Add the following words to the beginning of clause 5.8: "The provisions of this clause 5.8 and of clauses 5.9 to 5.14 (inclusive) shall apply when the Project Agreement has expired or been terminated (for so long as the Project Agreement is extant the provisions of clauses 5.15 to 5.27 below shall apply in place of clauses 5.8 to 5.14)".
Add the following new clauses as clauses 5.15 to 5.27 (see 6 below for the renumbering of existing clauses 5.15 to 5.18).
5.15 The provisions of this clause 5.15 and of clauses 5.16 to 5.27 (inclusive) shall apply when the Project Agreement is subsisting (when the Project Agreement has expired or been terminated the provisions of clauses 5.8 to 5.14 above shall apply in place of clauses 5.15 to 5.27). The Secretary of State will, at a date preceding the start of each Academy Financial Year, provide to the Company an indication of the level of funding to be provided by the Secretary of State to the Company by way of GAG and EAG in the next following Academy Financial Year (the "Indicative Funding").
5.16 For the purpose of clauses 5.15 to 5.27:
"Critical Years" means the then current financial year and, if an annual letter of funding has been received for the following financial year, that following financial year;
"Current Funding" means the funding specified in the annual letters of funding for the Critical Years and all other resources available and likely to be available to the Company, including such funds as are set out in the Master Agreement;
A "PFI EAG Refusal" occurs where:
(a) the Company has made a request for EAG funding to cover any costs that the Company has incurred or reasonably considers is likely to incur as a result of meeting its obligations and/or discharging its liabilities under the [Development and School Agreement][School Agreement] or the Principal Agreement; and
(b) the Secretary of State has not agreed, in accordance with clauses 55 and 56 of the Master Agreement, to provide such EAG funding to the Company.
5.17 Within 30 days of being notified by the Secretary of State of a PFI EAG Refusal, the Company may provide written notice that it considers that, after taking into account its Current Funding, it is likely that the running costs during the Critical Years would cause the Company to go into Insolvency ("Company Insolvency Notice").
5.18 Any Company Insolvency Notice must specify:
5.18.1 the grounds and evidence, including any professional accounting advice, upon which the Company's opinion is based;
5.18.2 a detailed statement of steps which the Company proposes to take with a view to ensuring that as soon as reasonably practicable the running costs are reduced sufficiently in the Critical Years to ensure that such costs are less than its Current Funding and the period of time within which such steps will be taken
5.18.3 the shortfall in the Critical Years between the Current Funding expected to be available to the Company to cover the running costs and the projected expenditure of the Company; and
5.18.4 detailed budget of income and expenditure for the Academy during the Critical Years.
5.19 Within 15 days of the provision of the Company Insolvency Notice, both parties shall discuss and if possible (using reasonable endeavours) agree whether or not on the basis of the Current Funding, it is likely that the running costs during the Critical Years would cause the Company to go into Insolvency and such Insolvency could not be avoided through prudent financial management (including, but not limited to, using GAG funding prudently in order to cover the normal reasonable funding costs of the Academy). Both parties recognise that they will need to engage in a constructive dialogue at the time about how best to provide education for the pupils at the Academy and undertake to use their reasonable endeavours to agree a practical solution to the problem.
5.20 If the parties are unable to reach an agreement in accordance with clause 5.19 within 15 days of the Company Insolvency Notice being served, then the following questions shall be referred to an independent expert (the "Expert") for determination:
5.20.1 whether, on the basis of the Current Funding, it is likely that the running costs during the Critical Years would cause the Company to go into Insolvency;
5.20.2 whether the Company is using the funds provided under this Agreement and the Master Agreement prudently; and
5.20.3 whether the Company is using the funds provided under this Agreement and the Master Agreement in accordance with the requirements of this Agreement and the Master Agreement.
The Expert's determination shall be final and binding on both parties. The Expert shall be requested to specify in his determination:
(a) the amount of the shortfall (if any) in funding between the running costs and the Current Funding during the Critical Years (the "Shortfall"); and
(b) (if appropriate) recommendations as to future spending and the running costs.
The Expert shall be an insolvency practitioner with significant professional experience of educational institutions or academies. If the parties fail to agree upon the appointment of the Expert then the Expert shall be appointed by the President for the time being of the Institute of Chartered Accountants in England and Wales.
5.21 The parties shall procure that the Expert (together with any educational specialist appointed pursuant to this clause) will act promptly in determining the matters referred to him. The Expert shall be required in performing his role to take account of advice from an educational specialist who is professionally familiar with the issues arising from the budget management of schools. If the parties fail to agree upon the appointment of the educational specialist then the educational specialist shall be appointed by the Chairman for the time being of the Specialist Schools and Academies Trust.
5.22 The Expert's and the educational specialist's fees shall be borne equally between the parties.
5.23 For the purpose of clauses 5.24 and 5.27, "Insolvency Decision" means either:
(a) in accordance with clause 5.19, the Secretary of State agrees with the Company that on the basis of the Current Funding it is likely that the running costs during the Critical Years would cause the Company to go into Insolvency which could not be avoided through prudent financial management (including, but not limited to, using GAG funding prudently in order to cover the normal reasonable funding costs of the Academy); or
(b) an Expert determines in accordance with clause 5.20 that on the basis of the Current Funding it is likely that the running costs during the Critical Years would cause the Company to go into Insolvency or that the Company is not using the funds provided under this Agreement and the Master Agreement prudently and in accordance with the requirements of this Agreement and the Master Agreement.
5.24 Within 10 Business Days of an Insolvency Decision, the Secretary of State may either at its option:
5.24.1 withdraw the PFI EAG Refusal and promptly pay to the Company the amount of requested EAG funding or such other sum as shall be appropriate; or
5.24.2 terminate this Agreement on not less than 20 Business Days notice to the Company.
5.25 In the event that the Secretary of State provides additional EAG funding in accordance with clause 5.24, the Secretary of State may:
5.25.1 appoint Additional Directors sufficient to enable him to appoint a majority of the board of directors in accordance with the Company's articles and implement the recommendations of the Expert; and
5.25.2 within 12 months of paying the additional EAG funding, terminate this Agreement at any time.
5.26 In the event that the Secretary of State appoints Additional Directors in accordance with clause 5.25.1, the Company must, upon the request of the Secretary of State, procure the resignation of the Directors who are not Additional Directors in accordance with the Company's articles.
5.27 In the event that there is no Insolvency Decision, this Agreement shall continue and the Secretary of State shall not be obliged to pay to the Company the requested EAG funding.