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Retail Supplier Enters New Supply, Credit Agreement

May 7, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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On May 1, 2018, Summer Energy Holdings, Inc. ("SEH"), and its subsidiaries Summer Energy, LLC ("Summer LLC") and Summer Energy Northeast, LLC ("Summer Northeast"; together with SEH and Summer LLC, the "Company") closed a transaction with EDF Energy Services, LLC and EDF Trading North America, LLC (collectively, "EDF"), Summer Energy said in an 8-K

As part of the transaction, the Company and EDF entered into an Energy Services Agreement (the "Energy Services Agreement") pursuant to which the Company agreed to purchase its electric power and associated services requirements from EDF, and EDF agreed to provide the Company with certain credit facilities to assist the Company in the purchase of its electric power and associated service requirements. The Company and EDF also entered into a Security Agreement, a Pledge Agreement and a Guaranty in favor of EDF.

The Energy Services Agreement has a term of three years, and automatically renews for successive one (1) year periods unless either party provides written notice of termination one hundred eighty (180) days prior to the renewal date. In addition to the market based commodity price charged by EDF for each underlying commodity transaction, the Company will pay a "Commodity Fee" for each MWh of power that the Company requests for delivery from EDF during the term of the Energy Services Agreement. In addition, the Company will be responsible for other mutually agreed upon fees incurred by EDF on its behalf. The Company will also be responsible for any reasonable transmission or transportation costs incurred in connection with power transactions. Monthly supply obligations will accrue interest at a rate equal to 3-month Libor plus six percent (6%) per annum. Any additional credit support will bear interest at the per annum rate equal to the lesser of (i) a rate per annum equal to 3-month Libor rate plus three percent (3%) per annum, and (ii) the maximum rate of interest permitted by applicable law.

In consideration of the services and credit support provided by EDF to the Company, and pursuant to the Security Agreement, the Company agreed to, among other things (i) grant a priority security interest to EDF in all of its assets, equipment and inventory; (ii) require its customers to remit monthly payments into a lockbox account over which EDF has a security interest; and (iii) deliver monthly and annual forecasted and audited statements to EDF.

Pursuant to the Pledge Agreement, SEH pledged to EDF, and granted to EDF a security interest in all of the membership interests of Summer LLC and Summer Northeast owned by SEH, as well as all additional membership interests of such subsidiaries from time to time acquired by SEH. Pursuant to the Guaranty, SEH agreed to guaranty the obligations of Summer LLC and Summer Northeast under the Energy Services Agreement.

As part of the transaction, the Company, EDF and DTE Energy Trading, Inc. entered into a Novation Agreement whereby the Company transferred by novation to EDF, and EDF accepted, the rights, liabilities, duties and obligations of the Company under and in respect of each transaction entered into pursuant to that certain Energy Marketing Agreement dated as of April 1, 2014 between Summer LLC and DTE Energy Trading, Inc., thereby terminating the EMA as of April 30, 2018.

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