DEFINITIONS AGREEMENT RELATING TO THE SCOTRAIL … · definitions agreement strategic rail authority strathclyde passenger transport executive and first scotrail limited definitions

Definitions Agreement

STRATEGIC RAIL AUTHORITY

STRATHCLYDE PASSENGER TRANSPORT EXECUTIVE

and

FIRST SCOTRAIL LIMITED

DEFINITIONS AGREEMENT RELATING TO

THE SCOTRAIL

FRANCHISE AGREEMENT

Deft

SootRail Franchise - Draft Definitions Agreement

CONTENTSCLAUSE PAGE

1. Interpretation and Definitions 1 *

2. Construction and Interpretation 1

3. Definitions 5

4. Governing Law 45

ScotRail Franchise - Draft Definitions Agreement

AGREEMENT

AMONG

(1) STRATEGIC RAIL AUTHORITY, whose principal place ofbusiness is at 55 Victoria Street, London, SW1H OEU (the Authority);

(2) STRATHCLYDE PASSENGER TRANSPORT EXECUTIVE,whose principal place of business is at Consort House, 12 West GeorgeStreet, Glasgow G2 1HN (the SPTE);

and

(3) FIRST SCOTRAIL LIMITED, whose registered number isSC185018 and registered office is at 395 King Street, Aberdeen AB245RP (the Franchisee),

WHEREAS

(A) The Authority, the SPTE and the Franchisee have entered into theFranchise Agreement relating to the ScotRail Franchise.

(B) The Authority, the SPTE and the Franchisee wish to set out in thisAgreement definitions of the terms used in the Franchise Agreement

1. INTERPRETATION AND DEFINITIONS

This Agreement, the Franchise Agreement, the Conditions PrecedentAgreement and the SQUIRE Service Schedules Agreement togetherconstitute a single agreement, which is a "franchise agreement" for thepurposes of the Act, and shall be interpreted in accordance with thisAgreement

2. CONSTRUCTION AND INTERPRETATION

In the Franchise Agreement, except to the extent the context otherwiserequires:

(a) words and expressions defined in Part I of the Act have the samemeanings when used therein provided that, except to the extentexpressly stated, "railway" shall not have the wider meaning attributedto it by Section 81 (2) of the Act;

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

(c) the words "include", "including" and "in particular" are to beconstrued without limitation;

(d) references to any person include its successors, transferees orassignees;

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(e) the words "subsidiary", "wholly owned subsidiary" and "parentundertaking" have the same meaning in the Franchise Agreement as inSections 258 and 736 of the Companies Act 1985;

(f) references to documents "in the agreed terms" are references todocuments initialled by or on behalf of the Authority (or, in respect ofthe documents in the agreed terms marked TP, IBP, SPTE SLC, OM,PC and ROA the Authority, the SPTE) and the Franchisee;

(g) references' in any of the agreements comprising the FranchiseAgreement to Recitals, clauses, Schedules, Parts, paragraphs andAppendices are to Recitals, clauses, Schedules, Parts of Schedules,paragraphs of Schedules and Appendices of Schedules of thatagreement, unless expressly specified to the contrary, and theSchedules and Appendices form part of the agreement in which theyappear;

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

(i) headings, and references to headings shall be disregarded in construingthe Franchise Agreement;

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

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

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

(m) wherever provision is made for the giving or issuing of any notice,endorsement, consent, approval, waiver, certificate or determination byany person, unless otherwise specified, such notice, endorsement,consent, approval, waiver, certificate or determination shall be inwriting and the words "notify", "consent", "endorse", "approve","waive", "certify" or "determine" and other cognate expressions shallbe construed accordingly;

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SootRail Franchise - Draft Definitions Agreement

(n) references to materials, information, data and other records shall be tomaterials, information, data and other records whether stored inelectronic, written or other form;

(o) references to the period of validity of any Fare are references to itsperiod of validity excluding any rights of any purchaser thereof toextend such period under the Passenger's Charter, any equivalentdocument, or the terms and conditions attaching to such Fare(including any applicable conditions of carriage) in the event of thecancellation or delay of any of the railway passenger services forwhich such Fare is valid;

(p) references to stations at which any train calls include stations at whichsuch train commences or terminates its journey; •

(q) references to "railway passenger services" are to be construed subjectto Section 214 of me Transport Act;

(r) references to the provision of railway passenger services include theorganisation of the relevant train movements and making the necessaryarrangements with Network Rail or any other relevant Facility Owner;

(s) references in lower case letters to terms defined in clause 3 of thisAgreement shall be construed, where relevant, as being references tothe terms defined as such in the franchise agreement or relevantagreement made under Section 30 of the Act or Section 211 or 213 ofthe Transport Act with any other Train Operator;

(t) references to amendments or variations of contracts or arrangementsinclude assignations, novations or other transfers of rights orobligations (in whole or in part) under such contracts or arrangements;

(u) references to sums of money being expended by the Franchisee shallbe to such sums exclusive of Value Added Tax;

(v) references to "undertakes" and references to "undertakings" are to beconstrued so as to include the word "covenants";

(w) references to "assignation" and words deriving meaning therefrom areto be construed so as to include the word "assignment" and wordsderiving meaning therefrom;

(x) references to "set-off1 are to be construed so as to include both thewords "retain" and "compensate" and words deriving meaningtherefrom;

(y) any reference to an arbitrator shall also be taken as a reference to anarbiter;

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(z) references to the words "shall not be liable" are to be construed asmeaning that no contravention of the Franchise Agreement and noEvent of Default shall arise as a result of the matter to which suchwords relate; and

(aa) references to a "contravention of this Agreement" (and cognateexpressions) are to be construed as meaning a breach of the FranchiseAgreement

3. DEFINITIONS

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

2003 Nominal Ticket Sales has the meaning given to it in paragraphs ofSchedule 5.4 (Regulation of Fares Basket Values);

2003 Ticket Revenue has the meaning given to it in paragraph 4.1 ofSchedule 5.4 (Regulation of Fares Basket Values);

Access Agreement has the meaning given to the term "access agreement" inSection 83(1) of the Act;

Act means the Railways Act 1993 (as modified, amended or replaced by theTransport Act 2000) and any regulations or orders made thereunder,

Actual Operating Costs means

(a) the Franchisee's total operating expenses for the period being reviewedas stated in its profit and loss account (including all amounts paid or payableto the Authority or the SPTE and taxation and dividends paid or payable, butexcluding depreciation, amortisation and other non-cash items); and

(b) either

(i) plus any reduction in total creditors over such period; or

(ii) less any increase in total creditors over such period (where totalcreditors include rolling stock vehicle-related creditors duewithin one year, but exclude season ticket liabilities and capitalborrowings);

Actual Passenger Demand has the meaning given to it in paragraph 1 ofSchedule 1.5 (Information about Passengers);

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

Affiliate means, in respect of any person, any person by which that person isControlled or which is Controlled by that person, or any person which isControlled by any other Affiliate of that person;

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Allowable Change means in Schedule 7.1A (Train Running Incentive Regime)a change to the Passenger Timetable which is caused by:

(a) any Network Rail Restriction of Use notified to the Franchiseeorincluded in the Timetable; or

(b) any other matter which may be specified from time to time by theAuthority;

Amended Timetable in Schedule 7.1 A (Train Running Incentive Regime)means, in respect of any particular day, the passenger timetable which reflectsthe working timetable for the Passenger Services required to be drawn up byNetwork Rail in accordance with the Network Code, as at 2200 on theimmediately preceding day, being the Passenger Timetable for that particular

) day, as amended from time to time (including to reflect the following:

(a) any amendment to the working timetable for the Passenger Servicesunder the applicable Rules of the Route or Rules of the Plan;

(b) any amendment to the working timetable for the Passenger Servicesunder Condition H of the Network Code; and

(c) any amendment which is required to the Passenger Timetable to reflectthe introduction, removal or alteration of a service by the Franchisee);

Ancillary Service means any service specified in paragraph 5 of Schedule 1.7(Franchise Services);

Annual Audited Accounts means the accounts of the Franchisee which:

(a) comply with paragraph 3.11 of Schedule 13.2 (Information); and

(b) are delivered to the Authority and the SPTE by the Franchisee inaccordance.with paragraph 3.9 of Schedule 13.2 (Information) andcertified by its auditors as fair and true;

Annual Financial Statements means the final draft financial statements of theFranchisee which:

. (a) comply with paragraph 3.11 of Schedule 13.2 (Information);

(b) give a fair and true view of the amount of Revenue earned by theFranchisee during any Franchisee Year (or part thereof), excluding:

(i) any Revenue Share Adjustments paid or payable by theFranchisee to the Authority or the SPTE in respect of thatFranchisee Year, and

(ii) any Revenue Support Adjustments received or receivable fromthe Authority or the SPTH by the Franchisee in respect of thatFranchisee Year;

(c) contain:

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•(i) a breakdown of the amount of Revenue referred to in paragraph(b), identifying the amount earned of each revenue flowspecified in the definition of Revenue; and

(ii) any explanatory notes which the Franchisee reasonably. believes would assist the Authority in fulfilling the purposereferred to in paragraph (d); and

(d) are delivered to the Authority by the Franchisee in accordance withparagraph 3.7 of Schedule 13.2 (Information) for the sole purpose ofcalculating any Revenue Share Reconciliation Amount or any RevenueSupport Reconciliation Amount;

Annual Franchise Payment means, in relation to any Franchisee Year, theamount determined in accordance with Schedule 8.2 (Annual FranchisePayments);

Annual Management Accounts means the management accounts of theFranchisee which:


(b) are delivered to the Authority by the Franchisee in accordance withparagraph 3.6 of Schedule 13.2 (Information);

Annual Season Ticket means a Season Ticket Fare which is valid in StandardClass Accommodation from (and including) the day on which it first comesinto effect until (but excluding) the day which falls 12 months after such day;

Annual Timetable in Schedule 7.1 A (Train Running Incentive Regime)means, in respect of any Reporting Period, the Franchisee's publishedpassenger timetable in which falls the last day of such Reporting Period, aftertaking into account any errata published after its initial publication;

Applicable Timetable in Schedule 7.1 A (Train Running Incentive Regime)means, in respect of any particular day, the Passenger Timetable for such dayor, if an Amended Timetable is in effect for such day, the Amended Timetablefor such day;

ATOC means the Association of Train Operating Companies;

Authority Maintenance Bond means the maintenance bond to be provided tothe Authority in respect of the Franchisee's liabilities under Schedule 1.6(Committed Obligations) in the form set out in Appendix 3 to Schedule 12(Financial Obligations and Undertakings) and any such other bond as mayreplace it from time to time under Schedule 12;

Authority Maintenance Costs Payment Profile means the payment profile(including due dates for payment) in respect of maintenance costs relating tothe Authority New Trains as set out in Appendix 3 to Part 1 of Schedule 1.6

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(Committed Obligations') or as subsequently adjusted pursuant to paragraph 5of Part 1 of Schedule 1.6;

Authority Maintenance Payments means all fixed maintenance costs set outin the Authority Maintenance Costs Payment Profile under the heading"Authority Funded Maintenance Costs";

Authority Maintenance Reserve Account Balance means, at any one time, thebalance on the Authority Maintenance Reserve Account being the amount oramounts advanced by the Authority pursuant to paragraph 2.2 of Schedule 1.6(Committed Obligations') less Authority Maintenance Payments paid by theFranchisee plus amounts applied to the Authority Maintenance ReserveAccount pursuant to paragraph 2.7 of Schedule 1.6;

Authority Maintenance Reserve Account means the funds received by theFranchisee from the Authority pursuant to paragraph 2.2 of Schedule 1.6(Committed Obligations) as may be adjusted from time to time pursuant to theterms of Schedule 1.6;

Authority New Trains means the twenty two (22) three (3) car Class 170diesel multiple units more fully described in the definition of "Rolling Stock"in Schedule 1 to the New Trams Authority Lease;

Authority Fares Assumption has the meaning set out in paragraph 12 ofSchedule 5.7 (Changes to Fares and Fares Regulation);

Authority Risk Assumptions means those assumptions set out in Schedule 9.4(Authority Risk Assumptions);

Authority Service Level Commitment means the service level commitment inrespect of the Authority Services more particularly described in Schedule 1.1(Service Development), with the first such Authority Service LevelCommitment being in the agreed terms and marked Authority SLC, and anyother service level commitment developed by the Authority in accordancewith Schedule 1.1;

Authority Services means all those Passenger Services provided, other thanSPTE Services, and such other Station Services, Depot Services and AncillaryServices as may be provided or operated hi connection with the PassengerServices;

Authority Share means the Authority's share of any Franchise Payment;

Authority Station means a station listed in paragraph 4(a) of Appendix 2 tothe Conditions Precedent Agreement;

Authority Systems in Schedule 7.1 A (Train Running Incentive Regime) hasthe meaning ascribed to that term in paragraph l(b) of Part 3 of Schedule7.1A;

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Authority Train Mileage means, in relation to any period, the aggregate trainmileage covered during such period by each train used by the Franchisee inthe provision of the Authority Services (excluding any train mileage coveredas a result of positioning or other movements of rolling stock vehicles outsidethe Timetable);

Average Earnings Index means the average earnings index:

(a) for the whole economy of the United Kingdom;

(b) seasonally adjusted; and

(c) excluding bonuses,

as published from time to time by the Office for National Statistics or, if suchindex shall cease to be published or if there is a material change in the basis ofthe index, such other average earnings index as the Authority may, afterconsultation with the Franchisee, determine to be appropriate in thecircumstances;

Average Lateness in Schedule 7.1 A (Train Running Incentive Regime) means,in respect of any Service Group, the average lateness (in minutes) of suchService Group as determined in accordance with paragraph 3 of Part 2 ofSchedule 7.1A;

Bank means a person which has a permission under Part TV of the FinancialServices and Markets Act 2000 to carry on one or more of the regulatedactivities provided thereunder and which is reasonably acceptable to theAuthority;

Bank Holiday means, except where otherwise specified in either the AuthorityService Level Commitment or the SPTE Service Level Commitment, aWeekday on which banks in Scotland are not open for business;

Benchmark means any of the Cancellations Benchmark, CapacityBenchmark, Network Rail Benchmark and Service Delivery Benchmark;

Benchmark Level means the performance level falling somewhere betweenFloor Level and Ceiling Level set out in paragraph 2 of each SQUIRE ServiceSchedule;

Benchmark Table means, in relation to:

(a) the Cancellations Benchmark, the table set out in Appendix 1(Cancellations Benchmark Table) to Schedule 7.1 (EnforcementBenchmarks);

(b) the Capacity Benchmark, the table set out in Appendix 2 (CapacityBenchmark Table) to Schedule 7.1 ;

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(c) die Network Rail Benchmark, the table set out in Appendix 3 (NetworkRail Benchmark Table) to Schedule 7.1; and

(d) the Service Delivery Benchmark, the table set out in Appendix 4(Service Delivery Benchmark Table) to Schedule 7.1;

Bond Provider means any person or persons who may provide or be anobligor under a Performance Bond or Season Ticket Bond or AuthorityMaintenance Bond or SPTA Maintenance Bond from time to time and whoshall, unless the Authority otherwise agrees, be a Bank;

Bond Year means the period beginning on the Franchise Commencement Dateand ending on 31 March 2005 and any subsequent period of 13 ReportingPeriods beginning on the day after the end of the preceding Bond Yearprovided that:

(a) the Franchisee and the Authority may agree to vary the ReportingPeriod in which a Bond Year ends from time to time; and

(b) the last Bond Year shall expire on the expiry of the Franchise Periodand may be a period of less than 13 Reporting Periods unless otherwiseagreed;

Bond Year Anticipated Interest means the interest to be earned over thecourse of a relevant Bond Year by reference to the Interest Rate;

Brand Licence means a licence between the Authority (or any companywholly owned by the Authority) and the Franchisee or between the SPTE andthe Franchisee in respect of any registered or unregistered trade marks,including the licences set out in paragraph 5 of Appendix 2 (List of ConditionsPrecedent Documents) to the Conditions Precedent Agreement;

Breach Performance Level means, in relation to a Benchmark for anyReporting Period, the number set out in column 4 of the Benchmark Tablerelating to that Benchmark and in the row of that table for that ReportingPeriod;

Business Action Plan means an action plan produced by the Franchisee inrelation to the delivery of any outcome anticipated by its Business Plan, inaccordance with paragraphs 2.7 or 2.8 of Schedule 13.2 (Information);

Business Plan means the Initial Business Plan or any Updated Business Plan,as the context requires, to be delivered in accordance with paragraphs 2.1 to2.4 of Schedule 13.2 (Information);

Cancellation means a Passenger Service:

(a) which is included in the Plan of the Day and which is cancelled andattributed to the Franchisee pursuant to its Track Access Agreement;

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(b) which is included in the Plan of the Day and which operates less than50 per cent of its scheduled mileage for reasons attributed to theFranchisee pursuant to its Track Access Agreement; or

(c) whichis omitted from the Plan of the Day, or included in it in amodified form that does not enable the Franchisee to operate more than50 per cent of such Passenger Service's scheduled mileage, withoutthe Franchisee discharging its obligations under Schedule 1.2(Operating Obligations) in relation thereto;

Cancellations Benchmark means any of the performance levels in respect ofCancellations and Partial Cancellations set out in the CancellationsBenchmark Table;

Cancellations Benchmark Table means the table set out in Appendix 1(Cancellations Benchmark Table) to Schedule 7.1 (Enforcement Benchmarks);

Capacity in Schedule 7.1 A (Train Running Incentive Regime) and paragraphs2.3 to 2.5 of Schedule 7.1 (Enforcement Benchmarks') means, in respect of anytrain and any Formation Monitoring Point, the number of seats or sleepingcabins in Standard Class Accommodation on such train which the Franchiseeprovides or (as the case may be) plans to provide under any relevant TrainPlan, on such train at such Formation Monitoring Point;

Capacity Benchmark means any of the performance levels in respect of thecapacity operated in delivering the Passenger Services set out in the CapacityBenchmark Table;

Capacity Benchmark Table means the table set out in Appendix 2 (CapacityBenchmark Table) to Schedule 7.1 (Enforcement Benchmarks);

Capacity Monitoring Point means any point for measuring passenger carryingcapacity on the Passenger Services:

(a) within the Passenger Transport Area that the Authority and the SPTEreasonably determine from time to time; or

(b) outside the Passenger Transport Area that the Authority reasonablydetermines from time to time;

Capital Expenditure has the meaning given to it in paragraph 3.5 of Schedule19 (Other Provisions);

CAPRI means the suite of computer programs originally used by the BritishRailways Board to collect and process Passenger Revenue and othersettlements for passenger train operating companies and third parties and anysuccessor system;

Ceiling Level means the performance level designated as such and set out inparagraph 2 of each SQUIRE Service Schedule;

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ScotRai] Franchise - Draft Definitions Agreement

Centre for Rail Skills means the organisation of that name to improve trainingand development of railway employees;

Certificate of Commencement means the certificate to be issued by theAuthority pursuant to the Conditions Precedent Agreement;

Change means:

(a) a change to the Authority Service Level Commitment and/or the SPTEService Level Commitment previously hi force pursuant to the issue ofa new Service Level Commitment in accordance with paragraph 9 ofSchedule 1.1 (Service Development);

(b) the occurrence of a change to the railway passenger services requiredto be operated by another franchisee or franchise operator by directionof the Authority which may reasonably be expected to have a materialeffect on the cost and revenues of providing the Passenger Services;

(c) any action that the Franchisee is required to take pursuant toparagraph 14.1 (a) and/or 14.1(b) of Schedule 1.1;

(d) a change effected pursuant to paragraph 6 of Schedule 1.2 (OperatingObligations), including as a result of any action that the Franchisee isrequired to take pursuant to paragraph 8.1(b) of Schedule 1.2t inrespect of any Strategy or plan referred to in paragraph 8.1(b) ofSchedule 1.2 published, endorsed or varied by the Authority after theFranchise Commencement Date;

(e) a change to the Authority's or the SPTE's standards in respect of. alternative transport arrangements, as referred to in paragraph 8.2(b) of

Schedule 1.2, from the Authority's standards or the SPTE's standards,as the case may be, which are current as at the date of signature of thisAgreement;

(f) if and whenever there is a Charge Variation;

(g) a variation to the SPTE SQUIRE Regime pursuant to paragraph 16.2of Schedule 7.2 (SQUIRE);

(h) if and whenever there is a Change of Law (excluding any Change ofLaw to the extent that results hi an adjustment to the FranchisePayments pursuant to Schedule 8.4 (Track Access Adjustments andStation Charge Adjustments'));

(i) if and to the extent that the Authority and the Franchisee agree or theAuthority serves written notice on the Franchisee, exercising its rightto call any Priced Option:

(i) informing the Franchisee that such Priced Option in Part 1 ofSchedule 3 (Priced Options) is to be exercised on different

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terms from those specified in respect of that Priced Option inthat Schedule; and/or

(ii) at any time after the last date for exercise of such Priced Option

except that, in these circumstances, any financial consequencespursuant to Schedule 9.1 (Financial Consequences of Change) shall beto the extent, and only to the extent, that the terms are different fromwhat they would have been if the Priced Option had been called on theterms set out Schedule 3 and, if the call is after the last date forexercise of the Priced Option, it had been called on that last date;

(j) if and to the extent that the SPTE and the Franchisee agree or theSPTE serves written notice on the Franchisee, exercising its right tocall any Priced Option:

(i) informing the Franchisee that such Priced Option in Part 2 ofSchedule 3 (Priced Options') is to be exercised on differentterms from those specified in respect of that Priced Option inthat Schedule; and/or

(ii) at any time after the last date for exercise of such Priced Option

except that, in these circumstances, any financial consequencespursuant to Schedule 9.1 (Financial Consequences of Change) shall beto the extent, and only to the extent, that die terms are different fromwhat they would have been if the Priced Option had been called on theterms set out Schedule 3 and, if the call is after the last date forexercise of the Priced Option, it had been called on that last date;

(k) if and whenever an event occurs which represents a change from theAuthority Risk Assumptions described in Schedule 9.4 (Authority RiskAssumptions);

(1) if and. whenever the Authority approves an amendment or proposed ,amendment to an Inter-Operator Scheme, as referred to in paragraph 5of Schedule 2.5 (Transport, Travel and Other Schemes), to the extentand only to the extent that the Franchisee makes a saving as aconsequence of such amendment or proposed amendment;

(m) if and whenever the Authority requests the Franchisee to take anyaction under paragraph 9.4 of Schedule 13.2 (Information) inaccordance with its terms, save that any adjustment to the FranchisePayments under Schedule 9 (Changes) in respect of any maintenanceor support costs incurred pursuant to such paragraph 9.4 shall only bemade to the extent that such maintenance and support costs are overand above the maintenance and support costs of any Computer Systemthat is replaced;

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(n) if and whenever the Franchisee is required to take any action underparagraph 9.5 of Schedule 13.2 in accordance with its terms;

(o) a Variation (other than a Variation as referred to in (ab), (ac) or (ad)below) to the terms of the Franchise Agreement, the DefinitionsAgreement or the SQUIRE Service Schedules Agreement pursuant toparagraph 1.1 of Schedule 19 (Other Provisions');

(p) an alteration to the time period of 10 minutes referred to in paragraphs6.5(b), 6.6(c) of Schedule 1.1 (Service Development) and 3.4.(b)(iii) ofSchedule 1.2 (Operating Obligations);

(q) the addition or omission of any station from the provisions ofparagraph 4.3 of Schedule 1.3 (Additional Service Specifications');

(T) an SPTE Change not specifically referred to above or below;

(s) the imposition of any costs associated with any multi modal publictransport information system (other than Traveline Scotland orTraveline) which the Franchisee is required to participate in pursuantto paragraph 9 of Schedule 1.4 (Passenger Facility Obligations) savethat where the system is Transport Direct any adjustment to theFranchise Payments under Schedule 9 in respect of costs shall only bemade to the extent that such costs are over and above the costs of theFranchisee's continued, or past, participation in Traveline;

(t) the imposition, subject to the provisions of paragraph 2.6 ofSchedule 4.2 (Persons with Disabilities and DisabilityDiscrimination), of any increased access charges in respect of DDARequirements at stations at which the Passenger Services call, otherthan stations where the Franchisee is Facility Owner;

(u) if and whenever the Authority or the SPTE exercises its powerspursuant to paragraph 5 or 10 of Schedule 5.7 (Changes to Fares andFares Regulation) to alter the obligations of and restrictions on theFranchisee under Schedule 5 (Fares) except that, in respect of anyalteration to the obligations of and restrictions on the Franchisee underSchedule 5 in respect of SPTE Controlled Fares, any financialconsequences pursuant to Schedule 9.1 (Financial Consequences ofChange) shall be to the extent, and only to the extent, that thealteration has the consequence that any SPTE Controlled Fare is higheror lower than is anticipated by the SPTE Fares Assumption;

(v) if and whenever the Franchisee is obliged to charge Value Added Taxon a Fare or there is an increase or decrease in the' rate of Value AddedTax which it must charge on such Fare, in either case due to a changein the Value Added Tax treatment of the provision of PassengerServices;

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(w) if and whenever the Authority effects an amendment to a DiscountFare Scheme, introduces a new Discount Fare Scheme or ceases toapprove a Discount Fare Scheme for the purposes of Section 28 of theAct;

(x) the implementation by the Franchisee of the Olympic ServicesDelivery Plan pursuant to paragraph 7 of Schedule 1.3 insofar as suchimplementation results in the imposition of costs on and the receipt ofrevenue by the Franchisee;

{y) the imposition of any start up costs (specified to an upper limit by theAuthority) associated with any pilot integrated ticketing initiativewhich the Franchisee is required to participate in pursuant to paragraph1.6 of Schedule 2.5;

(z) if and whenever the SPTE requires the Franchisee to give effect to aconcessionary travel scheme pursuant to paragraph 2.9 of Schedule 2.5or to a multi modal scheme pursuant to paragraph 3.9 of Schedule 2.5by the setting of a SPTE Set Fare, save that any adjustment to theFranchise Payments under Schedule 9 (Changes) shall only be made tothe extent necessary to ensure that the Franchisee is financially noworse off (meaning, for this purpose, financially no worse off than itwould have been if the relevant scheme had been given effect pursuantto, as the case may be, paragraph 2.1 or 3.1 of Schedule 2.5 and theFranchisee had pursued such rights as it had under the relevant schemeto ensure it was financially no worse off);

(aa) if any SPTE Controlled Fare is higher or lower than is anticipated bythe SPTE Fares Assumption but then only to the extent that suchdeparture from the SPTE Fares Assumption has not already been takenaccount of in a previous Change;

(ab) if and whenever the Authority has by a Variation regulated and/orspecified the Fares, Prices and/or Child Prices on all, or any, PassengerServices and/or Rows (all as referred to in paragraph 9(a) of Schedule5.7 (Changes to Fares and Fares Regulation)) to the extent, and onlyto the extent, that the Fares, Prices and/or Child Prices are for that FareYear higher or lower than the applicable Fares, Prices and/or ChildPrices which the Authority is, by making such Variation, seeking toregulate and/or specify;

(ac) if and whenever the Authority has by a Variation regulated and/orspecified the Fares, Prices and/or Child Prices on all, or any, PassengerServices and/or Flows (all as referred to in paragraph 9(a) of Schedule5.7) and, while it is so regulated or specified, the Fare, Price or ChildPrice is in any subsequent Fare Year higher or lower than is anticipatedby the Authority Fares Assumption;

(ad) if and whenever the Authority has by a Variation regulated and/orspecified the Fares, Prices and/or Child Prices on any Passenger

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Services and/or Flows (all as referred to in paragraph 9(a) of Schedule5.7) and the Authority then by a further Variation notifies theFranchisee that the Authority no longer wishes to regulate and/orspecify the Fare, Price and/or Child Price; provided that the financialconsequences of that Change pursuant to Schedule 9.1 (FinancialConsequences of Change) shall be limited to reversing the financialconsequences flowing from the original requirement of the Authorityand from any subsequent departure (in relation to the relevant Fare,Price and/or Child Price) from the Authority's Fares Assumption;

(ae) if and whenever the Authority or the SPTE requires the Franchisee toparticipate in a scheme pursuant to paragraph 1.7, 2.8 or 3.13 ofSchedule 2.5;

(af) die costs incurred by the Franchisee in using its reasonable endeavourswhen required to do so pursuant to paragraph 3 of Schedule 1.8(Major Projects);

(ag) if and whenever the Franchisee is required to novate any AccessAgreement pursuant to paragraph 1.1 of Schedule 2.2 (Security ofAssets, Rolling Stock Leases, Stations and Depot Leases) or to assignany Property Lease pursuant to paragraph 3.1 of Schedule 2.2, to thee'xtent and only to the extent that the Franchisee makes a saving as aconsequence of such novation or assignation;

(ah) the service by the Authority of any notice referred to in paragraph 14.6of Part 2 of Schedule 1.6 (Committed Obligations); and

(ai) any two or more of the foregoing that the Authority or the SPTE, as thecase may be, group together in accordance with any procedures issuedpursuant to paragraph 1.6 of Schedule 19 (Other Provisions).

Change Date means any of the dates on which changes may be made to theworking timetable for the Passenger Services under the Track AccessConditions, being initially two in number per calendar year and subsequentlysix in number per calendar year and of which two are Passenger ChangeDates; •

Change of Law means the coming into effect after the date of the FranchiseAgreement of:

(a) Legislation; or

(b) any applicable judgment of a court of Law which changes a bindingprecedent,

the terms of which apply only to the railway industry, a particular section ofthe railway industry or the provision of services to the railway industry andnot to other transport modes or to industries other than the railway industry,and without limitation:

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(i) excluding any changes in Taxation;

(ii) excluding'any changes which were foreseeable at the date of theFranchise Agreement, and for this purpose, but without limitation,there shall be regarded as foreseeable any Legislation which on thedate of the Franchise Agreement has been published:

(A) in a draft parliamentary bill as part of a government departmentalconsultation paper;

(B) in a parliamentary bill;

(C) in a draft statutory instrument; or

(D) as a proposal in the Official Journal of the European Communitiesexcept to the extent that such proposal is intended to apply solelywithin member states other than the United Kingdom,

to the extent that the same is subsequently enacted in substantially the sameform as the form in which it was previously so published In relation to theapplication of this sub-paragraph (ii), each TSI shall be considered separately.

Change of Law (1) includes any Legislation, which only applies to the railwayindustry, which is made under the Health and Safety at Work etc. Act 1974and which is not excluded under (i) and (ii) (a- Specifically Included Change ofLaw), but (2) excludes any Legislation (other than a Specifically IncludedChange of Law) which is made with the intention or effect of specificallyapplying to (or disapplying in relation to) the railway industry any otherLegislation which does not apply only to the railway industry;

Charge Variation means a variation:-

(a) to a Relevant Agreement; and

(b) which is effected as a result of a Charging Review (including any variationeffected in connection with an Incremental Output Statement Charge);

provided that it will not be treated as a Charge Variation if the Railway SafetyCharge levied by Network Rail ceases but is replaced by a levy (whether ornot of the same amount) payable by the Franchisee to the Railway Safety andStandards Board

Charging Review means:

(a) the exercise by the Regulator of his powers under:f

(i) . Part 7 of Schedule 7 of the Track Access Agreement to whichthe Franchisee is a party on the Franchise Commencement Dateor any Replacement Agreement which is deemed to be aRelevant Agreement in accordance with the definition of thatterm;

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(ii) Condition Fl 1.5 of the Franchise Station Access Conditions inrelation to any station which is not an Independent Station; and

(iii) Condition 42.5 of the Independent Station Access Conditions inrelation to any station which is an Independent Station;

(b) the following by the Regulator of the procedure in Schedule 4A of theAct;

(c) the exercise by the Regulator of any powers of the Regulator or thefollowing of any other procedure, which, in the Authority's reasonableopinion:

(i) has an equivalent effect to; or

(ii) is intended to fulfil the same function as,

any of the powers referred to in paragraphs (a) or (b) in relation to anyRelevant Agreement For this purpose, Relevant Agreement includesany Relevant Agreement which is not the subject of any previousCharging Review); or

(d) any amendment to a Relevant Agreement, or entry into a new,Relevant Agreement which is approved by the Regulator to the extentthat it relates to an Incremental Output Statement Charge or a schemeto which that charge relates;

Charter Service means a railway passenger service, whether operated on thesame routes as the Passenger Services or not:

(a) which is not reflected in the Timetable;

(b) which does not conform to the pattern of railway passenger servicesnormally provided by the Franchisee;

(c) for which the advance booking or booking arrangements for seats onthe relevant service are materially different from those generallyapplicable to the Passenger Services;

(d) for which tickets are available on a restricted basis or on terms andconditions materially different from those generally applicable to thePassenger Services; and/or

(e) for which the departure time, journey time and calling pattern arematerially different from those of the Passenger Services,

and which, in the opinion of the Authority, is not a railway passenger serviceprovided by the Franchisee as part of the Passenger Services;

Child Price means, in relation to any Fare, the amount charged or chargeableto a person under the age of 16 in respect of such Fare;

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Closed Scheme Employees has the meaning given to it in paragraph 3(a) ofSchedule 16 (Pensions);

Closed Schemes has the meaning given to it in paragraph 3(b) of Schedule 16(Pensions);

Closure means a closure under Part I of the Act of any of the PassengerServices or of any network on which the Passenger Services may be operatedor of any of the Stations or Depots or of any part of such network or Depot orStation;

Code of Practice means the code of practice for protecting the interests ofusers of railway passenger services or station services who have disabilities, asprepared, revised from time to time and published by the Authority pursuant toSection 71B of the Act;

Collateral Agreement means an agreement whichis required to be enteredinto by the Franchisee with Network Rail or any other franchisee as acondition to any Access Agreement of which the Franchisee is the beneficiary;

Commencement Transfer Scheme has the meaning given to it in clause 4.1 ofthe Conditions Precedent Agreement;

Committed Obligations means any of the Franchisee's obligations listed inSchedule 1.6 (Committed Obligations');

Commuter Fare means any:

(a) Weekly Season Ticket

(b) Monthly Season Ticket;

(c) Quarterly Season Ticket;

(d) Annual Season Ticket;

(e) unrestricted Single Fare; and

(f) unrestricted Return Fare,

on Flows between Stations (including for this purpose Edinburgh Waverley)within and including the boundary of Kirkcaldy, Glenrothes with Thornton,North Berwick (but not Dunbar), Addiewell, Bathgate, Falkirk High andFalkirk Grahamstone;

Commuter Fares Basket mesas the grouping of Commuter Fares:

(a) determined by the Authority pursuant to Schedule 5.3 (Allocation ofFares to Fares Baskets);

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(b) for the purposes of regulating their aggregate Prices or Child Prices, asthe case may be, in accordance with Schedule 5.4 (Regulation of FaresBasket Values);

(c) amended by the Authority from time to time in accordance withSchedule 5.7 (Changes to Fares and Fares Regulation); and

(d) set out in the Commuter Fares Document;

Commuter Fares Document means the document in the agreed terms markedCFD fwhich is expressed in 1995 prices) as the same may be developed inaccordance with paragraph 1.6 of Schedule 5.3 (Allocation of Fares to FaresBaskets) and as amended from time to time hi accordance with Schedule 5.7(Changes to Fares and Fares Regulation);

Competent Authority Restriction of Use has the meaning specified in Part 3Schedule 4 of the Track Access Agreement;

Compulsory Inter-available Flow has the meaning given to it in the Ticketingand Settlement Agreement;

Computer System means computer hardware and computer software,including licensed third party software and data protocols;

Conditions Precedent Agreement means an agreement among the partieshereto dated the date hereof, specifying the conditions precedent effecting theFranchise Agreement;

Connection means:-

(a) in Schedule 7.1 A (Train Running Incentive Regime), a connection(however described) between any of the Passenger Services providedby the Franchisee and any other railway passenger service provided byit or any other Train Operator or any bus, ferry or shipping service andwhich is either included in a Service Level Commitment (howeverdescribed therein) or which is otherwise included by the Franchisee inthe Timetable and is notified to the Franchisee by the Authority fromtime to tune as constituting a Connection for the purpose of Schedule7.1A;and

(b) in the rest of the Franchise Agreement, means a connection (howeverdescribed) between any of the Passenger Services provided by theFranchisee and any other railway passenger service provided by it orany other Train Operator or any bus, ferry or shipping service andcognate phrases shall be construed accordingly;

Connection Agreement means any agreement entered into by the Franchiseeand Network Rail on or before the Franchise Commencement Date relating tothe connection of a Depot to the relevant part of the network;

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Contingency Plan has the meaning given to it in paragraph l(a)(iv) ofSchedule 10.4 (Force Majeure);

Contract Manager means a person appointed by the Franchisee to undertakethe responsibilities of such person set out in Schedule 11 (AgreementManagement Provisions');

Control means, in respect of a person, that another person (whether alone orwith others and whether directly or indirectly and whether by the ownership ofshare capital, the possession of voting power, contract or otherwise):

(a) has the power to appoint and/or remove all or the majority of themembers of the board of directors or other governing body of thatperson or of any other person which Controls that person;

(b) controls or has the power to control the affairs and policies of thatperson or of any other person which Controls that person;

(c) is the parent undertaking of that person or of any other person whichControls that person; or

(d) possesses or is, or will be at a future date, entitled to acquire:

(i) 30 per cent, or more of the share capital or issued share capitalof, or of the voting power in, that person or any other personwhich Controls that person;

(ii) such part of the issued share capital of that person or any otherperson which Controls that person as would, if the whole of theincome of such person were distributed, entitle him to receive30 per cent or more of the amount so distributed; or

(iii) such rights as would, in the event of the winding-up of thatperson or any other person which Controls that person or in anyother circumstances, entitle him to receive 30 per cent, or moreof the assets of such person which would then be available fordistribution;

Creating has the meaning given to it in the Ticketing and SettlementAgreement and cognate expressions shall be construed accordingly;

DDA means the Disability Discrimination Act 1995;

DDA Claim has the meaning given to it in paragraph 3.1 of Schedule 4.2(Persons with. Disabilities and Disability Discrimination);

DDA Requirements means the duties of a provider of services underSections 21(2)(a), 21(2)(b) and 21(2)(c) of the DDA;

Default Performance Level means, in relation to a Benchmark for anyReporting Period, the numbers set out in column 5 of the Benchmark Table

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relating to that Benchmark and in the row of that table for that ReportingPeriod;

Defined Contribution Arrangement has the meaning given to it in theRailways Pensions Scheme;

Departure Station has the meaning given to it in paragraph 2(b) of Appendix2 (Alternative Transport) to Schedule 1.4 (Passenger Facing Obligations);

Depot means a depot in respect of which the Franchisee has entered into aDepot Lease;

Depot Condition Maintenance Programme has the meaning given to it inparagraph 3.4 of Schedule 4.1 (Franchise Facilities);

Depot Lease means any lease:

(a) of a depot set out in paragraph 4.2 of Appendix 2 (List of ConditionsPrecedent Documents) to the Conditions Precedent Agreement; or

(b) of any other depot of which the Franchisee becomes the FacilityOwner at any time during the Franchise Period;

Depot Strategy means the Franchisee's depot strategy set out in Part 3 ofSchedule 1.6 (Committed Obligations) as amended from time to time by theFranchisee with the agreement of both the Authority and fhe SPTE;

Designated Employer has the meaning given to it in the Pension Trust;

Destination Station has the meaning given to it in paragraph 2(b) of Appendix2 (Alternative Transport) to Schedule 1.4 (Passenger Facing Obligations);

Direct Agreement means any agreement made, or to be made, from time totime between the Authority and the counterparty of a Key Contract in relationto such Key Contract, including any agreement entered into by the Authorityunder Schedule 14.3 (Key Contracts);

Disabled People's Protection Policy means the Franchisee's policy for theprotection of persons with disabilities which the Franchisee is required toestablish and review from time to time in accordance with the conditions of itsLicences in respect of the operation of railway passenger services and/orstations;

Disabled Person has the meaning given to it in the DDA;

Disabled Person's Reporting System means the system known as theDisabled Person's Reporting System (forming part of the national rail"Computer Reservation System") as described in the Code of Practice as at thedate of this Agreement;

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Discount Card has the meaning given to it in the Ticketing and SettlementAgreement;

Discount Fare Scheme means:

(a) a discount fares scheme set out in paragraph 4 of the Appendix (List ofTransport, Travel and Other Schemes) to Schedule 2.5 (Transport,Travel and Other Schemes); or

(b) any other discount fare scheme approved from time to time by theAuthority for the purposes of Section 28 of the Act,

in each case until such time as it may cease to be approved by the Authorityfor the purposes of Section 28 of the Act;

Dispute Resolution Rules means the procedures for the resolution of disputesknown as "The Railway Industry Dispute Resolution Rules", as amended fromtime to time in accordance with the terms thereof;

Disputes Secretary means the person appointed as Disputes Secretary fromtime to time in accordance with the Dispute Resolution Rules;

Equivalent Fare has the meaning given to it in paragraph 6.1 of Schedule 5.7(Changes to Fares and Fares Regulation);

Equivalent Flow has the meaning given to it in paragraph 6. l(b) ofSchedule 5.7 (Changes to Fares and Fares Regulation);

Escalation Procedure in Schedule 7.2 (SQUIRE) and in the SQUIRE ServiceSchedules Agreement means the procedure for resolution of disputes set out inAppendix C (Escalation Procedure) to Schedule 7.2;

Escrow Documents has the meaning given to it in paragraph 1.1 of Schedule9.2 (Identity of the Financial Model etc);

Estimated Revisions has the meaning given to it in paragraph 2.1 of Schedule9.1 (Financial Consequences of Change);

Evening Peak means, in relation to any Passenger Service, except whereotherwise specified in a Service Level Commitment, the period between 16.00hours and 18.59 hours, or such other continuous evening 3 hour period as theAuthority (with the consent of the SPTE, where the SPTE is affected) shallspecify from time to time;

Event of Default means any of the events set out in paragraph 2 ofSchedule 10.3 (Events of Default and Termination Event); '

Excluded Liabilities has the meaning given to it in clause 4.2 of theConditions Precedent Agreement;

Expiry Date mesas

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(a) the Initial Expiry Date,

(b) if the Authority has given notice of continuation to the Franchiseepursuant to paragraph 1.1 of Schedule 18 (Franchise ContinuationCriteria), and the Franchisee has not given notice pursuant toparagraph 1.2 of Schedule 18, the last date of the Reporting Period inwhich the tenth anniversary of the Franchise Commencement Dateoccurs, or

(c) the date to which the Franchise Agreement is continued in accordancewith paragraph 1.3 of Schedule 18;

Facility Owner has the meaning given to the term facility owner in Section17(6) of the Act;

Fare means:

(a) for the purposes of Schedules 5.3 (Allocation of Fares to FaresBaskets) to 5.8 (Fares Regulation. Information and Monitoring)(inclusive) only, a Fare which is:

(i) valid for a journey or journeys on the Passenger Servicesincluded in the Timetable or other railway passenger serviceswhich are required to be included in another relevant TrainOperator's passenger timetable by the Authority;

(ii) sold under the Travelcard Agreement; or

(iii) a Cross-London Ticket (as defined in the Through Ticketing(Non-Travelcard) Agreement); and

(b) for the purposes of paragraph 3 of Schedule 1.4 (Passenger FacingObligations'), Schedule 5.2 (Franchisee's Obligation to Create Fares)and for all other purposes, the right, exercisable against one or moreTrain Operators, subject to any applicable rights or restrictions and thepayment of the relevant price, to make one or more journeys on thenetwork or to carry on such a journey an item of luggage or an animal(where this right does not arise under the relevant conditions ofcarriage except on the payment of a fee) and, where applicable, toobtain goods or services from a person;

Fare Year means the period from 1st January in any year to 31st December inthe same year;

Fares Basket means either the Commuter Fares Basket or the Protected FaresBasket;

Fares Document means any of the Commuter Fares Document and theProtected Fares Document;

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Fares Setting Round has the meaning given to it in the Ticketing andSettlement Agreement;

Financial Action Plan means any action plan produced by the Franchiseepursuant to paragraph 3.3(f) of Schedule 13.2 (Information), where the levelof its financial performance specified in the Management Accounts is worsethan forecast by the Franchisee in its current Business Plan;

Financial Model means the Franchisee's financial model deposited with theAuthority on the date of this Agreement and as subsequently revised in eachcase in accordance with Schedule 9.2 (Identity of the Financial Model etc);

Financial Services Authority means the independent non-governmental bodygiven statutory powers by the Financial Services and Markets Act 2000;

Floor Level means the performance level designated as such and set out inparagraph 2 of each SQUIRE Service Schedule;

Flow has the meaning given to it in the Ticketing and Settlement Agreement;

Force Majeure Event means any of the events described as such in paragraph1 of Schedule 10.4 (Force Majeure) where the conditions specified inparagraph 2 of Schedule 10.4 are satisfied;

Forecast Modified Revenue means, in relation to any Reporting Period, theitems specified in the definition of Modified Revenue, as most recentlyforecast for that Reporting Period pursuant to paragraph 3.4 of Schedule 13.2(Information);

Forecast Operating Costs means, in relation to any Reporting Period, theitems specified in the definition of Actual Operating Costs, as most recentlyforecast for that Reporting Period pursuant to paragraph 3.4 of Schedule 13.2(Information);

Forecast Passenger Demand means the forecast by the Franchisee pursuant toparagraphs 6.1 of Schedule 1.1 (Service Development) and 1.4 of Schedule1.5 (Information about Passengers) in respect of:

(a) the number of passengers travelling in each class of accommodation:

(i) on each Passenger Service;

(ii) on each Route; and/or

(iii) at any station (meaning for this purpose both the numbers ofpassengers getting on and off at the station and also thenumbers of passengers remaining on a train at the station) orbetween any stations; and

(b) the times of day, week or year at which passengers travel,

Page 24 of 65


for the period in respect of which the next Timetable is to apply and for 5years following the date of the forecast, even if such 5 year period extendsbeyond the Franchise Term;

Formation Monitoring Point in Schedule 7.1 A (Train Running IncentiveRegime) and paragraphs 2.3 to 2.5 of Schedule 7.1 (Enforcement Benchmarks)means the point (not being more than one) for every train in each Service.Code which the Authority may designate as such by notice to the Franchiseefrom time to time (being the point at which it considers that passengernumbers are likely to be most concentrated for trains in that Service Code);

Franchise Agreement means the franchise agreement among the partieshereto, executed on the date hereof, which constitutes a single agreementtogether with the Conditions Precedent Agreement, the SQUIRE ServiceSchedules Agreement and this Agreement and which is a "franchiseagreement" for the purposes of the Act;

Franchise Assets means the property, rights and liabilities designated as suchpursuant to paragraph 1 of Schedule 14.4 (Designation of Franchise Assets)but excluding such property, rights or liabilities as shall, in accordance withthe terms of the Franchise Agreement, cease to be so designated;

Franchise Commencement Date means the date and, where relevant, the timestated in the Certificate of Commencement as being the date on which (and,where relevant, the time at which) the Franchisee is to commence operatingthe Franchise Services;

Franchise Employee means

(a) any employee of the Franchisee from time to time; and

(b) any other person employed by the Franchisee or any of its Affiliates orany subcontractor or delegate of any of the Franchise Services whosecontract of employment may be transferred to a Successor Operatorfollowing the expiry of the Franchise Period by virtue of the operationof Law (including the Transfer of Undertakings (Protection ofEmployment) Regulations 1981 (as amended, replaced or substitutedfrom time to time)) or in respect of whom liabilities arising from acontract of employment or employment relationship may be sotransferred;

Franchise Facilities means the facilities described in the Franchise FacilitiesBook;

Franchise Facilities Book has the meaning given to it in paragraph 2.2 ofSchedule 4.1 (Franchise Facilities);

Franchise Manager means a person appointed by the Authority to undertakethe responsibilities of such person set out in Schedule 11 (AgreementManagement Provisions);

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Franchise Payment means, in relation to any Reporting Period, the amountdetermined in accordance with paragraph 1.1 of Schedule 8.1 (FranchisePayments);

Franchise Performance Meeting means any meeting between the Authority,the SPTE and the Franchisee to be held in each Reporting Period inaccordance with paragraph 5 of Schedule 11 (Agreement ManagementProvisions');

Franchise Period means the period commencing on the FranchiseCommencement Date and ending on the Expiry Date or, if earlier, the date oftermination of the Franchise Agreement pursuant to clause 2.2(a) of theConditions Precedent Agreement or Schedule 10 (Remedies and Termination);

Franchise Re-letting Process Agreement means the agreement so entitleddated 23 January 2003 between the Authority and the Franchisee entered intoby the Franchisee as part of its proposal to secure the provision and operationof the Franchise Services;

Franchise Sections has the meaning given to it in paragraph 1 of Schedule 16(Pensions);

Franchise Services means such of the Passenger Services, the LightMaintenance Services, the Station Services and the Ancillary Services as theFranchisee may provide or operate from time to time, including any of suchservices as the Franchisee may delegate or subcontract or otherwise securethrough any other person from time to time in accordance with the FranchiseAgreement;

Franchise Station Access Conditions has the meaning given to it in therelevant Access Agreement to which it relates;

Franchise Term means the period commencing on the FranchiseCommencement Date and expiring on the Expiry Date;

Franchisee Year means any period of 12 months during the Franchise Periodbeginning on 1 April in any year, except that the first and last such periodsmay be for a period of less than 12 months and the first such period shallbegin on the Franchise Commencement Date and end on 31 March 2005 andthe last such period shall end on the last day of the Franchise Period;

GAAP means UK GAAP as at the date of this Agreement which denotes thecorpus of practices forming the basis for determining what constitutes a trueand fair view of accounting standards and, where relevant, the accountingrequirements of company law and the listing rules of the Financial ServicesAuthority;

Games means the Olympic Games to be held in 2012, the Franchisee'sobligations in respect of which are specified in paragraph 7 of Schedule 1.3(Additional Service Specifications);

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Gross Revenue means, in relation to any period and any Fare, the grossrevenue (excluding any applicable Value Added Tax) to the Franchiseeattributable to such Fare over the relevant period, excluding any costs,commissions or other expenses which may be paid or incurred in connectionwith such Fare;

Handover Package means a package containing the information and objectsspecified in the Appendix (Form of'Handover Package) to Schedule 15.3(Handover Package) and such other information and objects as the Authoritymay reasonably specify from time to time;

HMRI means Her Majesty's Railway Inspectorate, the operational division ofthe HSE with prime responsibility for the regulation of health and safety onthe railway;

Hot Standby means any rolling stock vehicle specified in the Train Planwhich:

(a) is operationally ready to provide the Passenger Services in theTimetable;

(b) is not already assigned to the delivery of any Passenger Service in theTimetable; and

(c) will only be used to deliver such Passenger Services if:

(i) a rolling stock vehicle scheduled to deliver such PassengerServices is unable to so deliver; and

(ii) Actual Passenger Demand could only be met by thedeployment in service of such rolling stock vehicle;

HR Strategy means the Franchisee's human resources strategy specified inparagraphs 1.2 and 1.3 of Schedule 13.1 (Franchise Management);

HSE means the Health and Safety Executive appointed under Section 10 ofthe Health and Safety at Work etc. Act 1974;

Improvement Plan has the meaning given to it in paragraph 3.14(b) ofSchedule 13.2 (Information);

Improvement Plan Performance Level means, in relation to a Benchmark forany Reporting Period, the number set out in column 3 of the Benchmark Tablerelating to that Benchmark and in the row of that table for that ReportingPeriod;

Incremental Output Statement Charge means the charge to which thatdescription is commonly given, first introduced into Relevant Agreements inApril 2001;

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Independent Station has the meaning given to it in paragraph 2.6 of Schedule8.4 (Track Access Adjustments and Station Charge Adjustments);

Independent Station Access Conditions has the meaning given to it in theAccess Agreement to which it relates;

Individual Station Charge Adjustment has the meaning given to it inparagraph 2.1 of Schedule 8.4 (Track Access Adjustments and Station ChargeAdjustments);

industrial action has the meaning given to it in paragraph l(h) of Schedule10.4 (Force Majeure);

Information Away from Station Services in Schedule 7.2 (SQUIRE) and inthe SQUIRE Service Schedules Agreement means the information providedhy the Franchisee as set out in service schedule 35 in the SQUIRE ServiceSchedules Agreement;

Initial Business Plan means the business plan (in the agreed terms andmarked IBP) to be provided by the Franchisee to the Authority and the SPTEon the date of signature of the Franchise Agreement, as described in paragraph2.1 of Schedule 13.2 (Information), including any adjusted version of suchplan resubmitted to the Authority and the SPTE in accordance with paragraph2.2 of that Schedule;

Initial Drawdown of the inter-company loan facility means the sum of £13.6million advanced to the Franchisee by the Parent on the FranchiseCommencement Date in accordance with the document in the agreed termsmarked ICF;

Initial Expiry Date means, if the Franchise Commencement Date is 17October 2004, 11.59 pm on Saturday 15 October 2011 and, if the FranchiseCommencement Date is some other date, means the last day of the ReportingPeriod in which the 7* anniversary of the Franchise Commencement Dateoccurs;

Initial Permanent Fare has the meaning given to it in the Ticketing andSettlement Agreement;

Integrated Transport Schemes means those schemes which relate to theintegration of any other form of transport with the Franchise Services:

(a) listed in the Appendix (List of Transport, Travel and Other Schemes)to Schedule 2.5 (Transport, Travel and Other Schemes); or

(b) designated as such in accordance with paragraph 1.1 of Schedule 2.5;

Integrated Transport Smartcard Organisation means the organisation createdby passenger transport executives, bus operators and Train Operators for thedevelopment and promotion of smartcards for use on transport;

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Interest Rate means in Part 1 of Schedule 1.6 (Committed Obligations) a rateof 5.188% per annum and, elsewhere in the Franchise Agreement, means arate equivalent to 2 per cent per annum above the base lending rate publishedby the Royal Bank of Scotland pic (or such other bank as the Authority may,after consultation with the Franchisee, determine from time to time) duringany period in which an amount payable under the Franchise Agreementremains unpaid;

Interest Application Date means the date on which the expiry of each InterestPeriod fells;

Interest Period means the period from the Franchise Commencement Dateuntil 31 March 2005 and thereafter the period from each 1 April until thefollowing 31 March or the date of expiry of the Franchise Period if earlier in aparticular year;

Inter-Operator Schemes means:

(a) the schemes, agreements and/or contracts set out in paragraph 4 of theAppendix (List of Transport, Travel and Other Schemes) to Schedule2.5 (Transport, Travel and Other Schemes) which have been approvedby the Authority and which relate to arrangements between theFranchisee and other participants in the railway industry;

(b) any other scheme, agreement and/or contract of a similar or equivalentnature as may from time to time during the Franchise Period amend,replace or substitute, in whole or in part, any of such schemes,agreements and/or contracts; and

(c) any Discount Fare Scheme;

Key Contract means:

(a) each agreement and contract listed in the Appendix (List of KeyContracts) to Schedule 14.3 (Key Contracts) as at the date of theFranchise Agreement; and

(b) any other agreement, contract, licence or other arrangement to whichthe Franchisee is a party or under which the Franchisee is thebeneficiary from time to time which is designated as such pursuant toSchedule 14.3,

but excluding any such agreement, contract, licence or other arrangementwhich ceases, in accordance with the terms of the Franchise Agreement, to bedesignated as a Key Contract;

fey Personnel has the meaning given to it in paragraph 3 of Schedule 11(Agreement Management Provisions);

Page 2P of 55


Law includes any enactment, subordinate legislation, rule, regulation, order,directive or other provision, including those of the European Community, andany judicial or administrative interpretation or application thereof, which has,in each case, the force of Law in the United Kingdom or any part of it(including the Act and the Transport Act);

Lead Operator has the meaning given to it in the Ticketing and SettlementAgreement;

Legislation means any enactment or subordinate legislation, rule, regulation,order, directive or other provision including those of the EuropeanCommunity, which has, in each case, the force of Law in the United Kingdomor any part of it, but excluding:

(a) any order under Section 1 of the Transport and Works Act 1992 or anyorder relating to, or matters ancillary to, operation of a transportsystem at the times mentioned in that Section made under the PrivateLegislation (Scotland) Act 1936; and

(b) any objectives, instructions, directions or guidance given from time totime to the Authority pursuant to the Act;

Licences means such licences granted or to be granted under Section 8 of theAct as the Franchisee may be required from time to time to hold under the Actin order to provide or operate the Franchise Services;

Light Maintenance Service means any service specified in paragraph 4 ofSchedule 1.7 (Franchise Services) which may be provided by the Franchiseeat the Depots and Stations;

Local Authority means:

(a) in England, a county council, a district council, a unitary authority, apassenger transport executive, a London borough council, the commoncouncil of the City of London, or a council which is established underthe Local Government Act 1992 and which is either an authorityresponsible for expenditure on public passenger transport serviceswithin the meaning of Section 88 of the Transport Act 1985 or a localauthority for the purposes of Section 93 of the Transport Act 1985;

(b) in Wales, a county council, a district council or a council which isestablished under the Local Government Act 1972 or the LocalGovernment (Wales) Act 1994;

(c) in Scotland, the Strathclyde Passenger Transport Authority or a councilor islands council which is established or continued under the LocalGovernment, etc. (Scotland) Act 1994;

(d) in London, the Mayor of London and Transport for London establishedunder the Greater London Authority Act 1999;

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(e) any other body or council replacing any of the above from time totime; and

(f) any other body or instrument of local or regional government specifiedby the Authority from time to time;

Lock-up Period has the meaning given to it in paragraph 3.2 of Schedule 12(Financial Obligations and Undertakings');

London Station means any station served by the Railway Passenger Servicesin the Zones and any Zone to or from which a passenger may travel from or tosuch station;

Long Stop Date means 18 October 2004 or such other date:

(a) on or before 31 January 2005 as may be determined by the Authorityand notified to the Franchisee if any one or more of die conditionsprecedent set out in the Conditions Precedent Agreement are notsatisfied by 18 October 2004; or

(b) as is agreed between the parties in any circumstances other than thosespecified in paragraph (a);

Maintenance Contract means any contract or arrangement to which theFranchisee is a party, which includes the carrying out for the Franchisee ofany maintenance work (including light maintenance services) or serviceprovision in respect of rolling stock vehicles used by the Franchisee in theprovision of the Passenger Services or for the enforcement of warranties orother rights against a manufacturer in respect of any such rolling stockvehicles;

Maintenance Payment Dates means the due dates for payment ofmaintenance costs for the Authority New Trains and the SPTE New Trains setout in the Authority Maintenance Costs Payment Profile and the SPTEMaintenance Costs Payment Profile respectively;

Major Event in Schedule 7.2 (SQUIRE) and in the SQUIRE ServiceSchedules Agreement means any of the following:- act of God, war damage,enemy action, terrorism, riot, civil commotion, rebellion, fire, lightning,explosion, storm, tempest, flood, bursting or overflowing of water tanks,apparatus or pipes, earthquake, aircraft and other aerial devices or articlesdropped therefrom except where that Major Event is caused, or contributed to,by any act or omission of the Franchisee, its agents or employees;

Major Flow Operator has the meaning given to it in the Ticketing andSettlement Agreement;

Major Projects has the meaning given to it in the Network Code;

Page 31 of65


Major Station means Edinburgh Waverley, Glasgow Central (High Level) andLondon Eustqn;

Major Station Area means:

(a) those premises set out in paragraph 4.3 of Appendix 2 (List ofConditions Precedent Documents) to the Conditions PrecedentAgreement; or

(b) any other premises:

(i) comprising part or parts of a Major Station to be occupied bythe Franchisee after the Franchise Commencement Date; and

(ii) used for or in connection with the provision of the FranchiseServices;

Management Accounts means, in relation to any Reporting Period, theFranchisee's management accounts which:


(b) are delivered to the Authority by the Franchisee in accordance withparagraphs 3.2 and 3.3 of Schedule 13.2;

Management and Processes in Schedule 7.2 (SQUIRE) and in the SQUIREService Schedules Agreement means the management and processes as set outin SQUIRE Service Schedule 34;

Mandatory Modification means a modification or addition to any rollingstock vehicle which is required to be made under any applicable Law or anydirective of the Rail Safety and Standards Board Limited or any governmentauthority;

Marks means such trade marks as the Franchisee may apply to any PrimaryFranchise Asset or other asset used by it under a Key Contract, which areapplied on the expiry of the Franchise Period and are not the subject of aBrand Licence;

Maximum Lateness in Schedule 7.1 A (Train Running Incentive Regime)means, in respect of any train in a Service Group, the number of minutesspecified in the relevant section of Part 4 of Schedule 7.1 A for that ServiceGroup;

Minor Works has the meaning given to it in paragraph 2.7(a) of Schedule 4.2(Persons with Disabilities and Disability Discrimination);

Minor Works Budget means: £250,000 for each Franchisee Year allocated bythe Franchisee for the purpose of facilitating Minor Works at Stations toimprove accessibility of the Stations to persons with disabilities, save that:

Page 32 of 65


(a) for any Franchisee Year which is shorter than 12 months, the amountshall be reduced pro-rata; and

(b) for each Franchisee Year after the first Franchisee Year, the amountspecified in paragraph (a) shall be subject to adjustment as follows:

Minor Works Budget x RPI

where RPI has the meaning given to it in Schedule 8.2 (Annual FranchisePayments');

Minor Works Programme means the Franchisee's programme of MinorWorks at Stations to improve accessibility of the Stations to persons withdisabilities, developed prior to the start of each Franchisee Year pursuant toparagraph 2.7(b) of Schedule 4.2 (Persons with Disabilities and DisabilityDiscrimination);

Minutes Delay means the minutes of delay to the Passenger Services that areattributed to the Franchisee or Network Rail, as the case may be, in each casepursuant to the Track Access Agreement and disregarding any minutes ofdelay that are imputed to Passenger Services that were cancelled;

Minutes Late in Schedule 7.1 A (Train Running Incentive Regime) means, inrelation to any train and any Monitoring Point, the number of minutes (notbeing less than zero and rounded down to the nearest whole minute) by whichsuch train Stops at such Monitoring Point after the time it was scheduled so todo in the Applicable Timetable provided that if such number is greater thanthe Maximum Lateness of the train the number of minutes shall be deemed toequal the Maximum Lateness of that train;

Model Changes has the meaning given to it in paragraph 2.2 of Schedule 9.3(Runs of the Financial Model);

Modified Revenue means:-

(a) the sum of:-

(i) the Franchisee's total revenue for the period being reviewed as statedin its profit and loss account (including all amounts received orreceivable from the Authority or the SPTE); and

(ii) the opening cash balance for the period being reviewed, excluding:

(A) any cash held for the exclusive purpose of the provision of theSeason Ticket Bond or the Performance Bond;

(B) the proportion of income recognised in the profit and lossaccount relating to deferred income from season ticket salesreleased in such period being reviewed; and

Page 33 of 65


(C) any cash that is held pursuant to any restrictive terms under anyagreement and that, consequently, cannot be used for generaloperating purposes; and

(b) either

(i) plus any reduction in total debtors over such period (wheretotal debtors are gross of any bad debts provision or write offand exclude any capital-related debtors); or

(ii) less any increase in total debtors over such period (where totaldebtors are gross of any bad debts provision or write off andexclude any capital-related debtors);

Monitoring Point in Schedule 7.1 A (Train Running Incentive Regime) means,in respect of any train, any monitoring point listed in Part 4 of Schedule 7.1 Afor a service whose Service Code, timing, direction and description that trainsatisfies and each such monitoring point shall be treated as a separateMonitoring Point notwithstanding that it may also be a monitoring point forthe same Service Code in the opposite direction and/or for other PassengerServices;

Monthly Season Ticket means a Season Ticket Fare which is valid inStandard Class Accommodation from (and including) the day it first comesinto effect until (but excluding) the day which falls 1 month after such day;

Morning Peak means, in relation to any Passenger Service, except whereotherwise specified in a Service Level Commitment, the period between 07.00hours and 09.59 hours, or such other continuous morning 3 hour period as theAuthority (with the consent of the SPTE, where the SPTE is affected) shallspecify from time to time;

National Passenger Survey means a passenger satisfaction survey which maybe carried out by or on behalf of the Authority as described in paragraph 2 ofSchedule 1.5 (Information about Passengers');

National Rail Timetable means the passenger timetable published by NetworkRail (currently twice per annum) specifying the timings and stopping patternsof all passenger railway services in Great Britain;

Network Change has the meaning given to it in the Network Code;

Network Code means the document now known as the Network Code andformerly known as the Railtrack Track Access Conditions 1995 (assubsequently replaced or amended from time to time) or any equivalent codeor agreement applying to any party referred to in the definition of "NetworkRail" other than Network Rail Infrastructure Limited;

Network Kail means in respect of:

Page 34 of 65


(a) the network or any relevant facility:

(i) Network Rail Infrastructure Limited, a company registered inEngland with registered number 02904587 whose registeredoffice is at 40 Melton Street, London NW1 2EE; and

(ii) any successor in title to the network or any relevant railwayfacility; or

(b) any new or other sections of network or any relevant new or otherrailway facilities, the owner (if different);

Network Mail Benchmark means any of the performance levels in respect ofMinutes Delay attributable to Network Rail set out in the Network RailBenchmark Table;

Network Rail Benchmark Table means the table set out in Appendix 3(Network Rail Benchmark Table) to Schedule 7.1 (Enforcement Benchmarks);

Network Rail Restrictions of Use in Schedule 7.1 A (Train Running IncentiveRegime) means any Restriction of Use including a Competent AuthorityRestriction of Use and a Part G Restriction of Use;

Network Rail Systems in Schedule 7.1 A (Train Running Incentive Regime)has the meaning ascribed to that term in paragraph l(a) of Part 3 of Schedule7.1 A;

new insurance arrangements shall have the meaning given to it in paragraph2.2(b) of Schedule 2.2 (Security of Access. Assets. Rolling Stock Leases,Station and Depot Leases);

New Results means, in relation to any Change, the following as restatedfollowing a Run of the Financial Model in relation to that Change:

(a) the restated amounts of Target Revenue to be specified for eachFranchisee Year in Appendix 1 (Target Revenue) to Schedule 8.2(Annual Franchise Payments); and

(b) the restated values of FXD, VCRPI, PRPI and TRRPI to be specifiedfor each Franchisee Year in Appendix 2 (Figures for Calculation ofAnnual Franchise Payments) to Schedule 8.2;

New Station means:

(a) a station not served by railway passenger services as at Junej 2003, butwhich has since that time been, or is subsequently, served by railwaypassenger services which have been, or are subsequently to be,included in the Timetable or in another relevant Train Operator'stimetable; and/or

P«gc35offiS


(b) if the Authority requires, a station, other than a Station, at which, withthe consent of the Authority (whether by amendment to thisAgreement or otherwise) railway passenger services operated by theFranchisee call;

New Trains means the SPTE New Trains and the Authority New Trains;

New Trains Authority Lease means the lease agreement between PorterbrookLeasing Company Limited and ScotRail Railways Limited dated 16 October2003 relating to die leasing of 22 Class 170 3 Car Diesel Multiple Units andthe collateral agreement in respect of the same between the same parties dated16 October 2003;

New Trains Authority Maintenance Agreements means the maintenancereserve agreement in respect of the Authority New Trains between PorterbrookLeasing Company Limited and ScotRail Railways dated 16 October 2003;

New Trains SPTE Lease means the lease agreement between PorterbrookLeasing Company Limited and ScotRail Railways Limited dated 16 October2003 relating to the leasing of 7 Class 170 3 Car Diesel Multiple Units and thecollateral agreement in respect of the same between the same parties dated 16October 2003;

New Trains SPTE Maintenance Agreements means the maintenance reserveagreement in respect of the SPTE New Trains between Porterbrook LeasingCompany Limited and ScotRail Railways dated 16 October 2003;

Non SPTE Train Fleet means the rolling stock vehicles which are not part ofthe SPTE Train Fleet and which are at the date hereof listed as such in Table1A of Appendix 1 (The Train Fleet) to Schedule 1.1 (Service Development)and such further rolling stock vehicles as are from time to time designated assuch (by notice to the Franchisee and the SPTE) by the Authority;

OFF-Peak means, in relation to any Passenger Service, the period of timeoutside of the Peak;

OFF-Peak Passenger Services means Passenger Services other than PeakPassenger Services;

Old Results means, in relation to any Change, the following, as produced bythe Run of the Financial Model in respect of the immediately precedingChange, or, in relation to the first Change only, the following as at the datehereof:

(a) the amounts of Target Revenue to be specified for each FranchiseeYear in Appendix 1 (Target Revenue) to Schedule 8.2 (AnnualFranchise Payments)', and

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(b) the values of FXD, VCRPI, PRPI and TRRPI to be specified for eachFranchisee Year in Appendix 2 (Figures for Calculation of AnnualFranchise Payments) to Schedule 8.2;

Olympic Services Recovery Plan has the meaning given to it in paragraph7.3(a) of Schedule 1.3 (Additional Service Obligations);

On-Train Services in Schedule 7.2 (SQUIRE) and in the SQUIRE ServiceSchedules Agreement means the services provided by the Franchisee onTrains as set out in SQUIRE Service Schedules 19 to 33, 36 and 38;

Opening Balance of the Authority Maintenance Reserve Account means theamount transferred from the Outgoing Franchisee (or the Authority) to theFranchisee in respect of the Authority Maintenance Reserve Account on, or onthe next Weekday following, the Franchise Commencement Date beingapproximately £20,600,000 with the figure being confirmed by the Authorityprior to the Franchise Commencement Date;

Opening Balance of the SPTE Maintenance Reserve Account means theamount transferred from the Outgoing Franchisee (or the Authority) to theFranchisee in respect of the SPTE Maintenance Reserve Account on, or on thenext Weekday following, the Franchise Commencement Date and beingapproximately £22,200,000 with the figure being confirmed by the Authorityprior to the Franchise Commencement Date;

Operating Assets has the meaning given to it in paragraph 1.1 ofSchedule 14.2 (Maintenance of Operating Assets);

Operational Model means the operational model in the agreed terms andmarked OMof:

(a) the revenue model;

(b) the performance model;

(c) all cost models; and

(d) any other relevant models that have generated input to the FinancialModel;

ORCATS means the suite of computer programs which provide the CAPRIsystem with a file of allocation factors that may be used to apportion toindividual passenger train operating companies passenger revenue on certainflows;

Outgoing Franchisee means National Express Group PLC whose registerednumber is 2590560 and registered office is at 75 Davies Street, London W1K5HT;

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Outgoing Operator means ScotRail Railways Limited, whose registerednumber is 2938994 and whose registered office is at 75 Davies Street, LondonW1K5HT;

Parent means First Group pic (company number 157176) and having itsregistered office at 395 King Street, Aberdeen AB24 5RP;

Partial Cancellation means a Passenger Service which is included in the Planof the Day and in respect of which the Franchisee:

(a) misses a stop;

(b) completes 50 per cent or more, but less than 100 per cent, of itsscheduled journey; or

(c) arrives at its final destination scheduled in the Timetable more than120 minutes late,

in each case, for reasons which are attributed to the Franchisee pursuant to itsTrack Access Agreement,

Participating Employer has the meaning given to it in the Pension Trust;

Pass in Schedule 7.1 A (Train Running Incentive Regime) means, in relation toany Formation Monitoring Point, the act of a train arriving at, passing ordeparting from (as the context may require) such Formation Monitoring Point;

Part G Restriction of Use has the meaning specified in Part 3 Schedule 4 ofthe Track Access Agreement;

passenger carrying capacity means, in relation to a Passenger Service, thecapacity of the rolling stock vehicles (as stated in Appendix 1 (Train Fleet) toSchedule 1.1 (Service Development)') from which the Passenger Service isformed but, in relation to any train used in the provision of a SPTE Service,any accommodation on such train which appears not to be Standard ClassAccommodation shall only be included in such capacity where passengershave been made aware that such accommodation is available as if it wereStandard Class Accommodation;

Passenger Change Date means a date upon which significant changes may bemade to the Timetable in accordance with or by virtue of the Network Code;

Passenger Services means the Franchisee's railway passenger servicesspecified in any Timetable and/or in any Plan of the Day, including thoserailway passenger services which the Franchisee may delegate or subcontractor otherwise secure through any other person from time to time in accordancewith the Franchise Agreement;

Passenger Timetable is. Schedule 7.1 A (Train Running Incentive Regime)means, in respect of any particular day, the passenger timetable in respect of

Pige38of6S


the Passenger Services for such day as determined following receipt fromNetwork Rail, under the Network Code, of the working timetable for theperiod between the Change Date preceding such day and the next succeedingChange Date, being, where the Change Date preceding such day is aPassenger Change Date, the Timetable;

Passenger Transport Area means the area in relation to which the SPTE isunder a duty to secure the provision of such public passenger transportservices as are required to meet public transfer requirements, being the area inwest central Scotland designated by the name Strathclyde Passenger TransportArea in The Strathclyde Passenger Transport Area (Designation) Order 1995;

Passenger Transport Extended Area means the Passenger Transport Area andthe area which is within 25 miles beyond the boundary of the PassengerTransport Area;

Passenger's Charter means the Franchisee's service commitments to itspassengers in the agreed terms and marked PC, as amended or replaced fromtime to time with the prior written consent of the Authority and the SPTE inaccordance with paragraph 4 of Schedule 1.4 (Passenger Facing Obligations);

Passenger's Charter Guidelines means the document of the same nameissued by or on behalf of the Authority containing the methodology forcompiling performance statistics and Passenger's Charter compensation, asamended or replaced from time to time by the Authority after consultationwith the Franchisee and with other franchisees whose franchise agreementscontain a similar or equivalent obligation for consultation;

Passenger's Charter Statistics means the record of the Franchisee'sperformance against the standards specified in the Passenger's Charter foreach Reporting Period as published in accordance with paragraph 4.9 ofSchedule 1.4 (Passenger Facing Obligations);

Payment Date means the date for the payment of Franchise Payments inaccordance with paragraph 2.3 of Schedule 8.1 (Franchise Payments);

Peak means the Morning Peak and the Evening Peak;

Peak Passenger Service means any Passenger Service operated on a Weekdaywhich:

(a) arrives at Edinburgh Waverley, Glasgow Central (High Level and LowLevel), Glasgow Queen Street (High Level and Low Level), ArgyleStreet, High Street, Charing Cross, Anderston, Exhibition Centre andPartick in the Morning Peak; or

(b) first departs from Edinburgh Waverley, Glasgow Central (High Leveland Low Level), Glasgow Queen Street (High Level and Low Level),Argyle Street, High Street, Charing Cross, Anderston, ExhibitionCentre and Partick in the Evening Peak;

Page 39 of 65


Pension Trust means the pension trust governing the Railways PensionScheme;

Pensions Committee has the meaning given to it in the Railways PensionScheme;

Performance Bond -means the performance bond to be provided to theAuthority in the form set out in Appendix 1 (Form-of Performance Bond) toSchedule 12 (Financial Obligations and Undertakings'), as replaced oramended from time to time ia accordance with Schedule 12;

Performance Improvement Plan has the meaning given to it in paragraph3.13(a) of Schedule 13.2 (Information);

Performance 'Points means the number of points incurred by the Franchisee asderived from paragraph 4 of each of the SQUIRE Service Schedules;

Permitted Aggregate Increase has the meaning given to it in paragraph 4.2 ofSchedule 5.4 (Regulation of Fares Basket Values');

Permitted Individual Increase has the meanings given to it in paragraphs 2.2and 2.4, as appropriate, of Schedule 5.5 (Regulation of Individual Fares);

Placed in Escrow means :

(a) in respect of the Financial Model, delivery of the Financial Model:

(i) dated the date hereof;

(ii) adjusted to the extent necessary to reflect any differencebetween the actual Franchise Commencement Date and thedate assumed to be the Franchise Commencement Date in theInitial Business Plan; and

(iii) audited following a Run of the Financial Model and updatedwith any Revised Inputs; and

(b) in respect of the Operational Model, delivery of:

(i) the Operational Model dated the date hereof;

(ii) the Operational Model adjusted to the extent necessary toreflect any time elapsed between the actual FranchiseCommencement Date and the date assumed to be the FranchiseCommencement Date in the Initial Business Plan; and

(iii) the inputs to the Financial Model derived therefrom followingan audit of a Run of the Financial Model; and

(c) in respect of the Record of Assumptions, delivery thereof,

Page 40 of65


exh in accordance with Schedule 9.2 (Identity of the Financial Model etc);

Plan of the Day means, in relation to each day during the Franchise Term, thePassenger Services specified in the Timetable or as notified to the Franchiseeby Network Rail from time to time, scheduled to be operated on that day;

fewer of Attorney means the power of attorney in favour of the Authority tobe executed and delivered by the Franchisee in the agreed terms and markedPOA;

Preceding Year Ticket Price has the meaning given to it in paragraphs 2.1 and2.3 of Schedule 5.5 (Regulation of Individual Fares);

Previous Franchise Agreement means any franchise agreement whichterminated on or about the day prior to the Franchise Commencement Dateunder which services equivalent to the Franchise Services (or a materialproportion thereof)'were provided by a Train Operator; .

Price means, in respect of any Fare, the price of such Fare before thededuction of any applicable discount to which a purchaser may be entitled, asnotified to RSP in accordance with Schedule 5 to the Ticketing and SettlementAgreement;

Priced Option means any of the options set out in Schedule 3 (PricedOptions);

Primary Franchise Assets means:

(a) the property, rights and liabilities of the Franchisee listed in theAppendix to Schedule 14.4 (Designation of Franchise Assets); and

(b) any other property, rights and liabilities of the Franchisee which is orare designated as such pursuant to Schedule 14.4,

but excluding such property, rights or liabilities as may, in accordance withthe terms of the Franchise Agreement, cease to be so designated;

profit means profit before corporation tax, determined in accordance withGAAP;

Projected Revenue means the revenue in any Fare Year which is projected tobe attributable to any Fare, determined in accordance with paragraph 3 ofSchedule 5.4 (Regulation of Fares Basket Values);

Property Lease means each lease of the facilities set out in paragraph 4 ofAppendix 2 (List of Conditions Precedent Documents') to the ConditionsPrecedent Agreement and any agreement or lease of a similar or equivalentnature (whether in respect of any such facility or otherwise) which theFranchisee may enter into with a person who has an interest in a network or a

Page 41 of 65


railway facility which is to he used for or in connection with the provision oroperation of the Franchise Services;

Protected Employees has the meaning given to it in the Railways Pension(Protection and Designation of Schemes) Order 1994;

Protected Fare means a Protected Return Fare or a Protected Weekly SeasonTicket;

Protected Fares Basket means the grouping (if any) of Protected Fares:

(a) determined by the Authority pursuant to Schedule 5.3 (Allocation ofFares to Fares Baskets);

(b) for the purposes of regulating their aggregate Prices or Child Prices, asthe case may be, in accordance with Schedule 5.4 (Regulation of FaresBasket Values);

(c) amended by the Authority from time to time in accordance withSchedule 5.7 (Changes to Fares and Fares Regulation); and

(d) set out in the Protected Fares Document;

Protected Fares Document means a document (to be prepared by theAuthority if it wishes prior to the Franchise Commencement Date) being adocument that lists the price at the date hereof for every Protected Fare and (ifthe document is not prepared) references to a Protected Fares Document shallbe construed as a list of these fares as if it has been prepared;

Protected Proposal has the meaning given to it in paragraph 1,14 of Schedule19 (Other Provisions);

Protected Return Fare means:

(a) in respect of a Fare for a Flow for which there was a Saver Return Farein June 2003, a Return Fare for each such Flow in respect of which theFranchisee is entitled from time to time to set the Price or Child Priceunder the Ticketing and Settlement Agreement, subject to thefollowing additional rights and restrictions:

(i) it shall be valid for no less than one month;

(ii) it shall be valid all day on a Saturday or Sunday and from no later than1030 on any other day;

(iii) it need not be valid for any journey:

(A) beginning between 1500 and 1900 on any .day other than aSaturday or Sunday;

P&ge42of65


(B) where such journey begins from a London Station or anystation between London and Reading station, Watford station,Luton station, or Stevenage station (inclusively) ; and

(C) which is in a direction away from London; or

(b) in respect of a Fare for a Flow for which there was no Saver ReturnFare in June 2003, a Return Fare for each such Flow in respect ofwhich the Franchisee is entitled from time to time to set the Price orChild Price'under the Ticketing and Settlement Agreement, except ineach case to the extent that a Return Fare for any such Row is aCommuter Fare;

Protected Weekly Season Ticket means a Weekly Season Ticket for any Flowfor which there was a weekly season ticket in the fares manuals and systemsof RSP in June 2003 and which the Franchisee is entitled to set the Price orChild Price of under the Ticketing and Settlement Agreement except to theextent that a Weekly Season Ticket for any such Flow is a Commuter Fare;

Public Sector Operator means any person (other than a franchisee in relationto the services provided or operated under its franchise agreement) whoprovides railway passenger services or operates any station or lightmaintenance depot pursuant to or under Section 30 of the Act or Sections 211or 213 of the Transport Act;

Publication Expenditure has the meaning given to it in paragraph 4^1.8 ofSchedule 1.4 (Passenger Facing Obligations);

Qualifying Change means a Change which would (if it were subject to a Runof the Financial Model in accordance with Schedule 9 (Changes)) result inadjustments in Franchise Payments over the remaining life of the FranchiseAgreement that have net present value as at the date of the Change in excessof the Threshold Amount, and for the purposes of ascertaining a net presentvalue of the amount of any adjustment in any Franchise Payment, it shall bediscounted- at the prevailing discount rate per annum (in real terms) stated inHM Treasury's "Green Book Appraisal Guidelines" (which discount rate is 5.5per cent, per annum (in real terms) at the date of die Franchise Agreement)from the date of receipt of that adjusted Franchise Payment to the date of theChange;

Quality Plan means the plan specified in paragraph 2.1 of Schedule 13.1(Franchise Management);

Quality Report means the report specified hi paragraph 2.4 of Schedule 13.1(Franchise Management);

Quarterly Season Ticket means a Season Ticket Fare which is valid inStandard Qass Accommodation from (and including) the day it first comesinto effect until (but excluding) the day which falls 3 months after such day;

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Rail Passengers' Committee means a passengers' committee establishedunder Section 2 of the Act;

railway industry standards has the meaning given-to it in paragraph 10.1 ofSchedule 13.2 (Information);

Railway Passenger Services means, for the purpose of Schedule 5 (Fares')only, services for the carriage of passengers by railway which are provided bya person who is bound by die Ticketing and Settlement Agreement, or any partof it, and including the Franchisee and any other Train Operator from time totime;

Railways Pension Scheme means the pension scheme established by theRailways Pension Scheme Order 1994 (No. 1433);

Record of Assumptions means a document prepared by the Franchisee in theagreed terms and marked ROA or revised in accordance with Schedule 9(Changes) and Placed in Escrow providing:

(a) detailed assumptions, explanations of assumptions and parametersunderlying the Financial Model;

(b) details of how Franchise Payments have been calculated (including byreference to a defined annual profit margin);

(c) a description of the functionality, operation and structure of theFinancial Model; and

(d) a description of each input cell, its requirements and its inter-relationship with the Financial Model;

Reference Fare has the meaning given to it in paragraph 6.1 (a) ofSchedule 5.7 (Changes to Fares and Fares Regulation);

Reference Flow has the meaning given to it in paragraph 6.1 (a) ofSchedule 5.7 (Changes to Fares and Fares Regulation);

Reference Revenue means the aggregate Gross Revenue recorded by RSP asattributable to sales of all Commuter Fares or Protected Fares for the FinancialYear which ended 31st March 2003;

Regulated Child Price means the Child Price that is permitted to be chargedby the Franchisee hi respect of any Fare in any Fare Year, determined inaccordance with paragraph 2.1 of Schedule 5.5 (Regulation of IndividualFares);

Regulated Price means the Price that is permitted to be charged by theFranchisee in respect of any Fare in any Fare Year, determined in accordancewith paragraph 2.1 of Schedule 5.5 (Regulation of Individual Fares);

Page 44 of«5


Regulated Value means the Value of any Fares Basket that is permitted in anyFare Year, determined in accordance with paragraph 4.1 of Schedule 5.4(Regulation of Fares Basket Values);

Regulations has the meaning given to it in paragraph 2.3 of Schedule 2.5(Transport, Travel and other Schemes);

Relevant Agreement means any Property Lease or Access Agreement inrelation to any stations or network which may he used from time to time bythe Franchisee in connection with the Franchise Services, as replaced oramended from time to time. If and to the extent mat:

(a) following the effective date of any Charge Variation, the Franchiseeenters into any Replacement Agreement;

(b) the effect of that Charge Variation is reflected in the terms of theReplacement Agreement; and

(c) the Authority has consented to such Replacement Agreement beingentered into and constituting a Replacement Agreement for thepurposes of this definition,

then the Replacement Agreement shall be deemed to be a RelevantAgreement;

Relevant Authority means the Authority in respect of the Authority Servicesand the SPTE in respect of the SPTE Services, but in Schedule 7.2 (SQUIRE)and in the SQUIRE Service Schedules Agreement means, in relation to theSPTE Services and the SPTE Stations, the SPTE and, in relation to all otherFranchise Services including the Authority Services and the AuthorityStations, the Authority;

Relevant Days has the meaning given to it in paragraph 2.2 of Schedule 15.2(Last 12 or 13 Months of Franchise Period);

relevant Reporting Period has, for the purposes of paragraph 5.3 of Schedule12 (Financial Obligations and Undertakings') only, the meaning given to it inthat paragraph;

Relevant Terms has the meaning given to it in paragraph' 1.2 of Schedule 10.1(Remedial Plans);

Remedial Agreement has the meaning given to it in paragraph 1.5 of Schedule10.1 (Remedial Plans');

Remedial Plan has the meaning given to it in paragraph 1.2 of Schedule 10.1(Remedial Plans');

Remedial Plan Notice has the meaning given to it in paragraph 1.1 ofSchedule 10.1 (Remedial Plans);

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Replacement Agreement means an agreement entered into as a replacementfor any Relevant Agreement;

Reporting Accountants means PKF;

Reporting Period means:

(a) for the purposes of the Season Ticket Bond, any consecutive 7-dayperiod or any other period, each within a Reporting Period (as definedin paragraph (b)) agreed in accordance with paragraph 5.12 ofSchedule 12 (Financial Obligations and Undertakings); or

(b) for all other purposes, a period of 28 days, provided that:

(i) the first such period during the Franchise Period shall excludeany days up to but not including the Franchise CommencementDate;

(ii) the first and last such period in any Reporting Year may bevaried by up to 7 days by notice from the Authority to theFranchisee;

(iii) each such period shall start on the day following the last day ofthe preceding such period; and

(iv) the last such period during the Franchise Period shall end onthe end of the Franchise Period;

Reporting Year means a period normally commencing on 1 April in eachcalendar year, comprising 13 consecutive Reporting Periods;

Required Commencement Agreements has the meaning given to it in clause4.1 of the Conditions Precedent Agreement;

Restriction of Use for the purposes only of the definition of "Network RailRestriction of Use" means in respect of any day, any restriction of use of anyrelevant section of track notified by Network Rail to the Franchisee whichnecessitates any difference between the Applicable Timetables;

Retail Prices Index means the retail prices index for the whole economy ofthe United Kingdom and for all items as published from time to time by theOffice for National Statistics or, if such index shall cease to be published orthere is a material change in the basis of the index or if, at any relevant time,there is a delay in the publication of the index, such other retail prices index asthe Authority may, after consultation with the Franchisee, determine to beappropriate in the circumstances;

Return Fare means a Fare which entitles the purchaser to make, withoutfurther restrictions as to the time of day for which the Fare is valid, a journeyin each direction in Standard Class Accommodation between the stations

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and/or the zones for which such Fare is valid and which expires no earlier than0200 on the day after the day of the outward journey or, if later, the time therelevant return journey may be completed if commenced before 0200;

Revenue means the gross revenue (without any deduction for operating costsor charges except for commission charged to revenue in the normal course ofbusiness and also without any deduction for payments by the Franchisee underSchedule 7.1 A (Train Running Incentive Regime) or payments by theFranchisee under Schedule 7.2 (SQUIRE) in both of the latter cases whenascertaining Revenue for the purposes of paragraphs 3 and 4 of Schedule 8.1(Franchise Payments)) of the Franchisee, as stated in the audited ormanagement accounts and statements submitted to the Authority inaccordance with Schedule 13.2 (Information), relating to:

(a) railway passenger services;

(b) the provision of catering services on any Passenger Service;

(c) charging for the use of station car parks;

(d) other revenue directly related to passenger demand for railwaypassenger services;

(e) payments to the Franchisee by Network Rail under Schedule 4 to theTrack Access Agreement;

(f) the "MRE" element of any payments to the Franchisee by NetworkRail as provided for under Schedule 8 to the Track Access Agreement,net of MRE payments to Network Rail thereunder;

(g) the revenue element of any payments to the Franchisee by NetworkRail under Condition G of the Network Code; and

(h) retail commission,

but shall not include any Franchise Payment (and for the avoidance of doubt,as well as not including Franchise Payments, it shall not include payments tothe Franchisee under Schedule 7.1 A or payments to the Franchisee underSchedule 7.2 when ascertaining Revenue for the purposes of paragraphs 3 and4 of Schedule 8.1). References in paragraphs (e), (f) and (g) to Schedules tothe Track Access Agreement, the Network Code and/or to particularprovisions of those Schedules or the Network Code shall be deemed to includeany other provisions of, or incorporated in, any Track Access Agreementwhich the Authority reasonably considers have an equivalent effect or areintended to fulfil the same function;

Revenue Share Adjustment means the amount of an adjustment to a FranchisePayment determined in accordance with paragraph 3.2 of Schedule 8.1(Franchise Payments);

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Revatue Share Adjustment Date means the Payment Date for the3rd Reporting Period in any Franchisee Year, except in respect of any RevenueShare Adjustment felling due in the final Franchisee Year, for which theprovisions of paragraph 5 of Schedule 8.1 (Franchise Payments) shall apply;

Revenue Share Reconciliation Amount means the amount determined inaccordance with paragraph 3.5 of Schedule 8.1 (Franchise Payments);

Revenue Share Reconciliation Date means the first Payment Date falling noless than 7 days after a determination pursuant to paragraph 3.4 ofSchedule 8.1 (Franchise Payments), except in respect of any Revenue ShareReconciliation Amount falling due in the final Franchisee Year, for which theprovisions of paragraph 5 of Schedule 8.1 shall apply;

Revenue Support Adjustment means an adjustment to a Franchise Paymentdetermined in accordance with paragraph 4.6 of Schedule 8.1 (FranchisePayments);

Revenue Support Adjustment Date means the first Payment Date falling noless than 7 days after the Franchisee claims revenue support pursuant toparagraph 4.1 of Schedule 8.1 (Franchise Payments), except in respect of anyRevenue Support Adjustment falling due in the final Franchisee Year andwhich has not been made during the Franchise Period, for which theprovisions of paragraph 5 of Schedule 8.1 shall apply;

Revenue. Support Reconciliation Amount means an amount determined inaccordance with paragraph 4.9 of Schedule 8.1 (Franchise Payments);

Revenue Support Reconciliation Date means the first Payment Date fallingno less than 7 days after a determination pursuant to paragraph 4.8 ofSchedule 8.1 (Franchise Payments), except in respect of any Revenue SupportReconciliation Amount falling due in the final Franchisee Year and which hasnot been made during the Franchise Period, for which the provisions ofparagraph 5 of Schedule 8.1 shall apply;

Revised Inputs has the meaning given to it in paragraph 2.1 of Schedule 9.3(Runs of the Financial Model);

Revised Reference Revenue Period has the meaning given to it in paragraph3.1(a) of Schedule 5.7 (Changes to Fares and Fares Regulation);

Rolling Stock Lease means any agreement for the leasing of rolling stockvehicles listed in Table 1 of Appendix 9 (The Train Fleet) to Schedule 1.1(Service Development) and any agreement of a similar or equivalent nature(including, any agreement or arrangement for the subleasing, hiring, licensingor other use of rolling stock vehicles) to which the Franchisee is a party fromtime to time during the Franchise Term whether in addition to, or replacementor substitution for, in whole or in part, any such agreement;

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Rolling Stock Related Contract means any Rolling Stock Lease, MaintenanceContract or Technical Support Contract;

Rolling Stock Unit means the smallest number of rolling stock vehicles whichare normally comprised in a train used by the Franchisee in the provision ofthe Passenger Services;

Route means any route specified in either or both Service Level Commitmentswhich the Franchisee has permission to operate the Passenger Services overpursuant to any Track Access Agreement;

Route Utilisation Strategy means any route utilisation strategy notified to theFranchisee by the Authority on or before the Franchise Commencement Dateor as developed by the Authority from time to time and notified to theFranchisee for the purposes of the Franchise Agreement;

RPM means the revenue protection manager to be employed by the Franchiseeto perform the responsibilities of such person specified in Schedule 1.3(Additional Service Specifications);

RSP means Rail Settlement Plan Limited;

Rules of the Plan has the meaning given to it in the Network Code;

Rules of the Route has the meaning given to it in the Network Code;

Run of the Financial Model means an operation of the Financial Model withthe Revised Inputs and which complies with the requirements of Schedule 9.3(Runs of the Financial Model);

Safety Case means the statement of procedures, standards and internalregulations designed to achieve the safe provision or operation of theFranchise Services prepared by the Franchisee and accepted by Network Rail(or any successor thereto) under The Railways (Safety Case) Regulations 1994or by the HSE (or any successor thereto) under The Railways (Safety Case)Regulations 2000;

Saturday Peak has the meanings set out in paragraph 4.7 of Schedule 1.3(Additional Service Specifications);

Saver Return Fare means a return fare which is shown as a saver fare in thefares manuals and systems of the RSP as at the date of such manuals;

ScotRail Franchise means the rights tendered by the Authority on 23 October2003 to operate railway passenger services primarily in Scotland under theterms and conditions set out in the Franchise Agreement;

Season Ticket Bond means the season ticket bond to be provided to theAuthority in respect of the Franchisee's liabilities under certain Fares andSeason Ticket Fares in the form set out in Appendix 2 (Form of the Season

P«.ge49offi5


Ticket Bond) to Schedule 12 (Financial Obligations and Undertakings) andsuch other bond as may replace it from time to time under Schedule 12;

Season Ticket Fare means:

(a) for the purposes of Schedule 12 (Financial Obligations andUndertakings) only, a Fare which entitles the purchaser to make,without further restriction except as to class of accommodation, anunlimited number of journeys in any direction during the period forwhich, and between the stations and/or the zones for which, such Fareis valid; and

(b) for all other purposes, a Fare which entitles the purchaser to make anunlimited number of journeys in any direction during the period forwhich, and between the stations and/or the zones for which, such Fareis valid;

Security Interest means any mortgage, pledge, lien, hypothecation, securityinterest or other charge or encumbrance or any other agreement orarrangement having substantially the same economic effect;

Service Delivery Benchmark means any of the performance levels in respectof Minutes Delay attributable to the Franchisee set out in the Service DeliveryBenchmark Table;

Service Delivery Benchmark Table means the table set out in Appendix 4(Service Delivery Benchmark Table) to Schedule 7.1 (EnforcementBenchmarks)',

Service Code in Schedule 7.1 A (Train Running Incentive Regime) means thethird, fourth and fifth digits of an eight character train service code applied inNetwork Rail's performance monitoring system to trains and used to identifythem;

Service Group has the meaning given to it in the Passenger's Charter whenused in relation to the Passenger's Charter, and when used in the FranchiseAgreement it has the meaning given to it in the Track Access Agreement, or asspecified by the Authority from time to time, provided that in Schedule 7.1 A(Train Running Incentive Regime) Service Group means any of ServiceGroup A, Service Group B , Service Group C, Service Group D, ServiceGroup E, Service Group F, Service Group G and Service Group H;

Service Group A in Schedule 7.1 A (Train Running Incentive Regime) meansthe Passenger Services described in Part 4(a) of Schedule 7.1 A;

Service Group B in Schedule 7.1 A (Train Running Incentive Regime) meansthe Passenger Services described in Part 4(b) of Schedule 7.1A;

Service Group C in Schedule 7.1 A (Train Running Incentive Regime) meansthe Passenger Services described in Part 4(c) of Schedule 7.1 A;

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Service Group D in Schedule 7.1 A (Train Running Incentive Regime) meansthe Passenger Services described in Part 4(d) of Schedule 7.1 A;

Service Group E in Schedule 7.1A (Train Running Incentive Regime) meansthe Passenger Services described in Part4(e) of Schedule 7.1 A;

Service Group F in Schedule 7.1 A (Train Running Incentive Regime) meansthe Passenger Services described in Part 4(f) of Schedule 7.1 A;

Service Group G in Schedule 7,1 A (Train Running Incentive Regime) meansthe Passenger Services described in Part 4(g) of Schedule 7.1 A;

Service Group ff in Schedule 7.1 A (Train Running Incentive Regime) meansthe Passenger Services described in Part 4(h) of Schedule 7.1 A;

Service Level Commitments means together the Authority Service LevelCommitment and the SPTE Service Level Commitment and any reference to aService Level Commitment is a reference to the Authority Service LevelCommitment or the SPTE Service Level Commitment as the context requires;

Service Quality Manager means the service quality manager to be employedby the Franchisee to perform the responsibilities of such person specified inSchedule 7.2 (SQUIRE);

Service Quality Monitoring Plan in Schedule 7.2 (SQUIRE) and in theSQUIRE Service Schedules Agreement means apian which the Authority mayrequire the Franchisee to provide in accordance with paragraph 15 of Schedule7.2;

Service Quality Payment in Schedule 7.2 (SQUIRE) and in the SQUIREService Schedules Agreement means any payment payable by the Franchiseeto the Authority or the SPTE, as the case may be, or any payment payable bythe Authority or the SPTE, as the case may be, to the Franchisee;

Service Recovery Plan means, in the event of a prevention or restriction ofaccess to the track or a section of the track (howsoever caused) which resultsin any Cancellation, Partial Cancellation, and/or any Passenger Service beingoperated with less passenger carrying capacity than the passenger carryingcapacity specified for such Passenger Service in the Train Plan, a plan

J implemented by the Franchisee:

(a) to minimise the disruption arising from such prevention or restrictionof access by operating during such period of disruption, the bestpossible level of service given such disruption, including by:

(i) keeping service intervals to reasonable durations;

(ii) keeping extended journey times to reasonable durations; and

(iii) managing any resulting overcrowding;

(b) to:

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(i) return the level of service to that level specified in theTimetable as soon as reasonably practicable; and

(ii) prior to the attainment of the level of service specified inparagraph (b)(i), operate any reduced level of service agreedwith Network Rail for the purpose of minimising suchdisruption pursuant to paragraph (a);

(c) in accordance with the principles of service recovery set out in theATOC "Approved Code of Practice: Contingency Planning for TrainService Recovery - Service Recovery 2003"; and

(d) where the particulars of such plan in relation to the requirements ofparagraphs (a) and (b) have been:

(i) agreed at an initial and, where required, subsequent telephoneconference between the Franchisee, Network Rail and anyother affected Train Operator; and

(ii) on each occasion, recorded in an official control log by therelevant Region Control Manager of Network Rail,

and prevention or restriction of access to the track or a section of the trackshall have the meaning given to that term in paragraph 1.1 (a)(i) ofSchedule 10.4 (Force Majeure);

Services in. Schedule 7.2 (SQUIRE) and in the SQUIRE Service SchedulesAgreement means the Franchise Services which make up each SQUIREService Specification;

Settlement Proposal has the meaning given to it in paragraph 3.2 ofSchedule 4.2 (Persons with Disabilities and Disability Discrimination);

SFIP Service Group in Schedule 7.1 A (Train Running Incentive Regime)means any of Service Group A, Service Group B, Service Group C, ServiceGroup D, Service Group E or Service Group H (sleepers);

Shared Cost Arrangement has the meaning given to it in the RailwaysPension Scheme;

significant alterations shall, in relation to a Timetable, include alterations tothe Timetable which result in:

(a) the addition or removal of railway passenger services;

(b) changes to stopping patterns or destinations or origin;

(c) changes of timings for first/last trains by more than 10 minutes;

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(d) changes to clockface (or near clockface) service patterns (meaning theprovision of railway passenger services at a specified time or timesrelative to the hour); and

(e) significant changes to journey times and/or key connections at theStation or at other stations at which relevant railway passenger servicescall;

Single Fare means a Fare which entitles the purchaser to make, withoutfurther restrictions as to the time of day for which the Fare is valid, on any oneday one journey in Standard Class Accommodation between the stationsand/or the zones for which the Fare is valid;

Spares means parts and components of rolling stock vehicles which areavailable for the purpose of carrying out maintenance services on rolling stockvehicles;

SPTA means Strathclyde Passenger Transport Authority;

SPTA Grant Funding Agreement means an agreement between SPTA and theFranchisee in respect of the amount advanced to the Franchisee pursuant toparagraph 3.2 of Schedule 1.6 (Committed Obligations);

SPTA Maintenance Bond means the maintenance bond to be provided to theSPTE (for delivery to the SPTA) in favour of SPTA in respect of theFranchisee's liabilities under Schedule 1.6 (Committed Obligations) in theform set out in Appendix 4 (Form of SPTA Maintenance Bond) to Schedule 12(Financial Obligations and Undertakings) and any such other bond as mayreplace it from time to time under Schedule 12;

SPTE Change means

(a) a change to the SPTE Service Level Commitment previously in forcepursuant to the issue of a new Service Level Commitment inaccordance with paragraph 9 of Schedule 1.1 (Service Development);

(b) a change effected by the SPTE pursuant to paragraph 6 of Schedule 1.2(Operating Obligations);

(c) a change to the SPTE's standards in respect of. alternative transportarrangements, as referred to in paragraph 8.2(b) of Schedule 1.2 fromthe SPTE's standards current as at the date of signature of thisAgreement;

i(d) a requirement of the SPTE pursuant to paragraph 2.9 or 3.9 of ' j

Schedule 2.5 (Transport, Travel and Other Schemes) or paragraph 5 or10 of Schedule 5.7 (Changes to Fares and Fares Regulation) orSchedule 5.9 (SPTE Control of Fares);

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(e) a variation to the SPTE SQUIRE Regime pursuant to paragraph 16.2of Schedule 7.2 (SQUIRE);

(f) a requirement of the SPTE pursuant to paragraph 2.2 of Schedule 19(Other Provisions');

(g) a requirement of the SPTE pursuant to paragraph 7,1 of Schedule 4.1(Franchise Facilities);

(h) an alteration by the SPTE to the time period of 10 minutes referred toin paragraphs 6.5(b) and 6.6(c) of Schedule 1.1 (Service Development)and 3,4(b)(iii) of Schedule 1.2 (Operating Obligations);

(i) a requirement of the SPTE to add or omit any station from theprovisions of paragraph 4.3 of Schedule 1.3 (Additional ServiceSpecifications);

(j) a requirement of the SPTE pursuant to paragraph 3 of Schedule 1.8(Major Projects);

(k) a requirement of the SPTE pursuant to paragraph 1.7, 2.8 or 3.13 ofSchedule 2.5; or

(1) a requirement of the SPTE pursuant to paragraph 3.3(b) of Part 2 ofSchedule 1.6 (Committed Obligations).

SPTE Fares Assumption has the meaning set out in paragraph 4 of Schedule5.9 (SPTE Control of Fares');

SPTE's Head of Rail Franchise Management means a person appointed bythe SPTE to undertake the responsibilities of such person set out in Schedule11 (Agreement Management Provisions);

SPTE Maintenance Costs Payment Profile means the payment profile(including due dates for payment) in respect of maintenance costs relating tothe SPTE New Trains set out in Appendix 4 to Part 1 of Schedule 1.6(Committed Obligations') or as subsequently adjusted pursuant to paragraph 5of Part 1 of Schedule 1.6.;

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SPTE Maintenance Payments all fixed maintenance costs set out in SPTEMaintenance Costs Payment Profile under the heading "SPTE FundedMaintenance Costs";

SPTE Maintenance Reserve Account Balance means, at any one time, thebalance on the SPTE Maintenance Reserve Account "being the amount oramounts advanced by the SPTE pursuant to paragraph 3.2 of Schedule 1.6(Committed Obligations) less SPTE Maintenance Payments paid by theFranchisee plus amounts applied to the SPTE Maintenance Reserve Accountpursuant to paragraph 3.7 of Schedule 1.6;

SPTE Maintenance Reserve Account means the funds received by theFranchisee from the SPTE pursuant to paragraph 3.2 of Schedule 1.6(Committed Obligations) as may be adjusted from time to time pursuant to theterms of Schedule 1.6;

SPTE New Trains means the seven (7) three (3) car Class 170 diesel multipleunits more fully described in the definition of "Rolling Stock" in Schedule 1 tothe New Trains SPTE Lease;

SPTE Service means a Passenger Service specified in the SPTE Service LevelCommitment and/or derived from that Service Level Commitment and aPassenger Service provided in consequence of the SPTE exercising its rightsunder Schedule 1.1 (Service Development) or Schedule 1.2 (OperatingObligations);

SPTE Service Level Commitment means the service level commitment inrespect of certain Passenger Services within the Passenger Transport ExtendedArea more particularly described in Schedule 1.1 (Service Development), withthe first such SPTE Service Level Commitment being in the agreed terms andmarked SPTE SLC, and any other service level commitment developed by theSPTE in accordance with Schedule 1.1;

SPTE Set Fare means

(a) such fares as the SPTE may notify to the Franchisee from time to timepursuant to paragraph 2.9 of Schedule 2.5 (Transport, Travel andOther Schemes); and

(b) such fares as the SPTE may notify the Franchisee from time to timepursuant to paragraph 3.9 of Schedule 2.5;

SPTE Share means the SPTE's share of any Franchise Payment which ispayable to the Franchisee or, where in the calculations set out in Schedule 8.1(Franchise Payments') £FP is a negative number, the SPTE's share of thecorresponding positive amount payable by the Franchisee;

SPTE Station means a station listed in paragraph 4(b) of Appendix 2 (List ofConditions Precedent Documents') to the Conditions Precedent Agreement;

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ScotRafl Franchise - Draft Definitions Agreement

SPTE Train Fleet means the SPTE branded rolling stock vehicles which areat the date hereof listed in Table IB of Appendix 1 to Schedule 1.1 (ServiceDevelopment) and such further rolling stock vehicles as are from time to timedesignated as such (by notice to the Franchisee and the Authority) by theSPTE;

SPTE Train Mileage means in relation to any period, the aggregate trainmileage covered during such period b(y each train used by the Franchisee inthe provision of the SPTE Services (excluding any train mileage covered as aresult of positioning or other movements of rolling stock vehicles outside theTimetable);

SQI in Schedule 7.2 (SQUIRE) and in the SQUIRE Service SchedulesAgreement means a service quality inspector appointed in accordance with theprovisions of Schedule 7.2;

SQM in Schedule 7.2 (SQUIRE) and in the SQUIRE Service SchedulesAgreement means the service quality manager employed by the Franchisee inaccordance with paragraph 3 of Schedule 7.2;

SQUIRE Benchmark means any of Benchmark Level, Ceiling Level andFloor Level and "SQUIRE Benchmarks" means all of these;

SQUIRE Service Schedules Agreement means the agreement among theAuthority, the SPTE and the Franchisee of even date with this Agreementsetting out, amongst other things, the SQUIRE Service Specifications, theSQUIRE Benchmarks and the Performance Points;

SQUIRE Service Schedules means the service schedules in the Schedule tothe SQUIRE Service Schedules Agreement;

SQUIRE Service Specification means the service specification set out atparagraph 1 in each of the SQUIRE Service Schedules;

Stakeholder means any relevant Rail Passenger's Committee and any relevantLocal Authority (excluding the SPTE or other passenger transport executive)provided that where the word Stakeholder is used in relation to a route, Flowor Service beginning and ending within the Passenger Transport Area, theLocal Authorities for the area through which that route, Flow or Servicepasses shall not, for those purposes, be treated as a Stakeholder);

Standard Class Accommodation means, in respect of any train or service,accommodation which is available to the purchaser of any Fare which, takinginto account any rights or restrictions relating to that Fare (other thanrestrictions relating to accommodation on that tram or service), entitles suchpurchaser to make a journey on that train or service (provided that anyaccommodation on such train which may have been reserved by suchpurchaser shall be deemed to have been made so available if, had it not beenso reserved, it would have been available for use by such purchaser);

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Station means any Authority Station, SPTE Station, New Station or any otherstation in respect of which the Franchisee has entered into a Station Lease, andin Schedule 7.2 (SQUIRE) and hi the SQUIRE Service Schedules Agreementreferences to a Station are only to those areas of the Station to which thepublic are granted access including those areas to which the public are grantedaccess in an emergency;

Station Charge Adjustment means any adjustment to payments under anAccess Agreement determined in accordance with paragraph 2 of Schedule 8.4(Track Access Adjustments and Station Charge Adjustments');

Station Condition Maintenance Programme has the meaning given to it inparagraph 4.1 of Schedule 4 (Franchise Facilities);

Station Lease means any lease:

(a) of a station set out in paragraph 4.1 of Appendix 2 (List of ConditionsPrecedent Documents') to the Conditions Precedent Agreement; or

(b) of any other station of which the Franchisee becomes the FacilityOwner at any time during the Franchise Period;

Station Service means (other than in Schedule 7.2 (SQUIRE) and the SQUIREService Schedules Agreement) any service specified in paragraph 3 ofSchedule 1.7 (Franchise Services) which may be provided by the Franchiseeat the Stations, and, in Schedule 7.2 and the SQUIRE Service SchedulesAgreement, means services provided by the Franchisee at Stations and thesleeper services as set out in SQUIRE Service Schedules 1 to 18,37 and 39 ;

Station Sublease means a lease or sub-lease of premises comprising part orparts of a Station exclusively occupied by another Train Operator;

Stop in Schedule 7.1 A (Train Running Incentive Regime) means, in relation toa Monitoring Point, the act of a train arriving at the station associated with theMonitoring Point where scheduled in the relevant timetable to stop to setdown passengers;

Strategy has the meaning given to it in Section 206 of the Transport Act;

Successor Operator means a Train Operator succeeding the Franchisee in theprovision or operation of all or any of the Franchise Services including, wherethe context so admits, the Franchisee where it is te continue to provide oroperate the Franchise Services following termination of the FranchiseAgreement;

Supplemental Agreement means a supplemental agreement between theFranchisee and a Successor Operator to be entered into pursuant to a TransferScheme, being substantially in the form of Appendix 2 (Form of SupplementalAgreement) to Schedule 15.4 (Provisions Applying on and after Termination),but subject to such amendments as the Authority may reasonably make thereto

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as a result of any change of law affecting such supplemental agreement orother change of circumstances between the date of the Franchise Agreementand the date on which the relevant Transfer Scheme is made and subjectfurther to paragraph 3.2 of Schedule 15.4;

Systems in Schedule 7.1 A (Train Running Incentive Regime) means theAuthority Systems and the Network Rail Systems;

Target Passenger Demand means:

(a) the greater of Actual Passenger Demand or Forecast PassengerDemand; or

(b) as directed by the Authority (with the agreement of the SPTE inrelation to passenger demand on SPTE Services), either:

(i) the lower of such levels of passenger demand; or

(ii) any intermediate level of passenger demand;

Target Performance Level means in relation to a Benchmark for anyReporting Period, the number set out in column 2 of the Benchmark Tablerelating to that Benchmark and in the row of that Table for the ReportingPeriod;

Target Revenue means, in relation to:

(a) any Franchisee Year, an amount equal to:

TRxRPI

where

TR is the amount specified as Target Revenue in Appendix 1(Target Revenue (expressed in real terms)) to Schedule 8.2(Annual Franchise Payments) or as revised in accordance withSchedule 9 (Changes); and

RFI has the meaning given to it in Schedule 8.2;

(b) any Reporting Period wholly within a Franchisee Year other than thefirst and last Franchisee Years, one thirteenth of the amountdetermined pursuant to paragraph (a) for that Franchisee Year;

(c) any Reporting Period wholly within the first or last Franchisee Year,the amount determined pursuant, to paragraph (a) for that FranchiseeYear divided by the number of Reporting Periods wholly within thatFranchisee Year; and

(d) any Reporting Period partly within 1 Franchisee Year and partly withinthe next Franchisee Year, an amount equal to:

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Where:

A is the amount determined pursuant to paragraphs (b) or (c) (asthe case may be) in respect of a Reporting Period wholly withinthe earlier Franchisee Year, multiplied by the following:

X_28

where:

X is the number of days of the Reporting Period that is inthe earlier Franchisee Year, and

B is the amount determined pursuant to paragraphs (b) or (c) (asthe case maybe) in respect of a Reporting Period wholly withinthe later Franchisee Year, multiplied by the following:

28

where:

Y is the number of days of the Reporting Period that is inthe later Franchisee Year;

Taxation means any kind of tax, duty, levy or other charge whether or notsimilar to any in force at the date of this Agreement and whether imposed by alocal, governmental or other competent authority in the United Kingdom orelsewhere;

Technical Support Contract means a contract for technical support to whichthe Franchisee is a party, relating to the rolling stock vehicles used in theprovision of the Passenger Services;

Termination Event has the meaning given to it in paragraphs ofSchedule 10.3 (Events of Default and Termination Event);

Termination Notice means a notice from the Authority to the Franchiseeterminating the Franchise Agreement following an Event of Default or aTermination Event in accordance with Schedule 10.2 (Termination);

Threshold Amount means in the First Franchisee Year £385,900, in theSecond Franchisee Year £385,900 and in each subsequent Franchisee Year0.1 % of the actual Turnover for the previous Franchisee Year;

Through Ticketing (Non-Travelaard) Agreement means the agreement ofthat name referred to in paragraph 5.5 of the Appendix (List of Transport

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Travel and Other Schemes) to Schedule 2.5 (Transport, Travel and OtherSchemes);

Ticketing and Settlement Agreement means the Ticketing and SettlementAgreement dated 23 July 1995 between RSP, the Franchisee and the otherTrain Operators named therein, as amended from time to time with theapproval of the Authority;

Timetable means the timetable which reflects the working timetable issued byNetwork Rail at the conclusion of its timetable development process,published by the Franchisee at the Stations and at other stations in accordancewith paragraphs 1 and 2 of Schedule 1.4 (Passenger Facing Obligations)containing the departure and arrival times of:

(a) all Passenger Services which call at such Stations and such otherstations; and

(b) principal Connections at such other stations;

Timetable Development Rights means all or any of the rights of theFranchisee under any Track Access Agreement to:

(a) operate Passenger Services and ancillary movements by virtue of thatTrack Access Agreement;

(b) deliver any required notification and/or declaration to Network Rail inrespect of its intention to exercise any rights;

(c) make or refrain from making any bids for Train Slots, in each casebefore any relevant priority dates provided for in, and in accordancewith, the Network Code;

(d) surrender any Train Slots allocated to the Franchisee by Network Railin accordance with the Network Code;

(e) object to, make representations, appeal or withhold consent in respectof any actual or proposed act or omission by Network Rail; and

(f) seek from Network Rail additional benefits as a condition to grantingany consent to any actual or proposed act or omission by NetworkRail;

Track Access Adjustment means any adjustment to payments under a TrackAccess Agreement determined in accordance with paragraph 1 of Schedule 8.4(Track Access Adjustments and Station Charge Adjustments);

Track Access Agreement means each Access Agreement between NetworkRail and the Franchisee which permits the Franchisee to provide the PassengerServices on track operated by Network Rail;

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Train in Schedule 7.2 (SQUIRE) and in the SQUIRE Service SchedulesAgreement means a train in service on SPTE Services or on AuthorityServices during a Reporting Period;

Train Fleet means the rolling stock vehicles specified in or required byAppendix 1 (The Train Fleet) to Schedule 1.1 (Service Development} and anyother rolling stock vehicles the Authority or the SPTE (as the case may be)consents to in accordance with paragraph 15 of Schedule 1.1 from time totime;

Train Mileage means, in relation to any period, the aggregate train mileagecovered during such period by each train used in the provision of thePassenger Services (excluding, any train mileage covered as a result ofpositioning or other movements of rolling stock vehicles outside theTimetable);

Train Operator means a franchisee or franchise operator, either of whichoperate railway passenger services pursuant to a franchise agreement or aPublic Sector Operator;

Train Plan means the plan of the Franchisee for the operation of trains andtrain formations under the Timetable in the agreed terms marked TP and anyother train plan developed in accordance with Schedule 1.1 except that whenused in Schedule 7.1 (Enforcement Benchmarks') it shall have the meaninggiven to it in paragraph 2.16 of Schedule 7.1;

Train Slots shall have the meaning given to it in the Network Code;

Transfer Scheme means a transfer scheme made by the Authority underSection-220 and Schedule 21 of the Transport Act (or equivalent statutoryprovision) pursuant to paragraph 3.1 of Schedule 15.4 (Provisions Applying onand after Termination), being substantially in the form of Appendix 1 (Formof Transfer Scheme) to Schedule 15.4 but subject to such amendments as-theAuthority may make thereto as a result of any change of Law affecting suchtransfer scheme or other change of circumstances between the date of theFranchise Agreement and the date on which such scheme is made;

Transport Act means the Transport Act 2000;

Travelcard Agreement means the agreement of that name referred to inparagraph 5.4 of the Appendix (List of Transport, Travel and Other Schemes')to Schedule 2.5 (Transport, Travel and Other Schemes);

Travdine means the telephone enquiry service providing information on allpublic transport across the United Kingdom;

Transport Direct means the scheme presently known by that name;

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TSI means any Technical Standard for Interoperability with which theFranchisee is required to comply pursuant to Directives EU 96/48 and EU2001/16 and related legislation;

Turnaround Time means the time specified in the Train Plan between thecompletion of a Passenger Service in accordance with the Timetable and thecommencement of the next Passenger Service in accordance with theTimetable on the same day using some or all of the same rolling stockvehicles;

Turnover means, in relation to any period, the aggregate revenue (excludingany applicable Value Added Tax) accruing to the Franchisee from the sale ofFares, the receipt of Franchise Payments, the receipt of payments underSchedule 7.1 A (Train Running Incentive Regime) and the receipt of paymentsunder Schedule 7.2 (SQUIRE) during such period;

Updated Business Plan means the revised business plan to be provided priorto the start of each Franchisee Year (other than the first Franchisee Year) inaccordance with paragraph 2.3 of Schedule 13.2 (Information);

Value means the Projected Revenue of a Fares Basket for any Fare Year;

Value Added Tax means value added tax as provided for in the Value AddedTax Act 1994;

Variation means a variation to the terms of the Franchise Agreement, theDefinitions Agreement and/or the SQUIRE Service Schedules Agreementpursuant to paragraph 1 of Schedule 19 (Other Provisions);

Vehicle means rolling stock vehicle used in the provision of the PassengerServices which is designed principally for the carriage of passengers(including any rolling stock vehicle which provides seating accommodationand catering facilities but excluding (except in relation to services fallingwithin Service Group H) any rolling stock vehicle which is designedprincipally for passengers to sleep in);

Weekday means any day other than a Saturday, a Sunday or a Bank Holiday;

Weekly Season Ticket means a Season Ticket Fare which is valid in StandardClass Accommodation from (and including) the day it first comes into effectuntil (but excluding) the day which falls 7 days after such day;

Working Day in Schedule 7.2 (SQUIRE) and in the SQUIRE ServiceSchedules Agreement means any of Monday to Friday inclusive but shall notinclude a Scottish public holiday nor, when considering the passage of dayssince an inspection, a re-inspection or the issuing of any notice or report inrespect of a Station pursuant to the provisions of Schedule 7.2, any day whichis a local public holiday in the Local Authority area in which the relevantStation is located;

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Young Person's Railcard means a Discount Card issued under the DiscountFare Scheme referred to hi paragraph 3.2 of the Appendix (List of Transport,Travel and Other Schemes) to Schedule 2.5 (Transport, Travel and OtherSchemes'); and

Zone means a zone set out in the map in Schedule 2 of the TravelcardAgreement on the date such agreement came into effect

4. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with thelaws of Scotland and the parties irrevocably agree to prorogate the exclusivejurisdiction of the Court of Session to settle any disputes which may arise outof or in connection with this Agreement, except as expressly set out in thisAgreement or in the Franchise Agreement. The jurisdiction of the SheriffCourts in Scotland is expressly excluded by the parties.

IN WITNESS whereof the parties hereto have executed this Agreement asfollows:-

Sealed with the Corporate Seal of the STRATEGIC RAIL AUTHORITY

At

On the day of 2004

By

Name (printed)

Before this witness:-

Witness

Full Name

Address

Sealed with the Common Seal of

STRATHCLYDE PASSENGER TRANSPORT

EXECUTIVE and signed for it and on its behalf

At

On the day of 2004

By

Page 63 of £5


Name (printed)

Before this witness:-

Witness

Full Name

Address

Signed for and on behalf of FIRST SCOTRAIL LIMITED

At

On the day of 2004

By

Director

Name (Printed)

in the presence of

Witness

Name

Address

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