Document:

Exhibit 10.2

 

(Multicurrency-Cross Border)

 

 

ISDA®

International Swaps and Derivatives Association, Inc.

MASTER AGREEMENT

 

dated as of May 1, 2018

	EDF TRADING NORTH AMERICA, LLC

	and

	SUMMER ENERGY, LLC

AND

SUMMER ENERGY NORTHEAST, LLC

	(“Party A”)

	 

	(jointly and severally together, “Party B”)

	being a limited liability company organized and existing under the laws of the State of Delaware

	 

	each being a limited liability company organized and existing under the laws of the State of Texas

have entered and/or anticipate entering into one or more transactions (each a “Transaction”) that are or will 
be governed by this Master Agreement, which includes the schedule (the “Schedule”), and the documents 
and other confirming evidence (each a “Confirmation”) exchanged between the parties confirming those 
Transactions.

Accordingly, the parties agree as follows:

1.Interpretation 

(a)Definitions.  The terms defined in Section 14 and in the Schedule will have the meanings therein 
specified for the purpose of this Master Agreement. 

(b)Inconsistency.  In the event of any inconsistency between the provisions of the Schedule and the 
other provisions of this Master Agreement, the Schedule will prevail.  In the event of any inconsistency 
between the provisions of any Confirmation and this Master Agreement (including the Schedule), such 
Confirmation will prevail for the purpose of the relevant Transaction. 

(c)Single Agreement.  All Transactions are entered into in reliance on the fact that this Master 
Agreement and all Confirmations form a single agreement between the parties (collectively referred to as 
this “Agreement”), and the parties would not otherwise enter into any Transactions. 

2.Obligations 

(a)General Conditions. 

(i)Each party will make each payment or delivery specified in each Confirmation to be made by 
it, subject to the other provisions of this Agreement. 

(ii)Payments under this Agreement will be made on the due date for value on that date in the place 
of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in 
freely transferable funds and in the manner customary for payments in the required currency.  Where 
settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on 
the due date in the manner customary for the relevant obligation unless otherwise specified in the 
relevant Confirmation or elsewhere in this Agreement. 

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Execution Version

(iii)Each obligation of each party under Section 2(a)(i) is subject to (l) the condition precedent 
that no Event of Default or Potential Event of Default with respect to the other party has occurred 
and is continuing, (2) the condition precedent that no Early Termination Date in respect of the 
relevant Transaction has occurred or been effectively designated and (3) each other applicable 
condition precedent specified in this Agreement. 

(b)Change of Account.  Either party may change its account for receiving a payment or delivery by 
giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment 
or delivery to which such change applies unless such other party gives timely notice of a reasonable 
objection to such change. 

(c)Netting.  If on any date amounts would otherwise be payable: 

(i)in the same currency; and 

(ii)in respect of the same Transaction,  

by each party to the other, then, on such date, each party’s obligation to make payment of any such amount 
will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been 
payable by one party exceeds the aggregate amount that would otherwise have been payable by the other 
party, replaced by an obligation upon the party by whom the larger aggregate amount would have been 
payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more Transactions that a net amount will be determined in respect 
of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of 
whether such amounts are payable in respect of the same Transaction.  The election may be made in the 
Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions 
identified as being subject to the election, together with the starting date (in which case subparagraph (ii) 
above will not, or will cease to, apply to such Transactions from such date).  This election may be made 
separately for different groups of Transactions and will apply separately to each pairing of Offices through 
which the parties make and receive payments or deliveries.

(d)Deduction or Withholding for Tax. 

(i)Gross-Up.  All payments under this Agreement will be made without any deduction or 
withholding for or on account of any Tax unless such deduction or withholding is required by any 
applicable law, as modified by the practice of any relevant governmental revenue authority, then in 
effect.  If a party is so required to deduct or withhold, then that party (“X”) will:-- 

(1)promptly notify the other party (“Y”) of such requirement; 

(2)pay to the relevant authorities the full amount required to be deducted or withheld 
(including the full amount required to be deducted or withheld from any additional amount 
paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such 
deduction or withholding is required or receiving notice that such amount has been assessed 
against Y; 

(3)promptly forward to Y an official receipt (or a certified copy), or other documentation 
reasonably acceptable to Y, evidencing such payment to such authorities; and 

(4)if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is 
otherwise entitled under this Agreement, such additional amount as is necessary to ensure that 
the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed 
against X or Y) will equal the full amount Y would have received had no such deduction or 
withholding been required.  However, X will not be required to pay any additional amount to Y to 
the extent that it would not be required to be paid but for: 

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(A)the failure by Y to comply with or perform any agreement contained in 
Section 4(a)(i), 4(a)(iii) or 4(d); or 

(B)the failure of a representation made by Y pursuant to Section 3(f) to be accurate and 
true unless such failure would not have occurred but for (I) any action taken by a taxing 
authority, or brought in a court of competent jurisdiction, on or after the date on which a 
Transaction is entered into (regardless of whether such action is taken or brought with 
respect to a party to this Agreement) or (II) a Change in Tax Law. 

(ii)Liability.  If:-- 

(1)X is required by any applicable law, as modified by the practice of any relevant 
governmental revenue authority, to make any deduction or withholding in respect of which X 
would not be required to pay an additional amount to Y under Section 2(d)(i)(4); 

(2)X does not so deduct or withhold; and 

(3)a liability resulting from such Tax is assessed directly against X,  

then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y 
will promptly pay to X the amount of such liability (including any related liability for interest, but 
including any related liability for penalties only if Y has failed to comply with or perform any 
agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).

(e)Default Interest; Other Amounts.  Prior to the occurrence or effective designation of an Early 
Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any 
payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest 
(before as well as after judgment) on the overdue amount to the other party on demand in the same currency 
as such overdue amount, for the period from (and including) the original due date for payment to (but 
excluding) the date of actual payment, at the Default Rate.  Such interest will be calculated on the basis of 
daily compounding and the actual number of days elapsed.  If, prior to the occurrence or effective designation 
of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of 
any obligation required to be settled by delivery, it will compensate the other party on demand if and to the 
extent provided for in the relevant Confirmation or elsewhere in this Agreement. 

3.Representations 

Each party represents to the other party (which representations will be deemed to be repeated by each party 
on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at 
all times until the termination of this Agreement) that:

(a)Basic Representations. 

(i)Status.  It is duly organized and validly existing under the laws of the jurisdiction of its 
organization or incorporation and, if relevant under such laws, in good standing; 

(ii)Powers.  It has the power to execute this Agreement and any other documentation relating to 
this Agreement to which it is a party, to deliver this Agreement and any other documentation relating 
to this Agreement that it is required by this Agreement to deliver and to perform its obligations 
under this Agreement and any obligations it has under any Credit Support Document to which it is 
a party and has taken all necessary action to authorize such execution, delivery and performance; 

(iii)No Violation or Conflict.  Such execution, delivery and performance do not violate or conflict 
with any law applicable to it, any provision of its constitutional documents, any order or judgment 
of any court or other agency of government applicable to it or any of its assets or any contractual 
restriction binding on or affecting it or any of its assets; 

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(iv)Consents.  All governmental and other consents that are required to have been obtained by it 
with respect to this Agreement or any Credit Support Document to which it is a party have been 
obtained and are in full force and effect and all conditions of any such consents have been complied 
with; and 

(v)Obligations Binding.  Its obligations under this Agreement and any Credit Support Document 
to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance 
with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, 
moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to 
equitable principles of general application (regardless of whether enforcement is sought in a 
proceeding in equity or at law)). 

(b)Absence of Certain Events.  No Event of Default or Potential Event of Default or, to its knowledge, 
Termination Event with respect to it has occurred and is continuing and no such event or circumstance would 
occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support 
Document to which it is a party. 

(c)Absence of Litigation.  There is not pending or, to its knowledge, threatened against it or any of its 
Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, 
agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of 
this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations 
under this Agreement or such Credit Support Document. 

(d)Accuracy of Specified Information.  All applicable information that is furnished in writing by or 
on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of 
the date of the information, true, accurate and complete in every material respect. 

(e)Payer Tax Representation.  Each representation specified in the Schedule as being made by it for 
the purpose of this Section 3(e) is accurate and true. 

(f)Payee Tax Representations.  Each representation specified in the Schedule as being made by it for 
the purpose of this Section 3(f) is accurate and true. 

4.Agreements 

Each party agrees with the other that, so long as either party has or may have any obligation under this 
Agreement or under any Credit Support Document to which it is a party:--

(a)Furnish Specified Information.  It will deliver to the other party or, in certain cases under 
subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:-- 

(i)any forms, documents or certificates relating to taxation specified in the Schedule or any 
Confirmation; 

(ii)any other documents specified in the Schedule or any Confirmation; and 

(iii)upon reasonable demand by such other party, any form or document that may be required or 
reasonably requested in writing in order to allow such other party or its Credit Support Provider to 
make a payment under this Agreement or any applicable Credit Support Document without any 
deduction or withholding for or on account of any Tax or with such deduction or withholding at a 
reduced rate (so long as the completion, execution or submission of such form or document would 
not materially prejudice the legal or commercial position of the party in receipt of such demand), 
with any such form or document to be accurate and completed in a manner reasonably satisfactory 
to such other party and to be executed and to be delivered with any reasonably required certification,  

in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as 
reasonably practicable.

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(b)Maintain Authorizations.  It will use all reasonable efforts to maintain in full force and effect all 
consents of any governmental or other authority that are required to be obtained by it with respect to this 
Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain 
any that may become necessary in the future. 

(c)Comply with Laws.  It will comply in all material respects with all applicable laws and orders to 
which it may be subject if failure so to comply would materially impair its ability to perform its obligations 
under this Agreement or any Credit Support Document to which it is a party. 

(d)Tax Agreement.  It will give notice of any failure of a representation made by it under Section 3(f) 
to be accurate and true promptly upon learning of such failure. 

(e)Payment of Stamp Tax.  Subject to Section 1l, it will pay any Stamp Tax levied or imposed upon 
it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, 
organized, managed and controlled, or considered to have its seat, or in which a branch or office through 
which it is acting for the purpose of this Agreement is located (“Stamp Tax Jurisdiction”) and will indemnify 
the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party’s 
execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp 
Tax Jurisdiction with respect to the other party. 

5.Events of Default and Termination Events 

(a)Events of Default.  The occurrence at any time with respect to a party or, if applicable, any Credit 
Support Provider of such party or any Specified Entity of such party of any of the following events constitutes 
an event of default (an “Event of Default”) with respect to such party:-- 

(i)Failure to Pay or Deliver.  Failure by the party to make, when due, any payment under this 
Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not 
remedied on or before the third Local Business Day after notice of such failure is given to the party; 

(ii)Breach of Agreement.  Failure by the party to comply with or perform any agreement or 
obligation (other than an obligation to make any payment under this Agreement or delivery under 
Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation 
under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance 
with this Agreement if such failure is not remedied on or before the thirtieth day after notice of 
such failure is given to the party; 

(iii)Credit Support Default. 

(1)Failure by the party or any Credit Support Provider of such party to comply with or 
perform any agreement or obligation to be complied with or performed by it in accordance 
with any Credit Support Document if such failure is continuing after any applicable grace 
period has elapsed; 

(2)the expiration or termination of such Credit Support Document or the failing or ceasing 
of such Credit Support Document to be in full force and effect for the purpose of this Agreement 
(in either case other than in accordance with its terms) prior to the satisfaction of all obligations 
of such party under each Transaction to which such Credit Support Document relates without 
the written consent of the other party; or 

(3)the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in 
whole or in part, or challenges the validity of, such Credit Support Document; 

(iv)Misrepresentation.  A representation (other than a representation under Section 3(e) or (f)) 
made or repeated or deemed to have been made or repeated by the party or any Credit Support 
Provider of such party in this Agreement or any Credit Support Document proves to have been 
 

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incorrect or misleading in any material respect when made or repeated or deemed to have been made 
or repeated;

(v)Default under Specified Transaction.  The party, any Credit Support Provider of such party or 
any applicable Specified Entity of such party (l) defaults under a Specified Transaction and, after 
giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an 
acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, 
after giving effect to any applicable notice requirement or grace period, in making any payment or 
delivery due on the last payment, delivery or exchange date of, or any payment on early termination 
of, a Specified Transaction (or such default continues for at least three Local Business Days if there 
is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or 
rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity 
appointed or empowered to operate it or act on its behalf); 

(vi)Cross Default.  If “Cross Default” is specified in the Schedule as applying to the party, the 
occurrence or existence of (l) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable 
Specified Entity of such party under one or more agreements or instruments relating to Specified 
Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than 
the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified 
Indebtedness becoming, or becoming capable at such time of being declared, due and payable under 
such agreements or instruments, before it would otherwise have been due and payable or (2) a default 
by such party, such Credit Support Provider or such Specified Entity (individually or collectively) 
in making one or more payments on the due date thereof in an aggregate amount of not less than the 
applicable Threshold Amount under such agreements or instruments (after giving effect to any 
applicable notice requirement or grace period); 

(vii)Bankruptcy.   The party, any Credit Support Provider of such party or any applicable Specified 
Entity of such party:  

(1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes 
insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay 
its debts as they become due; (3) makes a general assignment, arrangement or composition 
with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding 
seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or 
insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its 
winding-up or liquidation, and, in the case of any such proceeding or petition instituted or 
presented against it, such proceeding or petition (A) results in a judgment of insolvency or 
bankruptcy or the entry of an order for relief or the making of an order for its winding-up or 
liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days 
of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official 
management or liquidation (other than pursuant to a consolidation, amalgamation or merger); 
(6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, 
conservator, receiver, trustee, custodian or other similar official for it or for all or substantially 
all its assets; (7) has a secured party take possession of all or substantially all its assets or has 
a distress, execution, attachment, sequestration or other legal process levied, enforced or sued 
on or against all or substantially all its assets and such secured party maintains possession, or 
any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days 
thereafter; (8) causes or is subject to any event with respect to it which, under the applicable 
laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) 
to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval 
of, or acquiescence in, any of the foregoing acts; or 

(viii)Merger Without Assumption.  The party or any Credit Support Provider of such party 
consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets 
to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:-- 

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(1)the resulting, surviving or transferee entity fails to assume all the obligations of such party 
or such Credit Support Provider under this Agreement or any Credit Support Document to 
which it or its predecessor was a party by operation of law or pursuant to an agreement 
reasonably satisfactory to the other party to this Agreement; or 

(2)the benefits of any Credit Support Document fail to extend (without the consent of the 
other party) to the performance by such resulting, surviving or transferee entity of its 
obligations under this Agreement. 

(b)Termination Events.  The occurrence at any time with respect to a party or, if applicable, any Credit 
Support Provider of such party or any Specified Entity of such party of any event specified below constitutes 
an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax 
Event Upon Merger if the event is specified in (iii) below and, if specified to be applicable, a Credit Event 
 

Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event 
is specified pursuant to (v) below:

(i)Illegality.  Due to the adoption of, or any change in, any applicable law after the date on which 
a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by 
any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after 
such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for 
such party (which will be the Affected Party): 

(1)to perform any absolute or contingent obligation to make a payment or delivery or to r
eceive a payment or delivery in respect of such Transaction or to comply with any other 
material provision of this Agreement relating to such Transaction; or 

(2)to perform, or for any Credit Support Provider of such party to perform, any contingent 
or other obligation which the party (or such Credit Support Provider) has under any Credit 
Support Document relating to such Transaction; 

(ii) Tax Event.  Due to (x) any action taken by a taxing authority, or brought in a court of competent 
jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such 
action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, 
the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on 
the next succeeding Scheduled Payment Date (l) be required to pay to the other party an additional 
amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest 
under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to 
be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 
6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under 
Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); 

(iii)Tax Event Upon Merger.  The party (the “Burdened Party”) on the next succeeding Scheduled 
Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable 
Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or 
(2) receive a payment from which an amount has been deducted or withheld for or on account of 
any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount 
(other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party 
consolidating or amalgamating with, or merging with or into, or transferring all or substantially all 
its assets to, another entity (which will be the Affected Party) where such action does not constitute 
an event described in Section 5(a)(viii); 

(iv)Credit Event Upon Merger.  If “Credit Event Upon Merger” is specified in the Schedule as applying 
to the party, such party (“X”), any Credit Support Provider of X or any applicable Specified Entity of X 
 

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consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets 
to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the 
creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such 
Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action 
(and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or

(v)Additional Termination Event.  If any “Additional Termination Event” is specified in the 
Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the 
Affected Party or Affected Parties shall be as specified for such Additional Termination Event in 
the Schedule or such Confirmation). 

(c)Event of Default and Illegality.  If an event or circumstance which would otherwise constitute or 
give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not 
constitute an Event of Default. 

6.Early Termination 

(a)Right to Terminate Following Event of Default.  If at any time an Event of Default with respect to 
a party (the “Defaulting Party”) has occurred and is then continuing, the other party (the “Non-defaulting 
Party”) may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, 
designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of 
all outstanding Transactions.  If, however, “Automatic Early Termination” is specified in the Schedule as 
applying to a party, then  an Early Termination Date in respect of all outstanding Transactions will occur 
immediately upon the occurrence with respect to such party of an Event of Default specified in 
Section 5(a)(vii)(l), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately 
preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the 
occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent 
analogous thereto, (8). 

(b)Right to Terminate Following Termination Event. 

(i)Notice.  If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of 
it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction 
and will also give such other information about that Termination Event as the other party may reasonably 
require. 

(ii)Transfer to Avoid Termination Event.  If either an Illegality under Section 5(b)(i)(l) or a Tax 
Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the 
Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate 
an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require 
such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after 
it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of 
the Affected Transactions to another of its Offices or Affiliates so that such Termination Event 
ceases to exist. 

If the Affected Party is not able to make such a transfer it will give notice to the other party to that 
effect within such 20 day period, whereupon the other party may effect such a transfer within 
30 days after the notice is given under Section 6(b)(i).

Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the 
prior written consent of the other party, which consent will not be withheld if such other party’s 
policies in effect at such time would permit it to enter into transactions with the transferee on the 
terms proposed.

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(iii)Two Affected Parties.  If an Illegality under Section 5(b)(i)(l) or a Tax Event occurs and there 
are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days 
after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. 

(iv)Right to Terminate.  If:-- 

(1)a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may 
be, has not been effected with respect to all Affected Transactions within 30 days after an 
Affected Party gives notice under Section 6(b)(i); or 

(2)an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional 
Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not 
the Affected Party,  

either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, 
any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more 
than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event 
Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not 
more than 20 days notice to the other party and provided that the relevant Termination Event is then 
continuing, designate a day not earlier than the day such notice is effective as an Early Termination 
Date in respect of all Affected Transactions.

(c)Effect of Designation. 

(i)If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early 
Termination Date will occur on the date so designated, whether or not the relevant Event of Default 
or Termination Event is then continuing. 

(ii)Upon the occurrence or effective designation of an Early Termination Date, no further 
payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will 
be required to be made, but without prejudice to the other provisions of this Agreement.  The amount, 
if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). 

(d)Calculations. 

(i)Statement.  On or as soon as reasonably practicable following the occurrence of an Early 
Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) 
and will provide to the other party a statement (1) showing, in reasonable detail, such calculations 
(including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving 
details of the relevant account to which any amount payable to it is to be paid.  In the absence of written 
confirmation from the source of a quotation obtained in determining a Market Quotation, the records of 
the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such 
quotation. 

(ii)Payment Date.  An amount calculated as being due in respect of any Early Termination Date 
under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the 
case of an Early Termination Date which is designated or occurs as a result of an Event of Default) 
and on the day which is two Local Business Days after the day on which notice of the amount payable 
is effective (in the case of an Early Termination Date which is designated as a result of a Termination 
Event).  Such amount will be paid together with (to the extent permitted under applicable law) 
interest thereon (before as well as after judgment) in the Termination Currency, from (and including) 
the relevant Early Termination Date to (but excluding) the date such amount is paid, at the 
Applicable Rate.  Such interest will be calculated on the basis of daily compounding and the actual 
number of days elapsed. 

(e)Payments on Early Termination.  If an Early Termination Date occurs, the following provisions 
shall apply based on the parties’ election in the Schedule of a payment measure, either “Market Quotation” 
 

9ISDA® 1992 

 

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or “Loss”, and a payment method, either the “First Method” or the “Second Method”.  If the parties fail to 
designate a payment measure or payment method in the Schedule, it will be deemed that “Market Quotation” 
or the “Second Method”, as the case may be, shall apply.  The amount, if any, payable in respect of an Early 
Termination Date and determined pursuant to this Section will be subject to any Set-off.

(i)Events of Default.  If the Early Termination Date results from an Event of Default:-- 

(1)First Method and Market Quotation.  If the First Method and Market Quotation apply, the 
Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the 
sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the 
Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing 
to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts 
owing to the Defaulting Party. 

(2)First Method and Loss.  If the First Method and Loss apply, the Defaulting Party will pay 
to the Non-defaulting Party, if a positive number, the Non-defaulting Party’s Loss in respect 
of this Agreement. 

(3)Second Method and Market Quotation.  If the Second Method and Market Quotation apply, 
an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the 
Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency 
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination 
Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party.  If that amount 
is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative 
number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting 
Party. 

(4)Second Method and Loss.  If the Second Method and Loss apply, an amount will be payable 
equal to the Non-defaulting Party’s Loss in respect of this Agreement.  If that amount is a 
positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative 
number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting 
Party. 

(ii)Termination Events.  If the Early Termination Date results from a Termination Event:-- 

(1)One Affected Party.  If there is one Affected Party, the amount payable will be determined 
in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss 
applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting 
Party will be deemed to be references to the Affected Party and the party which is not the 
Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being 
terminated, Loss shall be calculated in respect of all Terminated Transactions. 

(2)Two Affected Parties.  If there are two Affected Parties: 

(A)if Market Quotation applies, each party will determine a Settlement Amount in 
respect of the Terminated Transactions, and an amount will be payable equal to (I) the 
sum of (a) one-half of the difference between the Settlement Amount of the party with 
the higher Settlement Amount (“X”) and the Settlement Amount of the party with the 
lower Settlement Amount (“Y”) and (b) the Termination Currency Equivalent of the 
Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid 
Amounts owing to Y; and 

(B)if Loss applies, each party will determine its Loss in respect of this Agreement (or, 
if fewer than all the Transactions are being terminated, in respect of all Terminated 
Transactions) and an amount will be payable equal to one-half of the difference between 
 

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the Loss of the party with the higher Loss (“X”) and the Loss of the party with the lower 
Loss (“Y”).

If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X 
will pay the absolute value of that amount to Y.

(iii)Adjustment for Bankruptcy.  In circumstances where an Early Termination Date occurs 
because “Automatic Early Termination” applies in respect of a party, the amount determined under 
this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to 
reflect any payments or deliveries made by one party to the other under this Agreement (and retained 
by such other party) during the period from the relevant Early Termination Date to the date for 
payment determined under Section 6(d)(ii). 

(iv)Pre-Estimate.  The parties agree that if Market Quotation applies an amount recoverable under 
this Section 6(e) is a reasonable pre-estimate of loss and not a penalty.  Such amount is payable for 
the loss of bargain and the loss of protection against future risks and except as otherwise provided 
in this Agreement neither party will be entitled to recover any additional damages as a consequence 
of such losses. 

7.Transfer 

Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement 
may be transferred (whether by way of security or otherwise) by either party without the prior written consent 
of the other party, except that:

(a)a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation 
with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without 
prejudice to any other right or remedy under this Agreement); and 

(b)a party may make such a transfer of all or any part of its interest in any amount payable to it from 
a Defaulting Party under Section 6(e). 

Any purported transfer that is not in compliance with this Section will be void.

8.Contractual Currency 

(a)Payment in the Contractual Currency.  Each payment under this Agreement will be made in the 
relevant currency specified in this Agreement for that payment (the “Contractual Currency”).  To the extent 
permitted by applicable law, any obligation to make payments under this Agreement in the Contractual 
Currency will not be discharged or satisfied by any tender in any currency other than the Contractual 
Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, 
acting in  reasonable manner and in good faith in converting the currency so tendered into the Contractual 
Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement.  
If for any reason the amount in the Contractual Currency so received falls short of the amount in the 
Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to 
the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency 
as may be necessary to compensate for the shortfall.  If for any reason the amount in the Contractual Currency 
so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party 
receiving the payment will refund promptly the amount of such excess. 

(b)Judgments.   To the extent permitted by applicable law, if any judgment or order expressed in a 
currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect 
of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this 
Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described 
in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such 
party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other 
 

11ISDA® 1992 

 

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party the amount of any shortfall of the Contractual Currency received by such party as a consequence of 
sums paid in such other currency and will refund promptly to the other party any excess of the Contractual 
Currency received by such party as a consequence of sums paid in such other currency if such shortfall or 
such excess arises or results from any variation between the rate of exchange at which the Contractual 
Currency is converted into the currency of the judgment or order for the purposes of such judgment or order 
and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in 
converting the currency received into the Contractual Currency, to purchase the Contractual Currency with 
the amount of the currency of the judgment or order actually received by such party.  The term “rate of 
exchange” includes, without limitation, any premiums and costs of exchange payable in connection with the 
purchase of or conversion into the Contractual Currency.

(c)Separate Indemnities.  To the extent permitted by applicable law, these indemnities constitute 
separate and independent obligations from the other obligations in this Agreement, will be enforceable as 
separate and independent causes of action, will apply notwithstanding any indulgence granted by the party 
to which any payment is owed and will not be affected by judgment being obtained or claim or proof being 
made for any other sums payable in respect of this Agreement. 

(d)Evidence of Loss.  For the purpose of this Section 8, it will be sufficient for a party to demonstrate 
that it would have suffered a loss had an actual exchange or purchase been made. 

9. Miscellaneous 

(a)Entire Agreement.  This Agreement constitutes the entire agreement and understanding of the parties 
with respect to its subject matter and supersedes all oral communication and prior writings with respect 
thereto. 

(b)Amendments.  No amendment, modification or waiver in respect of this Agreement will be effective 
unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the 
parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. 

(c)Survival of Obligations.  Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the 
parties under this Agreement will survive the termination of any Transaction. 

(d)Remedies Cumulative.  Except as provided in this Agreement, the rights, powers, remedies and 
privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies 
and privileges provided by law. 

(e)Counterparts and Confirmations. 

(i)This Agreement (and each amendment, modification and waiver in respect of it) may be 
executed and delivered in counterparts (including by facsimile transmission), each of which will be 
deemed an original. 

(ii)The parties intend that they are legally bound by the terms of each Transaction from the moment 
they agree to those terms (whether orally or otherwise).  A Confirmation shall be entered into as 
soon as practicable and may be executed and delivered in counterparts (including by facsimile 
transmission) or be created by an exchange of telexes or by an exchange of electronic messages on 
an electronic messaging system, which in each case will be sufficient for all purposes to evidence 
a binding supplement to this Agreement.  The parties will specify therein or through another effective
 means that any such counterpart, telex or electronic message constitutes a Confirmation. 

(f)No Waiver of Rights.  A failure or delay in exercising any right, power or privilege in respect of this 
Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power 
or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or 
the exercise of any other right, power or privilege. 

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(g)Headings.  The headings used in this Agreement are for convenience of reference only and are not 
to affect the construction of or to be taken into consideration in interpreting this Agreement. 

10. Offices; Multibranch Parties 

(a)If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction 
through an Office other than its head or home office represents to the other party that, notwithstanding the 
place of booking office or jurisdiction of incorporation or organization of such party, the obligations of such 
party are the same as if it had entered into the Transaction through its head or home office.  This representation 
will be deemed to be repeated by such party on each date on which a Transaction is entered into. 

(b)Neither party may change the Office through which it makes and receives payments or deliveries 
for the purpose of a Transaction without the prior written consent of the other party. 

(c)If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make 
and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the 
Office through which it makes and receives payments or deliveries with respect to a Transaction will be 
specified in the relevant Confirmation. 

11. Expenses 

A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all 
reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by 
reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document 
to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including 
but not limited to, costs of collection.

12. Notices 

(a)Effectiveness.  Any notice or other communication in respect of this Agreement may be given in any 
manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given 
by facsimile transmission or electronic messaging system) to the address or number or in accordance with 
the electronic messaging system details provided (see the Schedule) and will be deemed effective as 
indicated: 

(i)if in writing and delivered in person or by courier, on the date it is delivered; 

(ii)if sent by telex, on the date the recipient’s answerback is received; 

(iii)if sent by facsimile transmission, on the date that transmission is received by a responsible 
employee of the recipient in legible form (it being agreed that the burden of proving receipt will be 
on the sender and will not be met by a transmission report generated by the sender’s facsimile 
machine); 

(iv)if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt 
requested), on the date that mail is delivered or its delivery is attempted; or 

(v)if sent by electronic messaging system, on the date that electronic message is received, 

unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business 
Day or that communication is delivered (or attempted) or received, as applicable, after the close of business 
on a Local Business Day, in which case that communication shall be deemed given and effective on the first 
following day that is a Local Business Day.

(b)Change of Addresses.  Either party may by notice to the other change the address, telex or facsimile 
number or electronic messaging system details at which notices or other communications are to 
be given to it. 

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13. Governing Law and Jurisdiction 

(a)Governing Law.  This Agreement will be governed by and construed in accordance with the law 
specified in the Schedule. 

(b)Jurisdiction.  With respect to any suit, action or proceedings relating to this Agreement 
(“Proceedings”), each party irrevocably: 

(i)submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed 
by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the 
United States District Court located in the Borough of Manhattan in New York City, if this 
Agreement is expressed to be governed by the laws of the State of New York; and 

(ii)waives any objection which it may have at any time to the laying of venue of any Proceedings 
brought in any such court, waives any claim that such Proceedings have been brought in an 
inconvenient forum and further waives the right to object, with respect to such Proceedings, that 
such court does not have any jurisdiction over such party. 

Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction 
(outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined 
in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or 
re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more 
jurisdictions preclude the bringing of Proceedings in any other jurisdiction.

(c)Service of Process.  Each party irrevocably appoints the Process Agent (if any) specified opposite 
its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings.  If for any reason any party’s Process Agent is unable to act as such, such party will promptly notify the other party 
and within 30 days appoint a substitute process agent acceptable to the other party.  The parties irrevocably 
consent to service of process given in the manner provided for notices in Section 12.  Nothing in this 
Agreement will affect the right of either party to serve process in any other manner permitted by law. 

(d)Waiver of Immunities.  Each party irrevocably waives, to the fullest extent permitted by applicable 
law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity 
on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief 
by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets 
(whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its 
revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and 
irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any 
Proceedings. 

14. Definitions 

As used in this Agreement:--

“Additional Termination Event” has the meaning specified in Section 5(b).

“Affected Party” has the meaning specified in Section 5(b).

“Affected Transactions” means (a) with respect to any Termination Event consisting of an Illegality, Tax 
Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event 
and (b) with respect to any other Termination Event, all Transactions.

“Affiliate” means, subject to the Schedule, in relation to any person, any entity controlled, directly or 
indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or 
indirectly under common control with the person.  For this purpose, “control” of any entity or person means 
ownership of a majority of the voting power of the entity or person.

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“Applicable Rate” means:--

(a)in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) 
by a Defaulting Party, the Default Rate; 

(b)in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date 
(determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; 

(c)in respect of all other obligations payable or deliverable (or which would have been but for 
Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and 

(d)in all other cases, the Termination Rate. 

“Burdened Party” has the meaning specified in Section 5(b).

“Change in Tax Law” means the enactment, promulgation, execution or ratification of, or any change in or 
amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the 
date on which the relevant Transaction is entered into.

“consent” includes a consent, approval, action, authorization, exemption, notice, filing, registration or 
exchange control consent.

“Credit Event Upon Merger” has the meaning specified in Section 5(b).

“Credit Support Document” means any agreement or instrument that is specified as such in this Agreement. 

“Credit Support Provider” has the meaning specified in the Schedule.

“Default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to 
the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus l% per annum.

“Defaulting Party” has the meaning specified in Section 6(a).

“Early Termination Date” means the date determined in accordance with Section 6(a) or 6(b)(iv).

“Event of Default” has the meaning specified in Section 5(a) and, if applicable, in the Schedule.

“Illegality” has the meaning specified in Section 5(b).

“Indemnifiable Tax” means any Tax other than a Tax that would not be imposed in respect of a payment 
under this Agreement but for a present or former connection between the jurisdiction of the government or 
taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient 
(including, without limitation, a connection arising from such recipient or related person being or having 
been a citizen or resident of such jurisdiction, or being or having been organized, present or engaged in a 
trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of 
business in such jurisdiction, but excluding a connection arising solely from such recipient or related person 
having executed, delivered, performed its obligations or received a payment under, or enforced, this 
Agreement or a Credit Support Document).

“law” includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of 
any relevant governmental revenue authority) and “lawful” and “unlawful” will be construed accordingly.

“Local Business Day” means, subject to the Schedule, a day on which commercial banks are open for 
business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any 
obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, 
as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated 
by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account 
is located and, if different, in the principal financial center, if any, of the currency of such payment, (c) in 
relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the 

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city specified in the address for notice provided by the recipient and, in the case of a notice contemplated 
by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to 
Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction.

“Loss” means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and 
a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be 
its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement 
or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of 
bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result 
of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain 
resulting from any of them).  Loss includes losses and costs (or gains) in respect of any payment or delivery 
required to have been made (assuming satisfaction of each applicable condition precedent) on or before the 
relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(l) or (3) or 
6(e)(ii)(2)(A) applies.  Loss does not include a party’s legal fees and out-of-pocket expenses referred to under 
Section 11.  A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably 
practicable, as of the earliest date thereafter as is reasonably practicable.  A party may (but need not) determine 
its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant 
markets.

“Market Quotation” means, with respect to one or more Terminated Transactions and a party making the 
determination, an amount determined on the basis of quotations from Reference Market-makers.  Each 
quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) 
or by such party (expressed as a positive number) in consideration of an agreement between such party (taking 
into account any existing Credit Support Document with respect to the obligations of such party) and the 
quoting Reference Market-maker to enter into a transaction (the “Replacement Transaction”) that would 
have the effect of preserving for such party the economic equivalent of any payment or delivery (whether 
the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable 
condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group 
of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date.  For this purpose, Unpaid Amounts in respect of the Terminated Transaction or 
group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that 
would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each 
applicable condition precedent) after that Early Termination Date is to be included.  The Replacement 
Transaction would be subject to such documentation as such party and the Reference Market-maker may, in 
good faith, agree.  The party making the determination (or its agent) will request each Reference 
Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time 
(without regard to different time zones) on or as soon as reasonably practicable after the relevant Early 
Termination Date.  The day and time as of which those quotations are to be obtained will be selected in good 
faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after 
consultation with the other.  If more than three quotations are provided, the Market Quotation will be the 
arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values.  If 
exactly three such quotations are provided, the Market Quotation will be the quotation remaining after 
disregarding the highest and lowest quotations.  For this purpose, if more than one quotation has the same 
highest value or lowest value, then one of such quotations shall be disregarded.  If fewer than three quotations 
are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group 
of Terminated Transactions cannot be determined.

“Non-default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) 
to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount.

“Non-defaulting Party” has the meaning specified in Section 6(a).

“Office” means a branch or office of a party, which may be such party’s head or home office.

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“Potential Event of Default” means any event which, with the giving of notice or the lapse of time or both, 
would constitute an Event of Default.

“Reference Market-makers” means four leading dealers in the relevant market selected by the party 
determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which 
satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make 
an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same 
city.

“Relevant Jurisdiction” means, with respect to a party, the jurisdictions (a) in which the party is 
incorporated, organized, managed and controlled or considered to have its seat, (b) where an Office through 
which the party is acting for purposes of this Agreement is located, (c) in which the party executes this 
Agreement and (d) in relation to any payment, from or through which such payment is made.

“Scheduled Payment Date” means a date on which a payment or delivery is to be made under Section 2(a)(i) 
with respect to a Transaction.

“Set-off” means set-off, offset, combination of accounts, right of retention or withholding or similar right 
or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under 
this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such 
payer.

“Settlement Amount” means, with respect to a party and any Early Termination Date, the sum of:--

(a)the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each 
Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; 
and 

(b)such party’s Loss (whether positive or negative and without reference to any Unpaid Amounts) for 
each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be 
determined or would not (in the reasonable belief of the party making the determination) produce a 
commercially reasonable result. 

“Specified Entity” has the meaning specified in the Schedule.

“Specified Indebtedness” means, subject to the Schedule, any obligation (whether present or future, 
contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money.

“Specified Transaction” means, subject to the Schedule, (a) any transaction (including an agreement with respect 
thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support 
Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or 
any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is 
a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or 
equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, 
cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap 
transaction, currency option or any other similar transaction (including any option with respect to any of these 
transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified 
Transaction in this Agreement or the relevant confirmation.

“Stamp Tax” means any stamp, registration, documentation or similar tax.

“Tax” means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including 
interest, penalties and additions thereto) that is imposed by any government or other taxing authority in 
respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax.

“Tax Event” has the meaning specified in Section 5(b).

“Tax Event Upon Merger” has the meaning specified in Section 5(b).

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“Terminated Transactions” means with respect to any Early Termination Date (a) if resulting from a 
Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions 
(in either case) in effect immediately before the effectiveness of the notice designating that Early Termination 
Date (or, if “Automatic Early Termination” applies, immediately before that Early Termination Date).

“Termination Currency” has the meaning specified in the Schedule.

“Termination Currency Equivalent” means, in respect of any amount denominated in the Termination 
Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other 
than the Termination Currency (the “Other Currency”), the amount in the Termination Currency determined 
by the party making the relevant determination as being required to purchase such amount of such Other 
Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case 
may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to 
the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such 
Other Currency with the Termination Currency at or about 11:00 a.m.  (in the city in which such foreign 
exchange agent is located) on such date as would be customary for the determination of such a rate for the 
purchase of such Other Currency for value on the relevant Early Termination Date or that later date.  The 
foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be 
selected in good faith by that party and otherwise will be agreed by the parties.

“Termination Event” means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be 
applicable, a Credit Event Upon Merger or an Additional Termination Event.

“Termination Rate” means a rate per annum equal to the arithmetic mean of the cost (without proof or 
evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such 
amounts.

“Unpaid Amounts” owing to any party means, with respect to an Early Termination Date, the aggregate of 
(a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become 
payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination 
Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated 
Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for 
Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date 
and which has not been so settled as at such Early Termination Date, an amount equal to the fair market 

18ISDA® 1992 

 

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value of that which was (or would have been) required to be delivered as of the originally scheduled date 
for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency 
of such amounts, from (and including) the date such amounts or obligations were or would have been required 
to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate.  Such 
amounts of interest will be calculated on the basis of daily compounding and the actual number of days 
elapsed.  The fair market value of any obligation referred to in clause (b) above shall be reasonably 
determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, 
it shall be the average of the Termination Currency Equivalents of the fair market values reasonably 
determined by both parties.

IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below 
with effect from the date specified on the first page of this document.

 

 

 

	EDF Trading North America, LLC

	Summer Energy, LLC

	(Name of Party)

	(Name of Party)

	By:          /s/Terry Nutt 

Name:       Terry Nutt

Title:         Chief Financial Officer

 

	By:        /s/ Neil Leibman 

Name:     Neil Leibman

Title:       Manager

 

	 

	Summer Energy Northeast, LLC

(Name of Party)

 

By:        /s/ Neil Leibman 

Name:     Neil Leibman

Title:       Manager

 

	 

	 

	 

	 

19ISDA® 1992 

 

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SCHEDULE

to the 

ISDA MASTER AGREEMENT

(Multicurrency - Cross Border)

dated as of May 1, 2018

between

	EDF TRADING NORTH AMERICA, LLC

	and

	Summer Energy, LLC

And

Summer Energy Northeast, LLC

	(“Party A”)

	 

	(jointly and severally together, “Party B”)

	being a limited liability company organized and existing under the laws of the State of Delaware

	 

	each being a limited liability company organized and existing under the laws of the State of Texas

Part 1.  Termination Provisions

In this Agreement:

(a)“Specified Entity” means:  

in relation to Party A, for the purpose of:

	Section 5(a)(v):

	Not applicable

	Section 5(a)(vi):

	Not applicable

	Section 5(a)(vii):

	Not applicable

	Section 5(b)(iv):

	Not applicable

And in relation to Party B, for the purpose of:

	Section 5(a)(v):

	Not applicable

	Section 5(a)(vi):

	Not applicable

	Section 5(a)(vii):

	Not applicable

	Section 5(b)(iv):

	Not applicable

(b)“Specified Transaction” has the meaning specified in Section 14 of this Agreement except that such term is amended by adding after the phrase “currency option” set forth in the 8th line thereof, the phrase “agreement for the purchase, sale, exchange or transfer of any commodity or any other commodity trading transaction”.  For purposes of such definition, “commodity” means any tangible or intangible commodity of any type or description (including, without limitation, electric energy and/or capacity, ancillary services, transmission, congestion rights, renewable energy credits, emission allowances,  

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petroleum and natural gas, coal and the products or by-products, or storage capacity or rights thereof).

(c)The “Cross Default” provisions of Section 5(a)(vi) of this Agreement apply to both Party A and Party B.  Section 5(a)(vi) is amended by deleting the phrase “, or becoming capable at such time of being declared” from clause (1) thereof. 

If such provisions apply:

(i)“Specified Indebtedness” has the meaning specified in Section 14 of this Agreement.  

(ii)“Threshold Amount” means:  

(1)With respect to Party A: (1)  an amount in USD equivalent to 3% of the total shareholders’ equity of Party A (or its equivalent in another currency, being the amount of that other currency required to purchase such amount at the rate equal to the spot exchange rate of any foreign exchange agent selected in good faith by the party asserting that a Cross Default has occurred); and 

(2)With respect to Party B: With respect to Party B: $1,000,000 (or its equivalent in another currency, being the amount of that other currency required to purchase such amount at the rate equal to the spot exchange rate of any foreign exchange agent selected in good faith by the party asserting that a Cross Default has occurred). 

For purposes of the above, shareholders’ equity shall be determined by reference to the relevant party’s most recent consolidated balance sheet prepared in accordance with GAAP (as such term is defined in the Energy Services Agreement). 

(d)The “Credit Event Upon Merger” provisions of Section 5(b)(iv) of this Agreement apply to Party A and Party B.  Section 5(b)(iv) of this Agreement is amended by adding the following to the end thereof: 

“The foregoing does not constitute a Termination Event if (A) immediately thereafter the resulting, surviving, or transferee entity (which entity is the successor-in-interest to such party) is directly or indirectly owned or controlled by such party’s Credit Support Provider, if any, and the Credit Support Documents supporting such party’s obligations remain in full force and effect, or (B) in connection with or upon the occurrence thereof X or its successor or transferee (i) provides (or causes to be provided) to the other party (“Y”) within two (2) Local Business Days of Y’s written demand therefore, performance assurance in a form amount acceptable to Y in its reasonable discretion or (ii) enters into an amendment to this Agreement that amends the Credit Support Annex on terms acceptable to Y in its discretion.  If performance assurance is provided pursuant to clause (i), it will be in addition to any Eligible Credit Support required under the Credit Support 

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Annex.”

(e)The “Automatic Early Termination” provision of Section 6(a) of this Agreement does not apply to Party A or to Party B unless the Event of Default specified in Sections 5(a)(vii)(1), (3), (4), (5), (6) or to the extent analogous thereto, (8), of this Agreement is  

governed by a system of law which does not permit termination to take place after the occurrence of the relevant Event of Default, in which case, the Automatic Early Termination provision of Section 6(a) of this Agreement applies to both Party A and Party B.

(f)Payments on Early Termination.  For the purpose of Section 6(e) of this Agreement 

(i)Loss will apply; and  

(ii)The Second Method will apply. 

(g)“Termination Currency” means United States Dollars (“USD”). 

(h)Additional Termination Event does not apply. 

Part 2.  Tax Representations

(a)Payer Tax Representations.  For the purpose of Section 3(e) of this Agreement, Party A and Party B make the following representation: 

It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party under this Agreement.  In making this representation, it may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement, and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) of this Agreement by reason of material prejudice to its legal or commercial position.

(b)Payee Tax Representations. For the purpose of Section 3(f) of this Agreement, Party A and Party B make the representations specified below, if any: 

(i)Party A represents that it is a limited liability company organized and existing under the laws of the State of Delaware and is a disregarded entity for federal tax purposes.  The entity that is treated as the owner of Party A’s assets for federal tax purposes is a United States person within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended. 

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(ii)Party B represents that it is a limited liability company organized and existing under the laws of the State of Texas and for federal tax purposes is a United States person within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended. 

Part 3.  Agreement to Deliver Documents

For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable:

(a)Tax forms, documents or certificates to be delivered are: 

	Party required to deliver document

	Form/Document/Certificate

	Date by which to be delivered

	Party A and 

Party B

 

	An executed United States Internal Revenue Service Form W-9 (or any successor thereto)

	(i)Upon the execution of this Agreement;  

(ii)promptly upon reasonable demand by the other party; and  

(iii)promptly upon learning that any such form previously provided by the party has become obsolete or incorrect. 

	Party A and 

Party B

	Uniform Sales & Use Tax Certificate – Multijurisdiction or other similar applicable resale certificates.

	(i)Upon the execution of this Agreement (if physical annex is attached);  

(ii)promptly upon reasonable demand by the other party; and  

(iii)promptly upon learning that any such form previously provided by the party has become obsolete or incorrect. 

(b)Other documents to be delivered are: 

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	Party required to deliver document

	Form/Document/Certificate

	Date by which to be delivered

	Covered by Section 3(d) Representation

	Party A and
Party B

	A duly executed certificate reasonably acceptable to the receiving party evidencing the authority (i) of such party to execute, deliver and perform its obligations under this Agreement and any Credit Support Document to which it is a party and (ii) of its Credit Support Provider, if any, to execute, deliver and perform its obligations under each Credit 

 

Support Document to which it is a party.

	Upon execution of this Agreement

	Yes

	Party A and
Party B

	A duly executed incumbency certificate reasonably acceptable to the receiving party certifying the name, true signature and authority of each person authorized to execute this Agreement and any Credit Support Document to which it is a party.

	Upon execution of this Agreement

	Yes

	Party A and
Party B

	Such other reasonable documentation (including financial information) the other party requests in connection with any Transaction.

	Promptly upon request

	Yes

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	Party A and
Party B

	A copy of the most recently available annual report containing audited consolidated financial statements of the party or its Credit Support Provider, as applicable.

	Promptly upon request if such financial statements are not available on “SEDAR”, “EDGAR” or on the party’s or its Credit Support Provider’s (as applicable) home page on the World Wide Web

	Yes

	Party A 

	A copy of the most recently available quarterly unaudited consolidated financial statements of Party A, or in the case of its Credit Support Provider, as applicable, a copy of its bi-annual consolidated financial statements

	Promptly upon request if such financial statements are not available on “SEDAR”, “EDGAR” or on the party’s or its Credit Support Provider’s (as applicable) home page on the World Wide Web

	Yes

	Party B

	A copy of the most recently available quarterly unaudited consolidated financial statements 

 

of Party B or its Credit Support Provider, as applicable.

	Promptly upon request if such financial statements are not 

 

available on “SEDAR”, “EDGAR” or on the party’s or its Credit Support Provider’s (as applicable) home page on the World Wide Web

	Yes

	Party A and Party B

	Duly executed copy of each Credit Support Document specified in Part 4(e) of this Schedule.

	Upon execution thereof 

	Yes

Part 4.  Miscellaneous

(a)Notices. 

(i)Effectiveness.  Section 12(a) of the Agreement is amended by (A) deleting the phrase “facsimile transmission” set forth in the third line and replacing it with the word “email” and (B) deleting the phrase “if sent by telex, on the date the  

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4833-0855-7924

recipient’s answerback is received;” set forth in clause (ii) thereof and replacing it with the phrase “if sent by email, on the date it is delivered;”.

(ii)Addresses for Notices.  For the purpose of Section 12(a) of this Agreement: 

Address for notices or other communication to Party A:

Address:EDF Energy Services, LLC 

4700 W. Sam Houston Parkway N., Suite 250

Houston, TX 77041

Attention:Contracts Administration 

Telephone:281-781-0333 

Facsimile:281-653-1454 

Email:edfes_contractadmin@edfenergyservices.com 

With a copy of notices or other communication under Section 5 or 6 to:

Address:EDF Energy Services, LLC 

4700 W. Sam Houston Parkway N., Suite 250

Houston, TX 77041

Attention:General Counsel 

Facsimile:281-653-1454 

Address for notices or other communication to Party B:

 

Address:Summer Energy Northeast, LLC 

(formerly:  REP Energy, LLC) 

5847 San Felipe Street #33700

Houston, Texas 77057

Attention:Jaleea George 

Telephone:713-375-2793 

Facsimile:713-481-8470 

Email:jgeorge@summerenergy.com 

With a copy to: 

Address:Kirton McConkie PC 

50 E. South Temple 

Salt Lake City, UT 84111

Attention:Alexander N. Pearson 

Telephone:801-328-3600 

Facsimile:801-212-2006 

Email:apearson@kmclaw.com 

 

(b)Offices.  The provisions of Section 10(a) apply to this Agreement. 

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(c)Multibranch Party.  For the purpose of Section 10(c) of this Agreement: 

(i)Party A is not a Multibranch Party. 

(ii)Party B is not a Multibranch Party. 

(d)Calculation Agent.  The Calculation Agent is Party A unless an Event of Default has occurred and is continuing with respect to Party A and Party A is the sole Defaulting Party, in which case the Calculation Agent will be Party B (or any designated third party mutually agreed to by the parties) until such time as Party A is no longer the sole Defaulting Party.  The failure by a party to perform any duties of the Calculation Agent under this Agreement is not an Event of Default or Termination Event under Sections 5(a) or (b) of this Agreement. 

(e)Credit Support Document.  Details of Credit Support Documents are as follows: 

(i)With respect to Party A and Party B, the Credit Support Annex.  For purposes of this Agreement, “Credit Support Annex” means the annex to this Schedule in the form of the ISDA Credit Support Annex, as published by ISDA in 1994, that includes the version of Paragraph 13 thereto that accompanies, and forms a part of, such annex and this Schedule. 

(ii)With respect to Party A, none. 

(iii)With respect to Party B, that certain Guaranty provided by Party B’s Credit Support Provider in respect of this Agreement, as may be amended, restated, supplemented or otherwise modified from time to time and any replacement thereto issued by Party B’s Credit Support Provider. 

(f)Credit Support Provider. 

(i)Credit Support Provider means in relation to Party A:  Not applicable. 

(ii)Credit Support Provider means in relation to Party B:  Summer Energy Holdings, Inc. 

(g)Governing Law.  This Agreement is governed by to be and construed in accordance with the laws of the State of New York (without giving effect to any provision of New York law that would cause another jurisdiction’s laws to be applied). 

(h)Netting of Payments.  The limitation set forth in Section 2(c)(ii) of this Agreement does not apply.  The result of the foregoing election is that the netting contemplated by Section 2(c) of this Agreement applies to all Transactions. 

(i)“Affiliate” has the meaning specified in Section 14 of this Agreement. 

Part 5.  Other Provisions

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(a)Incorporation of Definitions.  Unless otherwise specified in a Confirmation, this Agreement and each Confirmation incorporates, and is subject to and governed by, the 2005 ISDA Commodity Definitions (the “Commodity Definitions”) and the 2006 ISDA Definitions (the “Definitions”), each as published by the International Swaps and Derivatives Association, Inc. and as amended, supplemented, updated and restated through the date of this Agreement.   

If there is any conflict between the provisions of this Agreement and the provisions of the Commodity Definitions or the Definitions, the provisions of this Agreement apply.  If there is any conflict between the Commodity Definitions and the Definitions, the Commodity Definitions apply.  If there is any conflict between the provisions of this Agreement and a Confirmation, the provisions of the Confirmation apply with respect to the applicable Transaction.  The references in the Definitions to “Swap Transaction” are deemed to be references to any Transaction.

(b)Additional Representations.  Section 3 of this Agreement is amended by adding the following additional representations as clauses (g), (h), and (i) thereof: 

“(g)It is an “eligible contract participant” as such term is defined in Section 1a(18) of the U.S. Commodity Exchange Act (7 U.S.C. § 1a(18)). 

(h)It is entering into this Agreement, any Credit Support Document to which it is a party, each Transaction, and each other document executed and delivered in accordance with this Agreement as principal and not as agent or in any other capacity, fiduciary or otherwise. 

(i)In connection with the negotiation of, the entering into, and the confirming of the execution of this Agreement, any Credit Support Document to which it is a party, each Transaction and any other documentation relating to this Agreement to which it is a party or that it is required by this Agreement to deliver: 

(i)the other party hereto or thereto is not acting as a fiduciary or financial or investment advisor for it; 

(ii)it is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (except such representations as may be expressly set forth in this Agreement, in such Credit Support Document or in any Confirmation); 

(iii)the other party hereto or thereto has not given to it (directly or indirectly through any other person) any assurance, guarantee, or representation whatsoever as to the expected or projected success, profitability, return, performance, result, effect, consequence, or benefit (either legal, regulatory, tax, financial, accounting, or otherwise) of this Agreement, such Credit Support Document, such Transaction or other documentation; 

(iv)it has consulted with its own legal, regulatory, tax, business, investment,  

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financial, and accounting advisors to the extent it has deemed necessary, and it has made its own investment, hedging, and trading decisions (including decisions regarding the suitability of any Transaction pursuant to this Agreement) based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party hereto or thereto;

(v)all trading decisions have been the result of arm’s length negotiations between the parties; and 

(vi)it is entering into this Agreement, such Credit Support Document, each Transaction and any other documentation relating to this Agreement with a full understanding of all of the terms, conditions and risks hereof and thereof (economic and otherwise), and it is capable of assuming and willing to assume (financially and otherwise) those risks.” 

(c)Accuracy of Specified Information.  Section 3(d) of this Agreement is amended by adding in the third line thereof after the word “respect” and before the period the phrase “or, in the case of audited or unaudited financial statements, such financial statements fairly present, as of their date, the financial condition of the relevant entity in accordance with generally accepted accounting principles in the country of such entity’s formation or incorporation, as applicable, consistently applied.” 

(d)Transaction Procedure. 

(i)The parties agree that the essential terms of each Transaction to be entered into hereunder may be orally agreed upon over the telephone, in writing via email or  

instant messaging system, and in accordance with any other method customary for commodity transactions of the type proposed.

(ii)Following agreement on the terms of a Transaction, Party A shall complete and sign a Confirmation recording the agreed upon terms and forward same to Party B.  Party B shall either execute and return the Confirmation or return the Confirmation with applicable corrections, if any, within two (2) Local Business Days of receipt of the Confirmation.  Failure of Party A to complete and sign a Confirmation will not affect the validity or enforceability of the Transaction.  The Parties shall resolve any dispute in respect of a Confirmation raised within the applicable two (2) Local Business Day period in good faith and, if available, with reference to the recorded telephone negotiations of the Transaction, if any, or with reference to any written exchange confirming the terms of the Transaction at the time such Transaction was entered into.  Failure by Party B to respond to any Confirmation within the two (2) Local Business Day period after receipt will not adversely affect the binding, valid and enforceable nature of any Transaction and will, absent manifest error, be deemed to be an affirmation of the terms of the Transaction as set out in the Confirmation. 

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(e)Rounding. Prices for the following will be rounded as follows: 

	Commodity Pricing in MWh:

	rounded to the nearest fourth decimal place

	Commodity Pricing in MMBtu:

	rounded to the nearest fourth decimal place

	All Dollar amounts:

	rounded to the nearest cent

(f)Bank Fees.Each party making a payment to the other party is responsible for any bank fees or charges associated with such payment and shall not deduct such fees from the payment owed to the other party. 

(g)Set-off.  The following subsection (f) is added to Section 6 of this Agreement: 

“(f)Set-off.  Any amount (“Early Termination Amount”) payable to one party (the “Payee”) by the other party (the “Payer”) under Section 6(e) of this Agreement, in circumstances where there is a Defaulting Party or one Affected Party in the case where a Termination Event under Section 5(b)(iv) of this Agreement or any other Termination Event with respect to which all Transactions are Affected Transactions has occurred, will, at the option of the party (“X”) other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting Party or the Affected Party), be reduced by means of set off against any amount(s) (“Other Agreement Amount”) payable (whether at such time or in the future or upon the occurrence of a contingency) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation) under any other agreement(s) between the Payee and the Payer or instrument(s) or undertaking(s) issued or executed by the Payee to, or in the favor of, the Payer (and the Other Agreement Amount will be discharged promptly and in all respects to the extent it is so set-off).  X will give notice to the other party of any set-off effected under this paragraph, The failure to provide notice of set-off does not affect the validity of such set-off.  

For this purpose, either the Early Termination Amount or the Other Agreement Amount (or the relevant portion of such amounts) may be converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency.  The term “rate of exchange” includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the relevant currency.

If any obligation is unascertained, X may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other party when the obligation is ascertained.  Nothing in this subsection is effective to create a charge or other security interest.  This subsection is without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).”

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(h)Bankruptcy Provisions.  Each party acknowledges, intends and, as applicable, agrees that: 

(i)Each transfer of funds, securities or other property under this Agreement or any Transaction constitutes a transfer that may not be avoided under Sections 544, 545, 547, 548(a)(2) or 548(b) of Title 11 of the United States Code or similar or parallel Canadian legislation (the “Bankruptcy Code”). 

(ii)The rights given to each party hereunder upon an Event of Default by the other to cause the liquidation and termination of Transactions and to set-off mutual debts and claims in connection therewith, may not be stayed, limited or avoided under the Bankruptcy Code including, without limitation, Section 362, 365(e) or 105(a) of the Bankruptcy Code. 

(iii)(A) all transactions entered into under this Agreement constitute a “forward contract” within the meaning of the Bankruptcy Code or a “swap agreement” within the meaning of the Bankruptcy Code; (B) each party hereto is a “forward contract merchant” within the meaning of the Bankruptcy Code; (C) all payments made or to be made by one party to the other party pursuant to this Agreement constitute “settlement payments” within the meaning of the Bankruptcy Code; (D) all transfers of Eligible Credit Support or other performance assurance by one party to the other party under this Agreement constitute “margin payments” within the meaning of the Bankruptcy Code; and (E) this Agreement constitutes a “master netting agreement” within the meaning of the Bankruptcy Code.   

(iv)For purposes of this Agreement, the such party is not a “utility” as such term is used in 11 U.S.C. Section 366, and therefore each party waives and agrees not to assert the applicability of the provisions of 11 U.S.C. Section 366 in any bankruptcy proceeding wherein such party is a debtor.  In any such proceeding, each party further waives the right to assert that the other party is a provider of last resort. 

(i)Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction only, be ineffective to the limited extent of such  

prohibition or unenforceability unless such severance will materially impair the benefits of the remaining portions of this Agreement or materially change the reciprocal obligations of the parties.  Any severance will occur without otherwise invalidating or adversely affecting the validity or enforceability of the remainder of this Agreement in such jurisdiction or invalidating or adversely affecting the validity or enforceability of this Agreement as a whole in any other jurisdiction.  If severance is required, the parties shall in good faith negotiate a replacement for the prohibited or unenforceable provision, the economic effect of which approximates as close as possible that of the prohibited or unenforceable provision.

(j)WAIVER OF JURY TRIAL.  EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL  

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BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT.  EACH PARTY:

(i)CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY OR ANY CREDIT SUPPORT PROVIDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT IN THE EVENT OF A SUIT, ACTION OR PROCEEDING SEEK TO ENFORCE THE FOREGOING WAIVER; AND  

(ii)ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND PROVIDE FOR ANY CREDIT SUPPORT DOCUMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 

(k)Termination of Agreement.  If there are no Transactions (or any present or future payment or delivery obligations, contingent or otherwise, thereunder) outstanding under this Agreement, either party may, upon thirty (30) Local Business Days’ notice to the other, terminate this Agreement.  Such termination will not prejudice any rights or obligations that may have accrued prior to such termination.   

(l)Consent to Recording.  Each party consents to the recording of all telephone conversations between its employees and agents and the employees and agents of the other party and each party represents and warrants that its employees and agents have consented to all such recordings.  Any resulting recordings and other evidence may be introduced to prove a Transaction between the parties and to establish any matters pertinent to a Transaction. 

(m)LIMITATION OF LIABILITY.  NO PARTY IS LIABLE FOR OR REQUIRED TO PAY EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES (WHETHER OR NOT ARISING FROM ITS NEGLIGENCE) TO ANY OTHER PARTY, BUT NOTHING IN THIS PROVISION AFFECTS THE ENFORCEABILITY OF SECTION 6(E) OF THIS AGREEMENT.  IF AND TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO THIS AGREEMENT IS DEEMED TO CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE AND AGREE THAT SUCH DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE AND THAT SUCH PAYMENT IS INTENDED TO BE A REASONABLE APPROXIMATION OF THE AMOUNT OF THE DAMAGES AND NOT A PENALTY. 

(n)Confidentiality.  Each party agrees that this Agreement and all other documents relating to this Agreement and any other information provided to it or its Credit Support Provider, if any, will be kept confidential, subject to the following exceptions: 

(i)A party may disclose information to its Affiliates and its and their respective directors, employees, regulators, counsel, auditors, agents or other advisors (“Representatives”) to whom it is necessary to show the information for purposes  

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related to its relationship with the other party, each of whom will be informed of the confidential nature of the information.

(ii)A party may disclose information (1) in any statement or testimony pursuant to a subpoena, summons or order by any court, government body, agency or authority, or otherwise required by law, order, regulation, ruling or in connection with applicable litigation; (2) upon the request or demand of any applicable regulatory authority, self-regulatory authority, governmental agency or authority, or independent system operator or regional transmission operator; and (3) in order to comply with any applicable law, order, or regulation applicable to it.  In connection with any such disclosure pursuant to clause (1) or (2), the party shall to the extent practical and permitted provide prior notice of such disclosure to the other party in order to permit the party to take any action that it deems necessary to protect the confidentiality of such information. 

(iii)A party may disclose information to potential or actual bona fide assignees, participants and/or other transferees of an interest in extensions of credit related to any contemplated transaction, but only in connection with assignments or transfers permitted under the terms of Section 7 of this Agreement (such entities will be subject to the same confidentiality provisions as those of the parties hereto). 

(iv)A party may disclose information to third parties on a no name basis for the sole purpose of calculating a published index. 

(v)A party may disclose information to a ratings agency in connection with the party’s or its Credit Support Provider’s credit rating. 

(vi)The following information is not subject to the foregoing obligations of confidentiality and use:  information that (1) is or becomes generally available to the public other than as a result of a disclosure by the other party or its Representatives; (2) becomes available to the other party on a non-confidential basis from a source other than that party or one of its agents; (3) was known to the party on a non-confidential basis or independently developed by the party prior to its disclosure by the other party or one of its Representatives or (4) was independently developed by the other party without reference to the confidential information of the disclosing party. 

 

(vii)Party B may disclose the terms of this Agreement by filing the same on the EDGAR system of the United States Securities and Exchange Commission.  

(o)Reference Market-makers.  The definition of “Reference Market-makers” in Section 14 of this Agreement is amended by inserting the phrase “non-affiliated” before the word “dealers” and by deleting clause (b) thereof. 

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(p)Change of Account.  Section 2(b) of this Agreement is amended by adding the following at the end thereof: 

“Unless the other party consents (which consent shall not be unreasonably withheld), such new account must be in the same tax jurisdiction as the original account.” 

(q)Fully Performed Transactions.  Notwithstanding Sections 5 and 6 of this Agreement, if at any time and so long as one of the parties to this Agreement (“X”) has satisfied in full all of its payment and delivery obligations under this Agreement and has at that time no future payment or delivery obligations, whether absolute or contingent, then unless the other party (“Y”) is required pursuant to appropriate proceedings to return to X or otherwise returns to X upon demand of X any portion of any such payment or delivery, (i) the occurrence of an event described in Section 5(a) of this Agreement with respect to X, any Credit Support Provider of X or any Specified Entity of X does not constitute an Event of Default or Potential Event of Default with respect to X as the Defaulting Party and (ii) Y is entitled to designate an Early Termination Date pursuant to Section 6 of this Agreement only as a result of the occurrence of a Termination Event set forth in (x) either Section 5(b)(i) or 5(b)(ii) of this Agreement with respect to Y as the Affected Party or (y) Section 5(b)(iii) of this Agreement with respect to Y as the Burdened Party. 

(r)Events of Default.  Section 5(a)(vii) of this Agreement is amended by the insertion (a) in subclause (3) after the words “benefit of its creditors” the words “or sends out a notice convening a meeting of its creditors to propose a voluntary arrangement”, and (b) in subclause (4) after the words “instituted or presented against it” the parenthetical “(unless instituted or presented against it by any of its Affiliates)”. 

(s)Dodd Frank Requirements - Reporting.   

(i)In satisfaction of the Dodd Frank Requirement that counterparties to a Reportable Swap Transaction having the same regulatory status under the Dodd Frank Requirements mutually agree as to the identity of the Reporting Party, Party A and Party B agree, as a term of each Reportable Swap Transaction, as follows: 

(1)For all Reportable Swap Transactions (if any) between Party A and Party B, Party A is the Reporting Party for all reporting required pursuant to Parts 43 and 45 of the CFTC Regulations.   

(2)For any End-User Swap Transaction with respect to which Party A is the sole electing party and, on the condition that Party B has complied with its obligations under Part 5(s)(ii)(3) below, for any End-User Swap Transaction with respect to which Party B is an electing party, Party A is responsible for all reporting required pursuant to Section 50.50(b) of the CFTC Regulations. 

(ii)In connection with the agreements of Party A above and in order to permit Party A, as the Reporting Party, to comply with the Reporting Regulations, Party B agrees that: 

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(1)It will timely provide to Party A (A) notice of any change in the “primary economic terms”, as such term is used in the Reporting Regulations, of any Reportable Transaction and (B) all other information reasonably requested by Party A to allow it to comply with the Reporting Regulations. 

(2)Notwithstanding any confidentiality or other similar agreement, obligation, or requirement between the parties, Party A may disclose the information required by the Reporting Regulations to a swap data repository and Party B waives, solely to the extent necessary to permit such disclosure, any obligation of confidentiality which would otherwise bar or restrict such disclosure.   

(3)With respect to each End-User Swap Transaction with respect to which Party B is an electing party, it (A) is eligible to exercise an exception from the applicable mandatory clearing obligation, (B) it will have filed, as permitted by Section 50.50(b)(2) of the CFTC Regulations, an Annual End-User Information Report and any required amendment thereto during the three hundred sixty-five (365) day period immediately preceding the trade date for the End-User Swap Transaction and (C) will, upon request, provide Party A copy of its current Annual End-User Information Report. 

(4)It is not, as of the date of the Master Agreement, an entity registered as a “Swap Dealer” or “Major Swap Participant” and is not a “Financial Entity” (as such terms are defined in the Dodd-Frank Requirements) and, in the event it registers as or becomes such an entity, it will promptly notify Party A in writing of such change in its status and this Part 5(s) will be deemed deleted from this Agreement and replaced with “[RESERVED]” with no further action required of either party.   

(iii)The failure of either party to comply with its respective obligations under this Part 5(s) does not constitute an event of default or termination event (however defined or described) under, or otherwise constitute grounds on which the other party may vitiate, cancel, or otherwise terminate any Reportable Swap Transaction between the parties or any agreement (including this Agreement) governing the terms thereof, or any other agreement between the parties. Notwithstanding the agreement set forth in clause (i) above, nothing in this Agreement precludes Party A from relying on any applicable no-action or other relief. 

(iv)For purposes of this Part 5(s), the following terms have the following meanings: 

“Annual End-User Information Report” means a report of all information required to be reported under Section 50.50(b)(1)(iii) of the CFTC Regulations

“CFTC” means the Commodity Futures Trading Commission.

“CFTC Regulations” means the regulations promulgated by the CFTC and set 

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forth in Title 17 of the Code of Federal Regulations, as amended from time to time, and any interpretations or other guidance published by the CFTC with respect thereto, as in effect from time to time.

“Dodd Frank Requirements” means the collective reference to the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 11-203, as amended from time to time, and the CFTC Regulations implementing such act.

“End-User Swap Transaction” means a Reportable Swap Transaction entered into between Party A and Party B for which a party elects the exception to an applicable (if any) mandatory clearing requirement under Section 2(h)(7)(A) of the Commodity Exchange Act (7 U.S.C. § 2(h)(7)(A)).

“Reportable Swap Transaction” means a transaction that constitutes a “Swap” under, and as such term is defined in, the Dodd Frank Requirements.

“Reporting Party” means the party to a Reportable Swap Transaction responsible for complying with the mandatory data reporting provisions applicable to such Reportable Swap Transaction.

“Reporting Regulations” means the applicable mandatory data reporting obligations of Parts 43 and 45 and Section 50.50(b) of the CFTC Regulations.

(t)Legal Entity Identifier.   

Party A’s Legal Entity Identifier is 549300AGC7BAI04R6015.  

Party B’s Legal Entity Identifier is:

Summer Energy, LLC: 254900B27CF40NWYFV43

Summer Energy Northeast, LLC: 254900V0P3NDXMN3RP59

(u)Commodity Trade Options.  With respect to each Transaction entered into that constitutes a “commodity option transaction” as such term is used in Part 32 of Title 17 of the Code of Federal Regulations, each party represents to the other party as of the date that such Transaction is offered and as of the date that such Transaction is entered into that (i) it is a producer, processor, or commercial user of, or a merchant handling the commodity that is the subject of such Transaction; (ii) it is entering into the Transaction solely for purposes related to its business as such; and (iii) it intends to physically settle such Transaction such that if the option associated with such Transaction is exercised, the option would result in the sale of an “exempt commodity” (as such term is defined in Section 1a(20) of the Commodity Exchange Act, as amended), for immediate or deferred delivery. 

(v)Joint and Several Liability.Each of Summer Energy, LLC and Summer Energy Northeast, LLC hereby agrees that the obligations, covenants and agreements of Party B hereunder shall be joint and several obligations, covenants and agreements of each of  

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Summer Energy, LLC and Summer Energy Northeast, LLC, whether or not specifically stated herein without preferences or distinctions among them.  For the avoidance of doubt, each of such parties is individually making all representations hereunder with respect to itself and each other such party.

 

Part 6.  Physically Settled Power Transactions

Paragraphs (a) through (i) of the form of ISDA North American Power Annex, as set forth in Sub-Annex F to the 2005 ISDA Commodity Definitions, are incorporated into, supplement, and form a part of this Agreement as if set forth in this Part 6 in full without change or modification.  This Part 6 may be referred to in this Agreement and in any Confirmation as the “Power Annex” to this Agreement.  

(j)Elective Provisions. 

(1)Clause (a)(ii):  √   Applicability to Outstanding Power Transactions.  If not checked, not applicable. 

(2)Clause (a)(iii):  √  Applicability of Outstanding Power Credit Support held by a party in connection with Outstanding Power Transactions.  If not checked, not applicable. 

(3)Clause (c):  √  Accelerated Payment Damages.  If not checked, not applicable. 

(4)Clause (d)(ii):Timeliness of Payment 

      Option A 

  √  Option B 

If neither is checked, Option B shall be deemed to apply.

(5)Clause (h)(i):Wholesale Power Tariffs 

  √  Party A Electric Tariff.  Tariff/Date/Docket: 

Tariff:  Market-Based Rate Tariff

Dated:  May 16, 2016

Docket Number:  ER16-00325-001 

  √  Party B Electric Tariff.  Tariff/Date/Docket: 

Summer Energy, LLC:

 

N/A

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Summer Energy Northeast, LLC:

Tariff:  Market-Based Rate Tariff

Dated:   

Docket Number:  ER18-696-000

If not checked, not applicable.

(6)Clause (h)(ii):  √  Applicability of Severability provision.  If not checked, not applicable. 

(7)Clause (h)(iii):   √  Applicability of FERC Standard of Review and Certain Covenants and Waivers.  If not checked, not applicable. 

(k)Other Modifications to this Power Annex 

(i)Mobile-Sierra Amendments.  Clause (h)(iii) of this Power Annex is amended and restated in its entirety as follows: 

“(iii) FERC Standard of Review; Mobile-Sierra Waiver; Certain Covenants and Waivers.  If elected under clause (j) of this Power Annex as being applicable:

(a)Absent the agreement of all parties to the proposed change, the standard of review for changes to any rate, charge, classification, term or condition of this Agreement, whether proposed by a party (to the extent that any waiver in subsection (b) below is unenforceable or ineffective as to such party), a non-party or FERC acting sua sponte, will solely be the “public interest” application of the “just and reasonable” standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956) and clarified by Morgan Stanley Capital Group, Inc. v. Public Util. Dist. No. 1 of Snohomish, 554 U.S. 527 (2008) and NRG Power Marketing LLC v. Maine Pub. Util. Comm’n, 558 U.S. 165 (2010) (the “Mobile-Sierra” doctrine).  

(b)In addition, and notwithstanding the foregoing subsection (a), to the fullest extent permitted by applicable law, each party, for itself and its successors and assigns, hereby expressly and irrevocably waives any rights it can or may have, now or in the future, whether under §§ 205 and/or 206 of the Federal Power Act or otherwise, to seek to obtain from FERC by any means, directly or indirectly (through complaint, investigation or otherwise), and each hereby covenants and agrees not at any time to seek to so obtain, an order from FERC changing any section of this Agreement specifying the rate, charge, classification, or other term or condition agreed to by the parties, it being the express intent of the parties that,  

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to the fullest extent permitted by applicable law, neither party shall unilaterally seek to obtain from FERC any relief changing the rate, charge, classification, or other term or condition of this Agreement, notwithstanding any subsequent changes in applicable law or market conditions that may occur.  In the event it were to be determined that applicable law precludes the parties from waiving their 

rights to seek changes from FERC to their market-based power sales contracts (including entering into covenants not to do so) then this subsection (b) shall not apply, provided that, consistent with the foregoing subsection (a), neither party shall seek any such changes except solely under the “public interest” application of the “just and reasonable” standard of review and otherwise as set forth in the foregoing subsection (a).”

(ii)ERCOT Nodal Amendments.  Clauses (b) and (c) of this Power Annex are amended as specified in Paragraph 2 of that certain “Amendment relating to the Scheduling of Firm (LD) and Firm (No Force Majeure) Transactions in ERCOT’s Texas Nodal Market”, Version 2.0, as published by Edison Electric Institute effective November 19, 2010. 

(iii)Form of Master Agreement.  Clauses (a) through (i) of this Power Annex are amended by deleting each instance of the reference “Part [6]” and replacing it with the phrase “Power Annex” and clause (i)(ii)(B) of this Part 6 is amended by deleting the phrase “Section [5(a)(ii)][5(a)(ii)(1)]” and replacing it with the words “Section 5(a)(ii)”. 

(iv)Events of Default.  Clause (i)(ii)(A) of this Power Annex is amended by deleting the phrase “or delivery” and replacing it with the phrase “or delivery under Section 2(a)(i) or 2(e)”. 

(v)Additional Definitions.  The following definition is added to clause (i)(iv) of this Power Annex in its appropriate alphabetical order: 

““Claims” means all third party claims or actions, threatened or filed and, whether groundless, false, fraudulent or otherwise, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys’ fees and court costs, whether incurred by settlement or otherwise, and whether claims or actions are threatened or filed prior to or after the termination of the Agreement.”

(vi)Additional Product Definitions.  For purposes of defining the Product in connection with any applicable Power Transaction, the following terms have the following meanings: 

“CAISO Energy” means with respect to a Power Transaction, a Product under which the Seller shall sell and the Buyer shall purchase a quantity of energy equal to the hourly quantity without Ancillary Services (as defined in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule coordinator transaction 

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pursuant to the applicable tariff and protocol provisions of the California Independent System Operator (“CAISO”) (as amended from time to time, the “CAISO Tariff”) for which the only excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the CAISO Tariff).

“West Firm” means with respect to a Power Transaction, a Product that is or will be scheduled as firm energy consistent with the most recent rules adopted by the WECC for which the only excuses for failure to deliver or receive are if an 

interruption is (i) due to an “Uncontrollable Force” as provided in Section 10 of the WSPP Agreement; or (ii) where applicable, to meet Seller’s public utility or statutory obligations to its customers.  Notwithstanding any other provision in this Agreement, if Seller exercises its right to interrupt to meet its public utility or statutory obligations, Seller shall be responsible for payment of damages for failure to deliver firm energy as provided in clause (c)(i) of this Power Annex.

“WECC” means the Western Electricity Coordinating Council.  

“WSPP Agreement” means the Western Systems Power Pool Agreement as amended and in effect from time to time.”

(l)Notice Information for Power Transactions 

	PARTY A:

EDF Energy Services, LLC

	PARTY B:

Summer Energy, LLC and Summer Energy Northeast, LLC

	As set forth in Part 4 of the Schedule unless otherwise set forth below:

	As set forth in Part 4 of the Schedule unless otherwise set forth below:

	Invoices:

	Invoices:

	Attn.:Power Accounting 

Phone:281.653.1061 

Email:poweracctg@edftrading.com 

	Attention: Jaleea GeorgeJaleea George 

Telephone: 713-375-2793713-375-2793 

Facsimile: 713-481-8470713-481-8470 

Email:jgeorge@summerenergy.com 

	Scheduling:

	Scheduling:

	Attn.:Scheduling 

Phone:281.781.0333 

 

	Phone:713-375-2789 

Email:tandrews@summerenergy.com 

Fax:[_______] 

	Confirmations:

	Confirmations:

	Attn.:Confirmation Department 

Phone:281-781-0333 

Email:

Confirmations@edfenergyservices.com

	Attn.:Travis Andrews 

Phone:713-375-2789 

Email:tandrews@summerenergy.com 

Fax:[_______] 

	Wire Transfer - or - ACH

(check one box):

	Wire Transfer - or - ACH

(check one box):

	As set forth in Part 4 of the Schedule unless otherwise set forth below:

	As set forth in Part 4 of the Schedule unless otherwise set forth below

	Bank:Bank of America, NA 

ACCT :

Wire ABA:

ACH ABA:

Other Details:Not Applicable 

	Bank:Comerica Bank 

Account:

Wire ABA:

ACH ABA:

Other Details:Not Applicable 

	 

	Bank:Comerica Bank 

 

 

 

Account:

Wire ABA:

ACH ABA:

Other Details:Not Applicable 

Part 7.  Physically Settled Gas Transactions

Paragraphs (a) through (k) of the form of ISDA North American Gas Annex, as set forth in Sub-Annex E to the 2005 ISDA Commodity Definitions, are incorporated into, supplement, and form a part of this Agreement as if set forth in this Part 7 in full without change or modification.  This Part 7 may be referred to in this Agreement and in any Confirmation as the “Gas Annex” to this Agreement.  

(l)Elective Provisions. 

(1)Clause (a)(ii):Outstanding Gas Transactions. This Gas Annex applies to the following pre-existing Gas Transactions pursuant to clause (a)(ii) of this Gas Annex: 

  √  Option A: All Gas Transactions outstanding between the parties as of the date this Gas Annex becomes effective. 

      Option B: The Gas Transactions listed in Schedule 1 to this Gas Annex. 

      Option C: None of the Gas Transactions between the parties that were executed prior to the date this Gas Annex becomes effective. 

If none of the above options is selected, Option A applies.

(2)Clause (a)(iii):Outstanding Gas Credit Support 

  √  Outstanding Gas Credit Support held by a party in  

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connection with Outstanding Gas Transactions is deemed to have been delivered under and in connection with this Agreement pursuant to clause (a)(iii) of this Gas Annex.  If not checked, not applicable.

(3)Clause (b)(ii):Performance Obligation (remedy for breach of Firm obligation) 

  √  Option A: Cover Standard 

      Option B: Spot Price Standard 

If neither of the above options is selected, Option A applies.

(4)Clause (e):Taxes 

  √  Option A: Buyer Pays At and After Delivery Point  

      Option B: Seller Pays Before and At Deliver Point  

If neither of the above options is selected, Option A applies.

(5)Clause (f)(ii):Payment Date 

  √  Option A:  The later of the twenty fifth (25th) Day of Month following Month of delivery or ten (10) Days after receipt of the invoice by Buyer (except that if the Payment Date is not a Local Business Day, payment is due on the next Local Business Day following that date). 

      Option B:  The later of the (__) Day of Month following Month of delivery or ten (10) Days after receipt of the invoice by Buyer (except that if the Payment Date is not a Local Business Day, payment is due on the next Local Business Day following that date). 

      Option C:  Notwithstanding anything to the contrary in the Schedule, payments with respect to both Gas Transactions and Power Transactions (as defined separately in the Schedule) will be netted and payable on or before the later of the twentieth (20th) Day of Month following Month of delivery or ten (10) Days after receipt of the invoice by Buyer (except that if the Payment Date is not a Local Business Day, payment is due on the next Local Business Day following that date). 

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      Option D:  Notwithstanding anything to the contrary in the Schedule, payments with respect to both Gas Transactions and Power Transactions (as defined separately in the Schedule) will be netted and payable on or before the later of the twenty fifth (25th) Day of Month following Month of delivery or ten (10) Days after receipt of the invoice by Buyer (except that if the Payment Date is not a Local Business Day, payment is due on the next Local Business Day following that date). 

If none of the above options is selected, Option A applies.

(6)Clause (k)(xxii):Alternative to Spot Price Index. The parties have selected the following alternative index as the Spot Price Index: the Canadian Gas Price Reporter shall be the Spot Price Index for all Transactions with Alberta Delivery Points.   

If no index is specified, the Spot Price Index specified in clause (k)(xxi) of this Gas Annex applies.

(m)Other Modifications to this Gas Annex 

(i)The following clause (vi) is added to end of clause (f) of this Gas Annex: 

“(vi)Mobile-Sierra Standard of Review.  Each party irrevocably waives its rights, including its rights under §§ 4-5 of the Natural Gas Act, unilaterally to seek or support a change in the rate(s), charges, classifications, terms or conditions of this Gas Annex, any Gas Transaction hereunder or any other agreements entered into in connection with this Agreement (collectively, the “Covered Agreements”).  By this provision, each party expressly waives its right to seek or support:  (i) an order from the U.S. Federal Energy Regulatory Commission (“FERC”) finding that the market-based rate(s), charges, classifications, terms or conditions agreed to by the parties under the Covered Agreements are unjust and unreasonable; or (ii) any refund with respect thereto.  Each party agrees not to make or support such a filing or request, and that these covenants and waivers shall be binding notwithstanding any regulatory or market changes that may occur hereafter.  Absent the agreement of all parties to the proposed change, the standard of review for changes to any section of the Covered Agreements proposed by a party (to the extent that any waiver as set forth in this Section (f)(vi) is unenforceable or ineffective as to such party), a non-party or FERC acting sua sponte, shall solely be the “public interest” application of the “just and reasonable” standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956) and clarified by Morgan Stanley Capital Group, Inc. v. Public Util. Dist. No. 1 of Snohomish, 554 U.S. 527 (2008) and NRG Power Marketing LLC v. Mine Pub. Util. Comm’n, 558 U.S. 165 (2010)  

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(the Mobile-Sierra doctrine).”

(ii)The following clause (vii) is added to the end of clause (h) of this Gas Annex: 

“(vii)Notwithstanding anything to the contrary in this section (h), Seller is not obligated to deliver, and Buyer is not obligated to receive, Gas under this Agreement at points other than the Delivery Point; (ii) if as a result of Force Majeure a party is prevented from delivering or receiving, as the case may be, only a portion of the Contract Quantity at the Delivery Point, then such party may only reduce the quantity of Gas it is obligated to deliver or receive, as the case may be, at the Delivery Point by the same percentage that it reduces its deliveries or receipts of Gas under firm transactions with all of its other customers at that Delivery Point for the applicable period regardless of the price paid hereunder or under firm transactions with other customers; and (iii) Force Majeure shall not extend 

 the term of any transaction, or require a party to procure Gas from alternate sources of Gas or make up any quantity of Gas it would otherwise have been obligated to sell or purchase during any period in which Force Majeure was validly claimed.”

(n)Notices for Gas Transactions 

	PARTY A:

EDF Energy Services, LLC

	PARTY B:

Summer Energy, LLC 

	As set forth in Part 4 of the Schedule unless otherwise set forth below:

	As set forth in Part 4 of the Schedule unless otherwise set forth below:

	Invoices:

	Invoices:

	Attn.:Gas Accounting 

Phone:281.781.0333 

Email:

gasinvoicing@edfenergyservices.com

	Attention: Jaleea GeorgeJaleea George 

Telephone: 713-375-2793713-375-2793 

Facsimile: 713-481-8470713-481-8470 

Email:jgeorge@summerenergy.com 

	Nominations:

	Nominations:

	Attn.:Gas Trader 

Phone:281.781.0333 

 

	Attn.:Travis Andrews 

Phone:713-375-2789 

Email:tandrews@summerenergy.com 

Fax:[_______] 

	Option Exercise:

	Option Exercise:

	Attn.:Gas Trader 

Phone:281.781.0333 

 

	Attn.:Travis Andrews 

Phone:713-375-2789 

Email:tandrews@summerenergy.com 

Fax:[_______] 

	Confirmations:

	Confirmations:

	Attn.:Confirmation Department 

Phone:281.653.1683 

Email:

Confirmations@edfenergyservices.com

	Attn.:Travis Andrews 

Phone:713-375-2789 

Email:tandrews@summerenergy.com 

Fax:[_______] 

	Wire Transfer - or - ACH

(check one box):

	Wire Transfer - or - ACH

(check one box):

	As set forth in Part 4 of the Schedule unless otherwise set forth below:

	As set forth in Part 4 of the Schedule unless otherwise set forth below

	Bank:Bank of America, NA 

ACCT :

Wire ABA:

ACH ABA:

Other Details:Not Applicable 

	Bank:Comerica Bank 

Account:

Wire ABA:

ACH ABA:

Other Details:Not Applicable 

[Signature Page Follows]

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The parties executing this Schedule have executed the Master Agreement and have agreed as to the contents of this Schedule.

	EDF Trading North America, LLC

	Summer Energy, LLC

	 

	By:/s/ Terry Nutt 

Name:Terry Nutt 

Title:Chief Financial Officer 

 

	By:/s/ Neil Leibman 

Name:Neil Leibman  

Title:Manager 

 

	 

	 

	Summer Energy Northeast, LLC

	 

 

 

	 

	By:/s/ Neil Leibman 

Name:Neil Leibman  

Title:Manager 

 

	 

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(Bilateral Form)                                      (ISDA Agreements Subject to New York Law Only)

ISDAÒ

International Swaps and Derivatives Association, Inc.

 

CREDIT SUPPORT ANNEX

 

to the Schedule to the 

 

ISDA Master Agreement

 

dated as of May 1, 2018

 

between

 

	EDF TRADING NORTH AMERICA, LLC

	SUMMER ENERGY, LLC and SUMMER ENERGY NORTHEAST, LLC

	“Party A”

	Jointly and Severally together, “Party B”

 

This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule
and is a Credit Support Document under this Agreement with respect to each party.

Accordingly, the parties agree as follows:--

Paragraph 1. Interpretation

(a)Definitions and Inconsistency.  Capitalized terms not otherwise defined herein or elsewhere in this
Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs
are to Paragraphs of this Annex.  In the event of any inconsistency between this Annex and the other provisions
of this Schedule, this Annex will prevail and in the event of any inconsistency between Paragraph 13 and the
other provisions of this Annex, Paragraph 13 will prevail. 

(b)Secured Party and Pledgor.  All references in this Annex to the “Secured Party” will be to either party
when acting in that capacity and all corresponding references to the “Pledgor” will be to the other party when
acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all
references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party
as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions
of law generally relating to security interests and secured parties. 

Paragraph 2.  Security Interest

Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security for its Obligations,
and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against
all Posted Collateral Transferred to or received by the Secured Party hereunder.  Upon the Transfer by the Secured
Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral
will be released immediately and, to the extent possible, without further action by either party.

DB1/ 97256732.2

ISDA®1994

Paragraph 3. Credit Support Obligations

 

(a)Delivery Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Secured Party on or promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor’s Minimum Transfer Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph I 3). Unless otherwise specified in Paragraph 13, the “Delivery Amount” applicable to the Pledgor for any Valuation Date will equal the amount by which: 

 

(i) the Credit Support Amount

 

 exceeds

 

(ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.

 

(b)Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on  or promptly following a Valuation Date, if the Return Amount for that Valuation Date equals or exceeds the Secured Party’s Minimum Transfer Amount, then the Secured Party will  Transfer to the Pledgor Posted Credit Support specified by the Pledgor in that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the “Return Amount”   applicable to the Secured Party for any Valuation Date will equal the amount by which: 

 

(i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party

  

exceeds

 

(ii) the Credit Support Amount.

 

“Credit Support Amount” means, unless otherwise specified in Paragraph 13, for any  Valuation  Date  (i) the Secured Party’s  Exposure  for that  Valuation  Date plus  (ii) the  aggregate  of all  Independent  Amounts  applicable to the Pledgor, if any, minus (iii) all Independent Amounts applicable to the Secured Party, if any, minus (iv) the Pledgor’s Threshold; provided, however, that the  Credit  Support Amount  will  be  deemed  to be  zero whenever the calculation of Credit Support Amount yields a number less than zero.

 

Paragraph 4.  Conditions Precedent, Transfer Timing, Calculations and Substitutions

 

(a)Conditions Precedent. Each Transfer obligation of the Pledgor under Paragraphs 3 and  5  and  of  the Secured Party under Paragraphs 3, 4(d)(ii), 5 and 6(d) is subject to the conditions precedent that: 

 

(i) no Event of Default, Potential  Event of Default  or Specified  Condition  has occurred  and is continuing with respect to the other party; and

 

(ii)no Early Termination Date for which any unsatisfied payment obligations exist has occurred or been designated  as the result of an Event of Default or Specified Condition with respect to the other party.

 

(b)Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the second Local Business Day thereafter. 

 

(c)Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time. The Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) of its calculations not later than the Notification Time on the Local Business Day following the applicable Valuation Date (or in the case of Paragraph   6(d), following the date of calculation). 

DB1/ 97256732.2                                                                                                                                                  ISDA®1994

(d)Substitutions. 

 

(i) Unless otherwise specified in Paragraph 13, upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged, the Pledgor may, on any Local  Business Day, Transfer to the Secured Party substitute Eligible Credit Support (the “Substitute Credit Support”); and

 

(ii) subject to Paragraph 4(a), the Secured Party will Transfer to the  Pledgor the  items of Posted Credit Support specified by  the  Pledgor  in  its notice  not  later than  the  Local  Business  Day  following  the  date on which the  Secured  Party  receives  the  Substitute  Credit  Support,  unless  otherwise  specified  in Paragraph 13 (the “Substitution Date”); provided that the Secured Party will only be obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as of that date of the Substitute Credit Support.

 

Paragraph 5. Dispute Resolution

 

If a party (a “Disputing Party”) disputes (I) the Valuation Agent’s calculation of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of Eligible Credit Support or Posted  Credit  Support,  then  (1)  the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the  close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the  case of (I)  above or (Y) the  date of Transfer in the  case of (II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer  the  undisputed  amount  to the other  party  not  later than  the close of business  on the Local Business Day  following (X) the date that the demand  is made under Paragraph  3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties will consult with each other in an attempt to resolve the dispute and (4) if they  fail to resolve the dispute by the Resolution  Time, then:

 

(i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the Valuation Agent will recalculate the Exposure and the Value as of the Recalculation Date by:

 

(A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the parties have agreed are not in dispute;

 

(B) calculating the Exposure for the Transactions (or Swap Transactions) in dispute  by  seeking  four actual quotations at mid-market from Reference Market-makers for purposes of calculating Market Quotation, and taking the arithmetic average of those obtained; provided that if four quotations are not available for a particular Transaction (or Swap Transaction), then  fewer than  four  quotations  may  be used for that Transaction (or Swap Transaction); and if no quotations are available for a particular Transaction (or Swap Transaction), then the  Valuation  Agent’s  original  calculations  will  be  used  for that Transaction  (or Swap Transaction); and

 

(C) utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of Posted Credit  Support.

 

(ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support, the Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13.

 

Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) not later than the Notification Time on the Local Business Day following the Resolution Time. The appropriate party  will, upon  demand  following that notice by  the Valuation  Agent  or a resolution pursuant to (3) above and subject to Paragraphs 4(a) and 4(b), make the appropriate Transfer.

DB1/ 97256732.2                                                                                                                                                  ISDA®1994

Paragraph 6. Holding and Using Posted Collateral

 

(a)  Care of Posted Collateral. Without limiting the Secured Party’s rights under Paragraph  6(c), the  Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to  have  exercised  reasonable  care  if  it exercises at least the same degree of care as it would exercise  with  respect  to  its  own  property.  Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights pertaining thereto. 

 

(b)Eligibility to Hold Posted Collateral; Custodians. 

 

(i) General. Subject to the satisfaction of any conditions specified in Paragraph 13 for holding Posted Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an agent (a “Custodian”) to hold Posted Collateral for the Secured Party Upon notice by the Secured Party to the Pledgor of the appointment of a Custodian, the Pledgor’s obligations to make any Transfer will be discharged by making the Transfer to that Custodian.  The holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian is acting.

 

(ii) Failure to Satisfy Conditions. If the Secured  Party  or  its  Custodian  fails  to  satisfy  any  conditions for holding Posted Collateral, then upon  a demand made by the Pledgor, the Secured Party will, not  later than five Local Business Days after the demand, Transfer or cause its Custodian to  Transfer all Posted Collateral held by it to a Custodian that satisfies those  conditions or to  the  Secured  Party  if it satisfies those conditions.

 

(iii) Liability. The Secured Party will be liable for the acts or omissions of its Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions.

 

(c)Use of Posted Collateral. Unless otherwise specified in Paragraph 13 and without limiting the rights and obligations of the parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting  Party or an Affected Party with respect to a Specified Condition and no Early Termination  Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then the Secured Party will, notwithstanding Section 9-207 of the New  York  Uniform  Commercial  Code, have the right to: 

 

(i) sell, pledge, rehypothecate,  assign,  invest,  use,  commingle  or  otherwise  dispose  of,  or  otherwise  use in its business any Posted  Collateral  it holds,  free from  any  claim  or right  of any  nature  whatsoever  of the Pledgor, including any equity or right of redemption by the Pledgor; and

 

(ii) register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee for  either.

 

For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support  pursuant  to Paragraphs 3 and 5 and any rights or remedies authorized under  this  Agreement,  the  Secured  Party  will  be deemed to continue to hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii) above.

 

(d)Distributions and Interest Amount. 

 

(i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would not  be  created  or increased  by  that  Transfer,  as calculated  by  the  Valuation  Agent  (and  the  date of calculation will be deemed to be a Valuation Date for this purpose).

(ii) Interest Amount. Unless  otherwise  specified  in  Paragraph  13 and  subject  to  Paragraph  4(a),  in  lieu of any interest, dividends or other amounts paid or deemed to have been paid with  respect  to  Posted Collateral in the form of  Cash  (all  of which  may  be retained  by  the  Secured  Party),  the  Secured Party will  Transfer to the Pledgor  at the times specified  in Paragraph  13 the Interest Amount to the extent that a Delivery Amount would not be created or increased  by  that  Transfer,  as calculated  by  the  Valuation Agent (and the date of calculation will be deemed to  be a Valuation Date for this purpose). The Interest Amount  or  p01iion  thereof  not  Transferred  pursuant  to  this  Paragraph  will  constitute  Posted  Collateral in the form of Cash and will be subject to the security interest granted under Paragraph 2.

 

Paragraph  7. Events of Default

 

For purposes of Section 5(a)(iii)( 1) of this Agreement, an Event of Default will exist with respect to a party if:

 

(i) that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by  it  and  that  failure continues for two Local Business Days after notice of that failure is given to that party;

 

(ii) that party fails to  comply with any  restriction  or prohibition  specified  in this Annex  with  respect  to any of the rights  specified in Paragraph 6(c) and that failure continues for five Local Business Days after notice of that failure is given to that party; or

 

(iii) that party  fails to  comply  with  or  perform  any  agreement  or  obligation  other  than  those  specified in Paragraphs 7(i) and 7(ii) and that failure continues  for  30 days  after  notice  of that  failure  is given  to that party.

 

Paragraph 8. Certain Rights and Remedies

 

(a)Secured Party’s Rights and Remedies. If at any time (1) an Event of Default or Specified Condition with respect to the Pledgor has occurred and is continuing or (2) an Early Termination Date has  occurred  or  been designated as the result of an Event of Default or Specified Condition with  respect to the Pledgor, then,  unless the Pledgor has paid in full all of its Obligations that are then due, the Secured Party  may exercise one or more of the following rights and remedies: 

 

(i) all rights and remedies available to a secured party under applicable law with respect to  Posted Collateral held by the Secured Party;

 

(iv) any other rights and remedies  available to the Secured Party  under the terms of Other Posted  Support, if any;

 

(iii) the right to  Set-off any amounts payable by  the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party  (or  any obligation of the Secured Party to Transfer that Posted  Collateral);  and

 

(iv) the right  to  liquidate  any  Posted  Collateral  held  by  the  Secured  Party  through  one  or more  public or private sales or other dispositions with such notice,  if any,  as may  be  required  under  applicable  law, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or  right of redemption by the Pledgor (with the Secured Party having the right to purchase any or all of the Posted Collateral to be  sold) and to  apply the proceeds (or the Cash  equivalent  thereof)  from the liquidation  of the Posted Collateral to any amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect.

 

Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and is of a type customarily sold on a recognized market, and, accordingly, the Pledgor is not entitled to prior notice of any sale of that Posted Collateral by the Secured Party, except any notice  that  is  required  under applicable law and cannot be waived.

DBl/ 97256732.2

ISDA®l994

(b)Pledgor’s Rights and Remedies. If at any time an Early Termination Date has  occurred  or  been designated as the result of an Event of Default or Specified Condition with respect  to the  Secured Party,  then (except in the case of an Early Termination Date relating to  less than  all  Transactions  (or  Swap Transactions) where the Secured Party has paid in full all of its obligations that are then due under Section  6(e)  of  this Agreement): 

 

(i) the Pledgor may exercise all rights and remedies available to  a  pledgor  under  applicable  law  with respect to Posted Collateral held by the Secured Party;

 

(ii) the Pledgor may exercise any other rights and  remedies  available  to the Pledgor  under  the terms  of Other Posted Support, if any;

 

(iiI) the Secured Party will be obligated immediately to Transfer all Posted Collateral  and  the  Interest Amount to the Pledgor; and

 

(vi) to   the  extent  that   Posted   Collateral   or  the   Interest   Amount   is  not   so  Transferred   pursuant   to

(iii)above, the Pledgor may:

 

(A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral  held by the Secured Party  (or any obligation of the Secured Party to Transfer that Posted Collateral); and

 

(B) the extent that the Pledgor does not Set-off under (iv)(A) above, withhold payment of  any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value  of  any remaining Posted Collateral held  by  the  Secured  Party,  until  that  Posted  Collateral  is  Transferred  to the Pledgor.

 

(c)Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds and Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs S(a) and S(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts remaining unpaid after any liquidation, Set-off and/or application under Paragraphs S(a) and S(b). 

 

(d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any Obligations (except for any potential liability under Section 2(d) of this Agreement), the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if any. 

 

Paragraph 9. Representations

 

Each party represents to the other party (which representations will be deemed to be repeated as of each date on which it, as the Pledgor, Transfers Eligible Collateral) that:

 

(i) it has the power to grant a security interest in and lien on any  Eligible Collateral it Transfers as the Pledgor  and  has taken  all  necessary  actions to  authorize the  granting  of that security  interest  and  lien;

 

(ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the Secured Party hereunder, free and clear of  any  security  interest,  lien,  encumbrance  or  other  restrictions other than the security interest and lien granted under Paragraph 2;

 

(iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex, the Secured Party will have a valid and perfected first priority security  interest  therein  (assuming  that  any central clearing corporation  or any third-party  financial  intermediary  or other entity not within the control of the Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it under applicable law for perfection of that interest); and

 

(iv)the performance by it of its obligations under this Annex will not  result  in  the  creation  of  any security interest, lien or other encumbrance  on  any  Posted  Collateral  other than  the security  interest  and lien granted under Paragraph 2.

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Paragraph 10. Expenses

 

(a)General. Except  as otherwise provided in Paragraphs lO(b) and lO(c), each party  will  pay  its own  costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for any costs and expenses incurred by the other party in connection herewith. 

 

(b)Posted Credit Support. The Pledgor will promptly pay when due all taxes, assessments  or charges of any nature that are imposed with  respect to Posted  Credit Support held by  the Secured  Party upon  becoming  aware of the same, regardless of whether any portion of that Posted Credit Support is subsequently disposed of under Paragraph 6(c), except for those taxes, assessments and charges that  result  from  the  exercise  of  the  Secured Party’s rights under Paragraph  6(c). 

 

(c)Liquidation/Application of Posted Credit Support. All reasonable costs and expenses incurred by or on behalf of the Secured Party or the Pledgor in connection with the liquidation  and/or  application of any  Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this Agreement, by the Defaulting Party or, if there is no Defaulting Party, equally by the parties. 

 

Paragraph  11. Miscellaneous

 

(a)Default Interest. A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the Interest Amount will be obligated to pay the Pledgor (to the extent permitted under applicable  law) an amount equal to interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred, from (and including) the date that Posted Collateral or Interest Amount was  required  to  be Transferred to (but excluding) the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily compounding and the actual number of days elapsed. 

 

(b)Further Assurances. Promptly following a demand made by a party, the other party will execute, deliver, file and record any financing statement, specific assignment or other document and take any other action that may be necessary or desirable and reasonably requested by that party to  create,  preserve,  perfect  or validate  any security interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under this Annex with respect to Posted Credit Support or an Interest Amount or  to  effect  or  document  a  release  of  a security interest on Posted Collateral or an Interest Amount. 

 

(c)Further Protection. The Pledgor will promptly give notice to the Secured Party of, and defend against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely affect the security interest and lien granted by it under Paragraph 2, unless that suit, action, proceeding or lien results from the exercise of the Secured Party’s rights under Paragraph 6(c). 

 

(d)Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex, including, but not limited to, all calculations, valuations and determinations made by either party, will be made in good faith and in a commercially reasonable manner. 

 

(e)Demands and Notices. All demands and notices made by a party under this Annex will  be  made  as specified in the Notices Section of this Agreement, except as otherwise provided in Paragraph  13. 

 

(f)Specifications of Certain Matters.  Anything  referred  to  in  this  Annex  as  being  specified  in  Paragraph 13 also may be specified in one or more Confirmations or other documents and this Annex will be construed accordingly. 

 

Paragraph 12. Definitions 

 

As used in this Annex: -

 

“Cash” means the lawful currency of the United States of America. 

 

“Credit Support Amount” has the meaning specified in Paragraph 3. 

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“Custodian” has the meaning specified in Paragraphs 6(b)(i) and 13. 

 

“Delivery Amount” has the meaning specified in Paragraph 3(a). 

 

“Disputing Party” has the meaning specified in Paragraph 5.

 

“Distributions” means with respect to Posted Collateral other than Cash, all principal, interest and other payments and distributions of cash or other property with respect thereto, regardless of whether the Secured Party has disposed of that Posted Collateral under Paragraph 6(c). Distributions will not include  any  item  of  property acquired by the Secured Party upon any disposition or  liquidation  of Posted  Collateral  or, with  respect  to  any Posted Collateral in the form of Cash, any distributions on that collateral, unless otherwise specified herein.

 

“Eligible Collateral” means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13.

 

“Eligible Credit Support”   means Eligible Collateral and Other Eligible Support.

 

“Exposure” means for any Valuation Date or other date for  which Exposure is calculated and subject to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the other party (expressed as a positive number) or by a party that is the Secured Party to the other party (expressed as a negative number) pursuant to Section 6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions) were being terminated as of the relevant Valuation Time; provided  that Market Quotation will be determined by the Valuation Agent using its estimates at mid-market of the amounts that would be paid for Replacement Transactions (as that term is defined in the definition of “Market Quotation”).

 

“Independent Amount” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.

 

“Interest Amount” means, with respect to an Interest Period, the aggregate sum of the  amounts  of  interest calculated for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured Party on that day, determined by the Secured Party for each such day as follows:

 

(x) the amount of that Cash on that day; multiplied by

 

(y) the Interest Rate in effect for that day; divided by 

 

(z) 360.

 

“Interest Period”  means  the  period  from  (and  including)  the  last  Local  Business  Day  on  which  an  Interest

Amount was Transferred (or, if no Interest Amount has yet been Transferred, the Local Business Day on which Posted Collateral in the form of Cash was Transferred to or received by the Secured Party) to (but excluding) the Local Business Day on which the current Interest Amount is to be Transferred.

 

“Interest Rate” means the rate specified in Paragraph 13.

 

“Local Business Day”, unless otherwise specified in Paragraph 13, has the meaning specified in the Definitions Section of this Agreement, except that references to a payment in clause (b) thereof will be deemed to include a Transfer under this Annex.

 

Minimum Transfer Amount” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.

 

“Notification Time” has the meaning specified in Paragraph 13.

 

“Obligations” means, with respect to a party, all present and future obligations of that party under this Agreement and any additional obligations specified for that party in Paragraph 13.

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“Other Eligible Support” means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13.

 

“Other Posted Support” means all Other Eligible Support Transferred to the Secured Party that remains in effect for the benefit of that Secured Party.

 

“Pledgor” means either party, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a).

 

“Posted Collateral” means all Eligible Collateral, other property, Distributions, and all proceeds thereof that have been Transferred to or received by the Secured Pa1iy under this Annex and not Transferred to the Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph 8. Any Interest Amount or portion thereof not Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in the form of Cash.

 

“Posted Credit Support” means Posted Collateral and Other Posted Support.

 

“Recalculation Date” means the Valuation Date that gives rise to the dispute under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the “Recalculation Date” means the most recent Valuation Date under Paragraph 3.

 

“Resolution Time” has the meaning specified in Paragraph 13.

 

“Return Amount”   has the meaning specified in Paragraph 3(b).

 

“Secured Party” means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support.

 

“Specified Condition” means, with respect to a party, any event specified as such for that party in Paragraph 13.

 

“Substitute Credit Support”   has the meaning specified in Paragraph 4(d)(i).

 

“Substitution Date”   has the meaning specified in Paragraph 4(d)(ii).

 

“Threshold” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.

 

“Transfer” means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in accordance with the instructions of the Secured Party, Pledgor or Custodian, as applicable:

 

(i) in the case of Cash, payment  or  delivery  by  wire transfer  into one or more  bank  accounts  specified by the recipient;

 

(ii) in the case of certificated securities that cannot be paid or delivered  by  book-entry,  payment  or delivery in appropriate physical form to the  recipient or its account accompanied by any duly executed instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to constitute a legally valid transfer to the recipient;

 

(iii) in the case of securities that can be paid or delivered by  book-entry, the giving of written instructions to the relevant depository institution or other  entity  specified  by  the  recipient,  together  with  a written copy thereof to the recipient, sufficient if complied with to result in  a  legally  effective  transfer  of the relevant interest to the recipient; and

 

(iv) in the case of Other Eligible Support or Other Posted Support, as specified in Paragraph 13.

“Valuation Agent” has the meaning specified in Paragraph 13

 

“Valuation Date” means each date specified in or otherwise determined pursuant to Paragraph 13.

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“Valuation Percentage” means, for any item of Eligible Collateral, the percentage specified in Paragraph 13.

“Valuation Time” has the meaning specified in Paragraph 13.

“Value” means for any Valuation Date or other date for which Value is calculated and subject to Paragraph 5
in the case of a dispute, with respect to:

(i)Eligible Collateral or Posted Collateral that is: 

(A)Cash, the amount thereof; and 

(B)a security, the bid price obtained by the Valuation Agent multiplied by the applicable Valuation
Percentage, if any; 

(ii)Posted Collateral that consists of items that are not specified as Eligible Collateral, zero; and 

(iii)Other Eligible Support and Other Posted Support, as specified in Paragraph 13. 

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PARAGRAPH 13

to the 

CREDIT SUPPORT ANNEX

to the

SCHEDULE

To the

ISDA MASTER AGREEMENT

 

dated as of May 1, 2018

 

between

 

	EDF TRADING NORTH AMERICA, LLC

	and

	SUMMER ENERGY, LLC and SUMMER ENERGY NORTHEAST, LLC 

	(“Party A”)

	 

	(Jointly and severally together, “Party B”), each being a limited liability company organized and existing under the laws of the State of Texas

	being a limited liability company organized and existing under the laws of the State of Delaware

	 

	 

Paragraph 13.  Elections and Variables

(a)Security Interest for “Obligations”.  The term “Obligations” as used in this Annex includes the following additional obligations: 

With respect to Party A:None 

With respect to Party B:All obligations of Party B or any Affiliate of Party B to Party A or any of Party A’s Affiliates, whether direct or indirect, absolute or contingent, due or to become due or now existing or hereafter incurred, arising under or owed under the terms of (i) this Agreement (including any Confirmation hereunder), (ii) that certain Energy Services Agreement, dated as of the date hereof, between Party A and Party B (the “ESA”), (iii) that certain Security Agreement, dated as of the date hereof, by Party B in favor of Party A (the “Security Agreement”), (iv) that certain Pledge Agreement, dated as of the date hereof, by and between Summer Energy Holdings, Inc. in favor of Party A (the “Pledge Agreement”) and (v) that certain Guaranty, dated as of the date hereof, by Summer Energy Holdings, Inc., in favor of Party A (the “Guaranty” and, together with this Agreement and all Confirmations hereto, the ESA, the Security Agreement, and the Pledge Agreement, the “Secured Documents” ) (including post-petition interest or other obligations arising under the terms of any of the Secured Documents for which Party B obtains relief under bankruptcy or other laws providing for relief from creditors) and any 

renewals, extensions, increases or rearrangements of the Secured Documents. Credit Support Obligations. 

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(i)Delivery Amount, Return Amount and Credit Support Amount: 

(A)Delivery Amount has the meaning specified in Paragraph 3(a) of this Annex. 

(B)Return Amount has the meaning specified in Paragraph 3(b) of this Annex. 

(C)Credit Support Amount has the meaning specified in Paragraph 3 of this Annex. 

(ii)Eligible Collateral.  The following items qualify as “Eligible Collateral” for the party specified: 

	 

	Party A

	Party B

	Valuation Percentage

	Cash

	[X]

	[X]

	100%

(iii)Other Eligible Support.  The following items qualify as “Other Eligible Support” for the party specified:   

	 

	Party A

	Party B

	Valuation Percentage

	Letters of Credit (in accordance with Paragraph 13(j) of this Annex)

	[X]

	[X]

	100% unless:  (i) a Letter of Credit Default has occurred with respect to such Letter of Credit; or (ii) thirty (30)  or fewer calendar days remain prior to the expiration date of such Letter of Credit, in either of which case the Valuation Percentage is 0%. 

(iv)Thresholds. 

(A)Independent Amount means with respect to Party A and Party B, for each Transaction at any time, zero, unless otherwise specified in the Confirmation. 

(B)“Threshold” means:  

With respect to Party A, infinite; unless an Event of Default or a “Credit Event Upon Merger” Specified Condition has occurred and is continuing with respect to Party A, in which case Party A’s Threshold is zero.

With respect to Party B, infinite, unless an Event of Default or a “Credit Event Upon Merger” Specified Condition has occurred and is continuing with respect to Party B, in which case Party B’s Threshold is zero. 

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(C)“Minimum Transfer Amount” means, with respect to Party A:  $1.00, and with respect to Party B:  $1.00. 

(D)Rounding.  The Delivery Amount will be rounded up to the nearest integral amount of $10,000.00.  The Return Amount will be rounded down to the nearest integral amount of $10,000.00 unless the Secured Party’s Exposure at the time of the demand made pursuant to Paragraph 3(b) is equal to or less than zero, in which case the Return Amount is not subject to rounding. 

(b)Valuation and Timing –  

(i)Valuation Agent means, except as otherwise provided in this clause (i), for purposes of Paragraphs 3 and 5 of this Annex, the party making the demand under Paragraph 3 of this Annex; for purposes of Paragraph 4(d) of this Annex, the Secured Party for purposes of calculating the Value of the Substitute Credit Support and Posted Credit Support involved in the substitution; and for purposes of Paragraph 6(d) of this Annex, the Secured Party receiving or deemed to receive the Distributions or the Interest Amount, as applicable  If an Event of Default or Potential Event of Default has occurred and is continuing with respect to the party designated as the Valuation Agent, then in such case and for so long as the Event of Default or Potential Event of Default continues the other party will be the Valuation Agent. 

(ii)Valuation Date means any Local Business Day. 

(iii)Valuation Time means the close of business on the Local Business Day before the Valuation Date or date of calculation, as applicable.  Calculations of Value and Exposure will be made as of approximately the same time on the same date. 

(iv)Notification Time means 1:00 p.m. New York, New York time on a Local Business Day. 

(v)Transfer Timing has the meaning specified in Paragraph 4(b) of this Annex, except that if the Eligible Credit Support to be provided is a Letter of Credit and a demand for the Transfer is made by the Notification Time, then the relevant Transfer will be made not later than the close of business on the second (2nd) Local Business Day thereafter and if a demand is made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the third (3rd) Local Business Day thereafter. 

(c)Conditions Precedent and Secured Party’s Rights and Remedies.  The following Termination Event(s) are a “Specified Condition” for the party specified (that party being the Affected Party if the Termination Event occurs with respect to that party): 

	 

	Party A

	Party B

	Illegality

	[ X ]

	[ X ]

	Tax Event

	[ X ]

	[ X ]

	Tax Event Upon Merger

	[ X ]

	[ X ]

	Credit Event Upon Merger

	[ X ]

	[ X ]

	Additional Termination Event(s):

	None

	None

(d)Substitution. 

(i)Substitution Date has the meaning specified in Paragraph 4(d)(ii) of this Annex. 

(ii)Consent.  The Pledgor is required to obtain the Secured Party’s consent for any substitution pursuant to Paragraph 4(d) of this Annex. 

(e)Dispute Resolution. 

(i)Resolution Time means 1:00 p.m., New York, New York time, on the Local Business Day following the date on which the notice is given that gives rise to a dispute under Paragraph 5 of this Annex. 

(ii)Value.  For the purpose of Paragraph 5(i)(C) and 5(ii) of this Annex, the Value of Posted Credit Support will be calculated using the Valuation Percentages established in Paragraph 13(b)(ii) and 13(b)(iii) of this Annex. 

(iii)Alternative.  The provisions of Paragraph 5 of this Annex apply, except that, pending the resolution of a dispute, Transfer of the undisputed Value of Eligible Credit Support or Posted Credit Support involved in the relevant demand is, if the demand is made at or before the Notification Time, due as provided in Paragraph 5 of this Annex, and, if the demand is made after the Notification Time, due on the second (2nd) Local Business Day after the demand. 

(f)Holding and Using Posted Collateral. 

(i)Eligibility to Hold Posted Collateral; Custodians. 

Party A and its Custodian are entitled to hold Posted Collateral pursuant to Paragraph 6(b) of this Annex so long as the following conditions applicable to it are satisfied:

(1)Party A is not a Defaulting Party. 

(2)Posted Collateral may be held only in the following jurisdictions:  United States of America. 

Initially, the Custodian for Party A is:  Not Applicable.

Party B and its Custodian are entitled to hold Posted Collateral pursuant to Paragraph 6(b) of this Annex so long as the following conditions applicable to it 

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are satisfied:

(1)Party B is not a Defaulting Party. 

(2)Posted Collateral may be held only in the following jurisdictions:  United States of America. 

Initially, the Custodian for Party B is:  Not Applicable.

Notwithstanding the foregoing, each party shall cause all Posted Collateral received from the other party to be entered in one or more accounts (each, a “Collateral Account”) with a Qualified Institution, each of which accounts may include property of other parties but will bear a title indicating the Pledgor’s interest in said account and the Posted Collateral in such account.  In addition, the Secured Party may direct the Pledgor to transfer or deliver Eligible Collateral directly into the Secured Party’s Collateral Account(s).  The Secured Party may move the Collateral Accounts from one Qualified Institution to another upon reasonable notice to the Pledgor.  The Secured Party shall cause statements concerning the Posted Collateral transferred or delivered by the Pledgor to be sent to the Pledgor on request, which may not be made more frequently than once in each calendar month.

(ii)Use of Posted Collateral.  The provisions of Paragraph 6(c) of this Annex apply. 

(g)Distributions and Interest Amount. 

(i)Interest Rate.  The Interest Rate for each day is the Federal Funds (effective) rate for such day, as published by the Board of Governors of the Federal Reserve System in Statistical Release H.15. 

(ii)Transfer of Interest Amount.  The Secured Party shall Transfer the Interest Amount accrued in a given month on or before the third (3rd) Local Business Day immediately following the later of (x) the end of such calendar month and (y) Secured Party’s receipt of Pledgor’s invoice for payment of the Interest Amount.   

(iii)Alternative to Interest Amount.  The provisions of Paragraph 6(d)(ii) of this Annex will apply. 

(h)Additional Representation(s).  None. 

 

(i)Other Eligible Support and Other Posted Support. 

(i)“Value” means with respect to Other Eligible Support and Other Posted Support in the form of a Letter of Credit, an amount equal to the product of (x) the Valuation Percentage established in Paragraph 13(b)(iii) of this Annex and applicable to such Letter of Credit multiplied by (y) the amount available to be drawn by the Secured Party under such Letter of Credit. 

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(ii)“Transfer” means with respect to Other Eligible Support and Other Posted Support in the form of a Letter of Credit:  

(A)to be provided by the Pledgor to the Secured Party pursuant to Paragraph 3(a) or otherwise, the creation of an unconditional right of the Secured Party for whose benefit the Letter of Credit is established to draw upon that Letter of Credit, whether by delivery to the Secured Party of an original of such Letter of Credit, delivery to the Secured Party of an amendment to an outstanding Letter of Credit in a form reasonably acceptable to the Secured Party and executed by the Qualified Institution that issued such Letter of Credit increasing the amount available to be drawn thereunder, or through such other customary means as may be acceptable to the Secured Party. 

(B)to be returned by the Secured Party to the Pledgor pursuant to Paragraph 3(b), the return of such Letter of Credit by the Secured Party to the Pledgor or to the issuer of such Letter of Credit or by the reduction in the amount available to be drawn by Secured Party under such Letter of Credit.  If a Transfer is to be effected by a reduction in the amount of an outstanding Letter of Credit previously issued for the benefit of the Secured Party, the Secured Party may not unreasonably withhold its consent to a such reduction in the amount of such Letter of Credit and shall take such action as is reasonably necessary to effectuate such reduction. 

(iii)Letter of Credit Provisions.  Other Eligible Support and Other Posted Support in the form of a Letter of Credit is subject to the following provisions: 

(A)Unless otherwise agreed in writing by the parties, each Letter of Credit must be provided in accordance with the provisions of this Annex and maintained for the benefit of the Secured Party.  With respect to each Letter of Credit Transferred to the Secured Party, the Pledgor shall either (x) renew or cause the renewal of the Letter of Credit at least thirty (30) calendar days prior to the expiration date of such Letter of Creditor (y) within two (2) Local Business Days following its determination that it will not renew or cause the renewal of the outstanding Letter of Credit, notify the Secured Party of such determination.   

(B)In the event that the bank that issued an outstanding Letter of Credit indicates that it will not renew the Letter of Credit (or provide a substitute Letter of Credit) at least thirty (30) calendar days prior to the expiration of such Letter of Credit, the Pledgor shall within two (2) Local Business Days after obtaining knowledge of such intent provide notice thereof to the Secured Party.   

(C)Except in connection with a Letter of Credit Default, if a Delivery Amount in excess of the Pledgor’s Minimum Transfer Amount would be created by the change in Value of an outstanding Letter of Credit that resulted  

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from a reduction in the Valuation Percentage applicable to the Letter of Credit, the Pledgor shall at least thirty (30) calendar days prior to the expiration of such Letter of Credit Transfer to the Secured Party Eligible Credit Support in an amount at least equal to the Delivery Amount.

(D)Upon the occurrence of a Letter of Credit Default, the Pledgor shall Transfer to the Secured Party a substitute Letter of Credit or other Eligible Credit Support in an amount at least equal to the greater of (x) the Value of the affected Letter(s) of Credit immediately prior to the occurrence of the Letter of Credit Default and (y) the Delivery Amount applicable following the change in Value of the affected Letter(s) of Credit resulting from the Letter of Credit Default.  The Pledgor shall make such Transfer on or before, (x) the first (1st) Business Day in the case of a Letter of Credit Default of the type described in clause (ii), (iii), (iv) or (v) of the definition thereof and (y) the third (3rd) Business Day in the case of a Letter of Credit Default of the type described in clause (i) thereof, following the earlier to occur of the Pledgor’s discovery of such Letter of Credit Default and written demand by the Secured Party. 

(E)As one method of providing Eligible Credit Support, the Pledgor may increase the amount of an outstanding Letter of Credit or establish one or more additional Letters of Credit. 

(F)Each Letter of Credit must provide that the Secured Party may, and the Secured Party has the right to, in the following situations and upon presentation to the issuer of the Letter of Credit of the certificates or other documentation required by the terms of the Letter of Credit, draw upon the Letter of Credit in an amount up to the entire amount available to be drawn thereunder: 

(1)An Event of Default or Specified Condition has occurred and is continuing with respect to the Pledgor under this Agreement or an event of default (however defined or described) has occurred and is continuing with respect to the Pledgor under any other agreement between the Pledgor and the Secured Party. 

(2)An Early Termination Date has occurred or been designated as a result of a Termination Event or Event of Default and an early termination amount is or would be due and owing to the Secured Party on account of the termination of the applicable Transaction(s). 

(3)Thirty (30) or fewer calendar days remain until the expiration date of the Letter of Credit and the Pledgor has failed to renew, substitute, or sufficiently increase the amount of an outstanding Letter of Credit (as the case may be), establish one or more additional Letters of Credit, or otherwise Transfer sufficient Eligible Credit Support to the Secured Party and the Delivery  

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Amount applicable to the Pledgor as a result of such failure equals or exceeds the Pledgor’s Minimum Transfer Amount.

(G)If a party’s Credit Support Provider furnishes a Letter of Credit hereunder, the amount available to be drawn under the Letter of Credit may at the option of its Credit Support Provider be reduced by the Value of any Letter of Credit Transferred by the party.  In the event a party furnishes a Letter of Credit hereunder, the amount available to be drawn under the Letter of Credit may at the option of the party be reduced by the Value of any Letter of Credit Transferred by the party’s Credit Support Provider. 

(H)Notwithstanding Paragraph 10 of this Annex, in all cases, the Pledgor shall bear the costs and expenses of establishing, renewing, substituting, canceling, increasing, and reducing the amount of (as the case may be) one or more Letters of Credit. 

(I)Upon the occurrence of a Letter of Credit Default of the type described in clauses (ii), (iii) or (v) of the definition thereof with respect to an issuer of a Letter of Credit, such issuer shall cease to be a Qualified Institution for purposes of the definition of the term “Letter of Credit” unless approved as such by the party for whose benefit a letter of credit is to be issued. 

(j)Demands and Notices – All demands, specifications, and notices regarding Eligible Credit Support under this Annex will be made to: 

To Party A:

Attn:    Treasury

Phone:  281-653-1058

Email:  Collateral-NA@edftrading.com

 

To Party B:

Attn:  Jaleea George

Phone: 713-375-2793

 

Email:  jgeorge@summerenergy.com

(k)Addresses for Transfers – All transfers under this Annex will be sent to the address provided by the transferee. 

(l)Other Provisions. 

(i)Amendment to Paragraph 3.  The following is added as clause (c) to Paragraph 3 of this Annex: 

“(c)Credit Assurances.  If a party (the “Demanding Party”) has reasonable grounds to believe in good faith that the creditworthiness or performance of the other party (the “Impaired Party”) under this Agreement has become  

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unsatisfactory, the Demanding Party may provide to the Impaired Party written notice demanding performance assurance in the form of Eligible Credit Support and in an amount determined by the Demanding Party in a commercially reasonable manner.  The Impaired Party shall provide such performance assurance within two (2) Local Business Days following its receipt of the Demanding Party’s demand therefor.  Performance assurance provided in the form of Eligible Credit Support will be excluded from the calculation of the Return Amount until such time as the Demanding Party determines in its reasonable discretion that the creditworthiness or performance, as applicable, of the Impaired Party is no longer unsatisfactory.”

(ii)Amendment to Paragraph 7.  Paragraph 7(i) is amended by (A) deleting the phrase “Eligible Collateral, Posted Collateral” and replacing it with the phrase “Eligible Credit Support, Posted Credit Support” and (B) adding at the end thereof immediately prior to the semicolon the phrase “or fails to provide in accordance with Paragraph 3(c) any performance assurance demanded by the other party pursuant to Paragraph 3(c)”. 

(iii)Amendment to Paragraph 12.   

The definition of “Cash” in Paragraph 12 is deleted in its entirety and replaced with the following:

““Cash” means United States Dollars, or such other currency that is acceptable to the Secured Party.”

(iv)Additions to Paragraph 12.  The following definitions are added to Paragraph 12 in appropriate alphabetical order: 

““Credit Rating” means, with respect to a party (or its Credit Support Provider, as the case may be) or other entity on any date of determination, the respective rating then assigned to its senior unsecured long-term debt or deposit obligations (not supported by third party credit enhancement), or in the absence of such a rating, its then current corporate family rating or, if applicable, issuer rating, in either case by S&P, or Moody’s.  In the event of a split rating, the lowest of the available ratings applies.”

““Letter of Credit” means an irrevocable and transferable standby letter of credit, issued by a Qualified Institution and in a form acceptable to the party in whose favor the Letter of Credit is issued.”

““Letter of Credit Default” means with respect to an outstanding Letter of Credit, the occurrence of any of the following events:  (i) the issuer of such Letter of Credit fails to maintain a Credit Rating of a least “A-” by S&P and “A3” by Moody’s, (ii) the issuer of the Letter of Credit fails to comply with or perform its obligations under such Letter of Credit if such failure is continuing after the lapse of any applicable grace period; (iii) the issuer of such Letter of Credit disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, 

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such Letter of Credit; (iv) such Letter of Credit expires or terminates, or fails or ceases to be in full force and effect at any time while required to be maintained pursuant to the terms of this Agreement; or (v) any event analogous to an event specified in Section 5(a)(vii) of this Agreement occurs with respect to the issuer of such Letter of Credit.  Notwithstanding the foregoing, no Letter of Credit Default will occur in any event with respect to a Letter of Credit after the time such Letter of Credit is required to be canceled or returned to the Pledgor in accordance with the terms of this Annex.”

““Moody’s” means Moody’s Investors Service, Inc., or its successor.”

““Qualified Institution” means, subject to Paragraph 13(j)(iii)(H), a U.S. commercial bank or trust company or the U.S. branch of a foreign bank (in either case, which is not an affiliate of either party) having assets of at least $10 billion and a Credit Rating of at least (i) A3 from Moody’s and (ii) A- from S&P.”

““S&P” means Standard & Poor’s Financial Services LLC, or its successor”.

 

 

[Signature Page Follows]

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The parties executing this Paragraph 13 to the Credit Support Annex to the ISDA Master Agreement have agreed as to the contents of this Paragraph 13 to the Credit Support Annex.

	EDF TRADING NORTH AMERICA, LLC

	SUMMER ENERGY, LLC

	 

	By:/s/ Terry Nutt 

Name:Terry Nutt 

Title:Chief Financial Officer  

	By:/s/ Neil Leibman 

Name:Neil Leibman 

Title:Manager 

 

	 

	 

	SUMMER ENERGY NORTHEAST, LLC

	 

	 

	 

 

By:/s/ Neil Leibman 

Name:Neil Leibman 

Title:Manager 

 

 

	 

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ISDA®1994Execution Version

Exhibit 10.3

SECURITY AGREEMENT

THIS SECURITY AGREEMENT, dated as of May 1, 2018 (as amended, supplemented, or otherwise modified from time to time, this “Agreement”), by and among each of the Persons listed on the signature pages hereof as a “Grantor” and those additional entities that hereafter become parties hereto by executing a Joinder Agreement (collectively, jointly and severally, the “Grantors” and each, individually, a “Grantor”) as grantors, EDF Energy Services, LLC, a Delaware limited liability company (“EDF”), and EDF Trading North America, LLC, a Texas limited liability company (“EDFT NA”, and together with EDF, the “Secured Party”), as secured parties.

 WHEREAS, Summer Energy, LLC, a Texas limited liability company (“Summer”), Summer Energy Northeast, LLC, also a Texas limited liability company (“Summer Northeast” and, together with Summer, “ESCO”) and the Secured Party have entered into that certain Energy Services Agreement, dated of even date herewith (as amended, supplemented, or otherwise modified from time to time, the “Facility Agreement”), pursuant to which the Secured Party has agreed to make available to ESCO a financial and physical commodity supply and hedging facility (as amended, supplemented, or otherwise modified from time to time, the “Facility”);

WHEREAS, ESCO will receive energy supply and ESCO and each of the other Grantors will receive other substantial benefits from the Facility Agreement, and in connection therewith, each Grantor has agreed to grant certain security interests to the Secured Party in order to secure obligations owed by ESCO to the Secured Party thereunder and other obligations as provided herein; and

WHEREAS, it is a condition precedent to the Secured Party entering into the Facility Agreement that each Grantor shall have executed and delivered to the Secured Party this Agreement as security for ESCO’s obligations under the Facility Agreement and other obligations as provided herein.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows.

ARTICLE I.

DEFINITIONS AND TERMS

Section 1.01Defined Terms.  Initially capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meanings given to such terms in the Facility Agreement, including the Defined Terms Annex thereto, or, if not defined therein, in the UCC; provided, however, that if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term shall have the meaning specified in Article 9 of the UCC. 

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Section 1.02Additional Defined Terms.  The following terms shall have the meanings herein specified unless the context otherwise requires: 

“Accounts Receivable” means (i) all accounts, now existing or hereafter arising; and (ii) without limitation of the foregoing, in any event including (A) all right to a payment, whether or not earned by performance, for goods or other property (other than money) that has been or is to be sold, consigned, leased, licensed, assigned or otherwise disposed of, for services rendered or to be rendered, for a policy of insurance issued or to be issued, for a suretyship obligation incurred or to be incurred, for energy provided or to be provided, whether or not it has been earned by performance, and whether now existing or hereafter acquired or arising in the future, (B) all rights evidenced by an account, invoice, purchase order, requisition, bill of exchange, note, contract, security agreement, lease, chattel paper, or any evidence of indebtedness or security related to the foregoing, (C) all security pledged, assigned, hypothecated or granted to or held by a party to secure the foregoing, including all supporting obligations, (D) all guarantees, letters of credit, banker’s acceptances, drafts, endorsements, credit insurance and indemnifications on, for or of, any of the foregoing, including all rights to make drawings, claims or demands for payment thereunder, and (E) all powers of attorney for the execution of any evidence of indebtedness, guaranty, letter of credit or security or other writing in connection therewith.

“Agreement” shall have the meaning assigned to such term in the preamble of this Agreement.

“Assignment of Claims Act” means the Assignment of Claims Act of 1940 (41 U.S.C. Section 15, 31 U.S.C. Section 3727 et seq.), including all amendments thereto and regulations promulgated thereunder.

“Authorized Officer” means any duly authorized officer of a Grantor.

“Closing Date” means the date of this Agreement as first set forth above.

“Collateral” shall have the meaning assigned to such term in Section 2.01 of this Agreement.

“Collateral Account” means any Controlled Account.

“Collateral Assignment Agreement” means a Collateral Assignment of Patents, a Collateral Assignment of Trademarks or a Collateral Assignment of Copyrights.

“Collateral Assignment of Contracts” means a Collateral Assignment of Contracts in the form of Exhibit C or Exhibit D hereto, as applicable, or otherwise in form and substance acceptable to the Secured Party.

“Collateral Assignment of Copyrights” means a Collateral Assignment of Copyrights in the form of Exhibit B-1 hereto, or otherwise in form and substance acceptable to the Secured Party.

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“Collateral Assignment of Patents” means a Collateral Assignment of Patents in the form of Exhibit B-2 hereto, or otherwise in form and substance acceptable to the Secured Party.

“Collateral Assignment of Trademarks” means a Collateral Assignment of Trademarks in the form of Exhibit B-3 hereto, or otherwise in form and substance acceptable to the Secured Party.

“Contract” means any contract, agreement or other similar writing between any Grantor and one or more additional Persons.

“Contract Rights” means all rights of each Grantor under or in respect of a Contract, including all rights to payment, damages, liquidated damages, and enforcement.

“Control Agreement” means any Deposit Account Control Agreement or its equivalent with respect to any securities account delivered in connection with this Agreement.

“Controlled Account” means a deposit account or securities account (i) that is subject to a Control Agreement or (ii) as to which the Secured Party is the “customer” (as defined in Section 4-104 of the UCC) or “entitlement holder” (as defined in 8-102 of the UCC), as applicable.

“Copyright License” means any agreement now or hereafter in existence, providing for the grant by, or to, any rights (including the grant of rights for a party to be designated as an author or owner and/or to enforce, defend, use, display, copy, manufacture, distribute, exploit and sell, make derivative works, and require joinder in suit and/or receive assistance from another party) covered in whole or in part by a Copyright.

“Copyrights” means, collectively, all of the following: (a) all copyrights, works protectable by copyright, copyright registrations and copyright applications anywhere in the world, (b) all derivative works, counterparts, extensions and renewals of any of the foregoing, (c) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including damages or payments for past, present and future infringements, violations or misappropriations of any of the foregoing, (d) the right to sue for past, present and future infringements, violations or misappropriations of any of the foregoing and (e) all rights corresponding to any of the foregoing throughout the world.

“Debtor Relief Laws” means Title 11 of the United States Code, as now or hereafter in effect, or any other applicable law, domestic or foreign, as now or hereafter in effect, relating to bankruptcy, insolvency, liquidation, receivership, reorganization, arrangement or composition, extension or adjustment of debts, or similar laws affecting the rights of creditors.

“Deposit Account Control Agreement” means, with respect to a deposit account of each Grantor, a control agreement in form and substance reasonably acceptable to the Secured Party, among each Grantor, the Secured Party and the relevant Depositary Bank.

“Depositary Bank” means a bank at which the deposit accounts of any Grantor are maintained.

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“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“Facility Agreement” shall have the meaning assigned to such term in the recitals of this Agreement.

“Facility Documents” means the Facility Agreement and the other Transaction Documents, including any agreements, documents, certificates or instruments that are executed and delivered pursuant to any of the foregoing documents, as any of them may be amended, supplemented, or otherwise modified from time to time

“Facility Termination Date” means the date as of which all of the following shall have occurred:  (a) the Facility, the Facility Agreement and all commitments of the Secured Party thereunder have terminated in accordance with the provisions of the Facility Agreement and (b) all Secured Obligations (other than unasserted contingent obligations) have been paid in full.

“Grantor” shall have the meaning assigned to such term in the preamble of this Agreement.

“Intellectual Property” means (i) all Trademarks and Trademark Licenses, together with the registrations and right to all renewals thereof, and the goodwill of any business symbolized by the Trademarks; (ii) all Patents and Patent Licenses; (iii) all Copyrights and Copyright Licenses; (iv) all computer programs and software applications and source codes and all intellectual property rights therein and all other Proprietary Information including Trade Secrets; and (v) all Permits.

“Inventory” means (i) all inventory; and (ii) without limitation of the foregoing, and in all cases including all merchandise and other goods held for sale or lease, or furnished or to be furnished under contracts for service, including raw materials, works in process, finished goods.

“Issuer” means the issuer of any Pledged Collateral.

“Local Business Day” means every day that is not a Saturday, Sunday, federal holiday or a holiday that is customarily observed by the applicable Person.

“Notice of Exclusive Control” means a “Notice of Exclusive Control” (or any equivalent term) as defined in each of the Control Agreements.

“Patent License” means any agreement, now or hereafter in existence, providing for the grant of any rights (including the right for a party to be designated as an owner and/or to enforce, defend, make, have made, make improvements, manufacture, use, sell, import, export, and 

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require joinder in suit and/or receive assistance from another party) covered in whole or in part by a Patent.

“Patents” means collectively, all of the following:  (a) all patents, all inventions and patent applications anywhere in the world, (b) all improvements, counterparts, reissues, divisional, re-examinations, extensions, continuations (in whole or in part) and renewals of any of the foregoing and improvements thereon, (c) all income, royalties, damages or payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including damages or payments for past, present or future infringements, violations or misappropriations of any of the foregoing, (d) the right to sue for past, present and future infringements, violations or misappropriations of any of the foregoing and (e) all rights corresponding to any of the foregoing throughout the world.

“Perfection Certificate” means a certificate in the form of Exhibit A hereto, completed and supplemented with the schedules contemplated thereby to the reasonable satisfaction of the Secured Party, and signed by an Authorized Officer of each Grantor.

“Permits” means all licenses, permits, rights, orders, variances, franchises or authorizations of or from any Governmental Authority.

“Pledge Agreement” means that certain Pledge Agreement, dated on or about the date hereof by and among Summer Energy Holdings, Inc., and Secured Party, as amended, supplemented, or otherwise modified from time to time.

“Pledged Collateral” shall have the meaning assigned to such term in the Pledge Agreement.

“Pledged Equity Interests” shall have the meaning assigned to such term in the Pledge Agreement.

“Proceeds” means (i) all proceeds; and (ii) without limitation of the foregoing and in all cases, including, but not be limited to, (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of any Collateral, (B) whatever is collected on, or distributed on account of, any Collateral, (C) rights arising out of any Collateral, (D) claims arising out of the loss or nonconformity of, defects in, or damage to any Collateral, (E) claims and rights to any proceeds of any insurance, indemnity, warranty or guaranty payable to any Grantor (or the Secured Party, as assignee, loss payee or an additional insured) with respect to any of the Collateral, (F) claims and rights to payments (in any form whatsoever) made or due and payable to any Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of Governmental Authority), (G) all cash, money, checks and negotiable instruments received or held on behalf of the Secured Party pursuant to any lockbox or similar arrangement relating to the payment of Accounts Receivable or other Collateral, and (H) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

“Proprietary Information” means all information and know-how worldwide, including technical data; manufacturing data; research and development data; data relating to 

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compositions, processes and formulations, manufacturing and production know-how and experience; management know-how; training programs; manufacturing, engineering and other drawings; specifications; performance criteria; operating instructions; maintenance manuals; technology; technical information; software; computer programs; engineering and computer data and databases; design and engineering specifications; catalogs; promotional literature; financial, business and marketing plans; and inventions and invention disclosures.

“Secured Party” shall have the meaning assigned to such term in the preamble of this Agreement.

“Significant Intellectual Property” shall have the meaning assigned to such term in Section 6.04 of this Agreement.

“Trademark License” means any agreement, now or hereafter in existence, providing for the grant of any rights in (including the right for a party to be designated as an owner and/or to enforce, defend, use, mark, police, and require joinder in suit and/or receive assistance from another party) covered in whole, or in part, by a Trademark.

“Trademarks” means, collectively, all of the following: (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, internet domain names, trade styles, service marks, logos, other business identifiers, whether registered or unregistered, all registrations and recordings thereof, and all applications in connection therewith (other than each United States application to register any trademark or service mark prior to the filing under applicable Law of a verified statement of use for such trademark or service mark) anywhere in the world, (b) all counterparts, extensions and renewals of any of the foregoing, (c) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including damages or payments for past, present or future infringements, violations, dilutions or misappropriations of any of the foregoing, (d) the right to sue for past, present or future infringements, violations, dilutions or misappropriations of any of the foregoing and (e) all rights corresponding to any of the foregoing (including the goodwill) throughout the world.

“Trade Secrets” means any secretly held existing engineering and other data, information, production procedures and other know-how relating to the design, manufacture, assembly, installation, use, operation, marketing, sale and servicing of any products or business worldwide whether written or not written.

“UCC” means, unless the context indicates otherwise, the Uniform Commercial Code, as at any time adopted and in effect in the State of New York, specifically including and taking into account all amendments, supplements, revisions and other modifications thereto.

“Vessel” means any watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water (including those whose primary purpose is the maritime transportation of cargo or which are otherwise engaged, used or useful in any business activities of any Grantor) which are owned by and registered (or to be owned and registered) in the name of any Grantor, including any Vessel leased or otherwise registered in the foregoing parties’ names, pursuant to a lease or other operating agreement constituting a capital lease 

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obligation, in each case together with all related spares, equipment and any additional improvements, vessel owned, bareboat chartered or operated by any Grantor other than Vessels owned by an entity other than any Grantor and which are managed under Vessel management agreements.

Section 1.03Terms Generally.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as amended, supplemented, or otherwise modified from time to time (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, and (d) unless otherwise specified, all references herein to Sections, Schedules, Annexes and Exhibits shall be construed to refer to Sections of, and Schedules, Annexes and Exhibits to, this Agreement. 

ARTICLE II.

SECURITY INTEREST

Section 2.01Grant of Security Interest.  As security for the prompt and complete payment and performance when due, whether at stated maturity, by acceleration or otherwise, of all of the Secured Obligations, each Grantor does hereby collaterally assign, pledge, hypothecate, deliver and set over unto the Secured Party, and does hereby grant to the Secured Party, a continuing security interest in all of the right, title and interest of such Grantor in, to and under all of the following of such Grantor, whether now existing or hereafter from time to time arising or acquired and wherever located (collectively, the “Collateral”): 

(i)all Accounts, including each and every Account Receivable; 

(ii)all Goods; 

(iii)all Inventory; 

(iv)all Equipment; 

(v)all Documents; 

(vi)all Instruments; 

(vii)all Chattel Paper (including Electronic Chattel Paper and Tangible Chattel Paper); 

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(viii)all Money; 

(ix)all Deposit Accounts and Securities Accounts, including all Controlled Accounts, together with all monies, securities and instruments at any time deposited in any such deposit account or otherwise held for the credit thereof; 

(x)all Investment Property, including Pledged Equity Interests; 

(xi)all Fixtures; 

(xii)all General Intangibles, including all Contract Rights; 

(xiii)all Commercial Tort Claims, including, but not limited to, those certain Commercial Tort Claims set forth on Schedule 1; 

(xiv)all Intellectual Property; 

(xv)all Letter-of-Credit Rights; 

(xvi)to the extent not otherwise included above, all Supporting Obligations; 

(xvii)to the extent not otherwise included above, all additions, modifications, alterations, improvements, upgrades, accessions, components, parts, appurtenances, substitutions and/or replacements of, to or for any of the foregoing; 

(xviii)all books and records pertaining to the Collateral; and 

(xix)to the extent not otherwise included above, all Proceeds and products of any and all of the foregoing. 

Section 2.02Excluded Property.  Notwithstanding anything in Section 2.01 to the contrary, the term Collateral shall not include (nor shall any component definition of Collateral include) or the security interest granted under Section 2.01 attach to:  (i) any Equipment or Goods that are subject to a “purchase money security interest” or a Capital Lease to the extent that such purchase money security interest or Capital Lease (x) constitutes a Permitted Lien and (y) prohibits the creation by a Grantor of a security interest therein, unless the holder thereof has consented to the creation of such a security interest; (ii) vehicles and other assets subject to certificates of title of aggregate value equal or less than $50,000; (iii) applications filed in the U.S. Patent and Trademark Office to register Trademarks on the basis of a Grantor’s “intent to use” such Trademarks unless and until the filing of a “Statement of Use” or “Amendment to Allege Use” has been filed and accepted; (iv) assets as to which the Secured Party shall determine, in its commercially reasonable discretion, that the costs (including any applicable stamp, intangibles or other taxes) and burdens of obtaining a security interest therein or perfection thereof outweigh the value to the Secured Party of the incremental security afforded thereby; (v) any General Intangible, permit, license or other rights under contracts instruments or other documents if (but only to the extent that) the grant of a security interest therein would constitute a violation of a restriction in favor of a third party (except to the extent such  

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prohibition is unenforceable pursuant to the provisions of Article 9 of the UCC or to the extent that the third party has not otherwise consented to the security interest); and (vi) any direct Proceeds, substitutions or replacements of any of the foregoing, but only to the extent such Proceeds, substitutions or replacements would separately constitute “Excluded Property”.  No component of the term “Collateral” shall include any Excluded Property.

Section 2.03No Assumption of Liability.  The security interest hereunder of each Grantor is granted as security only and shall not subject the Secured Party to, or in any way alter or modify, any obligation or liability of such Grantor with respect to or arising out of any of the Collateral.  Each Grantor and the Secured Party hereby acknowledge and agree that the security interest created hereby in the Collateral (a) constitutes continuing collateral security for all of the Secured Obligations, whether now existing or hereafter arising and (b) is not to be construed as an assignment of any Intellectual Property. 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

Each Grantor represents and warrants to the Secured Party, which representations and warranties shall survive the execution and delivery of this Agreement until the termination of this Agreement in accordance with Section 9.09, as follows:

Section 3.01Title and Authority.  Each Grantor (i) has good, valid and marketable title to the Collateral purported to be owned by it and good, valid and marketable rights in all other Collateral in which it purports to have rights, in each case, subject to Permitted Liens and (ii) has full power and authority to grant to the Secured Party the security interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval that has been obtained. 

Section 3.02Absence of Other Liens. 

(a)There is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind of any Grantor in the Collateral, except for any filings or recordings made in connection with any Permitted Liens. 

(b)Each Grantor is, and as to any Collateral acquired by such Grantor from time to time after the date hereof such Grantor will own the Collateral, free and clear of any Lien (other than Permitted Liens). 

Section 3.03Validity of Security Interest.  The security interest granted by each Grantor constitutes a legal, valid and enforceable first priority (except as to any Permitted Liens) security interest in all of the Collateral of such Grantor, securing the payment and performance of the Secured Obligations. 

Section 3.04Perfection of Security Interest under UCC.  Each Grantor shall cooperate with Secured Party to ensure that all notifications and other actions, including (i) all deposits of  

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certificates and instruments evidencing any Collateral (duly endorsed and accompanied by appropriate instruments of transfer), (ii) all notices to and acknowledgments of any bailee or other Person, (iii) all acknowledgments and agreements respecting the right of Secured Party to obtain “control” (within the meaning of Section 9-102 of the UCC) and (iv) all filings, registrations and records, in each case, which are (x) required by the terms of this Agreement to have been given, made, obtained, done and accomplished and (y) necessary to create, preserve, protect and perfect the security interest granted by each Grantor to the Secured Party hereby in respect of its portion of the Pledged Collateral shall have been given, made, obtained and accomplished.

Section 3.05Perfection Certificates.  The Perfection Certificate delivered by each Grantor (including any supplements and updates thereto), and all information set forth therein, is true and correct in all material respects. 

Section 3.06Places of Business; Jurisdiction of Organization; Locations of Collateral.  (i) The principal place of business of each Grantor, or its chief executive office, if it has more than one place of business, is located at the address indicated on the most recent Perfection Certificate executed and delivered to the Secured Party; (ii) the jurisdiction of formation or organization of each Grantor is set forth on the most recent Perfection Certificate executed and delivered to the Secured Party; (iii) the U.S. Federal Tax I.D. Number and, if applicable, the organizational identification number of each Grantor is set forth on the most recent Perfection Certificate executed and delivered to the Secured Party; and (iv) all Inventory and Equipment of each Grantor is located at one of the locations set forth on the most recent Perfection Certificate executed and delivered to the Secured Party other than any natural gas owned by any Grantor in the ordinary course of business.  No Grantor or any Grantor’s predecessors in interest have conducted business in any jurisdiction, under any trade name, fictitious name or other name (including any names of divisions or predecessor entities), except the current legal name of such Grantor and such other trade, fictitious and other names as are listed on the most recent Perfection Certificate executed and delivered to the Secured Party. 

Section 3.07Types of Collateral.  None of the Collateral consists of, or is the Proceeds of, (i) As-Extracted Collateral, (ii) Consumer Goods, (iii) Farm Products, (iv) Manufactured Homes, (v) standing timber, (vi) an aircraft, airframe, aircraft engine or related property, (vii) an aircraft leasehold interest, (viii) a Vessel or (ix) any other interest in or to any of the foregoing. 

Section 3.08Deposit Accounts and Securities Accounts.  The Perfection Certificate delivered to the Secured Party as of the date hereof, as the same may be deemed to be updated pursuant to this Agreement, sets forth a true and complete list in all material respects of all Deposit Accounts and Securities Accounts (other than ESCO Excluded Accounts) owned by each Grantor or in which any of the Grantors’ Collateral is held.  All of the Deposit Accounts and Securities Accounts (other than ESCO Excluded Accounts) of each Grantor are, and all cash and money of each Grantor (other than cash and money held in ESCO Excluded Accounts) is held in, Controlled Accounts. 

Section 3.09Securities Accounts.  Each Grantor does not own any securities entitlements or any Investment Property that are not held in Controlled Accounts (or ESCO Excluded Accounts). 

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Section 3.10Consents, Etc.  No approval, consent, exemption, authorization or other action by, notice to, or filing with, any Governmental Authority or any other Person (including any stockholder, member or creditor of any Grantor), is necessary or required for (i) the grant by each Grantor of the security interest in the Collateral granted hereby or for the execution, delivery or performance of this Agreement by such Grantor, (ii) the perfection of such security interest (to the extent such security interest can be perfected by filing under the UCC), the granting of control or by filing an appropriate notice with the United States Patent and Trademark Office or the United States Copyright Office or (iii) the exercise by the Secured Party of the rights and remedies provided for in this Agreement (including as against any Issuer), except for (A) the filing or recording of UCC financing statements or other filings under the Assignment of Claims Act, (B) the filing of appropriate notices with the United States Patent and Trademark Office and the United States Copyright Office, (C) obtaining control to perfect the Liens created by this Agreement, (D) such actions as may be required by Laws affecting the offering and sale of securities, (E) consents, authorizations, filings or other actions which have been obtained or made, and (F) as may be required with respect to vehicles registered under a certificate of title. 

ARTICLE IV.

GENERAL COVENANTS

Section 4.01No Other Liens; Defense of Title.  No Grantor will make or grant, or suffer or permit to exist, any Lien on any of the Collateral, other than the Permitted Liens.  Each Grantor, at its sole cost and expense, will take any and all actions reasonably necessary or reasonably requested by Secured Party to defend title to the Collateral against any and all Persons and to defend the validity, enforceability, perfection, effectiveness and priority of the security interest of the Secured Party therein against any Lien other than Permitted Liens. 

Section 4.02Further Assurances; Filings and Recordings. 

(a)Each Grantor, at its sole cost and expense, will duly execute, acknowledge and deliver all such agreements, instruments and other documents and take all such actions (including (i) physically pledging instruments, documents, promissory notes, chattel paper and certificates evidencing any investment property or any of the Pledged Collateral with the Secured Party, (ii) obtaining Control Agreements in accordance with this Agreement, (iii) obtaining from other Persons lien waivers and bailee letters as the Secured Party shall reasonably request, (iv) obtaining from other Persons agreements evidencing the exclusive control and dominion of the Secured Party over any of the Collateral, in instances where obtaining control over such Collateral is the only or best method of perfection, and (v) making filings, recordings and registrations), as the Secured Party may from time to time reasonably request in writing to better assure, preserve, protect and perfect the security interest of the Secured Party in the Collateral, and the rights and remedies of the Secured Party hereunder, or otherwise to further effectuate the intent and purposes of this Agreement and to carry out the terms hereof.  Notwithstanding the foregoing provisions of this Section 4.02 or any other provisions of this Agreement, no Grantor shall be required to deliver any instruments, notices or other documents or take any other actions, if the costs and burdens to such Grantor of providing or taking the same outweigh the value (as  

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reasonably determined by Secured Party) in relation to the incremental benefits to Secured Party afforded thereby.

(b)Each Grantor, at its cost and expense, will (i) at all times cause this Agreement (and/or proper notices and supplemental collateral assignments or collateral security agreements in respect of any portion of the Collateral) to be duly registered and published, and re-registered and re-published in such manner and in such places as may be required under the UCC or other applicable law in order to establish, perfect, preserve and protect the rights, remedies and security interest of the Secured Party in or with respect to the Collateral of such Grantor, and (ii) pay all taxes (unless the same are being contested in good faith), fees and charges and comply with all statutes and regulations applicable to such registration and publishing and such re-registration and re-publishing. 

Section 4.03Use and Disposition of the Collateral.  Unless and until an Event of Default shall have occurred and be continuing, or a Termination Event or an Early Termination Date shall have occurred and Secured Party has provided written notice to a Grantor thereof that the rights of such Grantor under this Section 4.03 are suspended, each Grantor may use and dispose of its Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Facility Agreement or any other Facility Document. 

Section 4.04Authorization to File Financing Statements.  Each Grantor irrevocably authorizes the Secured Party at any time and from time to time to file in any UCC jurisdiction any initial financing statements and all amendments thereto that (a) indicate the Collateral (i) as “all assets” or “all personal property” of such Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the applicable UCC, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required pursuant to the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether such Grantor is an organization, the type of organization and any organization identification number, and (ii) in the case of a financing statement that is filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates.  Each Grantor agrees to furnish any such information to the Secured Party promptly upon the Secured Party’s request. 

Section 4.05Maintenance of Records.  Each Grantor will keep and maintain at its cost and expense complete records, in conformity with GAAP consistently applied and in material conformity with all applicable requirements of all applicable federal, state and local laws and any applicable laws of any relevant foreign jurisdiction, of their Accounts Receivable, Contracts and other Collateral, including the originals of all documentation with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith.  All billings and invoices issued by any Grantor with respect to its Accounts Receivable will be in material compliance with, and materially conform to, the material requirements of all applicable federal, state and local laws and any applicable laws of any relevant foreign jurisdiction and in conformity with GAAP consistently applied.  If an Event of Default shall have occurred and be continuing or a Termination Event or an Early Termination Date shall have occurred, and the Secured Party so directs, each Grantor shall legend, in form and manner satisfactory to the Secured Party, its Accounts Receivable and Contracts, as well as  

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books, records and documents of such Grantor evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts Receivable and Contracts have been assigned to the Secured Party and that the Secured Party has a security interest therein.

Section 4.06Perfection Certificates; Collateral Reports. 

(a)Perfection Certificates.  Each Grantor shall provide to the Secured Party a completed Perfection Certificate, duly executed by an Authorized Officer of such Grantor, together with all schedules required to be delivered in connection therewith (i) on the Closing Date as required pursuant to the Facility Agreement, and (ii) on the date that any additional Person becomes a party to this Agreement.  In addition, if any information contained in any Perfection Certificate previously delivered to the Secured Party shall become untrue or incorrect in any respect, or if any Grantor acquires or disposes of Collateral in excess of $250,000 (other than the purchase, sale and delivery of power and natural gas in the ordinary course of business), such that any previously delivered Perfection Certificate is no longer accurate or complete in all material respects, then within ten (10) Local Business Days after such information becoming untrue, incorrect, inaccurate or incomplete, such Grantor shall execute and deliver a new Perfection Certificate to the Secured Party.  The Perfection Certificate shall be deemed to have been updated to include the information included in any new Perfection Certificate delivered in accordance with this Section 4.06(a). 

(b)Collateral Reports.  Whenever requested to do so by the Secured Party, each Grantor will promptly, at its cost and expense, deliver to the Secured Party, in written hard copy form or other readable form, as specified by the Secured Party, such listings, agings, descriptions, schedules and other reports with respect to the Accounts Receivable, Inventory, equipment and other Collateral of such Grantor as the Secured Party may instruct, all of the same to be in such scope, categories and detail as the Secured Party may reasonably request and to be accompanied by copies of invoices and other documentation as and to the extent instructed by the Secured Party; provided, however, if no Potential Event of Default] or Event of Default has occurred and is continuing and if no Termination Event or Early Termination Date has occurred, each Grantor will be required to make such delivery no more frequently than as set forth in the Facility Agreement; provided further, if no such delivery requirement is set forth in the Facility Agreement, no Grantor shall be required to make such delivery more frequently than quarterly. 

Section 4.07Legal Status.  Each Grantor agrees that (a) it will not change its name, place of business or if more than one, chief executive office, or its mailing address or organizational identification number if it has one, in each case without providing the Secured Party at least thirty (30) days’ prior written notice thereof, (b) if such Grantor does not have an organizational identification number and later obtains one, it will promptly notify the Secured Party of such organizational identification number, and (c) no Grantor will change its type of organization, jurisdiction of organization or other legal structure or enter into any transaction of merger or consolidation, or convey, sell, lease or sub lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or substantially of its  

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business, property or assets (including its notes or receivables), whether now owned or hereafter acquired, or enter into any merger or consolidation.1

Section 4.08Inspections and Verification.  If an Event of Default has occurred and is continuing or a Termination Event or Early Termination Date shall have occurred, Secured Party shall have the right during normal business hours on not less than three (3) Local Business Days’ prior notice to a Grantor and so long as an Authorized Officer of such Grantor is present and allowed to participate, to discuss such Grantor’s affairs with its respective independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, such Collateral, including, in the case of accounts or other Collateral in the possession of any third Person, by contacting account debtors or the third Person possessing such Collateral (after not less than three (3) Local Business Days’ prior notice to such Grantor) for the purpose of making such verification; provided that, any procedures or actions taken in order to verify accounts by contacting account debtors, shall be effected by such Grantor’s independent accountants, acting at the direction of the Secured Party, in such manner (consistent with their normal auditing procedures) so as not to reveal the identity of the Secured Party or the existence of the security interest to the account debtors.  Subject to the limitations set forth in this Section, each Grantor will instruct its independent accountant to undertake any such verification when and as requested by the Secured Party.  The results of any such verification by such independent accountant shall be reported by such independent accountant to both the Secured Party and such Grantor. 

Section 4.09Insurance.  Each Grantor will at all times keep such Grantor’s business and Collateral insured with financially sound and reputable insurance companies, in such amounts, with such deductibles and covering such risks as are customarily carried by companies of the same or similar size engaged in similar businesses and owning similar properties in localities where such Grantor operates.  Each Grantor shall otherwise maintain insurance in accordance with Section 6.5 the Facility Agreement. 

Section 4.10Proceeds of Casualty Insurance, Condemnation or Taking. 

(a)All amounts recoverable under any policy of casualty insurance or any award for the condemnation or taking by any Governmental Authority of any portion of the Collateral are hereby assigned to the Secured Party. 

(b)Each Grantor will apply any such proceeds or amounts received by it in the manner provided in the Facility Agreement, including, if required under the terms of the Facility Agreement, by paying over the same directly to the Secured Party. 

(c)In the event any portion of the Collateral suffers a casualty loss or is involved in any proceeding for condemnation or taking by any Governmental Authority, then if an Event of Default has occurred and is continuing or a Termination Event or Early Termination Date shall have occurred and upon written notice, the Secured Party is authorized and empowered, at its option, to participate in, control, direct, adjust, settle and/or compromise any such loss or proceeding, to collect and receive the proceeds therefrom and, after deducting from  

1 NTD: revisions added to conform to obligations of 7.5 of ESA.

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such proceeds any expenses incurred by it in connection with the collection or handling thereof, to apply the net proceeds to the Secured Obligations in accordance with Section 8.05.

(d)If any proceeds are received by the Secured Party as a result of a casualty, condemnation or taking involving the Collateral and no Event of Default has occurred and is continuing, and neither a Termination Event nor Early Termination Date has occurred, then the Secured Party will promptly release such proceeds to the applicable Grantor, unless the Facility Agreement provides otherwise. 

Section 4.11Commercial Tort Claims.  If any Grantor shall at any time hold or acquire a commercial tort claim, the recovery from which could reasonably be expected to exceed $200,000, such Grantor shall promptly notify the Secured Party thereof in a writing signed by such Grantor which sets forth the details thereof and grants to the Secured Party (for the benefit of the Secured Party) a Lien thereon and on the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Secured Party. 

Section 4.12Electronic Chattel Paper and Transferable Records.  If any Grantor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act, as in effect in any relevant jurisdiction in excess of $200,000, such Grantor shall promptly notify the Secured Party thereof and, at the request of the Secured Party, shall take such action as the Secured Party may reasonably request to vest in the Secured Party control under the UCC or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.  The Secured Party agrees with each Grantor that the Secured Party will arrange, pursuant to procedures reasonably satisfactory to the Secured Party and so long as such procedures will not result in the Secured Party’s loss of control, for each Grantor to make alterations to the electronic chattel paper or transferable record permitted under the UCC or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic chattel paper or transferable record or a Termination Event or Early Termination Date shall have occurred. 

Section 4.13Letter-of-Credit Rights.  If any Grantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of such Grantor in excess of $200,000, such Grantor shall promptly notify the Secured Party thereof and, at the request of the Secured Party, such Grantor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Secured Party, either (i) arrange for the issuer or any confirming bank of such letter of credit to consent to an assignment to the Secured Party of the proceeds of any drawing under the letter of credit or (ii) arrange for the Secured Party to become the transferee beneficiary of the letter of credit, with the Secured Party agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to such Grantor unless an Event of Default has occurred and is continuing or a Termination Event or Early Termination Date has occurred. 

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Section 4.14Collateral Assignments of Contracts.  Each Grantor will, upon the Secured Party’s reasonable request, (a) cause the execution from time to time of a Collateral Assignment of Contracts in substantially the form attached hereto as Exhibit C with respect to each Contract reasonably requested by Secured Party and that does not by its terms prohibit the collateral assignment to the Secured Party and (b) with respect to each lease of real property entered into by such Grantor, use commercially reasonable efforts to deliver a Collateral Assignment of Contracts in substantially the form attached hereto as Exhibit D, duly executed by the applicable landlord. 

Section 4.15Protective Advances by the Secured Party.  At its option, but without being obligated to do so, the Secured Party may, upon prior written notice to any Grantor, after the occurrence and during the continuance of an Event of Default or after a Termination Event or Early Termination Date shall have occurred (i) pay and discharge past due taxes, assessments and governmental charges, at any time levied on or with respect to any of the Collateral of such Grantor which such Grantor has failed to pay and discharge in accordance with the requirements of this Agreement or any of the other Facility Documents, (ii) pay and discharge any claims of other creditors of such Grantor which are secured by any Lien on any Collateral, other than a Permitted Lien, (iii) pay for the maintenance, repair, restoration and preservation of the Collateral to the extent such Grantor fails to comply with its obligations in regard thereto under this Agreement and the other Facility Documents or the Secured Party reasonably believes payment of the same is reasonably necessary or appropriate to avoid a material loss or material diminution in value of the Collateral, and/or (iv) obtain and pay the premiums on insurance for the Collateral which such Grantor fails to maintain in accordance with the requirements of this Agreement and the other Facility Documents, and such Grantor agrees to reimburse the Secured Party, on demand, for all reasonable and out-of-pocket payments and expenses incurred by the Secured Party with respect to such Grantor or any of its Collateral pursuant to the foregoing authorization, provided, however, that nothing in this Section shall be construed as excusing any Grantor from the performance of, or imposing any obligation on the Secured Party to cure or perform, any covenants or other agreements of any Grantor with respect to any of the foregoing matters as set forth herein or in any of the other Facility Documents. 

Section 4.16Acquisition of Equity Interest.  No Grantor shall acquire any investment property, securities accounts or securities entitlements (other than ESCO Investment Accounts) without the prior written consent of Secured Party (such consent not to be unreasonably withheld).  The consent of the Secured Party to any Grantor’s acquisition of any investment property, securities account or securities entitlements (other than ESCO Investment Accounts) may be conditioned upon such Grantor’s execution of a pledge agreement and any control agreements reasonably requested by Secured Party to create and perfect Secured Party’s Lien in such investment property, securities account or securities entitlement. 

Section 4.17Required Notifications.  Each Grantor shall promptly following its discovery thereof notify the Secured Party, in writing, of: (i) any Lien (other than Permitted Liens) on any of the Collateral which would adversely affect the ability of the Secured Party to exercise any of its remedies hereunder and (ii) the occurrence of any other event which could reasonably be expected to have a material impairment on the aggregate value of the Collateral or on the security interests created hereby. 

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Section 4.18Perfection through Possession and Control. 

(a)Without limiting the generality of Section 4.02, if any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper or Supporting Obligation, or if any property constituting Collateral shall be stored or shipped subject to a Document, each Grantor shall ensure that such Instrument, Tangible Chattel Paper, Supporting Obligation or Document is either in the possession of such Grantor at all times or, if requested by the Secured Party to perfect its security interest in such Collateral, is delivered to the Secured Party duly endorsed in a manner satisfactory to the Secured Party.  Each Grantor shall ensure that any Collateral consisting of Tangible Chattel Paper is marked with a legend acceptable to the Secured Party indicating the Secured Party’s security interest in such Tangible Chattel Paper. 

(b)Without limiting the generality of Section 4.02, each Grantor shall deliver to the Secured Party promptly upon the receipt thereof by or on behalf of such Grantor, all certificates and instruments constituting Certificated Securities or Pledged Equity Interests.  Prior to delivery to the Secured Party, all such certificates constituting Certificated Securities or Pledged Equity Interests shall be held in trust by such Grantor for the benefit of the Secured Party pursuant hereto.  All such certificates representing Certificated Securities or Pledged Equity Interests shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank. 

Section 4.19Collateral Held by Warehouseman, Bailee, etc. 

(a)Without limiting the generality of Section 4.02, if any Collateral is at any time in the possession or control of a warehouseman, bailee or any agent or processor of a Grantor, such Grantor shall (i) notify the Secured Party of such possession, (ii) notify such Person in writing of the Secured Party’s security interest in such Collateral, (iii) instruct such Person to hold all such Collateral for the Secured Party’s account and subject to the Secured Party’s instructions and (iv) unless otherwise consented to in writing by the Secured Party, obtain (A) a written acknowledgment from such Person that it is holding such Collateral for the benefit of the Secured Party and (B) such other documentation required by the Secured Party (including subordination and access agreements). 

(b)Without limiting the generality of Section 4.02, each Grantor shall perfect and protect such Grantor’s ownership interests in all Inventory stored with a consignee against creditors of the consignee by filing and maintaining financing statements against the consignee reflecting the consignment arrangement filed in all appropriate filing offices, providing any written notices required by the UCC to notify any prior creditors of the consignee of the consignment arrangement, and taking such other actions as may be appropriate to perfect and protect such Grantor’s interests in such Inventory under Section 2-326, Section 9-103, Section 9-324 and Section 9-505 of the UCC or otherwise, which such financing statements filed pursuant to this Section shall be assigned to the Secured Party. 

ARTICLE V.

ACCOUNTS AND COLLECTION OF ACCOUNTS

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Section 5.01Deposit Accounts. 

(a)Each Grantor shall cause all deposit accounts and securities accounts (other than ESCO Excluded Accounts) to be subject at all times to a fully effective Control Agreement. 

(b)Unless otherwise directed by the Secured Party during the existence of an Event of Default or following the occurrence of a Termination Event or Early Termination Date, all amounts that are available for distribution from the Controlled Accounts shall be applied in accordance with the Facility Agreement. 

(c)During the existence of an Event of Default or following the occurrence of a Termination Event or an Early Termination Date, all amounts that are deposited or held in the Controlled Accounts shall be applied as determined by the Secured Party in accordance with the Facility Agreement and the Control Agreements. 

(d)Each Grantor shall maintain in effect and perform all of its obligations under each Control Agreement to which it is a party, without modification thereto, except as approved in writing by the Secured Party. 

(e)Immediately upon the creation or acquisition of any new deposit account or securities account or any interest therein by a Grantor (other than an Excluded Account), such Grantor shall cause to be in full force and effect, prior to the deposit of any funds therein, a Control Agreement duly executed by such Grantor, the Secured Party and the applicable Depositary Bank, and the Perfection Certificate shall be deemed to have been updated to include such newly created or acquired deposit account upon satisfaction of the foregoing. 

Section 5.02Operation of Collateral Accounts during Event of Default.  Upon the occurrence and during the continuance of an Event of Default or following the occurrence of a Termination Event or Early Termination Date, upon written notice to any Grantor, the Secured Party shall be permitted to (i) retain, or instruct the relevant Depositary Bank to retain, all cash and investments held in any Collateral Account, (ii) liquidate or issue entitlement orders with respect to, or instruct the relevant Depositary Bank to liquidate, any or all investments or financial assets held in any Collateral Account, (iii) issue a Notice of Exclusive Control or other similar instructions with respect to any Collateral Account and instruct the Depositary Bank to follow the instructions of the Secured Party, and (iv) withdraw any amounts held in any Collateral Account and apply such amounts in accordance with the terms of this Agreement. 

Section 5.03Collection of Accounts. 

(a)Each Grantor shall, in a manner consistent with the provisions of this Article V and the Facility Documents and in a manner consistent with past practice and in the ordinary course of business, endeavor to cause to be collected from the account debtor named in each Grantor’s Accounts Receivable, as and when due (including amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures), any and all amounts owing under or on account of such Accounts Receivable and shall, if required to do so pursuant to the terms of this Agreement, cause such collections to be deposited or held in a Collateral Account. 

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(b)Each Grantor shall, and the Secured Party hereby authorizes each Grantor to, enforce and collect all amounts owing to such Grantor on such Grantor’s Inventory and Accounts Receivable, for the benefit and on behalf of the Secured Party; provided, however, that such privilege may in the sole discretion of the Secured Party, upon prior written notice to such Grantor, be terminated upon the occurrence and during the continuance of an Event of Default or if a Termination Event or Early Termination Date shall have occurred. 

ARTICLE VI.

Intellectual property

Section 6.01Intellectual Property.  Each Grantor represents and warrants that:  (i) each Grantor is the true and lawful owner or licensee of the Trademarks and Trademark Licenses listed on the most recent Perfection Certificate delivered to the Secured Party and that said listed Trademarks and Trademark Licenses constitute all the marks registered in the United States Patent and Trademark Office and all trademark licenses that such Grantor now owns or uses in connection with its business; (ii) each Grantor is the true and lawful owner or licensee of all rights in the Patents and Patent Licenses listed on the most recent Perfection Certificate delivered to the Secured Party and that said Patents and Patent Licenses constitute all the United States patents and applications for United States patents and all patent licenses that such Grantor now owns or uses in connection with its business; and (iii) each Grantor is the true and lawful owner or licensee of all rights in the Copyright registrations and the Copyright Licenses identified as owned by such Grantor and listed on the most recent Perfection Certificate delivered to the Secured Party and that said Copyrights and Copyright Licenses constitute all the registered United States copyrights and copyright licenses that such Grantor now owns or uses in connection with its business.  Each Grantor further warrants that it is aware of no third-party claim that any aspect of such Grantor’s present or contemplated business operations infringes or will infringe any trademark, service mark, patent or copyright in a manner which could have a Material Adverse Effect. 

Section 6.02Collateral Assignments; Further Assurances.  Upon reasonable request of the Secured Party whenever made, each Grantor shall promptly execute and deliver to the Secured Party such Collateral Assignment Agreements as the Secured Party shall request in connection with such Grantor’s Intellectual Property.  Each Grantor agrees that it will take such action, and deliver such documents or instruments, as the Secured Party shall reasonably request in connection with the preparation, filing or registration and enforcement of any Collateral Assignment Agreement. 

Section 6.03Licenses and Assignments.  Each Grantor hereby agrees not to divest itself of any material right under or with respect to any Intellectual Property material to its business other than in the ordinary course of business or as expressly permitted pursuant to the Facility Agreement absent prior written approval of the Secured Party. 

Section 6.04Infringements.  Each Grantor agrees, promptly upon learning thereof, to notify the Secured Party in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who may be infringing or otherwise violating any of a Grantor’s rights in and to any Intellectual Property that could reasonably be  

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expected to have a Material Adverse Effect (any such Intellectual Property, “Significant Intellectual Property”), or with respect to any party claiming that a Grantor’s use of any Significant Intellectual Property violates any property right of that party, to the extent that such infringement or violation could reasonably be expected to have a Material Adverse Effect.  Each Grantor further agrees to prosecute any Person infringing any Significant Intellectual Property in a manner consistent with its past practice and in the ordinary course of business.

Section 6.05Trademarks. 

(a)Preservation of Trademarks.  Each Grantor agrees to use or license the use of its Trademarks in interstate commerce during the time in which this Agreement is in effect, sufficiently to preserve such Trademarks as trademarks or service marks registered under the laws of the United States, except where such Grantor in good faith determines it is commercially reasonable to abandon a Trademark. 

(b)Maintenance of Registration.  Except where a Grantor determines in good faith it is commercially reasonable to abandon a Trademark or a Trademark application, each Grantor shall, at its own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. §§ 1051, et seq. to maintain trademark registration, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its Trademarks pursuant to 15 U.S.C. §§ 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith. 

(c)Future Registered Trademarks.  If any mark registration issued hereafter to any Grantor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, then, in accordance with Section 4.06(a), within ten (10) Local Business Days of receipt of such certificate, such Grantor shall deliver to the Secured Party an updated Perfection Certificate, together with a copy of such certificate, and a grant of security in such mark to the Secured Party, confirming the grant thereof hereunder, the form of such confirmatory grant to be in form and substance reasonably acceptable to the Secured Party. 

Section 6.06Patents. 

(a)Maintenance of Patents.  Each Grantor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. §41 to maintain in force rights under each Patent held by such Grantor, except where such Grantor in good faith determines it is commercially reasonable to abandon such Patent. 

(b)Prosecution of Patent Applications.  Each Grantor shall maintain all Patents issued to such Grantor and shall diligently prosecute all applications for United States patents, and shall not abandon any such application, except in favor of a continuation application based on such application, prior to exhaustion of all administrative and judicial remedies, except where such Grantor in good faith determines it is commercially reasonable to abandon such Patent or application. 

Section 6.07Other Patents and Copyrights.  In accordance with Section 4.06(a), within ten (10) Local Business Days of acquisition of a United States Patent or Copyright, or of filing of an application for a United States Patent by any Grantor, such Grantor shall deliver to the  

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Secured Party an updated Perfection Certificate, together with a copy of said Patent or Copyright, as the case may be, with a grant of security as to such Patent or Copyright, as the case may be, confirming the grant thereof hereunder, the form of such confirmatory grant to be in form and substance acceptable to the Secured Party.

Section 6.08Remedies Relating to Intellectual Property.  If an Event of Default shall occur and be continuing or a Termination Event or Early Termination Date shall have occurred, the Secured Party may, by providing any Grantor with written notice, take any or all of the following actions:  (i) declare the entire right, title and interest of such Grantor in and to each of the Copyrights, Patents and Trademarks, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest in the Secured Party, in which case such Grantor agrees to execute an assignment in form and substance reasonably satisfactory to the Secured Party of all its rights, title and interest in and to all of such Grantor’s Copyrights, Patents and Trademarks to the Secured Party; (ii) take and practice or sell such Grantor’s Copyrights or Patents and take and use or sell such Grantor’s Trademarks and the good will of such Grantor’s business symbolized by the Trademarks and the right to carry on the business and use the assets of such Grantor in connection with which the Trademarks have been used; and (iii) direct such Grantor to refrain, in which event such Grantor shall refrain, from using the Copyrights, Patents and Trademarks in any manner whatsoever, directly or indirectly, and execute such other and further documents that the Secured Party may request in connection with such Grantor’s obligations under this Agreement and to transfer ownership of such Grantor’s Copyrights, Patents and Trademarks, and registrations and any pending trademark application, to the Secured Party. 

ARTICLE VII.

Power of Attorney

Section 7.01Appointment and Powers of Secured Party.  Each Grantor hereby irrevocably constitutes and appoints the Secured Party and all agents thereof, with full power of substitution, as its true and lawful attorneys-in-fact with full irrevocable power and authority in the place and stead of such Grantor or in Secured Party’s own name, for the purpose of carrying out the terms of this Agreement, to take any and all reasonably necessary action and to execute any and all documents and instruments that may be reasonably necessary to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives said attorneys the power and right, on behalf of such Grantor, to do the following: 

(a)during the continuance of an Event of Default or after the occurrence of a Termination Event or Early Termination Date and after delivering written notice to any Grantor, on behalf of such Grantor, to sell, transfer, pledge, license, lease, otherwise dispose of, make any agreement with respect to or otherwise deal with any of the Collateral in such manner as is consistent with the UCC and as fully and completely as though Secured Party were the absolute owner thereof for all purposes, and to do, such Grantor’s expense, from time to time all acts and things which Secured Party deems reasonably necessary to protect, preserve or realize upon the Collateral and the Security Interest therein, in order to effect the intent of this Agreement, all as fully and effectively as such Grantor might do in accordance with applicable law, including: (i) making, settling and adjusting claims in respect of Collateral under policies of insurance,  

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endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the Proceeds of such policies of insurance and making all determinations and decisions with respect thereto; (ii) to receive, endorse, present, assign, deliver and/or otherwise deal with any and all notes, acceptances, letters of credit, checks, drafts, money orders, or other evidences of payment relating to the Collateral of such Grantor or any part thereof; (iii) to demand, collect, receive payment of, and give receipt for and give credits, allowances, discounts, discharges, releases and acquittances of and for any or all of the Collateral; (iv) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral of such Grantor; (v) to send verifications of any or all of the Accounts Receivable of any Grantor to their respective account debtors; (vi) to commence and prosecute any and all suits, actions or proceedings at law or in equity in or before any court or other tribunal (including any arbitration proceedings) to collect or otherwise realize on all or any of the Collateral, or to enforce any rights of any Grantor in respect of any of its Collateral; (vii) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to any or all of the Collateral; (viii) to notify, or require any Grantor to notify or cause to be notified, its account debtors to make payment directly to the Secured Party or to a Controlled Account; or (ix) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with any or all of the Collateral, and to do all other acts and things reasonably necessary or appropriate to carry out the intent and purposes of this Agreement, as fully and completely as though the Secured Party were the absolute owner of the Collateral for all purposes;

(b)during the continuance of an Event of Default or after the occurrence of a Termination Event or Early Termination Date and after delivering written notice to any Grantor, (i) the filing and prosecuting of registration and transfer applications with the appropriate federal or local agencies or authorities with respect to such Grantor’s Trademarks, Copyrights and patentable inventions and processes; (ii) exercising voting rights with respect to voting securities, which rights may be exercised, if Secured Party, so elects, with a view to causing the liquidation in a commercially reasonable manner of assets of the issuer of any such securities; and (iii) executing, delivering and recording, in connection with any sale or other disposition of any Collateral, of the endorsements, assignments or other instruments of conveyance or transfer with respect to such Collateral; and 

(c)to the extent that sny Grantor’s authorization given in Section 4.04 is not sufficient, to file such financing statements with respect hereto, with or without such Grantor’s signature, or a photocopy of this Agreement in substitution for a financing statement, as Secured Party may deem reasonably necessary and to execute in such Grantor’s name such financing statements and amendments thereto and continuation statements which may require such Grantor’s signature. 

Section 7.02Ratification by Each Grantor.  To the extent permitted by applicable law, eah Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue of this Article VII.  This power of attorney is a power coupled with an interest and is irrevocable until the termination of this Agreement pursuant to Section 9.09. 

Section 7.03No Duty on Secured Party.  Except as set forth in Section 7.04, the powers conferred on Secured Party, its directors, officers and agents pursuant to this Article VII are solely to protect Secured Party’s interests in the Collateral and shall not impose any duty upon  

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any of them to exercise any such powers.  Secured Party shall be accountable only for the amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act, except for Secured Party’s own bad faith, gross negligence or willful misconduct.

Section 7.04Rights of Customers.  Notwithstanding Section 7.03, the Control Agreements or anything in this Agreement to the contrary, the Secured Party acknowledges that each Grantor’s Customers may, by law or regulation or pursuant to any Approved Customer Contracts, have rights prior to such Grantor’s rights or to Secured Party’s rights pursuant to its security interest to all or a substantial portion of the monies held within the Controlled Accounts.  Secured Party agrees to indemnify, defend and hold each Grantor, such Grantor’s directors, officers and agents harmless from and against all claims, lawsuits, damages, judgments, expenses and costs (including reasonable attorneys fees) arising from or related to any claim or action by a Customer (or the successor, assign, heir or legatee of a Customer) to the extent that the Customer’s monies have been misapplied, converted, misappropriated or the like, and where Secured Party’s or its agent’s actions or omissions caused such misapplication, conversion, misappropriation or the like and where Secured Party knew or should have known of such Customer’s prior rights in such monies. 

ARTICLE VIII.

REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT, 
TERMINATION EVENT, or Early Termination Date

Section 8.01Remedies Generally.  Each Grantor agrees that, if any Event of Default shall have occurred and be continuing or a Termination Event or Early Termination Date shall have occurred and Secured Party shall elect to exercise its remedies with respect to the Collateral by providing written notice to such Grantor, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Secured Party, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the UCC in all relevant jurisdictions and may exercise any or all of the following rights (all of which each Grantor hereby agrees is commercially reasonable to the fullest extent permitted under applicable law now or hereafter in effect): 

(a)personally, or by agents’ attorneys or other authorized representatives, immediately retake possession of the Collateral or any part thereof from any Grantor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon any Grantor’s or such other Person’s premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of any Grantor; 

(b)instruct the obligor or obligors on any Account Receivable, agreement, instrument or other obligation (including account debtors) constituting the Collateral to make any payment required by the terms of such Account Receivable, agreement, instrument or other obligation directly to the Secured Party and/or directly to a lockbox under the sole dominion and control of the Secured Party; 

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(c)sell, assign or otherwise liquidate, or direct any Grantor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; 

(d)issue a Notice of Exclusive Control or similar instructions with respect to any or all of the Collateral Accounts and issue entitlement orders or instructions with respect thereto; 

(e)except as set forth in Sections 5.01(c) and 7.04, withdraw any or all monies, securities and/or instruments in any Collateral Account for application to the Secured Obligations in accordance with Section 8.05; 

(f)pay and discharge taxes, Liens or claims on or against any of the Collateral; 

(g)pay, perform or satisfy, or cause to be paid, performed or satisfied, for the benefit of any Grantor, any of the obligations, terms, covenants, provisions or conditions to be paid, observed, performed or satisfied by any Grantor under any contract, agreement or instrument relating to its Collateral, all in accordance with the terms, covenants, provisions and conditions thereof, as and to the extent that such Grantor fails or refuses to perform or satisfy the same; 

(h)enter into any extension of, or any other agreement in any way relating to, any of the Collateral; 

(i)make any compromise or settlement the Secured Party deems reasonably necessary with respect to any of the Collateral; and/or 

(j)take possession of the Collateral or any part thereof, by directing any Grantor or any other Person in possession thereof in writing to deliver the same to the Secured Party at any place or places designated by the Secured Party, in which event such Grantor shall at its own expense: 

(i)forthwith cause the same to be moved to the place or places so designated by the Secured Party and delivered to the Secured Party, 

(ii)store and keep any Collateral so delivered to the Secured Party at such place or places pending further action by the Secured Party as provided in Section 8.02, and 

(iii)while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be reasonably necessary to protect the same and to preserve and maintain them in substantially the same condition prior to such action; 

it being understood that any Grantor’s obligation to so deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Secured Party shall be entitled to a decree requiring specific performance by such Grantor of said obligation.

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Section 8.02Disposition of the Collateral.  Upon the occurrence and continuance of an Event of Default or a Termination Event or Early Termination Date shall have occurred and after delivering written notice to any Grantor, any Collateral repossessed by the Secured Party under or pursuant to Section 8.01 and any other Collateral whether or not so repossessed by the Secured Party, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale of the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Secured Party may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable.  Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Secured Party or after any overhaul or repair which the Secured Party shall determine to be commercially reasonable.  Except in the case of any Collateral that is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, (i) in the case of any such disposition which shall be a private sale or other private proceedings permitted by such requirements, such sale shall be made upon not less than ten (10) days’ written notice to such Grantor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefore, and shall be subject, for the ten (10) days after the giving of such notice, to the right of such Grantor or any nominee of such Grantor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified, and (ii) in the case of any such disposition which shall be a public sale permitted by such requirements, such sale shall be made upon not less than ten (10) days’ written notice to such Grantor, on behalf of such Grantor, specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Secured Party’s sole option, be subject to reserve), after publication of notice of such auction not less than ten days prior thereto in two newspapers in general circulation in the city where such Collateral is located.  To the extent permitted by any such requirement of law, the Secured Party may bid for and become the purchaser (by bidding in Secured Obligations or otherwise) of the Collateral or any item thereof offered for sale in accordance with this Section without accountability to any Grantor (except to the extent of surplus money received as provided in Section 8.05).  Unless so obligated under mandatory requirements of applicable law, the Secured Party shall not be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to a Grantor as hereinabove specified.  The Secured Party need give a Grantor only such notice of disposition as the Secured Party shall deem to be reasonably practicable in view of such mandatory requirements of applicable law. 

Section 8.03Grant of License to Use Intellectual Property.  For the purpose of enabling the Secured Party to exercise rights and remedies under this Article VIII at such time as the Secured Party shall be lawfully entitled to exercise such rights and remedies and for no other purpose, each Grantor hereby grants to the Secured Party an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to such Grantor) to use, assign or sublicense any of the Intellectual Property of such Grantor, now owned or hereafter acquired by such Grantor, and wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof. 

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Section 8.04Waiver of Claims.  Except as otherwise provided in this Agreement, EACH GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE SECURED PARTY’S TAKING POSSESSION OR THE SECURED PARTY’S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ANY GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and such Grantor hereby further waives, to the extent permitted by law and except as provided in Section 7.04: (i) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Secured Party’s rights hereunder; and (ii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and such Grantor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws to the fullest extent permitted by applicable law now or hereafter in effect.  Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of any Grantor therein and thereto, and shall be a perpetual bar both at law and in equity against such Grantor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Grantor. 

Section 8.05Application of Proceeds.  Subject to the rights of Customers described in Section 7.04, all Collateral and proceeds of Collateral obtained and realized by the Secured Party in connection with the enforcement of this Agreement pursuant to this Article VIII shall be applied as follows: 

(a)first, to the payment to the Secured Party, for application to the Secured Obligations as provided in the Facility Agreement; and 

(b)second, to the extent remaining after the application pursuant to the preceding clause (i) and following the termination of this Agreement pursuant to Section 9.09, to such Grantor or to whomever may be lawfully entitled to receive such payment. 

Section 8.06Remedies Cumulative.  Each and every right, power and remedy hereby specifically given to the Secured Party shall be in addition to every other right, power and remedy specifically given under this Agreement or the other Facility Documents or now or hereafter existing at law or in equity, or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Secured Party.  All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise any other or others.  No delay or omission of the Secured Party in the exercise of any such right, power or remedy, or partial or single exercise thereof, and no renewal or extension of any of the Secured Obligations, shall impair or constitute a waiver of any such right, power or remedy or shall be construed to be a waiver of any Potential Event of Default, Event of Default or Termination Event or an acquiescence therein.  No notice to or demand on any Grantor in any case shall entitle it to any  

26

 

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other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Secured Party to any other or further action in any circumstances without notice or demand.  In the event that the Secured Party shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Secured Party may recover reasonable, actual expenses, including attorneys’ fees, and the amounts thereof shall be included in such judgment.

Section 8.07Discontinuance of Proceedings.  In case the Secured Party shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Secured Party, then and in every such case each Grantor, the Secured Party and each holder of any of the Secured Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Secured Party shall continue as if no such proceeding had been instituted. 

Section 8.08Purchasers of Collateral.  Upon any sale of any of the Collateral by the Secured Party hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Secured Party or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Secured Party or such officer or be answerable in any way for the misapplication or non-application thereof. 

ARTICLE IX.

MISCELLANEOUS

Section 9.01Notices.  Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing, sent by telecopier, mailed or delivered, (i) if to a Grantor, to such Grantor at the address specified in or pursuant to the Facility Agreement and (ii) if to the Secured Party, to it at its address specified in or pursuant to the Facility Agreement.  All such notices and communications shall be mailed, telecopied, sent by overnight courier or delivered, and shall be effective when received. 

Section 9.02Entire Agreement.  This Agreement together with the Facility Documents contains the complete agreement between each Grantor and the Secured Party with respect to the subject matter of this Agreement and supersedes all other agreements, whether written or oral, with respect to the matters contained therein. 

Section 9.03Obligations Absolute.  The obligations of each Grantor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, other than indefeasible payment in full of, and complete performance of, all of the Secured Obligations (other than unasserted contingent obligations), including: 

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(a)any renewal, extension, amendment or modification of, or addition or supplement to, or deletion from other Facility Documents or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; 

(b)any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement except as expressly provided in such renewal, extension, amendment, modification, addition, supplement, assignment or transfer; 

(c)any furnishing of any additional security to the Secured Party or its assignee or any acceptance thereof or any release of any security by the Secured Party or its assignee; 

(d)any limitation on any Person’s liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; 

(e)any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to each Grantor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding; or 

(f)to the fullest extent permitted by applicable law now or hereafter in effect, any other event or circumstance which, but for this provision, might release or discharge a guarantor or other surety from its obligations as such. 

Section 9.04Successors and Assigns.  Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Secured Party that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.  No Grantor may assign this Agreement or any of its obligations hereunder unless such assignment is with the prior written consent of Secured Party or is in accordance with the Facility Agreement. 

Section 9.05Headings Descriptive.  The headings are inserted for convenience and are to be ignored for the purposes of construction. 

Section 9.06Severability.  The invalidity, in whole or in part, of any of the foregoing Sections or provisions of this Agreement will not affect the validity of the remainder of such Sections or provisions. 

Section 9.07Enforcement Expenses, etc.  Each Grantor agrees to pay, to the extent not paid pursuant to the requirements of the Facility Agreement, all reasonable, actual and documented out-of-pocket costs and expenses of the Secured Party in connection with the enforcement of this Agreement, the preservation of the Collateral, the perfection of the security interest, and any amendment, waiver or consent relating hereto (including the reasonable, actual and documented out-of-pocket fees and disbursements of counsel employed by the Secured Party). 

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Section 9.08Release of Portions of Collateral. If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction permitted by the Facility Agreement, the security interest created hereby in any Collateral that is so sold, transferred, or otherwise disposed of shall automatically terminate and be released upon the closing of such sale, transfer, or other disposition, and such Collateral shall be sold free and clear of the Lien and security interest created hereby; provided, however, that such security interest will continue to attach to all proceeds of such sales or other dispositions.  Upon the occurrence of the events described in the foregoing sentence, the Secured Party agrees to execute a release of such Collateral and authorize the filing of a UCC-3 financing statement releasing such collateral, as is reasonably requested by the applicable Grantor. 

Section 9.09Continuing Agreement; Termination; Reinstatement. 

(a)This Agreement shall remain in full force and effect until the earlier of (i) the occurrence of the Facility Termination Date or (ii) the occurrence of the Collateral Release Date, at which time this Agreement shall terminate (other than obligations under this Agreement which expressly survive such termination) and the Secured Party, at the request and expense of each Grantor, will execute and deliver to such Grantor a proper instrument or instruments (including UCC termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Grantor (without recourse and without any representation or warranty) all of the Collateral of such Grantor as may be in the possession of the Secured Party and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. 

(b)This Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Secured Party as a preference, fraudulent conveyance or otherwise under any Debtor Relief Law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable, actual and documented out-of-pocket costs and expenses (including any reasonable, actual and documented out-of-pocket legal fees and disbursements) incurred by the Secured Party in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations. 

Section 9.10Other Creditors, etc. Not Third-Party Beneficiaries.  No creditor of any Grantor, or other Person claiming by, through or under any Grantor or any of any Grantor’s Affiliates, other than the Secured Party, and its successors and assigns, shall be a beneficiary or third-party beneficiary of this Agreement or otherwise shall derive any right or benefit herefrom. 

Section 9.11Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed will be deemed an original but all of which together will constitute one and the same instrument.  Furthermore, a facsimile or photocopied counterpart of this Agreement will be sufficient to bind a party hereto to the same extent as an original. 

Section 9.12Amendments.  No amendment or waiver of any provision of this Agreement and no consent to any departure by any Grantor shall in any event be effective unless  

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the same shall be in writing and signed by the Secured Party and such Grantor, as the case may be, and then such waiver or consent shall be effective only in the specific instance and for the specific Grantor and the specific purpose for which given.

Section 9.13Separate Actions.  A separate action may be brought and prosecuted against any Grantor, any guarantor or obligor, and whether or not any other guarantor or obligor or Grantor be joined in such action or actions. 

Section 9.14Governing Law; Venue; Waiver of Jury Trial. 

(a)THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. 

(b)ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK, NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR AND THE SECURED PARTY CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.  EACH PARTY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR OTHER DOCUMENT RELATED THERETO.  EACH PARTY WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE. 

(c)EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9.14 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 

Section 9.15Other Security.  To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral (including real property and securities owned by any Grantor), or by a guarantee, endorsement or property of any other Person, then the Secured Party shall have the right to proceed against such other property, guarantee or  

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endorsement upon the occurrence of any Event of Default, Termination Event, or Early Termination Date and the Secured Party shall have the right, in its sole discretion, to determine which rights, security, liens, security interests or remedies the Secured Party shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or the Secured Obligations or any of the rights of the Secured Party under this Agreement, under any other of the Facility Documents or under any other document relating to the Secured Obligations.

Section 9.16Marshaling.  The Secured Party shall not be required to marshal any present or future collateral security (including the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising.  To the extent that it lawfully may, each Grantor hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of the Secured Party’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws. 

Section 9.17Damages.  The Secured Party and each Grantor hereby agree that no such Person shall have a remedy of punitive or exemplary damages against any other party to a Facility Document and each such Person hereby waives any right or claim to punitive or exemplary damages that they may now have or may arise in the future in connection with any dispute under this Agreement or any other Facility Document, whether such dispute is resolved through arbitration or judicially. 

Section 9.18Bailment for Perfection of Certain Security Interests.  EDF agrees that if EDF, or agents or bailees of EDF, shall at any time be in possession or control of any Collateral or of any account in which Collateral is held that can be perfected by the possession or control of such Collateral or of any account in which such Collateral is held (such Collateral being referred to herein as the “Pledged or Controlled Collateral”), EDF shall, solely for the purpose of perfecting the security interests of EDFT NA granted under this Agreement or the Pledge Agreement and subject to the terms and conditions of this Section 9.18, also hold such Pledged or Controlled Collateral as bailee for EDFT NA.  EDFT NA agrees that if EDFT NA, or agents or bailees of EDFT NA, shall at any time be in possession or control of any Pledged or Controlled Collateral, EDFT NA shall, solely for the purpose of perfecting the security interests of EDF granted under this Agreement or the Pledge Agreement and subject to the terms and conditions of this Section 9.18, also hold such Pledged or Controlled Collateral as bailee for EDF.  The obligations and responsibilities of EDF to EDFT NA under this Section 9.18 and the obligations and responsibilities of EDFT NA to EDF under this Section 9.18 shall be limited solely to holding or controlling the Pledged or Controlled Collateral as bailee in accordance with this Section 9.18.  Without limiting the foregoing, neither EDF nor EDFT NA shall have any obligation or responsibility to ensure that any Pledged or Controlled Collateral is genuine or owned by any Grantor or other grantor or pledgor thereof. 

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Section 9.19Appointment of Collateral Agent.  EDFT NA hereby appoints EDF to act as collateral agent with respect to the Liens granted herein, including acting as EDFT NA’s collateral agent with respect to any Deposit Account Control Agreement. 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. 

 

	GRANTOR:

	SUMMER ENERGY, LLC

By:_/s/ Neil Leibman____________________

Name: Neil Leibman

Title: Manager

	GRANTOR:

	SUMMER ENERGY NORTHEAST, LLC

By:_/s/ Neil Leibman____________________

Name: Neil Leibman

Title: Manager

	 

	 

	 

	 

	 

	 

Signature Page to Security Agreement – EDF and ESCO

 

DB1/ 92447053

 

	Accepted by:

EDF ENERGY SERVICES, LLC, 

as Secured Party

BY:_/s/ Terry Nutt____________________

Name:Terry Nutt 

Title: Chief Financial Officer

	 

	EDF TRADING NORTH AMERICA, LLC, 

as Secured Party 

BY:_/s/ Terry Nutt____________________

Name:Terry Nutt 

Title: Chief Financial Officer

	 

Signature Page to Security Agreement – EDF and ESCO

DB1/ 92447053

Exhibit A to
Security Agreement

FORM OF PERFECTION CERTIFICATE

A-1      Exhibit A -- Security Agreement – Summer Energy

DB1/ 92447053.5

PERFECTION CERTIFICATE

In connection with proposed transactions by and among Summer Energy, LLC, a [_______] limited liability company (“Summer Energy”), and Summer Energy Northeast, LLC, (collectively with Summer Energy, [______], the “Grantors” and each individually a “Grantor”), as grantors, and EDF Energy Services, LLC and EDF Trading North America, LLC, as secured parties (collectively, the “Secured Parties”), Summer Energy hereby certifies as follows:

Section 1.Legal Names, Organizations and Jurisdictions of Organization.  The exact legal name, the type of organization and the jurisdiction of organization or formation, as applicable, of each Grantor is as follows: 

	Grantor

	Type of
Organization

	Jurisdiction of Organization/
Formation

	 

	 

	 

 

Section 2.Organizational and Federal Taxpayer Identification Numbers.  The state issued organizational identification number and federal taxpayer identification number of each Grantor is as follows: 

	Grantor

	Organizational 
Identification Number

	Federal Taxpayer
Identification Number

	Legal Entity Identifier

	 

	 

	 

	 

 

Section 3.Chief Executive Offices and Mailing Addresses.  The chief executive office address and mailing address, including, in each case, street address, city, county, state and ZIP code, of each Grantor is as follows: 

	Grantor

	Chief Executive Office/
Principal Place of Business

	 

	 

 

Section 4.Changes in Name, Jurisdiction of Organization or Corporate Structure.  Except as set forth below, no Grantor has changed its legal name, jurisdiction of organization or corporate structure in any way (e.g., merger, consolidation, conversion, change in corporate form, change in jurisdiction of organization or otherwise) within the past five years: 

A-2      Exhibit A -- Security Agreement – Summer Energy

DB1/ 92447053.5

Section 5.Location of Equipment and Inventory.  No Grantor has any Equipment or Inventory located at any location not identified below. 

	Grantor

	Location

	 

	 

 

Section 6.Prior Names.  Set forth below is each trade name, fictitious name or other name (excluding the legal name) used by each Grantor or by which such Grantor has been known or has transacted any business: 

	Grantor

	Name

	 

	 

 

Section 7.Intellectual Property.  Set forth below is a list of all copyrights, trademarks, patents, and applications therefor owned or used by each Grantor: 

(a)Copyrights and Copyright Licenses: 

	Grantor

	Copyright

	Registration Number

	Registration Date

	 

	 

	 

	 

 

(b)Trademarks and Trademark Licenses: 

	Grantor

	Trademark

	Country

	Application No. and/or 
Registration No.

	Application Filing Date and/or Registration Date

	 

	 

	 

	 

	 

 

(c)Patents and Patent Licenses: 

	Grantor

	Patent

	Country

	Application No. or Registration No. 
(as applicable)

	Application Filing Date or Registration Date (as applicable)

	 

	 

	 

	 

	 

 

Section 8.Deposit Accounts and Securities Accounts.  Set forth below is a list of all deposit accounts and securities accounts of each Grantor: 

A-3      Exhibit A -- Security Agreement – Summer Energy

DB1/ 92447053.5

	Grantor

	Depositary Institution
& Address

	Account Number

	Type of Account

	 

Account Name

 

Section 9.Instruments.  Set forth below is a list of all instruments that evidence amounts owed to Summer Energy: 

	 

	Amount

	Date of Instrument

	Date of Maturity

	 

	 

	 

	 

 

Section 10.Commercial Tort Claims.  The following is a list of each commercial tort claim held by each Grantor: 

	 

	Amount of Claim

	Brief Description of Claim

	 

	 

	 

 

Section 11.Real Estate Related Collateral. 

(a)Fixtures.  Set forth below are all the locations where each Grantor owns or leases any real property: 

	Address (including County)

	Owned or Leased

	Name and Address of 
Landlord (Leased Property)

	 

	 

	 

 

(b)“As Extracted” Collateral.  Set forth below are all the locations where each Grantor owns, leases or has an interest in any wellhead or minehead: 

 

(c)Timber to be Cut.  Set forth below are all locations where each Grantor owns goods that constitute timber to be cut: 

 

 [Signature Page Follows.]

A-4      Exhibit A -- Security Agreement – Summer Energy

DB1/ 92447053.5

IN WITNESS WHEREOF, the Grantors has caused this Perfection Certificate to be executed as of the ___ day of May, 2018 by its officer thereunto duly authorized.

 

	 

	SUMMER ENERGY, LLC

 

 

By:   

Name: Neil Leibman

Its: Manager

 

 

 

 

	 

	SUMMER ENERGY NORTHEAST, LLC

 

 

By:   

Name: Neil Leibman

Its: Manager

 

 B-1-1 Exhibit B-1 - Security Agreement - Summer Energy

 

DB1/ 92447053.4

Exhibit B-1
to Security Agreement

FORM OF COLLATERAL ASSIGNMENT OF COPYRIGHTS

COLLATERAL ASSIGNMENT OF COPYRIGHTS dated as of __________, 20__ (this “Agreement”), between ___________________ (together with its successors and assigns, the “Assignor”) and EDF Energy Services, LLC and EDF Trading North America, LLC, as secured party (together with their respective successors and assigns in such capacity, collectively the “Secured Party”):

RECITALS:

(1)This Agreement is made pursuant to that certain Energy Services Agreement, dated as of [  ], 2018, by and among Summer Energy, LLC, a Texas limited liability company, Summer Energy Northeast, LLC, a Texas limited liability company, EDF Energy Services, LLC, a Delaware limited liability company, and EDF Trading North America, LLC, a Texas limited liability company (as amended, supplemented, or otherwise modified from time to time, the “Facility Agreement”). 

(2)In connection with the Facility Agreement, the Assignor is a party that certain Security Agreement, dated as of [  ], 2018, by and among the Assignor, the other Grantors party thereto and the Secured Party (as amended, supplemented, or otherwise modified from time to time, the “Security Agreement”), pursuant to which the Assignor has granted to the Secured Party a continuing security interest in, assignment of and lien on substantially all of its assets, whether now owned or existing or hereafter acquired or arising. 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Assignor hereby covenants and agrees with the Secured Party as follows:

Section 1.Defined Terms.  Terms used herein without definition shall have the respective meanings ascribed thereto in the Security Agreement. 

Section 2.Assignment and Grant of Security Interest.  As security for the prompt payment and performance of the Secured Obligations, the Assignor hereby assigns, transfers, conveys and grants to the Secured Party a security interest in, a general lien upon and/or a right of set-off against (whether now owned or hereafter acquired by the Assignor and whether acquired in the United States or elsewhere in the world) all right, title and interest of the Assignor in and to the following, whether now existing or hereafter acquired: 

(i)all copyrights in any work subject to copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise (including, without limitation, those listed on Schedule A hereto); 

 B-1-2 Exhibit B-1 - Security Agreement - Summer Energy

 

DB1/ 92447053.4

(ii)all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office (including, without limitation, those listed on Schedule A to this Agreement); 

(iii)all reissues, continuations, continuations-in-part, extensions and divisions of any of the foregoing; 

(iv)all licenses and other agreements relating in whole or in part to any of the foregoing, including all rights to payments in respect thereof; 

(v)all rights to sue for past, present or future infringements of any of the foregoing; 

(vi)all good will related to any of the foregoing; 

(vii)to the extent not included above, all general intangibles (as such term is defined in the UCC) of the Assignor related to the foregoing; and 

(viii)all proceeds of any and all of the foregoing. 

Section 3.Reference to Separate Security Agreement.  This Agreement has been entered into by the Assignor and the Secured Party primarily for recording purposes as contemplated by the Security Agreement.  In the event of any inconsistency between any of the terms or provisions hereof and the terms and provisions of such Security Agreement, the terms and provisions of such Security Agreement shall govern. 

 

[Remainder of page intentionally left blank]

 B-1-3 Exhibit B-1 - Security Agreement - Summer Energy

 

DB1/ 92447053.4

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first set forth above.

	 

	[__________________________]

By:__________________________________ 

Name:

Title:

	Accepted and acknowledged by:

EDF ENERGY SERVICES, LLC

By:____________________________ 

Name:

Title:

	 

	EDF TRADING NORTH AMERICA, LLC 

By:____________________________ 

Name:

Title:

	 

 B-1-4 Exhibit B-1 - Security Agreement - Summer Energy

 

DB1/ 92447053.4

Schedule A

to Collateral Assignment of Copyrights

	Copyright No.

	Owner

	Issue Date

	 

	 

	 

	 

	 

	 

	 

	 

	 

 B-1-5 Exhibit B-1 - Security Agreement - Summer Energy

 

DB1/ 92447053.4

Exhibit B-2
to Security Agreement

FORM OF COLLATERAL ASSIGNMENT OF PATENTS

COLLATERAL ASSIGNMENT OF PATENTS dated as of __________, 20__ (this “Agreement”), between ___________________ (together with its successors and assigns, the “Assignor”) and EDF Energy Services, LLC and EDF Trading North America, LLC, as secured party (together with their respective successors and assigns in such capacity, collectively the “Secured Party”):

RECITALS:

(1)This Agreement is made pursuant to that certain Energy Services Agreement, dated as of [  ], 2018, by and among Summer Energy, LLC, a Texas limited liability company, Summer Energy Northeast, LLC, a Texas limited liability company, EDF Energy Services, LLC, a Delaware limited liability company, and EDF Trading North America, LLC, a Texas limited liability company (as amended, supplemented, or otherwise modified from time to time, the “Facility Agreement”). 

(2)In connection with the Facility Agreement, the Assignor is party to that certain Security Agreement, dated as of [  ], 2018, by and among the Assignor, the other Grantors party thereto and the Secured Party (as amended, supplemented, or otherwise modified from time to time, the “Security Agreement”), pursuant to which the Assignor has granted to the Secured Party a continuing security interest in, assignment of and lien on substantially all of its assets, whether now owned or existing or hereafter acquired or arising. 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Assignor hereby covenants and agrees with the Secured Party as follows:

Section 1.Defined Terms.  Terms used herein without definition shall have the respective meanings ascribed thereto in the Security Agreement. 

Section 2.Assignment and Grant of Security Interest.  As security for the prompt payment and performance of the Secured Obligations, the Assignor hereby assigns, transfers, conveys and grants to the Secured Party a security interest in, a general lien upon and/or a right of set-off against (whether now owned or hereafter acquired by the Assignor and whether acquired in the United States or elsewhere in the world) all right, title and interest of the Assignor in and to the following, whether now existing or hereafter acquired: 

(i)all of the Patents issued by the United States Patent and Trademark Office (including, without limitation, those listed on Schedule A hereto); 

B-2-1Exhibit B-2 - Security Agreement - Summer Energy 

 

DB1/ 92447053.4

(ii)all applications for Patents to be issued by the United States Patent and Trademark Office (including, without limitation, those listed on Schedule A to this Agreement); 

(iii)all Patents issued by any other country or any office, agency or other Governmental Authority thereof; 

(iv)all applications for Patents to be issued by any office, agency or other Governmental Authority referred to in clause (iii) above; 

(v)all registrations and recordings with respect to any of the foregoing; 

(vi)all reissues, continuations, continuations-in-part, extensions and divisions of any of the foregoing; 

(vii)all licenses and other agreements relating in whole or in part to any Patents, inventions, processes, production methods, proprietary information or know-how covered by any of the foregoing, including all rights to payments in respect thereof; 

(viii)all rights to sue for past, present or future infringements of any of the foregoing; 

(ix)all good will related to any of the foregoing; 

(x)to the extent not included above, all general intangibles (as such term is defined in the UCC) of the Assignor related to the foregoing; and 

(xi)all proceeds of any and all of the foregoing. 

Section 3.Reference to Separate Security Agreement.  This Agreement has been entered into by the Assignor and the Secured Party primarily for recording purposes as contemplated by the Security Agreement.  In the event of any inconsistency between any of the terms or provisions hereof and the terms and provisions of such Security Agreement, the terms and provisions of such Security Agreement shall govern. 

(Remainder of page intentionally left blank)

B-2-2Exhibit B-2 - Security Agreement - Summer Energy 

 

DB1/ 92447053.4

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first set forth above.

	 

	[__________________________]

By:__________________________________ 

Name:

Title:

	Accepted and acknowledged by:

EDF ENERGY SERVICES, LLC

By:____________________________ 

Name:

Title:

	 

	EDF TRADING NORTH AMERICA, LLC 

By:____________________________ 

Name:

Title:

	 

B-2-3Exhibit B-2 - Security Agreement - Summer Energy 

 

DB1/ 92447053.4

Schedule A

 

to Collateral Assignment of Patents

 

	U.S. Patent No./Application No.

	Title/Inventor

	Issue Date

	 

	 

	 

	 

	 

	 

	 

	 

	 

B-2-4Exhibit B-2 - Security Agreement - Summer Energy 

 

DB1/ 92447053.4

Exhibit B-3
to Security Agreement

FORM OF COLLATERAL ASSIGNMENT OF TRADEMARKS

COLLATERAL ASSIGNMENT OF TRADEMARKS dated as of __________, 20__ (this “Agreement”), between _________________________ (together with its successors and assigns, the “Assignor”) and EDF Energy Services, LLC and EDF Trading North America, LLC, as secured party (together with their respective successors and assigns in such capacity, collectively the “Secured Party”):

RECITALS:

(1)This Agreement is made pursuant to that certain Energy Services Agreement, dated as of [  ], 2018, by and among Summer Energy, LLC, a Texas limited liability company, Summer Energy Northeast, LLC, a Texas limited liability company, EDF Energy Services, LLC, a Delaware limited liability company, and EDF Trading North America, LLC, a Texas limited liability company (as amended, supplemented, or otherwise modified from time to time, the “Facility Agreement”). 

(2)In connection with the Facility Agreement, the Assignor is a party to that certain Security Agreement, dated as of [  ], 2018, by and among Assignor, the other Grantors party thereto and the Secured Party (as amended, supplemented, or otherwise modified from time to time, the “Security Agreement”), pursuant to which the Assignor has granted to the Secured Party a continuing security interest in, assignment of and lien on substantially all of its assets, whether now owned or existing or hereafter acquired or arising. 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Assignor hereby covenants and agrees with the Secured Party as follows:

Section 1.Defined Terms.  Terms used herein without definition shall have the respective meanings ascribed thereto in the Security Agreement. 

Section 2.Assignment and Grant of Security Interest.  As security for the prompt payment and performance of the Secured Obligations, the Assignor hereby assigns, transfers, conveys and grants to the Secured Party a security interest in, a general lien upon and/or a right of set-off against (whether now owned or hereafter acquired by the Assignor and whether acquired in the United States or elsewhere in the world) all right, title and interest of the Assignor in and to the following, whether now existing or hereafter acquired: 

(i)all trademarks, trade names and service marks registered with the United States Patent and Trademark Office (including, without limitation, those listed on Schedule A to this Agreement); 

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(ii)all applications for the registration of trademarks, trade names and service marks filed with the United States Patent and Trademark Office (including, without limitation, those listed on Schedule A to this Agreement); 

(iii)all trademarks, trade names and service marks registered with any office, agency or other Governmental Authority of any State, the District of Columbia or any possession or territory of the United States; 

(iv)all trademarks, trade names and service marks registered with any office, agency or other Governmental Authority of any other country or any province, department or other governmental subdivision thereof; 

(v)all registrations and recordings with respect to any of the foregoing; 

(vi)all reissues, extensions and renewals of any of the foregoing; 

(vii)all corporate names, business names, trade styles, logos, other source or business identifiers; all information, customer lists, identification of supplier, data, plans, blueprints, specifications, designs, drawings, recorded knowledge, surveys, engineering reports, test reports, manuals, materials standards, processing standards, performance standards, catalogs, computer and automatic machinery software and programs, and the like pertaining to operations by the Assignor in, on or about any of its plants or warehouses; all field repair data, sales data and other information relating to sales or service of products now or hereafter manufactured on or about any of its plants; and all accounting information pertaining to operations in, on or about any of its plants and all media in which or on which all of the information or knowledge or data or records relating to its plants and warehouses may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data, and the Secured Party shall keep all such information, knowledge, records or data strictly confidential in accordance with the Facility Agreement; 

(viii)all licenses and other agreements relating in whole or in part to any of the foregoing, including all rights to payments in respect thereof; 

(ix)all rights to sue for past, present or future infringements of any of the foregoing; 

(x)all good will related to any of the foregoing; 

(xi)to the extent not included above, all general intangibles (as such term is defined in the UCC) of the Assignor related to the foregoing; and 

(xii)all proceeds of any and all of the foregoing. 

Section 3.Reference to Separate Security Agreement.  This Agreement has been entered into by the Assignor and the Secured Party primarily for recording purposes as contemplated by the Security Agreement.  In the event of any inconsistency between any of the  

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terms or provisions hereof and the terms and provisions of such Security Agreement, the terms and provisions of such Security Agreement shall govern.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first set forth above.

	 

	[__________________________]

By:__________________________________ 

Name:

Title:

	Accepted and acknowledged by:

EDF ENERGY SERVICES, LLC

By:____________________________ 

Name:

Title:

	 

	EDF TRADING NORTH AMERICA, LLC 

By:____________________________ 

Name:

Title:

	 

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Schedule A

to Collateral Assignment of
Trademarks

	Trademarks

	Registration No.

	Summer Energy

	4253461

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Exhibit C
to Security Agreement

FORM OF COLLATERAL ASSIGNMENT OF CONTRACTS

THIS COLLATERAL ASSIGNMENT OF CONTRACTS, dated as of __________, 20__ (this “Agreement”), is by and between ______________________ (herein, together with its successors and assigns, “Assignor”) and EDF Energy Services, LLC and EDF Trading North America, LLC, as secured party (herein, together with their respective successors and assigns in such capacity, collectively “Assignee”): 

RECITALS:

(1)Except as otherwise defined herein, terms used herein and defined in the Security Agreement (as defined below), shall be used herein as therein defined.  

(2)This Agreement is made pursuant to that certain Security Agreement, dated as of [  ], 2018, by and among Assignor, the other Grantors party thereto and Assignee (as the same may be from time to time further amended, supplemented or otherwise modified, the “Security Agreement”), which was entered into in connection with that certain Energy Services Agreement, dated as of [  ], 2018, by and among Summer Energy, LLC, Summer Energy Northeast, LLC, and Assignee (as the same may be from time to time further amended, supplemented or otherwise modified, and together with all schedules, annexes, confirmations and transactions thereunder, collectively, the “Facility Agreement”).  

(3)Assignor has entered into the contracts and agreements listed on Schedule A hereto (the “Contracts”). 

(4)Assignee has requested that Assignor execute and deliver this Agreement, and it is a requirement under Section 4.14 of the Security Agreement that this Agreement shall have been executed and delivered by Assignor to Assignee. 

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1.Collateral Assignment; No Consents.  As collateral security for all debts, liabilities and obligations of Assignor now existing or hereafter arising under the Facility Documents, including, without limitation, the Secured Obligations, Assignor hereby collaterally assigns, transfers and sets over to Assignee all of its rights, but not its obligations, under the Contracts.  Assignor represents and warrants to Assignee that other than as disclosed on Schedule A hereto, no consent is required for the collateral assignment granted hereunder, and if any such consent is required, such consent has been obtained, each such consent to be in form and substance reasonably satisfactory to Assignee.  A copy of each such consent, if any, has been provided to Assignee. 

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2.No Obligations.  Assignee shall have no obligation or duty to perform any of the obligations of Assignor under the Contracts, all of which shall remain the sole and exclusive duty and obligation of Assignor. 

3.Rights Assigned.  The rights collaterally assigned hereunder include, and are not limited to, any and all rights and rights of enforcement regarding warranties, representations, covenants and indemnities made by Assignor under the Contracts including, without limitation, all rights granted to Assignor pursuant to any exhibits and schedules to the foregoing, and all rights, claims or causes of action Assignor may have for any breach or violation of the same.  Assignee shall have the right to institute action and seek redress directly against the parties to the Contracts for any such breach or violation; provided, however, that so long as there exists no Event of Default, and so long as no Termination Event or Early Termination Date has occurred, Assignor may enforce all of the rights, claims or causes of action which Assignor may have under the Contracts, but only to the extent such enforcement is not inconsistent with Assignee’s interest under this Agreement or the Facility Agreement; provided, further, that any proceeds received by Assignor from such enforcement are applied to the Secured Obligations in accordance with the terms and conditions of the Facility Agreement. 

4.Enforcement of Rights.  Upon the occurrence and during the continuance of an Event of Default, or after the occurrence of a Termination Event or Early Termination Date and after providing notice to Assignor, Assignee may enforce, either in its own name or in the name of Assignor, all rights of Assignor under the Contracts, including, without limitation, to (a) bring suit to enforce any rights under the Contracts, (b) compromise or settle any disputed claims as to rights under the Contracts, (c) give releases or acquittances of rights under the Contracts, and/or (d) do any and all things reasonably necessary, desirable or proper to fully and completely effectuate the collateral assignment of the rights under the Contracts pursuant hereto.  Assignor hereby constitutes and appoints Assignee or Assignee’s designee as Assignor’s attorney-in-fact with full power in Assignor’s name, place and stead to do or accomplish any of the aforementioned undertakings and to execute such documents or instruments in the name or stead of Assignor as may be reasonably necessary, desirable or proper in Assignee’s reasonable discretion.  The aforementioned power of attorney shall be a power of attorney coupled with an interest and irrevocable.  In the event any action is brought by Assignee to enforce any rights under the Contracts, Assignor agrees to fully cooperate with and assist Assignee in the prosecution thereof.  Without limiting any other provision of this Agreement, upon the occurrence and during the continuance of an Event of Default, or after the occurrence of a Termination Event or Early Termination Date and after Assignee has provided written notice to Assignor, Assignor hereby specifically authorizes and directs each party other than Assignor upon written notice to it by Assignee to make all payments due under or arising under the Contracts directly to Assignee and hereby irrevocably authorizes and empowers Assignee to request, demand and receive any and all amounts which may be or become due or payable or remain unpaid at any time and times to Assignor under and pursuant to the Contracts, and to endorse any checks, drafts or other orders for the payment of money payable to Assignor in payment thereof, and in Assignee’s discretion to file any claims or take any action or proceeding, either in its own name or in the name of Assignor or otherwise, which Assignee may deem reasonably necessary or desirable in its reasonable discretion.  It is expressly understood and agreed, however, that Assignee shall not be required or obligated in any manner to make any demand or to make any inquiry as to the nature or sufficiency of any payment received by it, or  

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to present or file any claim or take any other action to collect or enforce the payment of any amounts which may have been assigned to Assignee or to which Assignee may be entitled hereunder at any time or times.

5.Authorization.  Each Customer is hereby authorized to recognize Assignee’s claims and rights hereunder without investigating any reason for any action taken by Assignee or the validity or the amount of the obligations under the Facility Agreement and the other Facility Documents or existence of any default thereunder. 

6.Notices.  Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, transmitted, cabled or delivered, to the address set forth on the signature page of this Agreement for Assignor, Assignee or Counterparty, as applicable; or in any case at such other address as any of the persons listed above may hereafter notify the others in writing.  All such notices and communications shall be mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and shall be effective when received. 

7.Governing Law; Venue. 

(a)THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. 

(b)ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, ASSIGNOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.  ASSIGNOR IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR OTHER DOCUMENT RELATED THERETO.  ASSIGNOR WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE. 

(c)ASSIGNOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND ASSIGNOR HEREBY AGREES AND CONSENTS THAT ANY  

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SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 7 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

8.Termination.  Upon the earlier of (i) the occurrence of the Facility Termination Date or (ii) the Collateral Release Date, this Agreement will terminate. 

9.General Limitation on Claims by Assignor.  Except as set forth in Section 7.04 of the Security Agreement, no claim may be made by Assignor against Assignee, or the Affiliates, directors, officers, employees, attorneys or agents of any of them, for any special, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, any other Facility Document or any of the Contracts, or any act, omission or event occurring in connection therewith; and Assignor hereby, to the fullest extent permitted under applicable law, waives, releases and agrees not to sue or counterclaim for any special, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor. 

10.Attorneys, Accountants, etc. of Assignee Have No Duty to Assignor.  All attorneys, accountants, appraisers, consultants and other professional persons (including the firms or other entities on behalf of which any such person may act) retained by Assignor or Assignee with respect to the transactions contemplated by the Facility Documents and the Contracts shall have the right to act exclusively in the interest of Assignor or Assignee, as the case may be, and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to Assignee or Assignor, as the case may be, to any of their applicable Affiliates, or to any other person, with respect to any matters within the scope of such representation or related to their activities in connection with such representation.  Each of Assignor and Assignee agrees, on behalf of itself and its Affiliates, not to assert any claim or counterclaim against any such persons with regard to matters within the scope of such representation or related to their activities in connection with such representation, all such claims and counterclaims, now existing or hereafter arising, whether known or unknown, foreseen or unforeseeable, being hereby waived, released and forever discharged. 

11.Assignee Not Fiduciary to Assignor, etc.  The relationship between the Assignor, on the one hand, and Assignee, on the other hand, and its Affiliates is solely that of debtor and creditor, and no term or provision of any Facility Document, no course of dealing, no written or oral communication, or other action, shall be construed so as to deem such relationship to be other than that of debtor and creditor. 

12.Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  

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IN WITNESS WHEREOF, each of the parties has duly executed this Agreement as of the date first written above.

	 

	ASSIGNOR

[______________________________________]

By:__________________________________ 

Name:

Title:

	 

	[SPECIFY NOTICE ADDRESS]

	 

	ASSIGNEE

EDF ENERGY SERVICES, LLC,
as Secured Party 

By:__________________________________ 

Name:

Title:

	 

	[SPECIFY NOTICE ADDRESS]

	 

	ASSIGNEE

EDF TRADING NORTH AMERICA, LLC,
as Secured Party 

By:__________________________________ 

Name:

Title:

	 

	 

[SPECIFY NOTICE ADDRESS]

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Schedule A
to Collateral Assignment of
Contracts

Contracts; Consents

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Exhibit D
to Security Agreement

FORM OF COLLATERAL ASSIGNMENT OF CONTRACTS

THIS COLLATERAL ASSIGNMENT OF CONTRACTS, dated as of [____________] (this “Agreement”), is by and between [____________] (herein, together with its successors and assigns, “Assignor”) and EDF Energy Services, LLC, a Delaware limited liability company, and EDF Trading North America, LLC, a Texas limited liability company, as secured party (herein, together with their respective successors and assigns in such capacity,  collectively “Assignee”). 

RECITALS:

(1)Except as otherwise defined herein, terms used herein and defined in the Security Agreement (as defined below), shall be used herein as therein defined.  

(2)This Agreement is made pursuant to that certain Security Agreement, dated as of [  ], 2018, by and among Assignor, the other Grantors party thereto and Assignee (as the same may be from time to time further amended, supplemented or otherwise modified, the “Security Agreement”), which was entered into in connection with that certain Energy Services Agreement, dated as of [  ], 2018, by and among Summer Energy, LLC, Summer Energy Northeast, LLC, and Assignee (as the same may be from time to time further amended, supplemented or otherwise modified, and together with all schedules, annexes, confirmations and transactions thereunder, collectively, the “Facility Agreement” and together with the Security Agreement, the “Base Documents”). 

(3)Assignor and [____________] (“Counterparty”) have entered into the contract listed on Schedule A hereto (the “Contract”). 

(4)Assignee has requested that Assignor execute and deliver this Agreement, and it is a requirement under Section 4.14 of the Security Agreement that this Agreement shall have been executed and delivered by Assignor to Assignee. 

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1.Collateral Assignment; No Consents.  As collateral security for all debts, liabilities and obligations of Assignor now existing or hereafter arising under the Base Documents, including, without limitation, the Secured Obligations, Assignor hereby collaterally assigns, transfers and sets over to Assignee all of its rights, but not its obligations, under the Contract.  Assignor represents and warrants to Assignee that no consent is required for the collateral assignment granted hereunder, and Counterparty’s consent is given on the signature page attached hereto.   

2.No Obligations.  Prior to the time Assignee forecloses on its security interest in the Contract and becomes party to the Contract pursuant to the Security Agreement or this  

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Agreement, Assignee shall have no obligation or duty to perform any of the obligations of Assignor under the Contract, all of which shall remain the sole and exclusive duty and obligation of Assignor.  At and after the time Assignee forecloses on its security interest in the Contract and becomes party to the Contract pursuant to the Security Agreement or this Agreement, Assignee shall have the obligation and duty to perform the obligations of Assignor under the Contract.

3.Rights Assigned.  The rights collaterally assigned hereunder include, and are not limited to, any and all rights and rights of enforcement regarding warranties, representations, covenants and indemnities made by Assignor under the Contract including, without limitation, all rights granted to Assignor pursuant to any exhibits and schedules to the foregoing, and all rights, claims or causes of action Assignor may have for any breach or violation of the same.  Assignee shall have the right to institute action and seek redress directly against the parties to the Contract for any such breach or violation; provided, however, that so long as there exists no Potential Event of Defaultor Event of Default and so long as no Early Termination Date has occurred, Assignor may enforce all of the rights, claims or causes of action which Assignor may have under the Contract, but only to the extent such enforcement is not inconsistent with Assignee’s interest under this Agreement or the Facility Agreement; provided, further, that any proceeds received by Assignor from such enforcement are applied to the Secured Obligations owed to Assignee in accordance with the terms and conditions of the Facility Agreement. 

4.Enforcement of Rights.  Upon the occurrence and during the continuance of a Potential Event of Defaultor an Event of Default, or after the occurrence of an Early Termination Date, Assignee may enforce, either in its own name or in the name of Assignor, all rights of Assignor under the Contract, including, without limitation, to (a) bring suit to enforce any rights under the Contract, (b) compromise or settle any disputed claims as to rights under the Contract, (c) give releases or acquittances of rights under the Contract, and/or (d) do any and all things reasonably necessary, convenient, desirable or proper to fully and completely effectuate the collateral assignment of the rights under the Contract pursuant hereto.  Assignor hereby constitutes and appoints Assignee or Assignee’s designee as Assignor’s attorney-in-fact with full power in Assignor’s name, place and stead to do or accomplish any of the aforementioned undertakings and to execute such documents or instruments in the name or stead of Assignor as may be reasonably necessary, convenient, desirable or proper in Assignee’s reasonable discretion.  The aforementioned power of attorney shall be a power of attorney coupled with an interest and irrevocable.  In the event any action is brought by Assignee to enforce any rights under the Contract, Assignor agrees to fully cooperate with and assist Assignee in the prosecution thereof.  Without limiting any other provision of this Agreement, upon the occurrence and during the continuance of a Potential Event of Default or an Event of Default, or after the occurrence of an Early Termination Date and after Assignee has provided written notice to Assignor, Assignor hereby specifically authorizes and directs each party other than Assignor upon written notice to it by Assignee to make all payments due under or arising under the Contract directly to Assignee and hereby irrevocably authorizes and empowers Assignee to request, demand and receive any and all amounts which may be or become due or payable or remain unpaid at any time and times to Assignor under and pursuant to the Contract, and to endorse any checks, drafts or other orders for the payment of money payable to Assignor in payment thereof, and in Assignee’s discretion to file any claims or take any action or proceeding, either in its own name or in the name of Assignor or otherwise, which Assignee may deem reasonably necessary or desirable in its reasonable discretion.  It is expressly understood and  

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agreed, however, that Assignee shall not be required or obligated in any manner to make any demand or to make any inquiry as to the nature or sufficiency of any payment received by it, or to present or file any claim or take any other action to collect or enforce the payment of any amounts which may have been assigned to Assignee or to which Assignee may be entitled hereunder at any time or times.

5.Authorization.  Counterparty hereby agrees that if Assignee forecloses on its security interest in the Contract or becomes party to the Contract pursuant to the Security Agreement or this Agreement, Counterparty hereby recognizes Assignee as its counterparty under the Contract for all purposes going forward. In furtherance of the foregoing, and in addition to the other provisions set forth in this Agreement, Counterparty hereby agrees, for the benefit of Assignee, that if Assignor defaults in the performance of any of its obligations under the Contract, or upon the occurrence or non-occurrence of any event or condition under the Contract which would immediately or with the passage of any applicable grace period or the giving of notice, or both, enable Counterparty to terminate or suspend its performance under the Contract, Counterparty will not terminate or suspend its performance under the Contract, until it first gives written notice of such default to Assignee, and affords the Assignee a period of, (a) in the case of monetary defaults, ten (10) days from receipt of such notice to cure such default, or (b) in the case of bankruptcy or insolvency of Assignor, a reasonable period of time, which shall not exceed ten (10) business days from the date of such notice of default to cure or obtain an order from the applicable bankruptcy court, or (c) in the case of non-monetary defaults (other than those specified in clause (b)) such longer period to cure, which shall not exceed thirty (30) days from receipt of such notice of default.   

6.Notices.  Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, transmitted, cabled or delivered, to the address set forth on the signature page of this Agreement for Assignor, Assignee or Counterparty, as applicable; or in any case at such other address as any of the persons listed above may hereafter notify the others in writing.  All such notices and communications shall be mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and shall be effective when received. 

7.Governing Law; Venue.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. 

8.Termination.  Upon the earlier of (i) the occurrence of the Facility Termination Date or (ii) the Collateral Release Date, this Agreement will terminate. 

9.General Limitation on Claims by Assignor.  No claim may be made by Assignor against Assignee, or the Affiliates, directors, officers, employees, attorneys or agents of any of them, for any special, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, any other Base Document or the Contract, or any act, omission or event occurring in connection therewith; and Assignor hereby, to the fullest extent permitted under applicable law, waives, releases and agrees not to sue or counterclaim for any special,  

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consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor.

10.Attorneys, Accountants, etc. of Assignee Have No Duty to Assignor.  All attorneys, accountants, appraisers, consultants and other professional persons (including the firms or other entities on behalf of which any such person may act) retained by Assignor  or Assignee with respect to the transactions contemplated by the Security Agreement and the Contract shall have the right to act exclusively in the interest of Assignor or Assignee, as the case may be, and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to Assignee or Assignor, as the case may be, to any of their applicable Affiliates, or to any other person, with respect to any matters within the scope of such representation or related to their activities in connection with such representation.  Each of Assignor and Assignee agrees, on behalf of itself and its Affiliates, not to assert any claim or counterclaim against any such persons with regard to matters within the scope of such representation or related to their activities in connection with such representation, all such claims and counterclaims, now existing or hereafter arising, whether known or unknown, foreseen or unforeseeable, being hereby waived, released and forever discharged. 

11.Assignee Not Fiduciary to Assignor, etc.  The relationship between the Assignor, on the one hand, and Assignee, on the other hand, and its Affiliates is solely that of debtor and creditor, and no term or provision of any fiduciary duty, no course of dealing, no written or oral communication, or other action, shall be construed so as to deem such relationship to be other than that of debtor and creditor. 

12.Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  

[Signature Pages to Follow]

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IN WITNESS WHEREOF, each of the parties has duly executed this Agreement as of the date first written above.

	 

	ASSIGNOR

[______________________________________]

By:__________________________________ 

Name:

Title:

Address:

[SPECIFY]

Attention: [SPECIFY]

Telephone: [SPECIFY]

Facsimile: [SPECIFY]

Email:  [SPECIFY]

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	ASSIGNEE

EDF ENERGY SERVICES, LLC,

By:__________________________________ 

Name:

Title:

4700 W. Sam Houston Parkway N., Suite 250
Houston, TX  77041
Attn:  General Counsel
Telephone:  281-781-0333
Facsimile:  281-653-1454

	 

	ASSIGNEE

EDF TRADING NORTH AMERICA, LLC,

By:__________________________________ 

Name:

Title:

Attention:  General Counsel and Contract Administration

4700 W. Sam Houston Parkway N. Suite 250

Houston, TX  77041

Telephone:  281-781-0333

Facsimile:  281-653-1454

	For purposes of consenting to this Agreement, including Section 5 hereof, and the assignment of the Contract to Assignee:

	[______________________________________]

By:__________________________________ 

Name:

Title:

Address:
Facsimile:
Attention:

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Schedule A
to Collateral Assignment of
Contracts

Contracts; Consents

4818-5594-3247

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