1 Definitions

In each section of this Schedule 22 the following expressions (in addition to those specified in Schedule 1 (Definitions and Interpretations)) shall, save where the context or the express provisions of this Agreement otherwise requires or admits, have the following meanings:

Adjusted Estimated Fair Value of this Agreement means the Estimated Fair Value of this Agreement, less an amount equal to the aggregate of:

(a) where relevant, any Post Termination Service Amount paid to the Service Provider (if a positive number);

(b) the Tender Costs; and

plus an amount equal to the aggregate of:

(i) all credit balances on any bank accounts held by or on behalf of the Service Provider on the date that the Estimated Fair Value of this Agreement is calculated;

(ii) any insurance proceeds and other amounts owing to the Service Provider (and which the Service Provider is entitled to retain), to the extent not included in (i); and

(iii) the Post Termination Service Amount (if a negative number),

to the extent that:

(A) (i), (ii) and (iii) have not been directly taken into account in calculating the Estimated Fair Value of this Agreement; and

(B) the Authority has received such amounts in accordance with this Agreement

Base Case Equity IRR means [♦] per cent ([♦]%)

Compensation Date means either:

(a) if paragraph 2 of Part 3 (Compensation following Service Provider Default) of this Schedule 22 applies, the earlier of:

(i) the date that the New Contract is entered into; and

(ii) the date on which the Authority pays the Adjusted Highest Compliant Tender Price to the Service Provider; or

(b) if paragraph 3 of Part 3 (Compensation following Service Provider Default) of this Schedule 22 applies, the date that the Adjusted Estimated Fair Value of this Agreement has been agreed or determined

Compliant Tender means any tender submitted by a Compliant Tenderer that meets the Qualification Criteria notified under paragraph 2.1(c) of Part 3 (Compensation following Service Provider Default) of this Schedule 22

Compliant Tenderer means a tenderer who is a Suitable Substitute Service Provider

Deemed New Contract means an agreement on the same terms and conditions as this Agreement as at the Termination Date, but with the following amendments

(a) if this Agreement is terminated prior to the Actual Completion Date, then the Planned Service Commencement Date shall be extended by such period as would have been granted to allow a New Service Provider to achieve completion of the Works;

(b) any accrued Service Failure Points shall, for the purposes of termination only and without prejudice to the rights of the Authority to make financial deductions, be cancelled; and

Estimated Fair Value of this Agreement means the amount determined in accordance with paragraph 3 of Part 3 (Compensation following Service Provider Default) of this Schedule 22 that a third party would pay to the Authority as the market value of the Deemed New Contract

Fair Value means the amount at which an asset or liability could be exchanged in an arm's length transaction between informed and willing parties, other than in a forced sale or liquidation

Force Majeure Termination Sum means the sum calculated in accordance with paragraph 1.2 of Part 5 (Compensation following a Force Majeure Event or Uninsurability) of this Schedule 22 as the same may be adjusted in accordance with paragraphs 1.4 to 1.6 (inclusive) of Part 5 (Compensation following a Force Majeure Event or Uninsurability) of this Schedule 22

Highest Compliant Tender Price means the price offered by the Compliant Tenderer (if any) with the highest tender price and, if no Compliant Tenders are received, zero

Instalment Dates shall have the meaning given to it in paragraph 4.2(a) of Part 7 (General) of this Schedule 22

Junior Debt means all amounts outstanding at the Termination Date under the Subordinated Financing Agreements

Liquid Market means that there are sufficient willing parties (being at least two parties each of whom is capable of being a Suitable Substitute Service Provider) in the market for PFI contracts or similar contracts for the provision of services (in each case the same as or similar to this Agreement) for the price that is likely to be achieved through a tender to be a reliable indicator of Fair Value provided always that any vehicle controlled and established by the Senior Lenders specifically for the purposes of this Project and to which this Agreement may be novated shall be discounted in assessing whether there are sufficient willing parties in the market for such purposes

Market Value Availability Deduction Amount means for any month or part of a month, an amount equal to the Unavailability Deductions that was made to the Service Payment under the Payment Mechanism in the month immediately preceding the Termination Date, less an amount equal to any Unavailability Deduction that was made for [available place] which was Unavailable at the Termination Date but which has subsequently become Available whether as a result of the Authority incurring Rectification Costs or otherwise

Maximum Service Payment means, in respect of a month, the Service Payment payable during that month before any deductions under the Payment Mechanism but allowing for indexation under [clause 2.15 (Interpretation)] [the Payment Mechanism]

New Contract means an agreement on the same terms and conditions as this Agreement at the Termination Date, but with the following amendments

(a) if this Agreement is terminated prior to the Actual Completion Date, then the relevant Planned Service Commencement Dates shall be extended by a period to allow a New Service Provider to achieve completion of the Works;

(b) any accrued Service Failure Points and/or Warning Notices shall, for the purposes of termination only and without prejudice to the rights of the Authority to make financial deductions, be cancelled;

(d) any other amendments which do not adversely affect the Service Provider

New Service Provider means the person who has entered or who will enter into the New Contract with the Authority

Notice Date means the later of the Termination Date and (if applicable) the date that the Adjusted Estimated Fair Value of this Agreement is agreed between the parties pursuant to paragraph 3 of Part 3 (Compensation following Service Provider Default) of this Schedule 22

Outstanding Principal means the principal amount outstanding at the Termination Date of each borrowing (other than any borrowing under any equity bridge facility) under the [Senior Credit Agreement]

Post Termination Service Amount means for the purposes of paragraph 2 of Part 3 (Compensation following Service Provider Default) of this Schedule 22, for the whole or any part of a Month for the period from the Termination Date to the Compensation Date, an amount equal to the Maximum Service Payment which would have been payable in that month under this Agreement had this Agreement not been terminated, less an amount equal to the aggregate of:

(a) the Market Value Availability Deduction Amount for that month;

(b) the Rectification Costs incurred by the Authority in that month; and

Rectification Costs means for the purposes of any Termination Date that occurs during the Service Period, an amount equal to the reasonable and proper costs incurred by the Authority in a particular month or part of a month in ensuring that the Services are delivered

Relevant Assumptions means the assumptions that the sale of the Service Provider is on the basis that there is no default by the Authority, that the sale is on a going concern basis, that no restrictions exist on the transfer of share capital, that no Additional Permitted Borrowing has taken place and therefore that the effect of the Additional Permitted Borrowing on the calculation of such amount is disregarded but that otherwise the actual state of affairs of the Service Provider and the Project is taken into account

Senior Credit Agreement means [♦]1 as at the date of this Contract or as amended with the prior written approval of the Authority pursuant to clause 3.4 (No Increased Liability).

Senior Debt Rate means [the non-default interest rate as defined in the Senior Financing Agreement] or such lower rate as the parties may agree

Sub-Contractor Breakage Costs means Losses that have been or will be reasonably and properly incurred by the Service Provider as a direct result of the termination of this Agreement but only to the extent that:

(a) the Losses are incurred in connection with the Project and in respect of the provision of Services or the completion of Works including:

(i) any materials or goods ordered or Sub-Contracts placed into that cannot be cancelled without such Losses being incurred;

(ii) any expenditure incurred in anticipation of the provision of services or the completion of works in the future;

(iii) the cost of demobilisation including the cost of any relocation of equipment used in connection with the Project; and

(iv) redundancy payments;

(b) the Losses are incurred under arrangements and/or agreements that are consistent with terms that have been entered into in the ordinary course of business and on reasonable commercial terms [and [ ]2; and

Suitable Substitute Service Provider means a person approved by the Authority (such approval not to be unreasonably withheld or delayed) as:

(a) having the legal capacity, power and Authority to become a party to and perform the obligations of the Service Provider under this Agreement; and

(b) employing persons having the appropriate qualifications, experience and technical competence and having the resources available to it (including committed financial resources and sub-contracts) which are sufficient to enable it to perform the obligations of the Service Provider under this Agreement

Tender Costs means the reasonable and proper costs of the Authority incurred in carrying out the Tender Process and/or in connection with any calculation of the Estimated Fair Value of this Agreement

Tender Process means the process by which the Authority requests tenders from any parties interested in entering into a New Contract, evaluates the responses from those interested parties and enters into a New Contract with a New Service Provider, in accordance with paragraph 2 of Part 3 (Compensation following Service Provider Default) of this Schedule 22

Tender Process Monitor means the third party appointed by the Service Provider pursuant to paragraph 2.1(e) of Part 3 (Compensation following Service Provider Default) of this Schedule 22

Tendering Procedure means the procedure set out in paragraph 3 of Part 3 (Compensation following Service Provider Default) of this Schedule 22

Termination Date Discount Rate means a discount rate expressed as

((1 + real base case project IRR + Gilt B – Gilt A) * (1 + i) – 1)

where:

real base case project IRR is the real pre-tax Project IRR as set out in the Base Case;

i is the agreed assumed forecast rate of increase in the [indexation formula] set out in this Agreement for the remaining term of the Agreement;

Gilt A is the real yield to maturity on a benchmark government Gilt instrument of the same maturity as the average life of the outstanding Senior Debt as shown in the Base Case at Base Case; and

Gilt B is the real yield to maturity on a benchmark government Gilt instrument of the same maturity as the average life of the outstanding Senior Debt as shown in the Base Case on the Termination Date

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1 Reference should be made here to the document under which the senior loan facility is made available.
2 Authorities should inserting a relevant Sub-Contractor loss of profit cap as recommended by Section 21.1.3.7 of SoPC4