16.1.1 Events and Conditions Constituting Default
Developer shall be in default under this Agreement upon the occurrence of any one or more of the following events or conditions:
(a) Developer fails promptly to begin the Work for a Pilot System and/or a Project Segment under the Contract Documents following issuance of an NTP for such Pilot System and/or Project Segment, or
(b) Developer fails to resume performance of Work for the Project as a whole or, individually, for a Pilot System or a Project Segment which has been suspended or stopped, within a reasonable time after receipt of notice from TxDOT to do so or (if applicable) after cessation of the event preventing performance; or
(c) Developer fails to perform the Work in accordance with the Contract Documents, including conforming to applicable standards set forth therein for the design, installation, integration, construction and maintenance of the Project, or refuses to correct, remove and replace rejected materials or Nonconforming Work or unacceptable Work, or fails to deliver a System that achieves Final Acceptance within at least 60 Days following the Final Acceptance Completion Deadline; or
(d) Developer suspends, ceases, stops or abandons the Work for the Project as a whole or, individually, for a Pilot System or a Project Segment or fails to continuously and diligently prosecute the Work for the Project as a whole or, individually, for a Pilot System or a Project Segment (exclusive of work stoppage (i) due to termination by TxDOT, or (ii) due to and during the continuance of a Force Majeure Event or suspension by TxDOT); or
(e) Developer fails to maintain the insurance, bonds and letters of credit required hereunder; or
(f) Developer attempts or purports to assign or transfer the Contract Documents or any right or interest herein, except as expressly permitted under Section 24.4; or
(g) Developer fails, absent a valid dispute, to make payment when due for labor, equipment or materials in accordance with its agreements with Subcontractors and applicable Law, or shall have failed to comply with any Law or failed reasonably to comply with the instructions of TxDOT consistent with the Contract Documents, or fails to make payment to TxDOT when due of any amounts owing to TxDOT under this Agreement; or
(h) Developer breaches any other agreement, covenant, representation or warranty contained in the Contract Documents; or
(i) Developer or any Guarantor fails to discharge or obtain a stay within ten Days of any final judgment(s) or order for the payment of money against it in excess of $100,000 in the aggregate (provided that for purposes hereof, posting of a bond in the amount of 125% of such judgment or order shall be deemed an effective stay); or
(j) Any Guarantor revokes or attempts to revoke its obligations under its guarantee or otherwise takes the position that such instrument is no longer in full force and effect; or
(k) Any final judgment is issued holding Developer or any Guarantor liable for an amount in excess of $100,000 based on a finding of intentional or reckless misconduct or violation of a state or federal false claims act; or
(l) Any representation or warranty made by Developer or any Guarantor in the Contract Documents or any certificate, schedule, instrument or other document delivered by Developer pursuant to the Contract Documents shall have been false or materially misleading when made; or
(m) Developer commences a voluntary case seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect; seeks the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its assets; becomes insolvent, or generally does not pay its debts as they become due; admits in writing its inability to pay its debts; makes an assignment for the benefit of creditors; or takes any action to authorize any of the foregoing; or any of the foregoing acts or events shall occur with respect to any of Developer's partners, members or joint venturers, any other Major Participants identified in Proposal Form B-1, or any Surety, Guarantor or Letter of Credit Bank; or
(n) An involuntary case is commenced against Developer seeking liquidation, reorganization, dissolution, winding up, a composition or arrangement with creditors, a readjustment of debts or other relief with respect to Developer or Developer's debts under any bankruptcy, insolvency or other similar Laws now or hereafter in effect; seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of Developer or any substantial part of Developer's assets; seeking the issuance of a writ of attachment, execution, or similar process; or seeking like relief, and such involuntary case shall not be contested by Developer in good faith or shall remain undismissed and unstayed for a period of 60 Days; or any such involuntary case; or any of the foregoing acts or events shall occur with respect to any of Developer's partners, members or joint venturers, any other Major Participants identified in Proposal Form B-1, or any Surety, Guarantor or Letter of Credit Bank ; or
(o) Developer is a party to fraud; or
(p) A Tolling Zone in a Project Segment fails to meet or exceed the functional System Availability performance levels defined in Table 1 of the TP or the System performance requirements defined in Table 4 of the TP for more than 5 consecutive Days, or more than 10 Days in any calendar quarter (3 month period).
16.1.2 Notice and Opportunity to Cure
Developer and Surety shall be entitled to 15 Days written notice and opportunity to cure any breach before an Event of Default is declared under clauses (a) through (d) and clauses (g) through (i) of Section 16.1.1, provided that no such notice and opportunity to cure is required for any breach which by its nature cannot be cured (which shall include the items described in clauses (e) through (f) and clauses (j) through (p)) of Section 16.1.1. Failure to provide notice to Surety shall not preclude TxDOT from exercising its remedies against Developer. If a breach is capable of cure but, by its nature, cannot be cured within 15 Days, as determined by TxDOT, such additional period of time shall be allowed as may be reasonably necessary to cure the breach so long as Developer commences such cure within such 15-Day period and thereafter diligently prosecutes such cure to completion; provided, however, that in no event shall such cure period exceed 60 Days in total. Notwithstanding the foregoing, TxDOT may, without notice and without awaiting lapse of the period to cure any default, in the event of existence of a condition on or affecting the Project which TxDOT believes poses an immediate and imminent danger to public health or safety, rectify the dangerous condition at Developer's cost, and so long as TxDOT undertakes such action in good faith, even if under a mistaken belief in the occurrence of such default, such action shall not expose TxDOT to any liability to Developer and shall not entitle Developer to any other remedy, it being acknowledged that TxDOT has a paramount public interest in providing and maintaining safe public use of and access to the Project. TxDOT's good faith determination of the existence of such danger shall be deemed conclusive in the absence of clear and convincing evidence to the contrary.
16.2.1 If any breach described in Section 16.1.1 is not subject to cure or is not cured within the period (if any) specified in Section 16.1.2, TxDOT may declare that an "Event of Default" has occurred and notify Developer to discontinue the Work. The declaration of an Event of Default shall be in writing and given to Developer and Surety. In addition to all other rights and remedies provided by law or equity and such rights and remedies as are otherwise available under the Contract Documents, the Performance Bond(s), the Maintenance Bond(s) and any letters of credit, if an Event of Default shall occur, TxDOT shall have the following rights without further notice and without waiving or releasing Developer from any obligations and Developer shall have the following obligations (as applicable):
(a) TxDOT may terminate this Agreement or a portion thereof, including Developer's rights of entry upon, possession, control and operation of the Project, in which case, the provisions of Sections 15.2 and 15.3 shall apply;
(b) If and as directed by TxDOT, Developer shall withdraw from all Project Sites and shall remove, at TxDOT's direction, materials, equipment, tools and
instruments used by, and any debris or waste materials generated by, any Developer-Related Entity in the performance of the Work;
(c) Developer shall deliver to TxDOT possession of any or all Design Documents, Construction Documents and all other completed or partially completed drawings (including plans, elevations, sections, details and diagrams), specifications, records, information, schedules, samples, shop drawings, Hardware, Software, electronic files and other documents and facilities related to the Project that TxDOT deems necessary for completion of the Work;
(d) Developer shall confirm the assignment to TxDOT of the Subcontracts requested by TxDOT and Developer shall terminate, at its sole cost, all other Subcontracts;
(e) TxDOT may deduct from any amounts payable by TxDOT to Developer such amounts payable by Developer to TxDOT, including reimbursements owing, Liquidated Damages, Stipulated Damages, an amount TxDOT deems advisable to cover any existing or threatened claims, Liens and stop notices of Subcontractors, laborers, or Utility Owners against Developer or against TxDOT, the amount of any Losses that have accrued, the cost to complete or remediate uncompleted Work or Nonconforming Work or other damages that TxDOT has determined are or may be payable to TxDOT under the Contract Documents;
(f) TxDOT may draw or realize upon any letter of credit, funds, collateral or security then held by TxDOT;
(g) TxDOT shall have the right, but not the obligation, to pay such amount and/or perform such act as may then be required;
(h) TxDOT may appropriate any or all materials, supplies, Hardware, Software and equipment on each Project Site as may be suitable and acceptable and may direct the Surety to complete this Agreement or may enter into an agreement for the completion of this Agreement according to the terms and provisions hereof with another contractor or the Surety, or use such other methods as may be required for the completion of the Work and the requirements of the Contract Documents, including completion of the Work by TxDOT; and/or
(i) If TxDOT exercises any right to perform any obligations of Developer, in the exercise of such right TxDOT may, but is not obligated to, among other things: (i) perform or attempt to perform, or cause to be performed, such work; (ii) spend such sums as TxDOT deems necessary and reasonable to employ and pay such architects, engineers, consultants and contractors and obtain materials and equipment as may be required for the purpose of completing such work; (iii) execute all applications, certificates and other documents as may be required for completing the work; (iv) modify or terminate any contractual arrangements; (v) take any and all other actions which it may in its sole discretion consider necessary to complete the Work; and (vi) prosecute and defend any action or proceeding incident to the Work.
16.2.2 If an Event of Default shall have occurred, Developer, Surety and each Guarantor shall be jointly and severally liable to TxDOT (in addition to any other damages under the Contract Documents except for those costs intended to be covered by Liquidated Damages and Stipulated Damages payable hereunder) for all costs reasonably incurred by TxDOT or any party acting on TxDOT's behalf in completing the Work or having the Work completed by another Person (including any re-procurement costs, throw away costs for unused portions of the completed Work, and increased financing costs). The preceding sentence shall expressly include all maintenance Work and Work to be performed during the Maintenance Term, as extended by the exercise of all Maintenance Option Periods. Upon occurrence of an Event of Default and so long as it continues, TxDOT shall be entitled to withhold all or any portion of further payments to Developer until the later of (i) the latest Final Acceptance Date occurs for any Pilot System or Project Segment with respect to which an NTP has been issued or (ii) the date on which TxDOT otherwise accepts such Pilot System or Project Segment as complete or determines that it will not proceed with completion, at which time TxDOT will determine whether and to what extent Developer is entitled to further payments. Promptly following such Final Acceptance Date or the date on which TxDOT otherwise accepts such Pilot System or Project Segment as complete or determines that it will not proceed with completion, the total cost of all completed Work shall be determined, and TxDOT shall notify Developer, its Surety and each Guarantor in writing of the amount, if any, that Developer, its Surety and each Guarantor shall pay TxDOT or TxDOT shall pay Developer or its Surety with respect thereto. All costs and charges incurred by TxDOT, including attorneys', consultants', accountants' and expert witness fees and costs, together with the cost of completing the Work under the Contract Documents and any other deduction that TxDOT would be entitled to make with respect to a Final Payment of the Price (including those set forth in Section 12.4), will be deducted from any moneys due or which may become due Developer or its Surety. If such expense exceeds the sum which would have been payable under this Agreement, then Developer and its Surety(ies) and each Guarantor shall be liable and shall pay to TxDOT the amount of such excess. If the Surety or Guarantor fails to pay such amount immediately upon TxDOT's demand, then TxDOT shall be entitled to collect interest from the Surety or Guarantor on the amounts TxDOT is required to pay in excess of the remaining balance of the applicable Prices for which an NTP has been issued. The interest rate which the Surety and each Guarantor shall pay shall be the lesser of (a) 12% per annum or (b) the maximum rate allowable under applicable Law. The interest rate shall accrue on all amounts TxDOT has had to pay excess of the remaining balance of the applicable Prices for which an NTP has been issued from the date of TxDOT payment.
16.2.3 Developer acknowledges that if a default under Section 16.1.1(m) or (n) occurs, such event could impair or frustrate Developer's performance of the Work. Accordingly, Developer agrees that upon the occurrence of any such event, TxDOT shall be entitled to request of Developer, or its successor in interest, adequate assurance of future performance in accordance with the terms and conditions hereof. Failure to comply with such request within 10 Days of delivery of the request shall entitle TxDOT to terminate this Agreement and to the accompanying rights set forth above. Pending receipt of adequate assurance of performance and actual performance in accordance therewith, TxDOT shall be entitled to proceed with the Work with its own forces or with other contractors on a time and material or other appropriate basis, the cost of which will be credited against and deducted from TxDOT's payment obligations hereunder. The foregoing shall be in addition to all other rights and remedies provided by law or equity and such rights and remedies as are otherwise available under this Agreement and the Performance Bond(s), the Maintenance Bonds and any letter of credit.
16.2.4 In lieu of the provisions of this Section 16.2 for terminating this Agreement and completing the Work, TxDOT may, in its sole discretion, pay Developer for the parts already done according to the provisions of the Contract Documents and may treat the parts remaining undone as if they had never been included or contemplated by this Agreement. No claim under this provision will be allowed for prospective profits on, or any other compensation relating to, Work uncompleted by Developer.
16.2.5 If this Agreement is terminated for grounds which are later determined not to justify a termination for default, such termination shall be deemed to constitute a termination for convenience pursuant to Section 15.
16.2.6 The exercise or beginning of the exercise by TxDOT of any one or more rights or remedies under this Section 16.2 shall not preclude the simultaneous or later exercise by TxDOT of any or all other such rights or remedies, each of which shall be cumulative.
16.2.7 If TxDOT suffers damages as a result of Developer's breach or failure to perform an obligation under the Contract Documents, then, subject to the limitation on liability contained in Section 17.6, TxDOT shall be entitled to recovery of such damages from Developer regardless of whether the breach or failure that gives rise to the damages ripens into an Event of Default.
16.2.8 Developer and Surety shall not be relieved of liability for continuing Liquidated Damages or Stipulated Damages on account of a default by Developer hereunder or by TxDOT's declaration of an Event of Default, or by actions taken by TxDOT under this Section 16.2.
16.2.9 TxDOT's remedies with respect to Nonconforming Work shall include the right to accept such Work and receive payment as provided in Section 5.6.2 in lieu of the remedies specified in this Section 16.
Notwithstanding anything to the contrary contained herein, the Parties agree that the term "Event of Default" shall specifically exclude Developer's failure to meet a Completion Deadline, if such failure is caused solely and directly by an event or events beyond Developer's control, which event was not due, in whole or in part, to the breach, default, fault, act, omission, negligence, recklessness, gross negligence or willful misconduct of any Developer-Related Entity, and which delay could not have been avoided by due diligence and use of reasonable efforts by Developer. The foregoing circumstance is referred to herein as a "Delay Event," with the understanding that the term "Delay Event" does not apply in cases where the delay to the Critical Path is resolved by extension of the applicable Completion Deadline(s) under Section 13. Delay Events shall only apply to the particular Pilot System or Project Segment with respect to which it has occurred and shall not apply to any other Pilot System or Project Segment or any other aspect of the Work. If Developer fails to meet a Pilot System Schedule or a Project Segment Schedule as a result of a Delay Event, TxDOT shall not be entitled to terminate this Agreement or exercise any of the remedies described in Section 16.2 for such failure of Developer to perform, except as follows: (i) if Developer fails to perform or delays the performance of any Work as the result of a Delay Event, then TxDOT shall have the right, but not the obligation, to cause third parties to perform such Work, and, in such event, the cost of such Work shall be deducted from the applicable Price; and (ii) occurrence of a Delay Event shall not excuse Developer from its obligation to implement a Recovery Schedule or from its obligation to pay damages, including Liquidated Damages, for failure to achieve the applicable System Acceptance, Punch List Acceptance or Final Acceptance by the applicable Completion Deadline; provided, however, that to the extent that Developer is excused from payment of Liquidated Damages by reason of Section 17.6 or otherwise, TxDOT shall be entitled to terminate this Agreement and exercise any and all remedies available. Developer shall promptly notify TxDOT in writing of any occurrence of a Delay Event and of the steps that Developer intends to implement to mitigate the delays arising therefrom.
Developer shall have the right to stop Work if TxDOT fails to make an undisputed payment due hereunder within 15 business days after TxDOT's receipt of written notice of nonpayment from Developer. Any such work stoppage shall be considered a suspension for convenience under Section 14. Developer shall not have the right to terminate this Agreement for default as the result of any failure by TxDOT to make an undisputed payment due hereunder, but Developer shall have the right to declare a termination for convenience under Section 15 by delivering to TxDOT a written notice of termination specifying its effective date, if such nonpayment continues for more than 180 Days after TxDOT's receipt of written notice of nonpayment from Developer.