39 Compensation on Termination (HPP Ref: Clauses 42 to 45)

The following definitions should be amended or added to HPP and clauses 42 to 45 should be deleted and replaced with the following:

Base Senior Debt Termination Amount means subject to clause 54.2 (Changes to Financing Agreements and Ancillary Documents):

(a) all amounts outstanding at the Termination Date, including interest and Default Interest accrued as at that date, from the Contractor to the Senior Lenders in respect of Permitted Borrowing (other than in respect of Additional Permitted Borrowing); and

(b) all amounts including costs of early termination of interest rate hedging arrangements and other breakage costs, payable by the Contractor to the Senior Lenders as a result of a prepayment in respect of Permitted Borrowing (other than in respect of Additional Permitted Borrowing), or, in the case of early termination of interest rate hedging arrangements only, as a result of termination of this Agreement, subject to the Contractor and the Senior Lenders mitigating all such costs to the extent reasonably possible:

less, to the extent it is a positive amount, the aggregate of (without double counting in relation to the calculation of the Base Senior Debt Termination Amount or the amounts below):

(i) all credit balances on any bank accounts (but excluding the Joint Insurance Account [and the [Distribution Account]]) held by or on behalf of the Contractor on the Termination Date;

(ii) any amounts claimable on or after the Termination Date in respect of Contingent Funding Liabilities;

(iii) all amounts, including costs of early termination of interest rate hedging arrangements and other breakage costs, payable by the Senior Lenders to the Contractor as a result of prepayment of amounts outstanding in respect of Permitted Borrowing (other than in respect of Additional Permitted Borrowing), or, in the case of early termination of interest rate hedging arrangements only, as a result of termination of this Agreement;

(iv) all other amounts received by the Senior Lenders on or after the Termination Date and before the date on which any compensation is payable by the Authority to the Contractor as a result of enforcing any other rights they may have; and

(v) the Lender RV Element;

and if the resultant calculation is a negative figure the amount shall be treated as nil;

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 Full Services Commencement Date then the relevant Planned Services Commencement Dates [which have not occurred] shall be extended by such period as would have been granted to allow a New Contractor to achieve Services Commencement at the Phase in question;

(b) any [Unavailability Deductions or Performance Deductions or performance 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) the Leases shall continue to subsist in accordance with the terms and conditions of the Leases or new leases on the same terms and conditions as the Leases would be granted by the Authority to a New Contractor;

Estimated Fair Value of the Contract means the amount determined in accordance with clause 43.3 (No Retendering Procedure) that a third party would pay to the Authority as the Market Value of the Deemed New Contract;

Lender RV Element means the [senior debt scheduled to be outstanding] at the Expiry Date discounted back at an annual rate of [♦]% p.a. from the Expiry Date to the Termination Date, subject to further adjustment in the event that the Termination Date is prior to final Services Commencement Date by multiplying the discounted figure by the ratio of the amount drawn under the senior debt facility at the Termination Date to £[♦], [being the maximum drawdown anticipated in the base case financial model]]37;

Liquid Market means there are sufficient willing parties (being at least two parties, each of whom is capable of being a Suitable Substitute Contractor) in the market for PFI contracts or similar contracts for the provision of services and ownership of [Dwellings/Common Parts/Apartment Blocks] pursuant to leases (in each case the same as or similar to the Agreement and the Leases) 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 and the Leases assigned shall be discounted in assessing whether there are sufficient willing parties in the market for such purposes;

Maximum Rents and Service Charges means in respect of a month, the Rents and Service Charges payable by Tenants to the Landlord under and pursuant to their Tenancy Agreement calculated on the assumption that all Dwellings are tenanted and Rents and Service Charges are being paid in full by Tenants in respect of all Dwellings;

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 Full Services Commencement Date, then the relevant Planned Services Commencement Dates [which have not occurred] shall be extended by a period to allow a New Contractor to achieve Services Commencement at the Phase in question;

(b) any accrued [Unavailability Deductions or Performance Deductions or performance 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) the Leases shall continue to subsist in accordance with the terms and conditions of the Leases or new leases on the same terms and conditions as the Leases would be granted by the Authority; and

(e) any other amendments which do not adversely affect the Contractor;

Non Collection Deduction means for any month or part of a month for the period from the Termination Date to the Compensation Date an amount equal to the aggregate of:

(a) Rents and Service Charges not paid by Tenants or not collected by [the Housing Management Contractor] for any Dwellings which were Void in that month; plus

(b) any Rents or Service Charges which first become due and payable in that month which were not paid by Tenants and not collected by [the Housing Management Contractor] in part or at all in that month;

Post Termination Service Amount means for the purposes of clause 45.2 (Retendering Procedure), 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 Availability Charge which would have been payable in that month under this Agreement and the Maximum Rents and Service Charges that would have first become due and payable in that month 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 Non Collection Deduction for that month;

(d) (where relevant) the amount by which the Post Termination Service Amount for the previous month was less than zero;

Revised Senior Debt Termination Amount means subject to clause 54.2 (Changes to Financing Agreements and Ancillary Documents):

(a) all amounts outstanding at the Termination Date, including interest and (other than in respect of Additional Permitted Borrowing) Default Interest accrued as at that date, from the Contractor to the Senior Lenders in respect of Permitted Borrowing;

(b) all amounts including costs of early termination of interest rate hedging arrangements and other breakage costs, payable by the Contractor to the Senior Lenders as a result of a prepayment in respect of Permitted Borrowing, or, in the case of early termination of interest rate hedging arrangements only, as a result of termination of this Agreement subject to the Contractor and the Senior Lenders mitigating all such costs to the extent reasonably possible,

less, to the extent it is a positive amount, the aggregate of (without double counting in relation to the calculation of the Revised Senior Debt Termination Amount or the amounts below):

(i) all credit balances on any bank accounts (but excluding the Joint Insurance Account [or the [Distribution Account]]) held by or on behalf of the Contractor on the Termination Date;

(ii) any amounts claimable on or after the Termination Date in respect of Contingent Funding Liabilities;

(iii) all amounts, including costs of early termination of interest rate hedging arrangements and other breakage costs, payable by the Senior Lenders to the Contractor as a result of prepayment of amounts outstanding in respect of Permitted Borrowing or, in the case of early termination of interest rate hedging arrangements only, as a result of termination of this Agreement;

(v) all APB Distributions; and

(vi) the Lender RV Element;

and if the resultant calculation is a negative figure the amount shall be treated as nil;

Void means a Dwelling which is not occupied by a Tenant (for whatever reason) under a Tenancy Agreement;

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37 See paragraph 2(d) of this appendix for discussion of the selection of the appropriate inflation figure.

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