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An energy service agreement (ESA) is a long-term contract between an energy company and a business to supply natural gas or electricity. The idea behind ESAs is that they provide certainty to both parties about costs while also ensuring that there are no surprises in terms of price fluctuations.
Businesses can sometimes save money by using ESAs because they will know what their cost per unit of power will be over the next several years. This makes it easier to plan budgets and investments in new equipment. They are also helpful for businesses with seasonal ups and downs in demand who want to ensure they have enough power when needed but don’t want to buy more than necessary when demand is low.
Below is a list of common sections included in Energy Service Agreements. These sections are linked to the below sample agreement for you to explore.
ENERGY SERVICES AGREEMENT
Dated as of May 1, 2018
EDF ENERGY SERVICES, LLC
EDF TRADING NORTH AMERICA, LLC,
SUMMER ENERGY, LLC
SUMMER ENERGY NORTHEAST, LLC
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ENERGY SERVICES AGREEMENT
THIS ENERGY SERVICES AGREEMENT (as amended, supplemented, or otherwise modified from time to time, this “ Agreement ”), dated as of May 1, 2018, is entered into by and among EDF Energy Services, LLC (“ Originator ”), EDF Trading North America, LLC (“ EDFT NA ”), Summer Energy, LLC (“ Summer ”), Summer Energy Northeast, LLC (“ Summer Northeast ” and, together with Summer, “ ESCO ”) (collectively, the “ Parties ” and each, a “ Party ”).
WHEREAS , Originator is providing credit support and other services described herein for the benefit of ESCO that is contracting with EDFT NA to enter into Power Transactions, Gas Transactions, Capacity Transactions, REC Transactions and other Related Services and financially-settled transactions as more specifically described in this Agreement;
WHEREAS , in consideration for Originator providing credit support and other services for the benefit of the ESCO that is contracting with EDFT NA to enter into certain transactions as more specifically described in this Agreement, and in consideration for certain other accommodations that Originator may from time to time make available to ESCO pursuant to the terms of this Agreement, ESCO has agreed to enter into this Agreement and to pledge certain collateral in favor of Originator as more specifically provided herein; and
WHEREAS , in light of the foregoing, the Parties wish to set forth more specific understandings relative to such arrangements as specified in this Agreement.
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 hereby agree as follows.
Section 1. INTERPRETATION
1.1 Definitions . Capitalized terms used but not defined herein shall have the meanings set forth in the “ Defined Terms Annex ” which is incorporated by reference herein.
1.2 Interpretation . In the event of any conflict between the terms and conditions of this Agreement, any other schedule, annex or exhibit to this Agreement, the terms of this Agreement shall control and govern.
1.3 References . Unless otherwise specified in this Agreement, references in this Agreement to sections, exhibits and schedules are to sections, exhibits and schedules of this Agreement.
1.4 Interest Rate Limitation . The Parties intend to strictly comply with all applicable federal and State of New York laws, including applicable usury laws. Accordingly, the provisions of this Section 1.4 shall govern and control over every other provision of this Agreement or any of the Transaction Documents which conflict or are inconsistent with this Section 1.4 , even if such provision declares that it controls. As used in this Section, the term “interest” includes the aggregate of all charges, fees, benefits or other compensation which
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constitute interest under applicable Law, provided that, to the maximum extent permitted by applicable Law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money and not as interest, and (b) all interest at any time contracted for, reserved, charged or received shall be amortized, prorated, allocated and spread, using the actuarial method, during the entire Term. In no event shall ESCO or any other Person be obligated to pay, or either of Originator or EDFT NA have any right or privilege to reserve, receive or retain, any interest in excess of the Maximum Lawful Rate. The daily interest rates to be used in calculating interest at the Maximum Lawful Rate shall be determined by dividing the applicable Maximum Lawful Rate per annum by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in any Transaction Document which directly or indirectly relate to interest shall ever be construed without reference to this Section 1.4 , or be construed to create a contract to pay for the use, forbearance or detention of money at any interest rate in excess of the Maximum Lawful Rate. If the Term is shortened by reason of acceleration or maturity as a result of any Event of Default or by any other cause, or by reason of any required or permitted prepayment, and if for that (or any other) reason Originator at any time, including, but not limited to, the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Maximum Lawful Rate, then and in any such event all of any such excess interest shall be canceled automatically as of the date of such acceleration, prepayment or other event which produces the excess, and, if such excess interest has been paid to Originator, it shall be credited pro tanto against the then-outstanding principal balance of ESCO’s obligations to Originator, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such obligations have been fully satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor.
1.5 Approvals Not Unreasonably Withheld . Unless explicitly stated otherwise, any approval or consent that ESCO is required to obtain from EDFT NA or Originator under this Agreement shall not be unreasonably withheld, conditioned or delayed.
2.1 Term . The term of this Agreement shall commence on the Effective Date and continue until the Scheduled Maturity Date unless earlier terminated as provided herein (the “ Initial Term ”); provided, that expiration or termination of this Agreement shall not affect or excuse the performance by a Party of obligations that by their nature survive such expiration or termination; provided further, that this Agreement shall continue in effect to support any Transaction under the ISDA Agreement, and all other obligations under this Agreement, in each case, entered into prior to the end of the Term, until the Parties have fulfilled all obligations with respect to all such Transactions under the ISDA Agreement and all obligations and Transactions under this Agreement in a manner consistent with Section 2.4 . The Term shall be automatically renewed for successive one (1) year periods following the expiration of the Scheduled Maturity Date (each, a “ Renewal Term ”, and all Renewal Terms collectively with the Initial Term, the “ Term ”) unless either Party provides written notice to the other Party of the Party’s intention not to renew the Term, which notice must be provided not less than one hundred eighty (180) days prior to the Scheduled Maturity Date or last day of the current Renewal Term, as applicable.
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2.2 Termination for Convenience . Notwithstanding anything to the contrary contained in Section 2.1 or otherwise in this Agreement (but subject to Sections 2.3 and 2.4 ), ESCO shall have the right to terminate this Agreement at any time by providing Originator with no less than thirty (30) days’ prior written notice of the effective date of such termination.
2.3 Early Termination Fee . On the effective date of a termination pursuant to Section 2.2 that occurs prior to the Scheduled Maturity Date, ESCO shall pay to Originator the sum of (i) all amounts that would have otherwise been owed to Originator on the Scheduled Maturity Date and (ii) the Early Termination Fee; provided, however, that if the Early Termination Fee becomes payable as a result of a Change of Control, then ESCO shall only pay 50% of the applicable Early Termination Fee. ESCO acknowledges and agrees that the Early Termination Fee shall be in addition to any amounts owed to EDFT NA under the ISDA Agreement (including any amounts due as a result of the early termination of the ISDA Agreement, which for determination of an early termination calculation shall include all applicable Commodity Fees). For the avoidance of doubt, the Early Termination Fee shall not be applied as an additional fee if ESCO or ESCO’s assets are liquidated or if ESCO becomes insolvent or files for bankruptcy protection.
2.4 Unwind Process . On the first day of the Unwind Period, all amounts outstanding with respect to the Deferred Supply Amount shall become immediately due and payable by ESCO. In no event, however, will ESCO be charged or required to pay a Commodity Fee for future volumes by Originator following the Scheduled Maturity Date. In the event any credit support provided under Section 3.4 has not been returned to Originator on or before the first day of the Unwind Period, ESCO shall deliver to Originator, on or before the first day of the Unwind Period, cash or letters of credit approved by Originator in an amount equal to 102% of the aggregate outstanding amount of the unreturned credit support, which cash or letters of credit will be held by Originator as collateral for the obligations owed by ESCO with respect to such unreturned credit support and returned to ESCO from time to time promptly upon ESCO’s request upon the expiration or cancellation, or Originator’s receipt, of portions of such outstanding credit support in the amount of 102% of the associated reduction in the outstanding credit support resulting from such expirations, cancellations or returns. All other amounts shall become due and payable in accordance with the terms of the Transaction Documents.
During the Unwind Period, ESCO may elect to take one or more of the following actions:
(a) Roll-off; Cash Posting . ESCO may maintain one or more outstanding Transactions under the terms of the Transaction Documents. ESCO may elect to post cash or Letters of Credit (as defined in the ISDA Agreement) under the Credit Support Annex for outstanding Transactions so maintained in accordance with the terms of the Credit Support Annex for the purposes of Section 2.5 (the “ Unwind Cash Posting Election ”).
(b) Novation . Subject to Section 2.4(c) , ESCO may elect to assign or novate to one or more counterparties selected by ESCO and approved by EDFT NA one or more outstanding Transactions by entering into written assignment or novation agreements under which such counterparties assume or replace by novation the obligations of ESCO under the outstanding Transactions being assigned or novated. If one counterparty takes assignment or
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novation of all outstanding Transactions and becomes the principle supplier or lender to ESCO, at the request of ESCO Originator shall negotiate in good faith to permit ESCO to grant to any such counterparty a continuing second lien security interest in the Collateral subject to intercreditor terms satisfactory to Originator.
(c) Termination of Transactions . ESCO may elect to terminate one or more outstanding Transactions by providing a written notice of such termination to Originator designating a termination date for such Transactions, and upon such termination date such outstanding Transactions shall terminate with the amounts payable resulting from such termination being determined as if an Event of Default with respect to ESCO existed (without implying the existence thereof for any other purpose), and being settled within ten (10) Local Business Days.
(d) Cooperation. Originator and EDFT NA shall at ESCO’s request reasonably cooperate with ESCO with respect to the timing and mechanics of the assignment, novation or termination of Transactions, as requested by ESCO to facilitate an orderly wind-down of the facilities evidenced by this Agreement and the Transaction Documents.
2.5 Release of Liens . If at any time during the Unwind Period (i) ESCO has performed all obligations to Originator under the Transaction Documents (other than obligations which expressly or by their nature survive termination of this Agreement), and (ii) in respect of each Transaction, either (A) ESCO has made the Unwind Cash Posting Election under Section 2.4(a) and has posted all Eligible Collateral (as defined in the ISDA Agreement) and has otherwise complied with the requirements of the Credit Support Annex with respect thereto, (B) such Transaction has been assigned or novated by ESCO in accordance with Section 2.4(b) and ESCO has no outstanding obligations to Originator in respect thereof and EDFT NA is adequately collateralized or secured for any such assigned or novated Transactions in accordance with the documentation executed with the applicable counterparty in connection with such assignment or novation, or (C) ESCO has terminated such Transaction in accordance with Section 2.4(c) , and has no outstanding obligations to Originator in respect thereof (the date of the occurrence of the foregoing being the “ Collateral Release Date ”), then Originator’s right to Liens on the Collateral under the Security Documents (other than as required under the Credit Support Annex) shall terminate and Originator shall take actions reasonably requested by ESCO to terminate the Security Documents and release the Liens evidenced thereby.
Section 3. TRANSACTION COMMITMENTS
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(a) During the Term and subject to the terms and conditions of the Transaction Documents, to the extent requested by ESCO in accordance with Section 3.3 , Originator, as ESCO’s Credit Support Provider pursuant to the ISDA Agreement, agrees to cause EDFT NA, and EDFT NA agrees to, from time to time, to enter into:
(i) Power Transactions to supply electricity and Related Services required in connection therewith to ESCO;
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(ii) Gas Transactions to supply natural gas and Related Services required in connection therewith to ESCO;
(iii) Capacity Transactions to the extent desirable or required in connection with the Power Transactions requested by ESCO;
(iv) REC Transactions to the extent desirable or required in connection with the Power Transactions requested by ESCO; and
(v) other financially settled natural gas and power derivatives (including heat rate derivatives), financial transmission rights, and other congestion management derivatives;
provided , that Originator shall not be required to cause EDFT NA to enter into any Transaction under this commitment if: (A) such Transaction does not comply with the Risk Management Policy as provided in Exhibit E ; or (B) a Potential Event of Default, an Event of Default or a Termination Event has occurred and is continuing (or will occur as a result of EDFT NA and ESCO entering into such Transaction).
(b) The Parties acknowledge and agree that this Section 3.1 only sets forth a commitment to enter into Transactions under this Agreement and the ISDA Agreement, and that Transactions, if any, entered into under such commitment shall be set forth in applicable Confirmations to the ISDA Agreement.
(c) At ESCO’s request, Originator, as ESCO’s Credit Support Provider pursuant to the ISDA Agreement, shall have the right to request that EDFT NA enter into transactions described in this Agreement and pursuant to the ISDA Agreement that are in addition to those into which it has committed to enter into pursuant to Section 3.1 .
(d) All Power Transactions shall be executed in accordance with the terms of the ISDA Agreement. ESCO shall be responsible for all scheduling of power from EDFT NA to ESCO and for deliveries of power from ESCO to the Customers. ESCO will observe the scheduling deadlines and other scheduling protocols observed and required by any Applicable Market or RTO entities as applicable. The forecast models whether for deliveries of standard block products or shaped products will indicate the anticipated amount of power required to serve the needs of the Customers in the particular region for which an identified Power Transaction is applicable. ESCO will be exclusively responsible for all “forecasting” of power requirements for any Customers and will be responsible for the economic and financial consequences associated with any balancing requirements, clearing requirements or similar financial effects that arise from imbalances between the Customer requirements and amounts scheduled to ESCO. Upon reasonable request of EDFT NA, ESCO shall grant EDFT NA “viewing” rights to any ESCO account maintained by ESCO with any Applicable Market so that EDFT NA can monitor forecasting and balancing requirements. EDFT NA may from time to time reasonably require daily or hourly forecasts for the portfolios of Customers in each
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Applicable Market in comparison to the anticipated wholesale power needs under each Power Transaction and amounts scheduled for ESCO’s anticipated Power Transaction requirements.
(e) Market Pricing Acknowledgements. ESCO acknowledges and agrees that (i) all Transactions contemplated to be entered into between EDFT NA and ESCO will be ultimately negotiated between EDFT NA and ESCO in a manner consistent with the provisions of this Agreement and the ISDA Agreement and based on prevailing market prices at the time; (ii) in determining “market prices” neither Originator nor EDFT NA has access to all prices available in any specific market and EDFT NA’s determination of market prices may not be consistent with the ESCO’s specific views as to “market pricing” and as such EDFT NA shall have no obligation hereunder to alter fees and other components set forth in this Agreement to accommodate or otherwise to accommodate a specific request of ESCO to transact with any retail customer; (iii) the evaluation and ultimate negotiation of any transaction with any retail customer is solely ESCO’s responsibility; and (iv) in accordance with Section 3.3(c) , ESCO may request that EDFT NA enter into a transaction with an Approved Counterparty.
3.2 Confirmations . The Parties agree that each Transaction entered into under the ISDA Agreement shall be evidenced by a Confirmation executed in accordance with the terms of the ISDA Agreement.
3.3 Transaction Request Procedure .
(a) ESCO may request that EDFT NA enter into a Transaction under Originator’s commitment pursuant to Section 3.1(a) and request pricing for such Transaction by submitting the terms of the requested Transaction to EDFT NA under the ISDA Agreement. After receipt of any such request, EDFT NA shall process the requested Transaction and, if such Transaction satisfies the terms and conditions of Originator’s commitment hereunder, shall timely provide a pricing quote to ESCO for such Transaction after receipt of the request from ESCO and ESCO may accept or reject such quote within the reasonable time designated by EDFT NA; provided, that EDFT NA shall not be obligated to provide a quote or enter into any requested Transaction under this Section 3.3(a) if (i) such Transaction does not satisfy the terms and conditions of Originator’s commitment hereunder, including those in Section 3.1 , (ii) the relevant market on which the price is based is unavailable for such Transaction, (iii) there is, in EDFT NA’s commercially reasonable view, consistent with EDFT NA’s practices in respect of transactions entered into by EDFT NA on its own behalf, insufficient liquidity in the relevant market to support such Transaction, or (iv) other considerations, in EDFT NA’s commercially reasonable view, consistent with EDFT NA’s practices in respect of transactions entered into by EDFT NA on its own behalf, render EDFT NA unable to provide a quote for such Transaction. If ESCO accepts EDFT NA’s quote, EDFT NA and ESCO shall enter into a Confirmation to the applicable ISDA Agreement to evidence such Transaction.
(b) In furtherance of the foregoing, all Gas Transactions shall be executed in accordance with the terms of the ISDA Agreement. ESCO must make a request for monthly “baseload” Gas Transactions not later than six (6) Local Business Days prior to the close of the prompt month for NYMEX contract deliveries along with the daily minimum and maximum nominations required for any upcoming delivery month of the Term. EDFT NA’s quote for
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monthly baseload Gas Transactions shall be priced by reference to the applicable monthly prices for natural gas at the applicable index location or delivered to the Applicable Market “city gate” as determined by EDFT NA and as referenced in Platts Inside FERC’s Gas Market Report or Natural Gas Intelligence or other mutually agreeable price. If the location for a requested Gas Transaction is not specified in Inside FERC’s Gas Market Report or Natural Gas Intelligence as applicable, EDFT NA will make good faith efforts to provide a comparable quote in response to ESCO’s request. Requests for daily Gas Transactions for volumes of natural gas in excess of the monthly baseload quantities requested by ESCO shall be priced at mutually agreeable market-based prices. ESCO’s request for “daily” volumes under any Gas Transaction shall be submitted to EDFT NA not later than 8:00 a.m. CST on the Local Business Day immediately preceding the requested day of delivery. ESCO shall be responsible for any Imbalance Charges (as defined in the ISDA Agreement) associated with Gas Transactions other than those resulting from Originator’s or EDFT NA’s breach of this Agreement or the ISDA Agreement (including any Transaction). In certain markets, ESCO will be required to deliver specific “point” gas to the LDC, which will require additional transportation costs which will be charged by EDFT NA to the ESCO. Furthermore, ESCO will be responsible for maintaining all arrangements with the LDC, applicable distribution systems and similar entities. ESCO may request “fixed forward price” transactions subject to market conditions and the availability of transportation capacity for execution of such transactions within the parameters of this Agreement.
(c) ESCO may request that EDFT NA enter into a transaction with an Approved Counterparty under Originator’s commitment under Section 3.1(a) by submitting the terms of the proposed transaction to EDFT NA. After receipt of such request, EDFT NA shall process the requested transaction, and, if the Mirror Transaction (as defined below) related to such transaction satisfies the terms and conditions of Originator’s commitment hereunder, Originator shall timely cause EDFT NA to enter into such transaction (an “ Approved Counterparty Transaction ”). Upon EDFT NA entering into any such Approved Counterparty Transaction, a corresponding Transaction automatically shall be deemed to be entered between EDFT NA and ESCO (a “ Mirror Transaction ”) that shall have the same material economic terms as the Approved Counterparty Transaction, except that the relationship of EDFT NA to the Approved Counterparty shall be reversed (i.e., where the Approved Counterparty was the seller, EDFT NA will be the seller) and the invoice from EDFT NA for any such Transaction will include the Credit Fee – Power Transactions, Credit Fee – Gas Transactions, the Credit Fee – REC Transactions, or the Credit Fee – Capacity Transactions, as appropriate, in accordance with the other terms of this Agreement. EDFT NA and ESCO shall promptly execute a Confirmation evidencing each such Mirror Transaction; provided, however, that the failure by ESCO to execute such Confirmation shall not negate the Mirror Transaction. Notwithstanding anything in this Agreement to the contrary, EDFT NA shall not be obligated to enter into any Approved Counterparty Transaction or corresponding Mirror Transaction if (i) such Approved Counterparty Transaction or Mirror Transaction does not satisfy the terms and conditions of Originator’s commitment hereunder, including those in Section 3.1 , (ii) such Approved Counterparty Transaction or Mirror Transaction is materially different than the market rate of similar transactions as reasonably determined by Originator, (iii) entering into such Approved Counterparty Transaction would not be in compliance with EDFT NA’s then current internal credit tolerance limits with respect to such Approved Counterparty, (iv) such Approved
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Counterparty Transaction or Mirror Transaction fails to satisfy the conditions contained in Schedule I-AC, or (v) a Potential Event of Default, an Event of Default or a Termination Event has occurred and is continuing (or will occur as a result of EDFT NA and ESCO entering into such Approved Counterparty Transaction or corresponding Mirror Transaction). EDFT NA shall use commercially reasonable efforts to maintain contractual relationships with at least five (5) counterparties with whom ESCO could seek to enter a proposed Approved Counterparty Transaction.
3.4 Credit Support and ISO Advances .
(a) At all times during the Term of this Agreement, Originator shall serve as ESCO’s Credit Support Provider under the ISDA Agreement. If requested by ESCO, Originator agrees to provide, subject to the other provisions of this Agreement and the ISDA Agreement, credit support in the form of cash (including cash required to be posted as collateral for the issuance of a letter of credit), or a guaranty or similar instrument in form reasonably acceptable to Originator, required by any Applicable Market, any state utility commission, any transmission or transportation providers or distribution companies or any other similar utility, in each case to support ESCO’s ability to purchase, sell and deliver power or natural gas in any Applicable Market. The Parties agree that all cash collateral or guarantees, issued to or on behalf of ESCO existing as of the Effective Date and set forth in Schedule 3.4 shall remain in full force and effect during the Term, subject to all conditions and obligations herein. On the third (3 rd ) Local Business Day after ESCO’s receipt of a written notice from Originator that any amount has been drawn by any beneficiary of any cash collateral or guaranty or any amount has been paid by Originator (or any Affiliate of Originator) to any beneficiary of any guaranty, cash collateral or other credit support instrument, in each case, provided by Originator (or any Affiliate of Originator) pursuant to this Section 3.4 , and provided that the cause of such draw or payment is not the result of an action or omission by Originator (or any Affiliate of Originator), ESCO hereby unconditionally agrees, without offset or counterclaim, to pay to Originator an amount equal to (i) the aggregate amount drawn on such cash collateral or paid under such credit support instrument, plus (ii) interest on any such amount outstanding through the date such amount was drawn or paid until ESCO has paid Originator such amount in full, at a rate per annum equal to the lesser of (A) three-month LIBOR plus 3% percent per annum, and (B) the Maximum Lawful Rate. ESCO shall be irrevocably and unconditionally obligated to make each such payment when due without presentment, demand, protest or other formalities of any kind, except as otherwise provided herein. To the maximum extent allowable by Law, ESCO shall instruct, or shall provide Originator with independent ability to instruct that any cash issued on ESCO’s behalf be returned directly to account information provided by Originator and not to the accounts, ESCO Controlled Accounts or otherwise maintained by ESCO. The Credit Support Amount may not exceed the Maximum Credit Support Amount at any time during the Term.
(b) Originator shall timely pay on ESCO’s behalf amounts owed by ESCO or any of its Subsidiaries to any ISO in any Applicable Market, or, upon ESCO’s written request, as long as no Event of Default, Potential Event of Default or Termination Event has occurred and is then continuing, shall advance to ESCO such amounts in order for ESCO to make any such payment (each such advance, an “ ISO Advance ”). Any request by ESCO for an ISO Advance shall include reasonable documentation supporting the amount of such requested ISO Advance.
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Subject to Section 3.7 , each ISO Advance shall repaid by ESCO on the first Monthly Payment Date following the month in which such ISO Advance was made.
3.5 Replacement Transactions . The Parties acknowledge that they may enter into Transactions hereunder with respect to products that are defined by any Applicable Market, or another source, and that such products may be discontinued or changed by such source during the term of such Transactions. In the event any such Transaction is entered into with respect to a product that is discontinued or changed by the applicable source, the Parties agree to work together in good faith to replace such existing Transactions with new Transactions hereunder that
are based on products then available in the market containing terms intended to place the Parties in the same position as if the applicable change had not occurred.
3.6 Certain Limitations on Commitment . The Parties agree that Originator’s commitment under Section 3.1 , (including any obligations to cause EDFT NA to provide supply as described in Section 3.1 ) is subject to ESCO’s compliance with the permitted hedging limitations set forth in the Risk Management Policy, which shall only be modified with the prior written approval of Originator. In addition, Originator shall not be required to honor its commitment under Section 3.1 , (including any obligations to cause EDFT NA to provide supply as described in Section 3.1 ) to the extent doing so would, in Originator’s commercially reasonable discretion, cause the Facility Utilization to exceed the Approved Facility Size.
3.7 Deferred Supply Amount .
(a) Notwithstanding anything to the contrary in this Agreement, but subject to Section 9.6 , ESCO may defer a regularly scheduled Supply Payment or a payment required under Section 3.4 (including the repayment of any ISO Advance) to the extent that funds are not available for payment thereof pursuant to Section 12.1(c) (vii) on the Monthly Payment Date on which such Supply Payment became due (the “ Deferred Supply Amount ”). Any Deferred Supply Amount must be repaid within XXXX following the regularly scheduled Supply Payment and, if not repaid, such failure to pay, subject to any applicable cure periods, shall constitute an Event of Default; provided, however, that if such amount is not fully repaid within XXXX and such failure to pay is caused in large part by the failure of ESCO being paid timely within a POR Market, then Originator shall consider in good faith waiving such Event of Default based on the circumstances.
(b) The aggregate outstanding Deferred Supply Amounts may not exceed the Maximum Deferred Supply Amount at any time during the Term.
(c) The aggregate outstanding Deferred Supply Amount shall accrue interest at a rate equal to the lesser of (i) LIBOR plus 6%, and (ii) the Maximum Lawful Rate. Any outstanding Deferred Supply Amount not paid within one calendar month following the regularly
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scheduled Supply Payment but paid within XXXX after such date shall accrue interest at the rate equal to the lesser of (i) LIBOR plus 15%, and (ii) the Maximum Lawful Rate. Such interest shall be calculated based on the actual number of days elapsed on the basis of a 360-day period from the date due until the date paid and shall be payable on each Monthly Payment Date in accordance with Section 12.1(c)(vi) .
(d) For purposes of applying any payment of a Deferred Supply Amount made pursuant to Section 12.1(c)(ix) , such funds shall be applied to amounts deferred under Section 3.7(a) in the order in which such amounts were deferred. The total outstanding Deferred Supply Amount must be paid in full each month of the Term (including any interest on such amount pursuant to Section 3.7(c)) prior to any funds being attributed to a Supply Payment on a subsequent Monthly Payment Date.
3.8 New Retail Markets . If ESCO desires to enter any new market during the Term and to conduct operations in such new market, it will:
(i) present to Originator details regarding such entrance into the new market, including, without limitation, information regarding permitting requirements, credit support requirements, market design, potential customer profile and transaction requirements (the “ Proposal ”); and
(ii) deliver a certificate (the “ Certificate ”), in form and substance satisfactory to Originator, certifying, as of the date of the entering such new market that:
(A) all the representations and warranties made by the ESCO under this Agreement are true and correct, or if any such representations and warranties are not true and correct, such Certificate shall describe in reasonable detail any such deficiencies;
(B) ESCO is in compliance with all Requirements of Law, except to the extent that a failure to do so would not reasonably be expected to have a Material Adverse Effect;
(C) UCC financing statements naming ESCO as “debtor,” naming Originator as “secured party” and describing the Collateral have been filed in the Office of the Secretary of State or analogous office of the state in which the ESCO expects to enter as a new market, and the security interests in the Collateral granted to Originator continue to constitute perfected security interests therein prior to all other Liens (other than Permitted Liens) in all such Collateral that may be perfected by the filing of a financing statement, and all filings and other actions necessary or customary to perfect
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and protect such security interest shall have been duly made or taken;
(D) the ESCO has entered into all contracts and arrangements necessary to conduct the Retail Gas Business or Retail Power Business in such new market, except to the extent the failure to do so would not reasonably be expected to have a Material Adverse Effect, and all such contracts and arrangements are in force and effect and ESCO is not in breach or default under any such contract or arrangement, except for such breach or default that would not reasonably be expected to have a Material Adverse Effect;
(E) there are no Proceedings at law or in equity, or before or by any court or other Governmental Authority that are pending or threatened in writing against or affecting ESCO or any property of ESCO that, if determined adversely to ESCO, would reasonably be expected to have a Material Adverse Effect, and ESCO is not subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or other Governmental Authority, except for those that would not reasonably be expected to result in a Material Adverse Effect;
(F) (1) all tax returns and reports of ESCO required to be filed by it have been timely filed or a timely extension has been filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon ESCO and upon its properties, assets, income, businesses and franchises that are due and payable have been paid when due and payable, except (x) those which are being actively contested by it in good faith and by appropriate proceedings; provided that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor, or (y) those the failure to pay would not
reasonably be expected to have a Material Adverse Effect; (2) to the knowledge of ESCO, as of the proposed date to enter a new market there is no proposed tax assessment against ESCO, except (x) those which are being actively contested by it in good faith and by appropriate proceedings; provided that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor, or (y) those the failure to pay would not
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reasonably be expected to have a Material Adverse Effect, and (3) ESCO has no material obligations with respect to taxes that become past due after the proposed date of entering such new market, and it has not entered into any other agreement with respect to any such past due taxes;
(G) (1) ESCO owns, or possesses the right to use, all of IP Rights that are necessary for the operation of its business, without conflict with the rights of any other Person, other than to the extent the failure to own or have such rights would not individually or in the aggregate result in a Material Adverse Effect; (2) to the knowledge of ESCO, no slogan or other advertising device, product, process, method, substance, part or other material then contemplated to be employed after the date of entering such new market infringes upon any rights held by any other Person, except any such infringement that would not reasonably be expected to have a Material Adverse Effect, and (3) ESCO has not received a notice from a third party asserting a claim that ESCO is infringing the IP Rights of such third party, except any such notice that would not reasonably be expected to have a Material Adverse Effect;
(H) ESCO owns or has access to (through arm’s length service contracts then in effect) the material Information Technology Systems necessary to operate the Retail Gas Business or Retail Power Business of ESCO in the proposed new market;
(I) entering into such new market does not result in (1) the acquisition by or assignment or novation to ESCO of, or (2) ESCO becoming obligated by operation of law or otherwise
(J) under, in each case as of the date of entering such new market, any transactions that would otherwise materially contravene the provisions of Section 4.1 ;
(K) ESCO has a combination of (1) positive net equity determined in accordance with GAAP, that is greater than the expected total of the next proceeding 12 month period of projected collateral funding requirements and general and administrative operations expenses anticipated for the same period, and (2) trailing six months of positive earnings; and
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(L) there is no condition or event that constitutes a Potential Event of Default, an Event of Default or a Termination Event under this Agreement prior to and after giving effect to entering such new market.
After providing the Proposal and the Certificate, ESCO shall have the right, with Originator’s prior written consent, to enter such new market and ESCO may proceed by entering such market and conducting operations in such new market after which time, the new market shall become an “ Applicable Market ” for all purposes of this Agreement. If such prior written consent from Originator is not provided within 30 days, then such consent shall be deemed denied, and ESCO may not enter into such new market.
3.9 Gas Storage Transactions and Gas Asset Management . During the Term, ESCO may request that EDFT NA manage certain storage capacity, associated storage rights and gas assets on behalf of ESCO in certain Applicable Markets (the “ Asset Management Services ”) in which ESCO operates. Upon such request, EDFT NA will make good faith efforts to provide the requested Asset Management Services on behalf of ESCO upon mutual agreement of the parties as to the associated terms, including agreement on the consideration payable by ESCO to EDFT NA for the Asset Management Services. The consideration may be in the form of a fixed fee or revenue sharing arrangement. Prior to EDFT NA providing Asset Management Services as described in this Section 3.9 , the Parties will document the agreement in a form to be agreed upon by the parties and such executed agreement will be added to this Agreement.
3.10 POR Markets . ESCO may enter into POR Market agreements with utilities at its own expense. If ESCO deems a POR Market agreement, in ESCO’s sole discretion, to be commercially unfavorable to ESCO, ESCO may seek exemption from such POR Market agreement, subject to Originator’s prior written approval.
3.11 Conditions Precedent and Closing Deliverables .
(a) Conditions Precedent . On or prior to the Effective Date and as a condition to the effectiveness of this Agreement, ESCO and its applicable Subsidiaries, EDFT NA and Originator and each other relevant Person shall have executed and delivered each of the following agreements to which it is a party:
(i) this Agreement;
(ii) the Security Agreement;
(iii) the ISDA Agreement;
(iv) the Pledge Agreements;
(v) each Control Agreement;
(vi) the Intercreditor Agreement;
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(vii) the other documents required of ESCO as provided in this Agreement, including any documentation required to effect a sale of ESCO’s receivables pursuant to a receivables financing contemplated by the Parties, and including any documents relating to Originator having an equity interest in ESCO; and
(viii) evidence that, on the Effective Date, ESCO meets the minimum Adjusted Equity Position as set forth in Section 0 hereof.
(b) ESCO Deliverables to EDFT NA and Originator . On or prior to the Effective Date and as a condition to the effectiveness of this Agreement, unless otherwise specified below, EDFT NA and Originator, as applicable, shall have received from ESCO and its applicable Subsidiaries the following:
(i) a certificate of incumbency;
(ii) a certificate of good standing;
(iii) a copy of by-laws or operating agreement, as applicable;
(iv) articles of incorporation or formation, as applicable, certified by an officer or manager of such Person as being true and correct; and
(v) certified copies of resolutions or other actions or authorizations, duly adopted by its members or other authorized governing body, authorizing its execution, delivery, and performance of the Transaction Documents to which it is a party; and
(vi) payment of closing-related fees and expenses actually incurred by Originator and EDFT NA, if any; provided, however, that ESCO shall not be responsible for any legal fees in excess of $10,000.
(c) Additional ESCO Deliverables to Originator . On or prior to the Effective Date and as a condition to the effectiveness of this Agreement, Originator shall have received from ESCO the following, each of which shall be in form and substance satisfactory to Originator:
(i) a written general corporate and enforceability legal opinion from ESCO’s and its Subsidiaries counsel;
(ii) a security interest opinion from ESCO’s and its Subsidiaries counsel; and
(iii) Exhibit A which sets forth all the account numbers and required information for each ESCO Controlled Account subject to this Agreement.
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Section 4. PERMITTED TRANSACTIONS
4.1 Transactions . During the Term, ESCO shall not enter into any Commodity Transaction with any Person other than EDFT NA and ESCO shall not enter into a Commodity Transaction directly with any counterparty to an Approved Counterparty Transaction; provided, however, that ESCO may enter into Commodity Transactions with Persons other than EDFT NA for the purchase of RECs.
4.2 Other Transactions . EDFT NA and EDFT NA’s Affiliates may enter into Commodity Transactions with Persons other than ESCO and its Affiliates, including such transactions where EDFT NA or an Affiliate of EDFT NA sells commodities to another Person at a price higher or lower than the price made available to ESCO under this Agreement and the ISDA Agreement. EDFT NA and EDFT NA’s Affiliates may compete in the same markets as ESCO and its Affiliates without restriction based upon EDFT NA’s contractual relationship with ESCO. Neither Originator’s contractual relationship with ESCO nor EDFT NA’s contractual relationship to ESCO is intended to create any fiduciary relationship, partnership, sole supply arrangement, or other similar relationship with ESCO or any of its Affiliates.
Section 5. REPRESENTATIONS AND WARRANTIES OF ESCO