The Authority shall not terminate or give notice terminating the Contract18 on the grounds of Contractor Default without giving to the Agent.
(a) at least the Required Period of prior written notice stating:
(i) the proposed Termination Date; and
(ii) the grounds for termination in reasonable detail, and
(b) not later than the date falling 30 days after the date of a Termination Notice or (if earlier) the date falling 30 days after the date on which the Agent informs the Authority that an Event of Default19 has occurred, a notice containing details of any amount owed by the Contractor to the Authority, and any other existing liabilities or unperformed obligations20 of which the Authority is aware (having made reasonable enquiry):
(i) at the time of the Termination Notice or the notification of an Event of Default; and/or
(ii) which will fall due on or prior to the end of the Required Period, under the Contract.21
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18 The termination events in the Contract can be distinguished for these purposes (for example, treating an insolvency default differently from a performance default), but if the Project can be rescued by the Senior Lenders then there is no good reason to draw such a distinction. This agreement also assumes that if the Contract is to be terminated in circumstances in which the Senior Lenders will be repaid in full (e.g. for corrupt gifts or force majeure) then the Senior Lenders will not want to exercise their rights under this Agreement. The Funders' Direct Agreement should also restrict the Authority's right to terminate other agreements ancillary to this Agreement (e.g. a lease of land on which the Project is built).
19 See footnote 25, as to whether this reference should be to an Enforcement Event.
20 Both parties should have a clear understanding of what these liabilities are, as it is likely that an increase in debt facilities will be needed to rectify defaults or cover interest that accrues. Care should be taken to ensure that the Authority does not intervene to specify how unperformed liabilities should be performed (e.g. following a request for conditions surveys), but instead give information on the default that led to termination and any other breaches of which it is reasonably aware.
21 This method is used instead of requiring a step-in undertaking. A step-in undertaking is an undertaking from the Senior Lenders or other financiers to meet certain obligations, usually existing as at the date of step-in (and in some cases those that arise later). Even a capped liability during the Step-In Period could discourage the Senior Lenders or other financiers from stepping-in and for that reason this approach is not taken here.