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Exhibit 10(k)  


18 March 2005  


 STRATEGIC RAIL AUTHORITY  


 and  


 GREAT NORTH EASTERN RAILWAY LIMITED  




INTERCITY EAST COAST

FRANCHISE AGREEMENT  










  



 
  Contents    
    



	CLAUSE
 
	 	PAGE

	1.    Interpretation and Definitions	 	1
	

2.    Commencement	
 	

1
	

3.    Term	
 	

2
	

4.    Franchisee's Obligations	
 	

2
	

5.    Arm's Length Dealings	
 	

2
	

6.    Compliance with Laws	
 	

2
	

7.    Entire Agreement	
 	

3
	

8.    Governing Law	
 	

3
	

SCHEDULE 1	
 	

6
	 	Passenger Service Obligations	 	6
	

SCHEDULE 1.1	
 	

8
	 	Service Development	 	8
	

APPENDIX 1 TO SCHEDULE 1.1	
 	

20
	 	The Train Fleet	 	20
	

APPENDIX 2 TO SCHEDULE 1.1	
 	

24
	 	Service Development Additional Factors	 	24
	

SCHEDULE 1.2	
 	

26
	 	Operating Obligations	 	26
	

SCHEDULE 1.3	
 	

34
	 	Additional Service Specifications	 	34
	

SCHEDULE 1.4	
 	

38
	 	Passenger Facing Obligations	 	38
	

APPENDIX 1 TO SCHEDULE 1.4	
 	

48
	 	Form of Passenger's Charter	 	48
	

APPENDIX 2 TO SCHEDULE 1.4	
 	

66
	 	Alternative Transport	 	66
	

SCHEDULE 1.5	
 	

68
	 	Information about Passengers	 	68
	

SCHEDULE 1.6	
 	

70
	 	Committed Obligations	 	70
	

APPENDIX 1 TO SCHEDULE 1.6	
 	

98
	 	Programme of Committed Obligations	 	98
	

APPENDIX 2 TO SCHEDULE 1.6	
 	

102
	 	Liquidated Damages for Late Completion of Committed Obligations	 	102
	

APPENDIX 3 TO SCHEDULE 1.6	
 	

106
	

GNER HST Refurbishment	
 	

106
	 	 	 





i







 

	

SCHEDULE 1.7	
 	

110
	 	Franchise Services	 	110
	

SCHEDULE 1.8	
 	

116
	 	Major Projects	 	116
	

SCHEDULE 2	
 	

118
	 	Assets, Leases, Third Parties, Other Franchise Operations and Schemes	 	118
	

SCHEDULE 2.1	
 	

119
	 	Asset Vesting and Transfer	 	119
	

SCHEDULE 2.2	
 	

121
	 	Security of Access Assets, Rolling Stock Leases, Station and Depot Leases	 	121
	

SCHEDULE 2.3	
 	

125
	 	Third Party Delivery of Passenger Services and Other Franchisees	 	125
	

SCHEDULE 2.4	
 	

127
	 	Other Franchise Operations	 	127
	

SCHEDULE 2.5	
 	

129
	 	Transport, Travel and Other Schemes	 	129
	

APPENDIX TO SCHEDULE 2.5	
 	

133
	 	List of Transport, Travel and Other Schemes	 	133
	

SCHEDULE 3	
 	

136
	 	Priced Options	 	136
	

SCHEDULE 4	
 	

138
	 	Maintaining and Enhancing Stations, Depots and Trains	 	138
	

SCHEDULE 4.1	
 	

140
	 	Franchise Facilities	 	140
	

APPENDIX TO SCHEDULE 4.1	
 	

146
	 	Station Surveys	 	146
	

SCHEDULE 4.2	
 	

148
	 	Persons with Disabilities and Disability Discrimination	 	148
	

APPENDIX TO SCHEDULE 4.2	
 	

154
	 	Minor Works	 	154
	

SCHEDULE 5	
 	

156
	 	Fares	 	156
	

SCHEDULE 5.1	
 	

158
	 	Purpose, Structure and Construction	 	158
	

SCHEDULE 5.2	
 	

162
	 	Franchisee's Obligation to Create Fares	 	162
	

SCHEDULE 5.3	
 	

164
	 	Allocation of Fares to Fares Baskets	 	164
	

SCHEDULE 5.4	
 	

166
	 	Regulation of Fares Basket Values	 	166
	 	 	 



ii







 

	

SCHEDULE 5.5	
 	

168
	 	Regulation of Individual Fares	 	168
	

SCHEDULE 5.6	
 	

170
	 	Exceeding the Regulated Value, Regulated Price or Regulated Child Price	 	170
	

SCHEDULE 5.7	
 	

172
	 	Changes to Fares and Fares Regulation	 	172
	

SCHEDULE 5.8	
 	

176
	 	Fares Regulation Information and Monitoring	 	176
	

SCHEDULE 6	
 	

178
	 	Farebox Securitisation	 	178
	

SCHEDULE 7	
 	

180
	 	Performance Benchmarks/Key Performance Indicators	 	180
	

SCHEDULE 7.1	
 	

182
	 	Performance Benchmarks	 	182
	

APPENDIX 1 TO SCHEDULE 7.1	
 	

190
	 	Cancellations Benchmark Table	 	190
	

APPENDIX 2 TO SCHEDULE 7.1	
 	

192
	 	Capacity Benchmark Table	 	192
	

APPENDIX 3 TO SCHEDULE 7.1	
 	

194
	 	Network Rail Benchmark Table	 	194
	

APPENDIX 4 TO SCHEDULE 7.1	
 	

197
	 	Service Delivery Benchmark Table	 	197
	

SCHEDULE 7.2	
 	

200
	 	Key Performance Indicators	 	200
	

APPENDIX TO SCHEDULE 7.2	
 	

218
	 	Average Profit Table	 	218
	

SCHEDULE 8	
 	

223
	 	Payments	 	223
	

SCHEDULE 8.1	
 	

225
	 	Franchise Payments	 	225
	

SCHEDULE 8.2	
 	

233
	 	Annual Franchise Payments	 	233
	

APPENDIX 1 TO SCHEDULE 8.2	
 	

236
	 	Target Revenue (expressed in real terms)	 	236
	

APPENDIX 2 TO SCHEDULE 8.2	
 	

239
	 	Figures for Calculation of Annual Franchise Payments	 	239
	

APPENDIX 3 TO SCHEDULE 8.2	
 	

241
	 	(HRO scheme 1 only)	 	241
	

SCHEDULE 8.3	
 	

244
	 	Miscellaneous Payment Provisions	 	244
	 	 	 





iii







 

	

SCHEDULE 8.4	
 	

246
	 	Track Access Adjustments and Station Charge Adjustments	 	246
	

SCHEDULE 9	
 	

250
	 	Changes	 	250
	

SCHEDULE 9.1	
 	

252
	 	Financial Consequences of Change	 	252
	

SCHEDULE 9.2	
 	

256
	 	Identity of the Financial Model etc.	 	256
	

SCHEDULE 9.3	
 	

258
	 	Runs of the Financial Model	 	258
	

APPENDIX TO SCHEDULE 9.3	
 	

264
	 	Incentivising Long-Term Investment	 	264
	

SCHEDULE 9.4	
 	

266
	 	Authority Risk Assumptions	 	266
	

SCHEDULE 10	
 	

268
	 	Remedies, Termination and Expiry	 	268
	

SCHEDULE 10.1	
 	

270
	 	Remedial Plans and Remedial Agreements	 	270
	

SCHEDULE 10.2	
 	

272
	 	Termination and Expiry	 	272
	

SCHEDULE 10.3	
 	

274
	 	Events of Default and Termination Event	 	274
	

SCHEDULE 10.4	
 	

280
	 	Force Majeure	 	280
	

SCHEDULE 10.5	
 	

285
	 	Liability	 	285
	

SCHEDULE 11	
 	

287
	 	Agreement Management Provisions	 	287
	

SCHEDULE 12	
 	

291
	 	Financial Obligations and Covenants	 	291
	

APPENDIX 1 TO SCHEDULE 12	
 	

299
	 	Form of Performance Bond	 	299
	

APPENDIX 2 TO SCHEDULE 12	
 	

305
	 	Form of Season Ticket Bond	 	305
	

SCHEDULE 13	
 	

314
	 	Franchise Management and Information Obligations	 	314
	

SCHEDULE 13.1	
 	

316
	 	Franchise Management	 	316
	

SCHEDULE 13.2	
 	

320
	 	Information	 	320
	 	 	 



iv







 

	

APPENDIX 1 TO SCHEDULE 13.2	
 	

332
	 	Efficient Franchisee	 	332
	

APPENDIX 2 TO SCHEDULE 13.2	
 	

240
	 	Key Assets	 	340
	

APPENDIX 3 TO SCHEDULE 13.2	
 	

342
	 	Operational Information	 	342
	

APPENDIX 4 TO SCHEDULE 13.2	
 	

348
	 	Passenger Journeys, Miles and Earnings Information	 	348
	

SCHEDULE 14	
 	

350
	 	Preservation of Assets	 	350
	

SCHEDULE 14.1	
 	

352
	 	Maintenance of Franchise	 	352
	

SCHEDULE 14.2	
 	

354
	 	Maintenance of Operating Assets	 	354
	

SCHEDULE 14.3	
 	

358
	 	Key Contracts	 	358
	

APPENDIX TO SCHEDULE 14.3	
 	

362
	 	List of Key Contracts	 	362
	

SCHEDULE 14.4	
 	

364
	 	Designation of Franchise Assets	 	364
	

APPENDIX TO SCHEDULE 14.4	
 	

368
	 	List of Primary Franchise Assets	 	368
	

SCHEDULE 14.5	
 	

370
	 	Dealing with Franchise Assets	 	370
	

SCHEDULE 15	
 	

372
	 	Obligations Associated with Termination	 	372
	

SCHEDULE 15.1	
 	

374
	 	Reletting Provisions	 	374
	

SCHEDULE 15.2	
 	

376
	 	Last 12 or 13 Months of Franchise Period	 	376
	

SCHEDULE 15.3	
 	

382
	 	Handover Package	 	382
	

APPENDIX TO SCHEDULE 15.3	
 	

384
	 	Form of Handover Package	 	384
	

SCHEDULE 15.4	
 	

386
	 	Provisions Applying on and after Termination	 	386
	

APPENDIX 1 TO SCHEDULE 15.4	
 	

392
	 	Form of Transfer Scheme	 	392
	

APPENDIX 2 TO SCHEDULE 15.4	
 	

396
	 	Form of Supplemental Agreement	 	396
	 	 	 






v







 

	

SCHEDULE 16	
 	

410
	 	Pensions	 	410
	

SCHEDULE 17	
 	

414
	 	Confidentiality	 	414
	

SCHEDULE 18	
 	

418
	 	Franchise Continuation Criteria	 	418
	

SCHEDULE 19	
 	

420
	 	Other Provisions	 	420




[Schedules
omitted from this copy] 


vi









   THIS AGREEMENT is dated eighteenth March 2005 


BETWEEN  


	(1)
	STRATEGIC RAIL AUTHORITY, whose principal place of business is at 55 Victoria Street, London, SW1H 0EU (the  Authority);
and



	(2)
	GREAT NORTH EASTERN RAILWAY LIMITED, whose registered office is at Sea Containers House, 20 Upper Ground, London SE1 9PF (the  Franchisee). 




WHEREAS  


        (A)  The
Authority wishes to appoint a franchisee to provide railway passenger services within its InterCity East Coast franchise and expects its franchisee, on the terms of
this Agreement, actively to seek, in all reasonable business ways, greatly improved performance over the Franchise Term from its employees, its Train Fleet and other assets, and from Network Rail and
its other suppliers, so as to deliver to the passenger the best railway passenger service that can be obtained from the resources that are available to it. 


        (B)  The
Franchisee wishes to be appointed as the Authority's franchisee for its InterCity East Coast franchise and intends, on the terms of this Agreement, actively to seek,
in all reasonable business ways, greatly improved performance over the Franchise Term from its employees, its Train Fleet and other assets, and from Network Rail and its other suppliers, so as to
deliver to the passenger the best railway passenger service that can be obtained from the resources that are available to it. 


        (C)  The
following provisions of this Agreement are intended to reflect and give effect to the matters referred to in Recitals (A) and (B). 



1.     INTERPRETATION AND DEFINITIONS  


        1.1   In
this Agreement: 




Conditions Precedent Agreement means the agreement between the Authority and the Franchisee of even date herewith specifying certain conditions to be
satisfied prior to issue of a Franchise Commencement Certificate. 


Definitions Agreement means the agreement between the Authority and the Franchisee of even date herewith relating to the interpretation of this
Agreement and the Conditions Precedent Agreement. 





        1.2   This
Agreement, the Conditions Precedent Agreement and the Definitions Agreement together constitute a single agreement, which is a "franchise agreement" for the
purposes of the Act, and shall be interpreted in accordance with the Definitions Agreement. 


2.     COMMENCEMENT  


        2.1   The
clauses of this Agreement and the provisions listed in clauses 2.1(a) to 2.1(r) (inclusive) shall take effect and be binding upon each of the Authority and the
Franchisee immediately upon signature of this Agreement: 



	(a)
	paragraph 5.3
of Schedule 1.4 (Passenger Facing Obligations);



	(b)
	appropriate
provisions (if any) of Schedule 1.6 (Committed Obligations);



	(c)
	paragraph 1
of Schedule 2.1 (Asset Vesting and Transfer);



	(d)
	paragraph 2
of Schedule 2.2 (Security of Access Assets, Rolling Stock Leases, Station and Depot Leases); 



1







 



	(e)
	paragraph 2
of Schedule 2.3 (Third Party Delivery of Passenger Services and Other Franchisees);



	(f)
	paragraphs
1 and 2 of Schedule 4.1 (Franchise Facilities);



	(g)
	Schedule 5.1
(Purpose, Structure and Construction);



	(h)
	Schedule 5.3
(Allocation of Fares to Fares Baskets);



	(i)
	Schedule 5.7
(Changes to Fares and Fares Regulation);



	(j)
	Schedule 9
(Changes);



	(k)
	Schedule 10
(Remedies, Termination and Expiry);



	(l)
	paragraphs
1 to 3 (inclusive) of Schedule 11 (Agreement Management Provisions);



	(m)
	paragraph 4
of Schedule 12 (Financial Obligations and Covenants);



	(n)
	Schedule 13.1
(Franchise Management);



	(o)
	paragraphs
1, 2, 5, 6, 7 and 8 of Schedule 13.2 (Information);



	(p)
	Schedule 14.3
(Key Contracts);



	(q)
	Schedule 17
(Confidentiality); and



	(r)
	Schedule 19
(Other Provisions). 




        2.2   The
other provisions of this Agreement shall take effect and become binding upon the parties on the Franchise Commencement Date. 


3.     TERM  


        This Agreement shall terminate on the Expiry Date or on the date of any earlier termination pursuant to clause 2.2(a) of the Conditions Precedent Agreement
or pursuant to Schedule 10 (Remedies and Termination). 


4.     FRANCHISEE'S OBLIGATIONS  


        4.1   The
Franchisee shall perform its obligations under this Agreement in accordance with their terms and with that degree of skill, diligence, prudence and foresight which
would be exercised by a skilled and experienced Train Operator of the InterCity East Coast franchise. 



        4.2   Any
obligation on the part of the Franchisee to use all reasonable endeavours shall extend to consequent obligations adequately to plan and resource its activities, and
to implement those plans and resources, with all due efficiency and economy. 


        4.3   The
Franchisee shall co-operate with the Authority and act reasonably and in good faith in and about the performance of its obligations and the exercise of
its rights pursuant to this Agreement. 



5.     ARM'S LENGTH DEALINGS  


        The Franchisee shall ensure that every contract or other arrangement or transaction to which it may become party in connection with this Agreement with any person
is on bona fide arm's length terms. 


6.     COMPLIANCE WITH LAWS  


        The Franchisee shall at all times during the Franchise Term perform the Franchise Services and all its other obligations under this Agreement in accordance with
all applicable Laws. 


2







 



7.     ENTIRE AGREEMENT  


        7.1   This
Agreement, the Definitions Agreement and the Conditions Precedent Agreement contain the entire agreement between the parties in relation to the subject matter of
this Agreement and supersede all prior agreements and arrangements between the parties other than any confidentiality agreements or undertakings which the Franchisee may have entered into with the
Authority in connection with its proposal to secure the provision of the Passenger Services under this Agreement. 


        7.2   The
Franchisee hereby acknowledges that it is not entering into this Agreement in reliance on any warranties, representations or undertakings howsoever or to whomsoever
made except in so far as such are: 



	(a)
	contained
in this Agreement; or



	(b)
	embodied
in any warranties, representations or undertakings contained in the long form report provided by the Reporting Accountants in respect of Great North Eastern Railway, dated 22
July 2004. 




        7.3   The
Franchisee hereby acknowledges and agrees with the Authority (for itself and as trustee for each of the other persons referred to therein) to the disclaimer of
liability which is contained in the section entitled "Important Notice" contained in any document supplied by or on behalf of the Authority in connection with this Agreement, the process leading to
the entering into of this Agreement, or the Franchise Services (including any "Invitation to Tender" issued in connection therewith). 



        7.4   The
Franchisee irrevocably and unconditionally waives any right which it may otherwise have to claim damages in respect of and/or to rescind this Agreement on the basis
of any warranty, representation (whether negligent or otherwise, and whether made prior to and/or in this Agreement) or undertaking howsoever or to whomsoever made unless and to the extent that such
warranty, representation or undertaking was made fraudulently. 


8.     GOVERNING LAW  


        This Agreement shall be governed by and construed in accordance with the Laws of England and Wales and the parties irrevocably agree that the courts of England
and Wales are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Agreement, except as expressly set out in this Agreement. 


3







 



IN WITNESS whereof the parties hereto have executed this Agreement the day and year first before written. 



	THE CORPORATE SEAL

OF THE STRATEGIC RAIL

AUTHORITY

HEREUNTO AFFIXED IS



AUTHENTICATED BY:
 ROBERT PLAMPLIN	 	}	 	 
	
SIGNED FOR AND ON

BEHALF OF THE
 FRANCHISEE



DIRECTOR:



DIRECTOR:	
 	
}	
 	
  






 CHRISTOPHER GARNETT



SHAUN MILLS





4











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