21.4.3.1 Regardless of whether or not the Assets have any alternative use, only the Revised Senior Debt Termination Amount should be paid out on a termination for Corrupt Gifts or Fraud. If the Authority wishes to have the right to terminate, it should accept such level of compensation.
21.4.3.2 Equity holders should acknowledge that their relationship to the Contractor renders them responsible for the Contractor's acts - the level of return they expect reflects the greater risks equity holders must accept. Where the Contractor itself is not the perpetrator of the relevant act, the recommended approach gives them ample opportunity to ensure termination does not occur.
21.4.3.3 Where the Project is fully financed by equity providers with no Senior Debt, it will be necessary to examine their relationship to the person who commits the breach in order to ascertain whether any payment is appropriate. Authorities are unlikely to agree in effect to paying out the breaching party (by paying out to its shareholder or parent).
21.4.3.4 The Contract should also provide the Authority with the option to retain or walk away from the asset. Whatever the Authority decides, only the payment outlined above should be made.
Required drafting is as follows:
21.4.4 Compensation on Termination for Corrupt Gifts and Fraud
(a) On termination of the Contract in accordance with Clause 21.4.3 (Termination for Corrupt Gifts and Fraud), then the Authority shall pay378 the Contractor an amount equal to the Revised Senior Debt Termination Amount.
(b) Such amount shall be determined and paid in accordance with [Section 22 (Calculation and Payment of Early Termination Payments)].
(c) If termination occurs then the Authority may require the Contractor to transfer its rights, title and interest in and to the Assets to the Authority.379
_________________________________________________________________
378 See Section 22 (Calculation and Payment of Early Termination Payments) for the right of set-off against such payments.
379 The Contract must provide that any charges are released by the financiers in this circumstance. See Section 31.3.8.