23.3.2.1 If the Contract terminates for Force Majeure, the Authority should pay compensation to the Contractor reflecting the principle that Force Majeure is neither party's fault and the financial consequences should to some extent be shared. There is, however, no equitable reason for "full" compensation (i.e. repayment of debt plus equity service and equity with profits) as this would involve the Authority in bearing all the pain.
23.3.2.2 The Contract should in addition provide the Authority with the option to retain or walk away from the Assets. Whatever the Authority decides, only the payment outlined in Clause 23.3.2 (Compensation on Termination for Force Majeure) should be made (see also Section 23.1.3.9 above for explanation where there has been Additional Permitted Borrowing).
Required drafting is as follows:
23.3.2 Compensation on Termination for Force Majeure
(a) On termination of the Contract under Clause 23.3 (Termination on Force Majeure), the Authority shall pay83 to the Contractor the "Force Majeure Termination Sum" in accordance with Section 24 (Calculation and Payment of Early Termination Payments).
Subject to paragraphs (c) to (e) below the Force Majeure Termination Sum shall be the amount equal to the aggregate of:
(i) the Base Senior Debt Termination Amount;
(ii) the Junior Debt less an amount equal to the aggregate of payments of interest made by the Contractor under the Subordinated Financing Agreements;84
(iii) all amounts paid to the Contractor by way of subscription for shares in the capital of the Contractor less dividends and other distributions paid to the shareholders of the Contractor (save to the extent deducted under (ii) above); and85
(iv) redundancy payments for employees of the Contractor that have been or will be reasonably incurred by the Contractor as a direct result of termination of the Contract and any Sub-Contractor Breakage Costs.
(b) If the amounts referred to in paragraphs (a)(ii) and/or (iii) are less than zero, then, for the purposes of the calculation in paragraph (a) they shall be deemed to be zero.
(c) If the aggregate of the amounts referred to in paragraphs (a)(i), (a)(ii) and (a)(iii) is less than the Revised Senior Debt Termination Amount, then the Force Majeure Termination Sum shall be increased so that it is equal to the aggregate of the Revised Senior Debt Termination Amount and the amount referred to in paragraph (a)(iv) provided always that:
(i) the amount referred to in paragraph (a)(iv) shall only be paid to the extent that the Contractor has demonstrated to the reasonable satisfaction of the Authority that the amount will not be paid in payment (in whole or in part) of any Distribution and
(ii) if, at the time of termination, there are any Additional Permitted Borrowings outstanding, no Sub-Contractor Breakage Costs shall be paid in respect of any Sub-Contract in circumstances where there is an event of default under such Sub-Contract which would entitle the Contractor to terminate such Sub-Contract.
(d) If a Distribution is made whilst any Additional Permitted Borrowing is outstanding and the Contractor has wilfully, or through gross negligence, failed to comply with its obligations under Clause 11(d)(iv)(A) of the Funders' Direct Agreement then in addition to the deduction of the Distribution referred to in paragraph (v) of the definition of Revised Senior Debt Termination Amount , the Authority shall be entitled to set off the value of that Distribution a second time against the Force Majeure Termination Sum, provided that the amount of the Force Majeure Termination Sum will never be less than the Revised Senior Debt Termination Amount .
(e) If the Contractor has wilfully or through gross negligence failed to comply with its obligations under Clause 11(d)(iv)(B) of the Funders' Direct Agreement and there has been an overstatement of the cash balances by the Contractor as at that date which has caused the Authority to reasonably believe that it would be required to pay a lesser sum at the Termination Date than it actually is required to pay under the terms of this Clause 23.3.2, then the Force Majeure Termination Sum, shall be reduced by the amount of such overstatement (to the extent such overstatement is still applicable at the Termination Date), provided that the amount of the Force Majeure Termination Sum will never be less than the Revised Senior Debt Termination Amount .
(f) Such amount shall be determined and paid in accordance with Section 24 (Calculation and Payment of Early Termination Payments).
(g) On termination, the Authority shall have the option to require the Contractor to transfer to the Authority all of its right, title and interest in and to the Assets.
(h) The Contractor shall within thirty (30) days of the Termination Date pay to the Authority an amount equal to half of the Lifecycle Surplus as at the Termination Date
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83 See Section 24 (Calculation and Payment of Early Termination Payments) for the rights of set-off against such payments.
84 The Junior Debt documentation should be checked to ensure that interest accrued, but not paid, will not come within the definition of Junior Debt. If it does, paragraph (ii) should be amended, to provide for its deduction.
85 The effect of this paragraph is to ensure that there are no circumstances in which a refund to the Authority is required.