Calderwood & Harkness LLP Matter No. 1015-00003
COLLATERAL ASSIGNMENT OF PROJECT CONTRACTS
Dated as of December 1, 2022
by and between
LONE STAR STORAGE I, LLC a Texas limited liability company
(as Assignor)
and
BRAZOS RIVER NATIONAL BANK, N.A. a national banking association, in its capacity as Administrative Agent and Lender
(as Assignee)
Relating to the $26,000,000 Construction-to-Term Loan Facility pursuant to the Credit Agreement dated as of December 1, 2022
Lone Star Battery Storage Project 50 MW / 200 MWh Lithium Iron Phosphate Battery Energy Storage System Ector County, Texas
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COLLATERAL ASSIGNMENT OF PROJECT CONTRACTS
This COLLATERAL ASSIGNMENT OF PROJECT CONTRACTS (this "Collateral Assignment") is made and entered into as of December 1, 2022, by and between:
LONE STAR STORAGE I, LLC, a Texas limited liability company (EIN: 88-1623504), with its registered agent at CT Agents of Texas, LLC, 1999 Bryan Street, Suite 900, Dallas, Texas 75201 (the "Assignor"); and
BRAZOS RIVER NATIONAL BANK, N.A., a national banking association, in its capacity as Administrative Agent and sole Lender under the Credit Agreement (as defined below), with its principal office at 600 Main Street, Fort Worth, Texas 76102 (the "Assignee").
Assignor and Assignee are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
A. The Credit Agreement. Assignor, as Borrower, and Assignee, as Administrative Agent and sole Lender, have entered into that certain Credit Agreement dated as of December 1, 2022 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), pursuant to which Assignee has agreed to provide to Assignor a construction-to-term loan facility in the aggregate principal amount of Twenty-Six Million Dollars ($26,000,000) (the "Loan"), representing approximately sixty-five percent (65%) of the total project development value of Forty Million Dollars ($40,000,000). The Loan bears interest at a rate equal to the Secured Overnight Financing Rate ("SOFR") plus 275 basis points (2.75%), subject to a SOFR floor of 0.50%. The Loan has a stated maturity date of February 10, 2030, which is approximately seven (7) years from the anticipated Financial Close Date. The proceeds of the Loan are to be used by Assignor to finance the development, construction, and commissioning of the Lone Star Battery Storage Project, a 50 megawatt ("MW") / 200 megawatt-hour ("MWh") lithium iron phosphate ("LFP") battery energy storage system located in Ector County, Texas (the "Project").
B. The Project Company. Assignor is a Texas limited liability company and a wholly owned subsidiary of Calloway-Briggs Renewables Inc., a Texas corporation ("CBR"). Assignor was formed as a single-purpose project company for the sole purpose of holding all Project assets, contracts, permits, and related rights. CBR serves as the Manager of Assignor pursuant to the terms of Assignor's Company Agreement. The Project is located on an approximately fifteen (15)-acre parcel of land situated at 4800 West University Boulevard, Odessa, Texas 79764, being a portion of Survey No. 42, Block 42, T-1-S, T&P RR Co. Survey, Ector County, Texas. The Project, upon completion and commissioning, will consist of a utility-scale LFP battery energy storage system with a nameplate capacity of 50 MW / 200 MWh, designed to provide energy arbitrage, ancillary services, and capacity to the Electric Reliability Council of Texas ("ERCOT") market.
C. The Assigned Contracts. In connection with the development, construction, and commissioning of the Project, Assignor has entered into the following agreements (each an "Assigned Contract" and collectively, the "Assigned Contracts"):
(1) EPC Agreement. That certain Engineering, Procurement and Construction Agreement dated as of December 1, 2022 (as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof and of the Credit Agreement, the "EPC Agreement"), by and between Assignor, as Owner, and Meridian Power Construction, Inc., a Texas corporation ("Contractor"), as Contractor, pursuant to which the Contractor has agreed to perform the design, engineering, procurement, construction, testing, and commissioning of the Project on a lump-sum, fixed-price basis for a contract price of Thirty-One Million Two Hundred Thousand Dollars ($31,200,000).
(2) Equipment Supply Agreement. That certain Equipment Supply Agreement dated as of December 1, 2022 (as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof and of the Credit Agreement, the "Equipment Supply Agreement"), by and between Assignor and Harmon-Dietrich Energy Solutions, LLC, a Delaware limited liability company ("Supplier"), for the supply and delivery of 50 MW / 200 MWh LFP battery modules (Model HD-LFP-200E), ten (10) 5 MW power conversion system ("PCS") inverters, a battery management system ("BMS"), thermal management (HVAC) systems, and container enclosures, for a total contract value of Eighteen Million Four Hundred Thousand Dollars ($18,400,000).
(3) Ground Lease. That certain Ground Lease Agreement dated as of December 1, 2022 (as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof and of the Credit Agreement, the "Ground Lease"), by and between Permian Basin Land Holdings, LP, a Texas limited partnership ("Lessor"), as Lessor, and Assignor, as Lessee, for the lease of an approximately fifteen (15)-acre parcel of real property located in Ector County, Texas, with an initial term of twenty-five (25) years and two (2) successive five (5)-year renewal options, for a maximum aggregate term of thirty-five (35) years, expiring no later than December 1, 2057.
(4) Interconnection Agreement. That certain Interconnection Agreement effective as of December 1, 2022 (as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof and of the Credit Agreement, the "Interconnection Agreement"), by and between Assignor and Aldermere & Co. ("Oncor"), for the interconnection of the 50 MW battery energy storage system at the Western Permian 138 kV Substation, Ector County, Texas, assigned ERCOT Queue No. INR-22-03347.
D. Security Requirement. Pursuant to Article VII (Conditions Precedent) and Article IX (Security) of the Credit Agreement, Assignor is required to grant to Assignee, for the benefit of Assignee in its capacity as Administrative Agent and sole Lender, a first-priority security interest in and collateral assignment of all of Assignor's right, title, and interest in, to, and under the Assigned Contracts, as security for the prompt and complete payment and performance of all Obligations (as defined in the Credit Agreement). The security package required under the Credit Agreement also includes, without limitation: (i) a first-priority lien on all Project assets, including all real and personal property of Assignor; (ii) a pledge by CBR of one hundred percent (100%) of the membership interests in Assignor; and (iii) a limited recourse completion guarantee from CBR in favor of Assignee (the "Completion Guarantee"), pursuant to which CBR has agreed to guarantee the timely completion of the Project in accordance with the terms and conditions of the Credit Agreement.
E. Consents. Assignor has obtained, or will deliver contemporaneously with the execution and delivery hereof, the written consent to this Collateral Assignment from each counterparty to the Assigned Contracts, as follows: (i) Meridian Power Construction, Inc. (attached hereto as Exhibit B); (ii) Harmon-Dietrich Energy Solutions, LLC (attached hereto as Exhibit C); (iii) Permian Basin Land Holdings, LP (attached hereto as Exhibit D); and (iv) Aldermere & Co. (attached hereto as Exhibit E).
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used in this Collateral Assignment, the following terms shall have the meanings set forth below:
"Assigned Contracts" means, collectively, the EPC Agreement, the Equipment Supply Agreement, the Ground Lease, and the Interconnection Agreement, including all amendments, supplements, exhibits, schedules, side letters, change orders, and ancillary documents related thereto, and any replacements or substitutions therefor made in accordance with the terms of this Collateral Assignment and the Credit Agreement.
"Assignee" means Brazos River National Bank, N.A., a national banking association, in its capacity as Administrative Agent and sole Lender under the Credit Agreement, and its successors and assigns in such capacity.
"Assignor" means Lone Star Storage I, LLC, a Texas limited liability company, and its permitted successors and assigns.
"Collateral" means all of Assignor's right, title, and interest in, to, and under the Assigned Contracts, as more particularly described in Section 2.1 of this Collateral Assignment, including all proceeds thereof.
"Completion Guarantee" means that certain Completion Guarantee dated as of December 1, 2022, executed and delivered by Calloway-Briggs Renewables Inc. in favor of Assignee, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Credit Agreement" has the meaning set forth in Recital A.
"Default" means any Event of Default (as defined in the Credit Agreement) or any event, act, condition, or omission that, with the giving of notice, the lapse of time, or both, would constitute an Event of Default under the Credit Agreement.
"EPC Agreement" has the meaning set forth in Recital C(1).
"Equipment Supply Agreement" has the meaning set forth in Recital C(2).
"Ground Lease" has the meaning set forth in Recital C(3).
"Interconnection Agreement" has the meaning set forth in Recital C(4).
"Obligations" means all indebtedness, liabilities, and obligations of Assignor to Assignee arising under or in connection with the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement), whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, liquidated or unliquidated, including, without limitation, all principal, interest (including interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency proceeding by or against Assignor, whether or not allowed as a claim in such proceeding), fees, costs, expenses, indemnification obligations, and all other amounts payable by Assignor under the Credit Agreement and the Loan Documents.
"Permitted Liens" has the meaning set forth in the Credit Agreement.
"Project" means the Lone Star Battery Storage Project, a 50 MW / 200 MWh LFP battery energy storage system located on the Project Site in Ector County, Texas, as more particularly described in the Credit Agreement and the Assigned Contracts.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of Texas, or, to the extent applicable, the Uniform Commercial Code as in effect from time to time in any other relevant jurisdiction.
Section 1.2 Rules of Construction. Unless the context of this Collateral Assignment otherwise requires:
(a) Terms defined in the Credit Agreement and not otherwise defined herein shall have the respective meanings assigned to such terms in the Credit Agreement.
(b) Terms defined in the UCC that are not otherwise defined herein or in the Credit Agreement shall have the meanings assigned to such terms in the UCC, to the extent not inconsistent with the definitions set forth herein or in the Credit Agreement.
(c) 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.
(d) 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."
(e) Unless the context requires otherwise, (i) 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 from time to time amended, restated, supplemented, or otherwise modified (subject to any restrictions on such amendments, restatements, supplements, or modifications set forth herein or in the Credit Agreement), (ii) any reference herein to any person shall be construed to include such person's successors and assigns, (iii) the words "herein," "hereof," and "hereunder," and words of similar import, shall be construed to refer to this Collateral Assignment in its entirety and not to any particular provision hereof, and (iv) all references herein to Articles, Sections, Exhibits, and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Collateral Assignment.
(f) References to any law, statute, rule, or regulation shall include all statutory and regulatory provisions consolidating, amending, replacing, or interpreting such law, statute, rule, or regulation and any reference to any law, statute, rule, or regulation shall, unless otherwise specified, refer to such law, statute, rule, or regulation as amended, modified, or supplemented from time to time.
(g) Section headings herein are included for convenience of reference only and shall not affect the interpretation of this Collateral Assignment.
ARTICLE II
COLLATERAL ASSIGNMENT
Section 2.1 Grant of Collateral Assignment. As collateral security for the full and timely payment and performance of all Obligations, Assignor hereby irrevocably assigns, transfers, conveys, pledges, hypothecates, and sets over to Assignee, and hereby grants to Assignee a continuing first-priority security interest in and to, all of Assignor's right, title, and interest in, to, and under the following (collectively, the "Collateral"):
(a) EPC Agreement. The EPC Agreement with Meridian Power Construction, Inc. (Contract Price: $31,200,000), including, without limitation, all of Assignor's rights thereunder to:
(i) receive the full and complete performance by Contractor of the design, engineering, procurement, construction, testing, and commissioning of the Project in accordance with the terms and specifications of the EPC Agreement;
(ii) enforce all warranties provided by Contractor under the EPC Agreement, including the general warranty period of two (2) years from the date of Substantial Completion (as defined in the EPC Agreement);
(iii) enforce all performance guarantees provided by Contractor, including (A) minimum round-trip efficiency of eighty-seven percent (87%), (B) guaranteed capacity of 50 MW / 200 MWh (±2%), and (C) Year 1 availability of not less than ninety-seven percent (97%);
(iv) receive all liquidated damages payable by Contractor, including (A) delay liquidated damages in the amount of Twenty-Five Thousand Dollars ($25,000) per day of delay beyond the Guaranteed Commercial Operation Date, subject to a cap of One Million Five Hundred Sixty Thousand Dollars ($1,560,000), (B) performance liquidated damages in the amount of Four Thousand Dollars ($4,000) per MWh of capacity shortfall, subject to a cap of One Million Five Hundred Sixty Thousand Dollars ($1,560,000), and (C) aggregate liquidated damages (delay and performance combined) subject to a cap of Three Million One Hundred Twenty Thousand Dollars ($3,120,000);
(v) exercise all retainage rights, including the right to withhold ten percent (10%) of all progress payments until the conditions for release of retainage set forth in the EPC Agreement have been satisfied;
(vi) make claims under and enforce the performance bond and payment bond, each in the amount of Thirty-One Million Two Hundred Thousand Dollars ($31,200,000), issued by Ironclad Surety Corporation in connection with the EPC Agreement; and
(vii) exercise any and all other rights, remedies, powers, privileges, and benefits of Assignor under the EPC Agreement, whether arising by contract, at law, in equity, or otherwise;
(b) Equipment Supply Agreement. The Equipment Supply Agreement with Harmon-Dietrich Energy Solutions, LLC (Contract Value: $18,400,000), including, without limitation, all of Assignor's rights thereunder to:
(i) receive delivery of all equipment to be supplied under the Equipment Supply Agreement, including the HD-LFP-200E battery modules, ten (10) 5 MW PCS inverters, the battery management system, thermal management (HVAC) systems, and container enclosures;
(ii) enforce all product warranties provided by Supplier, including (A) a ten (10)-year capacity warranty guaranteeing a minimum of eighty percent (80%) of nameplate capacity at Year 10, and (B) a five (5)-year defect warranty covering defects in materials and workmanship;
(iii) receive all delay liquidated damages payable by Supplier, in the amount of Fifteen Thousand Dollars ($15,000) per day per delayed shipment, subject to an aggregate cap of Nine Hundred Twenty Thousand Dollars ($920,000);
(iv) receive all replacement equipment, spare parts, and other remedial deliveries to which Assignor may be entitled under the Equipment Supply Agreement; and
(v) exercise any and all other rights, remedies, powers, privileges, and benefits of Assignor under the Equipment Supply Agreement, whether arising by contract, at law, in equity, or otherwise;
(c) Ground Lease. The Ground Lease with Permian Basin Land Holdings, LP, including, without limitation:
(i) all leasehold interests of Assignor in and to the approximately fifteen (15)-acre Project site, being a portion of Survey No. 42, Block 42, T-1-S, T&P RR Co. Survey, Ector County, Texas, located at 4800 West University Boulevard, Odessa, Texas 79764;
(ii) all renewal options under the Ground Lease, including the right to exercise two (2) successive five (5)-year renewal options extending the term through December 1, 2057;
(iii) all rights and benefits of Assignor under the Subordination, Non-Disturbance and Attornment Agreement and Lessor Lien Waiver (the "SNDA/Lessor Lien Waiver") delivered in connection with the Ground Lease; and
(iv) all other rights, remedies, powers, privileges, and benefits of Assignor under the Ground Lease, whether arising by contract, at law, in equity, or otherwise;
(d) Interconnection Agreement. The Interconnection Agreement with Aldermere & Co., including, without limitation:
(i) all rights to interconnect the Project at the Western Permian 138 kV Substation, Ector County, Texas, under ERCOT Queue No. INR-22-03347 (pending Resource ID LSBESS_01);
(ii) all rights relating to the approximately 1.2-mile 138 kV overhead generation tie line connecting the Project to the Western Permian 138 kV Substation;
(iii) all rights with respect to Two Million Eight Hundred Thousand Dollars ($2,800,000) in network upgrade costs, including the right to receive any refunds, credits, or reimbursements related thereto; and
(iv) all other rights, remedies, powers, privileges, and benefits of Assignor under the Interconnection Agreement, whether arising by contract, at law, in equity, or otherwise;
(e) Proceeds. All proceeds (as defined in the UCC and as used herein) of the foregoing, including, without limitation, all insurance proceeds, condemnation awards, damage payments, refunds, credits, and any and all other amounts payable in respect of claims under or relating to the Assigned Contracts; and
(f) Amendments, Modifications, and Replacements. All amendments, modifications, supplements, extensions, renewals, substitutions, and replacements of any of the foregoing, in each case whether now existing or hereafter arising.
Section 2.2 Nature of Assignment; Assignor Retains Rights Prior to Default.
(a) This Collateral Assignment is made as security only for the Obligations and shall not be construed as an absolute assignment or a transfer of ownership of any Assigned Contract or any interest therein. Nothing contained herein shall constitute or be construed as an assumption by Assignee of any of Assignor's duties, obligations, or liabilities under any Assigned Contract, whether arising before or after the date hereof, and Assignee shall not, by reason of this Collateral Assignment or any action taken or omitted to be taken hereunder, be deemed to be a party to or obligated under any Assigned Contract.
(b) Unless and until a Default has occurred and is continuing, Assignor shall retain the full right to exercise all rights, remedies, and powers under and in respect of each Assigned Contract and to receive and retain all payments, proceeds, and other benefits arising thereunder, in each case subject to and in accordance with the terms and conditions of the Credit Agreement and this Collateral Assignment. Assignor's exercise of such retained rights shall at all times be consistent with Assignor's obligations under the Credit Agreement and the other Loan Documents.
(c) At all times (whether or not a Default has occurred and is continuing), Assignor shall duly and punctually perform and observe all of its obligations, covenants, and conditions under each Assigned Contract in accordance with the terms thereof, and shall take no action (and shall refrain from any omission) that would result in a breach or default under any Assigned Contract or that would impair, diminish, or jeopardize the value of the Collateral or the rights of Assignee hereunder.
Section 2.3 Assignee's Rights Upon Default. Upon the occurrence and during the continuance of a Default under the Credit Agreement:
(a) Exercise of Assignor's Rights. Assignee may, in its sole discretion, exercise all rights, remedies, and powers of Assignor under the Assigned Contracts, including, without limitation, the right to receive all payments, enforce all guarantees, warranties, and performance obligations, make all elections, determinations, and decisions, give all consents, approvals, and notices, and exercise all remedies available to Assignor, as fully and to the same extent as if Assignee were the original party to the Assigned Contracts. Assignor hereby irrevocably constitutes and appoints Assignee as its true and lawful attorney-in-fact, with full power of substitution, to act in Assignor's name and on Assignor's behalf in connection with the foregoing, which power of attorney is coupled with an interest and shall be irrevocable during the continuance of a Default.
(b) Direction of Payments and Notices. Assignee may give written notice to each counterparty to the Assigned Contracts directing that all payments, notices, communications, and performances under the Assigned Contracts be made, delivered, or rendered directly to Assignee or to such other person as Assignee may designate in writing. Each such counterparty shall be entitled to rely conclusively on any such direction from Assignee without further inquiry or verification.
(c) Right to Cure. Assignee may, but shall have no obligation to, cure any default or breach of Assignor under any Assigned Contract, and Assignee may, in its sole discretion, take any action that Assignee deems necessary or advisable to protect or preserve the Collateral or to maintain the Assigned Contracts in full force and effect. Any and all amounts expended or obligations incurred by Assignee in connection with any such cure or protective action shall be deemed to constitute additional Obligations secured by this Collateral Assignment and all other Loan Documents, shall bear interest at the default rate specified in the Credit Agreement from the date of expenditure or incurrence until repaid in full, and shall be payable by Assignor to Assignee upon demand.
(d) UCC and Other Remedies. Assignee may exercise all rights and remedies available to a secured party under Article 9 of the UCC, as in effect in the State of Texas, and under the Credit Agreement, the other Loan Documents, and applicable law, including, without limitation, the right to foreclose upon and dispose of the Collateral in accordance with the UCC. The rights and remedies of Assignee hereunder shall be cumulative and not exclusive of any other rights or remedies available at law or in equity.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ASSIGNOR
Assignor hereby represents and warrants to Assignee as of the date hereof, and such representations and warranties shall be deemed to be repeated on each date on which any advance is made under the Credit Agreement, as follows:
Section 3.1 Organization and Authority. Assignor is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Texas. Assignor has all requisite limited liability company power and authority to execute, deliver, and perform its obligations under this Collateral Assignment and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Collateral Assignment by Assignor have been duly authorized by all necessary limited liability company action on the part of Assignor, including the requisite approval of CBR, in its capacity as Manager of Assignor, pursuant to the terms of Assignor's Company Agreement. No further action, consent, or approval on the part of Assignor, CBR, or any other person is required in connection with the execution, delivery, and performance of this Collateral Assignment by Assignor.
Section 3.2 Enforceability. This Collateral Assignment has been duly executed and delivered by Assignor and constitutes the legal, valid, and binding obligation of Assignor, enforceable against Assignor in accordance with its terms, except as enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or similar laws affecting the enforcement of creditors' rights generally, and (b) general principles of equity, whether enforcement is sought in a proceeding at law or in equity (including concepts of materiality, reasonableness, good faith, and fair dealing).
Section 3.3 No Conflicts. The execution, delivery, and performance by Assignor of this Collateral Assignment, and the consummation of the transactions contemplated hereby, do not and will not: (a) violate, conflict with, or result in a breach of any provision of Assignor's Certificate of Formation or Company Agreement; (b) violate, conflict with, or result in a breach of, or constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, or give rise to any right of termination, acceleration, or cancellation under, any Assigned Contract or any other material agreement or instrument to which Assignor is a party or by which Assignor or any of its assets may be bound; (c) result in the creation or imposition of any lien, charge, or encumbrance upon any of the Collateral, other than the lien created by this Collateral Assignment and Permitted Liens; or (d) violate any applicable law, rule, regulation, order, judgment, injunction, or decree of any governmental authority having jurisdiction over Assignor or the Project.
Section 3.4 Assigned Contracts in Full Force and Effect. Each Assigned Contract is in full force and effect as of the date hereof and has not been amended, modified, supplemented, or otherwise changed except as has been previously disclosed in writing to Assignee. Assignor has delivered to Assignee true, correct, and complete copies of each Assigned Contract, including all exhibits, schedules, attachments, side letters, and change orders thereto. No party to any Assigned Contract has given notice of its intention to terminate, cancel, or materially modify such Assigned Contract, and, to Assignor's knowledge, no event or circumstance has occurred that would give any party to an Assigned Contract the right to terminate, cancel, or materially modify such Assigned Contract.
Section 3.5 No Default. No default, breach, or event of default exists under any Assigned Contract, and no event, act, condition, or omission has occurred that, with the giving of notice, the lapse of time, or both, would constitute a default, breach, or event of default under any Assigned Contract. Assignor has not received any written notice or other communication from any counterparty to any Assigned Contract claiming or alleging that a default, breach, or event of default exists under such Assigned Contract, and Assignor is not aware of any basis upon which any such claim or allegation could be made.
Section 3.6 No Prior Assignment. Assignor has not previously assigned, pledged, hypothecated, or otherwise encumbered, and has not granted any security interest in, any of its right, title, or interest in, to, or under any Assigned Contract, except for Permitted Liens. The Collateral Assignment creates in favor of Assignee a valid and enforceable first-priority security interest in and lien upon the Collateral, subject to no prior liens, claims, or encumbrances other than Permitted Liens. Upon the filing of appropriate UCC financing statements with the Secretary of State of the State of Texas, the security interest created by this Collateral Assignment will be perfected as a first-priority security interest in the Collateral, to the extent that perfection may be obtained by the filing of a UCC financing statement.
Section 3.7 Consents Obtained. All consents, approvals, and authorizations required from the counterparties to the Assigned Contracts for the execution, delivery, and performance of this Collateral Assignment have been duly obtained in writing and are in full force and effect as of the date hereof. True, correct, and complete copies of such consents are attached hereto as Exhibits B through E. No additional consent, approval, or authorization from any counterparty or any governmental authority is required for the valid execution, delivery, and performance of this Collateral Assignment or for the exercise by Assignee of its rights and remedies hereunder.
Section 3.8 No Litigation. There is no action, suit, investigation, proceeding, or claim pending or, to the knowledge of Assignor, threatened before any court, arbitral tribunal, governmental authority, or other body that (a) challenges or seeks to prevent, enjoin, alter, or materially delay the consummation of the transactions contemplated by this Collateral Assignment, (b) would reasonably be expected to adversely affect the validity, binding effect, or enforceability of any Assigned Contract, or (c) would reasonably be expected to have a material adverse effect on the Project, the Collateral, or Assignor's ability to perform its obligations under this Collateral Assignment or any Assigned Contract.
ARTICLE IV
COVENANTS OF ASSIGNOR
Assignor hereby covenants and agrees with Assignee that, from and after the date hereof and so long as any Obligation remains outstanding under the Credit Agreement:
Section 4.1 Performance of Assigned Contracts. Assignor shall duly and punctually perform and observe all of the terms, covenants, conditions, agreements, and obligations on its part to be performed or observed under each of the Assigned Contracts in all material respects, and shall take all commercially reasonable actions necessary or appropriate to maintain each Assigned Contract in full force and effect. Assignor shall not take any action or fail to take any action that would result in a breach or default under any Assigned Contract or that would give any counterparty to an Assigned Contract the right to terminate, cancel, suspend performance under, or seek damages in respect of such Assigned Contract.
Section 4.2 No Modification or Termination Without Consent. Assignor shall not, without the prior written consent of Assignee (which consent may be withheld, conditioned, or delayed in Assignee's sole discretion): (a) amend, modify, supplement, restate, or waive any provision of any Assigned Contract in any material respect; (b) terminate, cancel, or surrender any Assigned Contract or accept or agree to the termination, cancellation, or surrender of any Assigned Contract; (c) consent to any assignment, transfer, or subcontracting by any counterparty under any Assigned Contract; (d) enter into any settlement or compromise of any claim, dispute, or proceeding arising under or in connection with any Assigned Contract involving an amount in excess of Fifty Thousand Dollars ($50,000); or (e) take or omit to take any action that would result in the release or discharge of any obligation of any counterparty under any Assigned Contract. For the avoidance of doubt, routine change orders under the EPC Agreement that do not, individually or in the aggregate, increase the Contract Price by more than Two Hundred Fifty Thousand Dollars ($250,000) or extend the Guaranteed Commercial Operation Date by more than fifteen (15) days shall not require the prior written consent of Assignee; provided, however, that Assignor shall deliver to Assignee a copy of each such change order promptly upon execution thereof.
Section 4.3 No Further Assignment. Assignor shall not assign, transfer, pledge, hypothecate, or otherwise encumber (whether voluntarily or involuntarily, by operation of law or otherwise) any of its right, title, or interest in, to, or under any Assigned Contract to any person other than Assignee, except for Permitted Liens. Assignor shall not enter into any agreement or arrangement that would have the effect of subordinating the lien and security interest of Assignee in any of the Collateral to the lien or security interest of any other person.
Section 4.4 Notices. Assignor shall:
(a) promptly (and in any event within five (5) Business Days of receipt or transmission) deliver to Assignee copies of all material notices, demands, claims, requests, certifications, approvals, consents, correspondence, and communications sent or received by Assignor under or in connection with any Assigned Contract, including, without limitation, notices of default, notices of completion, milestone certifications, change order requests, force majeure notices, and termination notices;
(b) promptly (and in any event within two (2) Business Days of obtaining knowledge thereof) notify Assignee in writing of (i) any default, breach, or event of default under any Assigned Contract (whether by Assignor or by any counterparty), (ii) any event, condition, or circumstance that could reasonably be expected to give rise to a default, breach, or event of default under any Assigned Contract, (iii) any dispute or controversy between Assignor and any counterparty under any Assigned Contract, (iv) any notice of termination or intention to terminate any Assigned Contract received from any counterparty, or (v) any event of force majeure declared under any Assigned Contract; and
(c) promptly deliver to Assignee copies of all material amendments, modifications, supplements, and change orders to any Assigned Contract, whether or not requiring the prior consent of Assignee.
Section 4.5 Enforcement of Rights. Assignor shall diligently and in good faith enforce all of its rights, remedies, and benefits under the Assigned Contracts, including, without limitation, the timely and vigorous pursuit of all claims for liquidated damages (whether for delay, performance shortfall, or otherwise), warranty claims, performance guarantee claims, indemnification claims, and insurance claims arising under or in connection with any Assigned Contract. Assignor shall not waive, release, compromise, or settle any material claim or right under any Assigned Contract without the prior written consent of Assignee.
Section 4.6 Maintenance of Permits. Assignor shall obtain, maintain, and keep in full force and effect all permits, licenses, approvals, authorizations, registrations, and filings necessary for the lawful development, construction, ownership, and operation of the Project, including, without limitation, Ector County Building Permit No. BP-2022-04517, Texas Commission on Environmental Quality ("TCEQ") Stormwater General Permit TXR150000, and all other permits and approvals required under applicable federal, state, and local laws and regulations. Assignor shall promptly notify Assignee of any pending or threatened revocation, suspension, modification, or non-renewal of any such permit.
Section 4.7 Insurance. Assignor shall obtain and maintain in full force and effect all insurance coverages required under the Assigned Contracts and the Credit Agreement, and shall ensure that Assignee is named as an additional insured, loss payee, and/or mortgagee, as applicable, on all such insurance policies. Without limiting the generality of the foregoing, Assignor shall maintain: (a) builder's risk insurance, which as of the date hereof is provided by Commonwealth Specialty Insurance Company under a policy with a limit of not less than Forty-Two Million Dollars ($42,000,000), covering all risks of physical loss or damage to the Project during construction; and (b) commercial general liability insurance, which as of the date hereof is provided by Pinnacle Mutual Assurance Corp., with such coverages, limits, and deductibles as are required under the Credit Agreement. Assignor shall deliver to Assignee evidence of all required insurance coverages promptly upon request.
Section 4.8 Further Assurances. Assignor shall, at its own cost and expense, promptly execute and deliver to Assignee such additional instruments, documents, financing statements, continuation statements, and other agreements, and shall take such further actions, as Assignee may from time to time reasonably request in order to perfect, protect, maintain, continue, and enforce the security interest and collateral assignment created by this Collateral Assignment, including, without limitation: (a) the filing of UCC-1 financing statements with the Secretary of State of the State of Texas and such other offices as Assignee may deem necessary or advisable; (b) the filing of UCC-3 continuation statements prior to the expiration of any filed financing statement; (c) the execution and delivery of any amendments to this Collateral Assignment; and (d) the delivery of additional counterparty consents with respect to any replacement or additional Assigned Contract.
ARTICLE V
RIGHTS AND REMEDIES OF ASSIGNEE
Section 5.1 Rights Under the UCC. Assignee shall have, in addition to all rights and remedies set forth in this Collateral Assignment and the Credit Agreement, all of the rights and remedies of a secured party under Article 9 of the UCC as in effect in the State of Texas, and under any other applicable law, all of which rights and remedies shall be cumulative and not exclusive. Without limiting the generality of the foregoing, Assignee may, in connection with the exercise of its remedies hereunder: (a) require Assignor to assemble the Collateral and make it available to Assignee at a place to be designated by Assignee that is reasonably convenient to both parties; (b) sell, assign, transfer, or otherwise dispose of the Collateral, or any part thereof, at public or private sale, with or without having the Collateral at the place of sale, upon such terms and conditions as Assignee may determine, all in accordance with applicable requirements of the UCC; and (c) apply the proceeds of any such disposition to the Obligations in the order of priority set forth in the Credit Agreement, with any surplus to be paid to Assignor or as otherwise required by law.
Section 5.2 Right to Perform. Upon the occurrence and during the continuance of a Default, Assignee may, but shall not be obligated to, perform any obligation of Assignor under any Assigned Contract that Assignor has failed to perform, and Assignor hereby irrevocably authorizes each counterparty to the Assigned Contracts to accept performance by Assignee or its designee in lieu of performance by Assignor. All costs, expenses, fees, charges, and other amounts paid or incurred by Assignee in connection with any such performance shall constitute additional Obligations secured by this Collateral Assignment and all other Loan Documents, shall bear interest at the default rate under the Credit Agreement from the date of payment or incurrence until paid in full, and shall be payable by Assignor on demand.
Section 5.3 Right to Direct Payments. Upon the occurrence and during the continuance of a Default, Assignee may, in its sole discretion, notify any or all counterparties to the Assigned Contracts that this Collateral Assignment is in effect and direct that all payments, proceeds, reimbursements, credits, refunds, and other amounts payable to Assignor under the Assigned Contracts be paid directly to Assignee or to such account as Assignee may designate. Any amounts so received by Assignee shall be applied to the Obligations in the order of priority set forth in the Credit Agreement. Assignor hereby authorizes and directs each counterparty to comply with any such notice and direction from Assignee, and each counterparty shall be entitled to rely on such notice and direction without any obligation to inquire as to whether a Default has in fact occurred or is continuing.
Section 5.4 Right to Assume or Terminate. Upon the occurrence and during the continuance of a Default, Assignee may elect, in its sole and absolute discretion: (a) to assume the rights and obligations of Assignor under any one or more of the Assigned Contracts by delivering written notice thereof to the applicable counterparty(ies), in which case Assignee (or its designee) shall be deemed to have succeeded to the rights and obligations of Assignor under the applicable Assigned Contract(s) as of the date specified in such notice; or (b) to exercise any termination rights available to Assignor under any one or more of the Assigned Contracts, subject in each case to the terms and conditions of the applicable Assigned Contract and the consent of the applicable counterparty to the extent required by the terms of such Assigned Contract or applicable law. Any assumption by Assignee shall not relieve Assignor of any liability for obligations arising under the applicable Assigned Contract prior to the effective date of assumption.
Section 5.5 Application of Proceeds. All proceeds received by Assignee pursuant to the exercise of its rights under this Collateral Assignment, whether derived from the enforcement of the Assigned Contracts, the sale or other disposition of the Collateral, insurance proceeds, condemnation awards, or otherwise, shall be applied by Assignee in the order of priority set forth in Section 8.4 of the Credit Agreement (or such other applicable provision of the Credit Agreement governing the application of proceeds). Any surplus remaining after the indefeasible payment in full of all Obligations shall be paid to Assignor or as otherwise required by law.
Section 5.6 No Duty. Notwithstanding anything to the contrary contained herein:
(a) Assignee shall have no obligation to exercise any right or remedy granted to Assignee hereunder, and Assignee's decision whether to exercise or refrain from exercising any such right or remedy shall be in its sole and absolute discretion.
(b) Assignee shall have no duty or obligation to preserve, protect, collect, or enforce any of the Collateral, to maintain the Assigned Contracts in force or effect, or to perform any obligation of Assignor under any Assigned Contract. Assignee shall not be liable to Assignor for any loss, damage, or expense arising from Assignee's failure to exercise any right or remedy hereunder or from any act or omission of Assignee in connection with the Collateral, except to the extent arising from Assignee's gross negligence or willful misconduct.
(c) The exercise by Assignee of any right, remedy, or power hereunder shall not constitute a waiver of any other right, remedy, or power of Assignee hereunder, under the Credit Agreement, or under applicable law. No single or partial exercise of any right, remedy, or power shall preclude any other or further exercise thereof or the exercise of any other right, remedy, or power. No delay or failure on the part of Assignee to exercise any right, remedy, or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, or power preclude any other or future exercise thereof.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 Governing Law. This Collateral Assignment and the rights and obligations of the Parties hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas (including Section 271.001 et seq. of the Texas Local Government Code, to the extent applicable), without regard to the conflicts of law principles thereof that would require the application of the laws of any other jurisdiction. To the extent that the UCC is applicable to any matter arising hereunder, the UCC as in effect in the State of Texas shall govern. Each Party irrevocably submits to the exclusive jurisdiction of the state and federal courts located in Tarrant County, Texas, for the purpose of any suit, action, or other proceeding arising out of or relating to this Collateral Assignment, and each Party waives any objection that it may now or hereafter have to the laying of venue of any such suit, action, or proceeding in any such court and any claim that any such suit, action, or proceeding has been brought in an inconvenient forum.
Section 6.2 Notices. All notices, demands, requests, consents, approvals, directions, and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when (a) delivered personally, (b) sent by registered or certified United States mail, postage prepaid, return receipt requested, (c) sent by a nationally recognized overnight courier service with delivery charges prepaid, or (d) transmitted by electronic mail (with confirmation of receipt), in each case addressed to the applicable Party at the address set forth below (or at such other address as such Party shall have specified by notice given in accordance with this Section 6.2):
If to Assignor:
Lone Star Storage I, LLC c/o Calloway-Briggs Renewables Inc. 2200 West Commerce Street, Suite 1400 Houston, Texas 77002
Attention: Sandra M. Briggs, President & COO
Email: sbriggs@calloway-briggs.com
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 1000 Louisiana Street, Suite 5500 Houston, Texas 77002
Attention: George Trujillo
Email: gtrujillo@calderwoodharkness.com
If to Assignee:
Brazos River National Bank, N.A. 600 Main Street Fort Worth, Texas 76102
Attention: Angela P. Montrose, SVP, Energy Finance
Email: amontrose@brnb.com
with a copy (which shall not constitute notice) to:
Archibald, Fenn & Shaw LLP 1700 Pacific Avenue, Suite 4000 Dallas, Texas 75201
Attention: Robert C. Fenn
Email: rfenn@archfennshaw.com
Any notice delivered personally or by overnight courier shall be deemed received on the date of delivery. Any notice sent by registered or certified mail shall be deemed received on the third (3rd) Business Day after mailing. Any notice sent by electronic mail shall be deemed received on the date sent (or, if sent after 5:00 p.m. Central Time, on the next succeeding Business Day), provided that a confirmation copy is sent on the same day by one of the other methods described above.
Section 6.3 Amendments and Waivers. No amendment, modification, supplement, or waiver of any provision of this Collateral Assignment shall be effective unless set forth in a written instrument duly executed by both Assignor and Assignee. No waiver of any right, remedy, or power hereunder shall be effective unless in writing and signed by the Party granting such waiver, and no such waiver shall extend to or affect any other right, remedy, or power or any other default, breach, or event of default, whether similar or dissimilar.
Section 6.4 Severability. If any provision of this Collateral Assignment is held to be invalid, illegal, or unenforceable in any respect under any applicable law, rule, or regulation by a court of competent jurisdiction, such invalidity, illegality, or unenforceability shall not affect the validity, legality, or enforceability of any other provision hereof. The Parties shall endeavor in good faith to negotiate a valid, legal, and enforceable substitute provision that most nearly gives effect to the original intent of the Parties.
Section 6.5 Successors and Assigns. This Collateral Assignment shall be binding upon and shall inure to the benefit of Assignor and Assignee and their respective successors and permitted assigns. Assignor may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Assignee. Assignee may assign, transfer, or participate its rights and obligations hereunder in accordance with the terms of the Credit Agreement, and any assignee or transferee of Assignee shall be entitled to all of the benefits and rights of Assignee hereunder.
Section 6.6 Entire Agreement. This Collateral Assignment, together with the Credit Agreement, the other Loan Documents, and the Assigned Contracts, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior negotiations, discussions, representations, warranties, and agreements (whether written or oral) between the Parties relating to the subject matter hereof.
Section 6.7 Counterparts. This Collateral Assignment may be executed in any number of counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of this Collateral Assignment by facsimile or by electronic mail in portable document format (.pdf) shall be effective as delivery of an original executed counterpart.
Section 6.8 Termination. This Collateral Assignment and the security interest and collateral assignment created hereby shall remain in full force and effect until the indefeasible payment and performance in full of all Obligations under the Credit Agreement (other than contingent indemnification obligations for which no claim has been made), at which time this Collateral Assignment shall automatically terminate and the Collateral shall be released from the lien and security interest created hereby. Upon such termination, Assignee shall, at Assignor's expense, promptly execute and deliver to Assignor such instruments, releases, satisfactions, and termination statements as Assignor may reasonably request to evidence such termination and release, including, without limitation, UCC-3 termination statements, and shall take such other actions as may be reasonably necessary to release and discharge the security interest and collateral assignment created by this Collateral Assignment.
Section 6.9 Relationship to Credit Agreement. This Collateral Assignment is one of the Loan Documents referred to in the Credit Agreement and is subject to the terms and provisions of the Credit Agreement. This Collateral Assignment supplements, and is not in derogation of, the Credit Agreement and the other Loan Documents. In the event of any conflict or inconsistency between the terms and provisions of this Collateral Assignment and the terms and provisions of the Credit Agreement, the terms and provisions of the Credit Agreement shall control and govern to the extent of such conflict or inconsistency.
Section 6.10 Attorneys' Fees. In the event that Assignee is required to enforce any provision of this Collateral Assignment, to exercise any of its rights or remedies hereunder, or to defend any action or proceeding relating to this Collateral Assignment, Assignor shall reimburse Assignee for all reasonable and documented out-of-pocket attorneys' fees, costs, expenses, and disbursements incurred by Assignee in connection therewith, including, without limitation, fees and expenses of outside counsel and any local counsel engaged by Assignee. All such amounts shall constitute additional Obligations secured by this Collateral Assignment and all other Loan Documents, shall bear interest at the default rate specified in the Credit Agreement from the date incurred until paid in full, and shall be payable by Assignor upon demand.
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SIGNATURE PAGE TO COLLATERAL ASSIGNMENT OF PROJECT CONTRACTS
IN WITNESS WHEREOF, the Parties have caused this Collateral Assignment of Project Contracts to be duly executed and delivered as of the date first written above.
ASSIGNOR:
LONE STAR STORAGE I, LLC, a Texas limited liability company
By: Calloway-Briggs Renewables Inc., a Texas corporation, its Manager
By: ________
Name: Sandra M. Briggs
Title: President & Chief Operating Officer
Date: December 1, 2022
SIGNATURE PAGE TO COLLATERAL ASSIGNMENT OF PROJECT CONTRACTS
ASSIGNEE:
BRAZOS RIVER NATIONAL BANK, N.A., a national banking association, as Administrative Agent and Lender
By: ________
Name: Angela P. Montrose
Title: Senior Vice President, Energy Finance
Date: December 1, 2022
EXHIBIT A
LIST OF ASSIGNED CONTRACTS
The following is a complete list of the Assigned Contracts that are the subject of this Collateral Assignment of Project Contracts dated as of December 1, 2022, between Lone Star Storage I, LLC (as Assignor) and Brazos River National Bank, N.A. (as Assignee):
1. EPC Agreement
Title: Engineering, Procurement and Construction Agreement
Date: December 1, 2022
Parties: Lone Star Storage I, LLC, a Texas limited liability company ("Owner"), and Meridian Power Construction, Inc., a Texas corporation ("Contractor")
Contract Price: $31,200,000 (lump sum, fixed price)
Scope of Work: The complete design, engineering, procurement, construction, testing, and commissioning of the Lone Star Battery Storage Project, a 50 MW / 200 MWh lithium iron phosphate (LFP) battery energy storage system located in Ector County, Texas, including site preparation, civil works, electrical and mechanical installation, control systems, safety systems, interconnection facilities (up to the point of interconnection), and all work necessary to achieve Substantial Completion and Final Completion in accordance with the terms and specifications of the EPC Agreement.
Guaranteed Commercial Operation Date: September 1, 2023
Performance Guarantees: Minimum 87% round-trip efficiency; 50 MW / 200 MWh guaranteed capacity (±2%); 97% Year 1 availability.
Liquidated Damages: Delay LDs: $25,000/day (cap: $1,560,000); Performance LDs: $4,000/MWh shortfall (cap: $1,560,000); Aggregate LD cap: $3,120,000 (10% of Contract Price).
Warranty Period: Two (2) years from the date of Substantial Completion.
Retainage: 10% of progress payments.
Performance Bond: $31,200,000, issued by Ironclad Surety Corporation.
Payment Bond: $31,200,000, issued by Ironclad Surety Corporation.
2. Equipment Supply Agreement
Title: Equipment Supply Agreement
Date: December 1, 2022
Parties: Lone Star Storage I, LLC, a Texas limited liability company, and Harmon-Dietrich Energy Solutions, LLC, a Delaware limited liability company ("Supplier")
Contract Value: $18,400,000
Scope of Supply: HD-LFP-200E lithium iron phosphate battery modules (50 MW / 200 MWh aggregate capacity); ten (10) 5 MW power conversion system (PCS) inverters; battery management system (BMS); thermal management (HVAC) systems; container enclosures; related cables, connectors, and ancillary equipment.
Delivery Schedule: Four (4) shipments:
• Shipment 1: March 15, 2023
• Shipment 2: April 15, 2023
• Shipment 3: May 15, 2023