULE 14.3 .............................................................................................. 711 KEY CONTRACTS ............................................................................................. 711 1. KEY CONTRACTS .................................................................................... 711 2. DESIGNATION OF KEY CONTRACTS .......................................................... 711 3. DE-DESIGNATION OF KEY CONTRACTS ..................................................... 712 4. RE-DESIGNATION OF KEY CONTRACTS ..................................................... 712 5. DIRECT AGREEMENTS ............................................................................. 712 6. EMERGENCIES ....................................................................................... 713 7. NO AMENDMENT .................................................................................... 713 8. REPLACEMENT OF KEY CONTRACTS .......................................................... 713 9. TERMINATION OF KEY CONTRACTS .......................................................... 713 APPENDIX 1 TO SCHEDULE 14.3 ..................................................................... 714 LIST OF KEY CONTRACTS .................................................................................. 714 SCHEDULE 14.4 .............................................................................................. 716 DESIGNATION OF FRANCHISE ASSETS ........................................................... 716 1. FRANCHISE ASSETS ............................................................................... 716 2. PRIMARY FRANCHISE ASSETS AND INVESTMENT ASSETS ............................ 716 3. DESIGNATION OF ADDITIONAL PRIMARY FRANCHISE ASSETS ..................... 719 4. DESIGNATION DURING LAST TWELVE (12) MONTHS OF FRANCHISE PERIOD . 719 5. DESIGNATION OF KEY CONTRACTS AS PRIMARY FRANCHISE ASSETS ........... 719 6. DESIGNATION OF FARES AND DISCOUNT CARDS ....................................... 719 7. RIGHTS AND LIABILITIES ........................................................................ 720 8. DISPUTES OVER DESIGNATION ............................................................... 720 9. PROVISION OF INFORMATION TO THE SECRETARY OF STATE....................... 721 10. DE-DESIGNATION OF FRANCHISE ASSETS AND PRIMARY FRANCHISE ASSETS 721 11. AMENDMENT OF THE LIST OF PRIMARY FRANCHISE ASSETS ........................ 721 12. SPARES ................................................................................................ 721 APPENDIX 1 TO SCHEDULE 14.4 ..................................................................... 723 LIST OF PRIMARY FRANCHISE ASSETS ................................................................ 723 SCHEDULE 14.5 .............................................................................................. 735 DEALING WITH FRANCHISE ASSETS .............................................................. 735 1. ASSETS NOT DESIGNATED AS PRIMARY FRANCHISE ASSETS ....................... 735 2. LIABILITIES NOT DESIGNATED AS PRIMARY FRANCHISE ASSETS ................. 735 3. FRANCHISE ASSETS AND PRIMARY FRANCHISE ASSETS .............................. 735 4. PROHIBITION ON OTHER SECURITY INTERESTS ......................................... 736 5. MISCELLANEOUS ................................................................................... 736 SCHEDULE 14.6 .............................................................................................. 737


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RESIDUAL VALUE MECHANISM ........................................................................... 737 1. PROVISIONS RELATING TO RV ASSETS ..................................................... 737 2. MAINTENANCE REQUIREMENTS FOR RV ASSETS ........................................ 740 LIST OF THE RV ASSETS ................................................................................... 742 SCHEDULE 14.7 .............................................................................................. 744 INCENTIVISING LONG TERM INVESTMENT ..................................................... 744 SCHEDULE 15 ................................................................................................. 746 OBLIGATIONS ASSOCIATED WITH TERMINATION .......................................... 746 SCHEDULE 15.1 .............................................................................................. 747 RELETTING PROVISIONS ................................................................................ 747 1. RELETTING OF FRANCHISE ...................................................................... 747 2. PREPARATION FOR RELETTING ................................................................ 747 3. DATA SITE INFORMATION ....................................................................... 748 4. NON-FRUSTRATION OF TRANSFER TO SUCCESSOR OPERATOR ..................... 751 5. INSPECTION RIGHTS AT PREMISES USED FOR THE PROVISION OF THE

FRANCHISE SERVICES ............................................................................ 752 SCHEDULE 15.2 .............................................................................................. 753 LAST TWELVE (12) OR THIRTEEN (13) MONTHS OF FRANCHISE PERIOD AND OTHER CONDUCT OF BUSINESS PROVISIONS ................................................ 753 1. LAST TWELVE (12) OR THIRTEEN (13) MONTH PERIOD ............................... 753 2. TERMS OF EMPLOYMENT OF EXISTING EMPLOYEES ..................................... 753 3. TERMS OF EMPLOYMENT OF NEW EMPLOYEES ............................................ 755 4. CHANGES IN NUMBERS AND TOTAL COST OF EMPLOYEES ........................... 755 5. FARES .................................................................................................. 756 6. VOTING ON SCHEME COUNCILS ............................................................... 757 7. SUCCESSOR OPERATOR .......................................................................... 757 SCHEDULE 15.3 .............................................................................................. 759 HANDOVER PACKAGE ..................................................................................... 759 1. HANDOVER PACKAGE STATUS ................................................................. 759 2. DIRECTOR'S CERTIFICATE ....................................................................... 759 APPENDIX 1 TO SCHEDULE 15.3 ..................................................................... 760 FORM OF HANDOVER PACKAGE .......................................................................... 760 SCHEDULE 15.4 .............................................................................................. 762 PROVISIONS APPLYING ON AND AFTER TERMINATION ................................. 762 1. NOVATION OF ACCESS AGREEMENTS ON TERMINATION OF THE FRANCHISE

AGREEMENT .......................................................................................... 762 2. CO-OPERATION WITH SUCCESSOR OPERATOR ........................................... 763 3. TRANSFER OF PRIMARY FRANCHISE ASSETS ............................................. 763 4. ASSOCIATED OBLIGATIONS ON TERMINATION .......................................... 764 5. ACTIONS REQUIRED IMMEDIATELY ON HANDOVER ..................................... 766 6. MAINTENANCE RECORDS ........................................................................ 766 7. TICKETING ARRANGEMENTS .................................................................... 767 8. FRANCHISEE'S INTELLECTUAL PROPERTY .................................................. 767 9. INFORMATION ABOUT PASSENGERS ......................................................... 768 APPENDIX 1 TO SCHEDULE 15.4 ..................................................................... 769


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FORM OF TRANSFER SCHEME ............................................................................ 769 APPENDIX 2 TO SCHEDULE 15.4 ..................................................................... 773 FORM OF SUPPLEMENTAL AGREEMENT ................................................................ 773 SCHEDULE 16 ................................................................................................. 790 PENSIONS ...................................................................................................... 790 1. DEFINITIONS ........................................................................................ 791 2. FRANCHISE SECTIONS ............................................................................ 791 3. CLOSED SCHEMES ................................................................................. 791 4. VARIATIONS IN BENEFITS, CONTRIBUTIONS AND INVESTMENT ................... 791 5. FUNDING LIABILITIES ............................................................................ 793 6. DISCHARGE OF OBLIGATIONS ................................................................. 793 7. TERMINATION OF FRANCHISE .................................................................. 794 APPENDIX 1 TO SCHEDULE 16 ........................................................................ 795 LIST OF SHARED COSTS SECTIONS ................................................................ 795 SCHEDULE 17 ................................................................................................. 796 CONFIDENTIALITY AND FREEDOM OF INFORMATION .................................... 796 1. CONFIDENTIALITY .................................................................................. 797 2. DISCLOSURE OF CONFIDENTIAL INFORMATION ......................................... 797 3. PUBLICATION OF CERTAIN INFORMATION ................................................. 798 4. SERVICE DEVELOPMENT INFORMATION .................................................... 800 5. PUBLICATION BY SECRETARY OF STATE .................................................... 800 6. PROVISION OF INFORMATION TO THE ORR ............................................... 800 7. DISCLOSURE BY COMPTROLLER AND AUDITOR GENERAL ............................ 800 8. CONTINUING OBLIGATION ...................................................................... 800 9. FREEDOM OF INFORMATION - GENERAL PROVISIONS ................................. 801 10. REDACTIONS ......................................................................................... 802


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THIS AGREEMENT is dated 7 APRIL 2017 BETWEEN:

(1) THE SECRETARY OF STATE FOR TRANSPORT, whose principal address is at 33 Horseferry Road, London SW1P 4DR (the “Secretary of State”); and

(2) FIRST MTR SOUTH WESTERN TRAINS LIMITED (Company Number: 07900320), whose registered office is 4th Floor, Capital House, 25 Chapel Street, London NW1 5DH1 (the “Franchisee”).

WHEREAS:

(A) On 9 June 2016 the Secretary of State invited prospective franchisees who are Passport Holders to submit proposals for the provision of railway services to the South Western rail passenger franchise. On the basis of the Franchisee's response to the Invitation to Tender, the Secretary of State selected the Franchisee as its preferred service provider.

(B) The Secretary of State wishes to appoint a franchisee to provide railway passenger services within the Franchise and expects his franchisee, on the terms of the Franchise 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 Franchisee wishes to be appointed as the Secretary of State's franchisee for the 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.

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

1. INTERPRETATION

1.1 In the Franchise Agreement, except to the extent the context otherwise requires:

(a) words and expressions defined in Part I of the Act have the same meanings when used therein provided that, except to the extent expressly stated, “railway” shall not have the wider meaning attributed to it by Section 81(2) of the Act;

(b) words and expressions defined in the Interpretation Act 1978 have the same meanings when used in the Franchise Agreement;

1 10 January 2018 (Date of Contract Change Letter) – Contract variation agreed by the Secretary of State and

Franchisee


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(c) references to “Parties” shall mean the Secretary of State and the Franchisee (and references to a “Party” shall mean the Secretary of State or the Franchisee as the context requires);

(d) the words “include”, “including” and “in particular” are to be construed without limitation;

(e) references to any “person” include its successors, transferees or assignees;

(f) the words “subsidiary”, “subsidiary undertaking” and “parent undertaking” each have the same meaning in the Franchise Agreement as in Section 1162 of the Companies Act 2006;

(g) references in any of the agreements comprising the Franchise Agreement to Recitals, clauses, Schedules, Parts of Schedules, paragraphs of Schedules and Appendices to Schedules are to Recitals, clauses, Schedules, Parts of Schedules, paragraphs of Schedules and Appendices to Schedules of that agreement, unless expressly specified to the contrary, and the Schedules and Appendices form part of the agreement in which they appear;

(h) references in any Schedule in any of the agreements comprising the Franchise Agreement to a Part, paragraph or Appendix are references to a Part, paragraph or Appendix of that Schedule (or the relevant Part of a Schedule), unless expressly specified to the contrary;

(i) headings and references to headings shall be disregarded in construing the Franchise Agreement;

(j) references to any enactment include any subordinate legislation made from time to time under such enactment and are to be construed as references to that enactment as for the time being amended or modified or to any enactment for the time being replacing or amending it and references to any subordinate legislation are to be construed as references to that legislation as for the time being amended or modified or to any legislation for the time being replacing or amending it;

(k) references to an agreement or any other document shall be construed as referring to that agreement or document as from time to time supplemented, varied, replaced, amended, assigned or novated;

(l) references to any particular provisions of any agreement or any other document shall be construed to include any other provisions of, or incorporated in, that agreement or other document which the Secretary of State reasonably considers have an equivalent effect or are intended to fulfil the same function;

(m) amendments to or variations of contracts or arrangements include assignments, novations or other transfers of rights and/or obligations (in whole or in part) under such contracts or arrangements;

(n) words importing the masculine gender include the feminine and vice-versa, and words in the singular include the plural and vice-versa;


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(o) wherever provision is made for the giving or issuing of any notice, endorsement, consent, approval, waiver, certificate or determination by any person, unless otherwise specified, such notice, endorsement, consent, approval, waiver, certificate or determination shall be in writing and the words “notify”, “endorse”, “consent”, “approve”, “waive”, “certify” or “determine” and other cognate expressions shall be construed accordingly;

(p) references to materials, information, data and other records shall be to materials, information, data and other records whether stored in electronic, written or other form;

(q) references to the Franchisee bidding for Train Slots or a Timetable shall mean the final action incumbent on the Franchisee under the Network Code to confirm to Network Rail its interests in the Train Slots to which that confirmation relates, and “bid” shall be construed accordingly;

(r) references to the period of validity of any Fare are references to its period of validity excluding any rights of any purchaser thereof to extend such period under the Passenger's Charter, any equivalent document, or the terms and conditions attaching to such Fare (including any applicable conditions of carriage) in the event of the cancellation or delay of any of the railway passenger services for which such Fare is valid;

(s) references to “railway passenger services” are to be construed subject to Section 40 of the Railways Act 2005;

(t) references to the “provision of railway passenger services” include the organisation of the relevant train movements and making the necessary arrangements with Network Rail or any other relevant Facility Owner;

(u) references in lower case letters to terms defined in clause 3 (Definitions) shall be construed, where relevant, as being references to the terms defined as such in a franchise agreement or relevant agreement made under Section 30 of the Act or Section 6 of the Railways Act 2005 with any other Train Operator;

(v) references to sums of money being expended by the Franchisee shall be to such sums exclusive of Value Added Tax;

(w) the words “shall not be liable” are to be construed as meaning that no contravention of the Franchise Agreement and no Event of Default shall arise as a result of the occurrence of the matter to which such words relate;

(x) references to a “contravention of the Franchise Agreement” or a “contravention” (and cognate expressions) are to be construed as meaning a breach of the Franchise Agreement;

(y) wherever provision is made for the Franchisee to “procure” or “ensure” the delivery of an obligation under the Franchise Agreement, unless otherwise specified, that provision shall be construed as a primary obligation on the Franchisee to deliver that obligation;


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(z) references to “profit” shall be construed as meaning profit before corporation tax, determined in accordance with GAAP; and

(aa) references to “process” or “processing” or “processed” are to be construed in accordance with the Data Protection Act for the purposes of Schedule 1.5 (Information about Passengers) and paragraph 2.1 of Schedule 14.4 (Designation of Franchise Assets).

1.2 Where there is a requirement on the Franchisee to “fully and effectively co-operate” with one (1) or more other parties with regard to an objective, that requirement relates to the quality of cooperation to be provided by the Franchisee taking into account and subject to the response of the other parties concerned. It does not indicate an obligation on the Franchisee beyond cooperation, relating to the funding of detailed design and development of an infrastructure project, actual delivery or subsequent operation (including in each case performance cost and revenue effects). It does indicate that the Franchisee shall participate actively in relation to the relevant objective including through the application of management time and internal resources, correspondence and attendance at meetings, in each case as the Franchisee reasonably considers in all of the circumstances to be an appropriate use of its resources and effective to achieve the relevant objective.

1.3 In the Franchise Agreement, the Secretary of State is acting as part of the Crown.

2. AGREED DOCUMENTS

2.1 References to documents “in the agreed terms” are references to documents initialled by or on behalf of the Secretary of State and the Franchisee.

2.2 As at the date of this Agreement, the documents “in the agreed terms” are as follows:

ABD Actual Benchmark Data;

CFD Commuter Fares Document;

CSES Customer & Stakeholder Engagement Strategy;

DL Depot Lease;

FF Financial Formats;

FM Financial Model;

IRAD Infrastructure and Rolling Stock Assumptions Document;

IRID Infrastructure and Rolling Stock Information Document;

OM Operational Model;

PC Passenger's Charter;

PFD Protected Fares Document;

POA Power of Attorney;

PSM Passenger Survey Methodology;


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ROA Record of Assumptions;

SCDP Station Social and Commercial Development Plan;

SL Station Lease;

TP Train Plan; and

TSS Train Service Specification (TSS0/TSS1/TSS2).

3. DEFINITIONS

3.1 In the Franchise Agreement, except to the extent the context otherwise requires, the following words and expressions have the following meanings:

“16 to 25 Railcard” means a Discount Card issued under the Discount Fare Scheme referred to in paragraph 3 of Schedule 2.5 (Transport, Travel and Other Schemes);

“2010 Nominal Ticket Sales”

has the meaning given to it in paragraph 3 of Schedule 5.4 (Regulation of Fares Basket Values);

“2010 Ticket Revenue” has the meaning given to it in paragraph 4 of Schedule 5.4 (Regulation of Fares Basket Values);

“Acceptance” and “Accept”

have the meaning given to those terms in the CP5 Rolling Stock MSA;

“Access Agreement” has the meaning given to the term “access agreement” in Section 83(1) of the Act;

“ACoRP” means the Association of Community Rail Partnerships whose principle place of business is The Old Water Tower, Huddersfield Railway Station, St Georges Square, Huddersfield, HD1 1JF or any successor body whose purpose is to support Community Rail Partnerships;

“Act” means the Railways Act 1993 (as modified, amended or replaced by the Transport Act 2000,the Railways Act 2005 and the Deregulation Act 2015) and any regulations or orders made thereunder;

“Actual Benchmark Data” or “ABD”

means the document in the agreed terms marked ABD;

“Actual CaSL Performance Level”

has the meaning given to it in paragraph 1.1 of Schedule 7.1 (Operational Performance);

“Actual Consist Data” means information as to the type of individual vehicles of rolling stock in the Train Fleet which are actually used to form a train on any particular Passenger Service and the manner in which they


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are configured, which may or may not be the same as the Scheduled Consist Data for the same service;

“Actual Operating Costs” means:

(a) the Franchisee's total operating expenses for the period being reviewed as stated in its profit and loss account, including any of the following operating expenses that are payable during that period:

(i) amounts payable to the Secretary of State and Network Rail;

(ii) taxation;

(iii) shareholder distributions including dividends;

(iv) interest;

(v) capital expenditure (net of grants received);

(vi) cash lease payments in relation to on-balance sheet leased assets; and

(vii) NOT USED,

but excluding any of the following expenses that are payable in that period:

(A) finance/interest costs solely relating to on-balance sheet leased assets;

(B) depreciation (including in relation to on-balance sheet leased assets);

(C) amortisation;

(D) bad debt provisions; and

(E) NOT USED; and

(b) either:

(i) plus any reduction in the total amount owing by the Franchisee to creditors over that period; or

(ii) less any increase in the total amount owing by the Franchisee to creditors over that period,

where creditors:


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(A) include any persons owed amounts by the Franchisee in respect of loans or funding agreements, operating expenses, including the types of expenses set out in paragraphs (a)(i) to (a)(v) above inclusive, provisions and deferred income balances; but

(B) exclude persons owed amounts by the Franchisee in respect of season ticket liabilities, lease liabilities in relation to on-balance sheet leased assets and liabilities in relation to grants received for the purchase of fixed assets;

(C) exclude any creditors or other liabilities relating to on-balance sheet leases;

“Actual Passenger Demand”

has the meaning given to it in paragraph 1.1 of Schedule 1.5 (Information about Passengers);

“Actual PPM Performance Level”


“Actual Train Mileage” means the actual train mileage operated during each Reporting Period by each train used in the provision of the Passenger Services (excluding, any actual train mileage operated as a result of positioning or other movements of rolling stock vehicles outside the Timetable) and “Actual Train Miles” shall be construed accordingly;

“Actuary” has the meaning given to it in the Pension Trust;

“Additional Expenditure” has the meaning given to it in paragraph 6.1 of Schedule 7.2 (National Rail Passenger Surveys, Customer Report and CCI Scheme);

“Additional Rolling Stock”

means Specified Additional Rolling Stock;

“Administration Fee” has the meaning given to it in clause 8.5 (Change of Control and Facilitation Fee);

“Advance Purchase Train-specific Fares”

has the meaning given to it under the Ticketing and Settlement Agreement;

“Affected Party” has the meaning given to it in the definition of “Occasion of Tax Non-Compliance”;

“Affiliate” means, in respect of any person, any person by which that person is Controlled or which is Controlled by that person, or any person which is Controlled by any other Affiliate of that person and for the purpose of this definition Network Rail or NR


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shall not be construed as being an affiliate of the Secretary of State;

“AFP” has the meaning given to it in Appendix 1 (Annual Franchise Payments) to Schedule 8.1 (Franchise Payments);

“Agreement” means clauses 1 to 16 and Schedules 1 to 17 including any Appendices and Annexes as varied from time to time;

“Aggregated Qualifying Change”

means two (2) or more Changes which:

(a) are notified or agreed (in the case of a Change which is a Variation pursuant to paragraph 1.1 of Schedule 9.3 (Variations to the Franchise Agreement and Incentivising Beneficial Changes)); and/or

(b) a Party has become aware of (in the case of any other kind of Change),

in a Franchisee Year (the “Aggregation Year”) which individually do not exceed the Threshold Amount for the Aggregation Year taken alone but do exceed it when taken together. For the avoidance of doubt, where the Changes arise in different Franchisee Years, for the purposes of determining whether in aggregate they exceed the Threshold Amount:

(i) the net present value of the adjustment in Franchise Payments which would result from a Run of the Financial Model (where Schedule 9.1 (Financial and Other Consequences of Change) applies) in respect of each Change shall be calculated in accordance with the process described in the definition of Qualifying Change; and

(ii) there will be an Aggregated Qualifying Change where the aggregate of the net present values of those Changes exceeds the Threshold Amount for the Aggregation Year;

“Alliance Agreement” has the meaning given to such term in paragraph 6.4 of Schedule 13.1 (Rail Industry Initiatives);

“Alternative NRPS” has the meaning given to such term in paragraph 2.6 of Schedule 7.2 (National Rail


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Passenger Surveys, Customer Report and CCI Scheme);

“Alternative Scheme” means a Committed Obligation proposed by the Franchisee in place of a Specimen Scheme in accordance with paragraph 7 of Part 2 (Special Terms related to Committed Obligations) of Schedule 6.2 (Committed Obligations);

“Amended Start Date and Expiry Date Change Notice” 2

means a notice from the Secretary of State to the Franchisee dated 7th April 2017 that amended the Start Date and the Expiry Date;

“Ancillary Service” means any service specified in paragraph 7 of Part 1 (Franchise Services) of Schedule 1.1 (Franchise Services and Service Development);

“Annual Audited Accounts”

means the accounts of the Franchisee which:

(a) comply with paragraph 9.5(b) of Schedule 11.2 (Management Information)

(b) are delivered to the Secretary of State by the Franchisee in accordance with paragraph 9.4(c) of Schedule 11.2 (Management Information) and certified by the Franchisee's auditors as true and fair;

“Annual Benchmark” means any of the Annual Cancellations Benchmark, the Annual TOC Minute Delay Benchmark or the Annual Short Formation Benchmark;

“Annual Business Plan” means the plan to be provided by the Franchisee to the Secretary of State in accordance with paragraph 10.2 of Schedule 11.2 (Management Information);

“Annual Cancellations Benchmark”

means for each Franchisee Year, each of the benchmarks specified in the Annual Cancellations Benchmark Table for that Franchisee Year, provided that where a Franchisee Year is shorter than thirteen (13) Reporting Periods but six (6) Reporting Periods or more, then the Annual Cancellations Benchmark for that Franchisee Year shall be as determined pursuant to paragraph 20.1(a) of Schedule 7.1 (Operational Performance);

“Annual Cancellations Benchmark Table”


2 Date of contract insertion 20/08/2017 – Agreed by the Secretary of state and Franchisee


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“Annual Cancellations Payment Table”


“Annual Cap Performance Level”


“Annual Floor Performance Level”


“Annual Franchise Payment Components”

means the values of “FXD”, “VCRPI”, “VCAWE”, “PRPI”, “ORRPI”, “PRRPIGDP” and “PRRPICLE” specified for each Franchisee Year in the table set out in Appendix 2 (Figures for Calculation of Annual Franchise Payments) to Schedule 8.1 (Franchise Payments);

“Annual Management Accounts”

means the management accounts of the Franchisee which:

(a) comply with paragraph 9.5(a) of Schedule 11.2 (Management Information); and

(b) are delivered to the Secretary of State by the Franchisee in accordance with paragraph 9.4(a) of Schedule 11.2 (Management Information);

“Annual Season Ticket” means a Season Ticket Fare which is valid in Standard Class Accommodation from (and including) the day on which it first comes into effect until (but excluding) the day which falls twelve (12) months after such day;

“Annual Short Formation Benchmark”


“Annual Short Formation Benchmark Table”


“Annual Short Formation Payment Table”


“Annual Target Performance Level”


“Annual TOC Minute Delay Benchmark”


“Annual TOC Minute Delay Benchmark Table”


“Annual TOC Minute Delay Payment Table”



Page 27 of 803

Clauses 1-17

“Apprenticeship” means (as the context requires) an individual apprenticeship pursuant to:

(a) an apprenticeship programme operated by the Franchisee:

(i) in connection with an apprenticeships framework listed on the Federation for Industry Sector Skills & Standards’ “Frameworks Library” (as located at the date of this Agreement at: http://www.afo.sscalliance.org/frameworkslibrary/); and

(ii) in compliance with the “Specification of Apprenticeship Standards for England” pursuant to the Apprenticeships, Skills, Children and Learning Act 2009; and/or

(b) an apprenticeship programme operated by the Franchisee pursuant to (and in accordance with applicable requirements of) such statutory apprenticeships system as may be introduced in replacement of, or in variation or addition to, the apprenticeships frameworks system described in paragraphs (a)(i) and (ii) above,

and references to “Apprenticeships” shall be construed accordingly;

“Apprenticeships Table” means the tabl

Documents

(1) The Secretary of State for Transport (2) First …...Version 3.5x FOIA 2000 Public Register Copy Page 1 of 803 Dated 7 APRIL 2017 (1) The Secretary of State for Transport (2) First