1. CALCULATION OF PAYMENT

1.1. On termination of this Contract pursuant to

1.1.1. Clause 65 (Termination for Authority Default);

1.1.2. Clause 73 (Voluntary Termination by the Authority); or

1.1.3. Clause 74A (Termination on an Authority Break Point Date),

the Authority shall pay the Contractor the "Authority Default Termination Sum" in accordance with paragraph 4 (Method of Payment of Compensation on Termination) of Part 7 (General) of this Schedule 17 (Compensation on Termination).

1.2. Subject to paragraphs 1.4 to 1.6 below, the Authority Default Termination Sum shall be an amount equal to the aggregate of:

1.2.1. the Base Senior Debt Termination Amount;

1.2.2. redundancy payments for employees of the Contractor that have been or will be reasonably incurred by the Contractor as a direct result of termination of this Contract and any Sub-Contractor Breakage Costs; and

1.2.3. either:106

[an amount which when taken together with:

(a) dividends (or other distributions) paid by the Contractor on its share capital on or before the Termination Date;

(b) interest paid and principal repaid by the Contractor under the Subordinated Financing Agreements on or before the Termination Date,107

taking account of the actual timing of all such payments, gives a real internal rate of return on the share capital subscribed and amounts advanced under the Subordinated Financing Agreements equal to the Base Case Equity IRR;]

[the aggregate amount for which the share capital of the Contractor and the amounts outstanding under the Subordinated Financing Agreements could have been sold on an open market basis based on the Relevant Assumptions];108

109[all amounts shown in the Base Case as payable by the Contractor from the Termination Date, either in dividends or other distributions on the share capital of the Contractor or as payments of interest or repayments of principal made by the Contractor under the Subordinated Financing Agreements, each amount discounted back at the Base Case Equity IRR from the date on which it is shown to be payable in the Base Case to the Termination Date].

1.3. On payment of the amount referred to in paragraph 1.1 above, the Authority shall have the option to require the Contractor to transfer its right, title and interest in and to the Assets to the Authority or as directed by the Authority in accordance with Clause 80 (Consequences of Termination or Expiry).

1.4. If the aggregate of the amounts referred to in paragraph 1.2.1 and paragraph 1.2.3 is less than the Revised Senior Debt Termination Amount, then the Authority Default Termination Sum shall be increased so that it is equal to the aggregate of the Revised Senior Debt Termination Amount and the amount referred to in paragraph 1.2.2 provided always that:

1.4.1. the amount referred to in paragraph 1.2.2 shall only be paid to the extent that the Contractor has demonstrated to the reasonable satisfaction of the Authority that the amount will not be paid in payment (in whole or in part) of any Distribution; and

1.4.2. if, at the time of termination, there are any Additional Permitted Borrowings outstanding, no Sub-Contractor Breakage Costs shall be paid in respect of any Sub-Contract in circumstances where there is an event of default under such Sub-Contract which would entitle the Contractor to terminate such Sub-Contract.

1.5. If a Distribution is made whilst any Additional Permitted Borrowing is outstanding and the Contractor has wilfully, or through gross negligence, failed to comply with its obligations under paragraph 11.4 of the Direct Agreement then in addition to the deduction of the Distribution referred to in paragraph (v) of the definition of Revised Senior Debt Termination Amount, the Authority shall be entitled to set off the value of that Distribution a second time against the Authority Default Termination Sum, provided that the amount of the Authority Default Termination Sum will never be less than the Revised Senior Debt Termination Amount.

1.6. If the Contractor has wilfully or through gross negligence failed to comply with its obligations under paragraph 11.4 of the Direct Agreement and there has been an overstatement of the cash balances by the Contractor as at that date which has caused the Authority to reasonably believe that it would be required to pay a lesser sum at the Termination Date than it actually is required to pay under the terms of this paragraph 1, then the Authority Default Termination Sum shall be reduced by the amount of such overstatement (to the extent such overstatement is still applicable at the Termination Date), provided that the amount of the Authority Default Termination Sum will never be less than the Revised Senior Debt Termination Amount.

1.7. Upon termination of this Contract under Clause 74A.4 (Termination on an Authority Break Point Date), the Authority shall pay the Contractor, in accordance with Clause 77 (Calculation and Payment of Early Termination Payments),110 an amount equal to the amount payable under paragraphs 1.1 and 1.2 above, save that in calculating such amount, the amount specified in paragraph 1.2.3 of this Part 2 of this Schedule 17 (Compensation on Termination) shall be substituted by:

(a) [in the case of termination on the first Authority Break Point Date,] £[ ]; [or]

(b) [in the case of termination on the second Authority Break Point Date, £[ ];]111

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106 Bidders to nominate which one of the options should apply.

107 These amounts will take into account the initial investments of the shareholders.

108 Where the market value option is selected in cases where Third Party Income over and above levels provided in the Base Case may accrue, Authorities should cap the level of Third Party Income (see definition of Relevant Assumption).

109 If a refinancing occurs then adding this figure to Senior Debt could give rise to an element of double counting. To the extent a refinancing is possible or likely this point will have to be addressed.

110 Where Authority Break Points are included in the Contract, Authorities should also include the provisions set out in Section 22.5 (Method of Payment) of SoPC4 to allow the Authority to elect to pay the Base Senior Debt Termination Amount or the Revised Senior Debt Termination Amount in instalments. The application of the provisions may be limited to termination on Authority Break Point Dates. Authorities should, at the time of termination, consider whether this would provide value for money.

111 Provisions to be included for each relevant Authority Break Point Date.