Version 40.0 x FOIA 2000 Public Register Copy Dated 1 March 2002 (1) THE STRATEGIC RAIL AUTHORITY and (2) M40 TRAINS LIMITED and (3) THE CHILTERN RAILWAY COMPANY LIMITED FRANCHISE AGREEMENT relating to the services for the carriage of passengers by railway to be provided by THE CHILTERN RAILWAY COMPANY LIMITED Strategic Rail Authority 55 Victoria Street London SW1H 0EU FRANCHISE AGREEMENT – PAGE 1 M40/CHILTERN Version 40.0 x FOIA 2000 Public Register Copy CONTENTS Clause Page PART I — PRELIMINARY 1. DEFINITIONS AND INTERPRETATION PAGE 1 1.1 Definitions 1.2 Construction and Interpretation PAGE 32 2. CONDITIONS PRECEDENT PAGE 33 2.1 Entry into Effect PAGE 33 2.2 Conditions Precedent PAGE 33 2.3 [Intentionally not used] PAGE 36 2.4 Consequences of non-fulfilment PAGE 36 3. WARRANTY PAGE 36 3.1 Franchise replacement process PAGE 36 3.2 Updating of warranty PAGE 36 3.3 Exceptions PAGE 37 PART II — OPERATION OF THE FRANCHISE PAGE 1 4. THE FRANCHISEE PAGE 1 5. PASSENGER SERVICE REQUIREMENT PAGE 1 5.1 Preparation of Timetable and Train Plan PAGE 1 5.2 Notification to the Authority PAGE 2 5.3 Compliance with Timetable and Train Plan PAGE 6 5.4 Force Majeure PAGE 7 5.5 Closures PAGE 10 5.6 INTENTIONALLY NOT USED PAGE 11 5.7 Safety PAGE 11 5.8 Targets and Performance Reviews PAGE 11 5.9 Permitted subcontracting PAGE11 6. PROVISION OF CAPACITY PAGE 12 6.1 General provision of capacity PAGE 12 6.2 Passenger Counts PAGE 13 6.3 Non-applicability PAGE 14 6.4 Load Factor Specifications PAGE 14 6.5 Preliminary statement PAGE 14 6.6 Feasibility Study PAGE 16 6.7 Implementation PAGE 16 6.8 Rolling Stock Capacities PAGE 16 6.9 Other Train Operators PAGE 17 7. THE TIMETABLE PAGE 17 7.1 Publication of Timetable PAGE 17 7.2 Notification of revisions to Timetable PAGE 19 8. PASSENGERS PAGE 19 8.1 Passenger’s Charter PAGE 19 8.2 Disruptions to Passenger Services PAGE 21 8.3 Bicycles PAGE 22 8.4 National Passenger Surveys PAGE 22 9. FARES AND FARE SCHEMES PAGE 29 9.1 Fare Regulation PAGE 29 9.2 Reduced Fares for Children PAGE 29 9.3 Agents of the Franchise Operator PAGE 29 FRANCHISE AGREEMENT – PAGE 2 M40/CHILTERN Version 40.0 x FOIA 2000 Public Register Copy 9.4 Local Authority Concessionary Travel Schemes PAGE 29 9.5 Local Authority Multi-modal Schemes PAGE 30 9.6 Discount Fare Schemes PAGE 30 9.7 Inter-Operator Schemes PAGE 31 9.8 Value Added Tax PAGE 31 10. STATIONS AND DEPOTS PAGE 31 10.1 Closures PAGE 31 10.2 Station and Depot Leases PAGE 31 10.3 Station standards PAGE 32 10.4 Derogation PAGE 33 10.5 Rail Passenger’s Committees PAGE 33 10.6 Statutory notices PAGE 33 10.7 Double arrow symbol PAGE 33 11. PSR/ASC CHANGES PAGE 34 11.1 Proposals for PSR/ASC Changes PAGE 34 11.2 Consideration of proposals PAGE 34 11.3 Sharing of Net Gain PAGE 35 11.4 Certain proposals to be accepted PAGE 35 11.5 Implementation of PSR/ASC Changes PAGE 36 11.6 Further investment or improvement or alteration PAGE 37 12. INDUSTRY ARRANGEMENTS PAGE 37 12.1 Inter-Operator Schemes PAGE 37 12.2 Licences PAGE 37 12.3 Access Agreements and LUL Agreements PAGE 37 12.4 Property Leases PAGE 39 12.5 Station Subleases PAGE 41 12.6 Rolling Stock Related Contracts PAGE 41 12.7 Output Plan Related Contracts PAGE 42 12.8 The Authority’s Consent PAGE 43 12.9 Brand Licences PAGE 43 12.10 Other Franchise Operators PAGE 43 12.11 Direct agreements PAGE 44 12.12 Royal Train PAGE 44 12.13 Disputes PAGE 44 12.14 Major Projects PAGE 45 12.15 Specified IOS Projects PAGE 46 12.16 Rolling Stock Testing and Commissioning PAGE 48 12.17 Integrated transport schemes PAGE 48 13. PENSIONS PAGE 49 13.1 Franchise Sections PAGE 49 13.2 Restrictions on Membership PAGE 49 13.3 Closed Schemes PAGE 49 13.4 Variations in benefits PAGE 49 13.5 Initial Transfer Value PAGE 50 13.6 Discharge of obligations PAGE 50 14. OTHER COVENANTS PAGE 51 14.1 Franchise Plan and Output Plan PAGE 51 14.2 Financial Covenants PAGE 51 14.3 Performance Bond PAGE 51 14.4 Season Ticket Bond PAGE 53 14.5 Supplier Accreditation PAGE 55 15. MONITORING AND PROVISION OF INFORMATION PAGE 56 15.1 Maintenance of records PAGE 56 15.2 Provision of accounts PAGE 56 15.3 Annual Business Plan PAGE 57 15.4 Provision of registered details PAGE 58 FRANCHISE AGREEMENT – PAGE 3 M40/CHILTERN Version 40.0 x FOIA 2000 Public Register Copy 15.5 Changes in business PAGE 59 15.6 Contraventions of Franchise Agreement PAGE 59 15.7 Passenger statistics PAGE 59 15.8 Quarterly review meetings PAGE 60 15.9 Further information PAGE 60 15.10 Right of audit or inspection PAGE 60 15.11 Access to third parties PAGE 61 15.12 Compatibility of information systems PAGE 61 15.13 Franchise Operator Year PAGE 62 PART III — FINANCIAL PROVISIONS PAGE 1 16. FRANCHISE PAYMENTS PAGE 1 16.1 Franchise Payments PAGE 1 16.2 Set-off 17. INCENTIVE PAYMENTS PAGE 1 18. FINANCIAL REVIEW PAGE 1 18.1 Track access and station charging reviews PAGE 1 18.2 [Intentionally not used] PAGE 5 18.3 Change of Law Review PAGE 5 19. FRANCHISE VIABILITY PAGE 7 19.1 Threat to viability of franchise PAGE 7 19.2 Review of terms of Franchise Agreement PAGE 7 19.3 Acceptance of offer PAGE 7 PART IV — TERM AND TERMINATION PAGE 1 20. FRANCHISE TERM PAGE 1 20.1 Expiry of term PAGE 1 20.2 Extension of term PAGE 1 20.3 Financial arrangements PAGE 1 20.4 Amendment of Term PAGE 2 21. EVENTS OF DEFAULT PAGE 3 21.1 Insolvency PAGE 3 21.2 Change of Control PAGE 3 21.3Revocation of Licence PAGE 4 21.4 Breach of Law PAGE 4 21.5 Breach of Passenger Service Requirement PAGE 5 21.6 Non-membership of Inter-Operator Schemes PAGE 5 21.7 Ceasing to provide Passenger Services PAGE 5 21.8 Bonds and Liquidity Maintenance PAGE 5 21.9 Key Contracts PAGE 5 21.10 Enforcement orders PAGE 5 21.11 Other Franchises PAGE 6 21.12 Safety Case PAGE 6 21.13 Franchise Default Milestones PAGE 6 21.14 Non-payment under the Implementation Agreement PAGE 6 21.15 Funder’s Direct Agreement PAGE 6 21.16 Breach of other obligations PAGE 6 22. CONSEQUENCES OF EVENTS OF DEFAULT PAGE 6 22.1 Notification of Event of Default PAGE 6 22.2 Termination PAGE 6 23. CONSEQUENCES OF TERMINATION PAGE 7 PART V — OBLIGATIONS ASSOCIATED WITH CHANGE OF FRANCHISE OPERATOR PAGE 1 24. RELETTING OF FRANCHISE PAGE 1 FRANCHISE AGREEMENT – PAGE 4 M40/CHILTERN Version 40.0 x FOIA 2000 Public Register Copy 25. MAINTENANCE OF FRANCHISE PAGE 1 25.1 Maintenance as going concern PAGE 1 25.2 Handover packages PAGE 2 25.3 Preparation for reletting PAGE 3 25.4 Non-frustration of transfer PAGE 4 25.5 Arrangements with Affiliates PAGE 4 25.6 Last twelve months of Franchise Period PAGE 4 26. RESTRICTIONS ON ACTIVITIES PAGE 5 26.1 Affiliates of Franchise Operator PAGE 5 26.2 Restrictions on Franchise Operator PAGE 5 26.3 Specific restrictions PAGE 6 26.4 Employees PAGE 6 27. KEY CONTRACTS PAGE 6 27.1 Key Contracts PAGE 6 27.2 No amendment PAGE 6 27.3 Designation PAGE 7 27.4 Notification of categories of Key Contracts PAGE 7 27.5 Designation of existing Contracts PAGE 7 27.6 Emergencies PAGE 7 27.7 De-designation of Key Contracts PAGE 7 27.8 Amendments to Schedule 11 PAGE 8 27.9 Replacement of Key Contracts PAGE 8 28. [INTENTIONALLY NOT USED] PAGE 8 29. FRANCHISE EMPLOYEES PAGE 8 29.1 Terms of employment of existing employees PAGE 8 29.2 Terms of employment of new employees PAGE 9 29.3 Changes in numbers and total cost of employees PAGE 9 30. FARES PAGE 10 30.1 Period of validity of Fares PAGE 10 30.2 Reduction in Prices of Fares PAGE 10 30.3 Percentage allocations PAGE 10 31. INTER-OPERATOR SCHEMES PAGE 11 31.1 Voting on scheme councils PAGE 11 31.2 Successor Operator PAGE 11 32. FRANCHISE ASSETS PAGE 11 32.1 Designation as Franchise Assets PAGE 11 32.2 Designation as Primary Franchise Assets PAGE 12 32.3 Consent of Authority to certain transactions PAGE 12 32.4 Security interests PAGE 13 32.5 Designation of additional property, rights and liabilities PAGE 13 32.6 Designation at expiry of Franchise Period PAGE 14 32.7 Maintenance of Primary Franchise Assets PAGE 15 32.8 Specified Franchise Assets PAGE 15 32.9 Designation of Key Contracts PAGE 16 32.10 Designation of Fares and Discount Cards PAGE 16 32.11 Rights and liabilities PAGE 16 32.12 Provision of information to the Authority PAGE 17 32.13 De-Designation PAGE 17 32.14 Implementation Agreement PAGE 17 33. SPARES PAGE 18 33.1 Maintenance of spares PAGE 18 33.2 Franchise Assets PAGE 18 33.3 Designation and De-designation of Spares Contracts PAGE 19 34. INTELLECTUAL PROPERTY PAGE 19 FRANCHISE AGREEMENT – PAGE 5 M40/CHILTERN Version 40.0 x FOIA 2000 Public Register Copy 34.1 Franchise Operator’s Intellectual Property PAGE 19 34.2 Intellectual Property Franchise Assets PAGE 20 34.3 Branding PAGE 21 34.4 Non-designation of new brands PAGE 22 35. TRANSFER OF PRIMARY FRANCHISE ASSETS PAGE 22 35.1 Option Arrangements PAGE 22 35.2 Supplemental Agreement PAGE 23 35.3 Payment of estimated transfer price and the Estimated RVA PAGE 23 35.4 Possession of Franchise Assets PAGE 24 36. ASSOCIATED OBLIGATIONS ON TERMINATION PAGE 25 36.1 Assistance in securing continuity PAGE 25 36.2 Access PAGE 25 36.3 Key Contracts PAGE 25 36.4 Change of Name PAGE 26 PART VI — GENERAL PROVISIONS PAGE 1 37. COMPLIANCE WITH LAWS PAGE 1 38. EXCLUSION OF LIABILITY PAGE 1 38.1 Liability with respect to Passengers and Third Parties PAGE1 38.2 Liability of the Authority PAGE 1 38.3 Entire Agreement PAGE 1 38.4 Liability in relation to projects PAGE 2 39. CONFIDENTIALITY PAGE 2 39.1 Confidentiality PAGE 2 39.2 Disclosure of Confidential Information PAGE 2 39.3 Publication of certain information PAGE 3 39.4 Publication by the Authority PAGE 5 39.5 Provision of information to Regulator PAGE 5 39.6 Disclosure by Comptroller and Auditor General PAGE 5 39.7 Continuing Obligation PAGE 5 40. NOTICES PAGE 5 40.1 Notices PAGE 5 40.2 Deemed Receipt PAGE 6 41. ASSIGNMENT PAGE 6 42. DELEGATION PAGE 6 43. SETTLEMENT OF DISPUTES PAGE 6 44. MISCELLANEOUS PROVISIONS PAGE 7 44.1 Variations in Writing PAGE 7 44.2 Waivers PAGE 7 44.3 Disregard Tolerances PAGE 7 44.4 Change of Framework PAGE 8 44.5 Time Limits PAGE 10 44.6 Payments to be Free and Clear PAGE 10 44.7 Partial Invalidity PAGE 10 44.8 Further Assurance PAGE 10 44.9 Rights of Third Parties PAGE 10 44.10 Relationship with Previous Franchise Agreement PAGE 11 44.11 Authority’s consent or approval PAGE 12 45. GOVERNING LAW PAGE 12 SCHEDULE 1 - CONDITIONS PRECEDENT AND OTHER DOCUMENTS PAGE 1 PART 1 — LICENCES PAGE 1 PART 2 — ACCESS AGREEMENTS PAGE 1 FRANCHISE AGREEMENT – PAGE 6 M40/CHILTERN Version 40.0 x FOIA 2000 Public Register Copy PART 2A — LUL AGREEMENTS PAGE 1 PART 3(A) — INTER-OPERATOR SCHEMES PAGE 1 PART 3(B) — DISCOUNT FARE SCHEMES PAGE 2 PART 4 — PROPERTY LEASES PAGE 2 PART 5 — ROLLING STOCK LEASES PAGE 3 PART 6 — BRAND LICENCES PAGE 4 PART 7 — LOCAL AUTHORITY SCHEMES PAGE 4 PART 8 - MAJOR PROJECTS PAGE 4 PART 9 - SPECIFIED IOS PROJECTS PAGE 5 SCHEDULE 2 — FRANCHISE SERVICES (CLAUSE 26 AND OTHERS) PAGE 1 PART 1 — PASSENGER SERVICES PAGE 1 PART 2 — STATION SERVICES PAGE 1 PART 3 — LIGHT MAINTENANCE SERVICES PAGE 2 PART 4 — ANCILLARY SERVICES PAGE 3 SCHEDULE 3 — PASSENGER SERVICE REQUIREMENT PAGE 1 PART 1 — PASSENGER SERVICE REQUIREMENT (CLAUSE 5.1) PAGE 1 TO PAGE 23 PART 2A — CANCELLATIONS, CAPACITY AND PPM THRESHOLDS - ACROSS ALL PASSENGER SERVICES (CLAUSES 5.3 AND 21.7) PAGE 24 PART 3 – LOAD FACTOR SPECIFICATIONS (CLAUSE 6) PAGE 24 PART 4 — CAPACITY LIMITS (CLAUSE 6) PAGE 25 PART 5 — INITIAL NUMBER OF VEHICLES (CLAUSE 6) PAGE 25 PART 6 – ADDITIONAL SERVICE COMMITMENT PAGE 25 SCHEDULE 4 — STATION STANDARDS (CLAUSE 10.3) PAGE 1 SCHEDULE 5 — FARES (CLAUSE 9.1) PAGE 1 PART 1 — DEFINITIONS AND CONSTRUCTION PAGE 1 PART 2 — FARE REGULATION PAGE 7 PART 3 — FARE BASKET PAGE 15 PART 4 - VALUES OF B, J, N AND V AND RPI PAGE 16 SCHEDULE 6 — FRANCHISE PAYMENTS PAGE 1 PART 1 — DEFINITIONS PAGE 1 PART 2 — FRANCHISE PAYMENTS PAGE 2 PART 3 — ANNUAL FRANCHISE PAYMENTS PAGE 19 PART 4 - ANNUAL BENEFIT SHARE PAGE 22 SCHEDULE 7 — INCENTIVE REGIME (CLAUSE 17) PAGE 1 PART 1 — DEFINITIONS AND CONSTRUCTION PAGE 1 PART 2 — DETERMINATION OF INCENTIVE PAYMENT PAGE 5 PART 3 — SYSTEMS AND PAYMENT PAGE 20 FRANCHISE AGREEMENT – PAGE 7 M40/CHILTERN Version 40.0 x FOIA 2000 Public Register Copy PART 4 – SERVICE GROUPS PAGE 26 SCHEDULE 8 — FRANCHISE RECORDS (CLAUSES 15.1 AND 15.2) PAGE 1 PART 1 — FINANCIAL AND PLANNING INFORMATION PAGE 1 PART 2 — KEY ASSETS PAGE 1 PART 3 — OPERATIONAL INFORMATION PAGE 1 PART 4 — REPORTING ACCOUNTS PAGE 4 PART 5 - PASSENGER JOURNEYS, MILES AND EARNINGS INFORMATION PAGE 4 SCHEDULE 9 — CHANGE ASSESSMENT PROCEDURES AND ACCOUNTING (CLAUSES 6, 9.4, 9.5, 9.6, 9.7, 9.8, 11, 12.14, 12.17, 14.2, 18.1, 18.3, 25.3, 44.4, SCHEDULES 5 AND 13 AND, WHERE APPLICABLE, ANY OUTPUT PLAN) PAGE 1 PART 1 — NO NET LOSS AND NO NET GAIN REGIME PAGE 1 PART 2 — FEASIBILITY STUDY AND IMPLEMENTATION PLAN PAGE 11 SCHEDULE 10 — FINANCIAL COVENANTS (CLAUSE 14.2) PAGE 1 PART 1 — LIQUIDITY MAINTENANCE PAGE 1 PART 2 — OTHER OBLIGATIONS PAGE 5 SCHEDULE 11 — FRANCHISE ASSETS AND KEY CONTRACTS PAGE 1 PART 1 — PRIMARY FRANCHISE ASSETS (CLAUSE 32.2(A)) PAGE 1 PART 2 – SPECIFIED FRANCHISE ASSETS (CLAUSE 32.8) PAGE 2 PART 3 – KEY CONTRACTS (CLAUSE 27) PAGE 3 SCHEDULE 12 — HANDOVER PACKAGES (CLAUSE 25.2) PAGE 1 SCHEDULE 13 —FRANCHISE PLAN (CLAUSE 14.1) PAGE 1 PART 1 - PRELIMINARY PAGE 1 PART 2 – PASSENGER SERVICES PAGE 6 PART 3 – ADDITIONAL TRANSPORT SERVICES PAGE 7 PART 4 – CUSTOMER SERVICES PAGE14 PART 5 – OTHER COMMITTED OUTPUTS PAGE 37 PART 6 – GENERAL PAGE 40 SCHEDULE 14 - PASSENGER SERVICE OUTPUT PLANS AND UPDATES (CLAUSE 14.1) PAGE 1 PART 1 - DEFINITIONS PAGE 1 PART 2 - OUTPUT COMMITMENTS PAGE 8 PART 3 - OUTPUT ASPIRATIONS PAGE 9 PART 4 - PASSENGER SERVICE OUTPUT UPDATES PAGE 12 PART 5 - TERMINATION PAYMENTS PAGE 20 PART 6 - MEDIATOR PAGE 24 PART 7 - PANEL PAGE 24 PART 8 SPECIAL OUTPUT REVIEW PAGE 32 SCHEDULE 15 - TARGETS AND PERFORMANCE REVIEWS PAGE 1 FRANCHISE AGREEMENT – PAGE 8 M40/CHILTERN Version 40.0 x FOIA 2000 Public Register Copy PART 1 - DEFINITIONS PAGE 1 PART 2 – OPERATION OF TARGETS AND PERFORMANCE REVIEW PROVISIONS PAGE 3 PART 3 – TARGETS PAGE 9 FRANCHISE AGREEMENT – PAGE 9 M40/CHILTERN Version 40.0 x FOIA 2000 Public Register Copy This Franchise Agreement is made the day of 2002 between: (1) The Strategic Rail Authority appointed under section 201 of the Transport Act 2000 (the Authority”); and and (2) M40 Trains Limited whose registered number is 3005018 and registered office is at 1 Admiral Way, Doxford International Business Park, Sunderland, SR3 3XP (the “Franchisee”); 1 2 (3) The Chiltern Railway Company Limited whose registered number is 3007939 and registered office is at 1 Admiral Way, Doxford International Business Park, Sunderland, SR3 3XP (the “Franchise Operator”).3 4 Whereas: (A) The Franchisee made a proposal on 5 May 2000 to the Authority to replace the franchise relating to certain services for the carriage of passengers by railway which are currently operated by the Franchise Operator. (B) Pursuant to section 23(1) of the Railways Act 1993 the Authority designated on 5 February 2002 such services as eligible for provision under franchise agreements. (C) The Secretary of State issued a direction under section 26(1) of the Act on 9 August 2000 that the Franchisee who is to be the franchisee under the franchise agreement relating to such services did not need to be selected from among those who submit tenders in response to an invitation to tender. (D) The Franchise Operator is a wholly-owned subsidiary of the Franchisee. (E) The parties have agreed terms on which the Franchise Operator will provide such services and wish to record their agreement. Now therefore it is hereby agreed as follows: Part I — Preliminary 1 Definitions and Interpretation 1.1 Definitions In this Franchise Agreement, except to the extent the context otherwise requires: “Access Agreement” has the meaning ascribed to the term “access agreement” in section 83(1) of the Act. 5"Acceptance Date" has the meaning ascribed to it in the Co-ordination Agreement; “Acquired Fixed Assets” has the meaning ascribed to that term in the Funder’s Direct Agreement. 1 Date of change 13/09/2010 2 Date of change 10/04/2014 3 Date of change 13/09/2010 4 Date of change 10/04/2014 5 Date of new Insertion DOA 2004 FRANCHISE AGREEMENT – PAGE 10 PART 1 M40/CHILTERN