Contract analysis

Section 1.1 Definitions. As used in this Lease, the following terms shall have the meanings set forth below. All capitalized terms used but not defined in this Section 1.1 shall have the meanings ascribed to them elsewhere in this Lease. "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. For purposes of

Section 2.1 Grant of Lease. Lessor hereby leases, demises, and lets to Lessee, and Lessee hereby leases from Lessor, the Premises, together with all rights, easements, privileges, and appurtenances thereto, for the Term and upon the terms and conditions set forth in this Lease. The Premises consist of approximately 15.0 acres of land, being a portion of Survey No. 42, Block 42, T-1-S, T&P RR Co. Survey, Ector County,

Section 2.2 Appurtenant Rights. In addition to the leasehold estate granted in Section 2.1, Lessor hereby grants to Lessee, for the benefit of the Premises and the Project, the following non-exclusive appurtenant rights over and across Lessor's adjacent property, which rights shall run with the Premises during the Term: (a) Ingress and Egress. A non-exclusive easement for vehicular and pedestrian ingress and egress b

Section 2.3 Quiet Enjoyment. Lessor covenants and warrants that Lessee, upon paying the rent and performing all of its obligations under this Lease, shall peacefully and quietly have, hold, and enjoy the Premises for the full Term without hindrance, molestation, or disturbance by Lessor or any Person claiming by, through, or under Lessor. Lessor shall defend Lessee's leasehold estate against all claims of any Person

Section 2.4 "As-Is" Condition. Lessee accepts the Premises in its present "as-is, where-is" condition, with all faults. Lessee acknowledges and agrees that it has conducted its own independent investigation and due diligence with respect to the physical, environmental, and legal condition of the Premises, including, without limitation, a Phase I Environmental Site Assessment and a Phase II Environmental Site Assessme

Section 3.1 Initial Term. The initial term of this Lease (the "Initial Term") shall be twenty-five (25) years, commencing on December 1, 2022 (the "Commencement Date") and expiring at 11:59 p.m., Central Time, on December 1, 2047, unless sooner terminated or extended as provided herein. The Commencement Date shall not be subject to adjustment or deferral for any reason, including delays in the construction or commiss

Section 3.2 Renewal Options. Lessee shall have the option to extend the Term of this Lease for two (2) successive periods of five (5) years each (each, a "Renewal Term"), for a maximum total term of thirty-five (35) years, with the latest possible expiration date being December 1, 2057. Each Renewal Term shall automatically commence upon the expiration of the then-current Term unless Lessee fails to exercise its rene

Section 3.3 Holding Over. If Lessee remains in possession of the Premises after the expiration of the Term or any Renewal Term (including the period during which Lessee is completing decommissioning activities under Article 20), without having exercised a renewal option or otherwise extended this Lease, such holdover shall be deemed to create a month-to-month tenancy on the same terms and conditions as this Lease, ex

Section 4.1 Permitted Use. Lessee shall use and occupy the Premises solely for the purpose of developing, constructing, installing, owning, operating, maintaining, repairing, replacing, repowering, upgrading, decommissioning, and removing a battery energy storage system (BESS) facility, together with all related improvements, equipment, and facilities, including but not limited to the following (collectively, the "Pe

Section 4.2 Compliance with Laws. Lessee shall comply with all Applicable Laws in connection with its use and occupancy of the Premises and the construction, operation, maintenance, and decommissioning of the Project, including, without limitation, all applicable ERCOT protocols, PUCT regulations, Ector County ordinances and building codes, TCEQ permits (including Stormwater General Permit No. TXR150000), zoning requ

Section 4.3 No Nuisance. Lessee shall not conduct or permit any activity on the Premises that constitutes a public or private nuisance or unreasonably interferes with Lessor's use and enjoyment of Lessor's adjacent properties. Lessee shall use commercially reasonable efforts to minimize noise, dust, vibration, and light pollution associated with the construction and operation of the Project, particularly during night

ARTICLE 5 — MINERAL RIGHTS RESERVATION AND SURFACE USE

Section 5.1 Mineral Rights Reservation. Lessor hereby expressly reserves unto itself and its successors and assigns all mineral rights, including all oil, gas, hydrocarbons, and other minerals (whether solid, liquid, or gaseous), in, on, and under the Premises, together with all rights to explore for, develop, produce, and market such minerals (collectively, the "Mineral Rights"). Provided, however, that Lessor shall

Section 5.2 Surface Use Restriction. Lessor's exercise of the reserved Mineral Rights shall at all times be subject to the following surface use restrictions, which shall be deemed a covenant running with the land for the duration of the Term: (a) No drilling rigs, pump jacks, tank batteries, pipelines, flow lines, injection wells, disposal wells, compressor stations, or other mineral production or processing equipme

Section 5.3 Coordination. Lessor shall provide Lessee with not less than ninety (90) days' prior written notice of any proposed mineral exploration, development, or production activity on Lessor's adjacent lands within five hundred (500) feet of the boundaries of the Premises. Such notice shall include a reasonably detailed description of the proposed activity, including the location, nature, scope, expected duration

Section 6.1 Lease Signing Payment. Upon execution of this Lease, Lessee shall pay to Lessor a one-time, non-refundable lease signing payment of Fifty Thousand Dollars ($50,000.00) (the "Signing Payment"). The Signing Payment represents consideration for Lessor's execution and delivery of this Lease and shall not be credited against, or applied as a prepayment of, any installment of Base Rent. The Signing Payment shal

Section 6.2 Development Period Rent. During the Development Period (Lease Year 1, commencing on the Commencement Date, December 1, 2022), Lessee shall pay to Lessor Base Rent in the amount of One Thousand Two Hundred Dollars ($1,200.00) per acre per year, calculated as follows: $1,200.00 per acre × 15.0 acres = $18,000.00 per year $18,000.00 ÷ 12 months = $1,500.00 per month Development Period Base Rent shall be paya

Section 6.3 Operating Period Rent. During the Operating Period (commencing on the first day following the end of the Development Period and continuing through Lease Year 25, and during any Renewal Terms), Lessee shall pay to Lessor Base Rent in the amount of One Thousand Eight Hundred Dollars ($1,800.00) per acre per year for the first Lease Year of the Operating Period, calculated as follows: $1,800.00 per acre × 15

Section 6.4 Annual Rent Escalation. Commencing on the second (2nd) anniversary of the start of the Operating Period and on each anniversary thereof throughout the remainder of the Term (including any Renewal Terms), the Base Rent shall increase by two percent (2.0%) over the Base Rent payable during the immediately preceding Lease Year, compounding annually. By way of illustration, if the first Lease Year of the Oper

Section 6.5 Late Payment. If any installment of Base Rent or any other amount due under this Lease is not received by Lessor within ten (10) days after the due date therefor, Lessee shall pay to Lessor a late charge of five percent (5%) of the overdue amount as liquidated damages for the administrative costs of processing and pursuing such late payment, and not as a penalty. In addition, all overdue amounts shall bea

Section 6.6 Payment Method. All payments of Base Rent and other amounts due under this Lease shall be made by wire transfer of immediately available funds or by automated clearing house (ACH) transfer to a bank account designated by Lessor in writing from time to time. Lessor shall provide Lessee with wire transfer instructions at least ten (10) days prior to the Commencement Date, and Lessor may change such instruct

Section 6.7 Net Lease. This Lease is intended to be, and shall be construed as, an absolute net lease. Except as expressly provided otherwise herein, Lessee shall be solely responsible for, and shall pay when due, all costs, expenses, taxes, assessments, insurance premiums, utility charges, maintenance costs, repair costs, and charges of every kind and nature whatsoever, whether foreseen or unforeseen, ordinary or ex

ARTICLE 7 — TAXES AND ASSESSMENTS

Section 7.1 Real Property Taxes. Lessee shall pay, before delinquency, all real property taxes, general and special assessments, levies, fees, and governmental charges of every kind and nature levied, assessed, or imposed against the Premises and the Improvements during the Term, whether assessed against Lessor or Lessee. Lessee shall furnish to Lessor, upon Lessor's reasonable request, evidence of the timely payment

Section 7.2 Personal Property Taxes. Lessee shall be solely responsible for the payment of all taxes, assessments, and governmental charges levied or assessed against Lessee's personal property, equipment, trade fixtures, inventory, and other tangible and intangible personal property located on the Premises. Lessee shall file all required personal property tax returns and renditions in a timely manner.

Section 7.3 Tax Contest. Lessee shall have the right, at its sole cost and expense, to contest the validity or amount of any real or personal property tax or assessment levied or assessed against the Premises, the Improvements, or Lessee's personal property, in good faith by appropriate legal proceedings. During the pendency of any such contest, payment of the contested tax or assessment may be deferred or withheld b

Section 7.4 Lessor's Taxes. Lessor shall be solely responsible for the payment of all income, franchise, or other taxes payable by Lessor with respect to rent or other amounts received by Lessor under this Lease. Lessee shall have no responsibility for any such taxes.

ARTICLE 8 — IMPROVEMENTS, ALTERATIONS, AND OWNERSHIP

Section 8.1 Right to Construct. Lessee shall have the right, at its sole cost and expense, to construct, install, erect, place, and maintain on the Premises all Improvements necessary or desirable for the Permitted Use, without the prior consent of Lessor. Such Improvements shall include, without limitation: (a) The BESS, consisting of a 50 MW / 200 MWh lithium iron phosphate battery energy storage system utilizing H

Section 8.2 Construction Standards. All construction of Improvements on the Premises shall be performed in a good and workmanlike manner, using materials of good quality, in compliance with all Applicable Laws (including all building codes, zoning requirements, and environmental regulations), and in accordance with the plans and specifications set forth in the EPC Agreement between Lessee and Meridian Power Construct

Section 8.3 Ownership of Improvements During Term. All Improvements placed on the Premises by or on behalf of Lessee shall remain the personal property of Lessee during the Term and shall not become fixtures or part of the realty, regardless of the manner in which such Improvements are attached to or incorporated into the Premises. The Parties intend that all Improvements shall be and remain severable from the Premis

Section 8.4 Removal of Improvements. Upon the expiration or earlier termination of this Lease, Lessee shall have the right and obligation, subject to Section 8.5, to remove all Improvements from the Premises within twelve (12) months following the end of the Term (the "Removal Period") and to restore the Premises to a condition reasonably similar to its condition as of the Commencement Date, ordinary wear and tear ex

Section 8.5 Lessor's Option to Retain Improvements. Notwithstanding Section 8.4, Lessor may elect, by delivering written notice to Lessee not less than ninety (90) days before the scheduled expiration of the Term (or promptly following any early termination), to retain some or all of the Improvements on the Premises. If Lessor elects to retain any Improvements, Lessee shall have no obligation to remove such retained

Section 8.6 Liens. Lessee shall keep the Premises free and clear of all liens, encumbrances, charges, and claims arising out of or in connection with work performed, services provided, or materials furnished to or for the Premises or the Project, other than Permitted Encumbrances (including the leasehold mortgage in favor of Lender under the Credit Agreement). If any mechanic's lien, materialmen's lien, or similar st

Section 9.1 Lessee's Insurance Obligations. Lessee shall maintain, or cause to be maintained, at its sole cost and expense, the following minimum insurance coverages throughout the Term: (a) Builder's Risk Insurance. During the period of construction of the Project, a builder's risk insurance policy in an amount not less than the full replacement cost of the Improvements under construction, with a current policy limi

Section 9.2 Additional Insureds. Lessor (Permian Basin Land Holdings, LP) and Lender (Brazos River National Bank, N.A.) shall be named as additional insureds on all liability insurance policies maintained by Lessee under this Lease, including the CGL policy. Lessor and Lender shall be named as loss payees (or mortgagee loss payees, as applicable) on all property insurance and builder's risk insurance policies, as the

Section 9.3 Evidence of Insurance. Lessee shall deliver to Lessor and Lender certificates of insurance (on Acord 25 or Acord 28 forms, as applicable), together with copies of all endorsements naming Lessor and Lender as additional insureds and loss payees, evidencing the insurance coverages required under this Article 9. Such certificates and endorsements shall be delivered (a) prior to the Commencement Date, (b) ann

Section 9.4 Waiver of Subrogation. Lessor and Lessee each hereby waive all rights of recovery, claim, action, or cause of action against the other and the other's partners, members, officers, directors, agents, and employees for any loss or damage covered (or required to be covered) by any insurance policy maintained or required to be maintained by the waiving party under this Lease, to the extent of the proceeds rec

Section 9.5 Lessor's Insurance. Lessor shall maintain property insurance on Lessor's adjacent property as Lessor deems appropriate in Lessor's sole discretion. Lessee shall have no responsibility for the cost or maintenance of any insurance coverage maintained by Lessor on property other than the Premises.

ARTICLE 10 — ENVIRONMENTAL MATTERS

Section 10.1 Lessor's Environmental Representations. Lessor represents and warrants to Lessee that, to the best of Lessor's actual knowledge after reasonable inquiry: (a) No Hazardous Materials have been released, stored, generated, treated, or disposed of on, in, under, or about the Premises in violation of Environmental Laws, except as may have been disclosed in the Phase I and Phase II Environmental Site Assessmen

Section 10.2 Lessee's Environmental Obligations. Lessee shall comply with all Environmental Laws in connection with its use, occupancy, and operation of the Premises and the Project during the Term. Without limiting the generality of the foregoing: (a) Lessee shall not release, discharge, store, generate, treat, transport, or dispose of any Hazardous Materials on, in, under, or about the Premises, except in complianc

Section 10.3 Environmental Due Diligence. Lessee has caused a Phase I Environmental Site Assessment (conforming to ASTM E1527-21) and a Phase II Environmental Site Assessment of the Premises to be performed by Terranova Environmental Group, Inc. (Lead Consultant: Karen V. Albrecht), with offices at 4500 Greenville Avenue, Suite 220, Dallas, Texas 75206 (collectively, the "Environmental Reports"). The Phase I ESA iden

Section 10.4 Indemnification. Lessee shall indemnify, defend (with counsel reasonably acceptable to Lessor), and hold Lessor harmless from and against any and all claims, demands, actions, suits, proceedings, losses, damages, liabilities, penalties, fines, costs, and expenses (including reasonable attorneys' fees and consultant fees) arising from or in connection with (a) any Hazardous Materials introduced to, releas

ARTICLE 11 — UTILITIES AND ACCESS

Section 11.1 Utilities. Lessee shall be solely responsible for obtaining, connecting, and paying for all utilities required for the construction and operation of the Project, including, without limitation, electricity, water, wastewater, natural gas (if applicable), and telecommunications. Lessee shall have the right, at its sole cost and expense, to install, construct, operate, maintain, repair, replace, and remove

Section 11.2 Access. Lessee and its authorized representatives, including, without limitation, its agents, employees, contractors (including the EPC Contractor, Meridian Power Construction, Inc., and the equipment supplier, Harmon-Dietrich Energy Solutions, LLC), subcontractors, invitees, consultants, and Lender's representatives (including Norgate Technical Advisors, Inc., as Independent Engineer, and Dr. Phillip S.