Exhibit 1.1
EXECUTION COPY
CLECO
KATRINA/RITA HURRICANE RECOVERY FUNDING LLC
CLECO
POWER LLC
$180,600,000
2008 SENIOR SECURED STORM RECOVERY BONDS
UNDERWRITING
AGREEMENT
February 28,
2008
To the
Representatives named in Schedule I hereto
of the Underwriters named in Schedule II hereto
Ladies
and Gentlemen:
1.
Introduction
. Cleco Katrina/Rita Hurricane Recovery Funding
LLC, a Louisiana limited liability company (the “Issuer”), proposes, subject to
the terms and conditions stated herein, to issue and sell $180,600,000
aggregate principal amount of its 2008 Senior Secured Storm Recovery Bonds (the
“Bonds”), identified in Schedule I hereto, to the Underwriters named in
Schedule II hereto. The Issuer and
Cleco Power LLC, a Louisiana limited liability company and the Issuer’s direct
parent (“CPL”), hereby confirm their agreement with the several Underwriters
(as defined below) as set forth herein.
The term “Underwriters” as used herein shall be deemed
to mean the entity or several entities named in Schedule II hereto and any
underwriter substituted as provided in Section 6 hereof and the term “Underwriter”
shall be deemed to mean any one of such Underwriters. If the entity or entities listed in
Schedule I hereto (the “Representatives”) are the same as the entity or
entities listed in Schedule II hereto, then the terms “Underwriters” and “Representatives”,
as used herein, shall each be deemed to refer to such entity or entities. All obligations of the Underwriters hereunder
are several and not joint. If more than
one entity is named in Schedule I hereto, any action under or in respect
of this underwriting agreement (“Underwriting Agreement”) may be taken by such
entities jointly as the Representatives or by one of the entities acting on
behalf of the Representatives and such action will be binding upon all the
Underwriters.
Capitalized terms used and not otherwise defined in
this Underwriting Agreement shall have the meanings given to them in the
Indenture (as defined below).
2.
Description
of the Bonds
. The issuance of the
Bonds is authorized by the Financing Order (the “Financing Order”), as issued
by the Louisiana Public Service Commission (the “LPSC”) on September 17,
2007, in accordance with The Louisiana Electric Utility Storm Recovery
Securitization Act, codified at Louisiana Revised Statutes 45:1226-1236 (the “Securitization
Act”). The Bonds will be issued pursuant
to an indenture to be dated as of March 6, 2008, as supplemented by the
First Supplemental Indenture thereto (as so supplemented, the “Indenture”),
between the Issuer and U.S. Bank National Association, as trustee (the “Trustee”).
The Bonds will be
senior secured obligations of the Issuer and will be supported by storm
recovery property (as more fully described in the Financing Order, “Storm
Recovery Property”), to be sold to the Issuer by CPL pursuant to the Storm
Recovery Property Sale Agreement, to be dated on or about March 6, 2008,
between CPL and the Issuer (the “Sale Agreement”). The Storm Recovery Property securing the Bonds
will be serviced pursuant to the Storm Recovery Property Servicing Agreement,
to be dated on or about March 6, 2008, between CPL, as servicer, and the
Issuer, as owner of the Storm Recovery Property sold to it pursuant to the Sale
Agreement (the “Servicing Agreement”).
3.
Representations
and Warranties of the Issuer
. The
Issuer represents and warrants to the several Underwriters that:
(a)
The
Issuer and the Bonds meet the requirements for the use of Form S-3 under
the Securities Act of 1933, as amended (the “Securities Act”), and the Issuer
in its capacity as co-registrant and issuing entity with respect to the Bonds
and CPL, in its capacity as co-registrant and as sponsor for the Issuer, has
filed with the Securities and Exchange Commission (the “Commission”) a
registration statement on such form on November 2, 2007 (Registration Nos.
333-147122 and 333-147122-01), as amended by Amendment No. 1 thereto dated
February 22, 2008, including a prospectus and a form of prospectus
supplement, for the registration under the Securities Act of up to $181,000,000
aggregate principal amount of the Bonds.
Such registration statement, as amended (“Registration Statement No. 333-147122”),
has been declared effective by the Commission and no stop order suspending such
effectiveness has been issued under the Securities Act and no proceedings for
that purpose have been instituted or are pending or, to the knowledge of the
Issuer, threatened by the Commission. No
bonds registered with the Commission under the Securities Act pursuant to
Registration Statement No. 333-147122 have been previously issued. References herein to the term “Registration
Statement” shall be deemed to refer to Registration Statement No. 333-147122,
including any amendment thereto, all documents incorporated by reference
therein pursuant to Item 12 of Form S-3 (“Incorporated Documents”)
and any information in a prospectus or a prospectus supplement deemed or
retroactively deemed to be a part thereof pursuant to Rule 430B (“Rule 430B”)
or 430C (“Rule 430C”) under the Securities Act that has not been
superseded or modified. “Registration
Statement” without reference to a time means the Registration Statement as of
the Applicable Time (as defined below), which the parties agree is the time of
the first contract of sale (as used in Rule 159) for the Bonds, and shall
be considered the “Effective Date” of the Registration Statement relating to
the Bonds. For purposes of this
definition, information contained in a form of prospectus or prospectus
supplement that is deemed retroactively to be a part of the Registration
Statement pursuant to Rule 430B or 430C shall be considered to be included
in the Registration Statement as of the time specified in Rule 430B or
430C as appropriate. The final
prospectus and the final prospectus supplement relating to the Bonds, as filed
with the Commission pursuant to Rule 424(b) under the Securities Act,
are referred to herein as the “Final Prospectus;” and the most recent
preliminary prospectus and prospectus supplement that omitted information to be
included upon pricing in a form of prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act and that was used
after the initial effectiveness of the Registration
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Statement and prior to the Applicable Time (as defined below) is
referred to herein as the “Pricing Prospectus.”
(b)
(i) At
the earliest time after the filing of the Registration Statement that the
Issuer or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) of the Securities Act) of the Bonds, and (ii) at
the date hereof, the Issuer was not and is not an “ineligible issuer,” as
defined in Rule 405 under the Securities Act.
(c)
At the
time the Registration Statement initially became effective, at the time of each
amendment thereto for the purposes of complying with Section 10(a)(3) of
the Securities Act (whether by post effective amendment, incorporated report or
form of prospectus) and on the Effective Date relating to the Bonds, the
Registration Statement, and the Indenture, at the Closing Date, fully complied
and will fully comply in all material respects with the applicable provisions
of the Securities Act, the Trust Indenture Act of 1939 (the “Trust Indenture
Act”) and, in each case, the applicable instructions, rules and
regulations of the Commission thereunder; the Registration Statement, at the
date it initially became effective and at the Effective Date, did not contain
and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, not misleading. As of the
Applicable Time and as of the Closing Date (as defined below), the Final
Prospectus fully complied and will fully comply in all material respects with
the applicable provisions of the Securities Act, the Trust Indenture Act and
the applicable rules and regulations of the Commission thereunder, and
such document will not contain a untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and on
said dates the Incorporated Documents, taken together as a whole, fully
complied or will fully comply in all material respects with the applicable
provisions of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the applicable rules and regulations of the Commission
thereunder; provided that the foregoing representations and warranties in this
paragraph (c) shall not apply to statements or omissions made in reliance
upon information furnished in writing to the Issuer or CPL by, or on behalf of,
any Underwriter through the Representatives expressly for use in connection
with the preparation of the Registration Statement or the Final Prospectus, or
to any statements in or omissions from any Statements of Eligibility on Form T-1
(or amendments thereto) of the Trustee under the Indenture filed as exhibits to
the Registration Statement or Incorporated Documents or to any statements or
omissions made in the Registration Statement or the Final Prospectus relating
to The Depository Trust Company (“DTC”) Book Entry System that are based solely
on information contained in published reports of DTC.
(d)
As of its
date, at the Applicable Time (as defined below), on the date of its filing, if
applicable, and on the Closing Date, the Pricing Prospectus and each Issuer
Free Writing Prospectus (as defined below) (other than the Pricing Term Sheet,
as defined in Section 5(b) below), considered together, did not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading (except that (i) the principal
amount of the Bonds, the tranches, the initial principal
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balances, the scheduled
final payment dates, the final maturity dates, the expected average lives, the
Expected Amortization Schedule and the Expected Sinking Fund Schedule described
in the Pricing Prospectus were subject to change based on market conditions and
supersede any previously issued descriptions of such information and (ii) the
interest rate, price to the public and underwriting discounts and commissions
for each tranche was not included in the Pricing Prospectus). The Pricing Term Sheet, as of its issue date
and at all subsequent times through the completion of the public offer and sale
of the Bonds, considered together with the Pricing Prospectus and each other
Issuer Free Writing Prospectus, did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstance in which they are made,
not misleading. The two preceding
sentences do not apply to statements in or omissions from the Pricing
Prospectus, the Pricing Term Sheet or any other Issuer Free Writing Prospectus
in reliance upon and in conformity with written information furnished to the
Issuer or CPL by any Underwriter through the Representatives specifically for
use therein. “Issuer Free Writing Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433(h) of the Securities Act,
relating to the Bonds, in the form filed or required to be filed with the
Commission or, if not required to be filed, in the form retained in the Issuer’s
records pursuant to Rule 433(g) of the Securities Act. References to the term “Free Writing
Prospectus” shall mean a free writing prospectus, as defined in Rule 405
under the Securities Act. References to the term “Applicable Time” mean
9:36 AM, eastern time, on the date hereof, except that if, subsequent to
such Applicable Time, the Issuer, CPL and the Underwriters have determined that
the information contained in the Pricing Prospectus or any Issuer Free Writing
Prospectus issued prior to such Applicable Time included an untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances in which they were
made, not misleading and have terminated their old purchase contracts and
entered into new purchase contracts with purchasers of the Bonds, then “Applicable
Time” will refer to the first of such times when such new purchase contracts
are entered into. The Issuer represents,
warrants and agrees that it has treated and agrees that it will treat each of
the free writing prospectuses listed on Schedule III hereto as an Issuer
Free Writing Prospectus, and that each such Issuer Free Writing Prospectus has
fully complied and will fully comply with the applicable requirements of Rules 164
and 433, including timely Commission filing where required, legending and
record keeping.
(e)
Each
Issuer Free Writing Prospectus, as of its issue date and at all subsequent
times through the Closing Date or until any earlier date that the Issuer
notified or notifies the Representatives as described in the next sentence, did
not, does not and will not include any information that conflicted, conflicts
or will conflict with the information then contained in the Registration
Statement. If at any time following
issuance of an Issuer Free Writing Prospectus there occurred or occurs an event
or development as a result of which such Issuer Free Writing Prospectus
conflicted or would conflict with the information then contained in the
Registration Statement or included or would include an untrue statement of a
material fact or omitted or would omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
prevailing at that subsequent time, not misleading, (i) CPL or the Issuer
has promptly notified or will promptly notify the Representatives and (ii) CPL
or the
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Issuer has
promptly amended or will promptly amend or supplement such Issuer Free Writing
Prospectus to eliminate or correct such conflict, untrue statement or
omission. The foregoing two sentences do
not apply to statements in or omissions from any Issuer Free Writing Prospectus
in reliance upon and in conformity with written information furnished to the
Issuer or CPL by any Underwriter through the Representatives specifically for
use therein.
(f)
The
Issuer has been duly formed and is validly existing as a limited liability
company in good standing under the Limited Liability Company Law of the State
of Louisiana, as amended, with full limited liability company power and
authority to execute, deliver and perform its obligations under this
Underwriting Agreement, the Bonds, the Sale Agreement, the Servicing Agreement,
the Indenture, the Issuer LLC Agreement, the Administration Agreement and the
other agreements and instruments contemplated by the Pricing Prospectus
(collectively, the “Basic Documents”) and to own its properties and conduct its
business as described in the Pricing Prospectus; the Issuer has been duly
qualified as a foreign limited liability company for the transaction of
business and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to require
such qualification, except where failure to so qualify or to be in good
standing would not have a material adverse effect on the business, properties
or financial condition of the Issuer; the Issuer has conducted and will conduct
no business in the future that would be inconsistent with the description of
the Issuer’s business set forth in the Pricing Prospectus; the Issuer is not a
party to or bound by any agreement or instrument other than the Basic Documents
and other agreements or instruments incidental to its formation; the Issuer has
no material liabilities or obligations other than those arising out of the
transactions contemplated by the Basic Documents and as described in the
Pricing Prospectus; CPL is the beneficial owner of all of the limited liability
company interests of the Issuer; and based on current law, the Issuer is not
classified as an association taxable as a corporation for United States federal
income tax purposes.
(g)
The
issuance and sale of the Bonds by the Issuer, the purchase of the Storm
Recovery Property by the Issuer from CPL, the execution, delivery and
compliance by the Issuer with all of the provisions of the Basic Documents to which the Issuer is a party, and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under any trust agreement, indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Issuer is now a party or by which the Issuer is bound or to which any
of the property or assets of the Issuer is subject, which conflict, breach,
violation or default would be material to the issue and sale of the Bonds or
would have a material adverse effect on the business, property or financial
condition of the Issuer, nor will such action result in any violation of the
Issuer’s Articles of Organization and Initial Report or the Issuer’s LLC
Agreement (collectively, the “Issuer Charter Documents”) or any statute, order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Issuer or any of its properties, except for violations
that would not, individually or in the aggregate, have a material adverse
affect on the business, property or financial condition of the Issuer.
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(h)
This
Underwriting Agreement has been duly authorized, executed and delivered by the
Issuer, which has the necessary limited liability company power and authority
to execute, deliver and perform its obligations under this Underwriting
Agreement, and constitutes a valid and binding obligation of the Issuer,
enforceable against the Issuer in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting
creditors’ or secured parties’ rights generally and by general principles of
equity (including concepts of materiality, reasonableness, good faith and fair
dealing), regardless of whether considered in a proceeding in equity or at law;
and possible limitations on enforceability of rights to indemnification or
contribution by federal or state securities laws or regulations or by public
policy.
(i)
The
Issuer (i) is not in violation of the Issuer Charter Documents, (ii) is
not in default and no event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance of
any term, covenant or condition contained in any indenture, mortgage, deed of
trust or other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties is subject, except for any such
defaults that would not, individually or in the aggregate, have a material
adverse effect on its business, property or financial condition, and (iii) is
not in violation of any law, ordinance, governmental rule, regulation or court
decree to which it or its property may be subject, except for any such
violations that would not, individually or in the aggregate, have a material
adverse effect on its business, property or financial condition.
(j)
The
Indenture has been duly authorized by the Issuer, and, on the Closing Date,
will have been duly executed and delivered by the Issuer and will be a valid
and binding instrument, enforceable against the Issuer in accordance with its
terms, except as the enforceability thereof may be limited (i) by
bankruptcy, insolvency, reorganization, receivership, moratorium or other
similar laws relating to or affecting creditors’ or secured parties’ rights
generally and by general principles of equity (including concepts of
materiality, reasonableness, good faith and fair dealing), regardless of
whether considered in a proceeding in
equity or at law and (ii) possible limitations on enforceability of rights
to indemnification or contribution by federal or state securities laws or
regulations or by public policy. On the
Closing Date, the Indenture will (i) comply as to form in all material
respects with the requirements of the Trust Indenture Act and (ii) conform
in all material respects to the description thereof in the Pricing Prospectus
and Final Prospectus.
(k)
The Bonds
have been duly authorized by the Issuer for issuance and sale to the
Underwriters pursuant to this Underwriting Agreement and, when executed by the
Issuer and authenticated by the Trustee in accordance with the Indenture and
delivered to the Underwriters against payment therefor in accordance with the
terms of this Underwriting Agreement, will constitute valid and binding
obligations of the Issuer entitled to the benefits of the Indenture and
enforceable against the Issuer in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting
creditors’ or secured parties’ rights generally and by general principles of
equity
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(including
concepts of materiality, reasonableness, good faith and fair dealing),
regardless of whether considered in a proceeding in equity or at law, and
possible limitations on enforceability of rights to indemnification or
contribution by federal or state securities laws or regulations or by public
policy; and the Bonds conform in all material respects to the description
thereof in the Pricing Prospectus and Final Prospectus. The Issuer has all requisite limited
liability company power and authority to issue, sell and deliver the Bonds in
accordance with and upon the terms and conditions set forth in this
Underwriting Agreement and in the Pricing Prospectus and Final Prospectus.
(l)
There is
no pending or threatened suit or proceeding before any court or governmental
agency, authority or body or any arbitration involving the Issuer, the Storm
Recovery Property or the Bonds required to be disclosed in the Pricing
Prospectus which is not adequately disclosed in the Pricing Prospectus.
(m)
Other than
any necessary action of the LPSC, any filings required under the Securitization
Act or Financing Order or as otherwise set forth or contemplated in the Pricing
Prospectus, no approval, authorization, consent or order of any public board or
body (except such as have been already obtained and other than in connection or
in compliance with the provisions of applicable blue sky laws or securities
laws of any state, as to which the Issuer makes no representations or
warranties), is legally required for the issuance and sale by the Issuer of the
Bonds.
(n)
The
Issuer is not, and, after giving effect to the sale and issuance of the Bonds,
will not be an “investment company” within the meaning of the Investment
Company Act of 1940, as amended (the “1940 Act”).
(o)
PricewaterhouseCoopers
LLP (“PricewaterhousCoopers”), who have performed certain agreed upon
procedures with respect to certain statistical and structural information
contained in the Pricing Prospectus and the Final Prospectus, are independent
public accountants as required by the Securities Act and the rules and
regulations of the Commission thereunder.
(p)
Each of
the Sale Agreement, the Servicing Agreement, the Administration Agreement and
Issuer LLC Agreement has been duly authorized by the Issuer, and when executed
and delivered by the Issuer and the other parties thereto, will constitute a
valid and legally binding obligation of the Issuer, enforceable against the
Issuer in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting creditors’ or secured parties’
rights generally and by general principles of equity (including concepts of
materiality, reasonableness, good faith and fair dealing), regardless of whether
considered in a proceeding in equity or at law, and possible limitations on
enforceability of rights to indemnification or contribution by federal or state
securities laws or regulations or by public policy.
4.
Representations
and Warranties of CPL
. CPL
represents and warrants to the several Underwriters that:
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(a)
CPL, in
its capacity as co-registrant and sponsor with respect to the Bonds, and
jointly with the Issuer, has filed with the Commission Registration Statement No. 333-147122
for the registration under the Securities Act of up to $181,000,000 aggregate
principal amount of the Issuer’s storm recovery bonds. Registration Statement No. 333-147122
has been declared effective by the Commission and no stop order suspending such
effectiveness has been issued under the Securities Act and no proceedings for
that purpose have been instituted or are pending or, to the knowledge of CPL,
threatened by the Commission.
(b)
(i) At
the earliest time after the filing of the Registration Statement that the
Issuer or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) of the Securities Act) of the Bonds and (ii) at
the date hereof, CPL was not and is not an “ineligible issuer,” as defined in Rule 405
under the Securities Act.
(c)
At the
time the Registration Statement initially became effective, at the time of each
amendment thereto for the purposes of complying with Section 10(a)(3) of
the Securities Act (whether by post effective amendment, incorporated report or
form of prospectus) and on the Effective Date relating to the Bonds, the
Registration Statement, and the Indenture, on the Closing Date, fully complied
and will fully comply in all material respects with the applicable provisions
of the Securities Act, the Trust Indenture Act and the applicable rules and
regulations of the Commission thereunder; the Registration Statement, at the
date it initially became effective and at the Effective Date, did not contain
and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, not misleading. As of the
Applicable Time and as of the Closing Date, the Final Prospectus fully complied
and will fully comply in all material respects to the provisions of the
Securities Act, the Trust Indenture Act and the applicable rules and
regulations of the Commission thereunder, and such document will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, that the foregoing
representations and warranties in this paragraph (c) shall not apply to
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Issuer or CPL by, or on behalf of, any
Underwriter through the Representatives expressly for use in connection with
the preparation of the Registration Statement or the Final Prospectus, or to
any statements in or omissions from any Statement of Eligibility on Form T-1,
or amendments thereto, of the Trustee under the Indenture filed as exhibits to
the Registration Statement or Incorporated Documents or to any statements or
omissions made in the Registration Statement or Final Prospectus relating to
the DTC Book Entry Only System that are based solely on information contained
in published reports of DTC.
(d)
As of its
date, at the Applicable Time, on the date of its filing, if applicable, and on
the Closing Date, the Pricing Prospectus and each Issuer Free Writing
Prospectus (other than the Pricing Term Sheet), considered together, did not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that the
principal amount of the Bonds, the tranches, the
8
initial principal
balances, the scheduled final payment dates, the final maturity dates, the
expected average lives, the Expected Amortization Schedule and the Expected
Sinking Fund Schedule described in the Pricing Prospectus were subject to
change based on market conditions and supersede any previously issued
descriptions of such information and (ii) the interest rate, price to the
public and underwriting discounts and commissions for each tranche was not
included in the Pricing Prospectus). The
Pricing Term Sheet, as of its issue date and at all subsequent times through
the completion of the public offer and sale of the Bonds, considered together
with the Pricing Prospectus and each other Issuer Free Writing Prospectus, did not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances in which they were made, not misleading. The two preceding sentences do not apply to
statements in or omissions from the Pricing Prospectus, the Pricing Term Sheet
or any Issuer Free Writing Prospectus in reliance upon and in conformity with
written information furnished to the Issuer or CPL by any Underwriter through
the Representatives specifically for use therein. CPL represents, warrants and agrees that it
has treated and agrees that it will treat each of the free writing prospectuses
listed on Schedule III hereto as an Issuer Free Writing Prospectus, and
that each such Issuer Free Writing Prospectus has fully complied and will fully
comply with the applicable requirements of Rules 164 and 433, including
timely Commission filing where required, legending and record keeping
(e)
Each
Issuer Free Writing Prospectus, as of its issue date and at all subsequent
times through the completion of the public offer and sale of the Bonds or until
any earlier date that the Issuer or CPL notified or notifies the
Representatives as described in the next sentence, did not, does not and will
not include any information that conflicted, conflicts or will conflict with
the information then contained in the Registration Statement. If at any time following issuance of an
Issuer Free Writing Prospectus there occurred or occurs an event or development
as a result of which such Issuer Free Writing Prospectus conflicted or would
conflict with the information then contained in the Registration Statement or
included or would include an untrue statement of a material fact or omitted or
would omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances prevailing at that subsequent time,
not misleading, (i) CPL or the Issuer has promptly notified or will
promptly notify the Representatives and (ii) CPL or the Issuer has
promptly amended or will promptly amend or supplement such Issuer Free Writing
Prospectus to eliminate or correct such conflict, untrue statement or
omission. The foregoing two sentences do
not apply to statements in or omissions from any Issuer Free Writing Prospectus
in reliance upon and in conformity with written information furnished to the
Issuer or CPL by any Underwriter through the Representatives specifically for
use therein.
(f)
CPL has
been duly formed and is validly existing as a limited liability company in good
standing under the laws of the State of Louisiana, has the limited liability
company power and authority to own, lease and operate its properties and to
conduct its business as presently conducted and as set forth in or contemplated
by the Pricing Prospectus, is qualified as a foreign limited liability company
to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business,
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except where the
failure to so qualify or be in good standing would not have a material adverse
effect on the business, property or financial condition of CPL and its
subsidiaries considered as a whole, and has all requisite power and authority
to sell the Storm Recovery Property as described in the Pricing Prospectus and
to otherwise perform its obligations under any Basic Document to which it is a
party. CPL is the beneficial owner of
all of the limited liability company interests of the Issuer.
(g)
CPL has
no significant subsidiaries within the meaning of Rule 1-02(w) of
Regulation S-X.
(h)
The
transfer by CPL of its rights and interests under the Financing Order relating
to the Bonds to the Issuer as provided in the Sale Agreement, the execution,
delivery and compliance by CPL with all of the provisions of the Basic
Documents to which CPL is a party, and the consummation by the Issuer and CPL
of the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any trust agreement, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which CPL is a party
or by which CPL is bound or to which any of the property or assets of CPL is
subject, which conflict, breach, violation or default would be material to the
issue and sale of the Bonds.
(i)
This
Underwriting Agreement has been duly authorized, executed and delivered by CPL,
which has the necessary corporate power and authority to execute, deliver and
perform its obligations under this Underwriting Agreement, and constitutes a valid and binding obligation of CPL,
enforceable against CPL in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting creditors’ or secured parties’ rights generally and by general principles
of equity (including concepts of materiality, reasonableness, good faith and
fair dealing), regardless of whether considered in a proceeding in equity or at
law, and possible limitations on enforceability of rights to indemnification or
contribution by federal or state securities laws or regulations or by public
policy.
(j)
CPL (i) is
not in violation of CPL’s Articles of Organization or Operating Agreement
(collectively “CPL Charter Documents”), (ii) is not in default and no
event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term,
covenant or condition contained in any indenture, mortgage, deed of trust or
other agreement or instrument to which it is a party or by which it is bound or
to which any of its properties is subject which would be material to the issue
and sale of the Bonds, or (iii) is not in violation of any law, ordinance,
governmental rule, regulation or court decree to which it or its property may
be subject which would be material to the issue and sale of the Bonds.
(k)
There is
no pending or threatened suit or proceeding before any court or governmental
agency, authority or body or any arbitration involving CPL, the Storm Recovery
Property or the Bonds required to be disclosed in the Pricing Prospectus which
is not adequately disclosed in the Pricing Prospectus.
10
(l)
Other
than any necessary action of the LPSC, any filings required under the Securitization
Act or Financing Order or as otherwise set forth or contemplated in the Pricing
Prospectus, no approval, authorization, consent or order of any public board or
body (except such as have been already obtained and other than in connection or
in compliance with the provisions of applicable blue sky laws or securities
laws of any state, as to which CPL makes no representations or warranties), is
legally required for the issuance and sale by the Issuer of the Bonds.
(m)
CPL is
not, and after giving effect to the sale and issuance of the Bonds, will not
be, an “investment company” within the meaning of the 1940 Act.
(n)
Each of
the Sale Agreement, the Servicing Agreement and the Administrative Agreement
has been duly and validly authorized by CPL, and when executed and delivered by
CPL and the other parties thereto will constitute a valid and legally binding
obligation of CPL, enforceable against CPL in accordance with its terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting creditors’ or secured parties’ rights generally and by general
principles of equity (including concepts of materiality, reasonableness, good
faith and fair dealing), regardless of whether considered in a proceeding in
equity or at law, and possible limitations on enforceability of rights to
indemnification or contribution by federal or state securities laws or
regulations or by public policy.
(o)
There are
no Louisiana transfer taxes related to the transfer of the Storm Recovery
Property or the issuance and sale of the Bonds to the Underwriters pursuant to
this Underwriting Agreement required to be paid at or prior to the Closing Date
by CPL or the Issuer.
(p)
PricewaterhouseCoopers
are independent public accountants with respect to CPL as required by the
Securities Act and the rules and regulations of the Commission thereunder.
5.
Investor
Communications
.
(a)
The
Issuer and CPL represent and agree that, unless they obtain the prior consent
of the Representatives, and each Underwriter represents and agrees that, unless
it obtains the prior consent of the Issuer and CPL and the Representatives, it
has not made and will not make any offer relating to the Bonds that would
constitute an Issuer Free Writing Prospectus, or that would otherwise
constitute a “free writing prospectus,” required to be filed by the Issuer or
CPL, as applicable, with the Commission or retained by the Issuer or CPL, as
applicable, under Rule 433 under the Securities Act; provided that the
prior written consent of the parties hereto shall be deemed to have been given
in respect of the term sheets and each other Free Writing Prospectus identified
in Schedule III hereto.
(b)
CPL and
the Issuer (or the Representatives at the direction of the Issuer) will prepare
a final pricing term sheet relating to the Bonds (the “Pricing Term Sheet”),
11
containing only
information that describes the final pricing terms of the Bonds and otherwise
in a form consented to by the Representatives, and will file such final pricing
term sheet within the period required by Rule 433(d)(5)(ii) under the
Securities Act following the date such final pricing terms have been
established for all classes of the offering of the Bonds. The Pricing Term Sheet is an Issuer Free
Writing Prospectus for purposes of this Underwriting Agreement.
(c)
Each
Underwriter may provide to investors one or more of the Free Writing
Prospectuses, including the Term Sheets, subject to the following conditions:
(i)
Unless preceded
or accompanied by a prospectus satisfying the requirements of Section 10(a) of
the Securities Act, an Underwriter shall not convey or deliver any Written
Communication (as defined herein) to any person in connection with the initial
offering of the Bonds, unless such Written Communication (i) is made in
reliance on Rule 134 under the Securities Act, (ii) constitutes a
prospectus satisfying the requirements of Rule 430B under the Securities
Act, (iii) constitutes “ABS informational and computational information”
as defined in Item 1101 of Regulation AB, (iv) is an Issuer Free
Writing Prospectus listed on Schedule IV hereto or (v) is an
Underwriter Free Writing Prospectus (as defined below). “Written Communication”
has the same meaning as that term is defined in Rule 405 under the
Securities Act.
An “Underwriter Free Writing Prospectus” means any free writing
prospectus that contains only preliminary or final terms of the Storm Recovery
Bonds and is not required to be filed by CPL or the Issuer pursuant to Rule 433
and that contains information substantially the same as the information
contained in the Pricing Prospectus or Pricing Term Sheet (including, without
limitation, (i) the class, size, rating, price, CUSIPs, coupon, yield,
spread, benchmark, status and/or legal maturity date of the Bonds, the weighted
average life, expected first and final payment dates, trade date, settlement
date, transaction parties, credit enhancement,
logistical details related to the location and timing of and access to
the roadshow, ERISA eligibility, legal investment status and payment window of
one or more classes of Bonds and (ii) a column or other entry showing the
syndicate structure or the status of the subscriptions for the Bonds, both for
the Bonds as a whole and for each Underwriter’s retention, and/or expected
pricing parameters of the Bonds).
(ii)
Each Underwriter
shall comply with all applicable laws and regulations in connection with the
use of Free Writing Prospectuses and Term Sheets, including but not limited to Rules 164
and 433 under the Securities Act.
(iii)
All
Free Writing Prospectuses provided to investors, whether or not filed with the
Commission, shall bear a legend including substantially the following
statement:
The Issuer has filed a registration statement
(including a prospectus) with the SEC for the offering to which this
communication
12
relates. Before
you invest, you should read the prospectus in that registration statement and
other documents the Issuer has filed with the SEC for more complete information
about Issuer and the offering. You may
get these documents for free by visiting EDGAR on the SEC web site at
www.sec.gov. Alternatively, the Issuer, any underwriter or any dealer
participating in the offering will arrange to send you the base prospectus if
you request it by calling Credit Suisse Securities (USA) LLC toll-free at
1-800-221-1037.
The Issuer and the Representatives shall have the
right to require additional specific legends or notations to appear on any Free
Writing Prospectus, the right to require changes regarding the use of
terminology and the right to determine the types of information appearing
therein with the approval of, in the case of the Issuer, the Representatives
and, in the case of the Representatives, the Issuer (which in either case shall
not be unreasonably withheld).
(iv)
Each Underwriter
covenants with the Issuer and CPL that after the Final Prospectus is available
such Underwriter shall not distribute any written information concerning the
Bonds to an investor unless such information is preceded or accompanied by the
Final Prospectus or by notice to the investor that the Final Prospectus is
available for free by visiting EDGAR on the SEC website at www.sec.gov.
(v)
Each Underwriter
agrees and covenants that if an Underwriter shall use an Underwriter Free
Writing Prospectus, the liability arising from its use shall be the sole responsibility
of the Underwriter using such Underwriter Free Writing Prospectus unless the
Underwriter Free Writing Prospectus was consented to in advance by CPL;
provided, however, that, for the avoidance of doubt, (a) this clause (v) shall
not be interpreted as tantamount to the indemnification obligations contained
in Section 10(b) hereof and (b) no Underwriter shall be
responsible for any errors or omissions in an Underwriter Free Writing
Prospectus to the extent that such error or omission related to or was derived
from any information provided by the Issuer or CPL.
6.
Purchase
and Sale; Time and Place of Closing
.
On the basis of the representations and warranties herein contained, and
subject to the terms and conditions herein set forth, the Issuer shall sell to
each of the Underwriters, and each Underwriter shall purchase from the Issuer,
at the time and place herein specified, severally and not jointly, at the
purchase price set forth in Schedule I hereto, the principal amount of the
Bonds set forth opposite such Underwriter’s name in Schedule II
hereto. The Underwriters agree to make a
public offering of the Bonds. The Issuer
shall pay (in the form of a discount to the principal amount of the offered
Bonds) to the Underwriters a commission equal to $812,700.
Delivery of the Bonds against payment of the aggregate
purchase price therefor by wire transfer in federal funds shall be made at the
place, on the date and at the time specified in Schedule I hereto, or at
such other place, time and date as shall be agreed upon in writing by the
13
Issuer and the Representatives. The hour and date of such delivery and
payment are herein called the “Closing Date”.
The Bonds shall be delivered to DTC or to U.S. Bank National
Association, as custodian for DTC, in fully registered global form registered
in the name of Cede & Co., for the respective accounts specified by
the Representatives not later than the close of business on the business day
preceding the Closing Date or such other time as may be agreed upon by the
Representatives. The Issuer agrees to
make the Bonds available to the Representatives for checking purposes not later
than 1:00 p.m. New York Time on the last business day preceding the
Closing Date at the place specified for delivery of the Bonds in
Schedule I hereto, or at such other place as the Issuer may specify.
If any Underwriter shall fail or refuse to purchase
and pay for the aggregate principal amount of Bonds that such Underwriter has
agreed to purchase and pay for hereunder, the Issuer shall immediately give
notice to the other Underwriters of the default of such Underwriter, and the
other Underwriters shall have the right within 24 hours after the receipt of
such notice to determine to purchase, or to procure one or more others, who are
members of the National Association of Securities Dealers, Inc. (“NASD”)
(or, if not members of the NASD, who are not eligible for membership in the
NASD and who agree (i) to make no sales within the United States, its
territories or its possessions or to persons who are citizens thereof or
residents therein and (ii) in making sales to comply with the NASD’s
Conduct Rules) and satisfactory to the Issuer, to purchase, upon the terms
herein set forth, the aggregate principal amount of Bonds that the defaulting
Underwriter had agreed to purchase. If
any non-defaulting Underwriter or Underwriters shall determine to exercise such
right, such Underwriter or Underwriters shall give written notice to the Issuer
of the determination in that regard within 24 hours after receipt of notice of
any such default, and thereupon the Closing Date shall be postponed for such
period, not exceeding three business days, as the Issuer shall determine. If in the event of such a default no
non-defaulting Underwriter shall give such notice, then this Underwriting
Agreement may be terminated by the Issuer, upon like notice given to the
non-defaulting Underwriters, within a further period of 24 hours. If in such case the Issuer shall not elect to
terminate this Underwriting Agreement it shall have the right, irrespective of
such default:
(a)
to
require each non-defaulting Underwriter to purchase and pay for the respective
aggregate principal amount of Bonds that it had agreed to purchase hereunder as
hereinabove provided and, in addition, the aggregate principal amount of Bonds
that the defaulting Underwriter shall have so failed to purchase up to
aggregate principal amount of Bonds equal to one tenth (1/10) of the aggregate
principal amount of Bonds that such non-defaulting Underwriter has otherwise
agreed to purchase hereunder, and/or
(b)
to
procure one or more persons, reasonably acceptable to the Representatives, who
are members of the NASD (or, if not members of the NASD, who are not eligible
for membership in the NASD and who agree (i) to make no sales within the
United States, its territories or its possessions or to persons who are
citizens thereof or residents therein and (ii) in making sales to comply
with the NASD’s Conduct Rules), to purchase, upon the terms herein set forth,
either all or a part of the aggregate principal amount of Bonds that such
defaulting Underwriter had agreed to purchase or that portion thereof that the
remaining Underwriters shall not be obligated to purchase pursuant to the
foregoing clause (a).
14
In the event the Issuer shall exercise its rights
under (a) and/or (b) above, the Issuer shall give written notice
thereof to the non-defaulting Underwriters within such further period of 24
hours, and thereupon the Closing Date shall be postponed for such period, not
exceeding three business days, as the Issuer shall determine.
In the computation of any period of 24 hours referred
to in this Section 6, there shall be excluded a period of 24 hours in
respect of each Saturday, Sunday or legal holiday that would otherwise be
included in such period of time.
Any action taken by the Issuer or CPL under this Section 6
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Underwriting Agreement. Termination of this Underwriting Agreement by
the Issuer under this Section 6 shall be without any liability on the part
of the Issuer, CPL or any non-defaulting Underwriter, except as otherwise
provided in Sections 7(a)(ii) and 10 hereof.
7.
Covenants
.
(a)
Covenants
of the Issuer
. The Issuer covenants
and agrees with the several Underwriters that:
(i)
If,
during such period of time (not exceeding nine months) after the Final
Prospectus has been filed with the Commission pursuant to Rule 424 as in
the opinion of Counsel for the Underwriters (as defined below) a prospectus
covering the Bonds is required by law to be delivered in connection with sales
by an Underwriter or dealer (including in circumstances where such requirement
may be satisfied pursuant to Rule 172 under the Securities Act), any event
relating to or affecting the Issuer, the Bonds or the Storm Recovery Property
or of which the Issuer shall be advised in writing by the Representatives shall
occur that in the Issuer’s reasonable judgment after consultation with Counsel
for the Underwriters should be set forth in a supplement to, or an amendment
of, the Final Prospectus in order to make the Final Prospectus not misleading
in the light of the circumstances when it is delivered to a purchaser
(including in circumstances where such requirement may be satisfied pursuant to
Rule 172 under the Securities Act), the Issuer will promptly notify the
Representatives of such event and, at its expense, amend or supplement the
Final Prospectus by either (A) preparing and furnishing to the
Underwriters at the Issuer’s expense a reasonable number of copies of a
supplement or supplements or an amendment or amendments to the Final Prospectus
or (B) making an appropriate filing pursuant to Section 13 or Section 15
of the Exchange Act, which will supplement or amend the Final Prospectus so
that, as supplemented or amended, it will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances when the Final Prospectus
is delivered to a purchaser (including in circumstances where such requirement
may be satisfied pursuant to Rule 172 under the Securities Act), not
misleading; provided that should such event relate solely to the activities of
any of the Underwriters, then such Underwriters shall assume the expense of
preparing and furnishing any such amendment or supplement.
15
(ii)
The Issuer or CPL
will, except as herein provided, pay or cause to be paid, all reasonable costs
and expenses of the Issuer, CPL and the Trustee and certain costs and expenses
of the Underwriters as specifically set forth herein incident to the
performance of the obligations hereunder, including, without limiting the
generality of the foregoing, (A) all costs, taxes and expenses incident to
the issue and delivery of the Bonds to the Underwriters, (B) all costs and
expenses incident to the preparation, printing, reproduction and distribution
of the Registration Statement as originally filed with the Commission and each
amendment or supplement thereto, the Pricing Prospectus (including any amendments
and supplements thereto), the Final Prospectus (including any amendments and
supplements thereto), and any Issuer Free Writing Prospectuses, (C) all
reasonable fees, disbursements and expenses of (1) the Issuer’s counsel, (2) CPL’s
counsel, (3) the Trustee’s counsel, (4) the Underwriters’ counsel, (5) the
Issuer’s accountants and (6) CPL’s accountants, (D) all fees charged
by the Rating Agencies in connection with the rating of the Bonds, (E) all
fees of DTC in connection with the book-entry registration of the Bonds, (F) all
costs and expenses incurred in connection with the qualification of the Bonds
for sale under the laws of such jurisdictions in the United States as the
Representatives may designate, together with costs and expenses in connection with
any filing with the National Association of Securities Dealers with respect
with the transactions contemplated hereby (including reasonable counsel fees
not to exceed $10,000), (G) and all costs and expenses of printing and
distributing all of the documents in connection with the Bonds, and (H) all
fees, costs and expenses of the LPSC and its advisors and counsel in connection
with the issuance of the Bonds.
(iii)
The
Issuer will cause the Pricing Prospectus and the Final Prospectus to be filed
with the Commission pursuant to Rule 424 as soon as practicable and advise
the Underwriters of any stop order suspending the effectiveness of the
Registration Statement or the institution of any proceeding therefor of which
Issuer shall have received notice. The
Issuer has complied and will comply with Rule 433 under the Securities Act
in connection with the offering of the Bonds.
(iv)
If the sale of the
Bonds provided for herein is not consummated because any condition set forth in
Section 8 hereof is not satisfied, because of any termination pursuant to Section 11
hereof or because of any refusal, inability or failure on the part of CPL or
the Issuer to perform any agreement herein or comply with any provision hereof
other than by reason of a default (including under Section 6) by any of
the Underwriters, CPL or the Issuer will reimburse the Underwriters upon demand
for the reasonable fees and disbursements of Counsel for the Underwriters, and
will reimburse the Underwriters for their reasonable out-of-pocket expenses, in
an aggregate amount not exceeding $200,000, incurred by them in connection with
the proposed purchase and sale of the Bonds.
The Issuer shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits.
16
(v)
During the period
from the date of this Underwriting Agreement to the date that is five days
after the Closing Date, the Issuer will not, without the prior written consent
of the Representatives, offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce the offering of, any asset backed
securities (other than the Bonds).
(vi)
To the extent, if
any, that any rating necessary to satisfy the condition set forth in Section 8(w) of
this Underwriting Agreement is conditioned upon the furnishing of documents or
the taking of other actions by the Issuer on or after the Closing Date, the
Issuer shall furnish such documents and take such other actions.
(vii)
For
a period from the date of this Underwriting Agreement until the retirement of
the Bonds or until such time as the Underwriters shall cease to maintain a
secondary market in the Bonds, whichever occurs first, the Issuer shall file
with the Commission, and to the extent permitted by and consistent with the
Issuer’s obligations under applicable law, make available on the website
associated with the Issuer’s parent or affiliate, such periodic reports, if
any, as are required (without regard to the number of holders of Bonds to the
extent permitted by and consistent with the Issuer’s obligations under
applicable law) from time to time under Section 13 or Section 15(d) of
the Exchange Act, provided that nothing herein shall prevent the Issuer from
suspending or terminating its filing obligations with the Commission as and to
the extent permitted by law. The Issuer
shall also, to the extent permitted by and consistent with the Issuer’s
obligations under applicable law, include in the periodic and other reports to
be filed with the Commission as provided above, such information as required by
Section 3.07(d) of the Indenture with respect to the Bonds. To the extent that the Issuer’s obligations
are terminated or limited by an amendment to Section 3.07(d) of the Indenture,
or otherwise, such obligations shall be correspondingly terminated or limited
hereunder.
(viii) The Issuer will furnish to the Representatives and Counsel
for the Underwriters, without charge, copies of the Registration Statement
(including exhibits thereto), and as many copies of the Pricing Prospectus and
the Final Prospectus and any amendment or supplement thereto as the
Representatives may reasonably request.
(ix)
So long as any of
the Bonds are outstanding, the Issuer will furnish to the Representatives, if
and to the extent not posted on the Issuer or its affiliate’s website, (A) as
soon as available, a copy of each report of the Issuer filed with the
Commission under the Exchange Act or mailed to Bondholders (to the extent such
reports are not publicly available on the Commission’s website), (B) a
copy of any filings with the LPSC pursuant to the Securitization Act and the
Financing Order including, but not limited to, any Issuance Advice Letter or
any annual or more frequent True-Up Advice Letters, and (C) from time to
time, any information concerning the Issuer as the Representatives may
reasonably request.
17
(b)
Covenants
of CPL
. CPL covenants and agrees
with the several Underwriters that, to the extent that the Issuer has not
already performed such act pursuant to Section 7(a):
(i) The Issuer
will furnish to the Representatives and Counsel for the Underwriters, without
charge, copies of the Registration Statement (including exhibits thereto), and
as many copies of the Pricing Prospectus and the Final Prospectus and any
amendment or supplement thereto as the Representatives may reasonably request.
(ii) CPL, in
its capacity as sponsor with respect to the Bonds, will cause the Pricing
Prospectus and the Final Prospectus to be filed with the Commission pursuant to
Rule 424 as soon as practicable and advise the Underwriters of any stop
order suspending the effectiveness of the Registration Statement or the
institution of any proceeding therefor of which Issuer shall have received
notice.
(iii) As soon as
practicable, but not later than 16 months, after the date hereof, CPL, in its
capacity as sponsor with respect to the Bonds, will make or cause the Issuer to
make generally available to its security holders, an earnings statement (which
need not be audited) that will satisfy the provisions of Section 11(a) of
the Securities Act with respect to the Bonds.
(iv) CPL, in its
capacity as sponsor with respect to the Bonds, will furnish such proper
information as may be lawfully required and otherwise cooperate in qualifying
the Bonds for offer and sale under the blue-sky laws of such jurisdictions as
the Representatives may designate and will maintain such qualifications in
effect so long as required for the distribution of the Bonds; provided that
neither the Issuer nor CPL shall be required to qualify as a foreign limited
liability company or foreign corporation or dealer in securities, file any
consents to service of process under the laws of any jurisdiction, or meet any
other requirements deemed by the Issuer or CPL, as applicable, to be unduly
burdensome.
(v) CPL will
not file any amendment to the Registration Statement or amendment or supplement
to the Final Prospectus during the period when a prospectus relating to the
Bonds is required to be delivered under the Securities Act, without prior
notice to the Underwriters, or to which Sidley Austin
LLP, who are acting as counsel for the
Underwriters (“Counsel for the Underwriters”), shall reasonably object by
written notice to CPL and the Issuer.
(vi) To the
extent permitted by applicable law and the agreements and instruments that bind
CPL, CPL will use its reasonable best efforts to cause the Issuer to comply
with the covenants set forth in Section 7(a) hereof.
18
(vii) CPL will
use its reasonable best efforts to prevent the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement and,
if issued, to obtain as soon as possible the withdrawal thereof.
(viii) If, during
such period of time (not exceeding nine months) after the Final Prospectus has
been filed with the Commission pursuant to Rule 424 as in the opinion of
Counsel for the Underwriters a prospectus covering the Bonds is required by law
to be delivered in connection with sales by an Underwriter or dealer, any event
relating to or affecting CPL, the Bonds or the Storm Recovery Property or of
which CPL shall be advised in writing by the Representatives shall occur that
in CPL’s reasonable judgment after consultation with Counsel for the
Underwriters should be set forth in a supplement to, or an amendment of, the Final
Prospectus in order to make the Final Prospectus not misleading in the light of
the circumstances when it is delivered to a purchaser, CPL will cause the
Issuer to promptly notify the Representatives of such event and, at CPL’s or
the Issuer’s expense, to amend or supplement the Final Prospectus by either (A) preparing
and furnishing to the Underwriters at CPL’s or the Issuer’s expense a
reasonable number of copies of a supplement or supplements or an amendment or
amendments to the Final Prospectus or (B) causing the Issuer to make an
appropriate filing pursuant to Section 13 or Section 15 of the
Exchange Act, which will supplement or amend the Final Prospectus so that, as
supplemented or amended, it will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances when the Final Prospectus
is delivered to a purchaser, not misleading; provided that should such event
relate solely to the activities of any of the Underwriters, then such
Underwriters shall assume the expense of preparing and furnishing any such
amendment or supplement.
(ix) During the
period from the date of this Underwriting Agreement to the date that is five
days after the Closing Date, CPL will not, without the prior written consent of
the Representatives, offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering of, any asset backed
securities (other than the Bonds).
(x) CPL will
cause the proceeds for the issuance and sale of the Bonds to be applied for the
purposes described in the Pricing Prospectus.
(xi) To the
extent, if any, that any rating necessary to satisfy the condition set forth in
Section 8(w) of this Underwriting Agreement is conditioned upon the
furnishing of documents or the taking of other actions by CPL on or after the
Closing Date, CPL shall furnish such documents and take such other actions.
(xii) The
initial Storm Recovery Charge will be calculated in accordance with the
Financing Order.
19
8.
Conditions to the Obligations of the
Underwriters
. The obligations
of the Underwriters to purchase the Bonds shall be subject to the accuracy of
the representations and warranties on the part of the Issuer and CPL contained
in this Underwriting Agreement, on the part of CPL contained in Article III
of the Sale Agreement, and on the part of CPL contained in Section 6.01 of
the Servicing Agreement as of the Closing Date, to the accuracy of the
statements of the Issuer and CPL made in any certificates pursuant to the
provisions hereof, to the performance by the Issuer and CPL of their
obligations hereunder, and to the following additional conditions:
(a) The
Final Prospectus shall have been filed with the Commission pursuant to Rule 424
prior to 5:30 P.M., New York time, on the second business day after the
date of this Underwriting Agreement, or such later time and date as may be
approved by the Underwriters. In
addition, all material required to be filed by the Issuer or CPL pursuant to Rule 433(d) under
the Securities Act that was prepared by either of them or that was prepared by
any Underwriter with the Issuer’s consent and timely provided to the Issuer or
CPL shall have been filed with the Commission within the applicable time period
prescribed for such filing by such Rule 433(d).
(b) No
stop order suspending the effectiveness of the Registration Statement shall be
in effect, and no proceedings for that purpose shall be pending before, or
threatened by, the Commission on the Closing Date; and the Underwriters shall
have received one or more certificates, dated the Closing Date and signed by an
officer of CPL and the Issuer, as appropriate, to the effect that no such stop
order is in effect and that no proceedings for such purpose are pending before,
or to the knowledge of CPL or the Issuer, as the case may be, threatened by,
the Commission.
(c) Sidley
Austin LLP, as Counsel for the Underwriters, shall have furnished to the
Representatives their written opinion (substantially in the form attached as
Annex I (c) hereto), dated the Closing Date, with respect to the
issuance and sale of the Bonds, the Indenture, the other Basic Documents, the
Registration Statement and other related matters; and such counsel shall have
received such papers and information as they may reasonably request to enable
them to pass upon such matters.
(d) Baker
Botts L.L.P., special counsel for CPL and the Issuer, shall have furnished to
the Representatives their written opinion (substantially in the form attached
as Annex I (d) hereto), dated the Closing Date, regarding the filing
of a voluntary bankruptcy petition.
(e) Phelps
Dunbar, L.L.P., Louisiana counsel for the Issuer and CPL, shall have furnished
to the Representatives their written opinion (substantially in the form
attached as Annex I (e) hereto), dated the Closing Date, regarding
certain federal and Louisiana constitutional matters relating to the Storm
Recovery Property.
(f) Phelps
Dunbar, L.L.P., Louisiana counsel for the Issuer and CPL, Sidley Austin LLP,
New York counsel for the Issuer and CPL, and each shall have furnished to the
Representatives their written opinions (substantially in the forms attached as
Annex I
20
(f) hereto)
to the effect that the Storm Recovery Property is not subject to the lien of
CPL’s Indenture of Mortgage, dated April 1, 1944, as supplemented and
modified.
(g) Phelps
Dunbar, L.L.P., Louisiana counsel for the Issuer and CPL, shall have furnished
to the Representatives their written opinion (substantially in the form
attached as Annex I (g) hereto), dated the Closing Date, with respect
to the characterization of the transfer of the Storm Recovery Property by CPL
to the Issuer as a “true sale” for Louisiana law purposes.
(h) Phelps
Dunbar, L.L.P. Louisiana counsel for CPL and the Issuer, shall have furnished
to the representatives their opinion (substantially in the form attached as
Annex I (h) hereto), dated the Closing Date, regarding certain
Louisiana regulatory issues.
(i) Phelps
Dunbar, L.L.P., Louisiana counsel to CPL and the Issuer, shall have furnished
to the Representatives their written opinion (substantially in the form
attached as Annex I (i) hereto), dated the Closing Date, regarding
various issues requested by the Representatives, including enforceability and
certain Louisiana perfection and priority issues.
(j) Phelps
Dunbar, L.L.P., Louisiana counsel for the Issuer and CPL, shall have furnished
to the Representatives their written opinion (substantially in the form
attached as Annex I (j) hereto), dated the Closing Date, as to
certain Louisiana tax matters.
(k) Phelps
Dunbar, L.L.P., Louisiana counsel for the Issuer and CPL, shall have furnished
to the Representatives their written opinion (substantially in the form
attached as Annex I (k) hereto), dated the Closing Date, with respect
to additional corporate and creditors rights matters relating to the Issuer.
(l) Wade
A. Heofling, Esq., Senior Vice President, General Counsel, Director of
Regulatory Compliance and Assistant Corporate Secretary of Cleco Power LLC,
shall have furnished to the Representatives his written opinion (substantially
in the form attached as Annex I (l) hereto), dated the Closing Date,
with respect to certain corporate matters relating to CPL.
(m) Baker
Botts L.L.P., counsel for the Issuer and CPL, shall have furnished to the
Representatives their written opinion (substantially in the form attached as
Annex I (m) hereto), dated the Closing Date, regarding securities
laws and other matters.
(n) Baker
Botts L.L.P., counsel for the Issuer and CPL, shall have furnished to the
Representatives their written opinion (substantially in the form attached as
Annex I (n) hereto), dated the Closing Date, to the effect that
a court sitting in bankruptcy would not order the substantive consolidation of
the assets and liabilities of the Issuer with those of CPL in connection with a
bankruptcy, reorganization or other insolvency proceeding involving
CPL; that if CPL were to become a debtor in such insolvency proceeding,
such court would hold that the Storm Recovery Property is not property of the
estate of CPL.
21
(o) Phelps
Dunbar, L.L.P., counsel for the Issuer and CPL, shall have furnished to the
Representatives their written opinion (substantially in the form attached as
Annex I (o) hereto), dated the Closing Date, regarding certain
federal tax matters.
(p) Baker
Botts L.L.P., counsel for the Issuer and CPL, shall have furnished to the
Representatives their written opinion (substantially in the form attached as
Annex I (p) hereto), dated the Closing Date, regarding certain
bankruptcy and creditors’ rights issues relating to the Issuer.
(q) Dorsey &
Whitney LLP, counsel for the Trustee, shall have furnished to the
Representatives their written opinion (substantially in the form attached as
Annex I (q) hereto), dated the Closing Date, regarding certain matters
relating to the Trustee.
(r) Baker
Botts L.L.P., counsel for the Issuer and CPL, shall have furnished to the
Representatives a reliance letter allowing the Representatives to rely on such
firms opinion delivered to the Trustee pursuant to Section 2.10(5)(h) of
the Indenture.
(s) On
or prior to the date of this Underwriting Agreement and on or before the
Closing Date, PricewaterhouseCoopers shall have furnished to the
Representatives one or more agreed upon procedure reports regarding certain
calculations and computations relating to the Bonds, contained in the Pricing
Prospectus, the Final Prospectus or any Free Writing Prospectus, in form or
substance reasonably satisfactory to the Representatives, in each case in
respect of which the Representatives shall have made specific requests therefor
and shall have provided acknowledgment or similar letters to
PricewaterhouseCoopers reasonably necessary in order for PricewaterhouseCoopers
to issue such reports.
(t) Subsequent
to the respective dates as of which information is given in each of the
Registration Statement, the Pricing Prospectus and the Final Prospectus, there
shall not have been any change specified in the Rating Agency letters required
by subsection (w) of this Section 8 which is, in the judgment of the
Representatives, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Bonds as
contemplated by the Registration Statement and the Final Prospectus.
(u) The
Issuer LLC Agreement, the Administrative Agreement, the Sale Agreement, the
Servicing Agreement and the Indenture and any amendment or supplement to any of
the foregoing shall have been executed and delivered.
(v) Since
the respective dates as of which information is given in each of the
Registration Statement and in the Pricing Prospectus and as of the Closing Date
there shall have been no (i) material adverse change in the business,
property or financial condition of CPL and its subsidiaries, taken as a whole,
whether or not in the ordinary course of business, or the Issuer or (ii) adverse
development concerning the business or assets of CPL and its subsidiaries,
taken as a whole, or the Issuer which would be reasonably likely to result in a
material adverse change in the prospective business, property or financial
condition of CPL and its subsidiaries, taken as a whole, whether or
22
not in the
ordinary course of business, or the Issuer or (iii) development which
would be reasonably likely to result in a material adverse change, in the Storm
Recovery Property, the Bonds or the Financing Order.
(w) At
the Closing Date, (i) the Bonds shall be rated at least “Aaa”, “AAA”, and “AAA”
by Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s,
a division of the McGraw Hill Companies, Inc. (“S&P”) and Fitch, Inc.
(“Fitch”), respectively, and the Issuer shall have delivered to the
Underwriters a letter from each such Rating Agency, or other evidence
satisfactory to the Underwriters, confirming that the Bonds have such ratings,
and (ii) none of Moody’s, S&P and Fitch shall have, since the date of
this Underwriting Agreement, downgraded or publicly announced that it has under
surveillance or review, with possible negative implications, its ratings of the
Bonds.
(x) The
Issuer and CPL shall have furnished or caused to be furnished to the
Representatives at the Closing Date certificates of officers of CPL and the
Issuer, reasonably satisfactory to the Representatives, as to the accuracy of
the representations and warranties of the Issuer and CPL herein, in the Sale
Agreement, the Servicing Agreement and the Indenture at and as of the Closing
Date, as to the performance by the Issuer and CPL of all of their obligations
hereunder to be performed at or prior to such Closing Date, as to the matters
set forth in subsections (b) and (v) of this Section and as to
such other matters as the Representatives may reasonably request.
(y) An
issuance advice letter, in a form consistent with the provisions of the
Financing Order, shall have been filed with the LPSC and shall have become
effective.
(z) On
or prior to the Closing Date, the Issuer shall have delivered to the
Representatives evidence, in form and substance reasonably satisfactory to the
Representatives, that appropriate filings have been or are being made in
accordance with the Securitization Act, the Financing Order and other
applicable law reflecting the grant of a security interest by the Issuer in the
collateral relating to the Bonds to the Trustee, including the filing of the
requisite notices in the office of the Secretary of State of the State of
Louisiana.
(aa) On
or prior to the Closing Date, CPL shall have funded the capital subaccount of
the Issuer with cash in an amount equal to $903,000.
(bb) The
Issuer and CPL shall have furnished or caused to be furnished or agree to
furnish to the Rating Agencies at the Closing Date such opinions and
certificates as the Rating Agencies shall have reasonably requested prior to
such Closing Date.
(cc) On
or prior to the Closing Date, the Issuer shall have delivered to the
Representatives evidence, in form and substance reasonably satisfactory to the
Representatives, of (i) a certificate that attaches a true, correct and
complete copy of the Financing Order and certifies such copy to be the act and
deed of the LPSC and (ii) a certificate that states the Financing Order
has not been altered, rescinded, amended, modified, revoked, or supplemented as
of the Closing Date.
23
Any opinion letters delivered on the Closing Date to
the Rating Agencies beyond those being delivered to the Underwriters above
shall either (x) include the Underwriters as addressees or (y) be
accompanied by reliance letters addressed to the Underwriters referencing such
letters.
If any of the conditions specified in this Section 8
shall not have been fulfilled in all material respects when and as provided in
this Underwriting Agreement, or if any of the opinions and certificates
mentioned above or elsewhere in this Underwriting Agreement shall not be in all
material respects reasonably satisfactory in form and substance to the
Representatives and Counsel for the Underwriters, this Underwriting Agreement
and all obligations of the Underwriters hereunder may be canceled at, or at any
time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to
the Issuer in writing or by telephone or facsimile confirmed in writing.
9.
Conditions of Issuer’s Obligations
. The obligation of the Issuer to deliver the
Bonds shall be subject to the conditions that no stop order suspending the
effectiveness of the Registration Statement shall be in effect at the Closing
Date and no proceeding for that purpose shall be pending before, or threatened
by, the Commission at the Closing Date and the issuance advice letter described
in Section 8(y) shall have become effective. In case these conditions shall not have been
fulfilled, this Underwriting Agreement may be terminated by the Issuer upon
notice thereof to the Underwriters. Any
such termination shall be without liability of any party to any other party
except as otherwise provided in Sections 7(a)(ii) and 10 hereof.
10.
Indemnification
and Contribution
.
(a) CPL
and the Issuer, jointly and severally, will indemnify and hold harmless each
Underwriter, and its directors and officers, and each person who controls any
Underwriter within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Securitization Act, the Securities Act, the Exchange
Act or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement as originally filed or in any amendment or supplement
thereof, (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Pricing Prospectus, the Final Prospectus, the
Issuer Free Writing Prospectuses or in any amendment thereof or amendment or
supplement thereto, or (iii) the omission or alleged omission to state in
the Registration Statement, the Pricing Prospectus, the Final Prospectus or the
Issuer Free Writing Prospectuses a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and will reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action,
provided
,
however
, neither
the Issuer nor CPL will be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such untrue statement or alleged untrue statement
or omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Issuer or CPL by or on behalf any
24
Underwriter
through the Representatives specifically for inclusion therein it being
understood and agreed that the only such information furnished by any
Underwriter consists of the information set forth in Schedule IV hereto,
or arises out of, or based upon, statements in or omissions from that part of
the Registration Statement that shall constitute the Statement of Eligibility
under the Trust Indenture Act of the Trustee with respect to any indenture
qualified pursuant to the Registration Statement; and provided further, that the
indemnity agreement contained in this Section 10 shall not inure to the
benefit of any Underwriter (or of any officer or director of such Underwriter
or of any person controlling such Underwriter within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) on account of any
such losses, claims, damages, liabilities, expenses or actions, joint or
several, arising from the sale of the Bonds to any person if a copy of the
Pricing Prospectus (including any amendment or supplement thereto if any
amendments or supplements thereto shall have been furnished to the Underwriters
at or prior to the time of the sale involved) (exclusive of the Incorporated
Documents) shall not have been given or sent to such person by or on behalf of
such Underwriter with or prior to the sale of the Bonds to such person unless
the alleged omission or alleged untrue statement was not corrected in the
Pricing Prospectus (including any amendment or supplement thereto if any
amendments or supplements thereto shall have been furnished to the Underwriters
at or prior to the time of the sale involved) at the time of such sale.
(b) Each
Underwriter severally agrees to indemnify and hold harmless CPL and the Issuer, each of their directors,
officers and managers, each of their officers, directors or managers who signs
the Registration Statement, and each person who controls CPL or the Issuer within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, against any and
all losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Securitization Act, the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement as originally filed or in any amendment or
supplement thereof, (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Pricing Prospectus, the Final Prospectus,
the Issuer Free Writing Prospectuses or in any amendment thereof or amendment
or supplement thereto, (iii) the omission or alleged omission to state in
the Registration Statement, the Pricing Prospectus, the Final Prospectus or the
Issuer Free Writing Prospectuses a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, but only with reference to written
information relating to such Underwriter furnished to the Issuer or CPL by or on behalf of such Underwriter through
the Representatives specifically for inclusion in the documents referred to in
the foregoing indemnity it being understood and agreed that the only such
information furnished by any Underwriter consists of the information set forth
in Schedule IV hereto and the Representatives confirm that such statements
are correct in all material respects.
This indemnity agreement will be in addition to any liability that any
Underwriter may otherwise have.
25
(c) CPL
and the several Underwriters each shall, upon the receipt of notice of the
commencement of any action against it or any person controlling it as
aforesaid, in respect of which indemnity may be sought on account of any
indemnity agreement contained herein, promptly give written notice of the
commencement thereof to the party or parties against whom indemnity shall be
sought under (a) or (b) above, but the failure to notify such
indemnifying party or parties of any such action shall not relieve such
indemnifying party or parties from any liability hereunder to the extent such
indemnifying party or parties is/are not materially prejudiced as a result of
such failure to notify and in any event shall not relieve such indemnifying
party or parties from any liability which it or they may have to the
indemnified party otherwise than on account of such indemnity agreement. In case such notice of any such action shall
be so given, such indemnifying party shall be entitled to participate at its
own expense in the defense, or, if it so elects, to assume (in conjunction with
any other indemnifying parties) the defense of such action, in which event such
defense shall be conducted by counsel chosen by such indemnifying party or
parties and reasonably satisfactory to the indemnified party or parties who
shall be defendant or defendants in such action, and such defendant or
defendants shall bear the fees and expenses of any additional counsel retained
by them; but if the indemnifying party shall elect not to assume the defense of
such action, such indemnifying party will reimburse such indemnified party or
parties for the reasonable fees and expenses of any counsel retained by them;
provided, however, if the defendants in any such action (including impleaded
parties) include both the indemnified party and the indemnifying party and
counsel for the indemnifying party shall have reasonably concluded that there
may be a conflict of interest involved in the representation by a single
counsel of both the indemnifying party and the indemnified party, the indemnified
party or parties shall have the right to select separate counsel, satisfactory
to the indemnifying party, whose reasonable fees and expenses shall be paid by
such indemnifying party, to participate in the defense of such action on behalf
of such indemnified party or parties (it being understood, however, that the
indemnifying party shall not be liable for the fees and expenses of more than
one separate counsel (in addition to local counsel) representing the
indemnified parties who are parties to such action). Each of CPL, Issuer and the several
Underwriters agrees that without the other party’s prior written consent, which
consent shall not be unreasonably withheld, it will not settle, compromise or
consent to the entry of any judgment in any claim in respect of which
indemnification may be sought under the indemnification provisions of this
Underwriting Agreement, unless such settlement, compromise or consent (i) includes
an unconditional release of such other party from all liability arising out of
such claim and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act by or on behalf of such other party.
(d) In
the event that the indemnity provided in paragraph (a) or (b) of this
Section 10 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, CPL , the Issuer and the Underwriters agree
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively “Losses”) to which the Issuer
and one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Issuer and CPL, on
the one hand, and by such Underwriter, on the other hand, from the offering of
the Bonds. If the
26
allocation
provided by the immediately preceding sentence is unavailable for any reason,
CPL, the Issuer and the Underwriters shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of CPL, the Issuer and the applicable Underwriter respectively in
connection with the statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by CPL, the Issuer or such Underwriter, as the case may
be. CPL, the Issuer and the Underwriters
agree that it would not be just and equitable if contribution were determined
by pro rata allocation or any other method of allocation that does not take
account of the equitable considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 10, each
person who controls an Underwriter within the meaning of either the Securities
Act or the Exchange Act and each director or officer of an Underwriter shall
have the same rights to contribution as such Underwriter, and each person who
controls the Issuer or CPL within the
meaning of either the Securities Act or the Exchange Act, each director,
officer or manager of the Issuer or CPL
who shall have signed the Registration Statement and each director,
officer or manager of the Issuer or CPL
shall have the same rights to contribution as the Issuer or CPL, subject
in each case to the applicable terms and conditions of this paragraph (d). The Underwriters’ obligations in this Section 10
to contribute are several in proportion to the respective principal amounts of
Bonds set forth opposite their names in
Schedule II hereto and not joint.
Notwithstanding the provisions of this Section 10, no Underwriter
shall be required to contribute in excess of the amount equal to the excess of (i) the
total underwriting fees, discounts and commissions received by it, over (ii) the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of any such untrue or alleged untrue statement or omission or alleged
omission.
11.
Termination
. This Underwriting Agreement shall be subject
to termination in the absolute discretion of the Representatives, by written
notice given to CPL and the Issuer prior to delivery of and payment for the
Bonds, if prior to such time (i) there shall have occurred any change, or
any development involving a prospective change, in or affecting either (A) the
business, properties or financial condition of the Issuer or CPL or (B) the
Storm Recovery Property, the Bonds, the Financing Order or the Securitization
Act, the effect of which, in either case and in the reasonable judgment of the
Representatives, materially impairs the investment quality of the Bonds or makes it impractical or inadvisable to
market the Bonds, (ii) trading in securities generally on the New York
Stock Exchange shall have been suspended or limited or minimum prices shall
have been established on such Exchange, (iii) a banking moratorium shall
have been declared either by federal, State of New York or State of Louisiana
authorities, (iv) there shall have occurred a material disruption in
securities settlement, payment or clearing systems, (v) there shall have
occurred any outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war or
(vi) there shall have occurred any terrorist act in the United States or
any other calamity (including any natural calamity, such as an earthquake) or
crisis or any change in financial, political or economic condition in the
United States or elsewhere, if the effect of any such event specified in clause
(v) or (vi), in the reasonable judgment of the Representatives, makes it
impracticable or inadvisable to proceed with the
27
offering or delivery of the Bonds as contemplated by the Final Prospectus
(exclusive of any amendment or supplement thereto).
12.
Absence
of Fiduciary Relationship
. Each of
the Issuer and CPL acknowledges and agrees that the Issuer and CPL,
respectively, each have arm’s length business relationships with Credit Suisse
Securities (USA) LLC, Wachovia Capital Markets, LLC and DEPFA First Albany
Securities LLC, and their respective affiliates that create no fiduciary duty
on the part of Credit Suisse Securities (USA) LLC, Wachovia Capital Markets,
LLC and DEPFA First Albany Securities LLC, and their respective affiliates in
connection with all aspects of the transactions contemplated by this
Underwriting Agreement, and each such party expressly disclaims any fiduciary relationship. Nothing in this Section is intended to
modify in any way the Underwriters’ obligations expressly set forth in the
Underwriting Agreement. Notwithstanding
any other provision of this Underwriting Agreement, immediately upon
commencement of discussions with respect to the transactions contemplated
hereby, the Issuer and CPL (and each employee, representative or other agent of
the Issuer or CPL, as the case may be) may disclose to any and all persons,
without limitation of any kind, the tax treatment and tax structure of the
transactions contemplated by this Agreement and all materials of any kind
(including opinions or other tax analyses) that are provided to the Issuer or
CPL relating to such tax treatment and tax structure. For purposes of the foregoing, the term “tax
treatment” is the purported or claimed federal, state or local income tax
treatment of the sale of the storm recovery property, the collection of the
storm recovery charges or the payment on the Bonds, and the term “tax structure”
includes any fact that may be relevant to understanding the purported or
claimed federal, state or local income tax treatment of the transactions
contemplated hereby.
13.
Notices
. Unless otherwise specifically provided
herein, all notices, directions, consents and waivers required under the terms
and provisions of this Underwriting Agreement shall be in English and in
writing, and any such notice, direction, consent or waiver may be given by
United States first class mail, reputable overnight courier service, facsimile
transmission or electronic mail (confirmed by telephone, United States first
class mail or reputable overnight courier service in the case of notice by
facsimile transmission or electronic mail) or any other customary means of
communication, and any such notice, direction, consent or waiver shall be
effective when delivered or transmitted, or if mailed, three days after deposit
in the United States mail with proper first class postage prepaid, at the
addresses specified below until otherwise provided, in writing, by the
respective parties:
|
To
Credit
Suisse:
|
Credit Suisse Securities (USA) LLC
|
|
|
11
Madison Avenue
|
|
|
New
York, NY 10010
|
|
|
Attention:
Charles Weilamann
|
|
|
Telephone:
212-325-5480
|
|
|
Facsimile:
212-743-3654
|
|
|
|
|
To CPL:
|
Cleco
Power LLC
|
|
|
2030
Donahue Ferry Road
|
|
|
Pineville,
Louisiana 71360-5226
|
|
|
Attention:
Chief Financial Officer
|
28
|
To the Issuer:
|
Cleco
Katrina/Rita Hurricane Recovery Funding LLC
|
|
|
2605
Highway 28 East #12
|
|
|
Pineville,
Louisiana 71360
|
|
|
Attention:
President
|
14.
Successors
. This Underwriting Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and the officers and directors and controlling persons referred to in
Section 10 hereof, and no other person will have any right or obligation
hereunder.
15.
Applicable
Law
. This Underwriting Agreement
will be governed by and construed in accordance with the laws of the State of
New York.
16.
Counterparts
. This Underwriting Agreement may be signed in
any number of counterparts, each of which shall be deemed an original, which
taken together shall constitute one and the same instrument.
17.
Integration
. This Agreement supersedes all prior
agreements and understandings (whether written or oral) among the Issuer, CPL
and the Underwriters, or any of them, with respect to the subject matter
hereof.
29
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to us the enclosed
duplicate hereof, whereupon this letter and your acceptance shall represent a
binding agreement among CPL, the Issuer and the several Underwriters.
|
|
Very truly yours,
|
|
|
|
|
|
CLECO POWER LLC
|
|
|
|
|
|
|
|
|
By:
|
/s/ Kathleen F. Nolen
|
|
|
|
Name:
|
Kathleen
F. Nolen
|
|
|
|
Title:
|
Senior
Vice President, CFO &
|
|
|
|
|
Treasurer
|
|
|
CLECO KATRINA/RITA HURRICANE
RECOVERY FUNDING LLC
|
|
|
|
|
|
|
|
|
By:
|
/s/ Keith D. Crump
|
|
|
|
Name:
|
Keith
D. Crump
|
|
|
|
Title:
|
Vice
President & Manager
|
|
|
|
|
|
|
|
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date specified in Schedule I hereto.
|
|
|
CREDIT SUISSE SECURITIES (USA) LLC
|
|
|
|
|
|
|
|
|
By:
|
/s/ Stephen Viscovich
|
|
|
|
Name:
|
Stephen
Viscovich
|
|
|
|
Title:
|
Director
|
30
SCHEDULE I
Underwriting Agreement dated February 28, 2008
Registration Statement Nos.: 333-147122 and 333-147122-01
Representatives:
Credit Suisse Securities (USA) LLC
c/o
Credit Suisse Securities
(USA) LLC
11 Madison Avenue
New York, NY 10010
Attention: Charles Weilamann
Title, Purchase Price and Description of Bonds:
Title:
Cleco Katrina/Rita Hurricane
Recovery Funding LLC 2008 Senior Secured Storm Recovery Bonds
|
|
|
Total Principal Amount of Tranche
|
|
Bond Rate
|
|
|
Per
Tranche A-1 Bond
|
|
$
|
113,000,000
|
|
4.41
|
%
|
|
Per
Tranche A-2 Bond
|
|
$
|
67,600,000
|
|
5.61
|
%
|
|
Total
|
|
$
|
180,600,000
|
|
|
|
|
Aggregate
price to be paid to the Issuer by the Underwriters for the Bonds:
|
|
$179,620,871
|
|
|
|
|
|
|
|
|
|
|
|
Underwriters’
fees:
|
|
$812,700
|
|
|
|
|
|
|
|
|
|
|
|
Original
Issue Discount (if any):
|
|
$166,429
|
|
|
|
|
|
|
|
|
|
|
|
Redemption
provisions:
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Other
provisions:
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Closing
Date, Time and Location:
|
|
March 6, 2008,
10:00 a.m.; offices of Baker Botts L.L.P.
|
|
I-1
SCHEDULE II
Principal Amount of Bonds
to be Purchased
|
Underwriter
|
|
Tranche A-1
|
|
Tranche A-2
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Suisse Securities (USA) LLC
|
|
$
|
83,264,000
|
|
$
|
49,810,000
|
|
$
|
133,074,000
|
|
|
Wachovia
Capital Markets, LLC
|
|
14,868,000
|
|
8,895,000
|
|
23,763,000
|
|
|
DEPFA
First Albany Securities LLC
|
|
14,868,000
|
|
8,895,000
|
|
23,763,000
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
113,000,000
|
|
$
|
67,600,000
|
|
$
|
180,600,000
|
|
II-1
Exhibit 4.1
CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC
Issuer
and
U.S. BANK NATIONAL ASSOCIATION
Trustee
INDENTURE
Dated as of March 6, 2008
Securing Storm Recovery Bonds
Issuable in Series
Table of
Contents
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ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
|
2
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|
SECTION 1.01.
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DEFINITIONS
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2
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SECTION 1.02.
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INCORPORATION BY REFERENCE OF THE TRUST INDENTURE
ACT
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2
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SECTION 1.03.
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RULES OF CONSTRUCTION
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2
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ARTICLE II THE STORM RECOVERY BONDS
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3
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SECTION 2.01.
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FORM
|
3
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SECTION 2.02.
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EXECUTION, AUTHENTICATION AND DELIVERY
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4
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SECTION 2.03.
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DENOMINATIONS; STORM RECOVERY BONDS ISSUABLE IN
SERIES
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4
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SECTION 2.04.
|
TEMPORARY STORM RECOVERY BONDS
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6
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SECTION 2.05.
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REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE
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6
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SECTION 2.06.
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MUTILATED, DESTROYED, LOST OR STOLEN STORM RECOVERY
BONDS
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8
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SECTION 2.07.
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PERSONS DEEMED OWNER
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9
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SECTION 2.08.
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PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST; INTEREST ON
OVERDUE PRINCIPAL AND PREMIUM, IF ANY; PRINCIPAL, PREMIUM AND INTEREST RIGHTS
PRESERVED
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9
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SECTION 2.09.
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CANCELLATION
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10
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SECTION 2.10.
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AMOUNT; AUTHENTICATION AND DELIVERY OF STORM
RECOVERY BONDS
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11
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SECTION 2.11.
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BOOK-ENTRY STORM RECOVERY BONDS
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13
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SECTION 2.12.
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NOTICES TO CLEARING AGENCY
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14
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SECTION 2.13.
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DEFINITIVE STORM RECOVERY BONDS
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14
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ARTICLE III COVENANTS
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15
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SECTION 3.01.
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PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
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15
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SECTION 3.02.
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MAINTENANCE OF OFFICE OR AGENCY
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15
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SECTION 3.03.
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MONEY FOR PAYMENTS TO BE HELD IN TRUST
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16
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SECTION 3.04.
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EXISTENCE
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17
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SECTION 3.05.
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PROTECTION OF TRUST ESTATE
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17
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SECTION 3.06.
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OPINIONS AS TO TRUST ESTATE
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18
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SECTION 3.07.
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PERFORMANCE OF OBLIGATIONS; COMMISSION FILINGS
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18
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SECTION 3.08.
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NEGATIVE COVENANTS
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20
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SECTION 3.09.
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ANNUAL STATEMENT AS TO COMPLIANCE
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21
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SECTION 3.10.
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ISSUER MAY CONSOLIDATE, ETC
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21
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SECTION 3.11.
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SUCCESSOR OR TRANSFEREE
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22
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SECTION 3.12.
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NO OTHER BUSINESS
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22
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i
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SECTION 3.13.
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NO BORROWING
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22
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SECTION 3.14.
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GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES
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22
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SECTION 3.15.
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CAPITAL EXPENDITURES
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23
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SECTION 3.16.
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RESTRICTED PAYMENTS
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23
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SECTION 3.17.
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NOTICE OF EVENTS OF DEFAULT
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23
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SECTION 3.18.
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INTENTIONALLY OMITTED
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23
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SECTION 3.19.
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INSPECTION
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23
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SECTION 3.20.
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SALE AGREEMENT, ADMINISTRATION AGREEMENT AND SERVICING AGREEMENT COVENANTS
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23
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SECTION 3.21.
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TAXES
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26
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ARTICLE IV SATISFACTION AND DISCHARGE; DEFEASANCE
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26
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SECTION 4.01.
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SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
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26
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SECTION 4.02.
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CONDITIONS TO DEFEASANCE
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28
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SECTION 4.03.
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APPLICATION OF TRUST MONEY
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30
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SECTION 4.04.
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REPAYMENT OF MONEYS HELD BY PAYING AGENT
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30
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ARTICLE V REMEDIES
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30
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SECTION 5.01.
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EVENTS OF DEFAULT
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30
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SECTION 5.02.
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ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT
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31
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SECTION 5.03.
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COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE
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32
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SECTION 5.04.
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REMEDIES; PRIORITIES
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35
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SECTION 5.05.
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OPTIONAL PRESERVATION OF THE TRUST ESTATE
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36
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SECTION 5.06.
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LIMITATION OF PROCEEDINGS
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36
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SECTION 5.07.
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UNCONDITIONAL RIGHTS OF STORM RECOVERY BONDHOLDERS TO RECEIVE
PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
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37
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SECTION 5.08.
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RESTORATION OF RIGHTS AND REMEDIES
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37
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SECTION 5.09.
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RIGHTS AND REMEDIES CUMULATIVE
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38
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SECTION 5.10.
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DELAY OR OMISSION NOT A WAIVER
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38
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SECTION 5.11.
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CONTROL BY STORM RECOVERY BONDHOLDERS
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38
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SECTION 5.12.
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WAIVER OF PAST DEFAULTS
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39
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SECTION 5.13.
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UNDERTAKING FOR COSTS
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39
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SECTION 5.14.
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WAIVER OF STAY OR EXTENSION LAWS
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39
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SECTION 5.15.
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ACTION ON STORM RECOVERY BONDS
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40
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ARTICLE VI THE TRUSTEE
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40
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SECTION 6.01.
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DUTIES AND LIABILITIES OF TRUSTEE
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40
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SECTION 6.02.
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RIGHTS OF TRUSTEE
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41
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SECTION 6.03.
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INDIVIDUAL RIGHTS OF TRUSTEE
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42
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SECTION 6.04.
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TRUSTEE’S DISCLAIMER
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42
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SECTION 6.05.
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NOTICE OF DEFAULTS
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43
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SECTION 6.06.
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REPORTS BY TRUSTEE TO HOLDERS
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43
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ii
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SECTION 6.07.
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COMPENSATION AND INDEMNITY
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44
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SECTION 6.08.
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REPLACEMENT OF TRUSTEE
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45
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SECTION 6.09.
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SUCCESSOR TRUSTEE BY MERGER
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46
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SECTION 6.10.
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APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE
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46
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SECTION 6.11.
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ELIGIBILITY; DISQUALIFICATION
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47
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SECTION 6.12.
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PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER
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48
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SECTION 6.13.
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REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE
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48
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SECTION 6.14.
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RIGHTS OF THE AUTHENTICATING AGENT, STORM RECOVERY
BOND REGISTRAR, PAYING AGENT, AND SECURITIES INTERMEDIARY
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48
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ARTICLE VII STORM RECOVERY BONDHOLDERS’ LISTS AND REPORTS
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50
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SECTION 7.01.
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ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF STORM RECOVERY
BONDHOLDERS
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50
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SECTION 7.02.
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PRESERVATION OF INFORMATION; COMMUNICATIONS TO STORM RECOVERY
BONDHOLDERS
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51
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SECTION 7.03.
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REPORTS BY ISSUER
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51
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SECTION 7.04.
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REPORTS BY TRUSTEE
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52
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SECTION 7.05.
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PROVISION OF SERVICER REPORTS
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52
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ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES
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53
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SECTION 8.01.
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COLLECTION OF MONEY
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53
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SECTION 8.02.
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COLLECTION ACCOUNT
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53
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SECTION 8.03.
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RELEASE OF TRUST ESTATE
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58
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SECTION 8.04.
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ISSUER OPINION OF COUNSEL
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59
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SECTION 8.05.
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REPORTS BY INDEPENDENT ACCOUNTANTS
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59
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ARTICLE IX SUPPLEMENTAL INDENTURES
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60
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SECTION 9.01.
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SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF STORM RECOVERY BONDHOLDERS
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60
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SECTION 9.02.
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SUPPLEMENTAL INDENTURES WITH CONSENT OF STORM RECOVERY BONDHOLDERS
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61
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SECTION 9.03.
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EXECUTION OF SUPPLEMENTAL INDENTURES
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63
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SECTION 9.04.
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EFFECT OF SUPPLEMENTAL INDENTURE
|
63
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SECTION 9.05.
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CONFORMITY WITH TRUST INDENTURE ACT
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63
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SECTION 9.06.
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REFERENCE IN STORM RECOVERY BONDS TO SUPPLEMENTAL
INDENTURES
|
63
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SECTION 9.07.
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LPSC CONSENT
|
64
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ARTICLE X REDEMPTION OF STORM RECOVERY BONDS
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64
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SECTION 10.01.
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MANDATORY REDEMPTION BY ISSUER
|
64
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SECTION 10.02.
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FORM OF REDEMPTION NOTICE
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65
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SECTION 10.03.
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PAYMENT OF REDEMPTION PRICE
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65
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iii
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ARTICLE XI MISCELLANEOUS
|
66
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SECTION 11.01.
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COMPLIANCE CERTIFICATES AND OPINIONS, ETC
|
66
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SECTION 11.02.
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FORM OF DOCUMENTS DELIVERED TO TRUSTEE
|
66
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SECTION 11.03.
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ACTS OF STORM RECOVERY BONDHOLDERS
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67
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SECTION 11.04.
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NOTICES, ETC
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67
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SECTION 11.05.
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NOTICES TO STORM RECOVERY BONDHOLDERS; WAIVER
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68
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SECTION 11.06.
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ALTERNATE PAYMENT AND NOTICE PROVISIONS
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69
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SECTION 11.07.
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NOTICES TO LUXEMBOURG STOCK EXCHANGE
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69
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SECTION 11.08.
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CONFLICT WITH TRUST INDENTURE ACT
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69
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SECTION 11.09.
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EFFECT OF HEADINGS AND TABLE OF CONTENTS
|
69
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SECTION 11.10.
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SUCCESSORS AND ASSIGNS
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70
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SECTION 11.11.
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SEPARABILITY
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70
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SECTION 11.12.
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BENEFITS OF INDENTURE
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70
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SECTION 11.13.
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LEGAL HOLIDAYS
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70
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SECTION 11.14.
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GOVERNING LAW
|
70
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SECTION 11.15.
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COUNTERPARTS
|
70
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SECTION 11.16.
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ISSUER OBLIGATION
|
70
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SECTION 11.17.
|
NO PETITION
|
70
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|
SCHEDULE 1.
|
FORM OF
SEMIANNUAL SERVICER’S CERTIFICATE
|
|
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EXHIBIT A SERVICING
CRITERIA TO BE ADDRESSED BY INDENTURE TRUSTEE IN ASSESSMENT OF COMPLIANCE
|
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APPENDIX A. MASTER
DEFINITIONS
|
|
iv
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO
SECTIONS 310 THROUGH 318, INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:
|
TRUST INDENTURE ACT
SECTION
|
|
INDENTURE
SECTION(S)
|
|
|
|
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Section 310(a)(1)
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6.11
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Section 310(a)(2)
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6.11
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Section 310(a)(3)
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6.10(b)
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Section 310(a)(4)
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Not Applicable
|
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Section 310(a)(5)
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6.11
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Section 310(b)
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6.08, 6.11
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Section 311(a)
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6.12
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Section 311(b)
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6.12
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Section 311(c)
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Not Applicable
|
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Section 312(a)
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7.01, 7.02
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Section 312(b)
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7.02
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Section 312(c)
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7.02
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Section 313(a)
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7.04
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Section 313(b)
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7.04
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Section 313(c)
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7.04
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Section 313(d)
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7.03, 7.04
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Section 314(a)
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3.09, 7.03
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Section 314(b)
|
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3.06
|
|
|
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Section 314(b)(1)
|
|
Not Addressed
|
|
|
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|
Section 314(b)(2)
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3.06
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Section 314(c)(1)
|
|
11.01
|
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Section 314(c)(2)
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11.01
|
v
|
TRUST INDENTURE ACT
SECTION
|
|
INDENTURE
SECTION(S)
|
|
|
|
|
|
Section 314(c)(3)
|
|
11.02
|
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Section 314(d)
|
|
8.03, 8.04, 9.02
|
|
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Section 314(e)
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11.01
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Section 315(a)
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6.01. 6.02
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Section 315(b)
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6.05
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Section 315(c)
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6.01
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Section 315(d)
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6.01
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|
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Section 315(e)
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5.13
|
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Section 316(a)
|
|
5.11, 5.12
|
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Section 316(a)(1)(A)
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|
5.11
|
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Section 316(a)(1)(B)
|
|
5.12
|
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|
Section 316(a)(2)
|
|
Not Applicable
|
|
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|
Section 316(b)
|
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5.07
|
|
|
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|
Section 316(c)
|
|
Not Addressed
|
|
|
|
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|
Section 317(a)(1)
|
|
5.03
|
|
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Section 317(a)(2)
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|
5.03
|
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|
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Section 317(b)
|
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3.03
|
|
|
|
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|
Section 318(a)
|
|
11.08
|
NOTE: This reconciliation and tie sheet shall not, for
any purpose, be deemed to be a part of the Indenture.
vi
INDENTURE dated as of March 6, 2008, by and among
Cleco Katrina/Rita Hurricane Recovery Funding LLC, a Louisiana limited
liability company (the “
Issuer
”), and U.S. Bank National Association, a
national banking association, in its capacity as trustee (the “
Trustee
”).
The Issuer has duly authorized the execution and
delivery of this Indenture to provide for one or more Series of Storm
Recovery Bonds, issuable as provided in this Indenture. Each Series of Storm Recovery Bonds will
be issued only under a separate Series Supplement to this Indenture, duly
executed and delivered by the Issuer and the Trustee. The Issuer is entering into this Indenture,
and the Trustee is accepting the trusts created hereby, each for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and each intending to be legally bound hereby.
The Storm Recovery Bonds of each Series shall be
non-recourse obligations and shall be secured by and payable solely out of the
Storm Recovery Property and the other Trust Estate securing such Series of
Storm Recovery Bonds. If and to the extent such Storm Recovery Property and the
other Trust Estate are insufficient to pay all amounts owing with respect to
the Storm Recovery Bonds secured thereby, then, except as otherwise expressly
provided herein, the Holders shall have no claim in respect of such
insufficiency against the Issuer or any other Person, and the Holders, by their
acceptance of such Storm Recovery Bonds, waive any such claim.
All things necessary to (a) make the Storm
Recovery Bonds, when executed and duly issued by the Issuer and authenticated
and delivered by the Trustee hereunder, valid obligations, and (b) make
this Indenture a valid agreement of the Issuer, in each case, in accordance
with their respective terms, have been done.
In consideration of the foregoing, the Issuer and the
Trustee agree as follows:
That under one or more Series Supplements, the
Issuer will Grant to the Trustee a Lien on and trust interest in the property
described therein (such property with respect to a particular Series being
the “
Series Trust Estate
” and all such property, collectively, the “
Trust
Estate
”). Each Series Trust
Estate shall secure the obligations of the Issuer as more particularly
described in the applicable Series Supplement.
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED
between the parties hereto that all Storm Recovery Bonds are to be issued,
countersigned, registered and delivered and the Trust Estate is to be held and
applied, subject to the further covenants, conditions, releases, uses and
trusts hereinafter set forth, and the Issuer, for itself and any successor,
does hereby covenant and agree to and with the Trustee and its successors in
said trust, for the benefit of the Holders, as follows:
ARTICLE I
DEFINITIONS AND
INCORPORATION BY REFERENCE
SECTION 1.01.
DEFINITIONS. Capitalized terms
used but not otherwise defined in this Indenture have the respective meanings
set forth in Appendix A hereto unless the context otherwise requires.
SECTION 1.02.
INCORPORATION BY REFERENCE OF THE TRUST INDENTURE ACT. Whenever this Indenture refers to a provision
of the TIA, the provision is incorporated by reference in and made a part of
this Indenture. Each of the following
TIA terms used in this Indenture has the following meaning:
“Commission” means the Securities and Exchange
Commission.
“indenture securities” means the Storm Recovery Bonds.
“indenture security holder” means a Holder.
“indenture to be qualified” means this Indenture.
“indenture trustee” or “institutional trustee” means
the Trustee.
“obligor” on the indenture securities means the Issuer
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute or defined by
Commission rule have the meaning assigned to them by such definitions.
SECTION 1.03.
RULES OF CONSTRUCTION.
(i)
An
accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles as in effect from time
to time;
(ii)
“including”
means including without limitation;
(iii)
with respect to terms defined in Appendix A
hereto, the meanings shall be equally applicable to both the singular and
plural forms of such terms and shall refer to either gender as may be
appropriate;
(iv)
unless
otherwise specified, references herein to Sections or Articles are to Sections
or Articles of this Indenture; and
(v)
the
words “herein,” “hereof,” “hereunder” and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
2
ARTICLE II
THE STORM RECOVERY BONDS
SECTION 2.01. FORM.
The Storm Recovery Bonds and the Trustee’s certificate of authentication
shall be in substantially the forms set forth in the related Series Supplement,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture or by the related Series Supplement
and may have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may, consistently herewith, be
determined by the Managers of the Issuer executing such Storm Recovery Bonds,
as evidenced by their execution of such Storm Recovery Bonds. Any portion of the text of any Storm Recovery
Bond may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Storm Recovery Bond.
Each Storm Recovery Bond shall be dated the date of its authentication.
The Storm Recovery Bonds shall be typewritten,
printed, lithographed or engraved or produced by any combination of these
methods (with or without steel engraved borders), all as determined by the
Managers of the Issuer executing such Storm Recovery Bonds, as evidenced by
their execution of such Storm Recovery Bonds.
Each Storm Recovery Bond shall bear upon its face the
designation so selected for the Series and Tranche, if any, to which it
belongs. The terms of all Storm Recovery
Bonds of the same Series shall be the same, unless such Series is
comprised of one or more Tranches, in which case the terms of all Storm
Recovery Bonds of the same Tranche shall be the same.
Each Storm Recovery Bond shall state that the
Securitization Act provides that the State of Louisiana pledges “to and agrees
with bondholders, the owners of storm recovery property, and other financing
parties that the state will not:
(1)
Alter the provisions of this Part [the Securitization Act] which
authorize the commission to create a contract right by the issuance of a
financing order, to create storm recovery property, and to make the storm recovery charges imposed by a financing
order irrevocable, binding, and
nonbypassable charges;
(2) Take or permit any action that impairs or
would impair the value of the storm recovery property; or
(3)
Except as allowed under this Section and
except for adjustments under any true-up mechanism established by the
commission, reduce, alter, or impair storm recovery charges that are to be imposed,
collected, and remitted for the benefit of the bondholders and other financing parties
until any and all principal, interest, premium, financing costs and other fees,
expenses, or charges incurred, and any contracts to be performed, in connection
with the related storm recovery bonds have been paid and performed in full. Nothing in
this Paragraph shall preclude limitation or alteration if and when full compensation
is made by law for the full protection of the storm recovery charges collected
pursuant to a financing order and full protection of the holders of storm recovery bonds and
any assignee or financing party.”
3
In addition, each Storm Recovery Bond shall state that
the Financing Order provides that the LPSC “covenants,
pledges and agrees it thereafter shall not
amend, modify, or rescind the Financing Order by any subsequent action, or
reduce, impair, postpone, terminate, or otherwise adjust the storm recovery
charges approved in the Financing Order, or in any way reduce or impair the
value of the storm recovery property created by the Financing Order, except as
may be contemplated by a refinancing authorized in strict accordance with the
Securitization Act by a subsequent order of the Commission or by the periodic
true up adjustments authorized by the Financing Order, until the indefeasible payment
in full of the storm recovery bonds and the related financing costs.”
SECTION 2.02.
EXECUTION, AUTHENTICATION AND DELIVERY.
The Storm Recovery Bonds shall be executed on behalf of the Issuer by a
Manager. The signature of any such
Manager on the Storm Recovery Bonds may be manual or facsimile.
Storm Recovery Bonds bearing the manual or facsimile
signature of individuals who were at any time Managers shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Storm Recovery Bonds.
The
Trustee hereby appoints
U.S. Bank National Association
as authenticating agent to authenticate the
Storm Recovery Bonds whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. The Trustee shall not be liable for any act or any failure of the
authenticating agent to perform any duty either required herein or authorized
herein to be performed by such person in accordance with this Indenture.
At any time and from time to time after the execution
and delivery of this Indenture, the Issuer may deliver Storm Recovery Bonds
executed on behalf of the Issuer to the Trustee pursuant to an Issuer Order for
authentication; and the Trustee shall authenticate and deliver such Storm
Recovery Bonds as provided in this Indenture and not otherwise.
No Storm Recovery Bond shall be entitled to any
benefit under this Indenture or be valid or obligatory for any purpose, unless
there appears on such Storm Recovery Bond a certificate of authentication
substantially in the form provided for herein executed by the Trustee by the
manual signature of one of its authorized signatories, and such certificate
upon any Storm Recovery Bond shall be conclusive evidence, and the only
evidence, that such Storm Recovery Bond has been duly authenticated and
delivered hereunder.
If and for so long as any Series of Storm
Recovery Bonds is listed on the Luxembourg Stock Exchange and the rules and
regulations of such exchange so require, a transfer or other agent appointed
pursuant to Section 3.02 shall be authorized on behalf of the Trustee to
execute and deliver such certificate of authentication.
SECTION 2.03.
DENOMINATIONS; STORM RECOVERY BONDS ISSUABLE IN SERIES. The Storm Recovery Bonds of each Series shall
be issuable as registered Storm Recovery Bonds in Authorized Denominations.
4
The Storm Recovery Bonds may, at the election of and
as authorized by a Manager and set forth in a Series Supplement, be issued
in one or more Series (each of which may be comprised of one or more
Tranches), and shall be designated generally as the “Storm Recovery Bonds” of
the Issuer, with such further particular designations added or incorporated in
such title for the Storm Recovery Bonds of any particular Series or
Tranche as a Manager of the Issuer may determine and as set forth in the Series Supplement
therefor.
Each Series of Storm Recovery Bonds shall be
created by a Series Supplement authorized by a Manager and establishing
the terms and provisions of such Series and, if applicable, any Tranches
thereof. The several Series and
Tranches thereof may differ as between Series and Tranches, in respect of
any of the following matters:
(a)
designation of the Series and,
if applicable, the Tranches thereof;
(b)
the aggregate initial
principal amount of the Storm Recovery Bonds of the Series and, if
applicable, each Tranche thereof;
(c)
the Bond Rate of the Series and,
if applicable, each Tranche thereof or the formula, if any, used to calculate
the applicable Bond Rate or Bond Rates for the Series and each Tranche
thereof;
(d)
the Payment Dates for
the Series and, if applicable, each Tranche thereof;
(e)
the Expected Final
Payment Date of the Series, and, if applicable, each Tranche thereof;
(f)
the Series Final
Maturity Date for the Series and, if applicable, the Tranche Final
Maturity Date for each Tranche thereof;
(g)
the Series Issuance
Date for the Series;
(h)
the Series Trust
Estate;
(i)
the place or places
for payments with respect to the Series and, if applicable, each Tranche
thereof;
(j)
the Authorized
Denominations for the Series and, if applicable, each Tranche thereof;
(k)
the provisions, if any,
for redemption of the Series by the Issuer and, if applicable, each
Tranche thereof;
(l)
restrictions, if any,
on issuing multiple Series or Tranches;
(m)
whether the Storm
Recovery Bonds of the Series are to be Book-Entry Storm Recovery Bonds and
the extent to which Section 2.11 will apply, and whether the Storm
Recovery Bonds of that Series will be listed on the Luxembourg Stock
Exchange or any other securities exchange;
5
(n)
the Expected
Amortization Schedule for the Series and, if applicable, each Tranche
thereof;
(o)
the Required Capital
Amount with respect to the Series;
(p)
the Calculation Dates
and Adjustment Dates for the Series;
(q)
the subaccounts in the
Collection Account for the Series;
(r)
the credit
enhancement, if any, applicable to the Series and each Tranche thereof;
and
(s)
any other terms of the Series or
Tranche that are not inconsistent with the provisions of this Indenture and
that will not result in any Rating Agency reducing or withdrawing its rating of
any Outstanding Series or Tranche of Storm Recovery Bonds.
SECTION 2.04.
TEMPORARY STORM RECOVERY BONDS.
Pending the preparation of definitive Storm Recovery Bonds pursuant to Section 2.13,
or by agreement of the purchasers of all Storm Recovery Bonds or, in the case
of Storm Recovery Bonds held in a book-entry only system by a Clearing Agency,
a Manager on behalf of the Issuer may execute, and upon receipt of an Issuer
Order, the Trustee shall authenticate and deliver temporary Storm Recovery
Bonds which are printed, lithographed, typewritten, mimeographed or otherwise
produced of the tenor of the definitive Storm Recovery Bonds in lieu of which
they are issued and with such variations not inconsistent with the terms of
this Indenture as a Manager executing such Storm Recovery Bonds may determine,
as evidenced by its execution of such Storm Recovery Bonds.
If temporary Storm Recovery Bonds are issued, the
Issuer will cause definitive Storm Recovery Bonds to be prepared without
unreasonable delay except where temporary Storm Recovery Bonds are held by a
Clearing Agency. After the preparation
of definitive Storm Recovery Bonds, the temporary Storm Recovery Bonds shall be
exchangeable for definitive Storm Recovery Bonds upon surrender of the
temporary Storm Recovery Bonds at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Storm Recovery Bonds, a Manager on behalf of the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like Series (and, if applicable, Tranche) and initial principal amount of
definitive Storm Recovery Bonds in Authorized Denominations. Until so exchanged, the temporary Storm
Recovery Bonds shall in all respects be entitled to the same benefits under
this Indenture as definitive Storm Recovery Bonds.
SECTION 2.05.
REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Issuer shall cause to be kept a register
(the “
Storm Recovery Bond Register
”) in which, subject to such
reasonable regulations as it may prescribe, the Storm Recovery Bond Registrar
shall provide for the registration of Storm Recovery Bonds and the registration
of transfers of Storm Recovery Bonds.
U.S. Bank National Association shall be Storm Recovery Bond Registrar
for the purpose of registering Storm Recovery Bonds and transfers of Storm
Recovery Bonds as herein provided. Upon
any resignation of any Storm Recovery Bond
6
Registrar, the Issuer shall promptly appoint a successor or, if it
elects not to make such an appointment, assume the duties of Storm Recovery
Bond Registrar.
If a Person other than the Trustee is appointed by the
Issuer as Storm Recovery Bond Registrar, the Issuer shall give the Trustee and
any transfer, paying, or listing agent of the Issuer prompt written notice of
the appointment of such Storm Recovery Bond Registrar and of the location, and any
change in the location, of the Storm Recovery Bond Register, and the Trustee
and any such agent shall have the right to inspect the Storm Recovery Bond
Register at all reasonable times and to obtain copies thereof, and the Trustee
shall have the right to rely conclusively upon a certificate executed on behalf
of the Storm Recovery Bond Registrar by a duly authorized officer thereof as to
the names and addresses of the Holders of the Storm Recovery Bonds and the
principal amounts and number of such Storm Recovery Bonds.
Upon surrender for registration of transfer of any
Storm Recovery Bond at the office or agency of the Issuer to be maintained as
provided in Section 3.02, a Manager on behalf of the Issuer shall execute,
and the Trustee shall authenticate and the Storm Recovery Bondholder shall
obtain from the Trustee, in the name of the designated transferee or
transferees, one or more new Storm Recovery Bonds in any Authorized
Denominations of a like Series (and, if applicable, Tranche) and aggregate
outstanding principal amount.
At the option of the Holder, Storm Recovery Bonds may
be exchanged for other Storm Recovery Bonds of a like Series (and, if
applicable, Tranche) and aggregate outstanding principal amount in Authorized
Denominations upon surrender of the Storm Recovery Bonds to be exchanged at
such office or agency of the Issuer to be maintained as provided in Section 3.02. Whenever any Storm Recovery Bonds are so
surrendered for exchange, a Manager on behalf of the Issuer shall execute, and
the Trustee shall authenticate, and the Storm Recovery Bondholder shall obtain
from the Trustee the Storm Recovery Bonds which the Storm Recovery Bondholder
making the exchange is entitled to receive.
All Storm Recovery Bonds issued upon any registration
of transfer or exchange of Storm Recovery Bonds shall be the valid obligations
of the Issuer, evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Storm Recovery Bonds surrendered upon such
registration of transfer or exchange.
Every Storm Recovery Bond presented or surrendered for
registration of transfer or exchange shall be duly endorsed by, or be
accompanied by a written instrument of transfer in the form set forth in the
applicable Series Supplement or such other form as is satisfactory to the
Trustee duly executed by, the Holder thereof or such Holder’s attorney duly
authorized in writing, with such signature guaranteed by an Eligible Guarantor
Institution in the form set forth in such Storm Recovery Bond.
No service charge shall be made to a Holder for any
registration of transfer or exchange of Storm Recovery Bonds (except as may be
required by the rules and regulations of the Luxembourg Stock Exchange
with respect to any Storm Recovery Bonds listed thereon), but, other than in
respect of exchanges pursuant to Section 2.04 or 9.06 not involving any
transfer, the Issuer or the Trustee may require payment of a sum sufficient to
cover any tax or other
7
governmental charge that may be imposed in connection
with any registration of transfer or exchange of Storm Recovery Bonds.
The preceding provisions of this Section notwithstanding,
except to the extent otherwise required by the rules and regulations of
the Luxembourg Stock Exchange with respect to any Storm Recovery Bonds listed
thereon, the Issuer shall not be required to make, and the Storm Recovery Bond
Registrar need not register, transfers or exchanges of Storm Recovery Bonds
selected for redemption or transfers or exchanges of any Storm Recovery Bond
for a period of 15 days preceding the Final Maturity Date with respect to such
Storm Recovery Bond.
SECTION 2.06.
MUTILATED, DESTROYED, LOST OR STOLEN STORM RECOVERY BONDS. If (i) any mutilated Storm Recovery Bond
is surrendered to the Trustee, or the Trustee receives evidence to its
satisfaction of the destruction, loss or theft of any Storm Recovery Bond, and (ii) there
is delivered to the Trustee such security or indemnity as may be required by it
to hold the Issuer and the Trustee harmless, then, in the absence of written
notice to the Issuer, the Storm Recovery Bond Registrar or the Trustee that
such Storm Recovery Bond has been acquired by a bona fide purchaser, a Manager
on behalf of the Issuer shall execute, and upon a Manager’s written request the
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Storm Recovery Bond, a replacement Storm
Recovery Bond of like Series (and, if applicable, Tranche), tenor and
initial principal amount in Authorized Denominations, bearing a number not
contemporaneously outstanding;
provided
,
however
, that if any
such destroyed, lost or stolen Storm Recovery Bond, but not a mutilated Storm
Recovery Bond, shall have become or within seven days shall be due and payable,
or shall have been called for redemption, instead of issuing a replacement
Storm Recovery Bond, the Issuer may pay such destroyed, lost or stolen Storm
Recovery Bond when so due or payable or upon the Redemption Date without
surrender thereof. If, after the
delivery of such replacement Storm Recovery Bond or payment of a destroyed,
lost or stolen Storm Recovery Bond pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Storm Recovery Bond in lieu of
which such replacement Storm Recovery Bond was issued, or in respect of which
such payment was made, presents for payment such original Storm Recovery Bond,
the Issuer and the Trustee shall be entitled to recover such replacement Storm
Recovery Bond (or such payment) from the Person to whom it was delivered or any
Person taking such replacement Storm Recovery Bond from such Person to whom
such replacement Storm Recovery Bond was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Trustee in connection therewith.
Upon the issuance of any replacement Storm Recovery
Bond under this Section, the Issuer or the Trustee may require the payment by
the Holder of such Storm Recovery Bond of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee and its
counsel) connected therewith.
Every replacement Storm Recovery Bond issued pursuant
to this Section in replacement of any mutilated, destroyed, lost or stolen
Storm Recovery Bond shall constitute an original additional contractual
obligation of the Issuer, whether or not the mutilated, destroyed, lost or
stolen Storm Recovery Bond shall be at any time enforceable by anyone, and
shall be entitled to
8
all the benefits of this Indenture equally and
proportionately with any and all other Storm Recovery Bonds duly issued
hereunder.
The provisions of this Section are exclusive and
shall preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Storm Recovery Bonds.
SECTION 2.07.
PERSONS DEEMED OWNER. Prior to
due presentment for registration of transfer of any Storm Recovery Bond, the
Issuer, the Trustee, the Storm Recovery Bond Registrar and any agent of the
Issuer, the Storm Recovery Bond Registrar or the Trustee may treat the Person
in whose name any Storm Recovery Bond is registered (as of the day of
determination) as the owner of such Storm Recovery Bond for the purpose of
receiving payments of Principal of and premium, if any, and Interest on such
Storm Recovery Bond and for all other purposes whatsoever, whether or not such
Storm Recovery Bond be overdue, and neither the Issuer, the Trustee, the Storm
Recovery Bond Registrar nor any agent of the Issuer, the Storm Recovery Bond
Registrar or the Trustee shall be affected by notice to the contrary.
SECTION 2.08.
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST; INTEREST ON OVERDUE
PRINCIPAL AND PREMIUM, IF ANY; PRINCIPAL, PREMIUM AND INTEREST RIGHTS
PRESERVED.
(a)
The Storm Recovery
Bonds of each Series shall accrue Interest as provided in the related Series Supplement,
at the applicable Bond Rate specified therein, and such Interest shall be payable
on each Payment Date as specified therein.
Any installment of Interest, principal or premium, if any, payable on
any Storm Recovery Bond which is punctually paid or duly provided for by the
Issuer on the applicable Payment Date shall be paid to the Person in whose name
such Storm Recovery Bond (or one or more Predecessor Storm Recovery Bonds) is
registered on the Record Date for such Payment Date, by check mailed
first-class, postage prepaid, to such Person’s address as it appears on the
Storm Recovery Bond Register on such Record Date, or in such other manner as
may be provided in the related Series Supplement, except that (i) upon
application to the Trustee by any Holder owning Storm Recovery Bonds of any Series or
Tranche in the principal amount of $10,000,000 or more not later than the
applicable Record Date payment will be made by wire transfer to an account
maintained and specified by such Holder and (ii) with respect to
Book-Entry Storm Recovery Bonds, payments will be made by wire transfer in immediately
available funds to the account designated by the Holder of the applicable
global Storm Recovery Bond unless and until such global Storm Recovery Bond is
exchanged for definitive Storm Recovery Bonds (in which event payments shall be
made as provided above) and except for the final installment of principal and
premium, if any, payable with respect to such Storm Recovery Bond on a Payment
Date which shall be payable as provided in Section 2.08(b). The funds represented by any such checks
returned undelivered shall be held in accordance with Section 3.03.
(b)
The principal of each
Storm Recovery Bond of each Series (and, if applicable, Tranche) shall be
payable in installments on each Payment Date specified in the Expected
Amortization Schedule included in the form of Storm Recovery Bond attached to
the Series Supplement for such Storm Recovery Bonds, but only to the
extent that moneys are available for such payment pursuant to Section 8.02;
provided
that installments of principal not paid when
9
scheduled
to be paid shall be paid upon receipt of moneys available for such purpose, in
the manner set forth in the applicable Expected Amortization Schedule. Failure to pay principal of each Storm
Recovery Bond of a Series in accordance with such Expected Amortization
Schedule because moneys are not available pursuant to Section 8.02 to make
such payments shall not constitute a Default or Event of Default under this
Indenture with respect to that Series.
Notwithstanding the foregoing, the entire unpaid principal amount of the
Storm Recovery Bonds of any Series or Tranche shall be due and payable, if
not previously paid (i) on the Series Final Maturity Date (or, if
applicable, Tranche Final Maturity Date) therefor, (ii) on the date on
which the Storm Recovery Bonds of all Series have been declared
immediately due and payable in accordance with Section 5.02 or (iii) on
the Redemption Date, if any, therefor.
The Trustee shall notify the Person in whose name a Storm Recovery Bond
is registered at the close of business on the Record Date preceding the Payment
Date on which the Issuer expects that the final installment of principal of and
premium, if any, and Interest on such Storm Recovery Bond will be paid. Such notice shall be mailed no later than
five days prior to such Expected Final Payment Date and shall specify that such
final installment of principal and premium, if any, will be payable only upon
presentation and surrender of such Storm Recovery Bond and shall specify the
place where such Storm Recovery Bond may be presented and surrendered for
payment of such installment, which, so long as any Storm Recovery Bonds are
listed on the Luxembourg Stock Exchange, shall include the office of the paying
agent in Luxembourg appointed pursuant to Section 3.02. Notices in connection with redemptions of
Storm Recovery Bonds shall be mailed to Storm Recovery Bondholders as provided
in Section 10.02.
(c)
If the Issuer defaults
in a payment of Interest on the Storm Recovery Bonds of any Series, the Issuer
shall pay defaulted Interest (plus Interest on such defaulted Interest at the
applicable Bond Rate to the extent lawful) in any lawful manner. The Issuer may pay such defaulted Interest to
the Persons who are Storm Recovery Bondholders on a subsequent special record
date, which date shall be at least fifteen Business Days prior to the special
payment date. The Issuer shall fix or
cause to be fixed any such special record date and payment date, and, at least
10 days before any such special record date, the Issuer shall mail to each
affected Storm Recovery Bondholder a notice that states the special record
date, the payment date and the amount of defaulted Interest to be paid.
SECTION 2.09.
CANCELLATION. All Storm Recovery
Bonds surrendered for payment, registration of transfer, exchange or redemption
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by the Trustee. The Issuer may at any time deliver to the
Trustee for cancellation any Storm Recovery Bonds previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner
whatsoever, and all Storm Recovery Bonds so delivered shall be promptly
canceled by the Trustee. No Storm
Recovery Bonds shall be authenticated in lieu of or in exchange for any Storm
Recovery Bonds canceled as provided in this Section, except as expressly
permitted by this Indenture. All
canceled Storm Recovery Bonds may be held or disposed of by the Trustee in
accordance with its standard retention or disposal policy as in effect at the
time unless the Issuer shall direct by an Issuer Order that they be destroyed
or returned to it;
provided
that such Issuer Order is timely and the
Storm Recovery Bonds have not been previously disposed of by the Trustee.
10
SECTION 2.10.
AMOUNT; AUTHENTICATION AND DELIVERY OF STORM RECOVERY BONDS. The aggregate principal amount of Storm
Recovery Bonds that may be authenticated and delivered under this Indenture
shall not exceed $180,600,000.
Storm Recovery Bonds of each Series created and
established by a Series Supplement shall be executed by a Manager on
behalf of the Issuer and delivered to the Trustee for authentication and
thereupon the same shall be authenticated and delivered by the Trustee upon
Issuer Request and upon delivery to the Trustee at the Issuer’s expense of the
following;
provided
,
however
, that except with respect to items
(1), (4)(a)(i) and (4)(a)(vi) below, compliance with the following
conditions and delivery of the following documents shall be required only in
connection with the original issuance of a Storm Recovery Bond or Bonds of such
Series:
(1)
Issuer Action
. An Issuer Order authorizing and directing the
execution, authentication and delivery of the Storm Recovery Bonds by the
Trustee or the authenticating agent and specifying the principal amount of
Storm Recovery Bonds to be authenticated.
(2)
Authorizing Certificate
. A certified resolution of the Managers
authorizing the execution and delivery of the Series Supplement for the
Storm Recovery Bonds applied for and the execution, authentication and delivery
of such Storm Recovery Bonds.
(3)
Series Supplement
. A Series Supplement in form satisfactory
to the Trustee for the Series of Storm Recovery Bonds being issued, which
shall set forth the provisions and form of the Storm Recovery Bonds of such Series (and,
if applicable, each Tranche thereof).
(4)
Certificates of the Issuer
and the Seller
.
(a)
An
Issuer Officer’s Certificate dated as of the Series Issuance Date,
stating:
(i)
that no Default has
occurred and is continuing under this Indenture and that the issuance of the
Storm Recovery Bonds being issued will not result in any Default;
(ii)
that the Issuer has not
assigned any interest or participation in the Series Trust Estate, except
for the Grant contained in the applicable Series Supplement; that the
Issuer has the power and authority to Grant the Series Trust Estate, and
to Grant a security interest in and a Lien upon the Series Trust Estate,
to the Trustee, free and clear of any other security interest, Liens, adverse
claims and options; and that such security interest is a perfected security
interest in all right, title and interest in and to the Series Trust
Estate free and clear of any Lien, except the Lien of this Indenture;
(iii)
that the Issuer has
appointed an Independent registered public accounting firm contemplated in Section 8.05
and identifying such firm;
(iv)
that attached thereto
are duly executed, true and complete copies of the applicable Sale Agreement,
Servicing Agreement and Administration Agreement;
11
(v)
that all filings with
the LPSC pursuant to the Securitization Act and the Financing Order and all
filings required under the Securitization Act and all UCC financing statements
with respect to the Series Trust Estate for that Series of Storm
Recovery Bonds that are required to be filed by the terms of the Financing
Order, the Securitization Act, the applicable Sale Agreement, the applicable
Servicing Agreement or this Indenture have been filed as required; and
(vi)
that all conditions
precedent provided in the Basic Documents relating to the authentication and
delivery of the Storm Recovery Bonds have been complied with.
(b)
An
Officer’s Certificate from the Seller, dated as of the Series Issuance
Date, to the effect that:
(i)
in the case of the
Storm Recovery Property to be transferred to the Issuer on such date,
immediately prior to the conveyance thereof to the Issuer pursuant to the
applicable Sale Agreement, the Seller was the sole owner of the rights and
interests under the Financing Order that comprises such Storm Recovery Property
and such ownership interest was perfected; such Storm Recovery Property has
been validly transferred and sold to the Issuer free and clear of all Liens
(other than Liens created by the Issuer pursuant to this Indenture) and such
transfer is absolute, irrevocable and has been perfected; the Seller has the
power and authority to own, sell and assign the rights and interests under the
Financing Order that comprises such Storm Recovery Property; and the Seller has
duly authorized such sale and assignment to the Issuer; and
(ii)
the Financing Order
creating such Storm Recovery Property attached to such certificate is in full
force and effect and the copy of the Financing Order attached thereto is true
and complete.
(5)
Issuer Opinion of Counsel
. An Issuer Opinion or Opinions of Counsel,
portions of which may be delivered by counsel for the Issuer and portions of
which may be delivered by counsel for the Seller and/or the Servicer, dated as
of the Series Issuance Date subject to customary qualifications,
acceptable to the Trustee, to the collective effect that (or, in the case of
subsection (d), in the form of):
(a)
all
conditions precedent provided for in this Indenture relating to (i) the
authentication and delivery of the Issuer’s 2008 Senior Secured Storm Recovery
Bonds and (ii) the execution of the First Supplemental Indenture to this
Indenture dated as of the date of this Indenture, have been complied with;
(b)
the
First Supplemental Indenture to this Indenture dated as of the date of this
Indenture is permitted by Article IX of this Indenture;
(c)
the
execution of the First Supplemental Indenture to this Indenture dated as of the
date of this Indenture is permitted by this Indenture; and
12
(d)
Annexes
I(d) - I(p) of that certain Underwriting Agreement dated February 28,
2008 by and among the Issuer, Cleco Power and the Underwriters named in
Schedule II thereto relating to the Issuer’s 2008 Senior Secured Storm Recovery
Bonds.
(6)
Reserved
.
(7)
Rating Agency Condition
. The Trustee shall receive written
confirmation from each Rating Agency that such Series of Storm Recovery
Bonds will be rated as set forth in the applicable Series Supplement.
(8)
Required Capital Amount
. Evidence satisfactory to the Trustee that the
Required Capital Amount for such Series has been credited to the Capital
Subaccount.
SECTION 2.11.
BOOK-ENTRY STORM RECOVERY BONDS.
Unless otherwise specified in the related Series Supplement, each Series of
Storm Recovery Bonds, upon original issuance, will be issued in the form of a
typewritten Storm Recovery Bond or Storm Recovery Bonds representing the
Book-Entry Storm Recovery Bonds, to be delivered to DTC (or its custodian), as
the initial Clearing Agency, by, or on behalf of, the Issuer. Such Storm Recovery Bond shall initially be
registered on the Storm Recovery Bond Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Storm Recovery Bond
Owner will receive a definitive Storm Recovery Bond representing such Storm
Recovery Bond Owner’s interest in such Storm Recovery Bond, except as provided
in Section 2.13. Unless and until
definitive, fully registered Storm Recovery Bonds of any Series (the “
Definitive
Storm Recovery Bonds
”) replacing the Book-Entry Storm Recovery Bonds have
been issued to Storm Recovery Bondholders of that Series pursuant to Section 2.13
or pursuant to any applicable Series Supplement relating thereto:
(a)
the provisions of this Section shall
be in full force and effect;
(b)
the Storm Recovery Bond
Registrar and the Trustee shall be entitled to deal with the Clearing Agency
for all purposes of this Indenture (including the payment of Principal of and
premium, if any, and Interest on the Storm Recovery Bonds and the giving of
instructions or directions hereunder) as the sole Holder of the Storm Recovery
Bonds, and shall have no obligation to the Storm Recovery Bond Owners;
(c)
to the extent that the
provisions of this Section conflict with any other provisions of this
Indenture, the provisions of this Section shall control;
(d)
the rights of Storm
Recovery Bond Owners shall be exercised only through the Clearing Agency and
shall be limited to those established by law and agreements between such Storm
Recovery Bond Owners and the Clearing Agency or the Clearing Agency
Participants. Pursuant to the DTC
Agreement, unless and until Definitive Storm Recovery Bonds are issued pursuant
to Section 2.13, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
payments of Principal of and premium, if any, and Interest on the Storm
Recovery Bonds to such Clearing Agency Participants; and
(e)
whenever this Indenture
requires or permits actions to be taken based upon instructions or directions
of Holders of Storm Recovery Bonds evidencing a specified percentage
13
of
the Outstanding Amount of the Storm Recovery Bonds or a Series or Tranche
thereof, the Clearing Agency shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect from Storm
Recovery Bond Owners or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the Storm
Recovery Bonds or such Series or Tranche and has delivered such
instructions to the Trustee.
SECTION 2.12.
NOTICES TO CLEARING AGENCY.
Whenever a notice or other communication to the Storm Recovery
Bondholders is required under this Indenture, unless and until Definitive Storm
Recovery Bonds shall have been issued to Storm Recovery Bond Owners pursuant to
Section 2.13 and the applicable Series Supplement, the Trustee, the
Servicer and the Paying Agent shall give all such notices and communications
specified herein to be given to Storm Recovery Bondholders to the Clearing
Agency, and shall have no obligation to the Storm Recovery Bond Owners.
SECTION 2.13.
DEFINITIVE STORM RECOVERY BONDS.
If (i) the Clearing Agency or the Issuer advises the Trustee in
writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities as nominee and depository with respect to any
Book-Entry Series or Tranche of Storm Recovery Bonds and the Issuer is
unable to locate a qualified successor, (ii) the Issuer advises the
Trustee in writing that it elects to discontinue use of the book-entry-only
transfers through the Clearing Agency with respect to any Series or
Tranche of Storm Recovery Bonds and to deliver certificated Storm Recovery
Bonds to the Clearing Agency or (iii) after the occurrence of an Event of
Default, Storm Recovery Bond Owners representing beneficial interests
aggregating at least a majority of the Outstanding Amount of the Storm Recovery
Bonds of all Series maintained as Book-Entry Storm Recovery Bonds advise
the Issuer and, through the Clearing Agency, the Trustee in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Storm Recovery Bond Owners of such Series, then the
Trustee shall notify all affected Storm Recovery Bond Owners and the Issuer of
the occurrence of any such event and of the availability of Definitive Storm
Recovery Bonds to affected Storm Recovery Bond Owners requesting the same. Upon surrender by the Clearing Agency to the
Trustee of the typewritten Storm Recovery Bond or Storm Recovery Bonds
representing the Book-Entry Storm Recovery Bonds of that Series, accompanied by
registration instructions, a Manager on behalf of the Issuer shall execute and
the Trustee shall authenticate the Definitive Storm Recovery Bonds in
accordance with the instructions of the Clearing Agency. None of the Issuer, the Storm Recovery Bond
Registrar or the Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of
Definitive Storm Recovery Bonds, the Trustee shall recognize the Holders of the
Definitive Storm Recovery Bonds as Storm Recovery Bondholders.
Definitive Storm Recovery Bonds will be transferable
and exchangeable at the offices of the Storm Recovery Bond Registrar or, with
respect to any Storm Recovery Bonds listed on the Luxembourg Stock Exchange, at
the offices of the transfer agent appointed pursuant to the second paragraph of
Section 3.02. With respect to any
transfer of such listed Storm Recovery Bonds, the new Definitive Storm Recovery
Bonds registered in the names specified by the transferee and the original
transferor shall be available at the offices of such transfer agent.
14
ARTICLE III
COVENANTS
SECTION 3.01.
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. The Issuer will duly and punctually pay the
Principal of and premium, if any, and Interest on the Storm Recovery Bonds in
accordance with the terms of the Storm Recovery Bonds, this Indenture and the
applicable Series Supplement;
provided
that except on the Series Final
Maturity Date, the Tranche Final Maturity Date or the Redemption Date for a Series or
Tranche of Storm Recovery Bonds or upon the acceleration of the Storm Recovery
Bonds following the occurrence of an Event of Default, the Issuer shall only be
obligated to pay the Principal of such Storm Recovery Bonds on each Payment
Date therefor to the extent moneys are available for such payment pursuant to Section 8.02. Amounts properly withheld under the Code or
other applicable tax laws by any Person from a payment to any Storm Recovery
Bondholder of Interest or Principal or premium, if any, shall be considered as
having been paid by the Issuer to such Storm Recovery Bondholder for all
purposes of this Indenture.
SECTION 3.02.
MAINTENANCE OF OFFICE OR AGENCY.
The Issuer will maintain in the Borough of Manhattan, the City of New
York or in St. Paul, Minnesota, an office or agency where Storm Recovery Bonds
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Storm Recovery Bonds and
this Indenture may be served. The Issuer
hereby initially appoints the office of the Trustee at 60 Livingston Avenue,
Mailcode EP MN WS3D, St. Paul, Minnesota
55107 to serve as its agent for the foregoing purposes. The Issuer will give prompt written notice to
the Holders and the Trustee of the location, and of any change in the location,
of any such office or agency. If at any
time the Issuer shall fail to maintain any such office or agency or shall fail
to furnish such agent with the address thereof, such surrenders, notices and
demands may be made or served at the Corporate Trust Office, and the Issuer
hereby appoints U.S. Bank National Association as its agent to receive all such
surrenders, notices and demands.
To the extent any of the Storm Recovery Bonds are
listed on the Luxembourg Stock Exchange and the rules of such exchange so
require, (i) the Issuer will maintain in Luxembourg (A) an office and
a transfer agent where Storm Recovery Bonds may be surrendered for registration
of transfer or exchange, (B) an office and a listing agent where notices
and demands to or upon the Issuer in respect of the Storm Recovery Bonds and
this Indenture may be served, and (C) an office and a paying agent where
payments in respect of the Storm Recovery Bonds may be made and (ii) any
reference in this Indenture to the office or agency of the Issuer referred to in
this Section 3.02 shall also refer to such offices, and the transfer,
listing and paying agents, of the Issuer in Luxembourg, as applicable. The Issuer shall give the Trustee and any
other agent appointed under this Section 3.02 written notice of the location
and identity, and of any change in the location or identity, of any such office
or agency.
SECTION 3.03.
MONEY FOR PAYMENTS TO BE HELD IN TRUST.
As provided in Section 8.02(a), all payments of Principal of, or
premium and Interest on, the Storm Recovery Bonds that are to be made from
amounts withdrawn from the Collection Account pursuant to Section 8.02(d) or
(e) or Section 4.03 shall be made on behalf of the Issuer by the
Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection
Account for payments
15
of Storm Recovery Bonds shall be paid over to the Issuer except as
provided in this Section and in Section 8.02.
The Issuer hereby appoints U.S. Bank National Association
as the Paying Agent hereunder and, in connection therewith the Paying Agent
agrees that it will (and the Issuer shall cause any other Paying Agent other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee (and during such time as the
Trustee acts as Paying Agent, it hereby so agrees that it will)), subject to
the provisions of this Section:
(a)
hold all sums held by it for the payment of Principal
of, or premium or Interest on, the Storm Recovery Bonds in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(b)
give the Trustee written notice of any Default by the
Issuer (or any other obligor upon the Storm Recovery Bonds) of which the Paying
Agent has actual knowledge in the making of any payment required to be made
with respect to the Storm Recovery Bonds;
(c)
at any time during the continuance of any such
Default, upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent;
(d)
immediately resign as a Paying Agent and forthwith pay
to the Trustee all sums held by the Paying Agent in trust for the payment of
Storm Recovery Bonds if at any time the Paying Agent ceases to meet the
standards required of Paying Agents at the time of its appointment; and
(e)
comply with all requirements of the Code and other
applicable tax laws with respect to the withholding from any payments made by
it on any Storm Recovery Bonds of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in connection
therewith.
The Issuer may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture or for any other
purpose, by Issuer Order direct any Paying Agent to pay to the Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent;
and upon such payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of
funds, any money held by the Trustee or any Paying Agent in trust for the
payment of any amount of Principal of, premium, if any, or Interest on any
Storm Recovery Bond and remaining unclaimed for two years after such amount has
become due and payable shall be discharged from such trust and be paid to the
Issuer upon delivery by the Issuer of an Issuer Order; and the Holder of such
Storm Recovery Bond shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof (but only to the extent of the amounts
so paid to the Issuer), and all liability of the Trustee or such Paying Agent
with respect to such trust money shall thereupon cease;
provided
,
however
,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the
16
expense of the Issuer cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Trustee may also adopt and employ, at the
expense of the Issuer, any other reasonable means of notification of such
repayment (including mailing notice of such repayment to Holders whose Storm
Recovery Bonds have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Trustee or of any Paying Agent, at the
last address of record for each such Holder).
SECTION 3.04.
EXISTENCE. Subject to Section 3.10,
the Issuer shall keep in full effect its existence, rights and franchises as a
statutory limited liability company under the laws of the State of Louisiana
(unless it becomes, or any successor Issuer hereunder is or becomes, organized
under the laws of any other State or of the United States of America, in which
case the Issuer will keep in full effect its existence, rights and franchises
under the laws of such other jurisdiction) and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification
is or shall be necessary to protect the validity and enforceability of this
Indenture, the Storm Recovery Bonds, the Trust Estate and each other instrument
or agreement included in the Trust Estate.
SECTION 3.05.
PROTECTION OF TRUST ESTATE. The
Issuer shall from time to time execute and deliver, and file if required, all
such supplements and amendments hereto and all such filings (including filings
with the LPSC pursuant to the Securitization Act), financing statements,
continuation statements, instruments of further assurance and other
instruments, and shall take such other action reasonably necessary to:
(a)
maintain and preserve the Grant, Lien and security
interest (and the priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
(b)
perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture, including all Series Supplements;
(c)
enforce any of the Trust Estate;
(d)
preserve and defend title to the Trust Estate and the
rights of the Trustee and the Storm Recovery Bondholders in the Trust Estate
against the claims of all Persons and parties; or
(e)
pay any and all taxes levied or assessed upon all or
any part of the Trust Estate.
The Issuer hereby authorizes the Trustee to execute
upon written direction any filing with the LPSC, financing statement,
continuation statement or other instrument required to be filed pursuant to
this Section.
SECTION 3.06.
OPINIONS AS TO TRUST ESTATE. (a) On
or before March 31 in each calendar year, while any Series is
outstanding, beginning on March 31, 2009, the Issuer shall furnish to the
Trustee an Issuer Opinion of Counsel stating that, in the opinion of such
counsel, either (i) all actions or filings (including filings and re-filings
with the Louisiana Filing
17
Officer in accordance with the rules prescribed under the
Securitization Act and the UCC) necessary to maintain perfection of the Lien
and security interest created by this Indenture have been taken or made, and
reciting the details of such actions and filings or (ii) no such actions
or filings are necessary to maintain such Lien and security interest. Such Issuer Opinion of Counsel shall also
describe the recording, filing, re-recording and re-filing of this Indenture,
any Supplemental Indentures and any other requisite documents, and the
execution and filing of any filings pursuant to the Securitization Act, the
Financing Order or the UCC, financing statements and continuation statements
that will, in the opinion of such counsel, be required to maintain the Grant,
Lien and security interest of this Indenture until March 31 in the
following calendar year.
(b)
Prior to the effectiveness of any amendment to any
Sale Agreement or Servicing Agreement, the Issuer shall furnish to the Trustee
an Issuer Opinion of Counsel either (i) stating that, in the opinion of
such counsel, all actions or filings (including filings and re-filings with the
Louisiana Filing Officer in accordance with the rules prescribed under the
Securitization Act and the UCC) necessary to preserve and protect the interest
of the Issuer and the Trustee in the Storm Recovery Property and the proceeds
thereof have been taken or made, and reciting the details of such actions and
filings or referring to prior Opinions of Counsel in which such details are
given, or (ii) stating that, in the opinion of such counsel, no such
actions or filings shall be necessary to preserve and protect such interest.
SECTION 3.07.
PERFORMANCE OF OBLIGATIONS; COMMISSION FILINGS.
(a)
The Issuer (i) shall diligently pursue any and
all actions to enforce its rights under the Basic Documents and each other
instrument or agreement included in the Trust Estate and (ii) shall not
take any action and will use its best efforts not to permit any action to be
taken by others that would release any Person from any of such Person’s
covenants or obligations under any such Basic Document, instrument or agreement
or that would result in the amendment, hypothecation, subordination,
termination or discharge of, or impair the validity or effectiveness of, any
such Basic Document, instrument or agreement, except, in each case, as
expressly provided in such Basic Document or such other instrument or
agreement.
(b)
The Issuer may contract with other Persons to assist
it in performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Trustee in an Issuer Officer’s Certificate
shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the
Administrator to assist the Issuer in performing its duties under this
Indenture.
(c)
The Issuer shall punctually perform and observe all of
its obligations and agreements contained in the Basic Documents and in all
other instruments and agreements included in the Trust Estate.
(d)
The Issuer shall file with the Commission such
periodic reports, if any, as are required (without regard to the number of
Holders of Bonds to the extent permitted by and consistent with the Issuer’s
obligations under applicable law) from time to time under Section 13 or Section 15(d) of
the Exchange Act so long as any Storm Recovery Bonds remain Outstanding. The
Issuer shall also, to the extent permitted by and consistent with the Issuer’s
obligations under applicable law, post on its website or furnish or file in the
periodic reports and other reports to be
18
filed with the Commission pursuant to the Exchange Act, as described
below, the following information in respect of each series of Outstanding Storm
Recovery Bonds to the extent such information is reasonably available to the
Issuer:
(i)
the final prospectus relating to the Series of
Storm Recovery Bonds;
(ii)
a statement of Storm Recovery Charge
remittances to the Trustee (to be included in a Form 10-D or Form 10-K
filed subsequent to the respective report);
(iii)
a
statement reporting the balance in the Collection Account and the balance in
each subaccount of the Collection Account as of the end of each quarter or the
most recent date available (to be included in a Form 10-D or Form 10-K);
(iv)
a statement showing the balance of
Outstanding Storm Recovery Bonds that reflects the actual periodic payments
made on the Storm Recovery Bonds (to be included in the next Form 10-D or Form 10-K);
(v)
the Semiannual Servicer’s Certificate
which is required to be submitted pursuant to the applicable Servicing
Agreement (to be filed with a Form 10-D, Form 10-K or Form 8-K);
(vi)
any reports and other information that
the Issuer is required to file with the Commission under the Exchange Act; and
(vii)
a
current organization chart for the Issuer and the Servicer (unless the Servicer
is not an Affiliate of the Issuer, in which case the Servicer shall post two
separate organization charts), in each case disclosing the parent company and
material subsidiaries of the Issuer and the Servicer.
In addition, the Issuer shall, to the extent permitted by and
consistent with the Issuer’s obligations under applicable law, cause to be
posted on the website associated with the Issuer’s parent’s website:
A.
the final prospectus (as filed with the
Commission under Rule 424 of the Securities Act) for each series of
Outstanding Storm Recovery Bonds;
B.
the Semiannual Servicer’s Certificate
delivered for each Series of Storm Recovery Bonds pursuant to each
Servicing Agreement;
C.
the periodic reports described above in
this subsection (d); and
D.
a current organization chart for the
Issuer and the Servicer (unless the Servicer is not related to the Issuer, in
which case the Servicer shall post two separate organization charts), in each
case disclosing the parents and material subsidiaries of the Issuer and the
Servicer.
19
(e)
The Issuer shall make all filings required under the
Securitization Act relating to the transfer of the ownership or security
interest in the Storm Recovery Property other than those required to be made by
the Seller or any Servicer pursuant to the Basic Documents.
SECTION 3.08.
NEGATIVE COVENANTS. So long as
any Storm Recovery Bonds are Outstanding, the Issuer shall not:
(i)
except as expressly permitted by this
Indenture, any Supplemental Indenture, any Sale Agreement or any Servicing
Agreement, sell, transfer, exchange or otherwise dispose of any of the assets
of the Issuer or the Trust Estate, unless directed to do so by the Trustee in
accordance with Article V;
(ii)
terminate its existence, dissolve or
liquidate in whole or in part, except as Section 3.10 permits;
(iii)
claim
any credit on, or make any deduction from the Principal or premium, if any, or
Interest payable in respect of, the Storm Recovery Bonds (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Storm Recovery Bondholder by reason of the
payment of taxes levied or assessed upon the Issuer or any part of the Trust
Estate;
(iv)
(A) permit the validity or
effectiveness of this Indenture to be impaired, or permit the Lien of this
Indenture to be amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or obligations with respect
to the Storm Recovery Bonds under this Indenture except as may be expressly
permitted hereby, (B) permit any Lien (other than the Lien created by this
Indenture) to be created on or extend to or otherwise arise upon or burden the
Trust Estate or any part thereof or any interest therein or the proceeds
thereof or (C) permit the Lien of this Indenture not to constitute a
continuing valid first priority security interest in the Trust Estate;
(v)
except as contemplated by this Indenture,
any Supplemental Indenture, any Sale Agreement, or any Servicing Agreement,
enter into any swap, hedge or other similar financial arrangement;
(vi)
elect to be classified as an association
taxable as a corporation for federal income tax purposes or otherwise take any
action, file any tax return or make any election inconsistent with the
treatment of the Issuer, for purposes of federal taxes and, to the extent
consistent with applicable state tax law, state income and franchise tax
purposes, as a disregarded entity that is not separate from the sole owner of
the Issuer; or
(vii)
take
any action that is the subject of a Rating Agency Condition if such action
would result in a reduction or withdrawal of the then-current rating on any
Outstanding Series or Tranche of Storm Recovery Bonds.
SECTION 3.09.
ANNUAL STATEMENT AS TO COMPLIANCE.
The Issuer will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Issuer (which, as of the date hereof, is the calendar
year) commencing with the fiscal year 2008, an Issuer Officer’s
20
Certificate (a copy of which the Issuer will deliver to each Rating
Agency and the LPSC) stating, as to the Manager signing such Issuer Officer’s
Certificate, that
(i)
a review of the activities of the Issuer
during such year (or relevant portion thereof) and of performance under this
Indenture has been made under such Manager’s supervision; and
(ii)
to the best of such Manager’s knowledge,
based on such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such fiscal year (or relevant portion thereof),
or, if there has been a default in compliance with any such condition or
covenant, describing each such default known to the Manager and the nature and
status thereof.
SECTION 3.10.
ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Issuer shall not consolidate or merge
with or into or convert into any other Person or sell substantially all of its
assets to any other Person, unless:
(i)
the Person (if other than the Issuer)
formed by or surviving such consolidation, merger or conversion or to whom
substantially all of such assets are sold shall be a Person organized and
existing under the laws of the United States of America or any State and shall
expressly assume by a Supplemental Indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment of
the Principal of and premium, if any, and Interest on all Outstanding Storm
Recovery Bonds and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be performed or
observed, all as provided herein and in the applicable Series Supplement
or any other Supplemental Indenture;
(ii)
the Person (if other than the Issuer)
formed by or surviving such consolidation, merger or conversion or to whom
substantially all of such assets are sold shall expressly assume all
obligations and succeed to all rights of the Issuer under the Basic Documents to
which the Issuer is a party (or under which the Issuer has rights) pursuant to
an assignment and assumption agreement executed and delivered to the Trustee,
in form satisfactory to the Trustee;
(iii)
immediately
after giving effect to such consolidation, merger, conversion or sale, no
Default or Event of Default shall have occurred and be continuing;
(iv)
prior notice to the Rating Agencies shall
have been provided and the Rating Agency Condition shall have been satisfied
with respect to such consolidation, merger, conversion or sale;
(v)
the Issuer shall have received an opinion
of Independent counsel (and shall have delivered copies thereof to the Trustee)
to the effect that such consolidation, merger, conversion or sale (a) will
not have any material adverse tax consequence to the Issuer or any Storm
Recovery Bondholder, (b) complies with this Indenture and all of the
conditions precedent herein relating to such transaction and (c) will
result in the Trustee maintaining a continuing valid first priority perfected
security interest in the Trust Estate;
21
(vi)
none of the Storm Recovery Property, any
Financing Order or the Issuer’s rights under the Securitization Act or the
Financing Order shall be impaired thereby; and
(vii)
any
action as is necessary to maintain the Lien created by this Indenture shall
have been taken.
SECTION 3.11.
SUCCESSOR OR TRANSFEREE.
(a)
Upon any consolidation, merger or conversion of the
Issuer in accordance with Section 3.10, the Person formed by or surviving
such consolidation, merger or conversion (if other than the Issuer) shall
succeed to, and be substituted for, and may exercise every right and power of,
the Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b)
Except for such obligations set forth in Section 6.07,
upon any sale by the Issuer of substantially all of its assets in a sale which
complies with Section 3.10, immediately upon the delivery of written notice
to the Trustee from the Person acquiring such assets stating that the Issuer is
to be so released, the Issuer will be released from every covenant and
agreement of this Indenture to be observed or performed on the part of the
Issuer with respect to the Storm Recovery Bonds and from every covenant and
agreement of the Basic Documents to be observed or performed on the part of the
Issuer.
SECTION 3.12.
NO OTHER BUSINESS. The Issuer
shall not engage in any business other than purchasing and owning the Storm
Recovery Property provided for in Financing Orders issued by the LPSC from time
to time, issuing Storm Recovery Bonds from time to time, pledging its interest
in the Trust Estate to the Trustee under this Indenture in order to secure the
Issuer’s obligations as set forth in the Series Supplements, entering into
and performing under the Basic Documents relating to the Storm Recovery Bonds,
and performing activities that are necessary, suitable or convenient to
accomplish these purposes or are incidental thereto.
SECTION 3.13.
NO BORROWING. The Issuer shall
not issue, incur, assume, guarantee or otherwise become liable, directly or
indirectly, for any indebtedness except for the Storm Recovery Bonds and any
obligations under any credit enhancement for any Series of Storm Recovery
Bonds and except as contemplated by the Basic Documents.
SECTION 3.14.
GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as contemplated by the Basic
Documents, the Issuer shall not make any loan or advance or credit to, or
guarantee (directly or indirectly or by an instrument having the effect of
assuring another’s payment or performance on any obligation or capability of so
doing or otherwise), endorse or otherwise become contingently liable, directly
or indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or securities of, or any other interest in, or make
any capital contribution to, any other Person other than any Eligible
Investments.
SECTION 3.15.
CAPITAL EXPENDITURES. The Issuer
shall not make any expenditure (by long-term or operating lease or otherwise)
for capital assets (either realty or personalty) other than the Storm Recovery
Property purchased from the Seller pursuant to, and in accordance with, any
Sale Agreement.
22
SECTION 3.16.
RESTRICTED PAYMENTS. The Issuer
shall not, directly or indirectly, (i) pay any dividend or make any
distribution (by reduction of capital or otherwise), whether in cash, property,
securities or a combination thereof, to any owner of a beneficial interest in
the Issuer or otherwise with respect to any ownership or equity interest in, or
ownership security of, the Issuer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security
or (iii) set aside or otherwise segregate any amounts for any such
purpose;
provided
,
however
, that if no Event of Default shall
have occurred and be continuing, the Issuer may make, or cause to be made, any
such distributions to any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or security in or of
the Issuer using funds distributed to the Issuer pursuant to Section 8.02(d) or
which are not otherwise subject to the Lien of this Indenture to the extent
that such distributions would not cause the book value of the remaining equity
in the Issuer to decline below 0.5% of the original principal amount of all Series of
Storm Recovery Bonds which remain outstanding.
The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with the Basic
Documents.
SECTION 3.17.
NOTICE OF EVENTS OF DEFAULT. The
Issuer agrees to deliver to the Trustee, the LPSC, the Rating Agencies and, to
the extent the rules and regulations of the Luxembourg Stock Exchange so
require, any agent in Luxembourg appointed pursuant to the second paragraph of Section 3.02
written notice in the form of an Issuer Officer’s Certificate of any Default or
Event of Default hereunder or under any of the Basic Documents, its status and
what action the Issuer is taking or proposes to take with respect thereto
within five Business Days after the occurrence thereof.
SECTION 3.18. INTENTIONALLY OMITTED.
SECTION 3.19. INSPECTION.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Trustee, during the Issuer’s normal business hours, to
examine all the books of account, records, reports, and other papers of the
Issuer, to make copies and extracts therefrom, to cause such books to be
audited annually by an Independent registered public accounting firm, and to discuss
the Issuer’s affairs, finances and accounts with the Issuer’s officers,
employees and an Independent registered public accounting firm, all at such
reasonable times and as often as may be reasonably requested. The Trustee shall hold and shall cause its
representatives to hold, in confidence all such information except to the
extent disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Trustee may reasonably determine that such disclosure is consistent with its
obligations hereunder.
SECTION 3.20.
SALE AGREEMENT, ADMINISTRATION AGREEMENT AND SERVICING AGREEMENT
COVENANTS.
(a)
The Issuer agrees to take all such lawful actions to
enforce its rights under any Sale Agreement, the Administration Agreement and
any Servicing Agreement and to compel or secure the performance and observance
by the Seller, the Administrator, the Servicer and Cleco Power of each of their
respective obligations to the Issuer under or in connection with any Sale
Agreement, the Administration Agreement and any Servicing Agreement in
accordance with the terms thereof. So
long as no Event of Default occurs and is continuing, but subject to Section
23
3.20(f),
the Issuer may exercise any and all rights, remedies, powers and privileges
lawfully available to the Issuer under or in connection with any Sale
Agreement, the Administration Agreement and any Servicing Agreement;
provided
that such action shall not adversely affect the interests of the Holders in any
material respect.
(b)
If an Event of Default occurs and is continuing, the
Trustee may, and at the direction (which direction shall be in writing) of the
holders of a majority of the Outstanding Amount of Storm Recovery Bonds of all Series or
Tranches affected thereby shall, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Administrator, the Seller and
the Servicer, as the case may be, under or in connection with the
Administration Agreement and the applicable Sale Agreement and Servicing
Agreement, including the right or power to take any action to compel or secure
performance or observance by the Administrator, the Seller or the Servicer of
each of their obligations to the Issuer thereunder and to give any consent,
request, notice, direction, approval, extension or waiver under the
Administration Agreement and the applicable Sale Agreement and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.
(c)
Except as set forth in Section 3.20(e) of
this Indenture, with the prior written consent of the Trustee and the consent
of the LPSC pursuant to Section 9.07 if the amendment increases ongoing
Financing Costs, the Administration Agreement, any Sale Agreement and Servicing
Agreement may be amended in accordance with the provisions thereof, so long as
the Rating Agency Condition is satisfied in connection therewith, at any time
and from time to time, without the consent of the Storm Recovery Bondholders of
the related Series;
provided
that such amendment shall not adversely
affect the interest of any Storm Recovery Bondholder of that Series in any
material respect, as evidenced by an Issuer Opinion of Counsel delivered to the
Trustee. The Trustee shall also be
entitled to receive an Opinion of Counsel pursuant to Section 9.01(c).
(d)
Except as set forth in Section 3.20(e) of
this Indenture, if the Issuer, the Seller, Cleco Power, the Administrator, the
Servicer or any other party to the respective agreement proposes to amend,
modify, waive, supplement, terminate or surrender, or agree to any amendment,
modification, waiver, supplement, termination or surrender of, the terms of the
Administration Agreement or any Sale Agreement or Servicing Agreement, or waive
timely performance or observance by the Administrator, the Seller or the
Servicer under the Administration Agreement or any Sale Agreement or Servicing
Agreement, in each case in such a way as would materially and adversely affect
the interests of Storm Recovery Bondholders of any Series, the Issuer shall
first notify the Rating Agencies of the proposed amendment, modification,
waiver, supplement, termination or surrender and, upon receipt of notification
regarding whether the Rating Agency Condition has been satisfied, shall notify
the Trustee, the Paying Agent, the Storm Recovery Bond Registrar and the LPSC
in writing and the Trustee shall notify the Storm Recovery Bondholders of such Series of
the proposed amendment, modification, waiver, supplement, termination or
surrender and whether the Rating Agency Condition has been satisfied with
respect thereto. The Trustee shall
consent to such proposed amendment, modification, waiver, supplement,
termination or surrender only with the prior written consent of the holders of
a majority of the Outstanding Amount of Storm Recovery Bonds of the Series or
Tranches materially and adversely affected thereby and, if the proposed
amendment, modification, waiver, supplement, termination or surrender would
increase ongoing
24
Financing
Costs, the consent of the LPSC pursuant to Section 9.07. If any such amendment, modification, waiver,
supplement, termination or surrender shall be so consented to by the Trustee or
such Holders, the Issuer agrees to execute and deliver, in its own name and at
its own expense, such agreements, instruments, consents and other documents as
shall be necessary or appropriate in the circumstances. For so long as any of the Storm Recovery
Bonds are listed on the Luxembourg Stock Exchange and the rules of that
exchange so require, notice of such proposed action will be published by an
agent to be appointed by the Issuer in accordance with such rules promptly
following its effectiveness.
(e)
If the Issuer or the Servicer proposes to amend,
modify, waive, supplement, terminate or surrender, or to agree to any
amendment, modification, supplement, termination, waiver or surrender of, the
Storm Recovery Charge Adjustment Process, the Issuer shall notify the LPSC, the
Trustee, the Paying Agent and the Storm Recovery Bond Registrar in writing and
the Trustee shall notify the Storm Recovery Bondholders of such proposal and
the Trustee shall consent thereto only with the consent of the LPSC pursuant to
Section 9.07 and the prior written consent of the holders of a majority of
the Outstanding Amount of Storm Recovery Bonds of the Series or Tranches
materially and adversely affected thereby and only if the Rating Agency
Condition has been satisfied with respect thereto.
(f)
Promptly following a default by the Seller under any
Sale Agreement, by the Administrator under the Administration Agreement, or the
occurrence of a Servicer Default under any Servicing Agreement, and at the
Issuer’s expense, the Issuer agrees to take all such lawful actions as the
Trustee may request in writing to compel or secure the performance and
observance by each of the Seller, the Administrator or the Servicer of their
obligations under and in accordance with that Sale Agreement, Administration
Agreement or Servicing Agreement, as the case may be, in accordance with the
terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with such
agreements to the extent and in the manner directed by the Trustee, including
the transmission of notices of any default by the Seller, the Administrator or
the Servicer, respectively, thereunder and the institution of legal or
administrative actions or Proceedings to compel or secure performance of their
obligations under that Sale Agreement, Administration Agreement or Servicing
Agreement, as applicable.
(g)
If the Issuer shall have knowledge of the occurrence
of a Servicer Default under any Servicing Agreement, the Issuer shall (i) promptly
give written notice thereof to the Trustee, the LPSC, the Paying Agent, the
Storm Recovery Bond Registrar and the Rating Agencies, (ii) specify in
such notice the action, if any, the Issuer is taking with respect to such
default and (iii) take such reasonable steps as are available to it to
remedy such defaults or shall take such actions as shall have been directed by
the Trustee, as the case may be,
provided
that, notwithstanding the
foregoing, the Issuer shall not take any action to terminate the Servicer’s
rights and powers under that Servicing Agreement unless a Servicer Default
shall have occurred and be continuing, and the Trustee shall not direct the
Issuer to take such action unless a Servicer Default shall have occurred and be
continuing.
(h)
As promptly as possible after the giving of notice of
termination to the Servicer, the LPSC and the Rating Agencies of the Servicer’s
rights and powers pursuant to that Servicing Agreement, the Trustee upon the written
direction of the majority of the Outstanding Amount of
25
Storm
Recovery Bonds of the related Series shall appoint a successor Servicer
(the “
Successor Servicer
”), and such Successor Servicer shall accept its
appointment by a written assumption in a form acceptable to the Issuer and the
Trustee. A person shall qualify as a
Successor Servicer only if such Person satisfies the requirements set forth in
that Servicing Agreement. If within 30
days after the delivery of the notice referred to above, a Successor Servicer
shall not have been appointed and accepted its appointment as such, the Trustee
may petition the LPSC or a court of competent jurisdiction to appoint a
Successor Servicer. In connection with
any such appointment, the Issuer may make such arrangements for the
compensation of such Successor Servicer as it and such Successor Servicer shall
agree, subject to the limitations set forth below and in that Servicing
Agreement, and in accordance with that Servicing Agreement, the Issuer shall
enter into an agreement with such Successor Servicer for the servicing of the
Storm Recovery Property related to that Series (such agreement to be in
form and substance satisfactory to the Trustee).
(i)
Upon termination of the Servicer’s rights and powers
pursuant to any Servicing Agreement, the Trustee shall promptly notify the
Issuer, the LPSC, the Storm Recovery Bondholders of the related Series and
the Rating Agencies in writing of such termination. As soon as a Successor Servicer is appointed,
the Issuer shall notify the Trustee, the LPSC, the Storm Recovery Bondholders
of the related Series, the Paying Agent, the Storm Recovery Bond Registrar and
the Rating Agencies of such appointment, specifying in such notice the name and
address of such Successor Servicer.
SECTION 3.21.
TAXES. So long as any of the
Storm Recovery Bonds are outstanding, the Issuer shall pay all taxes,
assessments and governmental charges imposed upon it or any of its properties
or assets or with respect to any of its franchises, business, income or
property before any penalty accrues thereon if the failure to pay any such
taxes, assessments and governmental charges would, after any applicable grace
periods, notices or other similar requirements, result in a Lien on the Trust
Estate.
ARTICLE IV
SATISFACTION AND
DISCHARGE; DEFEASANCE
SECTION 4.01.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE.
(a)
The Storm Recovery Bonds of any Series,
all moneys payable with respect thereto and this Indenture as it applies to
such Series shall cease to be of further effect and the Lien hereunder
shall be released with respect to such Series, Interest shall cease to accrue
on the Storm Recovery Bonds of such Series and the Trustee, on written
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Storm Recovery Bonds of such Series, when
(A)
either
(1)
all Storm Recovery Bonds of such Series theretofore
authenticated and delivered (other than (i) Storm Recovery Bonds that
26
have been destroyed, lost or stolen and that have been replaced or paid
as provided in Section 2.06 and (ii) Storm Recovery Bonds for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Issuer and thereafter repaid to the Issuer or discharged from such
trust, as provided in Section 3.03) have been delivered to the Trustee for
cancellation; or
(2)
the Issuer has irrevocably deposited or caused to be
irrevocably deposited with the Trustee cash, in trust for such purpose, in an
amount sufficient to make payments of Principal of and, premium, if any, and
Interest on the Storm Recovery Bonds of such Series and to pay and
discharge the entire indebtedness on such Storm Recovery Bonds not theretofore
delivered to the Trustee;
(B)
the Issuer has paid or caused to be paid all other
sums payable hereunder by the Issuer with respect to such Series; and
(C)
the Issuer has delivered to the Trustee an Issuer
Officer’s Certificate, an Issuer Opinion of Counsel and (if required by the TIA
or the Trustee) an Independent Certificate from an Independent registered
public accounting firm, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture with
respect to Storm Recovery Bonds of such Series have been complied with.
(b)
Subject to Sections 4.01(c) and 4.02, the Issuer
at any time may terminate (i) all its obligations under this Indenture
with respect to the Storm Recovery Bonds of any Series (“
Legal
Defeasance Option
”) or (ii) its obligations under Sections 3.05, 3.06
(other than with respect to the Defeasance Subaccounts and all funds and U.S.
Government Obligations therein), 3.07(a), (b) and (c), 3.08, 3.10, 3.16
and 3.19 and the operation of Section 5.01(iv) (other than with
respect to the Defeasance Subaccount and U.S. Government Obligations therein) (“
Covenant
Defeasance Option
”) with respect to any Series of Storm Recovery
Bonds. The Issuer may exercise the Legal
Defeasance Option with respect to any Series of Storm Recovery Bonds
notwithstanding its prior exercise of the Covenant Defeasance Option with
respect to such Series.
If the Issuer exercises the Legal Defeasance Option
with respect to any Series, the maturity of the Storm Recovery Bonds of such Series may
not be (a) accelerated because of an Event of Default or (b) except
as provided in Section 4.02, redeemed.
If the Issuer exercises the Covenant Defeasance Option with respect to
any Series, the maturity of the Storm Recovery Bonds of such Series may
not be accelerated because of an Event of Default specified in Section 5.01(iv).
Upon satisfaction of the conditions set forth herein
to the exercise of the Legal Defeasance Option or the Covenant Defeasance
Option with respect to any Series of Storm Recovery Bonds, the Trustee, on
written demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of the obligations that
are terminated pursuant to such exercise.
27
(c)
Notwithstanding Sections 4.01(a) and (b) above,
(i) rights of registration of transfer and exchange, (ii) rights of
substitution of mutilated, destroyed, lost or stolen Storm Recovery Bonds, (iii) rights
of Storm Recovery Bondholders to receive payments of Principal, premium, if
any, and Interest, but only from the amounts deposited with the Trustee for
such payments, (iv) Sections 4.03 and 4.04, (v) the rights,
obligations and immunities of the Trustee hereunder (including the rights of
the Trustee under Section 6.07 and the obligations of the Trustee under Section 4.03)
and (vi) the rights of Storm Recovery Bondholders under this Indenture
with respect to the property deposited with the Trustee payable to all or any
of them, shall survive until the Storm Recovery Bonds of the Series as to
which this Indenture or certain obligations hereunder have been satisfied and
discharged pursuant to Section 4.01(a) or 4.01(b) and have been
paid in full. Thereafter, the
obligations in Sections 6.07 and 4.04 with respect to such Series shall
survive.
SECTION 4.02.
CONDITIONS TO DEFEASANCE. The
Issuer may exercise the Legal Defeasance Option or the Covenant Defeasance
Option with respect to any Series of Storm Recovery Bonds only if:
(a)
the Issuer irrevocably deposits or causes to be
deposited in trust with the Trustee cash or U.S. Government Obligations for the
payment of Principal of and premium, if any, and Interest on such Series of
Storm Recovery Bonds to the Expected Final Payment Date or Redemption Date
therefor, as applicable, and all other amounts due and payable hereunder, such
deposit to be made in the Defeasance Subaccount for such Series of Storm
Recovery Bonds;
(b)
the deposit in the Defeasance Subaccount pursuant to
subsection (a) of this Section 4.02 constitutes proceeds from a
refunding of the Storm Recovery Bonds;
(c)
the Issuer delivers to the Trustee a certificate from
a nationally recognized Independent registered public accounting firm
expressing its opinion that the payments of Principal and Interest when due and
without reinvestment on the deposited U.S. Government Obligations plus any deposited
cash without investment will provide cash at such times and in such amounts
(but, in the case of the Legal Defeasance Option only, not more than such
amounts) as will be sufficient to pay in respect of the Storm Recovery Bonds of
such Series (i) subject to clause (ii), Principal in accordance with
the Expected Amortization Schedule therefor, (ii) if such Series is
to be redeemed, the redemption price therefor on the Redemption Date therefor
and (iii) Interest when due;
(d)
in the case of the Legal Defeasance Option, the
expiration of 95 days after the deposit is made and during such 95-day period
no Default specified in Section 5.01(v) or (vi) shall have
occurred and be continuing at the end of the period;
provided
,
however
,
that in determining whether a default under Section 5.01(v) has
occurred, the requirement that the decree or order shall remain unstayed and in
effect for 90 days shall be disregarded;
(e)
no Default has occurred and is continuing on the day
of such deposit and after giving effect thereto;
(f)
in the case of the Legal Defeasance Option, the Issuer
delivers to the Trustee an Issuer Opinion of Counsel stating that (i) the
Issuer has received from, or there has been
28
published
by, the Internal Revenue Service a ruling, or (ii) since the date of
execution of this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion shall confirm that, the Holders of the Storm Recovery Bonds of such Series will
not recognize income, gain or loss for federal income tax purposes as a result
of the exercise of such Legal Defeasance Option and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such legal defeasance had not occurred;
(g)
in the case of the Covenant Defeasance Option, the
Issuer delivers to the Trustee an Issuer Opinion of Counsel to the effect that
the Holders of the Storm Recovery Bonds of such Series will not recognize
income, gain or loss for federal income tax purposes as a result of the
exercise of such Covenant Defeasance Option and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred;
(h)
the Issuer delivers to the Trustee an Issuer Officer’s
Certificate and an Issuer Opinion of Counsel, each stating that all conditions
precedent to the satisfaction and discharge of the Storm Recovery Bonds of such
Series to the extent contemplated by this Article IV have been
complied with;
(i)
the Issuer delivers to the Trustee an Opinion of
Counsel to the effect that (i) in a case under the Bankruptcy Code in which
Cleco Power (or any of its Affiliates, other than the Issuer) is the debtor,
the court would hold that the deposited cash or U.S. Government Obligations
would not be in the bankruptcy estate of Cleco Power (or any of its Affiliates,
other than the Issuer, that deposited the cash or U.S. Government Obligations);
and (ii) in the event Cleco Power (or any of its Affiliates, other than
the Issuer, that deposited the cash or U.S. Government Obligations), were to be
a debtor in a case under the Bankruptcy Code, the court would not disregard the
separate legal existence of Cleco Power (or any of its Affiliates, other than
the Issuer, that deposited the cash or U.S. Government Obligations) and the
Issuer so as to order substantive consolidation under the Bankruptcy Code of
the Issuer’s assets and liabilities with the assets and liabilities of Cleco
Power (or any of its Affiliates, other than the Issuer, that deposited the cash
or U.S. Government Obligations), and
(j)
the Rating Agency Condition shall have been satisfied
with respect to the exercise of any Legal Defeasance Option or Covenant
Defeasance Option.
Notwithstanding any other provision of this Section 4.02
to the contrary, no delivery of cash or U.S. Government Obligations to the
Trustee under this Section shall terminate any obligations of the Issuer
under this Indenture with respect to any Storm Recovery Bonds which are to be
redeemed prior to the Expected Final Payment Date therefor until such Storm
Recovery Bonds shall have been irrevocably called or designated for redemption
on a date thereafter on which such Storm Recovery Bonds may be redeemed in
accordance with the provisions of this Indenture and proper notice of such
redemption shall have been given in accordance with the provisions of this Indenture
or the Issuer shall have given the Trustee, in form satisfactory to the
Trustee, irrevocable written instructions to give, in the manner and at the
times prescribed herein, notice of redemption of such Series.
29
SECTION 4.03.
APPLICATION OF TRUST MONEY. All
moneys or U.S. Government Obligations deposited with the Trustee pursuant to Section 4.01
or 4.02 hereof with respect to any Series of Storm Recovery Bonds shall be
held in trust in the Defeasance Subaccount for such Series and applied by
it, in accordance with the provisions of the Storm Recovery Bonds and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Trustee may determine, to the Holders of the particular Storm Recovery Bonds
for the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for Principal, premium, if
any, and Interest. Such moneys shall be
segregated and held apart solely for paying such Storm Recovery Bonds and such
Storm Recovery Bonds shall not be entitled to any amounts on deposit in the
Collection Account other than amounts on deposit in the Defeasance Subaccount
for such Storm Recovery Bonds.
SECTION 4.04.
REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with the satisfaction and
discharge of this Indenture or the Covenant Defeasance Option or Legal
Defeasance Option with respect to the Storm Recovery Bonds of any Series, all
moneys then held by any Paying Agent other than the Trustee under the
provisions of this Indenture with respect to such Storm Recovery Bonds shall,
upon written demand of the Issuer, be paid to the Trustee to be held and
applied according to Section 4.03 and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
SECTION 5.01.
EVENTS OF DEFAULT. “
Event of
Default
” with respect to any Series, wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i)
default in the payment of any Interest on
any Storm Recovery Bond of such Series when the same becomes due and
payable and the continuation of such default for five Business Days;
(ii)
default in the payment of the then unpaid
Principal of any Storm Recovery Bond of such Series on the Series Final
Maturity Date for such Series or, if applicable, any Tranche of such Series on
the Tranche Final Maturity Date for such Tranche;
(iii)
default
in the payment of the redemption price for any Storm Recovery Bond on the
Redemption Date therefor;
(iv)
default in the observance or performance
of any covenant or agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or performance of which is
specifically dealt with in clause (i), (ii) or (iii) above), any
covenant or agreement of the Issuer made in any credit enhancement agreement
permitted under Section 3.13 hereof and any Series Supplement, or any
representation or warranty of the Issuer made herein or therein or in any
certificate or
30
other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when made (other than a
covenant, agreement or representation or warranty expressly included herein or
in a Series Supplement solely for the benefit of a different Series of
Storm Recovery Bonds), and any such default shall continue or not be cured, for
a period of 30 days after the earlier of (A) there shall have been given,
by registered or certified mail, to the Issuer by the Trustee or to the Issuer
and the Trustee by the Holders of at least 25% of the Outstanding Amount of
Storm Recovery Bonds of such Series, a written notice specifying such default
or incorrect representation or warranty and requiring it to be remedied and
stating that such notice is a “Notice of Default” hereunder or (B) the
date the Issuer has knowledge of the default;
(v)
the filing of a decree or order for
relief by a court having jurisdiction in respect of the Issuer or any
substantial part of the Trust Estate securing such Series in an
involuntary case or Proceeding under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for the Issuer or its property or for any substantial part
of the Series Trust Estate securing such Series, or ordering the
winding-up or liquidation of the Issuer’s affairs, and such decree or order
shall remain unstayed and in effect for a period of 90 consecutive days;
(vi)
the commencement by the Issuer of a
voluntary case or Proceeding under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the consent by
the Issuer to the entry of an order for relief in an involuntary case under any
such law, or the consent by the Issuer to the appointment or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Series Trust
Estate securing such Series, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer generally
to pay its debts as such debts become due, or the taking of action by the
Issuer in furtherance of any of the foregoing;
(vii)
any
act or failure to act by the State of Louisiana or any of its agencies
(including the LPSC), officers or employees that violates or is not in
accordance with the pledge of the State of Louisiana in Section 1234 of
the Securitization Act or the Commission Pledge in the Financing Order,
including, without limitation, the failure of the LPSC to implement the
statutorily guaranteed true-up mechanism in accordance with the Financing
Order; or
(viii)
any
other event designated as an Event of Default in the related Series Supplement.
SECTION 5.02.
ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default other than an Event of
Default under Section 5.01(vii) occurs and is continuing, then and in
every such case either the Trustee or the Holders holding not less than a
majority of the Outstanding Amount of Storm Recovery Bonds of the Series with
respect to which an Event of Default has occurred, voting as a class, may, but
need not, declare all the Storm Recovery Bonds of such Series to be
immediately due and payable, by a notice in
31
writing to the Issuer (and to the Trustee if given by Storm Recovery
Bondholders), and upon any such declaration the unpaid principal amount of the
Storm Recovery Bonds of such Series, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of
maturity has been made and before a judgment or decree for payment of the money
due has been obtained by the Trustee as hereinafter in this Article V
provided, the Holders holding not less than a majority of the Outstanding
Amount of Storm Recovery Bonds of such Series, by written notice to the Issuer
and the Trustee, may rescind and annul such declaration and its consequences
if:
(i)
the Issuer has paid or deposited with the
Trustee, for deposit in the General Subaccount of the Collection Account of
such Series, a sum sufficient to pay
(A)
all payments of Principal of and premium, if any, and
Interest on all Storm Recovery Bonds of such Series due and owing at such
time as if such Event of Default had not occurred and was not continuing and
all other amounts that would then be due hereunder or upon such Storm Recovery
Bonds as if the Event of Default giving rise to such acceleration had not
occurred and was not continuing; and
(B)
all sums paid or advanced by the Trustee hereunder
with respect to such Series and the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel with
respect to such Series; and
(ii)
all Events of Default other than the
nonpayment of the Principal of the Storm Recovery Bonds of the Series that
has become due solely by such acceleration have been cured or waived as
provided in Section 5.12.
No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
SECTION 5.03.
COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
(a)
The Issuer covenants that if (i) Default is made
in the payment of any Interest on any Storm Recovery Bond when such Interest
becomes due and payable and such Default continues for five Business Days, (ii) Default
is made in the payment of the then unpaid Principal of any Storm Recovery Bond
on the Series Final Maturity Date or Tranche Final Maturity Date, as
applicable, therefor, or (iii) Default is made in the payment of the
redemption price for any Storm Recovery Bond on the Redemption Date therefor,
the Issuer shall, upon demand of the Trustee, pay to it, for the benefit of the
Holders of the Storm Recovery Bonds of such Series, such amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee
and its agents and counsel and the whole amount then due and payable on such
Storm Recovery Bonds for Principal, premium, if any, and Interest, with
interest upon the overdue Principal and premium, if any, and, to the extent
payment at such rate of interest shall be legally enforceable, upon overdue
installments of Interest, at the respective Bond Rate of such Series or
the applicable Tranche of such Series.
32
(b)
In case the Issuer shall fail forthwith to pay the
amounts specified in Section 5.03(a) upon such demand, the Trustee,
in its own name and as trustee of an express trust, may institute a Proceeding
for the collection of the sums so due and unpaid, and may prosecute such
Proceeding to judgment or final decree, and subject to the limitations on
recourse set forth herein, may enforce the same against the Issuer or other
obligor upon such Storm Recovery Bonds and collect in the manner provided by
law out of the Series Trust Estate and the proceeds thereof, the whole
amount then due and payable on the Storm Recovery Bonds of such Series for
Principal, premium, if any, and Interest, with interest upon the overdue
Principal and premium, if any, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of Interest,
at the respective rate borne by the Storm Recovery Bonds of such Series or
the applicable Tranche of such Series and in addition thereto such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee and its agents and counsel.
(c)
If an Event of Default other than the Event of Default
described in Section 5.01(vii) occurs and is continuing, the Trustee
may, as more particularly provided in Section 5.04, proceed to protect and
enforce its rights and the rights of the Storm Recovery Bondholders of all
materially and adversely affected Series by such appropriate Proceedings
as the Trustee shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Trustee by this Indenture or by law, including foreclosing or otherwise
enforcing the Lien on the Series Trust Estate securing those Series of
Storm Recovery Bonds or applying to the LPSC or a court of competent
jurisdiction for sequestration of revenues arising with respect to such Storm
Recovery Property.
(d)
In case there shall be pending, relative to the Issuer
or any other obligor upon any Series of Storm Recovery Bonds or any Person
having or claiming an ownership interest in the Series Trust Estate
securing that Series, Proceedings under Title 11 of the United States Code or
any other applicable federal or State bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon that Series of Storm Recovery
Bonds, or to the creditors or property of the Issuer or such other obligor, the
Trustee, irrespective of whether the principal of that Series of Storm
Recovery Bonds shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section, shall be entitled
and empowered to the extent permitted by applicable law, by intervention in
such Proceedings or otherwise:
(i)
to file and prove a claim or claims for the whole
amount of Principal, premium, if any, and Interest owing and unpaid in respect
of the Storm Recovery Bonds and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for reasonable compensation to the Trustee and each predecessor
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances made,
by
33
the Trustee and each predecessor Trustee, except as a
result of negligence or bad faith) and of the Storm Recovery Bondholders
allowed in such Proceedings;
(ii)
unless prohibited by applicable law and regulations,
to vote on behalf of the Holders of Storm Recovery Bonds in any election of a
trustee, a standby trustee or Person performing similar functions in any such
Proceedings;
(iii)
to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Storm Recovery Bondholders and of the Trustee
on their behalf;
(iv)
to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee or the Holders of Storm Recovery Bonds allowed in any judicial
Proceedings relative to the Issuer, its creditors and its property; and
(v)
to participate as a member, voting or otherwise, of
any official committee of creditors appointed in such matter,
and any trustee, receiver, liquidator, custodian or
other similar official in any such Proceeding is hereby authorized by each of
such Storm Recovery Bondholders to make payments to the Trustee, and, in the
event that the Trustee shall consent to the making of payments directly to such
Storm Recovery Bondholders, to pay to the Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Trustee and
each predecessor Trustee except as a result of negligence or bad faith.
(e)
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Storm Recovery Bondholder any plan of reorganization, arrangement,
adjustment or composition affecting the Storm Recovery Bonds or the rights of
any Holder thereof or to authorize the Trustee to vote in respect of the claim
of any Storm Recovery Bondholder in any such Proceeding except, as aforesaid,
to vote for the election of a trustee in bankruptcy or similar Person.
(f)
All rights of action and of asserting claims under
this Indenture, or under any Series of Storm Recovery Bonds, may be
enforced by the Trustee without the possession of any of those Storm Recovery
Bonds or the production thereof in any trial or other Proceedings relative
thereto, and any such action or Proceedings instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment, subject to the payment of the expenses, disbursements and
compensation of the Trustee, each predecessor Trustee and their respective
agents and attorneys, shall be for the ratable benefit of the Holders of those
Storm Recovery Bonds.
(g)
In any Proceedings brought by the Trustee (and also
any Proceedings involving the interpretation of any provision of this Indenture
to which the Trustee shall be a party), the Trustee shall be held to represent
all the Holders of the Storm Recovery Bonds, and it shall not be necessary to
make any Storm Recovery Bondholder a party to any such Proceedings.
34
SECTION 5.04.
REMEDIES; PRIORITIES. (a) If
an Event of Default other than the Event of Default described in Section 5.01(vii) occurs
and is continuing, the Trustee shall do one or more of the following at the
written direction of the holders of a majority of the Outstanding Amount of
Storm Recovery Bonds of such Series affected thereby or may do one or more
of the following in reliance upon Sections 6.01 and 6.02 of this Indenture
(subject, in either event, to Section 5.05):
(i)
institute Proceedings in its own name and
as trustee of an express trust for the collection of all amounts then payable
on the Storm Recovery Bonds or under this Indenture with respect thereto,
whether by declaration or otherwise, enforce any judgment obtained and collect
from the Issuer or the Servicer moneys adjudged due;
(ii)
institute Proceedings from time to time
for the complete or partial foreclosure of this Indenture with respect to the Series Trust
Estate securing such Series;
(iii)
exercise
any remedies of a secured party under the UCC or Section 1231 of the
Securitization Act or any other applicable law and take any other appropriate
action to protect and enforce the rights and remedies of the Trustee and the
Holders of the Storm Recovery Bonds of such Series;
(iv)
sell the Series Trust Estate
securing such Series or any portion thereof or rights or interest therein,
at one or more public or private sales called and conducted in any manner
permitted by law; and
(v)
exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Administrator, the Seller and
the Servicer under or in connection with, and pursuant to the terms of, the
Administration Agreement or any applicable Sale Agreement or Servicing
Agreement;
provided
,
however
, that the Trustee may not sell or
otherwise liquidate any portion of the Series Trust Estate securing such Series following
an Event of Default, unless the Final Payment Date of the Storm Recovery Bonds
of such Series has occurred or the Storm Recovery Bonds have been declared
due and payable and (A) the Holders of 100% of the Outstanding Amount of
the Storm Recovery Bonds of all Series consent thereto, (B) the
proceeds of such sale or liquidation distributable to the Storm Recovery
Bondholders of such Series are sufficient to discharge in full all amounts
then due and unpaid upon such Storm Recovery Bonds for Principal, premium, if
any, and Interest on all Outstanding Storm Recovery Bonds or (C) the
Trustee determines that the Series Trust Estate securing such Series will
not continue to provide sufficient funds for all payments on the Storm Recovery
Bonds of such Series as they would have become due if the Storm Recovery
Bonds had not been declared due and payable, and the Trustee obtains the
written consent of Holders of 66-2/3% of the Outstanding Amount of the Storm
Recovery Bonds of such Series. In
determining such sufficiency or insufficiency with respect to clause (B) and
(C), the Trustee may, but need not, obtain and conclusively rely upon an
opinion of an Independent investment banking firm or Independent registered
public accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Series Trust Estate for
such purpose.
35
If an Event of Default
occurs and is continuing, the amounts on deposit in the Collection Account
shall continue to be distributed in accordance with Sections 8.02(d) and
(e).
(b) If an Event of Default under Section 5.01(vii) occurs
and is continuing, the Trustee, for the benefit of the Storm Recovery
Bondholders, shall be entitled and empowered to the extent permitted by
applicable law to institute or participate in Proceedings reasonably necessary
to compel performance of or to enforce the pledge of the State of Louisiana in Section 1234
of the Securitization Act or the Commission Pledge in the Financing Order and
to collect any monetary damages incurred by the Storm Recovery Bondholders or
the Trustee as a result of any such Event of Default, and may prosecute any
such Proceeding to final judgment or decree.
Such remedy shall be the only remedy that the Trustee may exercise if
the only Event of Default that has occurred and is continuing is an Event of
Default under Section 5.01(vii).
(c) If the Trustee collects any money
pursuant to this Article V, it shall pay out such money in accordance with
the priorities set forth in Section 8.02(d) and (e).
SECTION 5.05. OPTIONAL PRESERVATION OF THE TRUST
ESTATE. If the Storm Recovery Bonds of a
Series have been declared to be due and payable under Section 5.02
following an Event of Default and such declaration and its consequences have
not been rescinded and annulled, the Trustee may, but need not, elect, as
provided in Section 5.11(iii), to maintain possession of the Series Trust
Estate securing that Series in accordance with Section 5.04(a). It is the desire of the parties hereto and
the Storm Recovery Bondholders that there be at all times sufficient funds for
the payment of Principal of and premium, if any, and Interest on the Storm
Recovery Bonds of any Series, and the Trustee shall take such desire into
account when determining whether or not to maintain possession of the Series Trust
Estate securing that Series or sell or liquidate the same. In determining whether to maintain possession
of the Series Trust Estate or sell or liquidate the same, the Trustee may,
but need not, obtain and conclusively rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Series Trust
Estate for such purpose.
SECTION 5.06. LIMITATION OF PROCEEDINGS. No Holder of any Storm Recovery Bond of any Series shall
have any right to institute any Proceeding, judicial or otherwise, or to avail
itself of the remedies provided in 1231 of the Securitization Act, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such
Holder has previously given written notice to the Trustee of a continuing Event
of Default with respect to the affected Series;
(ii) the
Holders of not less than a majority of the Outstanding Amount of the Storm
Recovery Bonds of such Series have made written request to the Trustee to
institute such Proceeding in respect of such Event of Default in its own name
as Trustee hereunder;
36
(iii) such
Holder or Holders have offered to the Trustee security or indemnity reasonably
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity has failed to institute such Proceedings; and
(v) no
direction inconsistent with such written request has been given to the Trustee
during such 60-day period by the Holders of a majority of the Outstanding
Amount of the Storm Recovery Bonds of such Series,
it being understood and intended that no one or more
Holders of Storm Recovery Bonds shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other Holders of Storm Recovery Bonds or
to obtain or to seek to obtain priority or preference over any other Holders or
to enforce any right under this Indenture, except in the manner herein
provided.
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Storm
Recovery Bonds, each representing less than a majority of the Outstanding
Amount of the Storm Recovery Bonds of all Series, the Trustee may determine
what action, if any, shall be taken, notwithstanding any other provisions of
this Indenture.
SECTION 5.07. UNCONDITIONAL RIGHTS OF STORM RECOVERY
BONDHOLDERS TO RECEIVE PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. Notwithstanding any other provisions in this
Indenture, the Holder of any Storm Recovery Bond shall have the right, which is
absolute and unconditional, and shall not be impaired without the consent of
each such Holder, (a) to receive payment of (i) the Interest, if any,
on such Storm Recovery Bond on or after the due dates thereof expressed in such
Storm Recovery Bond or in this Indenture, (ii) the unpaid Principal, if
any, of such Storm Recovery Bonds on or after the Final Maturity Date therefor
or (iii) in the case of redemption, the unpaid Principal, if any, of and
premium, if any, and Interest, if any, on such Storm Recovery Bond on or after
the Redemption Date therefor and (b) to institute suit for the enforcement
of any such payment, and such right shall not be impaired without the consent
of such Holder.
SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Storm Recovery
Bondholder has instituted any Proceeding to enforce any right or remedy under
this Indenture and such Proceeding has been discontinued or abandoned for any
reason or has been determined adversely to the Trustee or to such Storm
Recovery Bondholder, then and in every such case the Issuer, the Trustee and
the Storm Recovery Bondholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the Storm
Recovery Bondholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or
reserved to the Trustee or to the Storm Recovery Bondholders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to
the
37
extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission by the Trustee or any
Storm Recovery Bondholder to exercise any right or remedy accruing upon any
Default or Event of Default shall impair any such right or remedy or constitute
a waiver of any such Default or Event of Default or an acquiescence
therein. Every right and remedy given by
this Article V or by law to the Trustee or to the Storm Recovery
Bondholders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Storm Recovery Bondholders, as the case may
be.
SECTION 5.11. CONTROL BY STORM RECOVERY BONDHOLDERS. The Majority Holders (or, if less than all Series or
Tranches are affected, the Holders of a majority of the Outstanding Amount of
the Storm Recovery Bonds of the affected Series or Tranche or Tranches)
shall have the right to direct the time, method and place of conducting any
Proceeding for any remedy available to the Trustee with respect to the Storm Recovery
Bonds (or the Storm Recovery Bonds of such affected Series or Tranche or
Tranches) or exercising any trust or power conferred on the Trustee with
respect to the Storm Recovery Bonds (or the Storm Recovery Bonds of such
affected Series or Tranche or Tranches);
provided
that
(i) such
direction shall not be in conflict with any rule of law or with this
Indenture;
(ii) any
direction to the Trustee to sell or liquidate the Trust Estate shall be by the
Holders of Storm Recovery Bonds representing not less than 100% of the
Outstanding Amount of the Storm Recovery Bonds of all Series;
(iii) if
the conditions set forth in Section 5.05 have been satisfied and the
Trustee elects to retain the Series Trust Estate securing such Series pursuant
to such Section and elects not to sell or liquidate the same, then any
direction to the Trustee by Holders of Storm Recovery Bonds representing less
than 100% of the Outstanding Amount of the Storm Recovery Bonds of all affected
Series to sell or liquidate such Series Trust Estate shall be of no
force and effect; and
(iv) the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction;
provided
,
however
, that, subject to Section 6.01,
the Trustee need not take any action that it determines might involve it in
liability for which it reasonably believes it will not be indemnified to its
reasonable satisfaction against the costs, expenses and liabilities which might
be incurred by it in complying with this request. The Trustee also need not take any action
that it determines might materially and adversely affect the rights of any
Storm Recovery Bondholders not consenting to such action.
SECTION 5.12. WAIVER OF PAST DEFAULTS. Prior to the declaration of the acceleration
of the maturity of the Storm Recovery Bonds of a Series affected as
provided in
38
Section 5.02, the Holders of a majority of the
Outstanding Amount of Storm Recovery Bonds of such Series or Tranche
affected thereby, by written notice to the Trustee, may waive any past Default
or Event of Default and its consequences except a Default (i) in payment
of Principal of or premium, if any, or Interest on any of the Storm Recovery
Bonds or (ii) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the Holder of each Storm Recovery
Bond of such Series or Tranche affected.
In the case of any such waiver, the Issuer, the Trustee and the Holders
of the Storm Recovery Bonds shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to
exist and be deemed to have been cured and not to have occurred, and any Event
of Default arising therefrom shall be deemed to have been cured and not to have
occurred, for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 5.13.
UNDERTAKING FOR COSTS. All
parties to this Indenture agree, and each Holder of any Storm Recovery Bond by
such Holder’s acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys’ fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to (a) any
suit instituted by the Trustee, (b) any suit instituted by any Storm
Recovery Bondholder, or group of Storm Recovery Bondholders, in each case
holding in the aggregate more than 10% of the Outstanding Amount of the Storm
Recovery Bonds of a Series or (c) any suit instituted by any Storm
Recovery Bondholder for the enforcement of the payment of (i) Interest on
any Storm Recovery Bond on or after the due dates expressed in such Storm
Recovery Bond and in this Indenture, (ii) the unpaid Principal, if any, of
any Storm Recovery Bond on or after the Series Final Maturity Date or
Tranche Final Maturity Date, if applicable, therefor or (iii) in the case
of redemption, the unpaid Principal of and premium, if any, and Interest on any
Storm Recovery Bond on or after the Redemption Date therefor.
SECTION 5.14.
WAIVER OF STAY OR EXTENSION LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead or in any manner whatsoever, claim
or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, that may affect the covenants
or the performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 5.15.
ACTION ON STORM RECOVERY BONDS.
The Trustee’s right to seek and recover judgment on the Storm Recovery
Bonds or under this Indenture shall not be affected by the seeking, obtaining
or application of any other relief under or with respect to this
39
Indenture. Neither the Lien of this Indenture nor any
rights or remedies of the Trustee or the Storm Recovery Bondholders shall be
impaired by the recovery of any judgment by the Trustee against the Issuer or
by the levy of any execution under such judgment upon any portion of the Trust
Estate or upon any of the other assets of the Issuer.
ARTICLE VI
THE TRUSTEE
SECTION 6.01. DUTIES AND LIABILITIES OF TRUSTEE.
(a)
If an Event of Default has occurred and
is continuing, the Trustee shall exercise the rights and powers vested in it by
this Indenture and use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person’s own affairs.
(b)
Except during the continuance of an Event
of Default:
(i) the Trustee is hereby authorized and
undertakes to execute, deliver and perform the Basic Documents to the extent
called for by such documents and otherwise to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its
part, the Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of this
Indenture.
(c)
The Trustee may not be relieved from
liability for its own negligent action, its own negligent failure to act or its
own willful misconduct, except that:
(i) this subsection (c) does not
limit the effect of subsection (b) of
this Section 6.01;
(ii) the Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer unless it is
proved that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in accordance
with a direction received by it hereunder.
(d)
Every provision of this Indenture that in
any way relates to the Trustee is subject to subsections (a), (b) and (c) of
this Section 6.01.
(e)
The Trustee shall not be liable for
interest on any money received by it except as provided in this Indenture.
40
(f) Money held in trust by the Trustee
need not be segregated from other funds held by the Trustee except to the
extent required by law or the terms of this Indenture, the Administration
Agreement or the applicable Sale Agreement or Servicing Agreement.
(g) No provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
liability, financial or otherwise, in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if it shall have
reasonable grounds to believe that repayments of such funds or indemnity
reasonably satisfactory to it against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Trustee shall be subject to the provisions of this Section 6.01 and
to the provisions of the TIA.
(i) Under no circumstances shall the
Trustee be liable for any indebtedness of the Issuer, the Seller, the
Administrator or the Servicer evidenced by or arising under the Storm Recovery
Bonds or any Basic Document.
(j) On or before March 15
th
of each fiscal year ending December 31, with respect to which the Issuer
is obligated to file reports with the Commission pursuant to the Exchange Act,
the Trustee shall (i) deliver, at the expense of the Issuer, to the Issuer
a report (addressed to the Issuer and signed by an authorized officer of the
Trustee) regarding the Trustee’s assessment of compliance, during the
immediately preceding fiscal year ending December 31, with each of the
applicable servicing criteria specified on
Exhibit A
hereto as
required under Rules 13a-18 and 15d-18 of the Exchange Act and
Item 1122 of Regulation AB, together with such backup certification as to
compliance within the knowledge or under the control of the Trustee as the
Servicer may reasonably request and (ii) deliver to the Issuer a report of
an Independent registered public accounting firm that attests to and reports
on, in accordance with Rules 1-02(a)(3) and 2-02(g) of
Regulation S-X under the Securities Act and the Exchange Act, the assessment of
compliance made by the Trustee and delivered pursuant to
clause (i)
of
this subsection 6.01(j).
SECTION 6.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely conclusively and
shall be fully protected in acting or refraining from acting in accordance with
any document believed by it to be genuine and to have been signed or presented
by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains
from acting, it may require an Issuer Officer’s Certificate or an Issuer
Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on an Issuer Officer’s Certificate or an Issuer Opinion of Counsel.
(c) The Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly or
by or through agents or attorneys or a custodian or nominee, and the Trustee
shall not be responsible for any misconduct or negligence on the part of, or
for
41
the supervision of, any such agent, attorney,
custodian or nominee appointed with due care by it thereunder.
(d) The Trustee shall not be liable for
any action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers;
provided
,
however
,
that the Trustee’s conduct does not constitute willful misconduct, negligence
or bad faith.
(e) The Trustee may consult with counsel,
and the advice or opinion of counsel with respect to legal matters relating to
this Indenture and the Storm Recovery Bonds shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(f) The Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by or pursuant
to this Indenture at the request, order or direction of any of the Holders
unless such Holders shall have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that might be
incurred by it in compliance with such request, order or direction.
(g) In the event that the Trustee is also
acting in the capacity of Paying Agent or Storm Recovery Bond Registrar
hereunder, the rights, protections, immunities and indemnities afforded to the
Trustee pursuant to this Article VI shall also be afforded to the Trustee
in its capacity as Paying Agent or Storm Recovery Bond Registrar.
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other
capacity may become the owner or pledgee of Storm Recovery Bonds and may
otherwise deal with the Issuer or its affiliates with the same rights it would
have if it were not Trustee. Any Paying
Agent, Storm Recovery Bond Registrar, co-registrar or co-paying agent may do
the same with like rights. However, the
Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. TRUSTEE’S DISCLAIMER. The Trustee shall not be responsible for and
makes no representation as to the validity or adequacy of this Indenture or the
Storm Recovery Bonds. The Trustee shall
not be accountable for the Issuer’s use of the proceeds from the Storm Recovery
Bonds, and the Trustee shall not be responsible for any statement of the Issuer
in the Indenture or in any document issued in connection with the sale of the
Storm Recovery Bonds or in the Storm Recovery Bonds other than the Trustee’s
certificate of authentication. The
Trustee shall not be responsible for the form, character, genuineness,
sufficiency, value or validity of any of the Trust Estate, or for or in respect
of the validity or sufficiency of the Storm Recovery Bonds (other than the
certificate of authentication for the Storm Recovery Bonds) or the Basic
Documents and the Trustee shall in no event assume or incur any liability, duty
or obligation to any Holder of a Storm Recovery Bond, other than as expressly
provided for in this Indenture. The
Trustee shall not be liable for the default or misconduct of the Issuer, the
Seller, the Administrator, the Servicer or any Manager under any Basic Document
or otherwise and the Trustee shall have no obligation or liability to perform
the obligations of the Issuer.
42
SECTION 6.05.
NOTICE OF DEFAULTS. If a Default
occurs and is continuing with respect to any Tranche or Series and if it
is actually known to a Responsible Officer of the Trustee, the Trustee shall
mail to the LPSC, each Rating Agency and to each Holder of Storm Recovery Bonds
of all Tranches or Series affected thereby notice of the Default within 10
Business Days after it is actually known to a Responsible Officer of the
Trustee. Except in the case of a Default
in payment of Principal of or premium, if any, or Interest on any Storm
Recovery Bond, the Trustee may withhold the notice if and so long as a Responsible
Officer of the Trustee in good faith determines that withholding the notice is
in the interests of Storm Recovery Bondholders.
SECTION 6.06.
REPORTS BY TRUSTEE TO HOLDERS.
(a) If applicable and so long as Storm
Recovery Bonds are Outstanding, within the prescribed period of time for tax reporting
purposes after the end of each calendar year, the Storm Recovery Bond Registrar
or, in its absence or failure the Paying Agent, shall deliver to each relevant
current or former Holder of Storm Recovery Bonds such information as may be
required to enable such Holder to prepare its federal and State income tax
returns.
(b) With respect to each Series and
Tranche of Storm Recovery Bonds, on each Payment Date therefor, upon receipt by
the Trustee from the Servicer of the “
Semiannual Servicer’s Certificate
,”
the form of which is attached hereto as Schedule 1, the Storm Recovery Bond
Registrar or, in its absence or failure the Paying Agent, shall make such
Semiannual Servicer’s Certificate available to each Holder (and beneficial
owner) of Storm Recovery Bonds on its website www.usbank.com/abs and will
deliver such Semiannual Servicer’s Certificate to the LPSC and to each Rating
Agency, which will include (to the extent applicable) the following information
(and any other information so specified in the Series Supplement for such
Series) as to the Storm Recovery Bonds of such Series and Tranche with
respect to such Payment Date or the period since the previous Payment Date, as
applicable:
(i) the amount to be paid to Holders of
the Storm Recovery Bonds of such Series and Tranche in respect of
Principal, such amount also to be expressed as a dollar amount per thousand;
(ii) the amount to be paid to Holders of
the Storm Recovery Bonds of such Series and Tranche in respect of
Interest, such amount also to be expressed as a dollar amount per thousand;
(iii) the Storm Recovery Bond Balance, after
giving effect to the payments to be made on such Payment Date, and the
Projected Storm Recovery Bond Balance, in each case for such Series and
Tranche and as of such Payment Date;
(iv) the amount on deposit in the Capital
Subaccount for such Series as of such Payment Date;
(v) the amount, if any, on deposit in the
Excess Funds Subaccount for such Series as of such Payment Date;
43
(vi) the amount to be paid to the Trustee
relating to that Series on such Payment Date;
(vii) the amount to be paid to the Servicer
relating to that Series on such Payment Date; and
(viii) any other transfers and payments
relating to that Series made pursuant to this Indenture.
(c) If any Storm Recovery Bonds are
listed on the Luxembourg Stock Exchange and rules of such exchange so
require, the Issuer’s listing agent shall arrange for publication in accordance
with such rules a notice that such certificate shall be available with the
Issuer’s listing agent in Luxembourg appointed pursuant to the second paragraph
of Section 3.02.
(d) The Storm Recovery Bond Registrar’s
or Paying Agent’s responsibility for distributing the information described in
subsection (b) above to Holders of a Series of Storm Recovery Bonds
is limited to the availability, timeliness and accuracy of the information
provided by the Servicer pursuant to Sections 3 and 4 and Annex 1 of the
applicable Servicing Agreement.
SECTION 6.07. COMPENSATION AND INDEMNITY.
Subject in all respects to
the provisions of Article VIII hereof, the Issuer shall pay to the Trustee
from time to time reasonable compensation for its services as set forth in the
fee schedule between the Trustee and Cleco Power dated October 18, 2007. To the extent permitted by law, the Trustee’s
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Issuer shall
reimburse the Trustee for all reasonable out-of-pocket expenses, disbursements
and advances incurred or made by it, including costs of collection, in addition
to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses, disbursements
and advances of the Trustee’s agents, counsel, accountants and experts. The Issuer shall indemnify and hold harmless
the Trustee and its officers, directors, employees and agents from and against
any and all Losses or other amounts whatsoever (including reasonable counsel
fees and expenses) directly or indirectly incurred by the Trustee in connection
with the administration of this trust, the enforcement of this trust and all of
the Trustee’s rights, powers and duties under this Indenture (including this Section 6.07)
and the performance by the Trustee of the duties and obligations of the Trustee
under or pursuant to this Indenture, the Administration Agreement and any Sale
Agreement or Servicing Agreement;
provided
,
however
, that
notwithstanding the foregoing, the failure to pay to the Trustee by the Issuer
(including without limitation from Collections deposited into the Collection
Account or through the Storm Recovery Charge Adjustment Process) any amounts in
respect of indemnification hereunder in excess of an aggregate amount equal to
any Indemnity Amounts payable to the Trustee in accordance with Section 8.02(d) of
this Indenture shall not constitute a Default or Event of Default under Section 5.01
of this Indenture. The Trustee shall
notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Trustee so to notify the
Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend the claim and the
Trustee may have separate counsel and the Issuer shall pay the reasonable fees
and expenses of such counsel. Notwithstanding
the foregoing, the
44
Issuer need not reimburse any expense or indemnify
against any Loss incurred by the Trustee (i) through the Trustee’s own
willful misconduct, negligence or bad faith or (ii) to the extent the
Trustee was reimbursed for or indemnified against any such Loss by the Seller
or the Servicer pursuant to the Administration Agreement or any Sale Agreement
or Servicing Agreement. The obligations of
the Issuer under this Section shall survive the termination of this
Agreement and the earlier resignation or removal of the Trustee.
When the Trustee incurs expenses after the occurrence
of a Default specified in Section 5.01(v) or (vi) with respect
to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
federal or State bankruptcy, insolvency or similar law.
SECTION 6.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any time upon 30
days’ written notice to the Issuer. The
Issuer shall remove the Trustee by written notice if:
(i) the Trustee fails to comply with Section 6.11;
(ii) the Trustee is adjudged a bankrupt or
insolvent;
(iii) a receiver or other public officer
takes charge of the Trustee or its property;
(iv) the Trustee otherwise becomes
incapable of acting; or
(v) the Trustee fails to provide to the
Issuer any information reasonably requested by the Issuer pertaining to the
Trustee and necessary for the Issuer or Cleco Power or its parent entity to
comply with its reporting obligations under the Exchange Act and Regulation AB
and such failure is not resolved to the Issuer’s and the Trustee’s mutual
satisfaction within a reasonable period of time.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the “
Retiring Trustee
”), the Issuer shall promptly
appoint a successor Trustee.
In addition, the Majority Holders may remove the
Trustee by so notifying the Issuer and the Trustee in writing and such Holders
may appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the Retiring Trustee and to the Issuer. Thereupon the resignation or removal of the
Retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture. No resignation or removal of the Trustee will
become effective until the acceptance of the appointment by a successor
Trustee. The successor Trustee shall
mail a notice of its succession to the Storm Recovery Bondholders. The Retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 60
days after the Retiring Trustee resigns or is removed, the Retiring Trustee at
the expense of the Issuer, the Issuer or the Majority
45
Holders may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.11,
any Storm Recovery Bondholder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee
pursuant to this Section 6.08, the Issuer’s obligations under Section 6.07
shall continue for the benefit of the Retiring Trustee.
SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with, merges or
converts into, or transfers all or substantially all its corporate trust
business or assets to, another corporation or banking association, the resulting,
surviving or transferee corporation or banking association shall, without any
further act, be the successor Trustee.
Notice of any such event shall be promptly given to the LPSC and to each
Rating Agency by the successor Trustee and any agent in Luxembourg appointed
pursuant to the second paragraph of Section 3.02.
In case at the time such successor or successors by
merger, conversion, consolidation or transfer shall succeed to the trusts
created by this Indenture any of the Storm Recovery Bonds shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any Retiring Trustee, and deliver such
Storm Recovery Bonds so authenticated; and in case at that time any of the
Storm Recovery Bonds shall not have been authenticated, any successor to the
Trustee may authenticate such Storm Recovery Bonds either in the name of any
Retiring Trustee hereunder or in the name of the successor to the Trustee; and
in all such cases such certificates shall have the full force and effect granted
by the Storm Recovery Bonds or by this Indenture and this force and effect
shall be equal to any certificate issued by the Trustee.
SECTION 6.10.
APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions
of this Indenture, at any time, for the purpose of meeting any legal
requirement of any jurisdiction in which any part of the Trust Estate may at
the time be located, the Trustee shall have the power and may execute and
deliver all instruments to appoint one or more Persons to act as a co-trustee
or co-trustees, or separate trustee or separate trustees, of all or any part of
the Trust Estate, and to vest in such Person or Persons, in such capacity and
for the benefit of the Storm Recovery Bondholders, such title to the Trust
Estate, or any part hereof, and, subject to the other provisions of this Section 6.10,
such powers, duties, obligations, rights and trusts as the Trustee may consider
necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 6.11 and no notice to Storm Recovery
Bondholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.08 hereof.
Notice of any such appointment shall be promptly given to each Rating
Agency and the LPSC by the Trustee.
(b) Every separate trustee and co-trustee
shall, to the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
46
(i) all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee joining in
such act), except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed, the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Estate or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
(ii) no trustee hereunder shall be
personally liable by reason of any act or omission of any other trustee
hereunder; and
(iii) the Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing
given to the Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate
trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to the Trustee. Every such
instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee
may at any time constitute the Trustee, its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do any lawful act
under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall
die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Trustee and any co-trustee shall at all
times satisfy the requirements of TIA Section 310(a)(1) and (a)(5) and
Section 26(a)(1) of the Investment Company Act of 1940, as
amended. In addition, the Trustee and
any co-trustee shall have a combined capital and surplus of at least $50,000,000
as set forth in its most recent published annual report of condition and it
shall have a long term debt rating of “Baa3” or better by Moody’s, “BBB-” or
better by S&P and, if Fitch provides a rating thereon, “BBB-” or better by
Fitch. The Trustee and any co-trustee
shall comply with TIA Section
310(b), including the optional provision permitted by the second sentence
of TIA Section
310(b), including the optional provision
permitted by the second sentence of TIA Section 310(b)(9);
provided
,
however
, that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are
met.
47
SECTION 6.12.
PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The Trustee shall comply with TIA Section 311(a),
excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed
shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 6.13.
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE. The Trustee hereby represents and warrants
that:
(a) the Trustee is a national banking
association validly existing in good standing under the laws of the United
States of America; and
(b) the Trustee has full power, authority
and legal right to execute, deliver and perform this Indenture and all the
Basic Documents to which the Trustee is a party and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Indenture and such Basic Documents.
SECTION 6.14.
RIGHTS OF THE AUTHENTICATING AGENT, STORM RECOVERY BOND REGISTRAR AND
PAYING AGENT.
(a) Each of the authenticating agent,
Storm Recovery Bond Registrar and Paying Agent undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture. The authenticating agent,
Storm Recovery Bond Registrar and Paying Agent shall not have any duties or
responsibilities except those expressly set forth in this Indenture or be a
trustee for or have any fiduciary obligation to any party hereto.
(b) In the absence of bad faith on the
part of the authenticating agent, Storm Recovery Bond Registrar or Paying
Agent, respectively, such party may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to such party that conform to the
requirements of this Indenture.
(c) None of the authenticating agent,
Storm Recovery Bond Registrar and Paying Agent shall be liable for any error of
judgment made in good faith by an officer or officers of that party, unless it
shall be conclusively determined by a court of competent jurisdiction that such
party was negligent.
(d) None of the authenticating agent,
Storm Recovery Bond Registrar or Paying Agent shall be liable with respect to
any action taken or omitted to be taken by that party in good faith in
accordance with any direction of the Issuer or the Trustee given under this
Indenture.
(e) None of the provisions of this
Indenture shall require any of the authenticating agent, Storm Recovery Bond
Registrar or Paying Agent to expend or risk its own funds or otherwise to incur
any liability, financial or otherwise, in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or indemnity
satisfactory to it against such risk or liability is not assured to it.
48
(f) Each of the authenticating agent,
Storm Recovery Bond Registrar and Paying Agent may conclusively rely and shall
be fully protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties.
(g) Each of the authenticating agent,
Storm Recovery Bond Registrar and Paying Agent may consult with counsel and the
advice or any opinion of counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by that party hereunder in
good faith and in accordance with such advice or opinion of counsel.
(h) None of the authenticating agent,
Storm Recovery Bond Registrar or Paying Agent shall be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, entitlement
order, approval or other paper or document.
(i) None of the authenticating agent,
Storm Recovery Bond Registrar or Paying Agent shall have any obligation to
invest and reinvest any cash held in the accounts in the absence of timely and
specific written investment direction from the Issuer. In no event shall any of the authenticating
agent, Storm Recovery Bond Registrar or Paying Agent be liable for the selection
of investments or for investment losses incurred thereon. None of the authenticating agent, Storm
Recovery Bond Registrar or Paying Agent shall have any liability in respect of
losses incurred as a result of the liquidation of any investment prior to its
stated maturity or the failure of the Issuer to provide timely written
investment direction.
(j) Each of the authenticating agent,
Storm Recovery Bond Registrar and Paying Agent may at any time resign by giving
30 days’ written notice of resignation to the Issuer and the Trustee. Upon receiving such notice of resignation,
the Issuer shall promptly appoint a successor and, upon the acceptance by the
successor of such appointment, release the resigning party from its obligations
hereunder by written instrument, a copy of which instrument shall be delivered
to the Issuer, the Trustee, the resigning party and the successor. If no successor shall have been so appointed
and have accepted appointment within 45 days after the giving of such notice of
resignation, the resigning party may petition any court of competent
jurisdiction for the appointment of a successor.
(k) Any corporation into which any of the
authenticating agent, Storm Recovery Bond Registrar or Paying Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
authenticating agent, Storm Recovery Bond Registrar or Paying Agent,
respectively, shall be a party, or any corporation succeeding to the business
of the authenticating agent, Storm Recovery Bond Registrar or Paying Agent,
respectively, shall be the successor of the authenticating agent, Storm
Recovery Bond Registrar or Paying Agent, respectively, hereunder without the
execution or filing of any paper with any party hereto or any further act on
the part of any of the parties hereto except where an instrument of transfer or
assignment is required by law to effect such succession, anything herein to the
contrary notwithstanding.
49
(l) The Issuer shall indemnify and hold
harmless each of the authenticating agent, Storm Recovery Bond Registrar and
Paying Agent and its respective officers, directors, employees and agents from
and against any and all Losses or other amounts whatsoever (including
reasonable counsel fees and expenses) directly or indirectly incurred by such
party in connection with the performance by such party of its duties and
obligations under or pursuant to this Indenture. Each such party shall notify the Issuer
promptly of any claim for which it may seek indemnity. Failure by such party so to notify the Issuer
shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend the claim and such
party may have separate counsel and the Issuer shall pay the reasonable fees
and expenses of such counsel.
Notwithstanding the foregoing, the Issuer need not reimburse any expense
or indemnify against any Loss incurred by such party (i) through such
party’s own willful misconduct, negligence or bad faith or (ii) to the
extent such party was reimbursed for or indemnified against any such Loss by
the Seller or the Servicer pursuant to the Administration Agreement or any Sale
Agreement or Servicing Agreement. The
obligations of the Issuer under this Section 6.14(l) shall survive
the termination of this Agreement and the earlier resignation or removal of
such party.
SECTION 6.15. COMPLIANCE WITH APPLICABLE ANTI-TERRORISM AND
MONEY LAUNDERING REGULATIONS. In order
to comply with the laws, rules, regulations and executive orders in effect from
time to time applicable to banking institutions, including those relating to
the funding of terrorist activities and money laundering (“
Applicable Law
”),
the Trustee is required to obtain, verify and record certain information
relating to individuals and entities which maintain a business relationship
with the Trustee. Accordingly, the
Issuer agrees to provide to the Trustee, upon its reasonable request from time
to time such identifying information and documentation as may be available to
it in order to enable the Trustee to comply with Applicable Law.
ARTICLE VII
STORM RECOVERY
BONDHOLDERS’ LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND
ADDRESSES OF STORM RECOVERY BONDHOLDERS.
The Issuer shall furnish or cause to be furnished to the Trustee (a) not
more than five days after the earlier of (i) each Record Date with respect
to each Series and (ii) six months after the last Record Date with
respect to each Series, a list, in such form as the Trustee may reasonably
require, of the names and in the event the Trustee is acting as the Storm
Recovery Bond Registrar the addresses of the Holders of Storm Recovery Bonds of
such Series as of such Record Date, and (b) at such other times as
the Trustee may request in writing, within 30 days after receipt by the Issuer
of any such request, a list of similar form and content as of a date not more
than 10 days prior to the time such list is furnished;
provided
,
however
,
that so long as the Trustee is the Storm Recovery Bond Registrar, no such list
shall be required to be furnished. In
addition, the Issuer shall furnish such list to any listing, transfer or paying
agent appointed under the second paragraph of Section 3.02 to the extent
such information is required by the rules and regulations of the
Luxembourg Stock Exchange.
50
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS
TO STORM RECOVERY BONDHOLDERS.
(a) The Trustee shall preserve, in as
current a form as is reasonably practicable, the names and addresses of the
Holders of Storm Recovery Bonds contained in the most recent list furnished to
the Trustee as provided in Section 7.01 and the names and addresses of Holders
of Storm Recovery Bonds received by the Trustee in its capacity as Storm
Recovery Bond Registrar. The Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon
receipt of a new list so furnished.
(b) Storm Recovery Bondholders may
communicate with other Storm Recovery Bondholders pursuant to Section 312(b) of
the TIA, with respect to their rights under this Indenture or under the Storm
Recovery Bonds. In addition, upon the
written request of any Holder or group of Holders of Storm Recovery Bonds, each
of whom has held its Storm Recovery Bonds for at least six months, the Trustee
shall afford the Holder or Holders making such request a copy of a current list
of Holders of the Storm Recovery Bonds, for purposes of communicating with
other Holders with respect to their rights hereunder. The Trustee may elect not to afford the
requesting Holders access to the list of Holders of the Storm Recovery Bonds if
it agrees to mail the desired communication or proxy, on behalf and at the
expense of the requesting Holders, to all Holders of the Storm Recovery Bonds.
(c) The Issuer, the Trustee and the Storm
Recovery Bond Registrar shall have the protection of Section 312(c) of
the TIA.
SECTION 7.03. REPORTS BY ISSUER.
(a) The Issuer
shall:
(i) so long as the Issuer is required to
file such documents with the Commission, provide to the Trustee and, so long as
any Storm Recovery Bonds are listed on the Luxembourg Stock Exchange and its rules so
require, with the listing agent of the Issuer in Luxembourg appointed pursuant
to the second paragraph of Section 3.02, within 15 days after the Issuer
is required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such portions
of any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Issuer may be required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) provide to the Trustee, file with the
Commission and, so long as any Storm Recovery Bonds are listed on the
Luxembourg Stock Exchange and its rules so require, provide to the listing
agent of the Issuer in Luxembourg appointed pursuant to the second paragraph of
Section 3.02, in accordance with rules and regulations prescribed
from time to time by the Commission or the Luxembourg Stock Exchange,
respectively, such additional information, documents and reports with respect
to compliance by the Issuer with the conditions and covenants of this Indenture
as may be required from time to time by such rules and regulations;
51
(iii) supply to the Trustee (and the Trustee
shall transmit by mail to all Storm Recovery Bondholders described in TIA Section 313(c))
and, so long as any Storm Recovery Bonds are listed on the Luxembourg Stock
Exchange and its rules so require, to the listing agent of the Issuer in
Luxembourg appointed pursuant to the second paragraph of Section 3.02,
such summaries of any information, documents and reports required to be filed
by the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) as
may be required by rules and regulations prescribed from time to time by
the Commission; and
(iv) file a Form 15 (or applicable
successor form) suspending its obligations to file reports with the Commission
pursuant to the Exchange Act as soon as legally permissible.
(b) Unless the
Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31
of each year.
SECTION 7.04. REPORTS BY TRUSTEE. If required by TIA Section 313(a),
within 60 days after the end of each fiscal year of the Issuer, commencing with
the year after the issuance of the Storm Recovery Bonds of any Series, the
Trustee shall mail to each Holder of Storm Recovery Bonds of such Series as
required by TIA Section 313(c) a brief report dated as of such date
that complies with TIA Section 313(a).
The Trustee also shall comply with TIA Section 313(b);
provided
,
however
, that the initial report so issued shall be delivered not more
than 12 months after the initial issuance of each Series.
A copy of each report at the time of its mailing to
Storm Recovery Bondholders shall be filed by the Trustee with the Commission
and each stock exchange, if any, on which the Storm Recovery Bonds are listed
(to the extent required by the rules of such exchange). The Issuer shall notify the Trustee if and
when the Storm Recovery Bonds are listed on any stock exchange.
SECTION 7.05. PROVISION OF SERVICER REPORTS. Upon the written request of any Storm
Recovery Bondholder, the LPSC or any Rating Agency to the Trustee addressed to
the Corporate Trust Office, the Storm Recovery Bond Registrar, or in its
absence or failure the Paying Agent, shall provide such requesting party, the
Trustee and the Paying Agent or Storm Recovery Bond Registrar, as applicable,
with a copy of any Semiannual Servicer’s Certificate, Annual Accountant’s
Report and any other report of the Servicer referred to in the applicable Servicing
Agreement. If any Storm Recovery Bonds
are listed on the Luxembourg Stock Exchange and its rules so require, the
Storm Recovery Bond Registrar, or in its absence or failure the Paying Agent,
at the written direction of the Issuer shall also arrange for publication in
accordance with such rules of a notice that a copy of such Semiannual
Servicer’s Certificate, Annual Accountant’s Report or other report shall be
available with the Issuer’s listing agent in Luxembourg appointed pursuant to
the second paragraph of Section 3.02.
52
ARTICLE
VIII
ACCOUNTS,
DISBURSEMENTS AND RELEASES
SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by
the Trustee pursuant to this Indenture.
The Trustee shall apply all such money received by it as provided in
this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the Trust
Estate, the Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of
appropriate Proceedings. Any such action
shall be without prejudice to any right to claim a Default or Event of Default
under this Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. COLLECTION ACCOUNT.
(a) (i)
On or prior to the Series Issuance Date for each Series issued
hereunder, the Issuer shall open, at the Paying Agent’s Corporate Trust Office,
or at another Eligible Institution, one or more segregated non-interest-bearing
trust accounts in the Trustee’s name for the deposit of Collections for that Series of
Storm Recovery Bonds and all other amounts received with respect to the Series Trust
Estate securing that Series (each a “
Collection Account
” and collectively,
the “
Collection Accounts
”). The
Collection Account for each Series shall initially be divided into
subaccounts, which need not be separate accounts: a general subaccount (the “
General
Subaccount
”), a capital subaccount (the “
Capital Subaccount
”), an
excess funds subaccount (the “
Excess Funds Subaccount
”) and one or more
class subaccounts for any Tranche of any Series of Storm Recovery Bonds as
specified in any Series Supplement (each, a “
Tranche Subaccount
”). On or prior to the Series Issuance Date
for any Series of Storm Recovery Bonds, the Member shall deposit into the
Capital Subaccount for that Series an amount equal to the Required Capital
Amount for that Series. Unless otherwise
provided herein, all amounts in the Collection Account for any Series not
allocated to any other subaccount shall be allocated to the General Subaccount
for that Series. Unless otherwise
provided herein, prior to the initial Payment Date for a Series, all amounts in
the Collection Account for that Series (other than funds deposited into
the Capital Subaccount) shall be allocated to the General Subaccount for that
Series. Prior to depositing funds or
U.S. Government Obligations in the Collection Account pursuant to Section 4.01
or 4.02, the Issuer shall establish defeasance subaccounts (each a “
Defeasance
Subaccount
”) for each Series for which funds shall be deposited, as
subaccounts of the Collection Account.
All references to the Collection Account shall be deemed to include
reference to all subaccounts contained therein.
Withdrawals from and deposits to each of the foregoing subaccounts of
any Collection Account shall be made as set forth in Section 4.03 and Section 8.02(d) and
(e). Each Collection Account shall at
all times be maintained as an Eligible Securities Account and only the Trustee
shall
53
have access to that Collection Account for the purpose of making
deposits in and withdrawals from that Collection Account in accordance with
this Indenture. Funds in a Collection
Account shall not be commingled with any other moneys, including moneys in any
other Collection Account. All moneys
deposited from time to time in a Collection Account, all deposits therein
pursuant to this Indenture, and all investments made in Eligible Investments
with such moneys, including all income or other gain from such investments,
shall be held by the Trustee in that Collection Account as part of the Series Trust
Estate securing that Series as herein provided.
(ii) The Trustee also agrees that (A) each
of the Collection Accounts is, or on the date of its creation will be, and
shall at all times be maintained by the Trustee as, a “securities account”
(within the meaning of Section 8-501 of the New York UCC), (B) the “securities
intermediary’s jurisdiction” (within the meaning of Article 8 of the New
York UCC) of the Trustee is the State of New York, (C) all cash and other
property in each of the Accounts shall be treated by the Trustee as a “financial
asset” (as defined in Section 8-102(a)(9) of the New York UCC), (E) the
“entitlement holder” (as such term is defined in Section 8-102(a)(7) of
the New York UCC or, with respect to Book-Entry Securities, in the applicable
Federal Book-Entry Regulations) shall be the Trustee for the benefit of the
Storm Recovery Bondholders, (E) any financial asset in registered form or
payable to, or to the order of, a Person, and credited to any of the Accounts
shall be registered in the name of, payable to the order of, or specially
indorsed to, the Trustee or in blank, or credited to another securities account
maintained in the name of the Trustee, and in no case will any financial assets
credited to any of the Accounts be registered in the name of, payable to or to
the order of, or specially indorsed to the Issuer or the Trustee, except to the
extent the foregoing have been specially indorsed by the Issuer or the Trustee,
as applicable, to the Trustee or in blank, (F) the Trustee shall not
change the entitlement holder, and (G) the Trustee shall at all times act
as a “securities intermediary” (within the meaning of Section 8-102(a)(14)
of the New York UCC or, with respect to Book-Entry Securities, in the
applicable Federal Book-Entry Regulations) and shall credit to each of the
Accounts each financial asset to be held in or credited to each of the Accounts
pursuant to this Indenture.
(iii) Each of the Accounts shall remain at
all times with a securities intermediary (within the meaning of Section 8-102(a)(14)
of the New York UCC or, with respect to Book-Entry Securities, in the
applicable Federal Book-Entry Regulations) having a combined capital and
surplus of at least $50,000,000 and having a long-term debt rating of at least “A2”
by Moody’s and at least “AA-” by S&P.
(iv) The Trustee shall have sole dominion
and exclusive control over all property in each Collection Account. The Trustee
at the written direction of the Servicer shall also pay from the Collection
Account any amounts requested to be paid by or to the Servicer pursuant to of
the applicable Servicing Agreement.
54
(v) Collections shall be deposited in the
applicable General Subaccount as provided in the applicable Servicing
Agreement. All deposits to and withdrawals from a Collection Account, all
allocations to the subaccounts of such Collection Account and any amounts to be
paid to the applicable Servicer under Section 8.02(d) shall be made
by the Trustee in accordance with the written instructions provided by such
Servicer in the Semiannual Servicer’s Certificate or upon other written notice
provided by such Servicer pursuant to such Servicing Agreement, as applicable.
(vi) There are no other agreements entered
into between the Trustee and the Issuer with respect to the Accounts, other than
this Indenture. In the event of any
conflict between this Section 8.02 (or any portion thereof), any other
provision of this Indenture or any other agreement now existing or hereafter
entered into, the terms of this Section 8.02 shall prevail.
(b) So long as no Default or Event of
Default has occurred and is continuing, the Trustee upon written direction of
the Servicer will invest and reinvest all or a portion of the funds in the
Collection Account for each Series in Eligible Investments;
provided
,
however
, that (i) such Eligible Investments shall not mature later
than the next Payment Date for such Series (except as otherwise provided
in any Series Supplement), (ii) such Eligible Investments shall not
be sold, liquidated or otherwise disposed of at a loss prior to the maturity
thereof, and (iii) no funds in the Defeasance Subaccount for any Series of
Storm Recovery Bonds shall be invested in Eligible Investments or otherwise,
except that U.S. Government Obligations deposited by the Issuer with the Trustee
pursuant to Sections 4.01 or 4.02 shall remain as such. All income or other gain from investments of
moneys deposited in the Collection Account for that Series shall be
deposited by the Trustee in the Collection Account for that Series, and any
loss resulting from such investments shall be charged to that Collection
Account. The Servicer shall not direct
the Trustee to make any investment of any funds or to sell any investment held
in the Collection Account for a Series unless the security interest granted
and perfected in such account will continue to be perfected in such investment
or the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Trustee to make any such
investment or sale, if requested by the Trustee, the Issuer shall deliver to
the Trustee an Issuer Opinion of Counsel, acceptable to the Trustee, to such
effect. Subject to Section 6.01(c),
the Trustee shall not in any way be held liable for the selection of Eligible
Investments or for investment Losses incurred thereon except for Losses
attributable to the Trustee’s failure to make payments on such Eligible
Investments issued by the Trustee, in its commercial capacity as principal
obligor and not as Trustee, in accordance with their terms. The Trustee shall
have no liability in respect of Losses incurred as a result of the liquidation
of any Eligible Investment prior to its stated maturity or the failure of the
Issuer to provide timely and specific written investment direction. The Trustee shall have no obligation to
invest or reinvest any amounts held hereunder in the absence of written
investment direction of the Servicer.
(c) Any Collections remitted by the
Servicer to the Trustee with respect to a Series of Storm Recovery Bonds,
any amounts received by the Issuer relating to the indemnification obligations
payable by the Seller pursuant to the Sale Agreement or the Servicer pursuant
to the Servicing Agreement with respect to that Series remitted to the
Trustee, any other amount otherwise received by the Trustee or the Issuer
related to that Series, and any other proceeds of
55
Series Trust Estate securing that Series received
by the Servicer, the Issuer or the Trustee shall be deposited in the General
Subaccount for that Series, except that the Trustee shall deposit in the
Capital Subaccount for that Series the Required Capital Amount. All investment earnings on amounts in the
General Subaccount, the Capital Subaccount (other than released investment
earnings on amounts in the Capital Subaccount pursuant to clause (d)(x) below)
and the Excess Funds Subaccount of a Series will be deposited into the
General Subaccount, the Capital Subaccount and the Excess Funds Subaccount of
that Series, respectively;
provided
,
however
, that if on any
Payment Date after making allocations pursuant to clauses (d)(i)-(xi) below,
any excess investment earnings on amounts in the Capital Subaccount for that Series above
the per annum limit set forth in the Series Supplement related to that Series remain
in such Capital Subaccount, then such excess amount shall be allocated to the
Excess Funds Subaccount on such Payment Date.
(d) On each Payment Date for a particular
Series or other date specified in the Series Supplement with respect
to that Series, the Paying Agent pursuant to the written direction provided in
the Semiannual Servicer’s Certificate shall allocate or apply all amounts on
deposit in the General Subaccount of the Collection Account for that Series in
the following priority unless otherwise set forth in any Series Supplement
herein (provided, that no Series Supplement may modify the Pro Rata
payment of amounts described herein as being paid Pro Rata):
(i) fees and expenses (including
reasonable legal fees and expenses) and Indemnity Amounts owed to the Trustee
for such Payment Date shall be paid to the Trustee and, to the extent those
amounts are not separately identified by the Trustee as being payable with
respect to a Series, allocated among all Series of Storm Recovery Bonds
Outstanding on a Pro Rata basis;
provided
that the amount with respect
to that Series paid to the Trustee for expenses (including reasonable
legal fees and expenses) and Indemnity Amounts during any calendar year
pursuant to this clause (i) may not exceed the amount fixed therefor in
the applicable Series Supplement;
(ii) a pro rata portion of the Servicing
Fee for the current year, which will be a fixed percentage of the initial
principal amount of that Series of Storm Recovery Bonds specified in the
related Servicing Agreement, and all unpaid Servicing Fees from prior Payment
Dates shall be paid to the Servicer;
(iii) a pro rata portion of the
administration fee payable under the Administration Agreement for the current
year shall be paid to the Administrator and a pro rata portion of the fees of
the Issuer’s independent manager for the current year in connection with his or
her acting as a manager under the Issuer LLC Agreement shall be paid to such
independent manager;
(iv) all ordinary periodic Operating
Expenses (such as accounting and audit fees, rating agency fees, legal fees and
Servicer expenses under Sections 3.10 and 5.05 or equivalent provisions of the
applicable Servicing Agreement) other than those referred to in clauses (i), (ii) and
(iii) above shall be paid to the Persons entitled thereto;
(v) an amount equal to the Interest
payable on such Series of Storm Recovery Bonds on such Payment Date;
56
(vi) an amount equal to any Principal of
that Series or Tranche of Storm Recovery Bonds payable as a result of
acceleration pursuant to Section 5.02 shall be allocated to that Series or
Tranche and, if there are insufficient funds to make that allocation in full,
on a Pro Rata basis, and an amount equal to any Principal of that Series or
Tranche payable on a Series Final Maturity Date or Tranche Final Maturity
Date for that Series or Tranche and any Principal of and premium, if any,
on that Series or Tranche of Storm Recovery Bonds payable on a Redemption
Date shall be allocated to that Series or Tranche and, if there are
insufficient funds to make that allocation in full, on a Pro Rata basis;
(vii) an amount equal to Principal scheduled
to be paid on a Tranche of that Series of Storm Recovery Bonds on such
Payment Date according to the Expected Amortization Schedule shall be allocated
to the corresponding Tranche and if there are insufficient funds to make that
allocation in full, on a Pro Rata basis;
(viii) all remaining unpaid Operating Expenses
and any other amounts due and owing pursuant to the Basic Documents (including
any remaining amounts owed to the Trustee) shall be paid to the Persons
entitled thereto without duplication of any other payment from any other
source;
(ix) any amount necessary to replenish
amounts drawn from the Capital Subaccount for that Series (other than
released investment earnings on amounts in the Capital Subaccount pursuant to
clause (d)(x) below), plus any amount equal to the deficiency in the
amount of investment earnings on amounts in the Capital Subaccount for that Series allowed
under the Financing Order that have not previously been released to the Issuer
pursuant to clause (d)(x) below, shall be allocated to the Capital
Subaccount;
(x) if the balance in the Capital
Subaccount for that Series is greater than the Required Capital Amount for
that Series after making allocations pursuant to clauses (d)(i)-(ix) above,
an amount equal to investment earnings on amounts in the Capital Subaccount for
that Series, subject to any limits set forth in a Series Supplement, shall
be released to the Issuer; and
(xi) the balance, if any, shall be
allocated to the Excess Funds Subaccount for that Series.
Following repayment of
all Storm Recovery Bonds of a Series, the balance, if any, shall be released to
the Issuer free from the Lien of the Indenture.
“
Pro Rata
” means with respect to any Series or
Tranche of Storm Recovery Bonds a ratio:
(1) in the case of clause (d)(v) above, the
numerator of which is the aggregate amount of Interest payable with respect to
such Series or Tranche on such Payment Date and the denominator of which
is the sum of the aggregate amounts of Interest payable with respect to all
Outstanding Series or Tranches on such Payment Date; and
57
(2) in the case of all other clauses in (d) above,
the numerator of which is the aggregate amount of Principal to be paid or
payable pursuant to each such clause with respect to such Series or
Tranche on such Payment Date and the denominator of which is the sum of the
aggregate amounts of Principal to be paid or payable pursuant to each such
clause with respect to all Outstanding Series or Tranches on such Payment
Date, unless and to the extent, with respect to either clause (1) or (2) of
this definition, in the case of a Series comprised of two or more
Tranches, the Series Supplement for such Series provides otherwise.
If, on any Payment Date
for a Series of Storm Recovery Bonds, funds on deposit in the General
Subaccount for that Series are insufficient to make the payments or
transfers contemplated by clauses (i) through (ix) above, the Paying
Agent shall draw from amounts on deposit in the following subaccounts in the
following order up to the amount of such shortfall, in order to make such
payments and transfers:
(i) from the Excess Funds Subaccount for such Series for
allocations and payments contemplated by clauses (i) through (ix); and
(ii) from the Capital Subaccount for such Series for
allocations and payments contemplated by clauses (i) through (viii).
(e) Upon an acceleration of the maturity
of any Series of Storm Recovery Bonds pursuant to Section 5.02, the
aggregate amount of Principal of and Interest accrued on each Storm Recovery
Bond of that Series shall be payable, without priority of interest over
principal or of principal over interest and without regard to Tranche.
(f) The Trustee, shall, if in the future
directed by the Servicer under
Section 3.05(e)
of the Servicing
Agreement, maintain one or more segregated accounts in the Trustee's name
(each a "Third-Party Collector Deposit Account") at its office
located at the Corporate Trust Office, or at another Eligible Institution, for
any Third-Party Collector (as such term is defined in the Servicing Agreement)
cash deposits, surety bonds or guarantees or letters of credit provided
pursuant to the Tariff (as such term is defined in the Servicing Agreement),
any applicable agreements with such Third-Party Collector, other applicable
tariffs or applicable LPSC Regulation (as such term is defined in the Servicing
Agreement). The Trustee shall follow the written direction of the
Servicer regarding the allocation and release of funds on deposit in any
Third-Party Collector Deposit Account, as permitted or required by the
Servicing Agreement or any agreement with the Third-Party Collector, the
Tariff, other applicable tariffs or LPSC Regulations. The Trustee shall
be entitled to conclusively rely on any such written directions from the
Servicer.
SECTION 8.03. RELEASE OF TRUST ESTATE.
(a) All money and other property
withdrawn from a Collection Account by the Paying Agent for payment to the
Issuer as provided in this Indenture in accordance with Section 8.02 hereof
shall be deemed released from the Indenture when so withdrawn and applied in
accordance with the provisions of Article VIII, without further notice to,
or release or consent by, the Trustee.
(b) Other than as provided for in Section 8.03(a),
the Trustee or the Paying Agent, as applicable, shall release property from the
Lien of this Indenture only as and to the extent permitted by the Basic
Documents and only upon receipt of an Issuer Request accompanied by an Issuer
Officer’s Certificate, an Issuer Opinion of Counsel and Independent
Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or
an Issuer Opinion of Counsel in lieu of such Independent Certificates to the
effect that the TIA does not require any such Independent Certificate.
(c) Subject to the payment of its fees
and expenses pursuant to Section 6.07, the Trustee may, and when required
by the provisions of this Indenture shall, execute instruments to release
property from the Lien of this Indenture, or convey the Trustee’s interest in
the same, in a manner and under circumstances that are not inconsistent with
the provisions of this Indenture. No
party relying upon an instrument executed by the Trustee as provided in this Article VIII
shall be bound to ascertain the Trustee’s authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
58
(d) Subject to Section 8.03(b), the
Trustee shall, at such time as there are no Storm Recovery Bonds of a Series Outstanding
and all sums due the Trustee with respect to that Series pursuant to Section 6.07
have been paid, release any remaining portion of the Series Trust Estate
that secured that Series of Storm Recovery Bonds from the Lien of this
Indenture and release to the Issuer or any other Person entitled thereto any
funds or investments then on deposit in or credited to the Collection Account
for that Series of Storm Recovery Bonds.
SECTION 8.04. ISSUER OPINION OF COUNSEL. The Trustee shall receive at least five days’
notice when requested by the Issuer to take any action pursuant to Section 8.03,
accompanied by copies of any instruments involved, and the Trustee may also
require, as a condition to such action, an Issuer Opinion of Counsel, in form
and substance satisfactory to the Trustee, stating the legal effect of any such
action, outlining the steps required to complete the same, and concluding that
all conditions precedent to the taking of such action have been complied with
and such action will not materially and adversely impair the security for the
Storm Recovery Bonds or the rights of the Storm Recovery Bondholders in
contravention of the provisions of this Indenture;
provided
,
however
,
that such Issuer Opinion of Counsel shall not be required to express an opinion
as to the fair value of the Trust Estate.
Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other instrument
delivered to the Trustee in connection with any such action.
SECTION 8.05. REPORTS BY INDEPENDENT ACCOUNTANTS. The Issuer shall appoint a firm of
Independent certified public accountants of recognized national reputation for
purposes of preparing and delivering the reports or certificates of such
accountants required by this Indenture and the related Series Supplements
and the applicable Servicing Agreement.
Upon any resignation by such firm, the Issuer shall promptly appoint a
successor thereto that shall also be a firm of Independent certified public
accountants of recognized national reputation.
If the Issuer shall fail to appoint a successor to a firm of Independent
certified public accountants that has resigned within 15 days after such resignation,
the Trustee shall promptly notify the Issuer of such failure in writing. If the Issuer shall not have appointed a
successor within 10 days thereafter, the Trustee shall promptly appoint a
successor firm of Independent certified public accountants of recognized
national reputation. The fees of such
firm of Independent certified public accountants and its successor shall be
payable by the Issuer.
ARTICLE
IX
SUPPLEMENTAL
INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
STORM RECOVERY BONDHOLDERS.
(a) Without the consent of the Holders of
any Storm Recovery Bonds but with prior notice to the Rating Agencies, the
Issuer and the Trustee, when authorized by an Issuer Order, with the consent of
the LPSC pursuant to Section 9.07 if such supplemental indenture
increases Financing
Costs as defined in the Financing Order
(which consent shall not be required with regard to
the first Series Supplement), at any time and from time to time, may enter
into one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust
59
Indenture Act as in force at the date of the execution
thereof), in form satisfactory to the Trustee, for any of the following
purposes:
(i) to
correct or amplify the description of any Series Trust Estate, or to
better assure, convey and confirm unto the Trustee any Series Trust
Estate, or to subject additional property to the Lien of this Indenture;
(ii) to
evidence the succession, in compliance with the applicable provisions hereof,
of another Person to the Issuer, and the assumption by any applicable successor
of the covenants of the Issuer contained herein and in the Storm Recovery
Bonds;
(iii) to
add to the covenants of the Issuer, for the benefit of the Storm Recovery
Bondholders, or to surrender any right or power herein conferred upon the
Issuer;
(iv) to
convey, transfer, assign, mortgage or pledge any property to the Trustee for
the benefit of the Holders and the Trustee;
(v) to
cure any ambiguity, to correct or supplement any provision herein or in any
Supplemental Indenture which may be inconsistent with any other provision
herein or in any Supplemental Indenture, to make any other provisions with
respect to matters or questions arising under this Indenture or in any Supplemental
Indenture, to change in any manner or eliminate any provisions of this
Indenture or to modify in any manner the rights of the Storm Recovery
Bondholders under this Indenture;
provided
,
however
, that (i) such
action shall not, as evidenced by an Issuers’ Opinion of Counsel, adversely
affect in any material respect the interests of any Storm Recovery Bondholder
and (ii) the Rating Agency Condition shall have been satisfied with
respect thereto;
(vi) to
evidence and provide for the acceptance of the appointment hereunder by a
successor Trustee with respect to the Storm Recovery Bonds and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Article VI;
(vii) to
modify, eliminate or add to the provisions of this Indenture to such extent as
shall be necessary to effect the qualification of this Indenture under the TIA
or under any similar federal statute hereafter enacted and to add to this
Indenture such other provisions as may be expressly required by the TIA;
(viii) to
set forth the terms of any Series that has not theretofore been authorized
by a Series Supplement;
(ix) to
qualify the Storm Recovery Bonds for registration with a Clearing Agency; or
(x) to
satisfy any Rating Agency requirements.
60
The Trustee is hereby authorized to join in the
execution of any such Supplemental Indenture and to make any further
appropriate agreements and stipulations that may be therein contained.
(b) The Issuer and the Trustee, when
authorized by an Issuer Order, may, also without the consent of any of the
Holders of the Storm Recovery Bonds, with the consent of the LPSC pursuant to Section 9.07
if such indenture or supplemental indenture
increases Financing Costs as
defined in the Financing Order
, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to, or changing in any manner
or eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Storm Recovery Bonds under this
Indenture;
provided
,
however
, that (i) as evidenced by an
Issuer’s Opinion of Counsel, such action shall not adversely affect in any
material respect the interests of any Storm Recovery Bondholder and (ii) the
Rating Agency Condition shall have been satisfied with respect thereto;
(c) The Trustee shall not be required to
enter into any indenture supplemental hereto or to consent to or enter into any
amendment of the Basic Documents unless it shall have received an Opinion of
Counsel, addressed to the Trustee, satisfactory to it, that such supplement or
amendment is authorized or permitted by this Article IX.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF
STORM RECOVERY BONDHOLDERS. The Issuer
and the Trustee, when authorized by an Issuer Order, also may, with the consent
of the LPSC pursuant to Section 9.07 if the indenture or supplemental
indenture
increases Financing Costs as defined in the Financing Order
, prior notice to the Rating Agencies and
the consent of the Holders of not less than a majority of the Outstanding
Amount of the Storm Recovery Bonds of the Series or Tranches to be
affected, by Act of such Holders delivered to the Issuer and the Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Storm Recovery Bonds under this Indenture;
provided
,
however
,
that no such Supplemental Indenture shall, without the consent of the Holder of
each Outstanding Storm Recovery Bond of the Series or Tranches affected
thereby:
(i) change
the date of payment of any installment of Principal of or premium, if any, or
Interest on any Storm Recovery Bond, or reduce the principal amount thereof,
the Bond Rate thereon or the redemption price or the premium, if any, with
respect thereto, change the provisions of this Indenture and the related
applicable Series Supplement relating to the application of collections
on, or the proceeds of the sale of, the Trust Estate to payment of Principal of
or premium, if any, or Interest on the Storm Recovery Bonds, or change the
currency in which any Storm Recovery Bond or the Interest thereon is payable;
(ii) impair
the right to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as provided in
Article V, to the payment of any such amount due on the Storm Recovery
Bonds on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
61
(iii) reduce
the percentage of the Outstanding Amount of the Storm Recovery Bonds or of a Series or
Tranche thereof, the consent of the Holders of which is required for any such
Supplemental Indenture, or the consent of the Holders of which is required for
any waiver of compliance with provisions of this Indenture or defaults
hereunder and their consequences provided for in this Indenture or modify or
alter the provisions of the proviso to the definition of the term “
Outstanding
”;
(iv) reduce
the percentage of the Outstanding Amount of Storm Recovery Bonds of affected Series required
to direct the Trustee to direct the Issuer to sell or liquidate the Series Trust
Estate securing such Series pursuant to Section 5.04 or to preserve
the Series Trust Estate related to such Series pursuant to Section 5.05;
(v) modify
any provision of this Section 9.02 except to increase any percentage
specified herein or to provide that those provisions of this Indenture or the
other Basic Documents referenced in this Section cannot be modified or
waived without the consent of the Holder of each Outstanding Storm Recovery
Bond affected thereby;
(vi) modify
any of the provisions of this Indenture in such manner so as to affect the
amount of any payment of Interest, Principal or premium, if any, payable on any
Storm Recovery Bond on any Payment Date or change the Redemption Dates,
Expected Amortization Schedules or Series Final Maturity Dates or Tranche
Final Maturity Dates of any Storm Recovery Bonds;
(vii) decrease
the Required Capital Amount with respect to any Series;
(viii) modify
or alter the provisions of this Indenture regarding the voting of Storm
Recovery Bonds held by the Issuer, Cleco Power, an Affiliate of either of them
or any obligor on the Storm Recovery Bonds;
(ix) decrease
the percentage of the aggregate principal amount of Storm Recovery Bonds
required to amend the sections of this Indenture which specify the applicable
percentage of the aggregate principal amount of the Storm Recovery Bonds
necessary to amend any Basic Document; or
(x) permit
the creation of any Lien ranking prior to or on a parity with the Lien of this
Indenture with respect to any part of the Trust Estate or, except as otherwise
permitted or contemplated herein, terminate the Lien of this Indenture on any
property at any time subject hereto or deprive the Holder of any Storm Recovery
Bond of the security provided by the Lien of this Indenture.
It shall not be necessary for the LPSC or any Act of
Storm Recovery Bondholders under this Section 9.02 to approve the
particular form of any proposed Supplemental Indenture, but it shall be
sufficient if the LPSC or such Act of Storm Recovery Bondholders shall approve
the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
Supplemental Indenture pursuant to this Section 9.02, the Trustee shall
mail to the LPSC and the Holders of the Storm Recovery Bonds to which such
amendment or Supplemental Indenture relates a notice setting
62
forth in general
terms the substance of such Supplemental Indenture. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such Supplemental Indenture. If any Storm Recovery Bonds are listed on the
Luxembourg Stock Exchange and the rules of such exchange so require, the
Issuer’s listing agent shall arrange for publication in accordance with such rules of
a notice that the notice regarding the Supplemental Indenture shall be
available with the Issuer’s listing agent in Luxembourg appointed pursuant to
the second paragraph of Section 3.02.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or permitting the additional
trusts created by any Supplemental Indenture permitted by this Article IX
or the modifications thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and subject to Sections 6.01 and 6.02,
shall be fully protected in relying upon, an Issuer Opinion of Counsel stating
that the execution of such Supplemental Indenture is authorized or permitted by
this Indenture. The Trustee may, but
shall not be obligated to, enter into any such Supplemental Indenture that
affects the Trustee’s own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any Supplemental
Indenture pursuant to the provisions hereof, this Indenture shall be deemed to
be modified and amended in accordance therewith with respect to each Series or
Tranche of Storm Recovery Bonds affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Trustee, the Issuer and the Holders of the Storm Recovery
Bonds shall thereafter be determined, exercised and enforced hereunder subject
in all respects to such modifications and amendments, and all the terms and
conditions of any such Supplemental Indenture shall be and be deemed to be part
of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this Indenture and every
Supplemental Indenture executed pursuant to this Article IX shall conform
to the requirements of the TIA as then in effect so long as this Indenture
shall then be qualified under the TIA.
SECTION 9.06. REFERENCE IN STORM RECOVERY BONDS TO
SUPPLEMENTAL INDENTURES. Storm Recovery
Bonds authenticated and delivered after the execution of any Supplemental
Indenture pursuant to this Article IX may, and if required by the Trustee
shall, bear a notation in form approved by the Trustee as to any matter
provided for in such Supplemental Indenture.
If the Issuer or the Trustee shall so determine, new Storm Recovery
Bonds so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such Supplemental Indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Storm Recovery Bonds.
SECTION 9.07. LPSC CONSENT.
To the extent the consent of the LPSC is required to effect any
amendment to, modification of, or supplemental indenture to this Indenture or
any provision of this Indenture,
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(a) The Issuer may submit the amendment,
modification or supplemental indenture to the LPSC by delivering to the LPSC’s
executive counsel a written request for such consent, which request shall
contain:
(i) a
reference to Docket No. U-29157 and a statement as to the possible effect
of the amendment, modification or supplemental indenture on ongoing Financing
Costs
as defined in the Financing Order
;
(ii) an
Officer’s Certificate stating that the proposed amendment, modification or
supplemental indenture, as the case may be, has been approved by all parties to
this Indenture; and
(iii) a
statement identifying the person to whom the LPSC or its staff is to address
its consent to the proposed amendment, modification or supplemental indenture
or request additional time.
(b) Any amendment, modification or
supplemental indenture requiring the consent of the LPSC as provided in this Section 9.07
shall become effective on the later of:
(i) the
date proposed by the parties to the amendment, modification or supplemental
indenture, or
(ii) 31
days after such submission of the amendment, modification or supplemental
indenture to the LPSC unless the LPSC issues an order disapproving the
amendment within a 30-day period.
ARTICLE
X
REDEMPTION
OF STORM RECOVERY BONDS
SECTION 10.01. MANDATORY REDEMPTION BY ISSUER. The Issuer shall redeem all Storm Recovery
Bonds of a Series that have been called for redemption pursuant to this
Indenture on the Redemption Date or Dates, if any, in the amounts required, if
any, and at the redemption price specified in the Series Supplement for
such Series, which in any case shall be not less than the outstanding Principal
amount of the Bonds to be redeemed, plus accrued Interest thereon to, but
excluding, such Redemption Date. If the
Issuer is required to redeem the Storm Recovery Bonds of a Series pursuant
to this Section 10.01, it shall furnish written notice of such requirement
to the Trustee not later than 25 days prior to the Redemption Date for such
redemption and shall deposit with the Trustee the redemption price of the Storm
Recovery Bonds to be redeemed plus all other amounts due and payable hereunder
whereupon all such Storm Recovery Bonds shall be due and payable on the Redemption
Date upon the furnishing of a notice complying with Section 10.02 hereof
to each Holder of the Storm Recovery Bonds of such Series pursuant to this
Section 10.01.
SECTION 10.02. FORM OF REDEMPTION NOTICE. Unless otherwise specified in the Series Supplement
relating to a Series of Storm Recovery Bonds, notice of redemption under Section 10.01
hereof shall be given by the Trustee by first-class mail, postage prepaid,
mailed not less than five days nor more than 45 days prior to the applicable Redemption
Date to each
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Holder of Storm Recovery Bonds to be redeemed, as of
the close of business on the Record Date preceding the applicable Redemption
Date at such Holder’s address appearing in the Storm Recovery Bond Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) if less than all Outstanding Storm Recovery
Bonds of any Series are to be redeemed, the identification (and in the
case of partial redemption of any Storm Recovery Bonds, the principal amounts)
of the particular Storm Recovery Bonds to be redeemed;
(3) the redemption price;
(4) the place where such Storm Recovery Bonds are
to be surrendered for payment of the redemption price and accrued interest
(which shall be the office or agency of the Issuer to be maintained as provided
in the first paragraph of Section 3.02 hereof);
(5) the CUSIP number, if applicable; and
(6) the principal amount of Storm Recovery Bonds
to be redeemed.
Notice of redemption of
the Storm Recovery Bonds to be redeemed shall be given by the Trustee in the
name and at the expense of the Issuer.
For so long as any Storm Recovery Bonds are listed on the Luxembourg
Stock Exchange and the rules of such exchange so require, the Issuer’s
listing agent shall arrange that such notice will also be given by publication
pursuant to such rules at least ten (10) days prior to the Redemption
Date. Failure to give notice of
redemption, or any defect therein, to any Holder of any Storm Recovery Bond selected
for redemption shall not impair or affect the validity of the redemption of any
other Storm Recovery Bond. Notice of
optional redemption shall be irrevocable once given.
SECTION 10.03. PAYMENT OF REDEMPTION PRICE. If notice of redemption has been duly mailed,
or duly waived by the Holders of all Storm Recovery Bonds called for
redemption, and the redemption moneys have been duly deposited with the
Trustee, then the Storm Recovery Bonds called for redemption shall be payable
on the applicable Redemption Date at the applicable redemption price. No further Interest will accrue on the
principal amount of any Storm Recovery Bonds called for redemption after the
Redemption Date for such redemption if payment of the redemption price thereof
has been duly provided for, and the Holder of such Storm Recovery Bonds will
have no rights with respect thereto, except to receive payment of the
redemption price thereof and unpaid accrued Interest to the Redemption
Date. Payment of the redemption price
together with accrued Interest shall be made by the Trustee to or upon the
order of the Holders of the Storm Recovery Bonds called for redemption upon
surrender of such Storm Recovery Bonds, and the Storm Recovery Bonds so
redeemed shall cease to be of further effect and the Lien of this Indenture
shall be released with respect to such Storm Recovery Bonds.
65
ARTICLE
XI
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC.
Upon any application or request by the Issuer to the Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Trustee (i) an
Issuer Officer’s Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with, (ii) an Issuer Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent
Certificate from a firm of certified public accountants meeting the applicable
requirements of this Section 11.01, except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:
(i) a
statement that each signatory of such certificate or opinion has read or has
caused to be read such covenant or condition and the definitions herein
relating thereto;
(ii) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;
(iii) a
statement that, in the opinion of each such signatory, such signatory has made
such examination or investigation as is necessary to enable such signatory to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(iv) a
statement as to whether, in the opinion of each such signatory, such condition
or covenant has been complied with.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO
TRUSTEE. In any case where several
matters are required to be certified by, or covered by an opinion of, any
specified Person, it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of the Issuer may be based, insofar as it
relates to legal matters, upon, in the absence of bad faith, an Opinion of
Counsel.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
66
Whenever in this Indenture, in connection with any
application or certificate or report to the Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer’s compliance with any term hereof, it
is intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case
be conditions precedent to the right of the Issuer to have such application
granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee’s right to rely conclusively upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.03. ACTS OF STORM RECOVERY BONDHOLDERS.
(a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture
to be given or taken by Storm Recovery Bondholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Storm Recovery Bondholders in person or by agents duly appointed in
writing; and except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are delivered to the
Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the “
Act
” of the Storm Recovery Bondholders signing such instrument
or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section.
(b) The fact and date of the execution by
any Person of any such instrument or writing may be proved in any manner that
the Trustee deems sufficient.
(c) The ownership of Storm Recovery Bonds
shall be proved by the Storm Recovery Bond Register.
(d) Any request, demand, authorization,
direction, notice, consent, waiver or other action by the Holder of any Storm
Recovery Bonds shall bind the Holder of every Storm Recovery Bond issued upon
the registration thereof or in exchange therefor or in lieu thereof, in respect
of anything done, omitted or suffered to be done by the Trustee or the Issuer
in reliance thereon, whether or not notation of such action is made upon such
Storm Recovery Bond.
SECTION 11.04. NOTICES, ETC., TO TRUSTEE, PAYING AGENT,
STORM RECOVERY BOND REGISTRAR, ISSUER, LPSC AND RATING AGENCIES. Any request, demand, authorization,
direction, notice, consent, waiver or Act of Storm Recovery Bondholders or
other documents provided or permitted by this Indenture to be made upon, given
or furnished to or filed with:
(a) the Trustee, the Paying Agent or the
Storm Recovery Bond Registrar by any Storm Recovery Bondholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given, furnished or
filed in writing, delivered personally, via facsimile transmission, by
reputable overnight courier or by first-class mail, postage prepaid, to the
Trustee, the Paying Agent or the Storm Recovery Bond Registrar, as applicable,
at its Corporate Trust Office, or
67
(b) the Issuer by the Trustee, the Paying
Agent, the Storm Recovery Bond Registrar or any Storm Recovery Bondholder shall
be sufficient for every purpose hereunder if in writing, delivered personally,
via facsimile transmission, by reputable overnight courier or by first-class
mail, postage prepaid, to the Issuer addressed to: Cleco Katrina/Rita Hurricane
Recovery Funding LLC, 2605 Hwy. 28 East, Office Number 12, Pineville, Louisiana
71360-5226, Attention: Manager, or at any other address previously furnished in
writing to the Trustee by the Issuer.
The Issuer shall promptly transmit any notice received by it from the
Storm Recovery Bondholders to the Trustee, the Paying Agent and the Storm
Recovery Bond Registrar.
Notices required to be given to the Rating Agencies by
the Issuer, the Trustee, the Paying Agent, the Storm Recovery Bond Registrar or
a Manager shall be in writing, delivered personally, via facsimile
transmission, by reputable overnight courier or by first-class mail, postage
prepaid, to: (i) in the case of Moody’s: Moody’s Investors Service, Inc.,
Attention: ABS Monitoring Department, 99 Church Street, New York, New York 10007;
(ii) in the case of Standard & Poor’s: Standard & Poor’s,
a division of The McGraw-Hill Companies, 55 Water Street New York, NY 10041,
Attention: Asset Backed Surveillance Department; and (iii) in the case of
Fitch: Fitch, Inc., 1 State Street Plaza, New York, New York 10004,
Attention: ABS Surveillance or, if the foregoing addresses shall change at
their current address.
Notices required to be given to the LPSC shall be in
writing, delivered personally, via facsimile transmission, by reputable
overnight courier or by first-class mail, postage prepaid, to Louisiana Public
Service Commission, Galvez Building, 12th Floor, 602 North Fifth Street, Baton
Rouge, Louisiana 70821-9154, Attention: Executive Counsel.
SECTION 11.05. NOTICES TO STORM RECOVERY BONDHOLDERS;
WAIVER. Where this Indenture provides
for notice to Storm Recovery Bondholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and delivered by first-class mail, postage prepaid, to each Storm Recovery
Bondholder affected by such event, at the address of such Storm Recovery
Bondholder as it appears on the Storm Recovery Bond Register, not later than
the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where
notice to Storm Recovery Bondholders is given by mail, neither the failure to
mail such notice nor any defect in any notice so mailed to any particular Storm
Recovery Bondholder shall affect the sufficiency of such notice with respect to
other Storm Recovery Bondholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any
manner, such notice may be waived in writing by any Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of
notice by Storm Recovery Bondholders shall be filed with the Trustee but such
filing shall not be a condition precedent to the validity of any action taken
in reliance upon such a waiver.
In case it shall be impractical to deliver notice in
accordance with the first paragraph of this Section 11.05 to the Holders
of Storm Recovery Bonds when such notice is required to be given pursuant to
any provision of this Indenture, then any manner of giving such notice as shall
be satisfactory to the Trustee shall be deemed to be a sufficient giving of
such notice.
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Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other rights or
obligations created hereunder, and shall not under any circumstance constitute
a Default or Event of Default.
SECTION 11.06. ALTERNATE PAYMENT AND NOTICE
PROVISIONS. Notwithstanding any
provision of this Indenture or any of the Storm Recovery Bonds to the contrary,
the Issuer may enter into any agreement with any Holder of a Storm Recovery
Bond providing for a method of payment, or notice by the Trustee or any Paying
Agent to such Holder, that is different from the methods provided for in this
Indenture for such payments or notices.
The Issuer will furnish to the Trustee a copy of each such agreement and
the Trustee will cause payments to be made and notices to be given in
accordance with such agreements.
SECTION 11.07. NOTICES TO LUXEMBOURG STOCK EXCHANGE.
(a) For so long as any Storm Recovery
Bonds are listed on the Luxembourg Stock Exchange and to the extent the rules of
such exchange so require, the Issuer shall notify the Luxembourg Stock Exchange
and any agent appointed pursuant to the second paragraph of Section 3.02
if any rating assigned to such Storm Recovery Bonds is reduced or withdrawn and
shall arrange for such notice to be published pursuant to the rules of
such exchange.
(b) For so long as any Storm Recovery
Bonds are listed on the Luxembourg Stock Exchange and the rules of such
exchange so require, the Trustee shall make available to the Holders of such Storm
Recovery Bonds and shall deposit in accordance with the written direction of
the Issuer on file with the Issuer’s listing agent in Luxembourg appointed
pursuant to the second paragraph of Section 3.02 copies of any documents
executed in connection with this Indenture reasonably requested by the Issuer’s
listing agent and the reports of Independent certified public accountants
obtained with respect to the Issuer pursuant to this Indenture.
SECTION 11.08. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or
conflicts with another provision hereof that is required to be included in this
Indenture by any of the provisions of the TIA, such required provision shall
control.
The provisions of TIA Sections 310 through 317 that
impose duties on any Person (including the provisions automatically deemed
included herein unless expressly excluded by this Indenture) are a part of and
govern this Indenture, whether or not physically contained herein.
SECTION 11.09. EFFECT OF HEADINGS AND TABLE OF
CONTENTS. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
SECTION 11.10. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Indenture and the Storm Recovery Bonds by the Issuer shall bind its successors
and permitted assigns, whether so expressed or not.
All agreements of the Trustee in this Indenture shall
bind its successors.
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The Trustee shall provide written notice to the Rating
Agencies of any assignment of its obligations under this Agreement.
SECTION 11.11. SEPARABILITY. In case any provision in this Indenture or in
the Storm Recovery Bonds shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.12. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Storm
Recovery Bonds, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Storm Recovery
Bondholders, and any other party secured hereunder,
and any other Person with an ownership interest in any part of the Trust
Estate, any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 11.13. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Storm Recovery Bonds or this Indenture) payment need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the date on which nominally due, and no
interest shall accrue for the period from and after any such nominal date.
SECTION 11.14. GOVERNING LAW.
THIS INDENTURE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT THAT THE OBLIGATIONS OF THE
TRUSTEE HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK.
SECTION 11.15. COUNTERPARTS. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.16. ISSUER OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Trustee on the
Storm Recovery Bonds or under this Indenture or any certificate or other
writing delivered in connection herewith or therewith, against (i) the
Member or any Manager, employee or agent of the Issuer or (ii) any
stockholder, officer, director, employee or agent of the Trustee (it being
understood that none of the Trustee’s obligations are in its individual
capacity).
SECTION 11.17. NO PETITION.
The Trustee, by entering into this Indenture, and each Holder, by
accepting a Storm Recovery Bond (or interest therein) issued hereunder, hereby
covenant and agree that they shall not, prior to the date that is one year and
one day after the termination of this Indenture, acquiesce, petition or
otherwise invoke or cause the Issuer or any Manager to invoke the process of
any court or government authority for the purpose of commencing or sustaining a
case against the Issuer under any insolvency law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its respective property, or ordering
the dissolution, winding up or
70
liquidation of the affairs of the Issuer. Nothing in
this Section 11.17 shall preclude, or be deemed to estop, such Holder (A) from
taking or omitting to take any action prior to such date in (i) any case
or proceeding voluntarily filed or commenced by or on behalf of the Issuer
under or pursuant to any such law or (ii) any involuntary case or
proceeding pertaining to the Issuer that is filed or commenced by or on behalf
of a person other than such Holder and is not joined in by such Holder (or any
person to which such Holder shall have assigned, transferred or otherwise
conveyed any part of the obligations of the Issuer hereunder) under or pursuant
to any such law, or (B) from commencing or prosecuting any legal action
that is not an involuntary case or proceeding under or pursuant to any such law
against the Issuer or any of its properties.
SECTION 11.18.
STORM RECOVERY BONDS NOT PUBLIC DEBT.
Each Storm Recovery Bond shall contain on the face thereof a statement
to the following effect: “Neither the full faith and credit nor the taxing
power of the State of Louisiana is pledged to the payment of the principal of,
or interest on, this Storm Recovery Bond.”
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IN WITNESS WHEREOF, the Issuer and the Trustee have
caused this Indenture to be duly executed by their respective managers or
officers thereunto duly authorized, all as of the day and year first above
written.
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CLECO KATRINA/RITA HURRICANE
RECOVERY FUNDING LLC
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By:
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/s/ Keith D. Crump
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Name:
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Keith D. Crump
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Title:
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Vice President and Manager
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U.S. BANK NATIONAL ASSOCIATION, as
Trustee
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By:
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/s/ Melissa A. Rosal
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Name:
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Melissa A. Rosal
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Title:
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Vice President
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U.S. BANK NATIONAL ASSOCIATION
hereby agrees to act as Paying Agent, Storm Recovery
Bond Registrar, authenticating agent and agent under Section 3.02 hereof,
all as set forth in this Indenture.
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By:
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/s/ Melissa A. Rosal
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Name:
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Melissa A. Rosal
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Title:
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Vice President
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72
SCHEDULE 1
SEMIANNUAL SERVICER’S
CERTIFICATE
[INTENTIONALLY OMITTED]
1
EXHIBIT A
SERVICING CRITERIA
TO BE ADDRESSED BY INDENTURE TRUSTEE IN ASSESSMENT OF COMPLIANCE
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Reg AB
Reference
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Servicing
Criteria
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Applicable
Trustee
Responsibility
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General
Servicing Considerations
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1122(d)(1)(i)
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Policies and procedures
are instituted to monitor any performance or other triggers and events of
default in accordance with the transaction agreements.
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1122(d)(1)(ii)
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If any material
servicing activities are outsourced to third parties, policies and procedures
are instituted to monitor the third party’s performance and compliance with
such servicing activities.
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1122(d)(1)(iii)
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Any requirements in the
transaction agreements to maintain a back-up servicer for the pool assets are
maintained.
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1122(d)(1)(iv)
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A fidelity bond and
errors and omissions policy is in effect on the party participating in the
servicing function throughout the reporting period in the amount of coverage
required by and otherwise in accordance with the terms of the transaction
agreements.
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Cash
Collection and Administration
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1122(d)(2)(i)
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Payments on pool assets
are deposited into the appropriate custodial bank accounts and related bank
clearing accounts no more than two (2) business days of receipt, or such
other number of days specified in the transaction agreements.
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X
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1122(d)(2)(ii)
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Disbursements made via
wire transfer on behalf of an obligor or to an investor are made only by
authorized personnel.
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X
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1122(d)(2)(iii)
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Advances of funds or
guarantees regarding collections, cash flows or distributions, and any
interest or other fees charged for such advances, are made, reviewed and
approved as specified in the transaction agreements.
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1122(d)(2)(iv)
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The related accounts
for the transaction, such as cash reserve accounts or accounts established as
a form of overcollateralization, are separately maintained (e.g., with
respect to commingling of cash) as set forth in the transaction agreements.
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X
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1
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Reg AB
Reference
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Servicing
Criteria
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Applicable
Trustee
Responsibility
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1122(d)(2)(v)
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Each custodial account
is maintained at a federally insured depository institution as set forth in
the transaction agreements. For purposes of this criterion, “federally
insured depository institution” with respect to a foreign financial institution
means a foreign financial institution that meets the requirements of
Rule 13k-1(b)(1) of the Exchange Act.
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1122(d)(2)(vi)
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Unissued checks are
safeguarded so as to prevent unauthorized access.
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1122(d)(2)(vii)
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Reconciliations are
prepared on a monthly basis for all asset-backed securities related bank
accounts, including custodial accounts and related bank clearing accounts.
These reconciliations are (A) mathematically accurate; (B) prepared
within thirty (30) calendar days after the bank statement cutoff date, or
such other number of days specified in the transaction agreements;
(C) reviewed and approved by someone other than the person who prepared
the reconciliation; and (D) contain explanations for reconciling items.
These reconciling items are resolved within ninety (90) calendar days of
their original identification, or such other number of days specified in the transaction
agreements.
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Investor
Remittances and Reporting
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1122(d)(3)(i)
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Reports to investors,
including those to be filed with the Commission, are maintained in accordance
with the transaction agreements and applicable Commission requirements.
Specifically, such reports (A) are prepared in accordance with
timeframes and other terms set forth in the transaction agreements;
(B) provide information calculated in accordance with the terms
specified in the transaction agreements; (C) are filed with the
Commission as required by its rules and regulations; and (D) agree
with investors’ or the trustee’s records as to the total unpaid principal
balance and number of pool assets serviced by the Servicer.
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1122(d)(3)(ii)
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Amounts due to
investors are allocated and remitted in accordance with timeframes,
distribution priority and other terms set forth in the transaction
agreements.
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X
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2
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Reg AB
Reference
|
|
Servicing
Criteria
|
|
Applicable
Trustee
Responsibility
|
|
1122(d)(3)(iii)
|
|
Disbursements made to
an investor are posted within two (2) business days to the Servicer’s
investor records, or such other number of days specified in the transaction
agreements.
|
|
X
|
|
|
|
|
|
|
|
1122(d)(3)(iv)
|
|
Amounts remitted to
investors per the investor reports agree with cancelled checks, or other form
of payment, or custodial bank statements.
|
|
X
|
|
|
|
|
|
|
|
|
|
Pool
Asset Administration
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(i)
|
|
Collateral or security
on pool assets is maintained as required by the transaction agreements or
related pool asset documents.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(ii)
|
|
Pool assets and related
documents are safeguarded as required by the transaction agreements.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(iii)
|
|
Any additions, removals
or substitutions to the asset pool are made, reviewed and approved in
accordance with any conditions or requirements in the transaction agreements.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(iv)
|
|
Payments on pool
assets, including any payoffs, made in accordance with the related pool asset
documents are posted to the Servicer’s obligor records maintained no more
than two (2) business days after receipt, or such other number of days
specified in the transaction agreements, and allocated to principal, interest
or other items (e.g., escrow) in accordance with the related pool asset
documents.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(v)
|
|
The Servicer’s records
regarding the pool assets agree with the Servicer’s records with respect to
an obligor’s unpaid principal balance.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(vi)
|
|
Changes with respect to
the terms or status of an obligor’s pool assets (e.g., loan modifications or
re-agings) are made, reviewed and approved by authorized personnel in
accordance with the transaction agreements and related pool asset documents.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(vii)
|
|
Loss mitigation or
recovery actions (e.g., forbearance plans, modifications and deeds in lieu of
foreclosure, foreclosures and repossessions, as applicable) are initiated,
conducted and concluded in accordance with the timeframes or other
requirements established by the transaction agreements.
|
|
|
3
|
Reg AB
Reference
|
|
Servicing
Criteria
|
|
Applicable
Trustee
Responsibility
|
|
1122(d)(4)(viii)
|
|
Records documenting
collection efforts are maintained during the period a pool asset is
delinquent in accordance with the transaction agreements. Such records are
maintained on at least a monthly basis, or such other period specified in the
transaction agreements, and describe the entity’s activities in monitoring
delinquent pool assets including, for example, phone calls, letters and
payment rescheduling plans in cases where delinquency is deemed temporary
(e.g., illness or unemployment).
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(ix)
|
|
Adjustments to interest
rates or rates of return for pool assets with variable rates are computed
based on the related pool asset documents.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(x)
|
|
Regarding any funds
held in trust for an obligor (such as escrow accounts): (A) such funds
are analyzed, in accordance with the obligor’s pool asset documents, on at
least an annual basis, or such other period specified in the transaction
agreements; (B) interest on such funds is paid, or credited, to obligors
in accordance with applicable pool asset documents and state laws; and
(C) such funds are returned to the obligor within thirty (30) calendar
days of full repayment of the related pool assets, or such other number of
days specified in the transaction agreements.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(xi)
|
|
Payments made on behalf
of an obligor (such as tax or insurance payments) are made on or before the
related penalty or expiration dates, as indicated on the appropriate bills or
notices for such payments, provided that such support has been received by
the Servicer at least thirty (30) calendar days prior to these dates, or such
other number of days specified in the transaction agreements.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(xii)
|
|
Any late payment
penalties in connection with any payment to be made on behalf of an obligor
are paid from the Servicer’s funds and not charged to the obligor, unless the
late payment was due to the obligor’s error or omission.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(xiii)
|
|
Disbursements made on
behalf of an obligor are posted within two (2) business days to the
obligor’s records maintained by the Servicer, or such other number of days
specified in the transaction agreements.
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(xiv)
|
|
Delinquencies,
charge-offs and uncollectible accounts are recognized and recorded in
accordance with the transaction agreements.
|
|
|
4
|
Reg AB
Reference
|
|
Servicing
Criteria
|
|
Applicable
Trustee
Responsibility
|
|
1122(d)(4)(xv)
|
|
Any external
enhancement or other support, identified in Item 1114(a)(1) through
(3) or Item 1115 of Regulation AB, is maintained as set forth in the
transaction agreements.
|
|
|
*With respect to
its custodial functions relating to the Collection Account.
5
APPENDIX
A
MASTER
DEFINITIONS
The definitions contained in this Appendix A are applicable to the
singular as well as the plural forms of such terms.
“
Accounts
” means, collectively, the Collection Account (and each
sub-account thereof, including, without limitation, the General Subaccount, the
Capital Subaccount, the Defeasance Subaccount, the Excess Funds Subaccount and
each Tranche Subaccount).
“
Act
” has the meaning specified in Section 11.03 of the
Indenture.
“
Addition Notice
” means, with respect to the transfer of
Subsequent Storm Recovery Property to the Issuer, notice, which shall be given
by the Seller to the Issuer, the LPSC and the Rating Agencies not later than 10
days prior to the related Subsequent Transfer Date, specifying the Subsequent Transfer
Date for such Subsequent Storm Recovery Property.
“
Adjustment Date
” has the meaning specified in the applicable
Servicing Agreement.
“
Administration Agreement
” means the Administration Agreement
dated as of March 6, 2008, between Cleco Power, as Administrator, and the
Issuer, as the same may be amended and supplemented from time to time.
“
Administrator
” means Cleco Power as administrator under the
Administration Agreement and each successor to or assignee of Cleco Power in
the same capacity.
“
Affiliate
” means, with respect to any specified Person, any
other Person controlling or controlled by or under common control with such
specified Person. For the purposes of
this definition, control, when used with respect to any specified Person, means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms controlling and controlled have meanings correlative
to the foregoing.
“
Annual Accountant’s Report
” has the meaning assigned to that
term in the applicable Servicing Agreement.
“
Applicable Law
” has the meaning specified in Section 6.15
of the Indenture.
“
Authorized Denominations
” means, with respect to any Series or
Tranche of Storm Recovery Bonds, $1,000 and integral multiples thereof, or such
other denominations as may be specified in the Series Supplement therefor.
“
Authorized Officer
” means (i) with respect to any Person
that is a corporation or a limited liability company, any manager, the Chairman
of the Board, the Chief Executive Officer, the President, any Vice Chairman,
any Executive Vice President, Senior Vice President or Vice President, the
Treasurer or any Assistant Treasurer, the Secretary or any Assistant Secretary of
such Person, (ii) with respect to any Person that is a partnership, the
President, any Vice
1
President, Treasurer or Secretary (or Assistant
Secretary) of a general partner or managing partner of such Person;
provided
that in respect of the Issuer, Authorized Officer means any Manager or the
Member and, with respect to the Member, any officer who is authorized to act
for the Member in matters relating to the Issuer and who is identified on the
list of Authorized Officers delivered by the Member to the Trustee as of the
date hereof (as such list may be modified or supplemented from time to time
thereafter).
“
Bankruptcy Code
” means Title 11 of the United States Code (11
U.S.C. Section 101 et seq.), as amended from time to time.
“
Basic Documents
” means the Issuer LLC Agreement, the Issuer
Articles of Organization, each Sale Agreement, each Servicing Agreement, the
Administration Agreement, the Indenture, any Supplemental Indentures, each DTC
Agreement, each Underwriting Agreement and any Bills of Sale.
“
Bill of Sale
” means any bill of sale issued by the Seller to
the Issuer pursuant to any Sale Agreement evidencing the sale of Storm Recovery
Property by the Seller to the Issuer.
“
Bond Rate
” means, with respect to each Series or, if
applicable, each Tranche of Storm Recovery Bonds, the rate at which interest
accrues on the principal balance of Storm Recovery Bonds of such Series or
Tranche, as specified in the Series Supplement therefor.
“
Book-Entry Security
” means a security maintained in the form of
entries (including, without limitation, the security entitlements in, and the
financial assets based on, such security) in the commercial book-entry system
of the Federal Reserve System.
“
Book-Entry Storm Recovery Bonds
” means beneficial interests in
the Storm Recovery Bonds, ownership and transfers of which shall be made
through book entries by a Clearing Agency as described in Section 2.11 of
the Indenture.
“
Business Day
” means any day other than a Saturday or Sunday or
a day on which banking institutions in the City of New Orleans, Louisiana, in
the City of St. Paul, Minnesota, in the City of Chicago, Illinois, or in the
City of New York, New York, are required or authorized by law or executive
order to remain closed.
“
Calculation Date
” means, with respect to each Series of
Storm Recovery Bonds, the date on which the calculations and filings set forth
in Annex 1 to the applicable Servicing Agreement will be made each year.
“
Capital Subaccount
” has the meaning specified in Section 8.02(a) of
the Indenture.
“
Clearing Agency
” means an organization registered as a “clearing
agency” pursuant to Section 17A of the Exchange Act.
“
Clearing Agency Participant
” means a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
2
“
Cleco Power
” means Cleco Power LLC, a Louisiana limited
liability company, or its successors.
“
Code
” means the Internal Revenue Code of 1986, as amended from
time to time, and the Treasury Regulations promulgated thereunder.
“
Collection Account
” has the meaning specified in Section 8.02(a) of
the Indenture.
“
Collections
” means amounts collected in respect of Storm
Recovery Charges.
“
Commission
” means the U.S. Securities and Exchange Commission,
and any successor thereof.
“
Commission Pledge
” means the pledge and covenants of the LPSC
contained in Section VI(G) (Ordering Paragraphs 50 - 54) of the
Financing Order issued by the LPSC on September 17, 2007, in Docket No. U-29157.
“
Corporate Trust Office
” means, as the context requires, either (1) the
office of the Trustee at which at any particular time this Indenture shall be
administered, which office as of the date of the execution of this Indenture is
located at 209 South LaSalle Street, Mail Code MK-IL-RY3B, Chicago,
Illinois 60604-1219, Attn: Corporate
Trust Administration, Ref: Cleco Katrina/Rita Hurricane Recovery Funding LLC,
or at such other address as the Trustee may designate from time to time by
notice to the Storm Recovery Bondholders and the Issuer, or the principal
corporate trust office of any successor Trustee (the address of which the successor
Trustee will provide to the Storm Recovery Bondholders and the Issuer) or (2) the
office of the Paying Agent or Storm Recovery Bond Registrar at which at any
particular time this Indenture shall be
administered, each of which offices as of the date of the execution of this
Indenture is located at 209 South LaSalle Street, Mail Code MK-IL-RY3B,
Chicago, Illinois 60604-1219, or at such
other address as the Paying Agent or Storm Recovery Bond Registrar respectively
may designate from time to time by notice to the Storm Recovery Bondholders and
the Issuer, or the principal corporate trust office of any successor Paying
Agent or Storm Recovery Bond Registrar (the address of which the successor will
provide to the Storm Recovery Bondholders, the Trustee and the Issuer).
“
Covenant Defeasance Option
” has the meaning specified in Section 4.01(b) of
the Indenture.
“
Default
” means any occurrence that is, or with notice or the
lapse of time or both would become, an Event of Default.
“
Defeasance Subaccount
” has the meaning specified in Section 8.02(a) of
the Indenture.
“
Definitive Storm Recovery Bonds
” has the meaning specified in Section 2.11
of the Indenture.
“
DTC
” means The Depository Trust Company.
3
“
DTC Agreement
” means any applicable Letter of Representations
among the Issuer, the Storm Recovery Bond Registrar and DTC or other applicable
Clearing Agency, relating to the Clearing Agency’s rights and obligations (in
its capacity as Clearing Agency) with respect to any Book-Entry Storm Recovery
Bonds, as the same may be amended and supplemented from time to time.
“
Eligible Guarantor Institution
” means a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as “an eligible
guarantor institution,” including (as such terms are defined therein):
(a)
a
bank;
(b)
a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer;
(c)
a
credit union;
(d)
a
national securities exchange, registered securities association or clearing
agency; or
(e)
a
savings association that is a participant in a securities transfer association.
“
Eligible Institution
” means:
(a)
the
corporate trust department of the Trustee, so long as any of the securities of
the Trustee have a credit rating from each Rating Agency in one of its generic
rating categories which signifies investment grade, or
(b)
the
trust department of a depository institution organized under the laws of the
United States of America or any State (or any domestic branch of a foreign
bank), which
(i)
has
either
(A)
with
respect to any Eligible Investment having a maturity of greater than one month,
a long-term unsecured debt rating of “AA-” by Standard & Poor’s, “A2”
by Moody’s and, if Fitch provides a rating thereon, the equivalent of the lower
of those two ratings by Fitch or
(B)
with
respect to any Eligible Investment having a maturity of one month or less, a
certificate of deposit rating of “A-1+” by Standard & Poor’s, “P-1” by
Moody’s and, if Fitch provides a rating thereon, “F-1+” by Fitch, or any other
long-term, short-term or certificate of deposit rating acceptable to the Rating
Agencies, and
(ii)
whose
deposits are insured by the FDIC.
4
“
Eligible Investments
” mean Book-Entry Securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence and may include investments for which the Trustee and/or
its Affiliates acts as an investment manager or advisor:
(a)
direct
obligations of, and obligations fully and unconditionally guaranteed as to
timely payment by, the United States of America;
(b)
demand
deposits, time deposits or certificates of deposit of any depository
institution or trust company incorporated under the laws of the United States
of America or any State thereof (or any domestic branch of a foreign bank) and
subject to supervision and examination by federal or State banking or
depository institution authorities;
provided
,
however
, that at
the time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than
such obligations the rating of which is based on the credit of a Person other
than such depository institution or trust company) thereof shall have either (i) a
long-term unsecured debt rating from Moody’s, Standard & Poor’s and,
if Fitch provides a rating thereon, Fitch of at least “Aa3,” “AA” and “AA,”
respectively, or (ii) a certificate of deposit rating from Moody’s and
Standard & Poor’s of at least “P-1” and “A-1+,” respectively, and, if
Fitch provides a rating thereon, “F-1+” by Fitch;
(c)
commercial
paper or other short term obligations of any Person organized under the laws of
any State (other than Cleco Power, Cleco Corporation or any of their
affiliates) whose ratings, at the time of the investment or contractual
commitment to invest therein, from Moody’s and Standard & Poor’s shall
be at least “P-1” and “A-1+,” respectively and, if Fitch provides a rating
thereon, “F-1+” by Fitch;
(d)
investments
in money market funds having a rating from Moody’s, Standard & Poor’s
and, if Fitch provides a rating thereon, Fitch of “Aaa,” “AAA” and “AAA,”
respectively (including funds for which the Trustee or any of its Affiliates
act as investment manager or advisor);
(e)
bankers’
acceptances issued by any depository institution or trust company referred to
in clause (b) above;
(f)
repurchase
obligations with respect to any security that is a direct obligation of, or fully
guaranteed by, the United States of America or any agency or instrumentality
thereof the obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a depository
institution or trust company (acting as principal) described in clause (b) above;
(g)
repurchase
obligations with respect to any security or whole loan entered into with
(i)
a
depository institution or trust company (acting as principal) described in
clause (b) above (any depository institution or trust company being
referred to in this definition as a “financial institution”),
5
(ii)
a
broker/dealer (acting as principal) registered as a broker or dealer under Section 15
of the Exchange Act (any broker/dealer being referred to in this definition as
a “broker/dealer”), the unsecured short-term debt obligations of which are
rated at least “P-1” by Moody’s, “A-1+” by Standard & Poor’s and, if
Fitch provides a rating thereon, “F-1+” by Fitch at the time of entering into
this repurchase obligation, or
(iii)
an
unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary
of a non-bank or bank holding company the unsecured short-term debt obligations
of which are rated at least “P-1” by Moody’s, “A-1+” by Standard &
Poor’s and, if Fitch provides a rating thereon, “F-1+” by Fitch at the time of
purchase so long as the obligations of such unrated broker/dealer are
unconditionally guaranteed by such non-bank or bank holding company; or
(h)
any
other investment permitted by each of the Rating Agencies;
provided
,
that (a) any Book-Entry Security, instrument or security having a maturity
of one month or less that would be an Eligible Investment but for its failure,
or the failure of the obligor thereon, to have the rating specified above shall
be an eligible investment if such Book-Entry Security, instrument or security,
or the obligor thereon, has a short-term unsecured debt rating of at least “P-1”
by Moody’s, “A-1+” by S&P and, if Fitch provides a rating thereon, “F-1+”
by Fitch, and (b) any Book-Entry Security, instrument or security having a
maturity of greater than one month that would be an eligible investment but for
its failure, or the failure of the obligor thereon, to have the rating
specified above shall be an eligible investment if such Book-Entry Security,
instrument or security, or the obligor thereon, has a long-term unsecured debt
rating of at least “AA-” by S&P or “Aa3” by Moody’s (and, if Fitch provides
a rating thereon, “AA-” by Fitch) and a short-term unsecured debt rating of at
least “P-1” by Moody’s or the equivalent thereof by S&P (and Fitch, if
Fitch provides a rating thereon);
provided
,
further
, that unless otherwise permitted by the applicable Rating Agencies,
upon the failure of any Eligible Institution to maintain any applicable rating
set forth in this definition or the definition of Eligible Institution, the
related investments at that institution shall be reinvested in Eligible
Investments at a successor Eligible Institution within 10 days.
“
Eligible Securities Account
” means either:
(a)
a
segregated non-interest-bearing trust account with an Eligible Institution or
(b)
a
segregated non-interest-bearing trust account with the corporate trust department
of a depository institution organized under the laws of the United States of
America or any State (or any domestic branch of a foreign bank), having
corporate trust powers and acting as trustee for funds deposited in such
account, so long as any of the unsecured securities of such depository
institution shall have a credit rating from each Rating Agency in one of its
generic rating categories which signifies investment grade.
“
Event of Default
” has the meaning specified in Section 5.01
of the Indenture.
6
“
Excess Funds Subaccount
” has the meaning specified in Section 8.02(a) of
the Indenture.
“
Exchange Act
” means the Securities Exchange Act of 1934, as
amended.
“
Expected
Amortization Schedule
” means, with respect to each Series or, if
applicable, each Tranche of Storm Recovery Bonds, the expected amortization
schedule for principal thereof, as specified in the Series Supplement
therefor.
“
Expected Final Payment Date
” means, with respect to each Series or,
if applicable, each Tranche of Storm Recovery Bonds, the date when all interest
and principal is scheduled to be paid for that Series or Tranche in
accordance with the Expected Amortization Schedule, as specified in the Series Supplement
therefor.
“
FDIC
” means the Federal Deposit Insurance Corporation or any
successor.
“
Federal Book-Entry Regulations
” means (a) the federal
regulations contained in Subpart B (“Treasury/Reserve Automated Debt Entry
System (TRADES)”) governing Book-Entry Securities consisting of U.S. Treasury
bonds, notes and bills, and Subpart D (“Additional Provisions”) of 31 C.F.R.
part 357, Section 357.10 through Section 357.14 and Section 357.41
through Section 357.44 (including related defined terms in 31 C.F.R. Section 357.2);
and (b) to the extent substantially identical to the federal regulations
referred to in clause (a) above (as in effect from time to time), the
federal regulations governing other Book-Entry Securities.
“
Final Maturity Date
” means, for each Series or, if applicable,
each Tranche of Storm Recovery Bonds, the date by which all Principal and
Interest on that Series or Tranche is required to be paid, as specified in
the Series Supplement therefor.
“
Financing Costs
” has the meaning assigned to that term in the
Securitization Act and the Financing Order.
“
Financing Order
” means Financing Order No. U-29157-B
issued by the LPSC on September 17, 2007, in Docket No. U-29157 and
any subsequent financing order issued by the LPSC to Cleco Power pursuant to
which Cleco Power transfers its rights and interests thereunder to the Issuer
in connection with the issuance of a separate Series of Storm Recovery
Bonds.
“
Fitch
” means Fitch, Inc., or any successor thereto.
“
General Subaccount
” has the meaning specified in Section 8.02(a) of
the Indenture.
“
Grant
” means mortgage, pledge, bargain, sell, warrant,
alienate, remise, release, convey, assign, transfer, deliver, create and grant
a lien upon and a security interest in and right of set-off against, deposit,
set over and confirm pursuant to this Indenture. A Grant of the Trust Estate or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal, interest and other payments in respect of the Trust Estate and all
other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, to bring
7
Proceedings in the name of the Granting party or
otherwise and generally to do and receive anything that the Granting party is
or may be entitled to do or receive thereunder or with respect thereto.
“
Holder”
or
“Storm Recovery Bondholder
” means the Person
in whose name a Storm Recovery Bond of any Series or Tranche is registered
on the Storm Recovery Bond Register.
“
Indemnity Amounts
” means any indemnification obligations
payable by the Issuer pursuant to Section 6.07 of the Indenture.
“
Indenture
” means this Indenture dated as of March 6, 2008,
among the Issuer and the Trustee, as the same may be amended and supplemented
from time to time by one or more Series Supplements or Supplemental
Indentures, and shall include the forms and terms of the Storm Recovery Bonds
established thereunder.
“
Independent
” means, when used with respect to any specified
Person, that the Person
(a)
is
in fact independent of the Issuer, any other obligor upon the Storm Recovery
Bonds, Cleco Power and any Affiliate of any of the foregoing Persons,
(b)
does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, Cleco Power or any Affiliate of
any of the foregoing Persons and
(c)
is
not connected with the Issuer, any such other obligor, Cleco Power or any
Affiliate of any of the foregoing Persons as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
“
Independent Certificate
” means a certificate or opinion to be
delivered to the Trustee made by an Independent appraiser from a nationally
reputable appraisal firm or other expert appointed by an Issuer Order in the exercise
of reasonable care, and such opinion or certificate shall state that the signer
has read the definition of “Independent” in this Appendix A and that the signer
is Independent within the meaning thereof.
“
Initial Transfer Date
” means the Series Issuance Date for
the first Series of Storm Recovery Bonds.
“
Interest
” means, for any Payment Date for any Series or
Tranche of Storm Recovery Bonds, the sum, without duplication, of:
(a)
an
amount equal to the amount of interest accrued at the applicable interest rates
from the prior Payment Date or, with respect to the first Payment Date, the
amount of interest accrued since the Initial Transfer Date, with respect to
that Series or Tranche;
(b)
any
unpaid interest plus, to the extent permitted by law, any interest accrued on
this unpaid interest at the applicable interest rate;
8
(c)
if
the Storm Recovery Bonds have been declared due and payable, all accrued and
unpaid interest thereon; and
(d)
with
respect to a Series or Tranche to be redeemed prior to the next Payment
Date, the amount of interest that will be payable as interest on such Series or
Tranche upon such redemption.
“
Issuer
” means Cleco Katrina/Rita Hurricane Recovery Funding
LLC, a Louisiana limited liability company, or any successor thereto pursuant
to Section 3.11 of the Indenture.
“
Issuer Articles of Organization
” means the Articles of
Organization of the Issuer dated October 29, 2007 that was filed with the
Louisiana Secretary of State on October 30, 2007, as the same may be
amended and restated from time to time.
“
Issuer LLC Agreement
” means the Limited Liability Company
Operating Agreement between the Issuer and Cleco Power, as sole Member, dated
and effective as of October 29, 2007, as the same may be amended and
supplemented from time to time.
“
Issuer Opinion of Counsel
” means one or more written opinions
of counsel who may, except as otherwise expressly provided in the Indenture, be
employees of or counsel to the Issuer and who shall be satisfactory to the
Trustee and the LPSC, and which opinion or opinions shall be addressed to the
Trustee, as Trustee, and shall be in a form reasonably satisfactory to the
Trustee.
“
Issuer Officer’s Certificate
” means a certificate on behalf of
the Issuer signed by any Authorized Officer of the Issuer and delivered to the
Trustee.
“
Issuer Order
” or “
Issuer Request
” means a written order
or request signed in the name of the Issuer by any one of its Authorized
Officers and delivered to the Trustee.
“
Legal Defeasance Option
” has the meaning specified in Section 4.01(b) of
the Indenture.
“
Lien
” means a security interest, lien, charge, pledge, equity
or encumbrance of any kind.
“
Losses
” means collectively, any and all liabilities,
obligations, losses, damages, payments, costs or expenses of any kind
whatsoever.
“
LPSC
” means the Louisiana Public Service Commission or any
successor entity thereto.
“
Majority Holders
” means the Holders of a majority of the
Outstanding Amount of the Storm Recovery Bonds of all Series.
“
Manager
” means any manager of the Issuer.
“
Member
” means Cleco Power, as the sole member of the Issuer, or
any successor thereto.
“
Moody’s
” means Moody’s Investors Service, Inc., or any
successor thereto.
9
“
Officer’s Certificate
” means, in respect of any Person, an
officer’s certificate signed by an Authorized Officer of such Person;
provided
that unless otherwise specified, any reference in the Indenture to an Officer’s
Certificate shall be to an Officer’s Certificate of any Authorized Officer of
the Issuer.
“
Operating Expenses
” means, with respect to the Issuer, all
fees, costs and expenses owed by the Issuer with respect to a Series of
Storm Recovery Bonds, including all amounts owed by the Issuer to the Trustee
relating to that Series, the Servicing Fee relating to that Series (but
excluding costs and expenses incurred by the Servicer except as specifically
set forth in Sections 6.08 and 6.10 of the Servicing Agreement relating to that
Series), the fees relating to that Series payable by the Issuer to the
Administrator under the Administration Agreement, the fees and expenses
relating to that Series payable by the Issuer to the independent managers
of the Issuer, legal fees and expenses of the Servicer pursuant to the
applicable Servicing Agreement relating to that Series, the costs and expenses
incurred by the Seller in connection with the performance of the Seller’s
obligations under Section 4.07 of the Sale Agreement and payable by the Issuer,
and legal and accounting fees, costs and expenses of the Issuer relating to
that Series.
“
Opinion of Counsel
” means one or more written opinions of
counsel who may be an employee of or counsel to Cleco Power or the Issuer,
which counsel shall be reasonably acceptable to the Trustee, the LPSC, the
Issuer or the Rating Agencies and which shall be in form reasonably
satisfactory to the Trustee or the LPSC, if applicable.
“
Outstanding
” or “
outstanding
” with respect to Storm
Recovery Bonds means, as of the date of determination, all Storm Recovery Bonds
theretofore authenticated and delivered under the Indenture except:
(a)
Storm
Recovery Bonds theretofore canceled by the Storm Recovery Bond Registrar or
delivered to the Storm Recovery Bond Registrar for cancellation;
(b)
Storm
Recovery Bonds or portions thereof the payment for which money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent in
trust for the Holders of such Storm Recovery Bonds;
provided
,
however
,
that if such Storm Recovery Bonds are to be redeemed, notice of such redemption
has been duly given pursuant to the Indenture or provision therefor,
satisfactory to the Trustee; and
(c)
Storm
Recovery Bonds in exchange for or in lieu of other Storm Recovery Bonds which
have been authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Trustee is presented that any such Storm Recovery Bonds are
held by a bona fide purchaser;
provided
that in determining whether the Holders of the requisite Outstanding Amount of
the Storm Recovery Bonds or any Series or Tranche thereof have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or under any Basic Document, Storm Recovery Bonds owned by the Issuer, any
other obligor upon the Storm Recovery Bonds, Cleco Power or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be fully
protected in relying upon any such request, demand,
10
authorization, direction,
notice, consent or waiver, only Storm Recovery Bonds that a Responsible Officer
of the Trustee knows to be so owned shall be so disregarded. Storm Recovery Bonds so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee’s right so to act with respect
to such Storm Recovery Bonds and that the pledgee is not the Issuer, any other
obligor upon the Storm Recovery Bonds, the Servicer or any Affiliate of any of
the foregoing Persons.
“
Outstanding Amount
” means the aggregate principal amount of all
Outstanding Storm Recovery Bonds or, if the context requires, all Outstanding
Storm Recovery Bonds of a Series or Tranche Outstanding at the date of
determination.
“
Paying Agent
” means the entity so designated in Section 3.03
of the Indenture or any other Person that meets the eligibility standards for
the Trustee specified in Section 6.11 of the Indenture and is authorized
by the Issuer to make the payments of Principal of or premium, if any, or
Interest on the Storm Recovery Bonds on behalf of the Issuer.
“
Payment Date
” means, with respect to each Series or, if
applicable, each Tranche of Storm Recovery Bonds, each date or dates specified
as Payment Dates for such Series or Tranche in the Series Supplement
therefor, provided that if any such date is not a Business Day, the Payment
Date shall be the Business Day immediately succeeding such date.
“
Person
” means any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust (including any
beneficiary thereof), business trust, limited liability company, unincorporated
organization or government or any agency or political subdivision thereof.
“
Predecessor Storm Recovery Bond
” means, with respect to any
particular Storm Recovery Bond, every previous Storm Recovery Bond evidencing
all or a portion of the same debt as that evidenced by such particular Storm
Recovery Bond; and, for the purpose of this definition, any Storm Recovery Bond
authenticated and delivered under Section 2.06 of the Indenture in lieu of
a mutilated, lost, destroyed or stolen Storm Recovery Bond shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Storm
Recovery Bond.
“
Principal
” means, with respect to any Payment Date and each Series or,
if applicable, each Tranche of Storm Recovery Bonds the sum, without
duplication, of:
(a)
the
amount of principal scheduled to be paid on such Payment Date in accordance
with the Expected Amortization Schedule;
(b)
the
amount of principal due on the Final Maturity Date of any Series or
Tranche if such Payment Date is the Final Maturity Date;
(c)
the
amount of principal due as a result of the occurrence and continuance of an
Event of Default and acceleration of the Storm Recovery Bonds;
(d)
the
amount of principal and premium, if any, due as a result of a redemption of
Storm Recovery Bonds prior to such Payment Date; and
11
(e)
any
unpaid and previously scheduled payments of principal and overdue payments of
principal.
“
Pro Rata
” has the meaning specified for such term in Section 8.02(d) of
the Indenture.
“
Proceeding
” means any suit in equity, action at law or other
judicial or administrative proceeding.
“
Projected Storm Recovery Bond Balance
” means, as of any date,
the anticipated Outstanding Amount of Storm Recovery Bonds after giving effect
to payment of the sum of the amounts provided for in the Expected Amortization
Schedules for each outstanding Series of Storm Recovery Bonds to be paid
on or before such date.
“
Rating Agency
” means any rating agency rating the Storm
Recovery Bonds of any Tranche or Series at the time of issuance thereof at
the request of the Issuer, which initially shall be Moody’s, Fitch and
S&P. If no such organization or
successor is any longer in existence, “Rating Agency” shall be a nationally
recognized statistical rating organization or other comparable Person
designated by the Issuer, written notice of which designation shall be given to
the Trustee, the LPSC and the Servicer.
“
Rating Agency Condition,
” with respect to the issuance of a new
Series of Storm Recovery Bonds, has the meaning set forth in Section 2.10(7) of
the Indenture and, with respect to any other action, means the notification in
writing to each Rating Agency of such action, and confirmation from S&P to
the Trustee and the Issuer that such action will not result in a reduction or
withdrawal of the then current rating by such Rating Agency of any outstanding Series or
Tranche of Storm Recovery Bonds.
“
Record Date
” means, with respect to any Payment Date for a Series or
Tranche, the date set forth as such in the Series Supplement therefor.
“
Redemption Date
” means, with respect to each Series or, if
applicable, each Tranche of Storm Recovery Bonds, the date for the redemption
of the Storm Recovery Bonds of such Series or Tranche pursuant to Section 10.01
of the Indenture or the Series Supplement for such Series or Tranche,
which in each case shall be a Payment Date.
“
Regulation AB
” means the rules of the SEC promulgated
under Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R.
§§229.1100-229.1123, as such may be amended from time to time
.
“
Required Capital Amount
” means a capital contribution in an
amount equal to the amount specified in the related Series Supplement,
representing a capital contribution from Cleco Power.
“
Responsible Officer
” means, with respect to the Trustee, any
officer within the Corporate Trust Office of the Trustee, including any Vice
President, Director, Managing Officer, associate, Assistant Vice President,
Secretary, Assistant Secretary, or any other officer of the Trustee having
direct responsibility for the administration of this Indenture and also, with
respect
12
to a particular matter, any other officer to whom such
matter is referred because of such officer’s knowledge of and familiarity with
the particular subject.
“
Retiring Trustee
” means a Trustee that resigns or vacates the
office of Trustee for any reason.
“
Sale Agreement
” means the Storm Recovery Property Sale
Agreement for the related Storm Recovery Property, in each case, between the
Seller and the Issuer, as the same may be amended and supplemented from time to
time.
“
Securities Act
” means the Securities Act of 1933, as amended.
“
Securitization Act
” means Act No. 64 of the Louisiana
Regular Session of 2006, the “Louisiana Electric Utility Storm Recovery
Securitization Act,” codified at La. R.S. 45:1226-1236.
“
Seller
” means Cleco Power, or its successor, in its capacity as
seller of the Storm Recovery Property to the Issuer pursuant to any Sale Agreement.
“
Semiannual Servicer’s Certificate
” means the statement prepared
by the Servicer and delivered to the Trustee with respect to each Series of
Storm Recovery Bonds on or prior to each Payment Date therefor, the form of
which is attached hereto as Schedule 1.
“
Series
” means any series of Storm Recovery Bonds issued by the
Issuer and authenticated by the Trustee pursuant to the Indenture, as specified
in the Series Supplement therefor.
“
Series Final Maturity Date
” means the Final Maturity Date
for a Series.
“
Series Issuance Date
” means, with respect to any Series,
the date on which the Storm Recovery Bonds of such Series are to be
originally issued in accordance with Section 2.10 of the Indenture and the
Series Supplement for such Series.
“
Series Supplement
” means a Supplemental Indenture that
authorizes a particular Series of Storm Recovery Bonds.
“
Series Trust Estate
” has the meaning specified in a Series Supplement
for a particular Series of Storm Recovery Bonds.
“
Servicer
” means Cleco Power and each successor to or assignee
of Cleco Power, in its capacity as Servicer under the applicable Servicing
Agreement for a Series of Storm Recovery Bonds.
“
Servicer Default
” means the occurrence and continuation of one
of the events specified in the applicable Servicing Agreement.
13
“
Servicing Agreement
” means any Storm Recovery Property
Servicing Agreement between the Issuer and the Servicer for the related Storm
Recovery Property and acknowledged by the Trustee, as the same may be amended
and supplemented from time to time.
“
Servicing Fee
” means the fee payable by the Issuer to the
Servicer on each Payment Date with respect to each Series of Storm
Recovery Bonds in the amount to be specified in the applicable Servicing
Agreement.
“
Standard & Poor’s” or “S&P
” means Standard &
Poor’s, a division of The McGraw-Hill Companies, or any successor thereto.
“
State
” means any one of the 50 states of the United States of
America or the District of Columbia.
“
Storm Recovery Bond” or “Bond
” means any of the “storm recovery
bonds” (as defined in the Securitization Act) issued by the Issuer pursuant to
the Indenture and one or more Series Supplements authorizing such Series.
“
Storm Recovery Bond Balance
” means, as of any date, the
aggregate Outstanding Amount of all Series of Storm Recovery Bonds on such
date.
“
Storm Recovery Bond Owner
” means, with respect to a Book-Entry
Storm Recovery Bond, the Person who is the beneficial owner of such Book-Entry
Storm Recovery Bond, as reflected on the books of the Clearing Agency, or on
the books of a Person maintaining an account with such Clearing Agency
(directly as a Clearing Agency Participant or as an indirect participant, in
each case in accordance with the rules of such Clearing Agency).
“
Storm Recovery Bond Register
” has the meaning specified in Section 2.05
of the Indenture.
“
Storm Recovery Bond Registrar
” means U.S. Bank National
Association, in its capacity as keeper of the Storm Recovery Bond Register, or
any other Person appointed to act in such capacity by the Issuer pursuant to Section 2.05
of the Indenture.
“
Storm Recovery Charge Adjustment Process
” means the process by
which Storm Recovery Charges are adjusted pursuant to the applicable Servicing
Agreement, the Financing Order and the Securitization Act.
“
Storm Recovery Charges
” means the nonbypassable amounts to be
charged for the use or availability of electric services, approved by the LPSC
in the Financing Order to recover Financing Costs, that may be collected by
Cleco Power, its successors, assignees or other collection agents as provided
for in the Financing Order.
“
Storm Recovery Property
” means all of Seller’s rights and
interest under the Financing Order (including, without limitation, rights to
impose, collect and receive the “storm recovery charges” (as defined in the
Securitization Act) approved in such Financing Order) issued by the LPSC on September 17,
2007 (Docket No. U-29157) pursuant to the Securitization Act, except the
rights of Seller to earn and receive a rate of return on its invested capital
in the Issuer, to
14
receive administration and servicer fees, to withdraw
funds from its restricted storm recovery reserve funded by the proceeds from
the sale of the Storm Recovery Property, or to use the Seller’s remaining
portion of those proceeds.
“
Subsequent Sale
” means the sale of Storm Recovery Property
after the date hereof, subject to the satisfaction of the conditions specified
in any Sale Agreement and the Indenture.
“
Subsequent Transfer Date
” means any date on which a Subsequent
Sale will be effective, specified in an Addition Notice.
“
Subsequent Storm Recovery Property
” means Storm Recovery
Property (identified in the related Bill of Sale) sold by the Seller to the
Issuer as of a Subsequent Transfer Date pursuant to a Sale Agreement.
“
Successor Servicer
” has the meaning specified in the Servicing
Agreement.
“
Supplemental Indenture
” means a supplemental indenture entered
into by the Issuer and the Trustee pursuant to Article IX of the
Indenture.
“
Tranche
” means, with respect to any Series, any one of the
classes of Storm Recovery Bonds of that Series, as specified in the Series Supplement
for that Series.
“
Tranche Final Maturity Date
” means the Final Maturity Date of a
Tranche, as specified in the Series Supplement for the related Series.
“
Tranche Subaccount
” has the meaning specified in Section 8.02(a) of
the Indenture.
“
Trust Estate
” means all Series Trust Estate securing all
Storm Recovery Bonds issued under the Indenture.
“
Trust Indenture Act” or “TIA
”
means the Trust Indenture Act of 1939, as amended, as in force on the date
hereof, unless otherwise specifically provided.
“
Trustee
” means U.S. Bank National Association, as trustee, or
its successor or any successor Trustee under the Indenture.
“
UCC
” means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from
time to time.
“
Underwriting Agreement
” means any underwriting agreement
entered into by the Issuer, Cleco Power and the underwriters parties thereto in
connection with the issuance of a separate Series of Storm Recovery Bonds
in accordance with a Financing Order.
“
U.S. Government Obligations
” means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America is
pledged and which are not callable at the issuer’s option.
15
Exhibit 10.1
STORM RECOVERY PROPERTY SALE
AGREEMENT
between
CLECO KATRINA/RITA HURRICANE
RECOVERY FUNDING LLC
Issuer
and
CLECO POWER LLC
Seller
Dated as of March 6,
2008
TABLE OF CONTENTS
|
ARTICLE I
DEFINITIONS
|
1
|
|
Section 1.01
|
|
Definitions
|
1
|
|
Section 1.02
|
|
Other Definitional Provisions
|
1
|
|
|
|
|
|
|
ARTICLE
II CONVEYANCE OF THE STORM RECOVERY PROPERTY
|
2
|
|
Section 2.01
|
|
Conveyance of the Storm Recovery Property
|
2
|
|
Section 2.02
|
|
Conditions to Conveyance of the Storm Recovery
Property
|
2
|
|
|
|
|
|
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF SELLER
|
3
|
|
Section 3.01
|
|
Organization and Good Standing
|
4
|
|
Section 3.02
|
|
Due Qualification
|
4
|
|
Section 3.03
|
|
Power and Authority
|
4
|
|
Section 3.04
|
|
Binding Obligation
|
4
|
|
Section 3.05
|
|
No Violation
|
4
|
|
Section 3.06
|
|
No Proceedings
|
4
|
|
Section 3.07
|
|
Approvals
|
5
|
|
Section 3.08
|
|
The Storm Recovery Property
|
5
|
|
Section 3.09
|
|
Solvency
|
6
|
|
Section 3.10
|
|
The Financing Order
|
6
|
|
Section 3.11
|
|
State Action
|
7
|
|
Section 3.12
|
|
No Court Order
|
8
|
|
Section 3.13
|
|
Approvals Concerning the Storm Recovery Property
|
8
|
|
Section 3.14
|
|
Assumptions
|
8
|
|
Section 3.15
|
|
Creation of the Storm Recovery Property
|
8
|
|
Section 3.16
|
|
Prospectus
|
9
|
|
Section 3.17
|
|
Nature of Representations and Warranties
|
9
|
|
Section 3.18
|
|
Waivers of Legal Warranties
|
9
|
|
|
|
|
|
|
ARTICLE
IV COVENANTS OF THE SELLER
|
10
|
|
Section 4.01
|
|
Seller’s Existence
|
10
|
|
Section 4.02
|
|
No Liens or Conveyances
|
10
|
|
Section 4.03
|
|
Delivery of Collections
|
10
|
|
Section 4.04
|
|
Notice of Liens
|
11
|
|
Section 4.05
|
|
Compliance With Law
|
11
|
|
Section 4.06
|
|
Covenants Related to the Storm Recovery Property
|
11
|
|
Section 4.07
|
|
Protection of Title
|
12
|
|
Section 4.08
|
|
Taxes
|
13
|
|
Section 4.09
|
|
Filings Pursuant to Financing Order
|
13
|
|
Section 4.10
|
|
Issuance Advice Letter
|
13
|
|
Section 4.11
|
|
Tariff
|
13
|
|
Section 4.12
|
|
Notice of Breach to Rating Agencies, Etc.
|
13
|
|
Section 4.13
|
|
Use of Proceeds
|
14
|
|
Section 4.14
|
|
Further Assurances
|
14
|
|
|
|
|
|
|
ARTICLE V
ADDITIONAL UNDERTAKINGS OF SELLER
|
14
|
|
SECTION 5.01
LIABILITY OF THE SELLER; INDEMNITIES
|
14
|
|
Section 5.02
|
|
Merger or Consolidation of, or Assumption of the
Obligations of, the Seller
|
16
|
|
Section 5.03
|
|
Limitation on Liability of the Seller and Others
|
18
|
|
|
|
|
|
|
ARTICLE
VI MISCELLANEOUS PROVISIONS
|
18
|
|
Section 6.01
|
|
Amendment
|
18
|
|
|
|
|
|
|
|
i
|
Section 6.02
|
|
Notices
|
19
|
|
Section 6.03
|
|
Assignment by the Seller
|
20
|
|
Section 6.04
|
|
Assignment to the Indenture Trustee
|
20
|
|
Section 6.05
|
|
Limitations on Rights of Others
|
20
|
|
Section 6.06
|
|
Severability
|
20
|
|
Section 6.07
|
|
Separate Counterparts
|
21
|
|
Section 6.08
|
|
Headings
|
21
|
|
Section 6.09
|
|
Governing Law
|
21
|
|
Section 6.10
|
|
Nonpetition Covenants
|
21
|
|
APPENDIX A
|
|
DEFINITIONS
|
|
|
|
|
|
SCHEDULE 1
|
|
|
ii
STORM RECOVERY PROPERTY SALE
AGREEMENT (this “Agreement”) dated as of March 6, 2008, between CLECO
KATRINA/RITA HURRICANE RECOVERY FUNDING LLC, a Louisiana limited liability
company (the “Issuer”), and CLECO POWER LLC, a Louisiana limited liability
company, as seller (the “Seller”).
WHEREAS, the Issuer desires
to purchase the Storm Recovery Property created pursuant to the Securitization
Act and the Financing Order;
WHEREAS, the Seller is
willing to sell its rights and interests in and to the Storm Recovery Property
to the Issuer;
WHEREAS, the Issuer, in
order to finance the purchase of the Storm Recovery Property, will issue the
Storm Recovery Bonds under the Indenture; and
WHEREAS, the Issuer, to
secure its obligations under the Storm Recovery Bonds and the Indenture, will
pledge its right, title and interest in the Storm Recovery Property and this
Agreement to the Indenture Trustee for the benefit of the Storm Recovery
Bondholders.
NOW, THEREFORE, in
consideration of the premises and the mutual covenants herein contained and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01
Definitions.
Capitalized
terms used herein and not otherwise defined herein have the meanings assigned
to them in Appendix A to this Agreement.
Section 1.02
Other
Definitional Provisions.
(a)
“Agreement”
means this Storm Recovery Property Sale Agreement, as the same may be amended
and supplemented from time to time.
(b)
Non-capitalized
terms used herein which are defined in the Securitization Act, as the context
requires, have the meanings assigned to such terms in the Securitization Act,
but without giving effect to amendments to the Securitization Act after the
date hereof which have a material adverse effect on the Issuer or the Storm
Recovery Bondholders.
(c)
All terms
defined in this Agreement shall have such defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(d)
The words
“hereof,” “herein,” “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; Section, Schedule and Exhibit references
contained in this Agreement are references to Sections, Schedules and Exhibits
in or to
1
this Agreement unless otherwise specified; and the
term “including” shall mean “including without limitation.”
(e)
The definitions
contained in this Agreement are applicable to the singular as well as the
plural forms of such terms.
ARTICLE II
CONVEYANCE OF THE STORM
RECOVERY PROPERTY
Section 2.01
Conveyance
of the Storm Recovery Property.
(a)
In
consideration of the Issuer’s payment to or upon the order of the Seller of $176,000,000
(the “Purchase Price”), subject to the satisfaction or waiver of the conditions
specified in Section 2.02, the Seller does hereby irrevocably sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse
(subject, for the avoidance of doubt, to
the express obligations of the Seller herein) or warranty, except as set forth
herein, all right, title and interest of the Seller in and to the Storm
Recovery Property as identified in the Bill of Sale delivered pursuant to Section 2.02(i) on
or prior to the Transfer Date (such sale, transfer, assignment, setting over and
conveyance of the Storm Recovery Property to include, to the fullest extent
permitted by the Securitization Act, the right to impose, collect and receive
the Storm Recovery Charges, as the same may be adjusted from time to time). Such sale, transfer, assignment, setting over
and conveyance of the Storm Recovery Property is hereby expressly stated to be
a sale or other absolute transfer and, pursuant to Section 1230(1) of
the Securitization Act and other applicable law, is a true sale and is not a
secured transaction and title and ownership has passed to the Issuer. The preceding sentence is the statement
referred to in Section 1230 of the Securitization Act. The Seller agrees and confirms that upon
payment of the Purchase Price and the execution and delivery of this Agreement
and the Bill of Sale, the sale, transfer and assignment hereunder shall be
effective and the Seller shall have no right, title or interest in, to or under
the Storm Recovery Property.
(b)
Subject to the
satisfaction or waiver of conditions specified in Section 2.02, the Issuer
does hereby purchase the Storm Recovery Property from the Seller for the
consideration set forth in Section 2.01(a).
(c)
The Seller and
the Issuer each acknowledge and agree that the purchase price for the Storm
Recovery Property sold pursuant to this Agreement is equal to its fair market
value at the time of sale.
Section 2.02
Conditions
to Conveyance of the Storm Recovery Property
.
The obligation
of the Seller to sell, and the obligation of the Issuer to purchase the Storm
Recovery Property on the Transfer Date shall be subject to and conditioned upon
the satisfaction or waiver of each of the following conditions:
(i) on or prior to the Transfer Date, the Seller shall
deliver to the Issuer a duly executed Bill of Sale identifying the Storm
Recovery Property, substantially in the form of Exhibit A hereto;
2
(ii) as of the Transfer Date, the representations and
warranties of the Seller in this Agreement shall be true and correct in all
material respects and no material breach by the Seller of its covenants in this
Agreement shall exist and the Seller shall have delivered to the Issuer and the
Indenture Trustee an Officer’s Certificate to such effect and no Servicer
Default shall have occurred and be continuing;
(iii) as of the Transfer Date:
(A) the Issuer shall have sufficient funds available to pay the
Purchase Price, and
(B) all conditions set forth in the Indenture to the issuance
of the Storm Recovery Bonds intended to provide such funds shall have been
satisfied or waived.
(iv) on or prior to the Transfer Date, the Seller shall have
taken all actions required under the Securitization Act, the Financing Order
and other applicable law for the Issuer to have ownership of the Storm Recovery
Property, free and clear of all Liens other than Liens created by the Issuer
pursuant to the Indenture; and the Issuer, or the Servicer on behalf of the
Issuer, shall have taken any action required for the Issuer to grant the
Indenture Trustee a first priority perfected security interest in the Trust
Estate and maintain such security interest as of such date (including all
actions required under the Securitization Act, the Financing Order and the
Uniform Commercial Code as enacted in the State of Louisiana and each other
applicable jurisdiction (the “UCC”));
(v) the Seller shall have delivered to each Rating Agency and
to the Issuer any Opinions of Counsel requested by the Rating Agencies;
(vi) the Seller shall have delivered to the Indenture Trustee
and the Issuer an Officer’s Certificate confirming the satisfaction of each
relevant condition precedent specified in this Section 2.02; and
(vii) the Seller shall have received the Purchase Price in funds
immediately available on the Transfer Date.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF SELLER
As of the Transfer Date, the
Seller makes the following representations and warranties on which the Issuer
has relied and will rely in acquiring the Storm Recovery Property. The
following representations and warranties are made under existing law as in
effect as of the Transfer Date. The
Seller shall not be in breach of any representation or warranty herein as a
result of a change in law occurring after the Transfer Date, including by means
of legislative enactment, constitutional amendment or voter initiative. The representations and warranties shall
survive the sale of the Storm Recovery Property to the Issuer and the pledge
thereof on the Transfer Date to the Indenture Trustee pursuant to the
Indenture.
3
Section 3.01
Organization and Good
Standing.
The Seller is a limited liability company
duly organized and in good standing under the laws of the State of Louisiana,
with limited liability company power and authority to own its properties and to
conduct its business as currently owned or conducted.
Section 3.02
Due Qualification.
The
Seller is duly qualified to do business as a foreign limited liability company
in good standing, and has obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or the conduct of its
business requires such qualifications, licenses or approvals (except where the
failure to so qualify or obtain such licenses and approvals would not be
reasonably likely to have a material adverse effect on the Seller’s business,
operations, assets, revenues or properties).
Section 3.03
Power and Authority.
The
Seller has the limited liability company power and authority to obtain the
Financing Order and to execute and deliver this Agreement and to carry out its
terms; the Seller has the limited liability company power and authority to own
the rights and interests under the Financing Order, and to sell and assign the
rights and interests under the Financing Order and in the Storm Recovery
Property to the Issuer; and the execution, delivery and performance of this
Agreement have been duly authorized by the Seller by all necessary limited
liability company action.
Section 3.04
Binding Obligation.
This
Agreement constitutes a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, subject to
bankruptcy, receivership, insolvency, reorganization, moratorium, fraudulent
transfer and other laws relating to or affecting creditors’ or secured parties’
rights generally from time to time in effect and to general principles of
equity (including concepts of materiality, reasonableness, good faith and fair
dealing), regardless of whether considered in a proceeding in equity or at law.
Section 3.05
No Violation
. The
consummation of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof do not: (i) conflict with or result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the articles of organization or
limited liability company operating agreement of the Seller, or any indenture,
mortgage, credit agreement or other agreement or instrument to which the Seller
is a party or by which it or its properties is bound; (ii) result in the
creation or imposition of any Lien upon any of the Seller’s properties pursuant
to the terms of any such indenture, agreement or other instrument (except for
any Lien created by the Issuer under the Basic Documents in favor of the Storm
Recovery Bondholders and in accordance with Section 1231 of the
Securitization Act); or (iii) violate any existing law or any existing
order, rule or regulation applicable to the Seller of any Governmental
Authority having jurisdiction over the Seller or its properties.
Section 3.06
No Proceedings
. Except
as disclosed in the Issuer’s prospectus dated February 26, 2008 and the
related prospectus supplement dated February 28, 2008 relating to the
Storm Recovery Bonds (together, the “Prospectus”), there are no proceedings
pending and, to the Seller’s knowledge, (x) there are no proceedings
threatened and (y) there are no investigations pending or threatened
before any Governmental Authority having jurisdiction over the Seller or its
properties involving or relating to the Seller or the Issuer or, to the Seller’s
knowledge, any other Person:
4
(i) asserting the invalidity of this Agreement, any of the
other Basic Documents, the Storm Recovery Bonds, the Securitization Act or the
Financing Order;
(ii) seeking to prevent the issuance of the Storm Recovery
Bonds or the consummation of any of the transactions contemplated by this
Agreement or any of the other Basic Documents;
(iii) seeking any determination or ruling that could reasonably
be expected to materially and adversely affect the performance by the Seller of
its obligations under, or the validity or enforceability of, this Agreement,
any of the other Basic Documents or the Storm Recovery Bonds; or
(iv) challenging the Seller’s treatment of the Storm Recovery
Bonds as debt of the Seller for federal
or state income, gross receipts or franchise tax purposes.
Section 3.07
Approvals.
Except
for continuation filings under the UCC and the Securitization Act, no approval,
authorization, consent, order or other action of, or filing with, any
Governmental Authority is required under an applicable law, rule or regulation
in connection with the execution and delivery by the Seller of this Agreement,
the performance by the Seller of the transactions contemplated hereby or the
fulfillment by the Seller of the terms hereof, except those that have been
obtained or made and those that the Seller, in its capacity as Servicer under
the Servicing Agreement, is required to make in the future pursuant to the
Servicing Agreement.
Section 3.08
The Storm Recovery
Property.
(a) Information.
Subject to Section 3.14, all written information, as amended or
supplemented from time to time prior to the date this representation is made,
provided by the Seller to the Issuer with respect to the Storm Recovery
Property (including the Financing Order and the Issuance Advice Letter) is correct
in all material respects.
(b) Effect of Transfer.
It is the intention of the parties hereto that (other than for United
States federal income tax purposes and, to the extent consistent with
applicable state tax laws, state income and franchise tax purposes) the sale,
transfer, assignment, setting over and conveyance herein contemplated
constitutes a sale or other absolute transfer of all right, title and interest
of the Seller in and to the Storm Recovery Property from the Seller to the
Issuer. Upon execution and delivery of
this Agreement and the Bill of Sale and payment of the Purchase Price, the
Seller will have no right, title or interest in, to or under the Storm Recovery
Property; and that such Storm Recovery Property would not be a part of the
estate of the Seller as debtor in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law.
(c) Transfer Filings.
(i) The Seller is the sole owner of all the rights and
interests under the Financing Order to be sold to the Issuer on the Transfer
Date.
(ii) On the Transfer Date, immediately upon the sale hereunder,
the Storm Recovery Property will have
been validly sold, assigned, transferred, set
5
over and conveyed to the
Issuer free and clear of all Liens (except for any Lien created by the Issuer
under the Basic Documents in favor of the Storm Recovery Bondholders and in
accordance with Section 1231 of the Securitization Act).
(iii)
All actions or filings (including filings with the
Louisiana UCC Filing Officer in accordance with the rules prescribed under
the Securitization Act and the UCC) necessary in any jurisdiction to give the
Issuer a perfected ownership interest (subject to any Lien created by the Issuer
under the Basic Documents in favor of the Storm Recovery Bondholders and in
accordance with Section 1231 of the Securitization Act) in the Storm
Recovery Property and to grant to the Indenture Trustee a first priority
perfected security interest in the Storm Recovery Property, free and clear of
all Liens of the Seller or anyone else (except for any Lien created by the
Issuer under the Basic Documents in favor of the Storm Recovery Bondholders and
in accordance with Section 1231 of the Securitization Act), have been
taken or made
.
Section 3.09
Solvency.
After
giving effect to the sale of the Storm Recovery Property hereunder, the Seller:
(i) is solvent and expects to remain solvent,
(ii) is adequately capitalized to conduct its business and
affairs considering its size and the nature of its business and intended
purposes,
(iii) is not engaged and does not expect to engage in a business
for which its remaining property represents an unreasonably small portion of
its capital,
(iv) reasonably believes that it will be able to pay its debts
as they come due, and
(v) is able to pay its debts as they come due and does not
intend to incur, or believes that it will incur, indebtedness that it will not
be able to repay at its maturity.
Section 3.10
The Financing
Order.
(a) The Financing Order was issued by the Louisiana Commission
on September 17, 2007 in accordance with the Securitization Act; the
Financing Order and the process by which it was issued comply with all
applicable laws, rules and regulations of the State of Louisiana and the
federal laws of the United States, and the Financing Order is final,
non-appealable and in full force and effect.
(b) As of the date of issuance of the Storm Recovery Bonds,
the Storm Recovery Bonds will be entitled to the protections provided by the
Securitization Act and the Financing Order, the Issuance Advice Letter and the
Storm Recovery Charges authorized therein will have become irrevocable and not
subject to reduction, impairment or adjustment by further action of the
Louisiana Commission, except as permitted by
Section
1228(c)(4)
of t
he
Securitization Act, and the Issuance Advice Letter has been filed in accordance
with the Financing Order. The Issuance
Advice Letter and the Tariff
6
have been filed in accordance with the
Financing Order and an officer of the Seller has provided the certification to
the Louisiana Commission required by the Issuance Advice Letter. The initial Storm Recovery Charges and the
final terms of the Storm Recovery Bonds set forth in the Issuance Advice Letter
have become effective. No other
approval, authorization, consent, order or other action of, or filing with any
Governmental Authority is required in connection with the creation of the Storm
Recovery Property transferred on such date, except those that have been
obtained or made.
Section 3.11
State Action.
(a)
Under the
Securitization Act, the State of Louisiana has pledged that it will not take or
permit any action that would impair the value of the Storm Recovery Property
or, except as permitted in Section 1228(c)(4) of the Securitization
Act, reduce, alter or impair the Storm Recovery Charges until the principal,
interest and premium, if any, and any other charges incurred and contracts to
be performed in connection with the Storm Recovery Bonds, have been paid and
performed in full.
(b)
Under the laws of the
State of Louisiana and the federal laws of the United States, a reviewing court
of competent jurisdiction would hold that (x) the State of Louisiana could
not constitutionally take any action of a legislative character, including the
repeal or amendment of the Securitization Act, which would substantially limit,
alter or impair the Storm Recovery Property or other rights vested in the Storm
Recovery Bondholders pursuant to the Financing Order, or substantially limit,
alter, impair or reduce the value or amount of the Storm Recovery Property,
unless such action is a reasonable and necessary exercise of the State of
Louisiana’s sovereign powers based on reasonable conditions and of a character
reasonable and appropriate to the emergency or other significant and legitimate
public purpose justifying such action, and, (y) under the takings clauses
of the State of Louisiana and United States Constitutions, if the court
concludes that the Storm Recovery Property is protected by the takings clauses,
the State of Louisiana could not repeal or amend the Securitization Act or take
any other action in contravention of its pledge referred to in subsection (a) above
without paying just compensation to the Storm Recovery Bondholders, as
determined by a court of competent jurisdiction, if doing so would constitute a
permanent appropriation of a substantial property interest of the Storm
Recovery Bondholders in the Storm Recovery Property and deprive the Storm
Recovery Bondholders of their reasonable expectations arising from their
investments in the Storm Recovery Bonds; however, there is no assurance that,
even if a court were to award just compensation, it would be sufficient to pay
the full amount of principal of and interest on the Storm Recovery Bonds.
(c)
Under the laws of the
State of Louisiana and the United States Constitution, a Louisiana state court
reviewing an appeal of Louisiana Commission action of a legislative character
would conclude that the Louisiana Commission Pledge (i) creates a binding
contractual obligation of the State of Louisiana for purposes of the contract
clauses of the United States and Louisiana Constitutions, and (ii) provides
a basis upon which the Storm Recovery Bondholders could challenge successfully
any action of the Louisiana Commission of a legislative character, including
the rescission or amendment of the Financing Order, that such court determines
violates the Louisiana
7
Commission Pledge in a manner that
substantially reduces, limits or impairs the value of the Storm Recovery
Property or the Storm Recovery Charges, prior to the time that the Storm
Recovery Bonds are paid in full and discharged, unless there is a judicial
finding that the Louisiana Commission action clearly is exercised for a public
end and is reasonably necessary to the accomplishment of that public end so as
not to be arbitrary, capricious or an abuse of authority. There is no assurance, however, that, even if
a court were to award just compensation it would be sufficient to pay the full
amount of principal and interest on the Storm Recovery Bonds.
Section 3.12
No
Court Order.
There is no order by any court providing for
the revocation, alteration, limitation or other impairment of the
Securitization Act, the Financing Order, the Issuance Advice Letter, the Storm
Recovery Property or the Storm Recovery Charges or any rights arising under any
of them or that seeks to enjoin the performance of any obligations under the
Financing Order.
Section 3.13
Approvals
Concerning the Storm Recovery Property.
Under the laws of
the State of Louisiana and the federal laws of the United States, no other
approval, authorization, consent, order or other action of, or filing with any
Governmental Authority is required in connection with the creation or transfer
of the Seller’s rights and interests under the Financing Order and the Issuer’s
purchase of the Storm Recovery Property from the Seller, except those that have
been obtained or made.
Section 3.14
Assumptions.
Based
on information available to the Seller on the date hereof, the assumptions used
in calculating the Storm Recovery Charges in the Issuance Advice Letter are
reasonable and made in good faith; however, notwithstanding the foregoing,
THE SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
THAT BILLED STORM RECOVERY CHARGES WILL BE ACTUALLY COLLECTED FROM CUSTOMERS,
OR THAT AMOUNTS ACTUALLY COLLECTED ARISING FROM THE STORM RECOVERY CHARGES WILL
IN FACT BE SUFFICIENT TO MEET THE PAYMENT OBLIGATIONS ON THE STORM RECOVERY
BONDS OR THAT THE ASSUMPTIONS USED IN CALCULATING SUCH STORM RECOVERY CHARGES
WILL IN FACT BE REALIZED
.
Section 3.15
Creation
of the Storm Recovery Property.
(a)
Upon the effectiveness
of the Financing Order, the transfer of the Seller’s rights and interests under
the Financing Order related to the Storm Recovery Bonds and the Issuer’s
purchase of the Storm Recovery Property from the Seller pursuant to this
Agreement, the Storm Recovery Property will constitute a present contract right
vested in the Issuer.
(b)
Upon the effectiveness
of the Financing Order, the Issuance Advice Letter and the Tariff, the transfer
of the Seller’s rights and interests under the Financing Order and the Issuer’s
purchase of the Storm Recovery Property from the Seller pursuant to this
Agreement, the Storm Recovery Property includes:
(1)
the right to impose,
bill, charge, collect and receive the Storm Recovery Charges, including the
right to receive Storm Recovery
8
Charges in amounts and at times
sufficient to pay principal and interest on the Storm Recovery Bonds,
(2)
all rights and interest
of the Seller under the Financing Order, except the rights of Seller to earn
and receive a rate of return on its invested capital in the Issuer, to receive
administration and servicer fees, to withdraw funds from its restricted storm
recovery reserve funded by the proceeds from the sale of the Storm Recovery
Property, or to use the Seller’s remaining portion of those proceeds,
(3)
the rights to file for
periodic adjustments of the Storm Recovery Charges as provided in the Financing
Order, and
(4)
all revenues, collections,
claims, rights to payments, payments, money, or proceeds arising from the
rights and interests resulting from the Storm Recovery Charges.
(c)
Upon the effectiveness
of the Issuance Advice Letter and the Tariff, the transfer of the Seller’s
rights and interests under the Financing Order and the Issuer’s purchase of the
Storm Recovery Property from the Seller on the Transfer Date pursuant to this
Agreement, the Storm Recovery Property will not be subject to any Lien created
by a previous indenture.
Section 3.16
Prospectus.
As
of the date hereof, the information describing the Seller under the caption “The
Seller, Initial Servicer and Sponsor” in the Prospectus is true and correct in
all material respects.
Section 3.17
Nature
of Representations and Warranties.
The representations and
warranties set forth in Section 3.08 and Section 3.10 through Section 3.16,
insofar as they involve conclusions of law, are made not on the basis that the
Seller purports to be a legal expert or to be rendering legal advice, but
rather to reflect the parties’ good faith understanding of the legal basis on
which the parties are entering into this Agreement and the other Basic
Documents and the basis on which the Storm Recovery Bondholders are purchasing
the Storm Recovery Bonds, and to reflect the parties’ agreement that, if such
understanding turns out to be incorrect or inaccurate, the Seller will be
obligated to indemnify the Issuer and its permitted assigns (to the extent
required by and in accordance with Section 5.01), and that the Issuer and
its permitted assigns will be entitled to enforce any rights and remedies under
the Basic Documents on account of such inaccuracy to the same extent as if the
Seller had breached any other representations or warranties hereunder.
Section 3.18
Waivers
of Legal Warranties.
The Seller makes no representation or
warranty, express or implied, as to the solvency of any Customer on the
Transfer Date or as to the future solvency of any Customer. Further, the Issuer waives any right to
rescind this Agreement or any conveyance pursuant to this Agreement in case of
insolvency of any Customer, regardless of any actual or implied knowledge by
Seller at any time of the insolvency of any Customer. Additionally, the Issuer agrees that this
Agreement is not subject to a
9
suspensive condition under
Louisiana Civil Code Article 2450, notwithstanding that the imposition and
collection of Storm Recovery Charges depends upon future acts such as the
Servicer performing its servicing functions relating to the collection of Storm
Recovery Charges, the future provision of electric service to Customers, and
the future consumption by Customers of electricity.
ARTICLE IV
COVENANTS OF THE SELLER
Section 4.01
Seller’s
Existence
. Subject to Section 5.02, so long as any of
the Storm Recovery Bonds are outstanding, the Seller (i) shall keep in
full force and effect its existence and remain in good standing under the laws
of the state of its organization, and shall obtain and preserve its
qualification to do business in each jurisdiction in which such qualification
is or will be necessary to protect the validity and enforceability of this
Agreement and each other instrument or agreement to which the Seller is a party
necessary to the proper administration of this Agreement and the transactions
contemplated hereby and (ii) hereby agrees to continue to operate its
system to provide transmission and distribution delivery service to its
customers; and, to the extent that any interest in Storm Recovery Property
created by this Financing Order is assigned, sold or transferred to another
assignee, the Seller shall enter into a contract with that assignee that
requires the Seller to continue to operate its transmission and distribution
delivery system to provide service to the Seller’s Louisiana
Commission-jurisdictional customers; and further (in each case) the Seller will
undertake to collect, account and remit amounts in respect of the Storm
Recovery Charges for the benefit and account of such assignee (or its financing
party); provided, however, that this provision shall not prohibit the Seller
from selling, assigning, or otherwise divesting its transmission system or
distribution system (or any portions thereof) providing service to the Seller’s
Louisiana Commission-jurisdictional customers, by any method whatsoever,
including those specified in the Financing Order pursuant to which an entity
becomes a successor, so long as the entities acquiring either such system or
portion thereof agree to continue operating such facilities to provide service
to Louisiana Commission-jurisdictional customers.
Section 4.02
No
Liens or Conveyances.
Except for the conveyances hereunder
or any Lien under the Basic Documents pursuant to Section 1231 of the
Securitization Act for the benefit of the Indenture Trustee and the Storm
Recovery Bondholders, the Seller shall not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien
on, any of the Storm Recovery Property, whether now existing or hereafter
created, or any interest therein. The Seller shall not at any time assert any
Lien against or with respect to the Storm Recovery Property, and shall defend
the right, title and interest of the Issuer and the Indenture Trustee, as
assignee of the Issuer, in, to and under the Storm Recovery Property against
all claims of third parties claiming through or under the Seller.
Section 4.03
Delivery of Collections.
In the
event that the Seller receives collections in respect of the Storm Recovery
Charges or the proceeds thereof other than in its capacity as the Servicer, the
Seller agrees to pay to the Servicer, on behalf of the Issuer, all payments
received by it in respect thereof as soon as
10
practicable
after receipt thereof. Prior to such remittance to the Servicer by the Seller,
the Seller agrees that such amounts are held by it in trust for the Issuer and
the Indenture Trustee. If the Seller becomes a party to any future trade
receivables purchase and sale arrangement or similar arrangement under which it
sells all or any portion of its accounts receivables, the Seller and the other
parties to such arrangement shall enter into an intercreditor agreement in
connection therewith and the terms of the documentation evidencing such trade
receivables purchase and sale arrangement or similar arrangement shall
expressly exclude Storm Recovery Charges from any receivables or other assets
pledged or sold under such arrangement.
Section 4.04
Notice
of Liens.
The Seller shall notify the Issuer and the
Indenture Trustee promptly after becoming aware of any Lien on the Storm
Recovery Property, other than the conveyance hereunder, any Lien created in
favor of the Storm Recovery Bondholders or any Lien created by the Issuer under
the Indenture.
Section 4.05
Compliance
With Law
. The Seller shall comply with its organizational
or governing documents and all laws, treaties, rules, regulations and determinations
of any Governmental Authority applicable to the Seller, except to the extent
that failure to so comply would not materially adversely affect the Issuer’s or
the Indenture Trustee’s interests in the Storm Recovery Property or under any
of the Basic Documents or the Seller’s performance of its obligations hereunder
or under any of the other Basic Documents.
Section 4.06
Covenants
Related to the Storm Recovery Property.
(a)
So long as any of the
Storm Recovery Bonds are outstanding, the Seller shall:
(i)
treat the Storm
Recovery Bonds as debt of the Issuer and not of the Seller, except for
financial reporting or tax purposes;
(ii)
disclose in its
financial statements that the Issuer is, and the Seller is not, the owner of
the Storm Recovery Property and that the assets of the Issuer are not available
to pay creditors of the Seller or any of its Affiliates (other than the
Issuer),
(iii)
unless, and to the extent, required by applicable law or directed or
required by a Governmental Authority, disclose the effects of all
transactions between the Seller and the Issuer in accordance with generally
accepted accounting principles, and
(iv)
not own or purchase any
Storm Recovery Bonds.
(b)
So long as any of the
Storm Recovery Bonds are outstanding,
(i)
in all proceedings
relating directly or indirectly to the Storm Recovery Property, the Seller
shall: (A) affirmatively certify and confirm that it has sold all of its
rights and interests in and to the Storm Recovery Property to the Issuer (other
than for financial reporting or tax purposes), and (B) not make any
statement or reference in respect of the Storm Recovery Property that is
inconsistent with the ownership thereof by the Issuer (other than for financial
reporting or tax purposes);
11
(ii)
the Seller shall not
take any action in respect of the Storm Recovery Property except solely in its
capacity as the Servicer thereof pursuant to the Servicing Agreement or as
contemplated by the Basic Documents; and
(iii)
neither the Seller nor
the Issuer shall take any action, file any tax return, or make any election
inconsistent with the treatment of the Issuer, for purposes of federal taxes
and, to the extent consistent with applicable state, local and other tax law,
for purposes of state, local and other taxes, as a disregarded entity that is
not separate from the Seller (or, if relevant, from another sole owner of the
Issuer).
(c)
The Seller agrees that
upon the sale by the Seller of all of its rights and interests in and to the
Storm Recovery Property to the Issuer pursuant to this Agreement, to the
fullest extent permitted by law, including applicable Louisiana Commission
regulations and the Securitization Act, the Issuer shall have all of the rights
originally held by the Seller with respect to the transferred Storm Recovery
Property, including the right (subject to the terms of the Servicing Agreement)
to exercise any and all rights and remedies to collect any amounts payable by
any customer in respect of the transferred Storm Recovery Property,
notwithstanding any objection or direction to the contrary by the Seller (and
the Seller agrees not to make any such objection or to take any such contrary
action), and any payment to the Servicer by any Person responsible for
remitting Storm Recovery Charges to the Servicer under the terms of the
Financing Order or the Securitization Act or the Tariff shall discharge such
Person’s obligations in respect of the Storm Recovery Property to the extent of
such payment, notwithstanding any objection or direction to the contrary by the
Seller.
Section 4.07
Protection
of Title.
The Seller shall execute and file such filings,
and cause to be executed and filed such filings, in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
interests of the Issuer and the Indenture Trustee in the Storm Recovery
Property, including all filings required under the Securitization Act and the
UCC relating to the transfer of the ownership of the rights and interests under
the Financing Order by the Seller to the Issuer and the pledge of the Storm
Recovery Property by the Issuer to the Indenture Trustee. The Seller shall
deliver (or cause to be delivered) to the Issuer and the Indenture Trustee file-stamped
copies of, or filing receipts for, any document filed as provided above, as
soon as available following such filing.
The Seller shall institute any action or proceeding reasonably necessary
to compel performance by the Louisiana Commission or the State of Louisiana of
any of their obligations or duties under the Securitization Act, the Financing
Order or the Issuance Advice Letter relating to the transfer of the rights and
interests under the Financing Order by the Seller to the Issuer and shall
notify the Indenture Trustee of the institution of any such action. The Seller agrees to take such legal or
administrative actions, including defending against or instituting and pursuing
legal actions and appearing or testifying at hearings or similar proceedings,
in each case as may be reasonably necessary:
(a)
to protect the Issuer
and the Storm Recovery Bondholders from claims, state actions or other actions
or proceedings of third parties which, if successfully pursued, would result in
a breach of any representation set forth in Article III; or
12
(b)
so long as the Seller
is also the Servicer, to block or overturn any attempts to cause a repeal of,
modification of or supplement to the Securitization Act, the Financing Order,
the Issuance Advice Letter or the rights of Storm Recovery Bondholders by
legislative enactment (including any action of the Louisiana Commission of a
legislative character) or constitutional amendment that would be materially adverse
to the Issuer, the Indenture Trustee or the Storm Recovery Bondholders.
The costs of
any such actions or proceedings shall be reimbursed by the Issuer to the Seller
from amounts on deposit in the Collection Account as an Operating Expense (as
such terms are defined in the Indenture) in accordance with the terms of the
Indenture. The Seller’s obligations
pursuant to this Section 4.07 shall survive and continue notwithstanding
that the payment of Operating Expenses pursuant to the Indenture may be delayed
(it being understood that the Seller may be required to advance its own funds
to satisfy its obligation hereunder).
The Seller designates the Issuer as its agent and attorney-in-fact to
execute any filings of financing statements, continuation statements or other
instruments required of the Seller pursuant to this Section 4.07, it being
understood that the Issuer shall have no obligation to execute any such
instruments.
Section 4.08
Taxes.
So
long as any of the Storm Recovery Bonds are outstanding, the Seller shall pay
all material taxes, assessments and governmental charges imposed upon it or any
of its properties or assets or with respect to any of its franchises,
businesses, income or property before any penalty accrues thereon if the
failure to pay any such taxes, assessments and governmental charges would,
after any applicable grace periods, notices or other similar requirements,
result in a Lien on the Storm Recovery Property; provided that no such tax need
be paid if the Seller or any of its Affiliates is contesting the same in good
faith by appropriate proceedings promptly instituted and diligently conducted
and if the Seller or such Affiliate has established appropriate reserves as
shall be required in conformity with generally accepted accounting principles.
Section 4.09
Filings
Pursuant to Financing Order.
The Seller shall comply with
all filing requirements imposed upon the Seller in its capacity as such by the
Financing Order, including making any such post-closing filings.
Section 4.10
Issuance Advice Letter.
The
Seller hereby agrees not to withdraw the filing of the Issuance Advice Letter
with the Louisiana Commission.
Section 4.11
Tariff.
The
Seller hereby agrees to make all reasonable efforts to keep the Tariff in full
force and effect at all times.
Section 4.12
Notice
of Breach to Rating Agencies, Etc..
Promptly after
obtaining knowledge thereof, in the event of a breach in any material respect
(without regard to any materiality qualifier contained in such representation,
warranty or covenant) of any of the Seller’s representations, warranties or
covenants contained herein, the Seller shall promptly notify the Issuer, the
Indenture Trustee and the Rating Agencies of such breach. For the avoidance of doubt, any breach which would
adversely affect scheduled payments on the Storm Recovery Bonds will be deemed
to be a material breach for purposes of this Section 4.12.
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Section 4.13
Use
of Proceeds.
The Seller shall use the proceeds of the sale
of the Storm Recovery Property in accordance with the Financing Order and the
Securitization Act.
Section 4.14
Further
Assurances.
Upon the reasonable request of the Issuer, the
Seller shall execute and deliver such further instruments and do such further
acts as may be reasonably necessary to carry out more effectually the
provisions and purposes of this Agreement.
ARTICLE V
ADDITIONAL UNDERTAKINGS OF SELLER
The Seller
hereby undertakes the obligations contained in this Article V and
acknowledges that the Issuer shall have the right to assign its rights with
respect to such obligations to the Indenture Trustee for the benefit of the
Storm Recovery Bondholders.
SECTION 5.01
LIABILITY OF
THE SELLER; INDEMNITIES.
(a)
THE SELLER SHALL BE LIABLE
IN ACCORDANCE HEREWITH ONLY TO THE EXTENT OF THE OBLIGATIONS SPECIFICALLY
UNDERTAKEN BY THE SELLER UNDER THIS AGREEMENT.
(b)
THE SELLER SHALL INDEMNIFY
THE ISSUER AND THE INDENTURE TRUSTEE, FOR ITSELF AND ON BEHALF OF THE STORM
RECOVERY BONDHOLDERS, AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
MANAGERS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD HARMLESS EACH SUCH
PERSON FROM AND AGAINST, ANY AND ALL TAXES (OTHER THAN ANY TAXES IMPOSED ON
STORM RECOVERY BONDHOLDERS SOLELY AS A RESULT OF THEIR OWNERSHIP OF STORM
RECOVERY BONDS) THAT MAY AT ANY TIME BE IMPOSED ON OR ASSERTED AGAINST ANY
SUCH PERSON UNDER EXISTING LAW AS OF THE TRANSFER DATE AS A RESULT OF THE SALE
AND ASSIGNMENT OF THE SELLER’S RIGHTS AND INTERESTS UNDER THE FINANCING ORDER
BY THE SELLER TO THE ISSUER, THE ACQUISITION OR HOLDING OF THE STORM RECOVERY
PROPERTY BY THE ISSUER OR THE ISSUANCE AND SALE BY THE ISSUER OF THE STORM
RECOVERY BONDS, INCLUDING ANY SALES, GROSS RECEIPTS, TANGIBLE PERSONAL
PROPERTY, PRIVILEGE, FRANCHISE OR LICENSE TAXES, BUT EXCLUDING ANY TAXES
IMPOSED AS A RESULT OF A FAILURE OF SUCH PERSON TO PROPERLY WITHHOLD OR REMIT
TAXES IMPOSED WITH RESPECT TO PAYMENTS ON ANY STORM RECOVERY BOND, IN THE EVENT
AND TO THE EXTENT SUCH TAXES ARE NOT RECOVERABLE AS
FINANCING
COSTS, IT BEING UNDERSTOOD
THAT THE STORM RECOVERY BONDHOLDERS SHALL BE ENTITLED TO ENFORCE THEIR RIGHTS
AGAINST THE SELLER UNDER THIS SECTION 5.01(B) SOLELY THROUGH A CAUSE
OF ACTION BROUGHT FOR THEIR BENEFIT BY THE INDENTURE TRUSTEE IN ACCORDANCE WITH
THE TERMS OF THE INDENTURE.
(c)
THE SELLER SHALL INDEMNIFY
THE ISSUER AND THE INDENTURE TRUSTEE, FOR ITSELF AND ON BEHALF OF THE STORM
RECOVERY BONDHOLDERS, AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
MANAGERS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD HARMLESS EACH SUCH
PERSON FROM AND
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AGAINST, ANY AND ALL
LIABILITIES, OBLIGATIONS, CLAIMS, ACTIONS, SUITS OR PAYMENTS OF ANY KIND
WHATSOEVER THAT MAY BE IMPOSED ON OR ASSERTED AGAINST ANY SUCH PERSON
(WHICH MAY INCLUDE, WITHOUT LIMITATION, AN AMOUNT EQUAL TO PRINCIPAL AND
INTEREST ON THE STORM RECOVERY BONDS AS A MEASURE OF SELLER’S INDEMNIFICATION
OBLIGATIONS UNDER THIS SECTION 5.01) TOGETHER WITH ANY REASONABLE COSTS
AND EXPENSES INCURRED BY SUCH PERSON, IN EACH CASE AS A RESULT OF THE SELLER’S
BREACH OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR COVENANTS CONTAINED IN THIS
AGREEMENT.
(d)
THE INDEMNIFICATION
OBLIGATIONS OF THE SELLER UNDER THIS SECTION 5.01 SHALL RANK
PARI PASSU
WITH ALL OTHER GENERAL UNSECURED OBLIGATIONS OF
THE SELLER.
(e)
INDEMNIFICATION UNDER THIS SECTION 5.01
SHALL SURVIVE THE RESIGNATION OR REMOVAL OF THE INDENTURE TRUSTEE AND THE
TERMINATION OF THIS AGREEMENT AND SHALL INCLUDE REASONABLE FEES AND EXPENSES OF
INVESTIGATION AND LITIGATION (INCLUDING REASONABLE ATTORNEYS’ FEES AND
EXPENSES). THE SELLER SHALL NOT
INDEMNIFY ANY PARTY UNDER THIS SECTION 5.01 FOR ANY CHANGES IN LAW AFTER
THE TRANSFER DATE, INCLUDING BY MEANS OF LEGISLATIVE ENACTMENT, CONSTITUTIONAL
AMENDMENT OR VOTER INITIATIVE, OR FOR ANY LIABILITY RESULTING SOLELY FROM A
DOWNGRADE IN ANY RATING OF THE STORM RECOVERY BONDS BY ANY RATING AGENCY. THE SELLER SHALL NOT INDEMNIFY THE INDENTURE
TRUSTEE OR ITS OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES OR AGENTS UNDER THIS SECTION 5.01
AGAINST ANY LIABILITY, OBLIGATION, CLAIM, ACTION, SUIT OR PAYMENT OF ANY KIND
ARISING OUT OF THE WILLFUL MISCONDUCT, NEGLIGENCE OR BAD FAITH OF ANY SUCH
PERSON.
(f)
THE SELLER SHALL NOT BE
REQUIRED TO INDEMNIFY A PARTY UNDER THIS SECTION 5.01 FOR ANY AMOUNT PAID
OR PAYABLE BY SUCH PARTY IN THE SETTLEMENT OF ANY ACTION, PROCEEDING OR
INVESTIGATION WITHOUT THE PRIOR WRITTEN CONSENT OF THE SELLER WHICH CONSENT
SHALL NOT BE UNREASONABLY WITHHELD.
(g)
PROMPTLY AFTER RECEIPT BY A
PARTY OF NOTICE OF THE COMMENCEMENT OF ANY ACTION, PROCEEDING OR INVESTIGATION,
SUCH PARTY SHALL, IF A CLAIM IN RESPECT THEREOF IS TO BE MADE AGAINST THE
SELLER UNDER THIS SECTION 5.01, NOTIFY THE SELLER IN WRITING OF THE
COMMENCEMENT THEREOF. FAILURE BY A PARTY TO SO NOTIFY THE SELLER SHALL RELIEVE
THE SELLER FROM THE OBLIGATION TO INDEMNIFY AND HOLD HARMLESS SUCH INDEMNIFIED
PARTY UNDER THIS SECTION 5.01 ONLY TO THE EXTENT THAT THE SELLER SUFFERS
ACTUAL PREJUDICE AS A RESULT OF SUCH FAILURE.
(h)
WITH RESPECT TO ANY ACTION,
PROCEEDING OR INVESTIGATION BROUGHT BY A THIRD PARTY FOR WHICH INDEMNIFICATION MAY BE
SOUGHT UNDER SECTION 5.01(C), THE SELLER SHALL BE ENTITLED TO CONDUCT AND
CONTROL, AT ITS EXPENSE AND WITH COUNSEL OF ITS CHOOSING THAT IS REASONABLY
SATISFACTORY TO SUCH INDEMNIFIED PARTY, THE DEFENSE OF ANY SUCH ACTION,
PROCEEDING OR
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INVESTIGATION (IN WHICH CASE
THE SELLER SHALL NOT THEREAFTER BE RESPONSIBLE FOR THE FEES AND EXPENSES OF ANY
SEPARATE COUNSEL RETAINED BY THE INDEMNIFIED PARTY EXCEPT AS SET FORTH BELOW);
PROVIDED THAT THE INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO PARTICIPATE IN SUCH
ACTION, PROCEEDING OR INVESTIGATION THROUGH COUNSEL CHOSEN BY IT AND AT ITS OWN
EXPENSE. NOTWITHSTANDING THE SELLER’S ELECTION TO ASSUME THE DEFENSE OF ANY
ACTION, PROCEEDING OR INVESTIGATION, THE INDEMNIFIED PARTY SHALL HAVE THE RIGHT
TO EMPLOY SEPARATE COUNSEL (INCLUDING LOCAL COUNSEL), AND THE SELLER SHALL BEAR
THE REASONABLE FEES, COSTS AND EXPENSES OF SUCH SEPARATE COUNSEL IF (I) THE
DEFENDANTS IN ANY SUCH ACTION INCLUDE BOTH THE INDEMNIFIED PARTY AND THE SELLER
AND THE INDEMNIFIED PARTY SHALL HAVE REASONABLY CONCLUDED THAT THERE MAY BE
LEGAL DEFENSES AVAILABLE TO IT THAT ARE DIFFERENT FROM OR ADDITIONAL TO THOSE
AVAILABLE TO THE SELLER, (II) THE SELLER SHALL NOT HAVE EMPLOYED COUNSEL
REASONABLY SATISFACTORY TO THE INDEMNIFIED PARTY TO REPRESENT THE INDEMNIFIED
PARTY WITHIN A REASONABLE TIME AFTER NOTICE OF THE INSTITUTION OF SUCH ACTION, (III) THE
SELLER SHALL AUTHORIZE THE INDEMNIFIED PARTY TO EMPLOY SEPARATE COUNSEL AT THE
EXPENSE OF THE SELLER OR (IV) IN THE CASE OF THE INDENTURE TRUSTEE, SUCH
ACTION EXPOSES THE INDENTURE TRUSTEE TO A MATERIAL RISK OF CRIMINAL LIABILITY
OR FORFEITURE OR A SERVICER DEFAULT HAS OCCURRED AND IS CONTINUING. NOTWITHSTANDING THE FOREGOING, THE SELLER
SHALL NOT BE OBLIGATED TO PAY FOR THE FEES, COSTS AND EXPENSES OF MORE THAN ONE
SEPARATE COUNSEL FOR THE INDEMNIFIED PARTIES OTHER THAN ONE LOCAL COUNSEL, IF
APPROPRIATE.
NOTWITHSTANDING
THE FOREGOING, IN NO EVENT SHALL ANY SUCH FOREGOING INDEMNITY EXTEND TO THE
COLLECTIBILITY OF THE STORM RECOVERY CHARGES FROM ANY PERSON RESPONSIBLE FOR
REMITTING STORM RECOVERY CHARGES TO THE SERVICER UNDER THE TERMS OF THE
FINANCING ORDER, THE SECURITIZATION ACT OR AN APPLICABLE TARIFF, OR THE
CREDITWORTHINESS OF ANY SUCH PERSON OR THE INABILITY OR FAILURE OF SUCH PERSON
TO TIMELY PAY ALL OR A PORTION OF THE STORM RECOVERY CHARGES. THE REMEDIES PROVIDED IN THIS AGREEMENT ARE
THE SOLE AND EXCLUSIVE REMEDIES AGAINST THE SELLER FOR BREACH OF ITS
REPRESENTATIONS, WARRANTIES OR COVENANTS IN THIS AGREEMENT.
Section 5.02
Merger
or Consolidation of, or Assumption of the Obligations of, the Seller.
Any Person:
(a)
into which the Seller
may be merged, converted or consolidated and which succeeds to all or
substantially all of the electric transmission and distribution business of the
Seller (or, if the transmission and distribution business is split, any person
which the Louisiana Commission designates in connection with an order relating
to such split),
(b)
which results from the
division of the Seller into two or more Persons and which succeeds to all or
substantially all of the electric transmission and distribution
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business of the Seller (or, if the
transmission and distribution business is split, any person which the Louisiana
Commission designates in connection with an order relating to such split),
(c)
which may result from
any merger, conversion or consolidation to which the Seller shall be a party
and which succeeds to all or substantially all of the electric transmission and
distribution business of the Seller (or, if the transmission and distribution
business is split, any person which the Louisiana Commission designates in
connection with an order relating to such split),
(d)
which may purchase or
otherwise succeed to the properties and assets of the Seller substantially as a
whole and which purchases or otherwise succeeds to all or substantially all of
the electric transmission and distribution business of the Seller (or, if the
transmission and distribution business is split, any person which the Louisiana
Commission designates in connection with an order relating to such split), or
(e)
which may otherwise
purchase or succeed to all or substantially all of the electric transmission
and distribution business of the Seller (or, if the transmission and
distribution business is split, any person which the Louisiana Commission
designates in connection with an order relating to such split),
which Person
in any of the foregoing cases executes an agreement of assumption to perform
every obligation of the Seller under this Agreement, shall be the successor to
the Seller hereunder without the execution or filing of any document or any
further act by any of the parties to this Agreement; provided, however, that
(i)
immediately after
giving effect to such transaction, no representation, warranty or covenant made
pursuant to Article III or Article IV shall have been breached in any
material respect and no Servicer Default, and no event that, after notice or
lapse of time, or both, would become a Servicer Default, shall have occurred
and be continuing,
(ii)
the Rating Agencies
shall have received prior written notice of such transaction,
(iii)
the Seller shall have
delivered to the Issuer and the Indenture Trustee an Officer’s Certificate and
an Opinion of Counsel each stating that such consolidation, conversion, merger,
division or succession and such agreement of assumption comply with this Section 5.02
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with,
(iv)
the Seller shall have
delivered to the Issuer and the Indenture Trustee an Opinion of Counsel either
(A)
stating that, in the
opinion of such counsel, all filings to be made by the Seller, including
filings with the Louisiana Commission pursuant to the Securitization Act and
the UCC, that are necessary fully to preserve and protect the respective
interests of the Issuer and the Indenture Trustee in the Storm
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Recovery Property have been
executed and filed, and reciting the details of such filings, or
(B)
stating that, in the
opinion of such counsel, no such action is necessary to preserve and protect
such interests, and
(v)
the Seller shall have
delivered to the Issuer, the Indenture Trustee and the Rating Agencies an
opinion of independent tax counsel (as selected by, and in form and substance
satisfactory to the Seller, and which may be based on a ruling from the
Internal Revenue Service) to the effect that, for federal income tax purposes,
such transaction will not result in a material adverse federal income tax
consequence to the Issuer, the Indenture Trustee or the Storm Recovery
Bondholders.
The Seller
shall not consummate any transaction referred to in clauses (a), (b), (c), (d) or
(e) above except upon execution of the above described agreement of
assumption and compliance with clauses (i), (ii), (iii), (iv) and (v) above.
When any Person acquires the properties and assets of the Seller substantially
as a whole and succeeds to all or substantially all of the electric
transmission and distribution business of the Seller (or, if the transmission
and distribution business is split, any person which the Louisiana Commission
designates in connection with an order relating to such split), or otherwise
becomes the successor to the Seller in accordance with the terms of this Section 5.02,
then upon the satisfaction of all of the other conditions of this Section 5.02,
the Seller shall automatically and without further notice be released from its
obligations hereunder.
Section 5.03
Limitation
on Liability of the Seller and Others.
The Seller and any
manager, officer, employee or agent of the Seller may rely in good faith on the
advice of counsel or on any document of any kind, prima facie properly executed
and submitted by any Person, respecting any matters arising hereunder. Subject to Section 4.07, the Seller
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its obligations under this Agreement, and that
in its opinion may involve it in any expense or liability.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01
Amendment.
(a)
This Agreement may be
amended in writing by the Seller and the Issuer, provided that (i) the
Rating Agency Condition has been satisfied in connection therewith, (ii) the
Indenture Trustee has consented thereto and (iii) in the case of any
amendment that increases ongoing financing costs as defined in the Financing
Order, the Louisiana Commission has consented thereto or shall be conclusively
deemed to have consented thereto. Promptly
after the execution of any such amendment or consent, the Issuer shall furnish
written notification of the substance of such amendment or consent to each of
the Rating Agencies. With respect to the
Louisiana Commission’s consent to any amendment to this Agreement,
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(i)
the Seller may submit the amendment to the
Louisiana Commission by delivering to the Louisiana Commission’s executive
counsel a written request for such consent, which request shall contain:
(A)
a
reference to Docket No. U-29157 and a statement as to the possible effect
of the amendment on ongoing financing costs;
(B)
an
Officer’s Certificate stating that the proposed amendment has been approved by
all relevant parties to this Agreement; and
(C)
a
statement identifying the person to whom the Louisiana Commission or its staff
is to address its consent to the proposed amendment or request additional time;
(ii)
Any
amendment requiring the consent of the LPSC as provided in this Section 6.01(a) shall
become effective on the later of:
(A)
the
date proposed by the parties to the amendment, or
(B)
31
days after such submission of the amendment to the LPSC unless the LPSC issues
an order disapproving the amendment within a 30-day period.
(b)
Prior to the execution
of any amendment to this Agreement, the Issuer and the Indenture Trustee shall
be entitled to receive and rely upon an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement. The Issuer and the Indenture Trustee may, but
shall not be obligated to, enter into any such amendment that affects their own
rights, duties or immunities under this Agreement or otherwise. Following delivery of a notice to the Louisiana
Commission by the Seller under Section 6.01(a) above, the Seller and
Issuer may at any time withdraw from the Louisiana Commission further
consideration of any notification of a proposed amendment.
Section 6.02
Notices.
Unless
otherwise specifically provided herein, all demands, notices and communications
upon or to the Seller, the Issuer, the Indenture Trustee, the Louisiana
Commission or the Rating Agencies under this Agreement shall be in writing,
delivered personally, via facsimile, reputable overnight courier or by
certified mail, return-receipt requested, and shall be deemed to have been duly
given upon receipt
(a)
in the case of the
Seller, to Cleco Power LLC, 2030 Donahue Ferry Road, Pineville, Louisiana
71360-5226, Attention: Treasurer,
(b)
in the case of the
Issuer, to Cleco Katrina/Rita Hurricane Recovery Funding LLC, 2605 Hwy. 28 East
Office Number 12, Pineville, Louisiana 71360-5226, Attention: Manager,
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(c)
in the case of Moody’s,
to Moody’s Investors Service, Inc., ABS Monitoring Department, 99 Church
Street, New York, New York 10007,
(d)
in the case of Standard &
Poor’s, to Standard & Poor’s, a Division of the McGraw-Hill Companies,
55 Water Street, New York, New York 10041, Attention: Asset Backed Surveillance
Department,
(e)
in the case of Fitch,
to Fitch, Inc., 1 State Street Plaza, New York, New York 10004, Attention:
ABS Surveillance,
(f)
in the case the
Indenture Trustee, at the address provided for notices or communications to the
Indenture Trustee in the Indenture, and
(g)
in the case of the
Louisiana Commission, to Galvez Building, 12th Floor, 602 North Fifth Street,
Baton Rouge, Louisiana 70821-9154, Attention: Executive Counsel;
or, as to each
of the foregoing, at such other address as shall be designated by written
notice to the other parties.
Section 6.03
Assignment by the
Seller.
Notwithstanding anything to the contrary contained
herein, except as provided in Section 5.02, this Agreement may not be
assigned by the Seller.
Section 6.04
Assignment
to the Indenture Trustee.
The Seller hereby acknowledges
and consents to any pledge, assignment and grant of a security interest by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of
the Storm Recovery Bondholders of all right, title and interest of the Issuer
in, to and under the Storm Recovery Property and the proceeds thereof and the
assignment of any or all of the Issuer’s rights hereunder to the Indenture
Trustee. Notwithstanding such
assignment, in no event shall the Indenture Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
Section 6.05
Limitations
on Rights of Others.
The provisions of this Agreement are
solely for the benefit of the Seller, the Issuer and the Indenture Trustee, on
behalf of itself and the Storm Recovery Bondholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
Section 6.06
Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
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Section 6.07
Separate Counterparts.
This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 6.08
Headings.
The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
Section 6.09
Governing Law.
THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
LOUISIANA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.
Section 6.10
Nonpetition Covenants
.
(a) Notwithstanding any prior termination of this Agreement or the
Indenture, the Seller shall not, prior to the date which is one year and one
day after the termination of the Indenture, petition or otherwise invoke or
cause the Issuer to invoke the process of any Governmental Authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Issuer or any substantial part of the property of the Issuer,
or ordering the winding-up or liquidation of the affairs of the Issuer.
(b) Notwithstanding
any prior termination of this Agreement or the Indenture, the Issuer shall not,
prior to the date which is one year and one day after the termination of the
Indenture, petition or otherwise invoke or cause the Seller to invoke the
process of any Governmental Authority for the purpose of commencing or sustaining
a case against the Seller under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Seller or any substantial part of
the property of the Seller, or ordering the winding-up or liquidation of the
affairs of the Seller.
[Rest of page intentionally
left blank]
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IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the day and year first above written.
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CLECO KATRINA/RITA HURRICANE
RECOVERY FUNDING LLC,
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as Issuer,
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By:
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/s/ Keith D. Crump
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Name:
Keith D. Crump
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Title:
Vice President and Manager
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CLECO POWER LLC,
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as Seller,
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By:
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/s/ Kathleen F. Nolen
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Name:
Kathleen F. Nolen
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Title:
Senior Vice President and Chief Financial Officer
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22
APPENDIX A -
DEFINITIONS
The
definitions contained in this Appendix A are applicable to the singular as well
as the plural forms of such terms.
“Administration
Agreement” means the Administration Agreement, dated as of March 6, 2008,
between the Issuer and the Seller, as the same may be amended and supplemented
from time to time.
“Affiliate”
means, with respect to any specified Person, any other Person controlling or
controlled by or under common control with such specified Person. For the purposes of this definition, control,
when used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
controlling and controlled have meanings correlative to the foregoing.
“Agreement” or
the “Sale Agreement” means this Storm Recovery Property Sale Agreement, as the
same may be amended and supplemented from time to time.
“Basic
Documents” means the Articles of Organization of the Issuer which was filed
with the Secretary of State of the State of Louisiana on October 30, 2007,
the limited liability company operating agreement of the Issuer, the Sale
Agreement, the Bill of Sale, the Servicing Agreement, the Administration
Agreement, the Indenture and the Series Supplement.
“Bill of Sale”
means the Bill of Sale, dated as of March 6, 2008, issued by the Seller to
the Issuer pursuant to the Sale Agreement evidencing the sale of the Storm
Recovery Property by the Seller to the Issuer.
“Cleco Power”
means Cleco Power LLC, a Louisiana limited liability company, or its successor.
“Financing
Order” means Financing Order No. U-29157-B issued by the Louisiana
Commission on September 17, 2007 in Docket No. U-29157 pursuant to
the Securitization Act.
“Fitch” means
Fitch, Inc., or its successor.
“Governmental
Authority” means any court or any federal or state regulatory body,
administrative agency or governmental instrumentality.
“Indenture”
means the Indenture, dated as of March 6, 2008, among the Issuer and the
Indenture Trustee, and the Series Supplement (including the forms and
terms of the Storm Recovery Bonds), as the same may be amended and supplemented
with respect to the Storm Recovery Bonds from time to time.
“Indenture
Trustee” means U.S. Bank National Association, or its successor or any
successor Indenture Trustee under the Indenture.
A-1
“Issuance Advice Letter” means the issuance
advice letter submitted to the Louisiana Commission on February 29, 2008
by the Seller pursuant to the Financing Order in connection with the issuance
of the Storm Recovery Bonds.
“Issuer” means
Cleco Katrina/Rita Hurricane Recovery Funding LLC, a Louisiana limited
liability company, or its successor under the Indenture.
“Lien” means a
security interest, lien, charge, pledge, equity or encumbrance of any kind.
“Louisiana
Commission” means the Louisiana Public Service Commission or any successor.
“Louisiana
Commission Pledge” means the pledge of
the Louisiana Commission found in Part VI(G) of the Financing Order.
“Louisiana UCC
Filing Officer” has the meaning ascribed to such term in the Servicing
Agreement.
“Moody’s”
means Moody’s Investors Service, Inc., or any successor thereto.
“Officer’s
Certificate” means a certificate signed, in the case of the Seller, by any
manager, the chairman of the board, the chief executive officer, the president,
any vice chairman, any executive vice president, senior vice president or vice
president, the treasurer, assistant treasurer, the secretary or any assistant
secretary of the Seller.
“Opinion of
Counsel” means one or more written opinions of counsel who may be an employee
of or counsel to the Issuer or the Seller, which counsel shall be reasonably
acceptable to the Indenture Trustee, the LPSC, the Issuer or the Rating
Agencies, as applicable, and which shall be in form reasonably satisfactory to
the Indenture Trustee or the LPSC, if applicable.
“Person” means
any individual, corporation, estate, partnership, joint venture, association,
joint stock company, trust (including any beneficiary thereof), business trust,
limited liability company, unincorporated organization or government or any
agency or political subdivision thereof.
“proceeding”
means any suit in equity, action at law or other judicial or administrative
proceeding.
“Prospectus”
has the meaning specified in Section 3.06 hereof.
“Purchase
Price” has the meaning specified in Section 2.01(a) hereof.
“Rating Agency”
means any rating agency rating the Storm Recovery Bonds at the time of issuance
thereof at the request of the Issuer, which initially shall be Moody’s, Fitch
and S&P. If no such organization or
successor is any longer in existence, “Rating Agency” shall be a nationally
recognized statistical rating organization or other comparable Person
designated by the Issuer, written notice of which designation shall be given to
the Indenture Trustee, the Louisiana Commission and the Servicer.
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“Rating Agency
Condition” means, with respect to any action, the notification in writing to
each Rating Agency of such action, and confirmation from S&P to the
Indenture Trustee and the Issuer that such action will not result in a
reduction or withdrawal of the then current rating by such Rating Agency of any
outstanding class or tranche of Storm Recovery Bonds.
“Securitization
Act” means Act No. 64 of the Louisiana Regular Session of 2006, the “Louisiana
Electric Utility Storm Recovery Securitization Act,” codified at La. R.S.
45:1226-1236.
“Seller” means
Cleco Power, or its successor, in its capacity as seller of the Storm Recovery
Property to the Issuer pursuant to the Sale Agreement.
“Series Supplement”
means the First Supplemental Indenture dated as of March 6, 2008, among
the Issuer and the Indenture Trustee, which specifies the terms of the Storm
Recovery Bonds.
“Servicer”
means Cleco Power, in its capacity as the servicer under the Servicing
Agreement, and each successor to or assignee of Cleco Power (in the same
capacity) pursuant to the relevant sections of the Servicing Agreement.
“Servicer
Default” means the occurrence and continuation of one of the events specified
in Section 7.01 of the Servicing Agreement.
“Servicing
Agreement” means the Storm Recovery Property Servicing Agreement, dated as of March 6,
2008, between the Issuer and the Servicer and acknowledged by the Indenture
Trustee, as the same may be amended and supplemented from time to time.
“Standard &
Poor’s” or “S&P,” means Standard & Poor’s, a division of The
McGraw-Hill Companies, or its successor.
“Storm
Recovery Bond” means any of the 2008 Senior Secured Storm Recovery Bonds issued
by the Issuer pursuant to the Indenture and the Series Supplement.
“Storm
Recovery Bondholder” means a Person in whose name a Storm Recovery Bond is
registered on the Storm Recovery Bond Register.
“Storm
Recovery Bond Register” has the meaning specified in Section 2.05 of the
Indenture.
“Storm
Recovery Charges” means the nonbypassable amounts to be charged for the use or
availability of electric services, approved by the Louisiana Commission in the
Financing Order that may be collected by the Seller, its successors, assignees
or other collection agents as provided for in the Financing Order.
“Storm
Recovery Property” means all of Seller’s rights and interest under the
Financing Order (including, without limitation, rights to impose, collect and
receive the “storm recovery charges” (as defined in the Securitization Act)
approved in such Financing Order) issued by the Louisiana Commission on September 17,
2007 (Docket No. U-29157) pursuant to the
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Securitization Act, except the rights of Seller to earn and receive a
rate of return on its invested capital in the Issuer, to receive administration
and servicer fees, to withdraw funds from its restricted storm recovery reserve
funded by the proceeds from the sale of the Storm Recovery Property, or to use
the Seller’s remaining portion of those proceeds.
“Tariff” means
Rider SRCA and Rider SCSA filed by the Seller pursuant to ordering paragraph 10
of the Financing Order.
“Transfer Date”
means the date on which the Storm Recovery Bonds are to be originally issued in
accordance with Section 2.10 of the Indenture.
“Trust Estate”
means the “Series Trust Estate” as such term is defined in the Series Supplement.
“UCC” has the
meaning specified in Section 2.02(iv) hereof.
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EXHIBIT A
BILL OF SALE
1.
This
Bill of Sale is being delivered pursuant to the Storm Recovery Property Sale
Agreement, dated as of March 6, 2008 (the “Sale Agreement”), between Cleco
Power LLC (the “Seller”) and Cleco Katrina/Rita Hurricane Recovery Funding LLC
(the “Issuer”). All capitalized terms
used but not defined herein have the respective meanings ascribed thereto in
the Sale Agreement.
2.
In
consideration of the Issuer’s payment to the Seller of $176,000,000, receipt of
which is hereby acknowledged, the Seller does hereby irrevocably sell, transfer,
assign, set over and otherwise convey to the Issuer, without recourse or
warranty, except as set forth in the Sale Agreement, all right, title and
interest of the Seller in, to and under the Storm Recovery Property identified
on
Schedule 1
hereto (such sale, transfer, assignment, setting over and
conveyance of the Storm Recovery Property includes, to the fullest extent
permitted by the Securitization Act, the right to impose, collect and receive
the Storm Recovery Charges related to the Storm Recovery Property, as the same
may be adjusted from time to time). Such
sale, transfer, assignment, setting over and conveyance is hereby expressly
stated to be a sale or other absolute transfer and, pursuant to Section 1230(1) of
the Securitization Act and other applicable law, is a true sale and is not a
secured transaction and title and ownership has passed to the Issuer. The preceding sentence is the statement
referred to in Section 1230 of the Securitization Act. The Seller agrees and confirms that, after giving
effect to the sale evidenced by this Bill of Sale, the Seller has no right,
title or interest in, to or under the Storm Recovery Property.
3.
The
Issuer does hereby purchase the Storm Recovery Property identified on
Schedule
1
hereto from the Seller for the consideration set forth in paragraph 2
above.
4.
The
Seller and the Issuer each acknowledge and agree that the purchase price for
the Storm Recovery Property sold pursuant to this Bill of Sale and the Sale
Agreement is equal to its fair market value on the date hereof.
5.
The
Seller confirms that each of the representations and warranties on the part of
the Seller contained in the Sale Agreement are true and correct in all respects
on the date hereof as if made on the date hereof.
6.
This
Bill of Sale may be executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
7.
THIS BILL OF SALE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF LOUISIANA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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IN WITNESS
WHEREOF, the Seller and the Issuer have duly executed this Bill of Sale as of
the 6th day of March 2008.
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CLECO KATRINA/RITA HURRICANE
RECOVERY FUNDING LLC,
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as
Issuer,
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By:
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Name:
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Title:
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CLECO POWER LLC,
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as
Seller,
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By:
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Name:
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Title:
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SCHEDULE 1
to
BILL OF SALE
Storm Recovery
Property
All of Seller’s
rights and interest under the Financing Order (including, without limitation,
rights to impose, collect and receive the “storm recovery charges” (as defined
in the Securitization Act) approved in such Financing Order) issued by the
Louisiana Commission on September 17, 2007 (Docket No. U-29157) pursuant
to the Securitization Act, except the rights of Seller to earn and receive a
rate of return on its invested capital in the Issuer, to receive administration
and servicer fees, to withdraw funds from its restricted storm recovery reserve
funded by the proceeds from the sale of the Storm Recovery Property, or to use
the Seller’s remaining portion of those proceeds.
Exhibit 10.2
STORM RECOVERY PROPERTY SERVICING AGREEMENT
between
CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC
Issuer
and
CLECO POWER LLC
Servicer
Dated as of March 6, 2008
Table of
Contents
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ARTICLE I DEFINITIONS
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1
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SECTION 1.01. DEFINITIONS
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1
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SECTION 1.02. OTHER DEFINITIONAL PROVISIONS
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1
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ARTICLE II APPOINTMENT AND
AUTHORIZATION OF SERVICER
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2
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SECTION 2.01. APPOINTMENT OF THE SERVICER;
ACCEPTANCE OF APPOINTMENT
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2
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SECTION 2.02. AUTHORIZATION
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2
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SECTION 2.03. DOMINION AND CONTROL OVER
STORM RECOVERY PROPERTY
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2
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ARTICLE III BILLING AND OTHER
SERVICES
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3
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SECTION 3.01. DUTIES OF THE SERVICER
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3
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SECTION 3.02. SERVICING AND MAINTENANCE
STANDARDS
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6
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SECTION 3.03. ANNUAL REPORTS ON COMPLIANCE
WITH REGULATION AB
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7
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SECTION 3.04. ANNUAL REGISTERED INDEPENDENT
PUBLIC ACCOUNTING FIRM REPORT
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7
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SECTION 3.05. MONITORING OF THIRD-PARTY
COLLECTORS
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8
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ARTICLE IV SERVICES RELATED TO
STORM RECOVERY CHARGE ADJUSTMENTS AND ALLOCATION ADJUSTMENTS
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11
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SECTION 4.01. STORM RECOVERY CHARGE ADJUSTMENTS
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11
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SECTION 4.02. LIMITATION OF LIABILITY
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13
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ARTICLE V THE STORM RECOVERY
PROPERTY
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14
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SECTION 5.01. CUSTODY OF STORM RECOVERY
PROPERTY RECORDS
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14
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SECTION 5.02. DUTIES OF SERVICER AS
CUSTODIAN
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14
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SECTION 5.03. CUSTODIAN’S INDEMNIFICATION
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16
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SECTION 5.04. EFFECTIVE PERIOD AND
TERMINATION
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16
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ARTICLE VI THE SERVICER
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16
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SECTION 6.01. REPRESENTATIONS AND
WARRANTIES OF THE SERVICER
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16
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SECTION 6.02. INDEMNITIES OF THE SERVICER;
RELEASE OF CLAIMS
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18
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SECTION 6.03. MERGER OR
CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE SERVICER
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21
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SECTION 6.04. ASSIGNMENT OF THE SERVICER’S
OBLIGATIONS
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23
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SECTION 6.05. LIMITATION ON LIABILITY OF
THE SERVICER AND OTHERS
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23
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SECTION 6.06. CLECO POWER NOT TO RESIGN AS
SERVICER
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SECTION 6.07. SERVICING FEE
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24
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SECTION 6.08. COMPLIANCE WITH APPLICABLE
LAW
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25
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SECTION 6.09. SERVICER EXPENSES
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25
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SECTION 6.10. APPOINTMENTS
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25
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SECTION 6.11. NO SERVICER ADVANCES
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25
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SECTION 6.12. REMITTANCES
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25
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SECTION 6.13. SERVICER’S CERTIFICATE
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26
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SECTION 6.14. PROTECTION OF TITLE
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26
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SECTION 6.15. MAINTENANCE OF OPERATIONS
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ARTICLE VII SERVICER DEFAULT
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SECTION 7.01. SERVICER DEFAULT
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26
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SECTION 7.02. NOTICE OF SERVICER DEFAULT
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28
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SECTION 7.03. WAIVER OF PAST DEFAULTS
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28
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SECTION 7.04. APPOINTMENT OF SUCCESSOR
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28
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SECTION 7.05. COOPERATION WITH SUCCESSOR
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29
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ARTICLE VIII MISCELLANEOUS
PROVISIONS
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SECTION 8.01. AMENDMENT
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SECTION 8.02. NOTICES
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SECTION 8.03. ASSIGNMENT
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31
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SECTION 8.04. LIMITATIONS ON RIGHTS OF
OTHERS
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SECTION 8.05. SEVERABILITY
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31
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SECTION 8.06. SEPARATE COUNTERPARTS
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31
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SECTION 8.07. HEADINGS
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31
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SECTION 8.08. GOVERNING LAW
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31
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SECTION 8.09. ASSIGNMENT TO THE TRUSTEE
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31
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SECTION 8.10. NONPETITION COVENANTS
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32
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SECTION 8.11. TERMINATION
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SECTION 8.12. LPSC CONSENT
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SECTION 8.13. LIMITATION OF LIABILITY
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SCHEDULE A TO SERVICING
AGREEMENT
EXHIBIT A - SERVICER’S
CERTIFICATE
ANNEX 1 TO SERVICING
AGREEMENT
APPENDIX A -
MASTER DEFINITIONS
ii
STORM
RECOVERY PROPERTY SERVICING AGREEMENT dated as of March 6, 2008 (this “Agreement”)
between CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC, a Louisiana limited
liability company (the “Issuer”), and CLECO POWER LLC, a Louisiana limited
liability company (“Cleco Power”), as the servicer of the Storm Recovery
Property hereunder (together with each successor to Cleco Power in such
capacity pursuant to Section 6.03 or 7.04, the “Servicer”).
WHEREAS, pursuant to the Securitization Act and the
Financing Order, the Seller and the Issuer are concurrently entering into the
Sale Agreement dated as of the date hereof pursuant to which the Seller is
selling and the Issuer is purchasing the Storm Recovery Property created
pursuant to the Securitization Act and the Financing Order;
WHEREAS the Servicer is willing to service the Storm
Recovery Property purchased from the Seller by the Issuer;
WHEREAS the Issuer, in connection with ownership of
the Storm Recovery Property, desires to engage the Servicer to carry out the
functions described herein;
WHEREAS, the Storm Recovery Charges will be itemized
on Customers’ bills and the SRC Collections initially will be commingled with
other funds collected from Customers;
WHEREAS, the Financing Order calls for the Servicer to
execute a servicing agreement with the Issuer pursuant to which the Servicer
will be required, among other things, to impose and collect applicable Storm
Recovery Charges for the benefit and account of the Issuer, to make periodic
Storm Recovery Charge Adjustments required or allowed by the Financing Order,
and to account for and remit the applicable Storm Recovery Charges to the
Trustee on behalf and for the account of the Issuer in accordance with the
remittance procedures contained hereunder without any deduction or surcharge of
any kind; and
WHEREAS, the Financing Order provides that the LPSC
will enforce the obligations imposed by the
Financing Order, the LPSC’s applicable substantive rules, and applicable
statutory provisions.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained and intending to be legally bound hereby,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01.
DEFINITIONS. Capitalized terms
used but not otherwise defined in this Agreement have the respective meanings
set forth in Appendix A hereto.
SECTION 1.02.
OTHER DEFINITIONAL PROVISIONS.
(a)
The
words “hereof,” “herein,” “hereunder” and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Appendix, Annex, Exhibit and
Schedule references
contained
in this Agreement are references to Sections, Appendices, Annexes, Exhibits and
Schedules in or to this Agreement unless otherwise specified; and the term “including”
shall mean “including without limitation.”
(b)
The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms.
(c)
All
terms defined in this Agreement have the same defined meanings when used in any
certificate or other document made or delivered pursuant to this Agreement
unless otherwise defined therein.
ARTICLE II
APPOINTMENT AND
AUTHORIZATION OF SERVICER
SECTION 2.01.
APPOINTMENT OF THE SERVICER; ACCEPTANCE OF APPOINTMENT. The Issuer hereby appoints the Servicer, and
the Servicer hereby accepts such appointment, to perform the Servicer’s
obligations pursuant to this Agreement on behalf of and for the benefit of the
Issuer or any assignee thereof in accordance with the terms of this Agreement
and applicable law. This appointment and the Servicer’s acceptance thereof may
not be revoked except in accordance with the express terms of this Agreement.
SECTION 2.02.
AUTHORIZATION. With respect to
all or any portion of the Storm Recovery Property, the Servicer shall be, and
hereby is, authorized and empowered by the Issuer to:
(a)
execute
and deliver, on behalf of itself or the Issuer, as the case may be, any and all
instruments, documents or notices, and
(b)
on
behalf of itself or the Issuer, as the case may be, make any filing and
participate in Proceedings related to the duties of the Servicer hereunder with
any governmental authorities, including with the LPSC.
The Issuer shall furnish the Servicer with all
executed documents as have been prepared by the Servicer for execution by the
Issuer, and with such other documents as may be in the Issuer’s possession, as
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. Upon
the written request of the Servicer, the Issuer shall furnish the Servicer with
any powers of attorney or other documents necessary or appropriate to enable
the Servicer to carry out its duties hereunder.
SECTION 2.03.
DOMINION AND CONTROL OVER STORM RECOVERY PROPERTY. Notwithstanding any other provision contained
herein, the Servicer and the Issuer agree that the Issuer shall have dominion
and control over the Storm Recovery Property, and the Servicer, in accordance
with the terms hereof, is acting solely as the servicing agent of and custodian
for the Issuer with respect to the Storm Recovery Property and Storm Recovery
Property Documentation. The Servicer hereby
agrees that it shall not take any action that is not authorized by this
Agreement, the Securitization Act or the Financing Order, that is not
consistent with its customary procedures and practices, or that shall impair
the rights of the
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Issuer
with respect to the Storm Recovery Property, in each case unless such action is
required by law or court or regulatory order.
ARTICLE III
BILLING AND OTHER
SERVICES
SECTION 3.01.
DUTIES OF THE SERVICER. The
Servicer, as agent for the Issuer (to the extent provided herein), shall have
the following duties:
(a)
Duties
of Servicer Generally
. The Servicer
shall manage, service, administer and make collections in respect of the Storm
Recovery Property. The Servicer’s duties will include:
(i)
calculating and
billing the Storm Recovery Charges;
(ii)
obtaining meter reads;
(iii)
accounting for collected
Storm Recovery Charges and late-payment penalties;
(iv)
investigating and
resolving delinquencies (and furnishing reports with respect to such
delinquencies to the Issuer);
(v)
processing and
depositing collections and making periodic remittances;
(vi)
furnishing periodic
reports to the Issuer, the Trustee, the LPSC and the Rating Agencies;
(vii)
monitoring customer
payments of Storm Recovery Charges;
(viii)
notifying each customer of any defaults in its payment obligations and
other obligations (including its credit standards), and following such
collection procedures as it follows with respect to comparable assets that it
services for itself or others;
(ix)
collecting payments of
Storm Recovery Charges and payments with respect to Storm Recovery Property
from all persons or entities responsible for remitting Storm Recovery Charges
and other payments with respect to Storm Recovery Property to the Servicer
under the Financing Order, the Securitization Act, LPSC Regulations or
applicable tariffs and remitting these collections to the Trustee;
(x)
responding to
inquiries by Customers, the LPSC or any other Governmental Authority with
respect to the Storm Recovery Property and the Storm Recovery Charges;
(xi)
making all filings with
the LPSC and taking such other action as may be necessary to perfect the Issuer’s
ownership interests in and the Trustee’s first priority
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Lien on the Storm
Recovery Property and the other portions of the Series Trust Estate under
the Indenture;
(xii)
selling, as the agent
for the Issuer, as its interest may appear, defaulted or written-off accounts
in accordance with the Servicer’s usual and customary practices;
(xiii)
taking action in
connection with Storm Recovery Charge Adjustments and allocation of the charges among various classes of customers as is
set forth herein;
(xiv)
any other duties specified
for a servicer under the Financing Order or other applicable law; and
(xv)
reconciling, within 30 calendar days after
bank statement cutoff date or such later time as is consistent with the
Servicer’s usual and customary practices that does not materially impair the
ability of the Servicer to correct errors, all bank account debits and credits
for bank accounts that are held in the name of the Servicer (as Servicer
hereunder) or of the Issuer that relate to the Series Trust Estate or the
Storm Recovery Bonds.
Anything to the contrary notwithstanding, the duties
of the Servicer set forth in this Agreement shall be qualified in their
entirety by, and the Servicer shall at all times comply with, the Financing
Order, the Securitization Act and any LPSC Regulations, and the federal
securities laws and the rules and regulations promulgated thereunder,
including Regulation AB, as in effect at the time such duties are to be
performed. Without limiting the generality of this Section 3.01(a), in
furtherance of the foregoing, the Servicer hereby agrees that it shall also
have, and shall comply with, the duties and responsibilities relating to data
acquisition, usage and bill calculation, billing, customer service functions,
collections, payment processing and remittance set forth in the Issuer Annex
hereto, as it may be amended from time to time. For the avoidance of doubt, the
term “usage” when used herein refers to both kilowatt hour consumption and
kilowatt demand.
(b)
Reporting
Functions.
(i)
Notification of
Laws and Regulations
. Upon acquiring
actual knowledge thereof in the course of its performance of duties in
accordance with the terms hereof, the Servicer shall immediately notify the
Issuer, the LPSC, the Trustee and each Rating Agency in writing of any laws or
LPSC Regulations, orders or directions hereafter promulgated or LPSC
proceedings hereafter initiated related to the Financing Order that have, or in
the case of LPSC proceedings, may have a material adverse effect on the Servicer’s
ability to perform its duties under this Agreement.
(ii)
Other Information
. Upon the reasonable request of the Issuer,
the Trustee, the LPSC or any Rating Agency, the Servicer shall provide to the
Issuer, the Trustee, the LPSC or such Rating Agency, as the case may be, any
public financial information in respect of the Servicer, or any material
information regarding the Storm Recovery Property to the extent it is
reasonably available to the Servicer, that may be reasonably necessary and
permitted by law for the Issuer, the Trustee, the LPSC or such Rating Agency to
monitor the performance by the Servicer hereunder. In addition, so long as any
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of the Storm Recovery
Bonds are Outstanding, the Servicer shall provide to the Issuer, to the LPSC
and to the Trustee, within a reasonable time after written request therefor,
any information available to the Servicer or reasonably obtainable by it that
is necessary to calculate the Storm Recovery Charges applicable to each
Customer Class.
(iii)
Preparation of
Reports.
The Servicer shall prepare and deliver such additional reports as
required under this Agreement, including a copy of each Semi-Annual Servicer’s
Certificate described in Section 6.13, the annual Servicer’s Regulation AB
Compliance Certificate and Certificate of Compliance described in Section 3.03,
and the Annual Accountant’s Report described in Section 3.04. In addition,
the Servicer shall prepare, procure, deliver and/or file, or cause to be prepared,
procured, delivered or filed, any reports, attestations, exhibits, certificates
or other documents required to be delivered or filed with the SEC (and/or any
other Governmental Authority) by the Issuer or the Sponsor under the federal
securities or other applicable laws or in accordance with the Basic Documents,
including, but without limiting the generality of foregoing, filing with the
SEC, if applicable, a copy or copies of (i) the Semi-Annual Servicer’s
Certificates described in Section 6.13 (under Form 10-D or any other
applicable form), (iii) the annual statements of compliance, attestation
reports and other certificates described in Section 3.03, and (iv) the
Annual Accountant’s Report (and any attestation required under Regulation AB)
described in Section 3.04. In addition, the appropriate officer or
officers of the Servicer shall (in its separate capacity as Servicer) sign the
Sponsor’s annual report on Form 10-K (and any other applicable SEC or
other reports, attestations, certifications and other documents), to the extent
that the Servicer’s signature is required by, and consistent with, the federal
securities law and/or any other applicable law.
(c)
Opinions
of Counsel
.
The Servicer shall deliver to the Issuer, to the LPSC
and to the Trustee:
(i)
promptly after the
execution and delivery of this Agreement and of each amendment hereto, an
Opinion of Counsel either:
(A)
all actions or filings
(including filings with the Louisiana UCC Filing Officer in accordance with the
rules prescribed under the Securitization Act and the UCC) necessary to
perfect the Lien and security interest created by the Indenture have been taken
or made, and reciting the details of such actions and filings, or
(B)
no such actions or
filings are necessary to perfect such Lien and security interest.
(ii)
on or before March 31
in each calendar year beginning with the first calendar year beginning more
than three months after the Sale Date, an Opinion of Counsel, dated as of a
date during such calendar year, either:
(A)
all actions or filings
(including filings and refilings with the Louisiana UCC Filing Officer in
accordance with the rules prescribed under the Securitization Act and the
UCC) necessary to maintain perfection of the Lien and
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security interest created
by the Indenture have been taken or made, and reciting the details of such
actions and filings, or
(B)
no such actions or
filings are necessary to maintain such Lien and security interest.
Each
Opinion of Counsel referred to in clause (i) or (ii) above shall
specify any action necessary (as of the date of such opinion) to be taken in
the following year to preserve and protect such Lien and security interests.
SECTION 3.02.
SERVICING AND MAINTENANCE STANDARDS.
The Servicer shall, on behalf of the Issuer:
(a)
manage,
service, administer and make collections in respect of the Storm Recovery
Property with reasonable care and in material compliance with applicable law
and regulations, including all applicable LPSC Regulations and guidelines,
using the same degree of care and diligence that the Servicer exercises with
respect to similar assets for its own account;
(b)
follow
standards, policies and practices in performing its duties as Servicer that are
customary in the electric transmission and distribution industry or that the
LPSC has mandated and that are consistent with the terms and provisions of the
Financing Order, tariffs and existing law;
(c)
use
all reasonable efforts, consistent with the Servicer’s Policies and Practices,
to enforce and maintain the Issuer’s and the Trustee’s rights in respect of the
Storm Recovery Property;
(d)
calculate
Storm Recovery Charges and the allocation of
Storm Recovery Charges among customer classes in compliance with the
Securitization Act, the Financing Order, any LPSC order related to the Storm
Recovery Charge allocation and any applicable tariffs;
(e)
use all reasonable efforts consistent with the
Servicer’s Policies and Practices to collect all amounts owed in respect of the
Storm Recovery Property as they become due;
(f)
make
all filings required under the Securitization Act or the applicable UCC to
maintain the perfected security interest of the Trustee in the Storm Recovery
Property and the other portions of the Series Trust Estate under the
Indenture and use all reasonable efforts to otherwise enforce and maintain the
Trustee’s rights in respect of the Storm Recovery Property and the other
portions of the Series Trust Estate under the Indenture;
(g)
petition the LPSC for adjustments to the
Storm Recovery Charges that the Servicer determines to be necessary in
accordance with the Financing Order; and
(h)
keep on file, in accordance with customary
procedures, all documents pertaining to the Storm Recovery Property and
maintain accurate and complete accounts, records and computer systems
pertaining to the related Storm Recovery Property
6
except
where the failure to comply with any of the foregoing would not materially and
adversely affect the Issuer’s or the Trustee’s respective interests in the
Storm Recovery Property. The Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of all or any portion of the Storm Recovery Property, which, in the
Servicer’s judgment, may include the taking of legal action pursuant to Section 5.02(c) or
5.02(d) hereof or otherwise.
SECTION 3.03.
ANNUAL REPORTS ON COMPLIANCE WITH REGULATION AB.
(a)
The
Servicer shall deliver to the Issuer, the Trustee and the Rating Agencies, on
or before the earlier of (i) March 31 of each year, beginning March 31,
2009, to and including the March 31 succeeding the retirement of all Storm
Recovery Bonds or (ii) with respect to each calendar year during which
Cleco Power’s annual report on Form 10-K is required to be filed in
accordance with the Exchange Act and the rules and regulations thereunder,
the date on which the annual report on Form 10-K is required to be filed
in accordance with the Exchange Act and the rules and regulations
thereunder, certificates from a Responsible Officer of the Servicer (A) containing,
and certifying as to, the statements of compliance required by Item 1123 (or
any successor or similar items or rule) of Regulation AB, as then in effect
(the “Regulation AB Compliance Certificate”), and (B) containing, and
certifying as to, the statements and assessment of compliance required by Item
1122(a) (or any successor or similar items or rule) of Regulation AB, as
then in effect (the “Certificate of Compliance”). These certificates may be in the form of, or
shall include the forms attached hereto as
Exhibit B-1
and
Exhibit B-2
hereto, with, in the case of
Exhibit B-1
, such changes as may be
required to conform to applicable securities law.
(b)
The
Servicer shall use commercially reasonable efforts to obtain from each other
party participating in the servicing function any additional certifications as
to the statements and assessment required under Item 1122 or Item 1123 of
Regulation AB to the extent required in connection with the filing of the
annual report on Form 10-K referred to above; provided, however, that a
failure to obtain such certifications shall not be a breach of the Servicer’s
duties hereunder. The parties acknowledge that the Trustee’s certifications
shall be limited to the Item 1122 certifications described in
Exhibit A
of the Indenture.
SECTION 3.04.
ANNUAL REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM REPORT.
(a)
The
Servicer shall cause a registered independent public accounting firm (which may
also provide other services to the Servicer or the Seller) to prepare annually,
and the Servicer shall deliver annually to the Issuer, the LPSC, the Trustee
and each Rating Agency, on or before the earlier of (a) March 31 of
each year, beginning March 31, 2009, to and including the March 31
succeeding the retirement of all Storm Recovery Bonds or (b) with respect
to each calendar year during which the Sponsor’s annual report on Form 10-K
is required to be filed in accordance with the Exchange Act and the rules and
regulations thereunder, the date on which the annual report on Form 10-K
is required to be filed in accordance with the Exchange Act and the rules and
regulations thereunder, a report addressed to the Servicer (the “Annual
Accountant’s Report”), which may be included as part of the Servicer’s
customary auditing activities, to the effect that such firm has performed
certain procedures, agreed between the
7
Servicer
and such accountants, in connection with the Servicer’s compliance with its
obligations under this Agreement during the preceding calendar year ended December 31
(or, in the case of the first Annual Accountant’s Report, the period of time
from the Sale Date through December 31, 2008), identifying the results of
such procedures and including any exceptions noted. In the event such
accounting firm requires the Trustee or the Issuer to agree or consent to the
procedures performed by such firm, the Issuer shall direct the Trustee in
writing to so agree; it being understood and agreed that the Trustee shall
deliver such letter of agreement or consent in conclusive reliance upon the
direction of the Issuer, and the Trustee shall not make any independent inquiry
or investigation as to, and shall have no obligation or liability in respect
of, the sufficiency, validity or correctness of such procedures.
(b)
The
Annual Accountant’s Report shall also indicate that the accounting firm
providing such report is independent of the Servicer in accordance with the Rules of
the Public Company Accounting Oversight Board, and shall include the
attestation report required under Item 1122(b) of Regulation AB (or any
successor or similar items or rule), as then in effect. The Annual Accountant’s
Report shall also indicate that the accounting firm providing such report is
independent of the Servicer within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.
SECTION 3.05.
MONITORING OF THIRD-PARTY COLLECTORS.
If a Third-Party Collector bills or collects Storm Recovery Charges on
behalf of the Issuer, then, from time to time, until the retirement of the
Storm Recovery Bonds, the Servicer shall, in accordance with the Servicing
Standard, take all actions with respect to such Third-Party Collectors required
to be taken by the Servicer as set forth, if applicable, in any agreement with
the Third-Party Collector, the Tariff, other tariffs and any other LPSC Regulations
in effect from time to time and implement such additional procedures and
policies as are necessary to ensure that the obligations of all Third-Party
Collectors in connection with Storm Recovery Charges are properly enforced in
accordance with, if applicable, the terms of any agreement with the Third-Party
Collector, the Tariff, other tariffs and any other LPSC Regulations in effect
from time to time. Such procedures and policies shall include the following:
(a)
Maintenance
of Records and Information
. In addition to any actions required by the
Tariff, LPSC Regulations or other applicable law, the Servicer shall:
(i)
maintain adequate
records for promptly identifying and contacting each Third-Party Collector;
(ii)
maintain records of
end-user Customers which are billed by Third-Party Collectors to permit prompt
transfer of billing responsibilities in the event of default by such
Third-Party Collectors;
(iii)
maintain adequate
records for enforcing compliance by all Third-Party Collectors with their obligations
with respect to Storm Recovery Charges; and
(iv)
provide to each
Third-Party Collector such information necessary for such Third-Party Collector
to confirm the Servicer’s calculation of Storm Recovery Charges and
remittances, including, if applicable, charge-off amounts.
8
The Servicer shall update
the records described above no less frequently than quarterly.
(b)
Credit and Collection Policies.
The Servicer shall, to the fullest
extent permitted under the Financing Order, use all reasonable efforts
consistent with the Servicer’s Policies and Practices to collect all Billed SRC’s
from Customers and any Third-Party Collectors as and when the same become due.
The Servicer shall, in accordance with and to the extent permitted by
applicable LPSC Regulations and the terms of the Financing Order, include and
impose the above-described terms in all tariffs filed with the LPSC which would
allow Third-Party Collectors or other utilities to issue single bills which
include Storm Recovery Charges to Cleco Power’s Customers. The Servicer shall
periodically review the need for modified or additional terms based upon, among
other things, (i) the relative amount of SRC Collections received through
Third-Party Collectors relative to the Periodic Billing Requirement, (ii) the
historical payment and default experience of each Third-Party Collector and (iii) such
other credit and collection policies to which the Third-Party Collectors are
subject, and if permitted by applicable law, will set out any such modified or
additional terms in a supplemental tariff filed with the LPSC.
(c)
Monitoring of Performance and Payment by
Third-Party Collectors
. In addition to any actions required by the Tariff, LPSC Regulations
or other applicable law, the Servicer shall undertake to do the following:
(i)
The Servicer shall require each
Third-Party Collector to remit all Storm Recovery Charges (less any applicable
charge-off allowances) that such Third-Party Collector is obligated to pay in
accordance with the provisions of the Tariff, other applicable tariffs and LPSC
Regulations (whether or not disputed). The Servicer shall monitor compliance by
each Third-Party Collector and take prompt action to enforce such requirements.
(ii)
Where a Third-Party Collector is
responsible for billing the Customers, the Servicer shall, consistent with its
customary billing practices, bill each Third-Party Collector no less frequently
than the billing cycle otherwise applicable to such Customers.
(iii)
The Servicer shall work with Third-Party
Collectors to resolve any disputes using the dispute resolution procedures
established in the Tariff, other applicable tariffs and any LPSC Regulations,
in accordance with the Servicing Standard.
(d)
Enforcement of Third-Party Collector
Obligations.
The
Servicer shall, in accordance with the terms of the Tariff, applicable
agreements with Third-Party Collectors and other applicable tariffs, ensure
that each Third-Party Collector remits all SRC Collections which it is
obligated to remit to the Servicer. In the event of any default by any Third-Party
Collector, the Servicer shall enforce all rights set forth in and take all
other steps permitted by, if applicable, the Applicable Financing Orders,
Tariff, other applicable tariffs and any other LPSC Regulations as it
determines, in accordance with the Servicing Standard, are reasonably necessary
to ensure the prompt payment of SRC Collections by such Third-Party Collector
and to preserve the rights of the Holders with respect thereto, including,
where appropriate, terminating the right of any Third-Party Collector to bill
and collect Storm Recovery Charges or
9
petitioning the LPSC to
impose such other remedies or penalties as may be available under the
circumstances. Any agreement entered into between the Servicer and a defaulted
Third-Party Collector will be consistent with and limited by the terms of this
Agreement and will satisfy the Rating Agency Condition. In the event the
Servicer has actual knowledge that a Third-Party Collector is in default,
including due to the downgrade by the Rating Agencies of any party providing
credit support for such Third-Party Collector, the Servicer shall promptly
notify a Responsible Officer of the Trustee in writing of the same and, shall,
if applicable, instruct the Trustee either to:
(i)
withdraw from such Third-Party Collector’s
Third-Party Collector Deposit Account and deposit into the applicable
Collection Accounts the lesser of (x) the amount of cash on deposit in
such Third-Party Collector Deposit Account and allocable to the Storm Recovery
Property at such time and (y) the amount of any Storm Recovery Charges
then due and payable by such Third-Party Collector; or
(ii)
make demand under any letter of credit,
guarantee or other credit support up to the lesser of (x) the amount of
such letter of credit, guarantee or other credit support and (y) the
amount of any Storm Recovery Charges then due and payable by such Third-Party
Collector, and forward the amounts received, if any, as a result of such demand
to the applicable Collection Accounts.
The Trustee shall, within
two (2) Business Days of receipt of such written notice, withdraw such
funds from the Third-Party Collector Deposit Account or make demand under such
credit support, as applicable, and deposit such funds withdrawn or received, as
applicable, into the applicable Collection Accounts.
(e)
Maintenance of Third-Party Collector
Deposit Accounts.
If any Third-Party Collectors collect Storm Recovery Charges then the Servicer
shall cause the entity acting as Trustee to maintain an account for the
Third-Party
Collector to hold any of (A) a cash deposit to
the Trustee, (B) a surety bond or Affiliate guarantee or (C) a letter
of credit (a “Third-Party Collector Deposit Account”) that the Third-Party Collector
may be required to provide under the Tariff, any applicable agreements
with such Third-Party Collectors, other applicable tariffs or applicable LPSC
Regulation. The Servicer shall provide written direction to the Trustee
regarding the allocation and release of funds on deposit in the Third-Party
Collector Deposit Accounts, as permitted or required by the
Indenture, this Agreement or any
agreement with the Third-Party Collector, applicable Tariff, other applicable
tariffs or LPSC Regulations. The Trustee shall be entitled to conclusively rely
on any such written directions from the Servicer. The Servicer will seek and
use reasonable best efforts to obtain, from any Third-Party Collector which
wishes to satisfy its credit support requirements by making a deposit to a
Third-Party Collector Deposit Account, a written security agreement stating
that (i) by making such deposit the Third-Party Collector has granted a
security interest in such deposit in favor of the Trustee, and (ii) the
Trustee, in holding such deposit as collateral, will have the rights and
remedies of a secured party under Article 9 of the UCC with respect to
such collateral, and the Servicer will promptly forward any such agreement to
the Trustee.
(f)
Affiliated Third Party Collectors.
In performing its obligations under this
Section 3.05, the Servicer shall deal with any Third-Party Collectors
which are Affiliates of the
10
Servicer on terms which
are no more favorable in the aggregate to such Affiliated Third-Party Collector
than those used by the Servicer in its dealings with any Third-Party Collectors
that are not Affiliates of the Servicer.
ARTICLE IV
SERVICES
RELATED TO STORM RECOVERY CHARGE ADJUSTMENTS AND ALLOCATION ADJUSTMENTS
SECTION 4.01.
STORM RECOVERY CHARGE ADJUSTMENTS . From time to time, but at least
semi-annually, until the retirement of the Storm Recovery Bonds, the Servicer
shall identify the need for Storm Recovery Charge Adjustments and shall take
reasonable action to obtain and implement such Storm Recovery Charge
Adjustments, all in accordance with the following:
(a)
Expected Amortization Schedule
. The Expected Amortization Schedule for
the Storm Recovery Bonds is provided in the Supplement.
(b)
Semi-Annual Storm Recovery Charge
Adjustments
.
The Servicer will
calculate and make semi-annual Storm Recovery Charge Adjustments as of each
Adjustment Date commencing with the first Adjustment Date as follows:
(i)
subtract the
preceding period’s Storm Recovery Charge revenues collected and remitted from
the preceding period’s Periodic Payment Requirement to calculate the
under-collection or over-collection from the preceding period;
(ii)
calculate the
amount of the Storm Recovery Charge Adjustment, by (i) correcting any under-collection
or over-collection calculated in step (i) over a period of up to
12 months covering the next two succeeding payment dates (in order to
mitigate the size and impact of the adjustment), using the rules that (x) principal
payments on the Storm Recovery Bonds will be brought on schedule over the
next two succeeding payment dates, but (y) the resulting periodic billing
requirement always must be sufficient to cover operating expenses and interest
on the Storm Recovery Bonds on a timely basis, (ii) adding any amount
carried forward from the previous Storm Recovery Charge Adjustment by the
operation of step (i) above during the preceding Storm Recovery Charge
Adjustment calculation;
(iii)
add the amount
calculated in step (ii) to the upcoming period’s trued-up Periodic Billing
Requirement to determine an adjusted Periodic Billing Requirement for the
upcoming period;
(iv)
add the amount,
if a positive number, equal to the difference of the return on Cleco Power’s
invested capital in the Issuer for the preceding period minus the actual
investment earnings thereon from the Trustee’s eligible investments for the
preceding period
;
11
(v)
allocate the
result from step (iv) using the allocation factors approved by the LPSC in
the Financing Order and develop customer class specific Storm Recovery
Charge rates based on those allocated dollar amounts; and
(vi)
file those
adjusted storm recovery charge rates with the LPSC not less than 15 days
prior to the first billing cycle of the month in which the revised Storm
Recovery Charges will be in effect.
(c)
Interim Storm
Recovery Charge Adjustment Request.
The Servicer may also
make interim Storm Recovery Charge Adjustments more frequently at any time
during the term of the Storm Recovery Bonds: (i) if the Servicer forecasts
that SRC Collections will be insufficient to make all scheduled payments of
interest and other financing costs in respect of the Storm Recovery Bonds
during the current or next succeeding payment period or bring all principal
payments on schedule over the next two succeeding payment dates and/or (ii) to
replenish any draws upon the capital subaccount
.
(d)
Non-Standard
Storm Recovery Charge Adjustment
. The Servicer shall request
LPSC approval of an amendment to the Storm Recovery Charge Adjustment
mechanism, a non-standard Storm Recovery Charge Adjustment (under such
procedures as shall be proposed by the Servicer and approved by the LPSC at the
time) that it deems necessary or appropriate to address any material deviations
between SRC Collections and the periodic revenue requirement. No such change
shall cause any of the then-current credit ratings of the Storm Recovery Bonds
to be suspended, withdrawn or downgraded.
(e)
Notification of Adjustment Requests
. Whenever the Servicer files a Storm
Recovery Charge Adjustment request with the LPSC, the Servicer shall send a
copy of such filing to the Issuer, each Trustee and the Rating Agencies
concurrently therewith and such other persons as are entitled to notice under
the Financing Order. If any Storm Recovery Charge Adjustment request does not
become effective on the applicable date as provided in such filing and in
accordance with the Financing Order, the Servicer shall notify the Issuer, each
Trustee and the Rating Agencies by the end of the second Business Day after
such applicable date.
(f)
Reports
.
(i)
Servicer’s Certificate
. For each Calculation Date, the Servicer
shall provide to the Issuer, the LPSC, the Trustee and the Rating Agencies a statement
indicating
:
(A)
the Storm Recovery Bond Balance and the
Projected Storm Recovery Bond Balance as of the immediately preceding Payment
Date,
(B)
the amount on deposit in the Capital
Subaccount and the amount required to be on deposit in the Capital Subaccount
as of the immediately preceding Payment Date,
(C)
the amount on deposit in the Excess Funds
Subaccount as of the immediately preceding Payment Date,
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(D)
the Projected Storm Recovery Bond Balance
on the Calculation Date and the Servicer’s projection of the Storm Recovery
Bond Balance on the Payment Date immediately preceding the next succeeding
Adjustment Date,
(E)
the required Capital Subaccount balance
and the Servicer’s projection of the amount on deposit in the Capital
Subaccount for the Payment Date immediately preceding the next succeeding
Adjustment Date, and
(F)
the Servicer’s projection of the amount
on deposit in the Excess Funds Subaccount for the Payment Date immediately
preceding the next succeeding Adjustment Date.
(ii)
Reports to Customers
.
(A)
After each revised Storm Recovery Charge
has gone into effect pursuant to a Storm Recovery Charge Adjustment, the
Servicer shall, to the extent and in the manner and time frame required by
applicable LPSC
Regulations, if any, cause to be prepared and delivered to Customers any
required notices announcing such revised Storm Recovery Charges.
(B)
The Servicer shall comply with the
requirements of the Financing Order and Tariff with respect to the
identification of Storm Recovery Charges on Bills. In addition, at least once
each year, the Servicer shall cause to
be prepared and delivered to such Customers a notice stating, in effect, that
the Storm Recovery
Property and the Storm Recovery Charges are owned by
the Issuer and not the Seller and that the servicer is merely the collection
agent for the Issuer (or its assignee or pledgee). Such
notice shall be included as an insert to
or in the text of the Bills delivered to such Customers.
(C)
The Servicing Fee includes all costs of
preparation and delivery incurred in connection with
clauses (A)
and
(B)
above, including printing and postage costs.
SECTION 4.02.
LIMITATION OF LIABILITY
(a)
The Issuer and the Servicer expressly
agree and acknowledge that:
(i)
In connection with any Storm Recovery
Charge Adjustment, the Servicer is acting solely in its capacity as the
servicing agent of the Issuer hereunder.
(ii)
Neither the Servicer nor the Issuer shall
be responsible in any manner for, and shall have no liability whatsoever as a
result of, any action, decision, ruling or other determination made or not
made, or any delay (other than any delay resulting from the Servicer’s failure
to file the requests required by Section 4.01 in a timely and correct
manner or other breach by the Servicer of its duties under this Agreement that
materially and adversely affects the Storm Recovery Charge Adjustments), by the
LPSC in any way related to the Storm Recovery Property or in connection with
any Storm Recovery Charge Adjustment.
13
(iii)
Except only to the extent that the
Servicer is liable under Section 6.02, (A) the Servicer shall have no
liability whatsoever relating to the calculation of the Storm-Recovery Charges
and the adjustments thereto, including as a result of any inaccuracy of any of
the assumptions made in such calculation regarding expected electric energy or
demand usage volumes, the rate of charge-offs and estimated expenses and fees
of the Issuer, so long as the Servicer has not acted in bad faith or in a
grossly negligent manner in connection therewith, and (B) the Servicer
shall have no liability whatsoever as a result of any Person, including the
Holders, not receiving any payment, amount or return anticipated or expected in
respect of any Storm Recovery Bond generally.
(b)
Notwithstanding the foregoing, this Section 4.02
shall not relieve the Servicer of any liability under Section 6.02 for any
misrepresentation by the Servicer under Section 6.01 or for any breach by
the Servicer of its obligations under this Agreement.
ARTICLE V
THE
STORM RECOVERY PROPERTY
SECTION 5.01.
CUSTODY OF STORM RECOVERY PROPERTY RECORDS. To assure uniform quality
in servicing the Storm Recovery Property and to reduce administrative costs,
the Issuer hereby revocably appoints the Servicer, and the Servicer hereby
accepts such appointment, to act as the agent of the Issuer as custodian of any
and all documents and records relating to the Storm Recovery Property, which
are hereby constructively delivered to the Trustee, as pledgee of the Issuer,
with respect to all Storm Recovery Property.
SECTION 5.02.
DUTIES OF SERVICER AS CUSTODIAN.
(a)
Safekeeping
. The Servicer shall hold the Storm
Recovery Property and the Storm Recovery Property Documentation on behalf of
the Issuer and maintain such accurate and complete accounts, records and
computer systems pertaining to the Storm Recovery Property and Storm Recovery
Property Documentation in accordance with its standard accounting procedures
and in sufficient detail to permit reconciliation between payments or
recoveries on (or with respect to) Storm Recovery Charges and the SRC
Collections from time to time remitted to the Trustee pursuant to this
Agreement and as shall enable the Issuer and the Trustee, as applicable, to
comply with this Agreement, the Sale Agreement and the Indenture. In performing
its duties as custodian, the Servicer shall act with reasonable care, using
that degree of care and diligence that the Servicer exercises with respect to
comparable assets that the Servicer services for itself or, if applicable, for
others. The Servicer shall conduct, or cause to be conducted, periodic audits
of the Storm Recovery Property Documentation held by it under this Agreement
and of the related accounts, records and computer systems, in such a manner as
shall enable the Issuer and the Trustee, as pledgee of the Issuer, to verify
the accuracy of the Servicer’s record keeping. The Servicer shall promptly
report to the Issuer, the Trustee and the Rating Agencies any failure on its part to
hold the Storm Recovery Property Documentation and maintain its accounts,
records and computer systems as herein provided and promptly take appropriate
action to remedy any such failure. Nothing herein shall be deemed to require an
initial review or any periodic review by the Issuer or the Trustee of the Storm
Recovery Property Documentation. The Servicer’s duties to hold the Storm
Recovery Property Documentation set forth in this Section 5.02,
14
to the extent such Storm
Recovery Property Documentation has not been previously transferred to a
successor Servicer, shall terminate one year and one day after the earlier of
the date on which (i) the Servicer is succeeded by a successor pursuant to
the provisions of the Agreement and (ii) no Storm Recovery Bonds are
Outstanding.
(b)
Maintenance and Access to Records
. The Servicer shall maintain the Storm
Recovery Property Documentation at 2030 Donahue Ferry Road, Pineville,
Louisiana or at such other office as shall be specified to the Issuer, to the
LPSC and to the Trustee by written notice at least thirty (30) days prior to
any change in location. The Servicer shall make available, as is reasonably
required for the Trustee to perform its duties and obligations under the
Indenture and the other Basic Documents, for inspection, audit and copying to
the Issuer and the Trustee or their respective duly authorized representatives,
attorneys or auditors the Servicer’s records regarding the Storm Recovery
Property, the Storm Recovery Charges and the Storm Recovery Property
Documentation at such times during normal business hours as the Issuer or the
Trustee shall reasonably request and which do not unreasonably interfere with
the Servicer’s normal operations. Nothing in this Section 5.02(b) shall
affect the obligation of the Servicer to observe any applicable law (including
any LSPC Regulation) prohibiting disclosure of information regarding the
Customers, and the failure of the Servicer to provide access to such
information as a result of such obligation shall not constitute a breach of
this Section 5.02(b).
(c)
Release of Documents
. Upon instruction from the Trustee in
accordance with the Indenture, the Servicer shall release any Storm Recovery
Property Documentation to the Trustee, the Trustee’s agent or the Trustee’s
designee, as the case may be, at such place or places as the Trustee may designate,
as soon as practicable.
(d)
Litigation to Defend Storm Recovery
Property
.
The Servicer is
required to institute any action or proceeding reasonably necessary to compel
performance by the LPSC or the State of Louisiana of any of their respective
obligations or duties under the Securitization Act or the Financing Order, as
the case may be, with respect to the Storm Recovery Charge Adjustment,
provided, however, that in circumstances in which the servicing procedures set
out in Annex I apply, the provisions of this undertaking do not require the
Servicer to act in a manner different from the manner that the servicing
procedures require.
In
any proceedings related to the exercise of the power of eminent domain by any
municipality to acquire a portion of Cleco Power’s electric distribution
facilities,
including upon the expiration of any franchise
agreement,
the
Servicer will assert that that the court ordering such condemnation must treat
such municipality as a successor to Cleco Power under the Securitization Act
and the Financing
Order and that customers in such municipalities
remain responsible for payment of Storm Recovery Charges. The costs of any such
actions or proceedings would be reimbursed by the Issuer to the Servicer from
amounts on deposit in the Collection Account as an Operating Expense
(and shall not be deemed to constitute a
portion of the Servicing Fee)
in accordance with the terms
of Section 8.02(d) of the Indenture. The amount of any recoveries
received by the Servicer as a result of any such action or procedures shall be
forwarded to the Trustee for deposit in the Collection Account. The Servicer’s
obligations pursuant to this Section 5.02(d) survive and continue
notwithstanding that the payment of Operating Expenses pursuant to the
Indenture may be delayed.
15
SECTION 5.03.
CUSTODIAN’S INDEMNIFICATION.
THE SERVICER AS CUSTODIAN SHALL
INDEMNIFY THE ISSUER, THE INDEPENDENT MANAGERS AND THE TRUSTEE (FOR ITSELF AND
FOR THE BENEFIT OF THE STORM RECOVERY BONDHOLDERS) AND EACH OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD HARMLESS
EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PAYMENTS AND CLAIMS, AND REASONABLE COSTS OR EXPENSES, OF ANY
KIND WHATSOEVER (COLLECTIVELY, “
LOSSES
”) THAT MAY BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST EACH SUCH PERSON AS THE RESULT OF ANY NEGLIGENT
ACT OR OMISSION IN ANY WAY RELATING TO THE MAINTENANCE AND CUSTODY BY THE
SERVICER, AS CUSTODIAN, OF THE STORM RECOVERY PROPERTY DOCUMENTATION;
PROVIDED
,
HOWEVER
, THAT THE SERVICER SHALL NOT BE LIABLE FOR ANY PORTION OF ANY
SUCH AMOUNT RESULTING FROM THE WILLFUL MISCONDUCT, BAD FAITH OR NEGLIGENCE OF
THE ISSUER, THE INDEPENDENT MANAGERS OR THE TRUSTEE, AS THE CASE MAY BE.
INDEMNIFICATION
UNDER THIS SECTION 5.03 SHALL SURVIVE RESIGNATION OR REMOVAL OF THE
TRUSTEE OR ANY INDEPENDENT MANAGER AND SHALL INCLUDE REASONABLE OUT-OF-POCKET
FEES AND EXPENSES OF INVESTIGATION AND LITIGATION (INCLUDING REASONABLE
ATTORNEY’S FEES AND EXPENSES).
SECTION 5.04.
EFFECTIVE PERIOD AND TERMINATION. The Servicer’s appointment as
custodian shall become effective as of the Sale Date and shall continue in full
force and effect until terminated pursuant to this Section 5.04. If the
Servicer shall resign as Servicer in accordance with the provisions of this
Agreement or if all of the rights and obligations of the Servicer shall have
been terminated under Section 7.01, the appointment of the Servicer as
custodian shall be terminated effective as of the date on which the termination
or resignation of the Servicer is effective. Additionally, if not sooner
terminated as provided above, the Servicer’s obligations as custodian shall
terminate one year and one day after the date on which no Storm Recovery Bonds
are Outstanding.
ARTICLE VI
THE SERVICER
SECTION 6.01.
REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The Servicer makes
the following representations and warranties as of the Sale Date, on which the
Issuer has relied in acquiring the Storm Recovery Property. The representations
and warranties shall survive the execution and delivery of this Agreement, the
sale of any of the Storm Recovery Property to the Issuer and the pledge thereof
to the Trustee pursuant to the Indenture.
(a)
Organization and Good Standing
. The Servicer is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of
16
Louisiana, with the
limited liability company power and authority to conduct its business as such
business is presently conducted and to execute, deliver and carry out the terms
of this Agreement and had at all relevant times and has the requisite power,
authority and legal right to service the Storm Recovery Property and to hold
the Storm Recovery Property Documentation as custodian.
(b)
Due Qualification
. The Servicer is duly qualified to do
business and is in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which it is required to do so (except where
the failure to so qualify would not be reasonably likely to have a material
adverse effect on the Servicer’s business, operations, assets, revenues or
properties or adversely affect the servicing of the Storm Recovery Property).
(c)
Power and Authority
. The Servicer has the limited liability
company power and authority to execute and deliver this Agreement and to carry
out the terms thereof; and the execution, delivery and performance of this
Agreement have been duly authorized by the Servicer by all necessary limited
liability company action.
(d)
Binding Obligation
. This Agreement constitutes a legal,
valid and binding obligation of the Servicer enforceable against the Servicer
in accordance with its terms subject to applicable bankruptcy, receivership,
insolvency, reorganization, moratorium and equitable principles, regardless of
whether considered in a Proceeding in equity or at law.
(e)
No Violation
. The consummation of the transactions
contemplated by this Agreement (to the extent applicable to the Servicer’s
responsibilities thereunder) and the fulfillment of the terms will not conflict
with, result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the articles of organization,
by-laws or any material indenture or any material agreement to which the
Servicer is a party or by which it or any of its property is bound or result in
the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such agreement (other than any Lien that may be granted
under the Basic Documents pursuant to Section 1231 of the Securitization
Act); or violate any existing law or any existing order, rule or
regulation applicable to the Servicer.
(f)
Approvals
. No approval, authorization, consent, order or other
action of, or filing with, any Governmental Authority is required under an
applicable law, rule or regulation in connection with the execution and
delivery by the Servicer of this Agreement, the performance by the Servicer of
the transactions contemplated hereby or the fulfillment by the Servicer of the
terms of the Agreement, except those that have been obtained or made or that
are required by this Agreement to be made in the future by the Servicer, including
the Issuance Advice Letter, filings with the LPSC for adjusting Storm Recovery
Charges and allocation of storm recovery charge adjustments pursuant to Section 4.01
and filings with the Louisiana UCC Filing Officer under the Securitization Act
and the UCC.
17
(g)
No Proceedings
. Except as disclosed by the Servicer on Schedule A
hereto, there are no Proceedings pending or, to the Servicer’s knowledge,
threatened before any Governmental Authority having jurisdiction over the
Servicer or its properties:
(i)
asserting the invalidity of this
Agreement or any of the other Basic Documents;
(ii)
seeking any determination or ruling that
might materially and adversely affect the performance by the Servicer of its obligations
under, or the validity or enforceability against the Servicer of, this
Agreement, any of the other Basic Documents or the Storm Recovery Bonds;
(iii)
relating to the Servicer and which might
materially and adversely affect the federal income tax or State income, gross
receipts or franchise tax attributes of the Storm Recovery Bonds; or
(iv)
seeking to prevent the issuance of the
Storm Recovery Bonds or the consummation of any of the transactions
contemplated by this Agreement or any of the other Basic Documents.
(h)
Reports and Certificates
. Each report and certificate delivered
in connection with any filing made to the LPSC by the Servicer on behalf of the
Issuer with respect to Storm Recovery Charges, Storm Recovery Charge
Adjustments or allocation of storm recovery charges among customer classes will
be true and correct in all material respects;
provided
,
however
,
that to the extent any such report or certificate is based in part upon or
contains assumptions, forecasts or other predictions of future events, the
representation and warranty of the Servicer with respect thereto will be
limited to the representation and warranty that such assumptions, forecasts or
other predictions of future events are reasonable based upon historical
performance and the facts known to the Servicer on the date such report or
certificate is delivered.
SECTION 6.02.
INDEMNITIES OF THE SERVICER; RELEASE OF CLAIMS.
(a)
THE SERVICER SHALL BE LIABLE IN
ACCORDANCE HEREWITH ONLY TO THE EXTENT OF THE OBLIGATIONS SPECIFICALLY
UNDERTAKEN BY THE SERVICER UNDER THIS AGREEMENT.
(b)
THE SERVICER SHALL INDEMNIFY THE
ISSUER, THE TRUSTEE (FOR ITSELF AND ON BEHALF OF THE STORM RECOVERY
BONDHOLDERS) AND THE INDEPENDENT MANAGER AND EACH OF THEIR RESPECTIVE TRUSTEES,
MEMBERS, MANAGERS, OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND DEFEND
AND HOLD HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL LOSSES THAT MAY BE
IMPOSED UPON, INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON AS A RESULT OF:
(i)
THE SERVICER’S WILLFUL MISCONDUCT,
BAD FAITH OR NEGLIGENCE IN THE PERFORMANCE OF ITS DUTIES OR OBSERVANCE
18
OF ITS COVENANTS UNDER THIS AGREEMENT OR THE
SERVICER’S RECKLESS DISREGARD OF ITS OBLIGATIONS AND DUTIES UNDER THIS
AGREEMENT;
(ii)
THE SERVICER’S BREACH OF ANY OF
ITS REPRESENTATIONS OR WARRANTIES IN THIS AGREEMENT; OR
(iii)
LITIGATION AND RELATED EXPENSES
RELATING TO ITS STATUS AND OBLIGATIONS AS SERVICER (OTHER THAN ANY PROCEEDINGS
THE SERVICER IS REQUIRED TO INSTITUTE UNDER THIS AGREEMENT);
PROVIDED
,
HOWEVER
, THAT THE
SERVICER SHALL NOT BE LIABLE FOR ANY LOSSES RESULTING FROM THE BAD FAITH,
WILLFUL MISCONDUCT OR NEGLIGENCE OF ANY PERSON INDEMNIFIED PURSUANT TO THIS SECTION 6.02
(EACH, AN “INDEMNIFIED PERSON”) OR RESULTING FROM A BREACH OF A REPRESENTATION
OR WARRANTY MADE BY SUCH INDEMNIFIED PERSON TO THE SERVICER IN ANY BASIC
DOCUMENT THAT GIVES RISE TO THE SERVICER’S BREACH.
(c)
PROMPTLY AFTER RECEIPT BY AN
INDEMNIFIED PERSON OF WRITTEN NOTICE OF ITS INVOLVEMENT IN ANY ACTION,
PROCEEDING OR INVESTIGATION, SUCH INDEMNIFIED PERSON SHALL, IF A CLAIM FOR
INDEMNIFICATION IN RESPECT THEREOF IS TO BE MADE AGAINST THE SERVICER UNDER
THIS SECTION 6.02, NOTIFY THE SERVICER IN WRITING OF SUCH INVOLVEMENT. FAILURE
BY AN INDEMNIFIED PERSON TO SO NOTIFY THE SERVICER SHALL RELIEVE THE SERVICER
FROM THE OBLIGATION TO INDEMNIFY AND HOLD HARMLESS SUCH INDEMNIFIED PERSON
UNDER THIS SECTION 6.02 ONLY TO THE EXTENT THAT THE SERVICER SUFFERS
ACTUAL PREJUDICE AS DETERMINED BY A COURT OF COMPETENT JURISDICTION AS A RESULT
OF SUCH FAILURE. WITH RESPECT TO ANY ACTION, PROCEEDING OR INVESTIGATION
BROUGHT BY A THIRD PARTY FOR WHICH INDEMNIFICATION MAY BE SOUGHT BY AN
INDEMNIFIED PERSON UNDER THIS SECTION 6.02, THE SERVICER SHALL BE ENTITLED
TO ASSUME THE DEFENSE OF ANY SUCH ACTION, PROCEEDING OR INVESTIGATION UNLESS
(X) SUCH ACTION, PROCEEDING OR INVESTIGATION EXPOSES THE INDEMNIFIED
PERSON TO A RISK OF CRIMINAL LIABILITY OR FORFEITURE, (Y) THE SERVICER AND
SUCH INDEMNIFIED PERSON HAVE A CONFLICT OF INTEREST IN THEIR RESPECTIVE
DEFENSES OF SUCH ACTION, PROCEEDING OR INVESTIGATION OR (Z) THERE EXISTS
AT THE TIME THE SERVICER WOULD ASSUME SUCH DEFENSE AN ONGOING SERVICER DEFAULT.
UPON ASSUMPTION BY THE SERVICER OF THE DEFENSE OF ANY SUCH ACTION, PROCEEDING
OR INVESTIGATION, THE INDEMNIFIED PERSON SHALL HAVE THE RIGHT TO PARTICIPATE IN
SUCH ACTION OR PROCEEDING AND TO RETAIN ITS OWN COUNSEL (INCLUDING LOCAL
COUNSEL), AND THE SERVICER SHALL BEAR THE REASONABLE FEES, COSTS AND EXPENSES
OF SUCH SEPARATE COUNSEL. THE INDEMNIFIED PERSON SHALL NOT SETTLE
19
OR COMPROMISE OR CONSENT TO THE
ENTRY OF ANY JUDGMENT WITH RESPECT TO ANY PENDING OR THREATENED CLAIM, ACTION,
SUIT OR PROCEEDING IN RESPECT OF WHICH INDEMNIFICATION MAY BE SOUGHT UNDER
THIS SECTION 6.02 (WHETHER OR NOT THE SERVICER IS AN ACTUAL OR POTENTIAL
PARTY TO SUCH CLAIM OR ACTION) UNLESS THE SERVICER AGREES IN WRITING TO SUCH
SETTLEMENT, COMPROMISE OR CONSENT AND SUCH SETTLEMENT, COMPROMISE OR CONSENT
INCLUDES AN UNCONDITIONAL RELEASE OF THE SERVICER FROM ALL LIABILITY ARISING
OUT OF SUCH CLAIM, ACTION, SUIT OR PROCEEDING.
(d)
THE SERVICER SHALL INDEMNIFY THE
TRUSTEE AND ITS RESPECTIVE TRUSTEES, OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
FOR, AND DEFEND AND HOLD HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND
ALL LOSSES THAT MAY BE IMPOSED UPON, INCURRED BY OR ASSERTED AGAINST ANY
SUCH PERSON AS A RESULT OF THE ACCEPTANCE OR PERFORMANCE OF THE TRUSTS AND
DUTIES CONTAINED HEREIN AND IN THE INDENTURE, EXCEPT TO THE EXTENT THAT ANY
SUCH LOSS (I) SHALL BE DUE TO THE WILLFUL MISCONDUCT, BAD FAITH OR
NEGLIGENCE OF THE TRUSTEE OR (II) SHALL ARISE FROM THE TRUSTEE’S BREACH OF
ANY OF ITS REPRESENTATIONS OR WARRANTIES SET FORTH IN THE INDENTURE;
PROVIDED
,
HOWEVER
, THAT THE FOREGOING INDEMNITY IS EXTENDED TO THE TRUSTEE SOLELY
IN ITS INDIVIDUAL CAPACITY AND NOT FOR THE BENEFIT OF THE STORM RECOVERY
BONDHOLDERS OR ANY OTHER PERSON. SUCH AMOUNTS WITH RESPECT TO THE TRUSTEE SHALL
BE DEPOSITED AND DISTRIBUTED IN ACCORDANCE WITH THE INDENTURE.
(e)
THE SERVICER’S INDEMNIFICATION
OBLIGATIONS UNDER SECTION 6.02(b) AND (d) FOR EVENTS OCCURRING
PRIOR TO THE REMOVAL OR RESIGNATION OF THE TRUSTEE OR ANY INDEPENDENT MANAGER
OR THE TERMINATION OF THIS AGREEMENT SHALL SURVIVE THE RESIGNATION OR REMOVAL
OF THE TRUSTEE, ANY INDEPENDENT MANAGER OR THE TERMINATION OF THIS AGREEMENT
AND SHALL INCLUDE REASONABLE COSTS, FEES AND EXPENSES OF INVESTIGATION AND
LITIGATION (INCLUDING THE ISSUER’S AND THE TRUSTEE’S REASONABLE ATTORNEYS’ FEES
AND EXPENSES). INDEMNIFICATION UNDER THIS SECTION 6.02 SHALL SURVIVE ANY
REPEAL OF, MODIFICATION OF, OR SUPPLEMENT TO, OR JUDICIAL INVALIDATION OF, THE
SECURITIZATION ACT OR ANY FINANCING ORDER.
(f)
EXCEPT TO THE EXTENT EXPRESSLY
PROVIDED FOR IN THIS AGREEMENT, THE SALE AGREEMENT OR THE FORMATION DOCUMENTS
(INCLUDING THE SERVICER’S CLAIMS WITH RESPECT TO THE SERVICING FEES AND EXPENSES
REIMBURSEMENT AND THE SELLER’S CLAIM FOR PAYMENT OF THE PURCHASE PRICE OF STORM
RECOVERY PROPERTY), THE SERVICER HEREBY RELEASES AND DISCHARGES THE ISSUER
(INCLUDING ITS MEMBERS, MANAGERS, EMPLOYEES AND AGENTS, IF ANY), THE
INDEPENDENT MANAGER, AND THE TRUSTEE (INCLUDING ITS RESPECTIVE
20
OFFICERS, DIRECTORS AND AGENTS)
(COLLECTIVELY, THE “RELEASED PARTIES”) FROM ANY AND ALL CLAIMS WHATSOEVER,
WHICH THE SERVICER, IN ITS CAPACITY AS SERVICER OR OTHERWISE, SHALL OR MAY HAVE
AGAINST ANY SUCH PERSON RELATING TO THE STORM RECOVERY PROPERTY OR THE SERVICER’S
ACTIVITIES WITH RESPECT THERETO OTHER THAN ANY ACTIONS, CLAIMS AND DEMANDS
ARISING OUT OF THE WILLFUL MISCONDUCT, BAD FAITH OR NEGLIGENCE OF THE RELEASED
PARTIES.
(g)
THE SERVICER AND THE ISSUER
HEREBY ACKNOWLEDGE THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE
TRUSTEE IS A THIRD-PARTY BENEFICIARY OF THIS SECTION 6.02 AND IS ENTITLED
TO THE BENEFITS OF THE INDEMNITY FROM THE SERVICER CONTAINED HEREIN AND TO
BRING ANY ACTION TO ENFORCE SUCH INDEMNIFICATION DIRECTLY AGAINST THE SERVICER.
(h)
THE SERVICER SHALL INDEMNIFY THE
LPSC (FOR THE BENEFIT OF CUSTOMERS), THE ISSUER, THE TRUSTEE (FOR ITSELF AND ON
BEHALF OF THE STORM RECOVERY BONDHOLDERS), AND EACH OF THEIR RESPECTIVE
TRUSTEES, MEMBERS, MANAGERS, OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND
DEFEND AND HOLD HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL LOSSES
THAT MAY BE IMPOSED UPON, INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON
AS A RESULT OF ANY INCREASE IN THE SERVICING FEE THAT BECOMES PAYABLE PURSUANT
TO SECTION 6.07(b) OF THIS AGREEMENT AS A RESULT OF A DEFAULT
RESULTING FROM THE SERVICER’S MISCONDUCT,
NEGLIGENCE IN PERFORMANCE OF ITS DUTIES OR OBSERVANCE OF ITS COVENANTS
UNDER THIS AGREEMENT OR TERMINATION FOR CAUSE OF CLECO POWER OR AN AFFILIATE
SERVICER. THE INDEMNIFICATION OBLIGATION SET FORTH IN THIS PARAGRAPH MAY BE
ENFORCED BY THE LPSC BUT IS NOT ENFORCEABLE BY ANY THIRD-PARTY COLLECTOR OR ANY
CUSTOMER. ANY INDEMNITY PAYMENTS UNDER THIS PARAGRAPH FOR THE BENEFIT OF
CUSTOMERS SHALL BE REMITTED TO THE TRUSTEE PROMPTLY FOR DEPOSIT INTO THE
COLLECTION ACCOUNT.
SECTION 6.03.
MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE
SERVICER. Any Person:
(a)
into which the
Servicer may be merged, converted or consolidated and which succeeds to
all or substantially all of the electric transmission and distribution business
of the servicer
(or,
if the transmission and distribution business is split, any person which the
LPSC designates in connection with an order relating to such split),
(b)
which results
from the division of the Servicer into two or more persons and which succeeds
to all or substantially all of the electric transmission and distribution business
of the Servicer
(or,
if the transmission and distribution business is split, any person which the
LPSC designates in connection with an order relating to such split),
21
(c)
which may result
from any merger, conversion or consolidation to which the Servicer shall be a
party and which succeeds to all or substantially all of the electric
transmission and distribution business of the Servicer
(or, if the transmission and distribution
business is split, any person which the LPSC designates in connection with an
order relating to such split),
(d)
which may purchase
or otherwise succeed to the properties and assets of the Servicer substantially
as a whole and which purchases or otherwise succeeds to all or substantially
all of the electric transmission and distribution business of the Servicer
(or, if the transmission and distribution
business is split, any person which the LPSC designates in connection with an
order relating to such split), or
(e)
which may otherwise
purchase or succeed to all or substantially all of the electric transmission
and distribution business of the Servicer
(or, if the transmission and distribution business is
split, any person which the LPSC designates in connection with an order relating
to such split)
,
which Person in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Servicer under this Agreement, shall be the successor to the
Servicer under this Agreement without the execution or filing of any document
or any further act by any of the parties to this Agreement;
provided
,
however
,
that:
(i)
immediately after giving effect to such
transaction, the representations and warranties made pursuant to Section 6.01
shall be true and correct and no Servicer Default, and no event that, after
notice or lapse of time, or both, would become a Servicer Default, shall have
occurred and be continuing;
(ii)
the Servicer shall have delivered to the
Issuer, the LPSC and the Trustee an Officers’ Certificate and an Opinion of
Counsel each stating that such consolidation, merger, conversion, division or
succession and such agreement of assumption comply with this Section 6.03
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with;
(iii)
the Servicer shall have delivered to the
Issuer, the LPSC and the Trustee an Opinion of Counsel either
(A)
stating that, in the opinion of such
counsel, all filings to be made by the Servicer, including filings with the
LPSC pursuant to the Securitization Act and the UCC, that are necessary fully
to preserve and protect the interests of each of the Issuer and the Trustee in
the Storm Recovery Property have been executed and filed and are in full force and
effect, and reciting the details of such filings or
(B)
stating that, in the opinion of such
counsel, no such action is necessary to preserve and protect such interests;
(iv)
the Rating Agencies shall have received
prior written notice of such transaction and, if such Person is not an
Affiliate of Cleco Power, the Rating Agency Condition shall be satisfied; and
22
(v)
the Servicer shall have delivered to the
Issuer, the LPSC, the Trustee and the Rating Agencies an opinion of independent
tax counsel (as selected by, and in form and substance satisfactory to,
the Servicer, and which may be based on a ruling from the Internal Revenue
Service) to the effect that, for federal income tax purposes, such transaction
will not result in a material adverse federal income tax consequence to the
Issuer or the Storm Recovery Bondholders.
The Servicer shall not
consummate any transaction referred to in clauses (a), (b), (c), (d) or (e) above
except upon execution of the above-described agreement of assumption and
compliance with clauses (i), (ii), (iii), (iv) and (v) above. When
any Person acquires the properties and assets of the Servicer substantially as
a whole or otherwise becomes the successor to the Servicer in accordance with
the terms of this Section 6.03, then upon the satisfaction of all of the
other conditions of this Section 6.03, the Servicer shall automatically
and without further notice be released from its obligations hereunder.
SECTION 6.04.
ASSIGNMENT OF THE SERVICER’S OBLIGATIONS.
The Servicer
will not voluntarily assign or outsource its obligations hereunder except with
the LPSC’s prior approval and upon a demonstration that the costs under an
alternative arrangement will be no more than if the Servicer continued to perform such
services itself, or the assignment or outsourcing is to another Affiliate that
will provide such services at the same or lower cost than if the Servicer
continued to perform such services itself, or the assignment or outsourcing
is to a successor entity to the Servicer as the result of a merger or other
restructuring that assumes the Servicer’s responsibilities as the servicer and
administrator.
SECTION 6.05.
LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS. Neither the Servicer
nor any of the managers, officers, employees or agents of the Servicer shall be
liable to the Issuer, its managers, the Storm Recovery Bondholders, the Trustee
or any other person, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action pursuant to this
Agreement or for errors in judgment;
provided
,
however
, that this
provision shall not protect the Servicer against any liability that would
otherwise be imposed by reason of willful misconduct, bad faith or negligence
in the performance of its duties under this Agreement. The Servicer and any
manager or officer or employee or agent of the Servicer may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under this Agreement.
Except as provided in
this Agreement (including but not limited to Section 5.02(c) and 5.02(d) of
this Agreement), the Servicer shall not be under any obligation to appear in,
prosecute or defend any Proceeding that is not directly related to one of the
Servicer’s enumerated duties in this Agreement or related to its obligation to
pay indemnification, and that in its reasonable opinion may cause it to
incur any expense or liability;
provided
,
however
, that the
Servicer may, in respect of any Proceeding, undertake any reasonable action
that is not specifically identified in this Agreement as a duty of the Servicer
but that the Servicer may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties to this Agreement and the
interests of the Storm Recovery Bondholders under this Agreement. The Servicer’s
costs and expenses incurred in connection with any such Proceeding shall be
payable from the Collection Account as an Operating Expense (and shall not be
deemed to constitute a portion of the
23
Servicing Fee) in
accordance with Section 8.02(d) of the Indenture. The Servicer’s
obligations pursuant to this Section 6.05 shall survive and continue
notwithstanding the fact that the payment of Operating Expenses pursuant to the
Indenture may be delayed (it being understood that the Servicer may be
required initially to advance its own funds to satisfy its obligations
hereunder).
SECTION 6.06.
CLECO POWER NOT TO RESIGN AS SERVICER. Subject to the provisions of
Sections 6.03 and 6.04, Cleco Power shall not resign from the obligations and
duties imposed on it as Servicer under this Agreement unless the Servicer
delivers to the Issuer, the Trustee, the LPSC and each Rating Agency written
notice of such resignation at the earliest practicable time and, concurrently
therewith or promptly thereafter, an opinion of Independent legal counsel that
the Servicer’s performance of its duties under this Agreement shall no longer
be permissible under applicable law. No such resignation shall become effective
until a Successor Servicer shall have assumed the servicing obligations and
duties hereunder of the Servicer in accordance with Section 7.04.
SECTION 6.07.
SERVICING FEE.
(a)
The Issuer agrees to pay the Servicer on
each Payment Date, solely to the extent amounts are available therefor in
accordance with the Indenture, the Servicing Fee with respect to the Storm
Recovery Bonds. For so long as:
(i)
Cleco Power or one of its Affiliates is
the Servicer,
(ii)
a successor to Cleco Power or one of its
Affiliates is the Servicer due to the operation of the provisions of Section 6.03,
or
(iii)
any Person is the Successor Servicer
hereunder pursuant to the provisions of Section 6.03 if the predecessor
Servicer was Cleco Power or one of its Affiliates,
the amount of the
Servicing Fee paid to the Servicer annually shall equal 0.05% of the Storm
Recovery Bond Balance on the Issuance Date and shall be prorated based on the
fraction of a calendar year during which the Servicer provides any of the
services set forth in this Agreement.
(b)
In the event that a Successor Servicer
not an Affiliate of Cleco Power is appointed in accordance with Section 7.04,
the amount of Servicing Fee paid to the Servicer annually shall be agreed upon
by the Successor Servicer and the Trustee but shall in no event exceed 0.60% of
the Storm Recovery Bond Balance on the Issuance Date without the consent of the
LPSC and shall be prorated based on the fraction of a calendar year during
which the Successor Servicer provides any of the services set forth in this
Agreement. The foregoing fees set forth in Section 6.07(a) and this Section 6.07(b) constitute
a fair and reasonable price for the obligations to be performed by the Servicer.
The Servicer shall have indemnification obligations for an increased Servicing
Fee under certain circumstances, in accordance with Section 6.02(h).
(c)
The Servicing
Fee, together with any portion of the Servicing Fee that remains unpaid from
prior Payment Dates, will be paid solely to the extent funds are available. The
Servicing Fee will be paid prior to the payment of or provision for any amounts
in respect of interest on and principal of the Storm Recovery Bonds.
24
SECTION 6.08.
COMPLIANCE WITH APPLICABLE LAW. The Servicer covenants and agrees,
in servicing the Storm Recovery Property, to comply in all material respects
with all laws applicable to, and binding upon, the Servicer and relating to
such Storm Recovery Property the noncompliance with which would have a material
adverse effect on the value of the Storm Recovery Property;
provided,
however
, that the foregoing is not intended to, and shall not, impose any
liability on the Servicer for noncompliance with any Requirement of Law that
the Servicer is contesting in good faith in accordance with its customary
standards and procedures.
SECTION 6.09.
SERVICER EXPENSES. Except as expressly provided elsewhere in this
Agreement, the Servicer will not be reimbursed for any expenses incurred by it
in connection with its activities hereunder, including taxes imposed on the
Servicer and expenses incurred in connection with reports to Storm Recovery
Bondholders, and external information technology costs, bank wire fees and
legal fees related to this Agreement. The Servicer is entitled to receive
reimbursement for its out-of-pocket costs for external accounting as well as for
other items of costs that will be incurred annually to support and service the
Storm Recovery Bonds after issuance, as provided in the Financing Order.
SECTION 6.10.
APPOINTMENTS. The Servicer may at any time appoint a subservicer or agent
to perform all or any portion of its obligations as Servicer hereunder;
provided
,
however
, that unless such Person is an Affiliate of Cleco Power, the
Rating Agency Condition shall have been satisfied in connection therewith;
provided
further
that the Servicer shall remain obligated and be liable to the
Issuer for the servicing and administering of the Storm Recovery Property in
accordance with the provisions hereof without diminution of such obligation and
liability by virtue of the appointment of such subservicer or agent and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Storm Recovery Property. The fees and
expenses of the subservicer or agent shall be as agreed between the Servicer
and its subservicer or agent from time to time, and none of the Issuer, the
Trustee or the Storm Recovery Bondholders shall have any responsibility
therefor. Any such appointment shall not constitute a Servicer resignation
under Section 6.06. In the event any subservicer participates in the “servicing
function” within the meaning of Item 1122 of Regulation AB, the Servicer shall
be responsible for obtaining from each subservicer and delivering to the Issuer
any assessment of compliance and attestation required to be delivered by the
Servicer under Section 3.03.
SECTION 6.11.
NO SERVICER ADVANCES. The Servicer shall not make any advances of
interest on or principal of the Storm Recovery Bonds.
SECTION 6.12.
REMITTANCES.
The Servicer shall remit Storm Recovery Charges to
the Trustee each Business Day based on estimated daily collections, using a
weighted average balance of days outstanding on Cleco Power’s retail bills (the
“
Daily Remittance
”). The Servicer will track the amount billed for Storm
Recovery Charges by customer. The summation of those individual charges on a
daily basis will be remitted to the Trustee on each Business Day, net of
considerations of the timing lag between billing and collection, and as further
adjusted for uncollectible amounts. The Servicer will include in the
calculation of this remittance an allowance for the estimated charged-off
amount based on the prior annual period. Cleco Power will not be required to
credit Customers or the Issuer with any earnings accruing to Cleco Power on
transferred and untransferred daily collections of Storm Recovery Charges.
25
SECTION 6.13.
SERVICER’S CERTIFICATE.
Not later than two (2)
Business Days prior to each Payment Date, the Servicer shall deliver a written
report, for the Storm Recovery Bonds, substantially in the form of
Exhibit A
hereto (the “
Semi-Annual Servicer’s Certificate
”) to the Issuer, the
LPSC, the Trustee and the Rating Agencies setting forth the transfers and
payments to be made in respect of such Payment Date pursuant to the Indenture
and the amounts thereof and the amounts to be paid to Holders of Storm Recovery
Bonds pursuant to the Indenture.
SECTION 6.14.
PROTECTION OF TITLE. The Servicer shall execute and file all
filings, including filings with the Louisiana UCC Filing Officer pursuant to
the Securitization Act and the Louisiana UCC, and cause to be executed and
filed all filings, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interests of the
Issuer and the Trustee in the Storm Recovery Property, including all filings
required under the Securitization Act and the Louisiana UCC relating to the
transfer of the ownership or security interest in the Storm Recovery Property by
the Seller to the Issuer or any security interest granted by the Issuer in the
Storm Recovery Property. The Servicer shall deliver (or cause to be delivered)
to the Issuer, the LPSC and the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
SECTION 6.15.
MAINTENANCE OF OPERATIONS.
To the extent that any
interest in the Storm Recovery Property is assigned, sold, or transferred to an
assignee, Cleco Power shall enter into a contract with that assignee that
requires Cleco Power to continue to operate its electric transmission and
distribution system in order to provide electric services to Cleco Power’s
customers; provided, however, that this provision shall not prohibit Cleco
Power from selling, assigning, or otherwise divesting its electric transmission
and distribution systems or any part thereof so long as the entity or
entities acquiring such system agree to continue operating the facilities to
provide electric service to Cleco Power’s LPSC’s jurisdictional customers.
ARTICLE VII
SERVICER
DEFAULT
SECTION 7.01.
SERVICER DEFAULT. If any one of the following events (a “Servicer
Default”) occurs and is continuing:
(a)
any failure by the Servicer to remit to
the Trustee, on behalf of the Issuer, any required remittance by the date that
such remittance must be made that continues unremedied for a period of five
Business Days after the date on which written notice therof shall have been
given to the Servicer and the LPSC by the Issuer or the Trustee;
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(b)
any failure by the Servicer to duly
observe or perform in any material respect any other covenant or agreement
of the Servicer set forth in this Agreement (other than as provided in Section 7.01(a) or
(c)) or any other Basic Document to which it is a party in such capacity, which
failure
(i)
materially and adversely affects the
Storm Recovery Property or the timely collection of the Storm Recovery Charges
or the rights of the Storm Recovery Bondholders, and
(ii)
continues unremedied for a period of 60
days after the date on which written notice thereof shall have been given to
the Servicer by the Trustee, the LPSC or the Issuer or after discovery of such
failure by an officer of the Servicer, as the case may be;
(c)
any failure by the Servicer duly to perform its
obligations under Section 4.01(b) of this Agreement in the time and
manner set forth therein, which failure continues unremedied for a period of
five Business Days;
(d)
any representation or warranty made by
the Servicer in this Agreement proves to have been incorrect when made, which
has a material adverse effect on the Issuer or the Storm Recovery Bondholders,
and which material adverse effect continues unremedied for a period of 60 days
after the date on which written notice thereof shall have been given to the
Servicer by the Issuer or the Trustee or after discovery of such failure by an
officer of the Servicer, as the case may be; or
(e)
an Insolvency Event occurs with respect
to the Servicer;
then, so long as the
Servicer Default shall not have been remedied, the Trustee may, or shall upon
the written instruction of the Majority Holders and with the Issuer’s consent
(which shall not be unreasonably withheld), terminate all the rights and
obligations (other than the indemnification obligations set forth in Section 6.02
hereof and the obligation under Section 7.04 to continue performing its
functions as Servicer until a Successor Servicer is appointed) of the Servicer
under this Agreement by notice then given in writing to the Servicer (a “Termination
Notice”).
In addition, upon
a Servicer Default, the Storm Recovery Bondholders and the Trustee
shall be entitled to (i) apply to the 19th
Judicial District Court for the Parish of East Baton Rouge, Louisiana, for
sequestration and payment to the Trustee of revenues arising with respect to
the Storm Recovery Property, (ii) foreclose on or otherwise enforce the
Lien on and security interests in the Storm Recovery Property and (iii) apply
to the LPSC for an order that amounts arising from the Storm Recovery Charges
be transferred to a separate account for the benefit of the Storm Recovery
Bondholders, in accordance with the Securitization Act.
On or after the receipt
by the Servicer of a Termination Notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Storm Recovery
Property, the related Storm Recovery Charges or otherwise, shall, upon
appointment of a Successor Servicer pursuant to Section 7.04, without
further action, pass to and be vested in such Successor Servicer and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver,
27
on behalf of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such Termination Notice,
whether to complete the transfer of the Storm Recovery Property Documentation
and related documents, or otherwise. The predecessor Servicer shall cooperate
with the Successor Servicer, the Trustee and the Issuer in effecting the
termination of the responsibilities and rights of the predecessor Servicer
under this Agreement, including the transfer to the Successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Servicer for remittance, or shall thereafter be received by it with
respect to the Storm Recovery Property or the related Storm Recovery Charges.
As soon as practicable after receipt by the Servicer of such Termination
Notice, the Servicer shall deliver the Storm Recovery Property Documentation to
the Successor Servicer. All reasonable costs and expenses (including attorneys’
fees and expenses) incurred in connection with transferring the Storm Recovery
Property Documentation to the Successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section shall be paid
by the predecessor Servicer upon presentation of documentation of such costs
and expenses. All costs and expenses (including attorneys’ fees and expenses)
incurred in connection with transferring the Storm Recovery Property
Documentation to the Successor Servicer and amending this Agreement to reflect
the succession as Servicer other than pursuant to this Section shall be
paid by the party incurring such costs and expenses. Termination of Cleco Power’s
rights as a Servicer shall not terminate Cleco Power’s rights or obligations in
its individual capacity under the Sale Agreement (except rights thereunder
deriving from its rights as the Servicer hereunder).
SECTION 7.02.
NOTICE OF SERVICER DEFAULT. The Servicer shall deliver to the
Issuer, to the Trustee, to the LPSC, and to each Rating Agency promptly after
having obtained actual knowledge thereof, but in no event later than two
Business Days thereafter, written notice in an Officers’ Certificate of any
event or circumstance which, with the giving of notice or the passage of time,
would become a Servicer Default under Section 7.01.
SECTION 7.03.
WAIVER OF PAST DEFAULTS. The Trustee, with the written consent of
the Majority Holders, may waive in writing in whole or in part any
default by the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required remittances to the
Trustee of SRC Collections from Storm Recovery Property in accordance with Section 6.12
of this Agreement. Upon any such waiver of a past default, such default shall
cease to exist, and any Servicer Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
SECTION 7.04.
APPOINTMENT OF SUCCESSOR.
(a)
Upon the Servicer’s receipt of a
Termination Notice pursuant to Section 7.01 or the Servicer’s resignation
in accordance with the terms of this Agreement, the Servicer shall continue to
perform its functions as Servicer under this Agreement and shall be
entitled to receive the requisite portion of the Servicing Fee and expenses
reimbursement, until a Successor Servicer shall have assumed in writing the
obligations of the Servicer hereunder as described below. In the event of the
Servicer’s removal or resignation hereunder, the Trustee at the written
direction and with the consent of the Majority Holders shall appoint a
Successor
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Servicer with the Issuer’s
prior written consent thereto (which consent shall not be unreasonably
withheld), and the Successor Servicer shall accept its appointment by a written
assumption in form acceptable to the Issuer and the Trustee. In no event
shall the Trustee be liable for its appointment of a Successor Servicer
appointed at the written direction of
the Majority Holders. If, within 30 days after the delivery of the Termination
Notice, a new Servicer shall not have been appointed and accepted such
appointment, the Trustee may petition the LPSC or a court of competent
jurisdiction to appoint a Successor Servicer under this Agreement. A Person
shall qualify as a Successor Servicer only if:
(i)
such Person is permitted under LPSC Regulations
to perform the duties of the Servicer pursuant to the Securitization Act,
the Financing Order and this Agreement,
(ii)
either (A) the LPSC has approved the
appointment of the Successor Servicer or (B) 45 days have lapsed since the
LPSC received notice of appointment of the Successor Servicer and the LPSC has
neither approved nor disapproved that appointment,
(iii)
the Rating Agency Condition shall have
been satisfied, and
(iv)
such Person enters into a servicing
agreement with the Issuer having substantially the same provisions as this
Agreement.
(b)
Upon appointment, the Successor Servicer
shall be the successor in all respects to the predecessor Servicer under this
Agreement and shall be subject to all the responsibilities, duties and liabilities
arising thereafter relating thereto placed on the predecessor Servicer and
shall be entitled to the Servicing Fee and expenses reimbursement and all the
rights granted to the predecessor Servicer by the terms and provisions of this
Agreement.
(c)
The Successor Servicer may not
resign unless it is prohibited from serving as such by law.
SECTION 7.05.
COOPERATION WITH SUCCESSOR. The predecessor Servicer covenants and
agrees with the Issuer that it will, on an ongoing basis, cooperate with the
Issuer and Successor Servicer and provide whatever information is, and take
whatever actions are, reasonably necessary to assist the Successor Servicer in
performing its obligations hereunder.
ARTICLE VIII
MISCELLANEOUS
PROVISIONS
SECTION 8.01.
AMENDMENT.
(a)
This Agreement may be amended by the
Servicer and the Issuer, with the prior written consent of the Trustee and the
satisfaction of the Rating Agency Condition; provided, however, that no
amendment that would increase the ongoing financing costs, as defined in the
Financing Order, shall be permitted without the prior approval of the LPSC.
Promptly after the execution of any such amendment or consent, the Issuer shall
furnish written notification of the substance of such amendment or consent to
each of the Rating Agencies.
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(b) Notwithstanding Section 8.01(a) or
anything to the contrary in this Agreement, the Servicer and the Issuer may
amend the Issuer Annex in writing with prior written notice given to the
Trustee and the Rating Agencies, but without the consent of the Trustee, any
Rating Agency or any Holder, solely to address changes to the Servicer’s method
of calculating SRC Collections as a result of changes to the Servicer’s current
computerized customer information system;
provided
that any such
amendment shall not have a material adverse effect on the Holders of then
Outstanding Storm Recovery Bonds.
Prior to the execution of any amendment to this
Agreement, the Issuer and the Trustee shall be entitled to receive and
conclusively rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and the Opinion of
Counsel referred to in Section 3.01.
The Issuer and the Trustee may, but shall not be obligated to, enter
into any such amendment which affects their own rights, duties or immunities
under this Agreement or otherwise. Notwithstanding Section 8.01(a) or
anything to the contrary in this Agreement, this Agreement shall be amended
automatically to comply with changes in law.
SECTION 8.02.
NOTICES. All demands, notices and
communications upon or to the Servicer, the Issuer, the LPSC, the Trustee or
the Rating Agencies under this Agreement shall be in writing, delivered
personally, via facsimile, by reputable overnight courier or by certified mail,
return-receipt requested, and shall be deemed to have been duly given upon
receipt
(a) in the case of the Servicer, to Cleco
Power LLC, 2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226, Attention:
Treasurer;
(b) in the case of the Issuer, to Cleco
Katrina/Rita Hurricane Recovery Funding LLC, 2605 Hwy. 28 East, Office Number
12, Pineville, Louisiana 71360-5226, Attention: Manager;
(c) in the case of the Trustee, at its
Corporate Trust Office;
(d) in the case of Moody’s, to Moody’s
Investors Service, Inc., ABS Monitoring Department, 7 World Trade Center
at 250 Greenwich Street, New York, New York 10007;
(e) in the case of Standard &
Poor’s, to Standard & Poor’s, a division of The McGraw-Hill Companies,
55 Water Street, New York, New York 10041, Attention: Asset Backed Surveillance
Department; and
(f) in the case of Fitch, to Fitch, Inc.,
1 State Street Plaza, New York, New York 10004, Attention: ABS Surveillance;
(g) in the case of the LPSC, to Galvez
Building, 12th Floor, 602 North Fifth Street, Baton Rouge, Louisiana
70821-9154, Attention: Executive Counsel;
or, as to each of the foregoing, at such other address
as shall be designated by written notice to the other parties.
30
SECTION 8.03. ASSIGNMENT.
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 6.03 and 6.04 and
as provided in the provisions of this Agreement concerning the resignation or
termination of the Servicer, this Agreement may not be assigned by the
Servicer. Any purported assignment not
in compliance with this Agreement shall be void.
SECTION 8.04. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this Agreement are solely
for the benefit of the Servicer, the Issuer and, to the extent provided herein
or in the other Basic Documents, Customers and the other Persons expressly
referred to herein and the Trustee, on behalf of itself and the Storm Recovery
Bondholders, and nothing in this Agreement, whether express or implied, shall
be construed to give to any other Person any legal or equitable right, remedy
or claim in the Series Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein. Notwithstanding anything to the contrary
contained herein, for the avoidance of doubt, any right, remedy or claim to
which any Customer may be entitled pursuant to the Financing Order and this
Agreement may be asserted or exercised only by the LPSC (or by the Attorney
General of the State of Louisiana in the name of the LPSC) for the benefit of
such Customer.
SECTION 8.05. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 8.06. SEPARATE COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
SECTION 8.07. HEADINGS.
The headings of the various Articles and Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 8.08. GOVERNING LAW.
THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 8.09. ASSIGNMENT TO THE TRUSTEE. The Servicer hereby acknowledges and consents
to any pledge, assignment and grant of a security interest by the Issuer to the
Trustee pursuant to the Indenture for the benefit of any Storm Recovery
Bondholders of all right, title and interest of the Issuer in, to and under the
Storm Recovery Property owned by the Issuer and the proceeds thereof and the
assignment of any or all of the Issuer’s rights hereunder to the Trustee.
Notwithstanding such assignment, in no event shall the Trustee have any
liability for the representations, warranties, covenants, agreements or other
31
obligations of the Issuer, hereunder or in any of the certificates,
notices or agreements delivered pursuant hereto, as to all of which recourse
shall be had solely to the assets of the Issuer.
SECTION 8.10. NONPETITION COVENANTS. Notwithstanding any prior termination of this
Agreement or the Indenture, but subject to a court’s rights to order the
sequestration and payment of revenues arising with respect to the Storm
Recovery Property pursuant to Section 1229(F) of the Securitization
Act, the Servicer shall not, prior to the date which is one year and one day
after the termination of the Indenture, petition or otherwise invoke or cause the
Issuer to invoke the process of any Governmental Authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of the property of the Issuer, or ordering the
winding up or liquidation of the affairs of the Issuer.
SECTION 8.11. TERMINATION. This Agreement shall terminate
when all Storm Recovery Bonds have been retired or redeemed in full.
SECTION 8.12. LPSC CONSENT.
Except as specifically set forth in Section 7.04, to the extent the
consent of the LPSC is required to effect any amendment to or modification of
this Agreement or any provision of this Agreement,
(a) the Servicer may request the consent
of the LPSC by delivering to the LPSC’s executive director and general counsel
a written request for such consent, which request shall contain:
(i) a
reference to Docket No. U-29157 and a statement as to the possible effect
of the amendment on ongoing financing costs;
(ii) an
Officer’s Certificate stating that the proposed amendment or modification has
been approved by all parties to this Agreement; and
(iii) a
statement identifying the person to whom the LPSC or its staff is to address
its consent to the proposed amendment or modification or request additional
time;
(b) The LPSC shall, within 30 days of
receiving the request for consent complying with Section 8.12(a) above,
either
(i) provide
notice of its consent or its order denying consent to the person specified in Section 8.12(a)(iii) above,
or
(ii) be
conclusively deemed, on the 31st day after receiving the request for consent,
to have consented to the proposed amendment or modification.
Any amendment or modification requiring the consent of
the LPSC as provided in this Section 8.12 shall become effective on the
later of (i) the date proposed by the parties to such amendment or
modification and (ii) the first day after the expiration of the 30-day
period provided for in Section 8.12(b)(ii).
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Following the delivery of a notice to the LPSC by the
Servicer under Section 8.12(a), the Servicer and the Issuer shall have the
right at any time to withdraw from the LPSC further consideration of any
notification of a proposed amendment. Such withdrawal shall be evidenced by the
Servicer’s giving prompt written notice thereof to the LPSC, the Issuer
and the Trustee.
SECTION 8.13. LIMITATION OF LIABILITY
It is expressly understood and agreed by the parties
hereto that this Agreement is executed and delivered by the Trustee, not
individually or personally but solely as Trustee in the exercise of the powers
and authority conferred and vested in it, and that the Trustee, in acting
hereunder, is entitled to all rights, benefits, protections, immunities and
indemnities accorded to it under the Indenture.
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers as of the day and year first above
written.
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CLECO KATRINA/RITA
HURRICANE
RECOVERY FUNDING LLC, as Issuer
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By:
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/s/
Keith D. Crump
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Name: Keith D. Crump
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Title: Vice President
and Manager
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CLECO POWER LLC, as
Servicer
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By:
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/s/
Kathleen F. Nolen
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Name: Kathleen F. Nolen
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Title: Senior Vice President and Chief Financial
Officer
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Acknowledged
and Accepted:
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U.S.
Bank National Association,
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not
in its individual capacity but solely as
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Trustee
on behalf of the Holders
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of
the Storm Recovery Bonds
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By:
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/s/ Melissa A. Rosal
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Name: Melissa A. Rosal
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Title: Vice President
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SCHEDULE A
TO
STORM RECOVERY PROPERTY SERVICING AGREEMENT
Proceedings pending or, to the Servicer’s best
knowledge, threatened before any court, federal or State regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties seeking any determination or ruling that
might materially and adversely affect the Storm Recovery Property or the
performance by the Servicer of its obligations under, or the validity or
enforceability against the Servicer of, this Agreement:
[None]
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EXHIBIT A
FORM OF
SEMI-ANNUAL SERVICER’S CERTIFICATE
Pursuant to
Section 6.13
of the Storm Recovery Property
Servicing Agreement, dated as of March 6, 2008 (the “
Servicing
Agreement
”), between CLECO POWER LLC, as servicer and CLECO KATRINA/RITA
HURRICANE RECOVERY FUNDING LLC, the Servicer does hereby certify, for the
,
20 Payment Date (the “Current Payment Date”), as
follows:
(a) Capitalized terms used herein have
their respective meanings as set forth in the Servicing Agreement or the
Indenture. References herein to certain sections and subsections are references
to the respective sections of the Servicing Agreement or the Indenture, as the
context indicates.
(i) Allocation
of remittances as of Current Payment Date allocable to principal and interest:
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a.
Principal
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Aggregate
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i.
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Tranche A-1
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ii.
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Tranche A-2
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v.
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Total:
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b.
Interest
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Aggregate
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i.
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Tranche A-1
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ii.
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Tranche A-2
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v.
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Total:
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(b) Outstanding Amount of Bonds prior to,
and after giving effect to the payment on the current Payment Date and the
difference, if any, between the Outstanding Amount specified in the Expected
Amortization Schedule (after giving effect to payments to be made on such
Payment Date under 1a above) and the principal balance to be Outstanding
(following payment on current Payment Date):
(i) Principal
Balance Outstanding (as of the date of this certification):
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i.
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Tranche A-1
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ii.
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Tranche A-2
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v.
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Total:
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(ii) Principal
Balance to be Outstanding (following payment on current Payment Date):
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i.
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Tranche A-1
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ii.
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Tranche A-2
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v.
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Total:
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(iii) Difference
between (b) above and Outstanding Amount specified in Expected Amortization
Schedule:
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i.
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Tranche A-1
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ii.
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Tranche A-2
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v.
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Total:
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(c) All other transfers to be made on the
current Payment Date, including amounts to be paid to the Trustee and to the
Servicer:
(i) Operating
Expenses
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i.
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Trustee Fees and
Expenses:
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ii.
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Servicing Fee:
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iii.
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Administration
Fee:
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iv.
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Other Operating
Expenses:
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v.
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Total:
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(ii) Other
Payments
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i.
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Operating
Expenses (payable pursuant to Section 8.02(d)(4) of the Indenture):
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ii.
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Funding of
Capital Subaccount (to required amount):
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iii.
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Return on
Capital Subaccount payable to Cleco Katrina/Rita Hurricane Recovery Funding
LLC from investment earnings on the capital subaccount not to exceed 5.61%
per annum.
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iv.
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Operating
Expenses and Indemnity Amounts payable pursuant to Section 8.02(d)(8) of
the Indenture:
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v.
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Deposits to
Excess Funds Subaccount (including the portion, if any, of investment
earnings on the Capital Subaccount in excess of the amounts payable under
(iii)):
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vi.
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Total:
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(d) Estimated amounts on deposit in the
Capital Subaccount and Excess Funds Subaccount after giving effect to the
foregoing payments:
(i) Capital
Subaccount
(ii) Excess
Funds Subaccount
IN WITNESS WHEREOF, the undersigned has duly
executed and delivered this Semi-Annual Servicer’s Certificate this
day of
.
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CLECO POWER LLC,
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as Servicer
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By:
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Name:
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Title:
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EXHIBIT B-1
FORM OF
SERVICER’S REGULATION AB COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he/she is the
duly elected and acting [ ]
of
CLECO POWER LLC, as servicer
(the “
Servicer
”) under the Storm Recovery Property Servicing Agreement
dated as of March 6, 2008 (the “
Servicing Agreement
”) between the
Servicer and CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC (the “
Issuer
”)
and further that:
1. The
undersigned is responsible for assessing the Servicer’s compliance with the
servicing criteria set forth in Item 1122(d) of Regulation AB (the “
Servicing
Criteria
”).
2. With
respect to each of the Servicing Criteria, the undersigned has made the
following assessment of the Servicing Criteria in accordance with
Item 1122(d) of Regulation AB, with such discussion regarding the
performance of such Servicing Criteria during the fiscal year ended
,
and covered by
Cleco Power’s annual report on Form 10-K (such fiscal year, the “
Assessment
Period
”):
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Regulation
AB
Reference
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Servicing
Criteria
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Applicable
Servicing Criteria
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General Servicing Considerations
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1122(d)(1)(i)
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Policies and
procedures are instituted to monitor any performance or other triggers and
events of default in accordance with the transaction agreements.
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Applicable;
assessment below.
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|
|
|
|
|
1122(d)(1)(ii)
|
|
If any material
servicing activities are outsourced to third parties, policies and procedures
are instituted to monitor the third party’s performance and compliance with
such servicing activities.
|
|
Not applicable;
no servicing activities were outsourced.
|
|
|
|
|
|
|
|
1122(d)(1)(iii)
|
|
Any requirements
in the transaction agreements to maintain a back-up servicer for pool assets
are maintained.
|
|
Not applicable;
documents do not provide for a back-up servicer.
|
|
|
|
|
|
|
|
1122(d)(1)(iv)
|
|
A fidelity bond
and errors and omissions policy is in effect on the party participating in
the servicing function throughout the reporting period in the amount of
coverage required by and otherwise in accordance with the terms of the
transaction agreements.
|
|
Not applicable;
LPSC rules impose credit standards on retail electric providers who
handle customer collections and govern performance requirements of utilities.
|
|
Regulation
AB
Reference
|
|
Servicing
Criteria
|
|
Applicable
Servicing Criteria
|
|
|
|
|
|
|
|
|
|
Cash Collection and Administration
|
|
|
|
|
|
|
|
|
|
1122(d)(2)(i)
|
|
Payments on pool
assets are deposited into the appropriate custodial bank accounts and related
bank clearing accounts no more than two business days of receipt, or such
other number of days specified in the transaction agreements.
|
|
Applicable
|
|
|
|
|
|
|
|
1122(d)(2)(ii)
|
|
Disbursements
made via wire transfer on behalf of an obligor or to an investor are made
only by authorized personnel.
|
|
Applicable
|
|
|
|
|
|
|
|
1122(d)(2)(iii)
|
|
Advances of
funds or guarantees regarding collections, cash flows or distributions, and
any interest or other fees charged for such advances, are made, reviewed and
approved as specified in the transaction agreements.
|
|
Applicable, but
no current assessment required; no advances by the Servicer are permitted
under the transaction agreements.
|
|
|
|
|
|
|
|
1122(d)(2)(iv)
|
|
The related
accounts for the transaction, such as cash reserve accounts or accounts
established as a form of overcollateralization, are separately maintained
(e.g., with respect to commingling of cash) as set forth in the transaction
agreements.
|
|
Applicable, but
no current assessment is required since transaction accounts are maintained
by and in the name of the Trustee.
|
|
|
|
|
|
|
|
1122(d)(2)(v)
|
|
Each custodial
account is maintained at a federally insured depository institution as set
forth in the transaction agreements. For purposes of this criterion,
“federally insured depository institution” with respect to a foreign
financial institution means a foreign financial institution that meets the
requirements of Rule 13k-1(b)(1) of the Exchange Act.
|
|
Applicable, but
no current assessment required; all “custodial accounts” are maintained by
the Trustee.
|
|
|
|
|
|
|
|
1122(d)(2)(vi)
|
|
Unissued checks
are safeguarded so as to prevent unauthorized access.
|
|
Not applicable;
all transfers made by wire transfer.
|
|
Regulation
AB
Reference
|
|
Servicing
Criteria
|
|
Applicable
Servicing Criteria
|
|
1122(d)(2)(vii)
|
|
Reconciliations
are prepared on a monthly basis for all asset-backed securities related bank
accounts, including custodial accounts and related bank clearing accounts.
These reconciliations are (A) mathematically accurate; (B) prepared
within 30 calendar days after the bank statement cutoff date, or such other
number of days specified in the transaction agreements; (C) reviewed and
approved by someone other than the person who prepared the reconciliation;
and (D) contain explanations for reconciling items. These reconciling
items are resolved within 90 calendar days of their original identification,
or such other number of days specified in the transaction agreements.
|
|
Applicable;
assessment below.
|
|
|
|
|
|
|
|
|
|
Investor Remittances and Reporting
|
|
|
|
|
|
|
|
|
|
1122(d)(3)(i)
|
|
Reports to
investors, including those to be filed with the LPSC, are maintained in
accordance with the transaction agreements and applicable LPSC requirements.
Specifically, such reports (A) are prepared in accordance with
timeframes and other terms set forth in the transaction agreements;
(B) provide information calculated in accordance with the terms
specified in the transaction agreements; (C) are filed with the LPSC as
required by its rules and regulations; and (D) agree with
investors’ or the trustee’s records as to the total unpaid principal balance
and number of pool assets serviced by the Servicer.
|
|
Applicable;
assessment below.
|
|
|
|
|
|
|
|
1122(d)(3)(ii)
|
|
Amounts due to
investors are allocated and remitted in accordance with timeframes,
distribution priority and other terms set forth in the transaction
agreements.
|
|
Applicable;
assessment below.
|
|
|
|
|
|
|
|
1122(d)(3)(iii)
|
|
Disbursements
made to an investor are posted within two business days to the Servicer’s
investor records, or such other number of days specified in the transaction
agreements.
|
|
Applicable
|
|
|
|
|
|
|
|
|
|
Regulation
AB
Reference
|
|
Servicing
Criteria
|
|
Applicable
Servicing Criteria
|
|
1122(d)(3)(iv)
|
|
Amounts remitted
to investors per the investor reports agree with cancelled checks, or other
form of payment, or custodial bank statements.
|
|
Applicable;
assessment below.
|
|
|
|
|
|
|
|
|
|
Pool Asset Administration
|
|
|
|
|
|
|
|
|
|
1122(d)(4)(i)
|
|
Collateral or security
on pool assets is maintained as required by the transaction agreements or
related pool asset documents.
|
|
Applicable;
assessment below.
|
|
|
|
|
|
|
|
1122(d)(4)(ii)
|
|
Pool assets and
related documents are safeguarded as required by the transaction agreements.
|
|
Applicable;
assessment below.
|
|
|
|
|
|
|
|
1122(d)(4)(iii)
|
|
Any additions,
removals or substitutions to the asset pool are made, reviewed and approved
in accordance with any conditions or requirements in the transaction
agreements.
|
|
Not applicable;
no removals or substitutions of Storm Recovery property are contemplated or
allowed under the transaction documents.
|
|
|
|
|
|
|
|
1122(d)(4)(iv)
|
|
Payments on pool
assets, including any payoffs, made in accordance with the related pool asset
documents are posted to the Servicer’s obligor records maintained no more
than two business days after receipt, or such other number of days specified
in the transaction agreements, and allocated to principal, interest or other
items (e.g., escrow) in accordance with the related pool asset documents.
|
|
Applicable;
assessment below.
|
|
|
|
|
|
|
|
1122(d)(4)(v)
|
|
The Servicer’s
records regarding the pool assets agree with the Servicer’s records with
respect to an obligor’s unpaid principal balance.
|
|
Not applicable;
because underlying obligation (Storm Recovery charge) is not an interest
bearing instrument
|
|
|
|
|
|
|
|
1122(d)(4)(vi)
|
|
Changes with
respect to the terms or status of an obligor’s pool asset (e.g., loan
modifications or re-agings) are made, reviewed and approved by authorized
personnel in accordance with the transaction agreements and related pool
asset documents.
|
|
Applicable;
assessment below
|
|
|
|
|
|
|
|
|
Regulation
AB
Reference
|
|
Servicing
Criteria
|
|
Applicable
Servicing Criteria
|
|
1122(d)(4)(vii)
|
|
Loss mitigation
or recovery actions (e.g., forbearance plans, modifications and deeds in lieu
of foreclosure, foreclosures and repossessions, as applicable) are initiated,
conducted and concluded in accordance with the timeframes or other
requirements established by the transaction agreements.
|
|
Applicable; assessment
below.
|
|
|
|
|
|
|
|
1122(d)(4)(viii)
|
|
Records
documenting collection efforts are maintained during the period pool asset is
delinquent in accordance with the transaction agreements. Such records are
maintained on at least a monthly basis, or such other period specified in the
transaction agreements, and describe the entity’s activities in monitoring
delinquent pool assets including, for example, phone calls, letters and
payment rescheduling plans in cases where delinquency is deemed temporary
(e.g., illness or unemployment).
|
|
Applicable, but
does not require assessment since no explicit documentation requirement with
respect to delinquent accounts are imposed under the transactional documents
due to availability of “true-up” mechanism.
|
|
|
|
|
|
|
|
1122(d)(4)(ix)
|
|
Adjustments to
interest rates or rates of return for pool assets with variable rates are
computed based on the related pool asset documents.
|
|
Not applicable;
Storm Recovery charges are not interest bearing instruments.
|
|
|
|
|
|
|
|
1122(d)(4)(x)
|
|
Regarding any
funds held in trust for an obligor (such as escrow accounts): (A) such
funds are analyzed, in accordance with the obligor’s pool asset documents, on
at least an annual basis, or such other period specified in the transaction
agreements; (B) interest on such funds is paid, or credited, to obligors
in accordance with applicable pool asset documents and state laws; and
(C) such funds are returned to the obligor within 30 calendar days of
full repayment of the related pool assets, or such other number of days
specified in the transaction agreements.
|
|
Not Applicable;
Servicer does not maintain deposit accounts for obligors.
|
|
|
|
|
|
|
|
|
Regulation
AB
Reference
|
|
Servicing
Criteria
|
|
Applicable
Servicing Criteria
|
|
1122(d)(4)(xi)
|
|
Payments made on
behalf of an obligor (such as tax or insurance payments) are made on or
before the related penalty or expiration dates, as indicated on the
appropriate bills or notices for such payments, provided that such support
has been received by the Servicer at least 30 calendar days prior to these
dates, or such other number of days specified in the transaction agreements.
|
|
Not applicable;
Servicer does not make payments on behalf of obligors.
|
|
|
|
|
|
|
|
1122(d)(4)(xii)
|
|
Any late payment
penalties in connection with any payment to be made on behalf of an obligor
are paid from the Servicer’s funds and not charged to the obligor, unless the
late payment was due to the obligor’s error or omission.
|
|
Not applicable;
Servicer cannot make advances of its own funds on behalf of customers under
the transaction documents.
|
|
|
|
|
|
|
|
1122(d)(4)(xiii)
|
|
Disbursements
made on behalf of an obligor are posted within two business days to the
obligor’s records maintained by the Servicer, or such other number of days
specified in the transaction agreements.
|
|
Not applicable;
Servicer cannot make advances of its own funds on behalf of customers to pay
principal or interest on the bonds.
|
|
|
|
|
|
|
|
1122(d)(4)(xiv)
|
|
Delinquencies,
charge-offs and uncollectible accounts are recognized and recorded in
accordance with the transaction agreements.
|
|
Applicable;
assessment below.
|
|
|
|
|
|
|
|
1122(d)(4)(xv)
|
|
Any external
enhancement or other support, identified in Item 1114(a)(1) through
(3) or Item 1115 of Regulation AB, is maintained as set forth in the
transaction agreements.
|
|
Not applicable;
no external enhancement is required under the transaction documents.
|
|
|
|
|
|
|
|
3. To
the best of the undersigned’s knowledge, based on such review, the Servicer is
in compliance in all material respects with the applicable servicing criteria
set forth above as of and for the period ending the end of the fiscal year
ended
,
and covered by
Cleco Power’s annual report on Form 10-K.
[
If not true, include description of any material instance of
noncompliance.
]
4. A registered independent public accounting firm has
issued to us an attestation report
in accordance with Section 1122(b) of
Regulation AB on its assessment of
compliance with the applicable servicing criteria as of and for the period
ending the end of the fiscal year ended ,
and covered by Cleco Power’s annual report on Form 10-K.
Executed as of this
day of
,
.
|
|
CLECO POWER LLC
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
Name:
|
|
|
|
Title:
|
EXHIBIT B-2
FORM OF CERTIFICATE OF COMPLIANCE
The undersigned
hereby certifies that he/she is the duly elected and acting [ ]
of Cleco Power LLC as servicer (the “
Servicer
”) under the Storm Recovery
Property Servicing Agreement dated as of March 6, 2008 (the “
Servicing
Agreement
”) between the Servicer and Cleco Katrina/Rita Hurricane Recovery
Funding, LLC (the “Issuer”) and further that:
1. A review of the activities of the
Servicer and of its performance under the Servicing Agreement during the twelve
months ended [ ],
[ ] has
been made under the supervision of the undersigned pursuant to Section 3.03 of
the Servicing Agreement; and
2. To the best of the undersigned’s
knowledge, based on such review, the Servicer has fulfilled all of its
obligations in all material respects under the Servicing Agreement throughout
the twelve months ended [ ],
[ ],
except as set forth on
Annex A
hereto.
Executed as of this
day of ,
|
|
Cleco Power LLC
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
ANNEX A
to Certificate of Compliance
LIST OF SERVICER DEFAULTS
The following Servicer Defaults, or events which with
the giving of notice, the lapse of time, or both, would become Servicer
Defaults known to the undersigned occurred during the year ended
[ ]:
1
ANNEX 1
TO
STORM RECOVERY PROPERTY SERVICING AGREEMENT
SERVICING PROCEDURES
1.
Definitions
.
a. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
such terms in the Storm Recovery Property Servicing Agreement (the “
Agreement
”).
b. Whenever used in this
Annex I
,
the following words and phrases shall have the following meanings:
“
Applicable MDMA
”
means with respect to each Customer, any meter data management agent providing
meter reading services for that Customer’s account.
“
Billed SRCs
” means
the amounts of Storm Recovery Charges billed by the Servicer, whether billed
directly to Customers by the Servicer or indirectly through Third-Party
Collectors.
“
Budget Billing Plan
”
means a payment plan made available by Cleco Power to Customers, who have had
service for an established period of time and meet established rating
standards, that uses averaged demand in calculating periodic obligations of the
Customer.
“
Days Sales Outstanding
”
means the average number of days Cleco Power’s monthly bills to Customers in
its service area (or, following the advent of customer choice, monthly bills to
Third-Party Collectors) remain outstanding during the calendar year immediately
preceding the calculation thereof pursuant to Section 4.01(b)(i) of
the Agreement. The initial Days Sales Outstanding shall be 20 days until
updated pursuant to Section 4.01(b)(i) of the Agreement.
2. Data
Acquisition.
a.
Installation and Maintenance of Meters
.
Except to the extent that a Third-Party Collector is responsible for such
services, the Servicer shall cause to be installed, replaced and maintained
meters in such places and in such condition as will enable the Servicer to
obtain usage measurements for each Customer at least once every Billing Period.
To the extent a Third-Party Collector is responsible for such services, but not
performing such services, the Servicer shall take all reasonably necessary
actions to obtain usage measurements for each Customer at least once every
Billing Period.
b.
Meter Reading
. At least once each
Billing Period, the Servicer shall obtain usage measurements for each Customer,
either directly or if applicable, from the Applicable MDMA;
provided
,
however
,
that the Servicer may estimate any Customer’s usage determined in accordance
with applicable LPSC Regulations.
c.
Cost of Metering
. The Issuer shall
not be obligated to pay any costs associated with the routine metering duties
set forth in this Section 2, including the costs of installing, replacing
and
1
maintaining meters, nor
shall the Issuer be entitled to any credit against the Servicing Fee for any
cost savings realized by the Servicer as a result of new metering and/or
billing technologies.
3. Usage and Bill Calculation.
The Servicer (a) shall
obtain a calculation of each Customer’s usage (which may be based on data
obtained from such Customer’s meter read or on usage estimates determined in
accordance with applicable LPSC Regulations) at least once each Billing Period;
and (b) shall either (i) determine therefrom each Customer’s
individual Storm Recovery Charges to be included on Bills issued by it to such
Customer or to the Third-Party Collector responsible for billing such Customer,
or (ii) where the Third-Party Collector is responsible for billing the
Customers, allow the Third-Party Collector, rather than the Servicer, to determine
such Customers’ individual Storm Recovery Charges to be included on such
Customers’ Bills based on billing factors provided by the Servicer, and, in
such case, the Servicer shall deliver to the Third-Party Collector such billing
factors as are necessary for the Third-Party Collector to calculate such
Customers’ respective Storm Recovery Charges as such charges may change from
time to time pursuant to the Storm Recovery Charge Adjustments.
4.
Billing
.
The Servicer shall implement
the Storm Recovery Charges as of the closing date and shall thereafter bill
each Customer or, with respect to Customers billed by a Third-Party Collector,
the Third-Party Collector, for the respective Customer’s outstanding current
and past due Storm Recovery Charges accruing through the date on which such
Storm Recovery Charges may no longer be billed under the Tariff, all in
accordance with the following:
a.
Frequency of Bills;
Billing Practices
. In accordance with the Servicer’s then-existing policies
and practices for its own charges, as such policies and practices may be
modified from time to time, the Servicer shall generate and issue a Bill to
each Customer, or, where a Third-Party Collector, if any, is responsible for
billing the Customers, to the Third-Party Collector, for such Customers’ Storm
Recovery Charges once every applicable Billing Period, at the same time, with
the same frequency and on the same Bill as that containing the Servicer’s own
charges to such Customers or Third-Party Collectors, as the case may be. In the event that the Servicer makes any
material modification to these practices, it shall notify the Issuer, the
Trustee, and the Rating Agencies prior to the effectiveness of any such
modification;
provided
,
however
, that the Servicer may not make
any modification that will materially adversely affect the Holders.
b.
Format
.
i. Each Bill issued by the
Servicer shall contain the charge corresponding to the respective Storm
Recovery Charges owed by such Customer for the applicable Billing Period. The
Storm Recovery Charges shall be separately identified as required by and in
accordance with the terms of the Financing Order and Tariff. The Servicer shall
provide, and unless prohibited by applicable LPSC Regulations, shall cause any
and each Third-Party Collector to provide, Customers with the annual notice
required by Section 4.01(f)(ii)(B) of the Servicing Agreement.
2
ii. If a Third-Party
Collector is responsible for billing the Customers, the Servicer shall deliver
to the Third-Party Collector itemized charges for such Customer setting forth
such Customers’ Storm Recovery Charges.
iii. The Servicer shall
conform to such requirements in respect of the format, structure and text of
Bills delivered to Customers and any Third-Party Collectors in accordance with,
if applicable, the Financing Order, Tariffs, other applicable tariffs and any
other LPSC Regulations and any agreement with the LPSC staff. To the extent
that Bill format, structure and text are not prescribed by applicable LPSC
Regulations or Tariffs, the Servicer shall, subject to
clauses (i)
and
(ii)
above, determine the format, structure and text of all Bills
in accordance with its reasonable business judgment, its Servicer policies and
practices with respect to its own charges and prevailing industry standards.
c.
Delivery
. The Servicer shall deliver
all Bills issued by it (i) by United States mail in such class or classes
as are consistent with the policies and practices followed by the Servicer with
respect to its own charges to its customers or (ii) by any other means,
whether electronic or otherwise, that the Servicer may from time to time use to
present its own charges to its customers. If a Third-Party Collector is
responsible for billing the Customers, the Servicer shall deliver all Bills to
the Third-Party Collector by such means as are prescribed by applicable LPSC
Regulations or tariffs or the Servicer’s Policies and Practices, or if not
prescribed by applicable LPSC Regulations or tariffs or the Servicer’s Policies
and Practices, by such means as are mutually agreed upon by the Servicer and
the Third-Party Collector and are consistent with LPSC Regulations and the
Servicing Standard. The Servicer or any and each Third-Party Collector, as applicable,
shall pay from its own funds all costs of issuance and delivery of all Bills,
including but not limited to printing and postage costs as the same may
increase or decrease from time to time.
5. Customer Service Functions.
The Servicer shall handle all Customer inquiries and other Customer
service matters according to the same procedures it uses to service Customers
with respect to its own charges.
6. Collections; Payment Processing; Remittance.
a.
Collection Efforts, Policies, Procedures
.
i. The Servicer shall use
reasonable efforts to collect all Billed SRCs from Customers and any
Third-Party Collectors as and when the same become due and shall follow such
collection procedures as it follows with respect to comparable assets that it
services for itself or others, including with respect to the following:
A. The Servicer shall
prepare and deliver overdue notices to Customers and any Third-Party Collectors
in accordance with applicable LPSC Regulations and Servicer Policies and
Practices..
B. The Servicer shall apply
late payment charges to outstanding Customer and Third-Party Collector balances
in accordance with applicable LPSC Regulations and as required by the Financing
Order.
3
C. In circumstances where
the Servicer is allowed to bill Customers directly, the Servicer shall deliver
verbal and written final notices of delinquency and possible disconnection in
accordance with applicable LPSC Regulations and Servicer Policies and
Practices.
D. The Servicer shall adhere
to and carry out disconnection policies and termination of any future
Third-Party Collector billing in accordance with the Financing Orders,
applicable LPSC Regulations and Servicer Policies and Practices.
E. The Servicer may employ
the assistance of collection agents to collect any past-due Storm Recovery
Charges in accordance with Servicer Policies and Practices, applicable LPSC
Regulations and applicable tariffs.
F. The Servicer shall apply
Customer and any Third-Party Collector deposits to the payment of delinquent
accounts in accordance with applicable LPSC Regulations and Servicer Policies
and Practices and according to the priorities set forth in
Sections 6(b)(ii), (iii), (iv) and (v) of this
Annex I
.
ii. The Servicer shall not
waive any late payment charge or any other fee or charge relating to delinquent
payments, if any, or waive, vary or modify any terms of payment of any amounts
payable by a Customer, in each case unless such waiver or action: (A) would
be in accordance with the Servicer’s customary practices or those of any
successor Servicer with respect to comparable assets that it services for
itself and for others; (B) would not materially adversely affect the
rights of the Holders; and (C) would comply with applicable law;
provided
,
however
, that notwithstanding anything in the Agreement or this
Annex I
to the contrary, the Servicer is authorized to write off any Billed SRCs, in
accordance with Servicer Policies and Practices, that have remained outstanding
for one hundred eighty (180) days or more.
iii. The Servicer shall
accept payment from Customers in respect of Billed SRCs in such forms and
methods and at such times and places as it accepts for payment of its own
charges. The Servicer shall accept payment from any Third-Party Collectors in
respect of Billed SRCs in such forms and methods and at such times and places
as the Servicer and any and each Third-Party Collector shall mutually agree in
accordance with, if applicable, the Financing Order, Tariff, other applicable
tariffs, other LPSC Regulations and Servicer Policies and Practices.
b.
Payment Processing; Allocation; Priority of Payments
.
i. The Servicer shall post
all payments received to Customer accounts as promptly as practicable, and, in
any event, substantially all payments shall be posted no later than three (3) Business
Days after receipt.
ii.
If any Customer does not pay the full amount
of any Bill to the Servicer, the amount paid by the Customer will be applied to
all charges on the Bill, including without limitation electric service charges
and all Storm Recovery Charges, based, as to a Bill with charges covering more
than one month, on the chronological order of billing, and, as to those charges
with the same billing date, pro-rata. If there is more than one owner of Storm
Recovery Property, or if the sole or any owner of Storm Recovery Property (or
pledgee or pledgees) has issued multiple series of storm recovery bonds, such
partial collections representing Storm Recovery Charges shall be allocated
among such owners (or pledgee or pledgees), and among such series
4
of storm recovery bonds,
pro-rata based upon the amounts billed with respect to each series of storm
recovery bonds, provided that late fees and charges may be allocated to the
Servicer as provided in the tariff.
iii. When and if the service
area becomes subject to retail competition, the Servicer shall apply payments
received to each Customer’s or any and each Third-Party Collector’s account in
proportion to the charges contained on the outstanding Bill to such Customer or
Third-Party Collector. Any amounts collected by the Servicer that represent
partial payments of the total Bill to a Customer or any Third-Party Collector
shall be allocated as follows: (A) first to amounts owed to the Issuer,
Cleco Power and any other Affiliate of Cleco Power which is owed “Storm
Recovery Charges” as defined in the Securitization Law (excluding any late fees
and interest charges), regardless of age, pro rata in proportion to their
respective percentages of the total amount of their combined outstanding
charges on such Bill; then (B) all late charges shall be allocated to the
Servicer;
provided
that penalty payments owed on late payments of Storm
Recovery Charges shall be allocated to the Issuer in accordance with the terms
of the Tariffs. If more than one series of Storm Recovery Bonds is outstanding,
the Servicer shall allocate amounts owed to the Issuer ratably based on the
total amount of Storm Recovery Charges on such bill which were billed in
respect of each such series. It is understood that such allocations may be made
on a delayed basis in accordance with the reconciliations described in Section 6(e) of
this
Annex I
.
iv. The Servicer shall hold
all over-payments for the benefit of the Issuer and Cleco Power and shall apply
such funds to future Bill charges in accordance with
clauses (ii)
and
(iii)
(as applicable) as such charges become due.
v. For Customers on a Budget
Billing Plan, the Servicer shall treat SRC Collections received from such
Customers as if such Customers had been billed for their respective Storm
Recovery Charges in the absence of the Budget Billing Plan; partial payment of
a Budget Billing Plan payment shall be allocated according to
clause (ii) or
(iii)
(as applicable) and overpayment of a Budget Billing Plan payment
shall be allocated according to
clause (iv)
.
c.
Accounts; Records.
The Servicer shall maintain
accounts and records as to the Storm Recovery Property accurately and in
accordance with its standard accounting procedures and in sufficient detail (i) to
permit reconciliation between payments or recoveries with respect to the Storm
Recovery Property and the amounts from time to time remitted to the Collection
Accounts in respect of the Storm Recovery Property and (ii) to permit the
SRC Collections held by the Servicer to be accounted for separately from the
funds with which they may be commingled, so that the dollar amounts of SRC
Collections commingled with the Servicer’s funds may be properly identified and
traced.
d.
Investment of SRC Collections Received
.
Prior to each Daily
Remittance, the Servicer may invest SRC Collections received at its own risk
and (except as required by applicable LPSC Regulations) for its own benefit. So
long as the Servicer
complies
with its obligations under Section 6(c) of
this
Annex I
, neither such
5
investments nor such funds
shall be required to be segregated from the other investment and funds of the
Servicer.
e.
Calculation of Daily Remittance
.
i. For purposes of
calculating the Daily Remittance, (i) all Billed SRCs shall be estimated
to be collected the same number of days after billing as is equal to the Days
Sales Outstanding then in effect (or on the next Business Day) and (ii) the
Servicer will, on each Business Day, remit to the Trustee for deposit in the
applicable Collection Account an amount equal to the product of the applicable
Billed SRCs multiplied by one hundred percent less the system wide
write-off percentage (or if available in the ordinary course of business, gross
write-off percentage for each revenue class) used by the Servicer to calculate
the most recent Periodic Billing Requirement. Such product shall constitute the
amount of estimated SRC Collections for such Business Day. As part of each
Storm Recovery Charge Adjustment, pursuant to Section 4.01 of the
Agreement the Servicer shall calculate the amount of actual SRC Collections for
all completed Collection Periods during the Reconciliation Period as compared
to the estimated SRC Collections forwarded to the applicable Collection Account
in respect of such Reconciliation Period. If the actual SRC Collections exceed
the estimated SRC Collections remitted to the Trustee for the period, the
Servicer shall forward the excess to the Trustee for deposit into the
Collection Account on the next Payment Date.
If the estimated SRC Collection remitted to the Trustee for the period
are greater than the actual SRC Collections for the period, the Excess
Remittance shall be refunded to the Servicer at the next Payment Date provided
however, that no Excess Remittance shall be withdrawn from the applicable
Collection Account if such withdrawal would cause the amounts on deposit in the
applicable General Subaccount or the applicable Excess Funds Subaccount to be
insufficient for the payment of the next installment of interest or principal
due at maturity on the next Payment Date or upon acceleration on or before the
next Payment Date on the Storm Recovery Bonds and provided further that any
amount not refunded to the Servicer as a result of the preceding proviso, shall
be added to the Periodic Payment Requirement for the ensuing period and paid to
the Servicer on the first Payment Date at which such refund can be made without
violating the preceding proviso.
ii. On or before the
beginning of the first billing cycle in August and February of each year (or,
in the case of any subsequent series, the corresponding date relating to the
Storm Recovery Charge Adjustment for such series) in accordance with
Section 4.01(b)
of
the Agreement, the Servicer shall, in a timely manner so as to perform all
required calculations under such
Section 4.01(b)
, update the Days
Sales Outstanding and the system-wide write-off percentage (or if available in
the ordinary course of business, gross write-off percentage for each revenue
class) in order to be able to calculate the Periodic Billing Requirement for
the next Storm Recovery Charge Adjustment and to calculate any change in the
Daily Remittances for the next Calculation Period.
iii. The Servicer and the
Issuer acknowledge that, as contemplated in
Section 8.01(b)
of
the Agreement, the Servicer may make certain changes to its current
computerized customer information system, which changes, when functional, would
affect the Servicer’s method of calculating the SRC Collections estimated to
have been received by the Servicer during each Collection Period as set forth
in this
Annex I
. Should these changes to the computerized customer
information system become functional during the term of the Agreement, the
Servicer
6
and the Issuer agree that
they shall review the procedures used to calculate the SRC Collections estimated
to have been received in light of the capabilities of such new system and shall
amend this
Annex I
in writing to make such modifications and/or
substitutions to such procedures as may be appropriate in the interests of
efficiency, accuracy, cost and/or system capabilities; provided, however, that
the Servicer may not make any modification or substitution that will materially
adversely affect the Holders. As soon as practicable, and in no event later
than sixty (60) Business Days after the date on which all Customer accounts are
being billed under such new system, the Servicer shall notify the Issuer, the
Trustee and the Rating Agencies of the same.
iv. All calculations of
collections, each update of the Days Sales Outstanding, the system-wide write-off
percentage (or if available in the ordinary course of business, gross write-off
percentage for each revenue class) and any changes in procedures used to
calculate the estimated SRC Collections pursuant to this Section 6(e) shall
be made in good faith, and in the case of any update pursuant to
clause (ii)
above
or any change in procedures pursuant to
clause (iii)
above, in
a manner reasonably intended to provide estimates and calculations that are at
least as accurate as those that would be provided on the closing date utilizing
the initial procedures.
f.
Remittances.
i. The Issuer shall cause to
be established the Collection Accounts in the name of the Trustee in accordance
with the Indenture.
ii. The Servicer shall make
remittances to the Collection Accounts in accordance with Section 6.13 of
the Agreement.
iii. In the event of any
change of account or change of institution affecting any Collection Account,
the Issuer shall provide written notice thereof to the Servicer not later than
five (5) Business Days from the effective date of such change.
7
APPENDIX A
DEFINITIONS
The definitions contained in this Appendix A are
applicable to the singular as well as the plural forms of such terms.
“
Adjustment Date
” means the date other than an
Interim Adjustment Date on which any Storm Recovery Charge Adjustment (other
than an interim (non-semi-annual) Storm Recovery Charge Adjustment) and/or any adjustment to allocation of storm recovery charges
among customer classes, as applicable, becomes effective. The first Adjustment Date will be on or about
September 1, 2008, and all subsequent Adjustment Dates shall be on or about the
same day of the sixth month after each prior adjustment date.
“
Administration Agreement
” means the
administration agreement dated as of March 6, 2008, between Cleco Power,
as Administrator, and the Issuer, as the same may be amended and supplemented
from time to time.
“
Administrator
” means Cleco Power as
administrator under the Administration Agreement and each successor to or
assignee of Cleco Power in the same capacity.
“
Affiliate
” means, with respect to any
specified Person, any other Person controlling or controlled by or under common
control with such specified Person. For the purposes of this definition,
control, when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise; and
the terms controlling and controlled have meanings correlative to the
foregoing.
“
Annual Accountant’s Report
” has the meaning
assigned to that term in Section 3.04 of the Servicing Agreement.
“
Articles of Organization
” means the articles
of organization of the Issuer that was filed with the Louisiana Secretary of
State on October 30, 2007, as the same may be amended and restated from
time to time.
“
Basic Documents
” means the Issuer LLC
Agreement, the Articles of Organization, the Sale Agreement, the Servicing
Agreement, the Administration Agreement, the Indenture, the Supplement, the
Underwriting Agreement relating to the Storm Recovery Bonds and the Bill of
Sale.
“
Bill
” means each of the regular monthly bills,
summary bills, opening bills and closing bills issued to Customers or
Third-Party Collectors by Cleco Power on its own behalf and in its capacity as
Servicer.
“
Bill of Sale
” has the meaning assigned to that
term in the Sale Agreement.
“
Billing Period
” means the period of
approximately thirty (30) days for which the Servicer renders Bills.
1
“
Book-Entry Storm Recovery Bonds
” means
beneficial interests in the Storm Recovery Bonds, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in Section 2.11
of the Indenture.
“
Business Day
” means any day other than a
Saturday or Sunday or a day on which banking institutions in the City of New
Orleans, Louisiana, Chicago, Illinois, St. Paul, Minnesota or in the City of
New York, New York, are required or authorized by law or executive order to
remain closed.
“
Calculation Date
” means, with respect to the
Storm Recovery Bonds, the date on which the calculations and filings set forth
in Section 4.01(b) will be made for each Storm Recovery Charge Adjustment. The first Calculation Date will be no later
than August 15, 2008.
“
Capital Subaccount
” has the meaning specified
in Section 8.02(a) of the Indenture.
“
Cleco Power
” means Cleco Power LLC, a
Louisiana limited liability company, or its successor.
“
Clearing Agency
” means an organization
registered as a “clearing agency” pursuant to Section 17A of the Exchange
Act.
“
Clearing Agency Participant
” means a broker,
dealer, bank, other financial institution or other Person for whom from time to
time a Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
“
Collection Account
” has the meaning specified
in Section 8.02(a) of the Indenture.
“
Collection Period
” means the period from and
including the first day of a calendar month to but excluding the first day of
the next calendar month.
“
Corporate Trust Office
” has the meaning
specified in Appendix A to the Indenture.
“
Customer Class
” means each of the Storm Recovery
Charge classes specified in the Rider SRCA Form of Storm Restoration Cost
Adjustment Calculation Appendix B-1 to the Financing Order.
“
Customers
” means
any existing or future LPSC-jurisdictional customer who remain attached to
Cleco Power’s (or its successors) electric transmission or distribution lines,
and who, via such lines, receive any type of service from Cleco Power (or its
successors) under rate schedules or special contracts approved by the Louisiana
commission.
“
Daily Remittance
”
has the meaning specified in Section 6.12.
“
Default
” means any occurrence that is, or with
notice or the lapse of time or both would become, an Event of Default.
“
Event of Default
” has the meaning specified in
Section 5.01 of the Indenture.
2
“
Excess Funds Subaccount
” has the meaning
specified in Section 8.02 of the Indenture.
“
Excess Remittance
” means the amount, if any,
calculated for a particular Reconciliation Period, by which all estimated SRC
Collections remitted to the Collection Account during such Reconciliation
Period exceed actual SRC Collections received by the Servicer during such
Reconciliation Period.
“
Exchange Act
” means the Securities Exchange
Act of 1934, as amended.
“
Expected Amortization Schedule
” means, with
respect to the Storm Recovery Bonds, or any Tranche thereof, the expected
amortization schedule for principal thereof, as specified in the Supplement.
“
Financing Order
” means the Financing Order
issued by the LPSC on September 17, 2007 in Docket No. U-29157
pursuant to the Securitization Act.
“
Fitch
” means Fitch, Inc.; or any
successor thereto.
“
Formation Documents
” means, collectively, the
Articles of Organization, the Issuer LLC Agreement and any other document
pursuant to which the Issuer is formed or governed, as the same may be amended
and supplemented from time to time.
“
General Subaccount
” has the meaning specified
in Section 8.02 of the Indenture.
“
Governmental Authority
” means any court or any
federal or state regulatory body, administrative agency or governmental
instrumentality.
“
Holder” or “Storm Recovery Bondholder
” means
the Person in whose name a Storm Recovery Bond of any Tranche is registered on
the Storm Recovery Bond Register.
“
Indenture
” means the indenture, dated as of March 6,
2008, between the Issuer and the Trustee and the Supplement (including the
forms and terms of the Storm Recovery Bonds established thereunder), as the
same may be amended and supplemented with respect to the Storm Recovery Bonds,
from time to time.
“
Independent
” means, when used with respect to
any specified Person, that the Person:
(a)
is
in fact independent of the Issuer, any other obligor upon the Storm Recovery
Bonds, the Servicer and any Affiliate of any of the foregoing Persons,
(b)
does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Servicer or any Affiliate
of any of the foregoing Persons and
(c)
is
not connected with the Issuer, any such other obligor, the Servicer or any
Affiliate of any of the foregoing Persons as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
3
“
Insolvency Event
” means, with respect to a
specified Person,
(a)
the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in
an involuntary case under any applicable federal or State bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person’s affairs, and such
decree or order shall remain unstayed and in effect for a period of 90
consecutive days, or
(b)
the
commencement by such Person of a voluntary case under any applicable federal or
State bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
“
Interim Adjustment Date
” means the effective
date of any interim (non-semi-annual) Storm Recovery Charge Adjustment.
“
Issuance Advice Letter
” means the issuance
advice letter submitted to the LPSC by Cleco Power pursuant to the Financing
Order in connection with the issuance of the Storm Recovery Bonds.
“
Issuance Date
” means the date on which the
Storm Recovery Bonds, are to be originally issued in accordance with the
Indenture and the Supplement.
“
Issuer
” means Cleco Katrina/Rita Hurricane
Recovery Funding LLC, a Louisiana limited liability company, or any successor
thereto pursuant to the Indenture.
“
Issuer Annex
” means Annex 1 of the Servicing
Agreement.
“
Issuer LLC Agreement
” means the Limited
Liability Company Operating Agreement between the Issuer and Cleco Power, as
sole member, effective as of October 29, 2007, as the same may be amended
or supplemented from time to time.
“
Lien
” means a security interest, lien, charge,
pledge, equity or encumbrance of any kind.
“
Losses
” means collectively, any and all
liabilities, obligations, losses, damages, payments, costs or expenses of any
kind whatsoever.
“
Louisiana UCC Filing Officer
” means the
recorder of mortgages of Orleans Parish (or any successor by law) or the clerk
of the court of any other parish in Louisiana.
“
LPSC
” means the Louisiana Public Service
Commission or any successor entity thereto.
4
“
LPSC Regulations
” means any regulations,
rules, orders or directives promulgated, issued or adopted by the LPSC.
“
Majority Holders
” means the Holders of a
majority of the Outstanding Amount of the Storm Recovery Bonds.
“
Moody’s
” means Moody’s Investors Service Inc.,
or any successor thereto.
“
Officers’ Certificate
” means a certificate
signed, in the case of Cleco Power, by:
(a)
any
manager, the chairman of the board, the chief executive officer, the president,
the vice chairman or any executive vice president, senior vice president or
vice president; and
(b)
the
treasurer, any assistant treasurer, the secretary or any assistant secretary.
“
Operating Expenses
” means, with respect to the
Issuer, all fees, costs and expenses owed by the Issuer with respect to the
Storm Recovery Bonds, including all amounts owed by the Issuer to the Trustee,
the Servicing Fee, the Administration Fee, the costs and expenses incurred by
the Seller in connection with the performance of the Seller’s obligations under
Section 4.07 of the Sale Agreement, the fees relating to the Storm
Recovery Bonds, payable by the Issuer to the independent manager of the Issuer,
administrative expenses, including outside legal and accounting fees, and
ratings maintenance fees and all other costs and expenses recoverable by the
Issuer under the terms of the Financing Order.
“
Opinion of Counsel
” means one or more written
opinions of counsel who may be an employee of or counsel to the Servicer or the
Issuer, which counsel shall be reasonably acceptable to the Trustee, the LPSC,
the Issuer or the Rating Agencies, as applicable, and which shall be in form
reasonably satisfactory to the Trustee, if applicable.
“
Outstanding
” with respect to Storm Recovery
Bonds means, as of the date of determination, all Storm Recovery Bonds
theretofore authenticated and delivered under the Indenture except:
(a)
Storm
Recovery Bonds theretofore canceled by the Storm Recovery Bond Registrar or
delivered to the Storm Recovery Bond Registrar for cancellation;
(b)
Storm
Recovery Bonds or portions thereof the payment for which money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent in
trust for the Holders of such Storm Recovery Bonds;
provided
,
however
,
that if such Storm Recovery Bonds are to be redeemed, notice of such redemption
has been duly given pursuant to the Indenture or provision therefor,
satisfactory to the Trustee; and
(c)
Storm
Recovery Bonds in exchange for or in lieu of other Storm Recovery Bonds which
have been authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Trustee is presented that any such Storm Recovery Bonds are
held by a bona fide purchaser;
5
provided
that in determining whether
the Holders of the requisite Outstanding Amount of the Storm Recovery Bonds or
any Tranche thereof have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Storm Recovery
Bonds owned by the Issuer, any other obligor upon the Storm Recovery Bonds,
Cleco Power or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be fully protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Storm
Recovery Bonds that a Responsible Officer of the Trustee knows to be so owned
shall be so disregarded. Storm Recovery
Bonds so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee’s right so to act with respect to such Storm Recovery Bonds and that
the pledgee is not the Issuer, any other obligor upon the Storm Recovery Bonds,
the Servicer or any Affiliate of any of the foregoing Persons.
“
Outstanding Amount
” means the aggregate
principal amount of all Outstanding Storm Recovery Bonds, or, if the context
requires, all Outstanding Storm Recovery Bonds of a Tranche of the Storm
Recovery Bonds, Outstanding at the date of determination.
“
Paying Agent
” means the entity so designated
in Section 3.03 of the Indenture or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 of the
Indenture and is authorized by the Issuer to make the payments of Principal of
or premium, if any, or Interest on the Storm Recovery Bonds on behalf of the
Issuer.
“
Payment Date
” means, with respect to the Storm
Recovery Bonds, or, if applicable, each Tranche thereof, the date or dates
specified as Payment Dates for such Tranche in the Supplement, provided that if
any such date is not a Business Day, the Payment Date shall be the Business Day
immediately succeeding such date.
“
Periodic Billing Requirement
” means the aggregate dollar amount of Storm Recovery Charges that must
be billed during a given period (i.e., semi-annually, or such other applicable
period) so that the projected SRC Collections will be sufficient to meet the entire
aggregate Periodic Payment Requirement for that period, given: (i) forecast
usage data for the period; (ii) forecast uncollectibles for the period;
and (iii) forecast lags in collection of billed Storm Recovery Charges for
the period. In the Storm Recovery Charge Adjustment process, the over or under
collection from any period will be added to or subtracted from, as the case may
be, the Periodic Billing Requirement for the upcoming period.
“
Periodic Payment
Requirement
” means the required periodic payment for a given period (i.e.,
semi-annually, or such other applicable period) due under (or otherwise payable
with respect to) the Storm Recovery Bonds. Each periodic payment requirement
includes: (a) the principal amortization of the Storm Recovery Bonds in
accordance with the Expected Amortization Schedule (including deficiencies of
previously scheduled principal for any reason); (b) periodic interest on
the Storm Recovery Bonds (including any accrued and unpaid interest); (c) Operating
Expenses and (d)
Issuer’s return on the capital investment made by
Cleco Power in the Issuer, to the extent that earnings on investment in the
Capital Subaccount are less than the return permitted under the Financing Order
.
6
“
Person
” means any individual, corporation,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), business trust, limited liability company,
unincorporated organization or government or any agency or political
subdivision thereof.
“
Proceeding
” means any suit in equity, action
at law or other judicial or administrative proceeding.
“
Projected Storm Recovery Bond Balance
” means,
as of any date, the anticipated Outstanding Amount of Storm Recovery Bonds,
after giving effect to payment of the sum of the payment amounts provided for
in the Expected Amortization Schedules for the Storm Recovery Bonds, to be paid
on or before such date.
“
Rating Agency
” means any rating agency rating
the Storm Recovery Bonds, at the time of issuance at the request of the Issuer,
which initially shall be Moody’s, Fitch and Standard & Poor’s. If no
such organization or successor is any longer in existence, “Rating Agency”
shall be a nationally recognized statistical rating organization or other
comparable Person designated by the Issuer, written notice of which designation
shall be given to the Trustee, the LPSC and the Servicer.
“
Rating Agency Condition
” means, with respect
to any action, the notification in writing to each Rating Agency of such
action, and confirmation from S&P to the Trustee and the Issuer that such
action will not result in a reduction or withdrawal of the then current rating
by such Rating Agency of the Storm Recovery Bonds.
“
Reconciliation Period
” means, with respect to
any Collection Period, the six month period ending one month prior to each
Adjustment Date.
“
Regulation AB
” means the rules of the SEC
promulgated under Subpart 229.1100 – Asset Backed Securities (Regulation AB),
17 C.F.R. §§229.1100-229.1123, as such may be amended from time to time
.
“
Released Parties
” has the meaning specified in
Section 6.02(f) of the Servicing Agreement.
“
Requirement of Law
” means any foreign,
federal, state or local laws, statutes, regulations, rules, codes or ordinances
enacted, adopted, issued or promulgated by any Governmental Authority or common
law.
“
Responsible Officer
” means, with respect to
the Trustee, any officer within the Corporate Trust Office of the Trustee,
including any Vice President, Director, Managing Officer, associate, Assistant
Vice President, Secretary, Assistant Secretary, or any other officer of the
Trustee having direct responsibility for the administration of this Indenture
and also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer’s knowledge of and familiarity with
the particular subject.
7
“
Sale Agreement
” means the Storm Recovery
Property Sale Agreement dated as of March 6, 2008 relating to the Storm
Recovery Property, between the Seller and the Issuer, as the same may be
amended and supplemented from time to time.
“
Sale Date
” means the date on which the Seller
sells, transfers, assigns and conveys the Storm Recovery Property to which this
Agreement relates to the Issuer.
“
SEC
” means the U.S. Securities and Exchange
Commission.
“
Securitization Act
”
means Act No. 64 of the Louisiana
Regular Session of 2006, the “Louisiana Electric Utility Storm Recovery
Securitization Act,” codified at La. R.S. 45:1226-1236.
“
Seller
” means Cleco Power, or its successor,
in its capacity as seller of the Storm Recovery Property to the Issuer pursuant
to the Sale Agreement.
“
Semi-annual Servicer’s Certificate
” means the
statement prepared by the Servicer and delivered to the Trustee with respect to
the Storm Recovery Bonds, on or prior to each Payment Date therefor, the form
of which is attached to the Indenture as Schedule 1.
“
Series Trust Estate
” has the meaning
specified in the Supplement.
“
Servicer
” means Cleco Power, as the servicer
of the Storm Recovery Property, and each successor to or assignee of Cleco
Power (in the same capacity) pursuant to Section 6.03, 6.04, or 7.04 of
the Servicing Agreement.
“
Servicer Default
” means the occurrence and
continuation of one of the events specified in Section 7.01 of the
Servicing Agreement.
“
Servicer Policies and Practices
” means, with
respect to the Servicer’s duties under this Agreement, including Annex I,
the policies and practices of the Servicer applicable to such duties that the
Servicer follows with respect to comparable assets that it services for itself
and, if applicable, others.
“
Servicing Agreement
” or this “
Agreement
”
means the Storm Recovery Property Servicing Agreement dated as of March 6,
2008, between the Issuer and the Servicer, and acknowledged by the Trustee,
relating to the Storm Recovery Property as the same may be amended and
supplemented from time to time.
“
Servicing Fee
” means the fee payable by the
Issuer to the Servicer on each Payment Date with respect to the Storm Recovery
Bonds, in an amount specified in Section 6.07 of the Servicing Agreement.
“
Servicing Standard
” means the obligation of
the Servicer to calculate, apply, remit and reconcile proceeds of the Storm Recovery
Property, including SRC Collections, for the benefit of the Issuer and the
Holders (i) with the same degree of care and diligence as the Servicer
applies with respect to payments owed to it for its own account, (ii) in
accordance with all applicable
8
procedures and requirements established by the LPSC
for collection of electric utility tariffs and (iii) in accordance with
the other terms of the Servicing Agreement.
“
Sponsor
” means Cleco Power in its capacity as
the Person who organizes and initiates an asset-backed securities transaction
by selling or transferring assets, either directly or indirectly, to the
Issuer.
“
SRC Collections
” means amounts constituting
good funds collected by Servicer from any Person in respect of Storm Recovery
Charges and Storm Recovery Property.
“
Standard & Poor’s” or “S&P
” means
Standard & Poor’s, a division of The McGraw-Hill Companies, or any
successor thereto.
“
State
” means any one of the 50 states of the
United States of America or the District of Columbia.
“
Storm Recovery Bond
” means any of the Senior
Secured Storm Recovery Bonds issued by the Issuer pursuant to the Indenture.
“
Storm Recovery Bond Balance
” means, as of any
date, the aggregate Outstanding Amount of Storm Recovery Bonds on such date.
“
Storm Recovery Bond Register
” has the meaning
specified in Section 2.05 of the Indenture.
“
Storm Recovery Bond Registrar
” means the
Trustee, in its capacity as keeper of the Storm Recovery Bond Register, or any
successor to the Trustee in such capacity.
“
Storm Recovery Charge Adjustment
” means each
semi-annual adjustment to Storm Recovery Charges related to the Storm Recovery
Property made in accordance with Section 4.01 of the Servicing Agreement
and the Issuer Annex or in connection with the redemption or refunding by the
Issuer of Storm Recovery Bonds.
“
Storm Recovery Charges
” means the
nonbypassable amounts to be charged for the use or availability of electric
services, approved by the LPSC in the Financing Order to recover Financing
Costs, that shall be collected by Cleco Power, its successors, assignees or
other collection agents as provided for in the Financing Order.
“
Storm Recovery Property
” means all of Seller’s
rights and interest under the Financing Order (including, without limitation,
rights to impose, collect and receive the “storm recovery charges” (as defined
in the Securitization Act) approved in such Financing Order) issued by the
Louisiana Commission on September 17, 2007 (Docket No. U-29157-A) pursuant
to the Securitization Act, except the rights of Seller to earn and receive a
rate of return on its invested capital in the Issuer, to receive administration
and servicer fees, to withdraw funds from its restricted storm recovery reserve
funded by the proceeds from the sale of the Storm Recovery Property, or to use
the Seller’s remaining portion of those proceeds.
9
“
Storm Recovery Property Documentation
” means
all documents relating to the Storm Recovery Property, including copies of the
Financing Order and all documents filed with the LPSC in connection with any
Storm Recovery Charge Adjustment.
“
Successor Servicer
” means (i) a successor
to Cleco Power pursuant to Section 6.03 of the Servicing Agreement or (ii) a
successor Servicer appointed by the Trustee pursuant to Section 7.04 of
the Servicing Agreement which in each case will succeed to all the rights and
duties of the Servicer under the Servicing Agreement.
“
Supplement
” means the First Supplemental
Indenture dated of even date herewith to the Indenture that authorizes the
Storm Recovery Bonds.
“
Tariff
” means Rider SRCA and Rider SCSA filed
by the Seller pursuant to ordering paragraph 10 of the Financing Order.
“
Termination Notice
” has the meaning specified
in Section 7.01 of the Servicing Agreement.
“
Third-Party Collector
” means each third party,
which, pursuant to any tariffs filed with the LPSC, or any agreement with Cleco
Power, is obligated to bill, collect or remit Storm Recovery Charges.
“
Tranche
” means any one of the tranches of
Storm Recovery Bonds, as specified in the Supplement.
“
Trustee
” means U.S. Bank National Association,
as trustee, or its successor or any successor Trustee under the Indenture.
“
UCC
” means, unless the context otherwise
requires, the Uniform Commercial Code, as in effect in the relevant
jurisdiction, as amended from time to time.
“
Underwriting Agreement
” has the meaning
specified in the Indenture.
10
Exhibit 99.1
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New
Orleans, LA
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Jackson,
MS
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Baton
Rouge, LA
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Canal Place
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Tupelo,
MS
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365 Canal Street
·
Suite 2000
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Houston,
TX
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New Orleans,
Louisiana 70130-6534
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Gulfport,
MS
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(504) 566-1311
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London,
England
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Fax (504) 568-9130
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Tampa,
FL
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www.phelpsdunbar.com
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March 6, 2008
To the Parties Listed on
Schedule 1
Attached Hereto
Re:
Cleco
Katrina/Rita Hurricane Recovery Funding LLC:
|
|
Constitutional
Issues
|
12922-152
|
Ladies and Gentlemen:
We have acted as counsel to
Cleco Katrina/Rita Hurricane Recovery Funding LLC, a Louisiana limited
liability company (the “
Issuer
”), and Cleco Power LLC, a Louisiana
limited liability company (the “
Utility
”), in connection with the
following (collectively the “
Transaction
”):
(i) The issuance of Order No. U-29157-B
(the “
Financing Order
”) approved by the Louisiana Public Service
Commission (the “
LPSC
”) on September 12, 2007, and issued on September 17,
2007, pursuant to the Louisiana Electric Utility Storm Recovery Securitization
Act, Act No. 64 of 2006, La. R.S. 45:1226-1236 (the “
Securitization Act
”)
and other constitutional and statutory authority;
(ii) the sale of the rights and
interests of the Utility in and to certain storm recovery property as defined
in and created under the Securitization Act and the Financing Order to the
Issuer pursuant to that certain Storm Recovery Property Sale Agreement, dated
as of March 6, 2008 between the Utility and the Issuer (the “
Sale
Agreement
”); and
(iii) the concurrent issuance of debt
securities (the “
Bonds
”) by the Issuer secured by (among other things) a
security interest in the storm recovery property pursuant to that certain
Indenture dated as of March 6, 2008, as supplemented by a First
Supplemental Indenture dated as of March 6, 2008 (collectively, the “
Indenture
”),
between the Issuer and U.S. Bank National Association, as trustee acting on
behalf of the holders of the Bonds (the “
Bondholders
”).
Capitalized terms that are
defined in the Agreement but are not defined herein shall have the meanings
ascribed to them in the Indenture. The
Indenture, the Sale Agreement,
the Servicing Agreement and the
Administration Agreement (as defined in the Indenture) are referred to herein
collectively as the “
Transaction Documents
.”
Opinions
Requested
You have requested our opinion as to:
(a) whether the Bondholders could
challenge successfully under the “contract clause” of the United States
Constitution (Article I, Section 10, Clause 1 of the United States
Constitution, the “
Federal Contract Clause
”), which provides in
pertinent part that “[n]o State shall . . . pass any . . . Law impairing the
obligation of contracts,” or under the “contract clause” of the Louisiana
Constitution (Article I, Section 23 of the Louisiana Constitution of
1974, the “
Louisiana Contract Clause
”), which provides in pertinent part
that “[n]o . . . law impairing the obligation of contracts shall be enacted,”
the constitutionality of any action by the State of Louisiana, including the
LPSC, of a legislative character, including the repeal or amendment of the
Securitization Act or the Financing Order, that a reviewing court of competent
jurisdiction would determine repeals, amends or violates the Legislative Pledge
(as defined below) contained in the Securitization Act or the LPSC Pledge (as
defined below) authorized by the Securitization Act and contained in the
Financing Order in a manner that substantially reduces, limits or impairs the
value of the Bonds or substantially reduces, limits or impairs the Storm
Recovery Charges or the rights and remedies of the Bondholders (any such event
being an “
impairment
”) prior to the time the Bonds are fully paid and
discharged; and
(b) whether, under the
Fifth Amendment to the United States Constitution (made applicable to the State
of Louisiana through the Due Process Clause of the Fourteenth Amendment), which
provides in pertinent part, “nor shall private property be taken for public
use, without just compensation” (the “
Federal Takings Clause
”), or under
Article I, Section 4 of the Louisiana Constitution, which provides in
pertinent part that “[p]roperty shall not be taken or damaged by the state or
its political subdivisions except for public purposes and with just
compensation paid to the owner or into court for his benefit” (the “
Louisiana
Takings Clause
”), a reviewing court of competent jurisdiction would find a
compensable taking if the State of Louisiana, including the LPSC, takes action
of a legislative character that repeals, amends or violates the Legislative
Pledge or the LPSC Pledge or takes other action in contravention of either
Pledge that the court concludes permanently appropriates the Storm Recovery
Charges or otherwise substantially reduces, limits or impairs the value of the
Storm Recovery Charges, the Bonds or another substantial property interest of
the Bondholders and deprives such Bondholders of their reasonable expectations
arising from their investments in the Bonds (any such event being a “
taking
”).
2
Assumptions
In connection with rendering
the opinions set forth below, we have examined and relied upon originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Sale Agreement, (ii) the Indenture, (iii) the Registration Statement
(including the prospectus and prospectus supplement included therein) initially
filed by the Issuer with the Securities and Exchange Commission on November 2,
2007 (Registration Nos. 333-147122 and 333-147122-01), as amended by Amendment No. 1
thereto and declared effective by the Securities and Exchange Commission with
respect to the Bonds (the “
Registration Statement
”), (iv) the
Securitization Act, (v) the Financing Order, and (vi) such other
documents relating to the Transaction as we have deemed necessary or advisable
as the basis for such opinions.
In our examination, we have
assumed the legal capacity of all natural persons, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such latter
documents. In making our examination of
documents, for purposes of this Opinion we have assumed that the parties to
such documents had the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization by all
requisite action, corporate or other, and the execution and delivery by such
parties of such documents, including the Transaction Documents, and the
validity and binding effect thereof.
We have assumed for purposes of
this Opinion that any legislation enacted by the Louisiana Legislature or
supplemental order adopted by the LPSC impairing the value of the Bonds would
constitute a “substantial” modification of the provisions of the Securitization
Act or the Financing Order that provide support for the Bonds (and is done
without providing full compensation for the Bondholders). The determination of whether particular
governmental action of a legislative character constitutes a substantial
impairment of a particular contract is a fact-specific analysis, and nothing in
this Opinion expresses any opinion as to how a court would resolve the issue of
“substantial impairment” with respect to the Bonds in relation to any
particular action of a legislative character by the Legislature or the LPSC
being challenged.(1)
We have made no independent
investigation of the facts referred to herein, and with respect to such facts
we have relied, for purposes of rendering the opinions set forth below, and
except as otherwise expressly stated herein, exclusively on the statements
contained and matters provided for in the Transaction Documents, the
Registration Statement, and such other documents relating to the Transaction as
we have deemed advisable, including the factual representations, warranties and
covenants contained therein as made by the respective parties thereto.
(1)
See infra
n. 67.
3
The
Legislative Pledge
The Securitization Act contains
the following pledge (the “
Legislative Pledge
”) by the State of
Louisiana, for the benefit of Bondholders, defined as a person who holds a
storm recovery bond as defined in the Securitization Act:
The state
pledges to and agrees with bondholders, the owners of the storm recovery
property, and other financing parties that the state will not:
(1)
Alter
the provisions of this [Securitization Act] which authorize the commission to
create a contract right by the issuance of a financing order, to create storm
recovery property, and to make the storm recovery charges imposed by financing
order irrevocable, binding, and nonbypassable charges;
(2)
Take
or permit any action that impairs or would impair the value of storm recovery
property; or
(3)
Except
as allowed under this Section and except for adjustments under any true-up
mechanism established by the commission, reduce, alter, or impair storm
recovery charges that are to be imposed, collected, and remitted for the
benefit of the bondholders and other financing parties until any and all
principal, interest, premium, financing costs and other fees, expenses, or
charges incurred, and any contracts to be performed, in connection with the
related storm recovery bonds have been paid and performed in full. Nothing in this Paragraph shall preclude
limitation or alteration if and when full compensation is made by law for the
full protection of the storm recovery charges collected pursuant to a financing
order and full protection of the holders of storm recovery charges collected
pursuant to a financing order and full protection of the holders of storm
recovery bonds and any assignee or financing party.(2)
As explicitly authorized by the
Securitization Act, the Legislative Pledge has been included in the Bonds.
(2)
La. R.S. 45:1234(B).
4
The
Financing Order and LPSC Pledge
The Financing Order contains
the following ordering paragraphs (the “
LPSC Pledge
”, and together with
the Legislative Pledge collectively the “
Pledges
”):
50.
Irrevocable. After the earlier of the transfer of the
storm recovery property to the SPE or issuance of the storm recovery bonds
authorized by this Financing Order, this Financing Order is irrevocable until
the indefeasible payment in full of such bonds and the related financing
costs. The Commission covenants, pledges
and agrees it thereafter shall not amend, modify, or rescind this Financing
Order by any subsequent action, or reduce, impair, postpone, terminate, or
otherwise adjust the storm recovery charges approved in this Financing Order,
or in any way reduce or impair the value of the storm recovery property created
by this Financing Order, except as may be contemplated by a refinancing
authorized in strict accordance with the [Securitization Act] by a subsequent
order of the Commission or by the periodic true up adjustments authorized by
this Financing Order, until the indefeasible payment in full of the storm
recovery bonds and the related financing costs.
51.
Duration. This Financing Order and the charges
authorized hereby shall remain in effect until the storm recovery bonds and all
financing costs related thereto have been indefeasibly paid or recovered in
full. This Financing Order further shall
remain in effect and unabated notwithstanding the reorganization, bankruptcy,
or other insolvency proceedings, or the merger or sale, of Cleco or its
successors or assignees….
52.
Contract. The Commission acknowledges that the storm recovery
bonds approved by this Financing Order will be issued and purchased in express
reliance upon this Financing Order and the Commission’s covenant and pledge
herein of irrevocability and the vested contract right created hereby. The provisions of this Financing Order shall
create a contractual obligation of irrevocability by the Commission in favor of
the owners from time to time of the storm recovery bonds, and any such
bondholders may by suit or other proceedings enforce and compel the performance
of this Financing Order against the Commission in accordance with the
indenture. It is expressly provided that
such remedy as to individual commissioners of the Commission is strictly
limited to a claim solely for prospective relief of
5
declaratory and injunctive relief only; there shall be no other cause
or right of action for damages or otherwise against the individual
commissioners. The purchase of the
bonds, which reference in their related documentation the covenant and pledge
provided in this Financing Order, is acknowledged by the Commission to be
adequate consideration by the owners of the bonds for the Commission’s covenant
of irrevocability contained in this Financing Order. The Commission acknowledges that it would be
unreasonable, arbitrary and capricious for the Commission to take any action
contrary to the covenant and pledge set forth in this Financing Order after the
issuance of the storm recovery bonds.
…
54.
Inclusion
of Pledges. The SPE, as issuer of the
storm recovery bonds, is authorized,
pursuant
to Section 1234(C) of the Securitization Act and this Financing
Order, to include the State of
Louisiana
pledge contained in Section 1234 of the Securitization Act and the
Commission pledge
contained in
Ordering Paragraph 50 with respect to the storm recovery property and
storm recovery charges in the bonds and related
bond documentation. This Financing
Order is subject to the State pledge.
As explicitly authorized by the Financing
Order and by the Securitization Act, the LPSC Pledge in Financing Order
Ordering Paragraph 50 has been included in the Bonds.
Outline
of Analysis
If Louisiana were to take
action of a legislative character, either by the Louisiana Legislature or the
LPSC, including the repeal, rescission or amendment of the Securitization Act
or the Financing Order, that a court determines violates either of the Pledges
in a manner that substantially reduces, limits or impairs the value of the
Storm Recovery Property including the Storm Recovery Charges, such action would
raise issues under the Federal Takings Clause, the Louisiana Takings Clause,
the Federal Contract Clause and the Louisiana Contract Clause. Additionally, with respect to such action by
the LPSC, such action would raise questions on direct appeal to Louisiana state
courts of arbitrariness, capriciousness, abuse of authority and
unreasonableness. The jurisprudence of
the Louisiana Supreme Court clearly states that protection of private property,
due process, impairment of contracts and similar constitutional concerns are a
part of the judicial review process regarding LPSC orders. The jurisprudence of the United States
Supreme Court and the Louisiana Supreme Court also establishes that any
challenge to such action of a legislative character would raise the issue of
whether the Pledges
6
themselves are invalid and void
under the “reserved powers” doctrine as beyond the State’s power to create
irrevocable contract rights of this nature.
In addition to considering the foregoing issues, at your request we also
address issues pertaining to possible injunctive relief in federal or state
court.
We address these issues in the
following order:
The LPSC’s Powers
Irrevocability of the LPSC Pledge
Federal Takings Clause
Louisiana Takings Clause
Federal Contract Clause
Louisiana Contract Clause
Reserved Powers Doctrine
Jurisprudential Considerations and Injunctions
The Constitutional Claims on Direct Review
Conclusion: Reserved Powers Doctrine; Legislative Pledge; LPSC Pledge;
Securitization Act
The LPSC’s
Powers
The LPSC is a creature of the
Louisiana Constitution of 1974. It is a
commission in the state’s executive branch given the power and duty by Article IV,
Section 21 of that Constitution to “regulate all . . . public utilities.” “This provision gives the [LPSC]
constitutional jurisdiction over public utilities and has been interpreted as
granting the [LPSC] independent and plenary power to regulate public utilities.”(3)
Thus the LPSC is unlike the utility commissions in most other states, which are
statutory creatures subject to the authority of the respective state
legislatures. Because the LPSC is a
constitutional creature, the Legislature may not curtail its powers.(4)
Thus, the LPSC’s power in regulating utilities “is as complete in every respect
as the regulatory power that would have been vested in the legislature in the
absence of Article IV Section 21(B),” and “the legislature’s acts or
omissions can not subtract from the Commission’s exclusive, plenary power to
regulate all common carriers and public utilities.”(5) The LPSC pursues
its constitutional function “through the adoption and enforcement of reasonable
rules and orders fundamental to these purposes.”(6) The LPSC’s
plenary regulatory power exists by a self-executing constitutional provision(7) and
its quite broad powers and functions cause it to perform
(3)
Global Tel*Link, Inc. v. LPSC
,
1997-0645 (La. 1/21/98), 707 So.2d 28, 33 (citation omitted)
(“
Global Tel*Link
”).
(4)
The Daily Advertiser v. Trans-LA
, 612
So.2d 7, 10 (La. 1993).
(5)
Eagle Water, Inc. v. LPSC
, 947
So.2d 28, 32-33 (La. 2007);
Bowie v. LPSC
, 627 So.2d 164, 166 (La. 1993)
(“
Bowie
”).
(6)
Global Tel*Link
, 707 So.2d at 33
(citation omitted)
(7)
Bowie
, 627 So.2d at 166.
7
duties of prosecutor,
legislator and judge.(8) Further, the Louisiana Constitution explicitly
authorizes the Legislature in Article IV, Section 21 to grant to the
LPSC other regulatory authority as provided by statute.
The Louisiana Supreme Court,
recognizing the constitutional authority of the LPSC, has evolved a standard of
judicial review deferential to LPSC orders.
First, there is a presumption that LPSC orders are legal and proper, and
it is the burden of the party challenging an LPSC order to prove that it is
defective.(9) Beyond this, the Louisiana Supreme Court has opined first
that LPSC orders “should not be overturned absent a showing of arbitrariness,
capriciousness, or abuse of authority by the” LPSC; secondly, that “courts
should be reluctant to substitute their own views for those of the expert body
charged with the legislative function;” and, finally, that “a decision of the
[LPSC] will not be overturned absent a finding that it is clearly erroneous or
that it is unsupported by the record.”(10) This standard is more
deferential than the presumption of regularity usually accorded legislative
statutes.(11) This deferential standard “extends
also to the [LPSC]’s interpretation of its own rules and past orders.”
(12)
The LPSC acts in a legislative
capacity in exercising its rate making authority. Rate making is recognized as a legislative
function. Thus the LPSC’s rate making
orders have statutory effect.(13)
Irrevocability
of the LPSC Pledge
Based on our analysis of
relevant constitutional, legislative and judicial authority, as set forth in
this Opinion, and subject to all of the qualifications, limitations and
assumptions set forth in this Opinion (including the qualification regarding
the “reserved powers” doctrine), in our opinion the LPSC has the authority to
issue and enter into the LPSC Pledge (including the commitment therein
regarding irrevocability for the duration of the Bonds). Within its constitutional mandate to regulate
public utilities, the LPSC is of equal constitutional dignity with the
Louisiana Legislature. As presented
above, the LPSC’s power to regulate utilities is broad, independent, plenary
and complete in every respect on a par with traditional state legislative
power. The Louisiana Supreme Court has
characterized the constitutional plenary grant of authority to the LPSC as
full, entire, complete, absolute, perfect, and unqualified.(14) Furthermore, as noted above, under the Louisiana
Constitution(15) the LPSC expressly has such other regulatory authority as
provided by law, such as the Securitization Act. The Securitization
(8)
Standard Oil Co. of Louisiana v. LPSC
,
97 So. 859, 568 (La. 1923).
(9)
Global Tel*Link
, 707 So.2d at 33-34
(citations omitted).
(10)
Entergy Gulf States, Inc. v. LPSC
,
1998-1235 (La. 4/16/99), 730 So.2d 890, 897 (citations and internal quotation
marks omitted).
(11)
Dixie Elec. Membership Corp. v. LPSC
, 441
So.2d 1208, 1210 (La. 1983); cf
infra
n. 148.
(12)
Id
.
(citations omitted).
But see infra
at nn. 158-160 and 178-179.
(13)
Louisiana Power & Light Co. v. LPSC
, 377 So.2d 1023, 1028 (La. 1977);
see infra
n. 61.
(14)
Daily Advertiser
, 612 So.2d at 16 (quoting
Black’s Law Dictionary).
(15)
Art.
IV, Sec. 21(B).
8
Act explicitly authorizes the
LPSC to issue the Financing Order with a pledge that the LPSC will not amend,
modify or terminate the Financing Order by any subsequent action or reduce,
impair, postpone, terminate, or otherwise adjust the Storm Recovery
Charges.(16) Thus, in our opinion, with
respect to the Transaction the LPSC has the same power as would be vested in
the Louisiana Legislature if not for the constitutional grant to the LPSC in Article IV,
Section 21(B) of the Louisiana Constitution to enter into the LPSC
Pledge (and the same power to do so as possessed by the legislatures in other
states where the public utility commission is not a constitutional entity).
Nonetheless, it is generally
understood and established that a legislative body (whether a state legislature
or the LPSC) cannot abridge the power to act of a succeeding legislative
body. The “reserved powers” doctrine
limits a legislative body’s ability to bind itself contractually in a manner
that surrenders an essential attribute of its sovereignty. Under this doctrine, if a contract limits a
state’s reserved powers – powers that cannot be contracted away –such contract
is void. The application of this
reserved powers doctrine, discussed below in detail,(17) will be the critical
determination in any challenge to an action by the Legislature or the LPSC that
violates the Pledges.
In particular, for the reasons
discussed below, in our view the consequences of action by the LPSC that
rescinds or amends the Financing Order or otherwise creates an impairment or
taking is most likely to be reviewed in proceedings on direct appeal of such
action, as provided in the Securitization Act and the Louisiana Constitution. Such LPSC action and judicial review would
require consideration of issues under the general principles for judicial
review of LPSC orders, as well as the constitutional analysis under the
reserved powers doctrine and the Federal Takings Clause, the Louisiana Takings
Clause, the Federal Contract Clause and the Louisiana Contract Clause. Although, as discussed below, analysis of
these constitutional issues has been subsumed by the Louisiana Supreme Court
into its overall evaluation of whether an LPSC order should be overturned due
to a showing of arbitrariness, capriciousness, abuse of authority or
unreasonableness, in order to provide you a full understanding of our analysis,
we address below each of the constitutional provisions in turn first, before
addressing the standard of judicial review of LPSC action and its interaction
with constitutional challenges.
(16)
La. R.S. 45:1228(C)(5). The Securitization Act further provides that
nothing shall preclude limitation or alteration of the Financing Order if and
when full compensation is made for the full protection of the storm recovery
charges collected pursuant to the Financing Order and the full protection of
the holders of storm recovery bonds and any assignee or financing parties. The equivalent statement is made with respect
to the Legislative Pledge. La. R.S.
45:1234(B)(3).
(17)
See infra
pages 19,
21-22, 27-28 and 41-44.
9
Federal
Takings Clause
The Federal Takings Clause
provides: “nor shall private property be taken for public use, without just
compensation.”(18) That provision is
made applicable to state action by the Fourteenth Amendment of the United
States Constitution.(19) The Federal
Takings Clause covers both tangible and intangible property.(20)
The United States Supreme
Court has stated broadly that “contracts . . . are property and create vested
rights” for the purposes of the Federal Takings Clause.(21) However, it has clarified more recently that “the
fact that legislation disregards or destroys existing contractual rights does
not always transform the regulation into an illegal taking.”(22) “Contracts may create rights of property, but
when contracts deal with a subject matter which lies within the control of
Congress, they have a congenital infirmity.
Parties cannot remove their transactions from the reach of dominant
constitutional power by making contracts about them.”(23)
In addressing challenges pursuant
to the Federal Takings Clause to state action of a legislative character, the
Supreme Court has relied on an ad hoc factual inquiry into the circumstances of
each particular case (except for a limited category of “per se” regulatory
challenges).(24) The Supreme Court has
identified three factors that have particular significance in determining
whether a regulatory taking has occurred: (i) the economic impact of the
regulation on the claimant; (ii) the extent to which the regulation has
interfered with distinct investment – backed expectations; and (iii) the
character of the governmental action.(25)
The first factor concerns
whether the interference with property is so excessive as to require just
compensation. This inquiry is a highly
fact-sensitive analysis. It incorporates
the principle enunciated by Justice Holmes: “Government hardly could go on if
to some extent values incident to property could not be diminished without
paying for every such change in the general law.”(26) “[N]ot every destruction or injury to
property by governmental action has been
(18) U. S. Const., Amend V.
(19)
Web’s Fabulous Pharmacies v. Beckwith
,
449 U.S. 155 (1980).
(20)
Ruckelshaus v. Monsanto Co.
, 467 U.S.
986 (1984) (“
Monsanto
”);
Tahoe-Sierra
Preservation Counsel, Inc. v. Tahoe Regional Planning Agency
, 535 U.S.
302, 307 n. 1 (2002).
(21)
Lynch v. United States
, 292 U.S. 571,
577 (1934).
(22)
Connolly v. Pension Benefit Guar. Corp.
,
475 U.S. 211, 224 (1986) (“
Connolly
”).
(23)
Id
. at
223-24.
(24)
Connolly
, 475 U.S. at 224;
Penn
Central Transportation Co. v. New York City
, 438 U.S. 104, 124 (1978);
Monsanto
467 U.S. at 1005.
(25)
Connolly
, 475 U.S. at 225.
(26)
Penn Coal Co. v. Mahon
, 260 U.S. 393,
413 (1922);
Loveladies Harbor, Inc. v. U.S.
, 28 F.3d 1171, 1176-77
(Fed. Cir. 1994) (“
Loveladies
”).
10
held to be a ‘taking’ in the constitutional
sense.”(27) Diminution in property value
alone, thus, does not constitute a taking; there must be serious economic harm.
The second factor relates to whether the claimant reasonably relied to
the claimant’s economic detriment on the expectation that the government would
not act as it did. It is applied as “a
way of limiting takings recoveries to owners who could demonstrate that they
bought their property in reliance on a state of affairs that did not include
the challenged regulatory regime.”(28) The burden of showing such interference
is a heavy one.(29) Thus, a reasonable
investment-backed expectation “must be more than a ‘unilateral expectation or
an abstract need.’”(30) Further, “legislation
adjusting rights and burdens is not unlawful solely because it upsets otherwise
settled expectations.”(31) “[T]he fact
that legislation disregards or destroys existing contractual rights does not
always transform the regulation into an illegal taking. . . . This is not to say that contractual rights
are never property rights or that the Government may always take them for its
own benefit without compensation.”(32)
In order to sustain a claim under the Federal Takings Clause, the
private party must show that it had a “reasonable expectation” at the time the
contract was entered that it “would proceed without possible hindrance” arising
from changes in government policy.(33)
The third factor requires the court to examine “the purpose and
importance of the public interest underlying a regulatory imposition” and “inquire
into the degree of harm created by the claimant’s prohibited activity, its
social value and location, and the ease with which any harm stemming from it
could be prevented.”(34)
Connolly
is the leading
case examining whether a particular legislative action rises to the level of an
unconstitutional taking.
Connolly
concerned a challenge to statutory amendments imposing upon certain employers a
substantial withdrawal penalty to be remitted to the pension trust upon
withdrawal from a multi-employer pension plan.
This withdrawal penalty had not existed at the time the trust was formed
and the trust agreements were confected among the employers and their
employees.
The United States Supreme Court proceeded with an examination of the
three factors it had determined govern its review of regulatory takings claims
(in reverse order). In
(27)
Armstrong v. U.S.
, 364 U.S. 40, 48
(1960).
(28)
Loveladies
, 28 F.3d at 1177.
(29)
Keystone Bituminous Coal Ass’n v.
DeBenedictis
, 480 U.S. 470, 493 (1987).
(30) Monsanto, 467 U.S. at 1005 (quoting
Webb’s
Fabulous Pharmacies v. Beckwith
, 499 U.S. at 161).
(31)
Usery v. Turner Elkhorn Mining Co.
,
428 U.S. 1, 16 (1976).
(32)
Connolly
, 475 U.S. at 224.
(33)
Chang v. U.S.
, 859 F.2d 893, 897 (Fed
Cir. 1988).
(34)
Bass Enterprises Prod. Comp. v. United
States
, 381 F.3d 1360, 1370 (Fed. Cir. 2004).
See also
Tahoe-Sierra
Preservation Council, Inc. v. Tahoe Regional Planning Agency
, 535 U.S.
302, 323 (2002) (cases involving regulatory takings necessarily entail that
courts conduct complex factual assessments of the “purposes and economic
effects of government actions”);
Keystone Bituminous Coal Ass’n v.
DeBenedictis
, 480 U.S. 470, 484 (1987).
11
considering the first factor, “the economic
impact of the regulation on the claimant,” the Supreme Court found that the
regulation clearly imposed a financial hardship upon the employers.(35) However, the Supreme Court also found that “[t]here
is nothing to show that the withdrawal liability actually imposed on an
employer will always be out of proportion to its experience with the plan.”(36) Given the proportionate impact of the
regulation upon the employers, the Supreme Court concluded that this factor did
not suggest a compensable “taking” had occurred.(37)
Regarding the second factor,
the extent to which the regulation interfered with “reasonable
investment-backed expectations”,(38) the employers’ argument was that certain
rights and liabilities had been established by the original trust documents, “and
that the imposition of withdrawal liability upsets those reasonable
expectations.”(39) The Supreme Court
found, however, that “[p]ension plans were the objects of legislative concern
long before the passage of ERISA in 1974,” and furthermore that under ERISA “the
purpose of imposing withdrawal liability was to ensure that employees would
receive the benefits promised them.”(40)
Given this long-standing regulatory regime, “[p]rudent employers then
had more than sufficient notice not only that the pension plans were currently
regulated, but also that withdrawal itself might trigger additional financial
obligations.”(41) As the Supreme Court
admonished, “[t]hose who do business in the regulated field cannot object if
the legislative scheme is buttressed by subsequent amendments to achieve the
legislative end.”(42)
In examining the third factor,
the “character of the governmental action,” the Supreme Court found it
significant that the regulation “does not physically invade or permanently
appropriate any of the employer’s assets for its own use,” but rather “safeguards
the participants in multiemployer pension plan” by imposing upon a withdrawing
employer a financial obligation to pay.(43)
The Supreme Court observed that “[t]his interference with the property
rights of an employer arises from a public program that adjusts the benefits
and burdens of economic life to promote the common good and, under our cases,
does not constitute a taking requiring Government compensation.”(44) Based upon its consideration of the three
factors, the Supreme Court concluded that the imposition of withdrawal liability
by Congress did not result in a compensable “taking” under the Fifth Amendment.
(35)
Connolly
, 475 U.S. at 225.
(36)
Id
. at 226.
(37)
Id
.
(38)
Connolly
, 475 U.S. at 226-27.
(39)
Id
. at 226.
(40)
Connolly
, 475 U.S. at 227.
(41)
Id
.
(42)
Id
.
(internal quotation marks and citations omitted).
(43)
Connolly
, 475 U.S. at 225.
(44)
Id
. (citations omitted).
12
It is difficult to apply the
jurisprudence under the Federal Takings Clause to a hypothetical taking arising
by the otherwise proper exercise by the State of Louisiana of its police power
that to some degree abrogates (or impairs) contracts such as the Pledges
otherwise binding on the state. (There
is, of course, the significant overlap of such a taking also constituting an
impairment.) One argument by analogy is
based upon the opinion in
United States v. Security Industrial Bank
.(45) The plaintiffs were creditors challenging a
bankruptcy reform statute with the argument that its change in the bankruptcy
code to allow debtors to avoid the creditors’ liens on the debtors’ property
constituted an unconstitutional taking.
The government argued that the statute simply imposed a general economic
regulation which in effect transferred a property interest from one private
party to another private party, and did not involve the government acquiring
for itself the property in question. The
Supreme Court stressed that its cases show that the Federal Takings Clause
analysis is not limited to outright acquisitions by the Government for itself,
and explained (quoting an earlier case which did involve a classical taking by
the Government for itself): “The total destruction by the Government of all
value of these liens, which constitute compensable property, has every possible
element of a Fifth Amendment ‘taking’ and is not a mere ‘consequential
incidence’ of a valid regulatory measure.”(46)
To avoid the “substantial doubt” as to whether the statutory enactment
destroying the liens (property interests) comported with the Federal Takings
Clause, the Supreme Court as a matter of statutory construction held that the
legislation only applied to lien interests established after the enactment
date.(47)
Louisiana Takings Clause
The Louisiana Takings Clause
provides:
Every
person has the right to acquire, own, control, use, enjoy, protect, and dispose
of private property. This right is
subject to reasonable statutory restrictions and the reasonable exercise of the
police power.
Property
shall not be taken or damaged by the state or its political subdivisions except
for public purposes and with just compensation paid to the owner or into court
for his benefit.(48)
Louisiana recognizes an action for compensation for takings arising
from state action, i.e., inverse condemnation.
This action arises from the self-executing nature of the Louisiana
Takings Clause.(49) This procedural
remedy is available even though the Louisiana
(45) 459 U.S.
70 (1982).
(46)
Id
. at 412 (citation omitted).
(47)
Id
.
(48) La. Const. Art. I, Sec. 4.
(49)
State, Through DOTD v. Chambers Investment
Co., Inc.
, 595 So.2d 598, 602 (La. 1992) (“
Chambers
”).
13
Legislature has not provided a specific
statutory procedure for such claims.(50)
This action applies to all taking or damaging of property without just
compensation, regardless of whether such property is corporeal or incorporeal
(tangible or intangible).(51) The
Louisiana Supreme Court has adopted a three-prong analysis to determine whether
a compensable taking has occurred: “[i]n accordance with this analysis, the
court must: (1) determine if a
recognized species of property right has been affected; (2) if it is
determined that property is involved, decide whether the property has been
taken or damaged in a constitutional sense; and (3) determine whether the
taking or damaging is for a public purpose.”(52)
Application of this standard
has been uneven, however, and in many cases the reviewing court has appeared to
recognize the second factor as the dispositive one. Moreover, of those cases decided under the
Louisiana Takings Clause, none has considered regulations that affect an
incorporeal movable right akin to the Storm Recovery Property, as opposed to
some incorporeal right associated with immovable (real) property. These aspects of the Louisiana jurisprudence,
combined with the absence of any actual concrete action to evaluate, makes
resolving the hypothetical question presented difficult.
Nonetheless, some useful
principles may be distilled from the extant Louisiana jurisprudence. In recent years, the Louisiana Supreme Court,
in resolving inverse condemnation issues, has focused upon the extent to which
the state has guaranteed a particular return on investment, and the extent of
the taking.(53) Other cases, including
those concerning the LPSC’s regulation of public utilities, have relied upon
the Louisiana Takings Clause being expressly subject to “reasonable statutory
restrictions and the reasonable exercise of the police power,” to reject
inverse condemnations claims based upon a traditional exercise of the police
power in a regulated industry.(54)
In conclusion, in our view
the jurisprudence does not directly address the applicability of the Federal
Takings Clause or the Louisiana Takings Clause in the context of the proper
exercise by Louisiana of its police power to abrogate or impair the Pledges as
contracts otherwise binding on the state.
A challenge to a taking with respect to the Transaction will be
(50)
Id
.
(51)
Id
.
(52)
Avenal v. State of Louisiana through DNR
,
2003-3521 (La. 10/19/04), 886 So.2d 1085, 1104 (citations omitted) (“
Avenal
”).
(53)
See
Avenal
,
886 So.2d at 1106, 1107 (coastal restoration project did not constitute
compensable damaging of leases of oyster fishermen where, inter alia, leases
did not guarantee commercial viability, and restoration project did not
completely and permanently destroy economic value of leases);
see also
Annison v. Hoover
, 517 So.2d 420, 432 (La.
App. 1 Cir. 1987) (“We hold that a regulatory program that adversely affects
property values does not constitute a taking unless it destroys a major portion
of the property’s value.”) (citations omitted);
writ
denied
, 519 So.2d 148 (La. 1988).
(54)
See, e.g.
,
Louisiana
Power & Light Co. v. LPSC
, 343 So.2d 1040, 1043 (La. 1977) (order
inhibiting duplicative utility facilities was a reasonable exercise of LPSC’s
constitutional jurisdiction, and therefore not a compensable taking).
14
based primarily on the application of the
second of the three
Connolly
factors — the extent to which the state
action has interfered with distinct investment – backed expectations.(55) The expectations of the Bondholders regarding
the Storm Recovery Property and the Storm Recovery Charges will need to be
proven in fact to have been specifically created and promoted by the
Pledges. This factor of expectations
overlaps with the key factor under the Contract Clauses of reliance by the
contracting party on the abridged contractual term. Indeed, we believe the Federal and Louisiana
Contract Clauses would provide a clearer basis for challenging an impairment of
the Storm Recovery Property.
Federal
Contract Clause
The Federal Contract Clause
mandates: “No State shall. . . pass any . . .Law impairing the Obligation of
Contracts . . . . “(56) The United
States Supreme Court, however, has long held that this seemingly absolute
prohibition is not absolute at all.
Although the language of the Federal Contract Clause is facially
absolute, its prohibition must be accommodated to the inherent police power of
the state to safeguard the vital interests of its people.(57)
The law is well-settled that
the Federal Contract Clause limits the power of the states to modify their own
contracts as well as to regulate those between private parties, although the
Federal Contract Clause operates differently on private contracts on the one
hand and government contracts on the other.
The Supreme Court has indicated that impairment of a State’s own
contracts faces more stringent examination under the Federal Contract Clause
than do laws regulating contractual relationships between private parties,
although private parties’ contracts are not subject to unlimited modification
under the police power.(58)
The Supreme Court has
developed in recent cases a multi-part analysis to determine whether a
particular legislative action violates the Federal Contract Clause. (Variously characterized by courts as having
either three or four parts, we segregate the analysis for clarity herein
without concern for numbering.)
Initially, a court must determine whether state law has, in fact,
substantially impaired any contract.
This first inquiry itself contains three components: whether a contract
exists, whether a change in state regulation impairs that contractual
relationship, and whether the impairment substantial. As the second inquiry, if the state action
constitutes a substantial impairment of the contract, a court must determine
whether that impairment is nonetheless permissible as a legitimate exercise of
the state’s sovereign
(55)
See
Avenal
,
886 So.2d at 1107 n.28 (discussing Federal Takings Clause analysis). Although the factors set forth in
Chambers
under the Louisiana Takings Clause do not expressly include that
Connolly
factor, we believe it would be considered in the analysis.
See supra
n.
53.
Compare
Urban
Developers LLC v. City of Jackson
, 468 F.3d 281, 303 (5th Cir. 2006) (“It
is an unsettled question, of course, the extent to which many jurisdictions
will recognize as protected by the Taking Clause a property right in contract”).
(56) U.S. Const. Art. I, Sec. X, Cl. 1.
(57)
Energy Reserves Group, Inc. v. Kansas
Power & Light Co.
, 459 U.S. 400, 410 (1983);
Segura v. Frank
,
630 So.2d 714, 728 (La. 1994).
(58)
See infra
nn.
84, 92 & 95.
15
powers.
Also, a claimant must show that the contractual relationship is not an
invalid attempt to restrict or limit a state’s “reserved powers.” As the final inquiry, a court must determine
if the impairment is upon reasonable conditions and of a character appropriate
to the public purpose justifying its adoption.
Only if there is a contract, which has been substantially impaired, and
there is no legitimate public purpose justifying the impairment on a reasonable
and appropriate level, is there a violation of the Federal Contract
Clause. The following portions of this
subpart evaluate these inquiries with respect to the Legislative Pledge and the
LPSC Pledge.
The threshold inquiry is
whether these Pledges constitute a contract existing between the State and the
Bondholders.(59) The courts have
maintained the well established presumption that, absent some clear indication
that a legislature intends to bind itself contractually, “a law is not intended
to create private contractual or vested rights but merely declares a policy to
be pursued until the legislature shall ordain otherwise.”(60) This presumption is based on the fact that
the legislature’s principal function is not to make contracts, but to make laws
that establish the policy of the state.
Thus, a person asserting the creation of a contract with the state must
overcome this well-founded presumption.
This same presumption is applicable to the LPSC Pledge when considered
in the context of the LPSC’s rate-making actions, which are of a legislative
character.(61)
This general presumption can
be overcome where the language of the statute indicates an intention to create
contractual rights. In determining
whether a contract has been created by statute, “it is of first importance to
examine the language of the statute.”(62)
The courts have ruled that a statute creates a contractual relationship
between a state and private parties if the statutory language contains
sufficient words of contractual undertaking.
A contract is created when the language and circumstances evince a
legislative intent to create private rights of a contractual nature enforceable
against the State.
In
U.S. Trust
,
discussed in more detail below, the United States Supreme Court affirmed the
trial court’s finding, which was not contested on appeal, that a statutory
covenant of two states for the benefit of the holders of certain bonds gave
rise to a contractual obligation between such states and the bondholders. The covenant at issue limited the ability of
the Port
(59) Clearly the Transaction includes private
parties’ contracts between the Bondholders and the Issuer that could be
impaired, even if the Pledges were found not to be contracts of the State. But while in theory an impairment of the
Storm Recovery Property could be successfully challenged (albeit under a more
difficult to overcome standard of review,
see infra
n.
84) even if the Pledges are not contracts binding on the State, we believe that
a finding that the Pledges are not valid and binding contractual obligations
under the reserved powers doctrine likely also would be fatal to a Contracts
Clauses claim on the purely private contracts.
See infra
pages 19,
21-22, 27-28 and 41-44.
(60)
National R.R. Passenger Corp. v. Atchison,
Topeka & Sante Fe Ry Co.
, 470 U.S. 451, 466 (1985) (“
National R.R.
”) (citation omitted).
(61)
NOPSI
, infra n. 118, 491 U.S. at 371;
Louisiana Power & Light Co. v. LPSC
, 377 So.2d 1023, 1028 (La.
1979);
Louisiana Gas Service v. LPSC
, 162 So.2d 555, 563 (La. 1964);
United
Gas Pipe Line Co. v. LPSC
, 130 So.2d 652, 657 (La. 1961);
see supra n. 13; c.f. infra nn.
117 & 130.
(62)
Dodge v. Board of Educ.
, 302 U.S. 74, 78
(1937).
16
Authority of New York and New Jersey to
subsidize rail passenger transportation from revenues and reserves pledged as
security for such bonds. In finding the
existence of a contract between such states and bondholders, the Supreme Court
stated “[t]he intent to make a contract is clear from the statutory language: ‘The
2 States
covenant
and
agree
with each other and with the holders
of any affected bonds. . . .’”(63)
Later, in
National R.R.
, the Supreme Court discussed the
U.S.
Trust
covenant and noted: “[r]esort need not be had to a dictionary or case
law to recognize the language of contract”(64) in such covenant.
National R.R.
considered
several factors in determining that the legislative act at issue in that case
did not create a contractual obligation.
That act did not speak of a contract between the government and the
private party, nor did it in any respect provide for the execution of a written
contract by the government. Significantly,
that act “expressly reserved” Congress’ right to “repeal, alter or amend this
Act at any time.”(65) Finally, great
weight was given to the pervasiveness of prior government regulation of this
area, which “absent some affirmative indication to the contrary,” plus in that
case “coupled with [that act’s] express reservation of the power to repeal,”
strongly cut against finding that such act creates binding contractual rights.
(66)
The Louisiana Supreme Court
has not specifically addressed whether the Securitization Act and specifically
the Legislative Pledge, or a LPSC order akin to the Financing Order containing
the LPSC Pledge, should be construed as binding contractual obligations. With respect to the Securitization Act, one
negative factor is that there is no explicit contractual instrument executed by
the Louisiana Legislature and no written contract in the Transaction on behalf
of the State. But a very positive factor
is that the language of the Legislative Pledge plainly manifests the Louisiana
Legislature’s intent to bind the State, using similar language to the covenant
considered in
U.S. Trust
. The
Securitization Act provides that the State “pledges to and agrees with”
bondholders. The text of the
Securitization Act thus contrasts favorably with the act found wanting (as to
creating a contract) in
National R.R.
The Legislative Pledge expressly includes the word “pledges” and “agrees,”
and authorizes the pledge of the State to be included in Transaction
Documents. Here the (admittedly) heavy and
longstanding regulation of utilities is not coupled with and reinforced by an
express reservation of the power to repeal; instead the Legislative Pledge is
an express commitment not to enact countervailing legislation. This language unambiguously demonstrates that
the Legislative Pledge is intended to create a
(63)
United States Trust Co. of New York v. New
Jersey
, 431 U.S. 1, 18 (1977) (emphasis added). The issue of the existence of a contract
between the two states and the bondholders was not disputed on appeal, but the
Supreme Court expressly reviewed the language itself and the surrounding
circumstances and concluded there was no doubt the covenant was properly
characterized as a contractual obligation of the two states.
(64)
Id
. at
470. Similarly, in
Indiana ex rel.
Anderson v. Brand
, 303 U.S. 95, 104-05 (1938), the United States Supreme
Court determined in a materially different context that the Indiana Teachers’
Tenure Act created a contract between the state and specified teachers because
the statutory language demonstrated a clear legislative intent to
contract. The Supreme Court based its
decision, in part, on the legislature’s use of the word “contract” throughout
the statute to describe the legal relationship between the state and such
teachers.
(65)
National RR
,
470 U.S. at 456, 467, 469.
(66)
Id
. at 469.
17
contractual relationship between the State
and the Bondholders. Conclusion of Law
Paragraph 27 of the Financing Order states that the Storm Recovery Property
created by the Financing Order is a vested contractual right and creates a
contractual obligation of irrevocability by the LPSC in favor of financing
parties.
As quoted above, the LPSC
Pledge contains language even more decisively demonstrating the LPSC’s intent
to create a contractual relationship.
The next step of the
analysis is determining whether an impairment is substantial. The Supreme Court has provided little
specific guidance as to what constitutes a substantial contract impairment. The
determination of whether a particular legislative act constitutes a substantial
impairment of a particular contract is a fact-specific analysis. Nothing in this Opinion expresses any opinion
as to how a court will resolve the issue of substantial impairment with respect
to a particular state (including LPSC) action of a legislative character
regarding the storm recovery property.
We have assumed for purposes of this Opinion that any impairment
resulting from the legislative action being challenged under the Federal
Contract Clause would be substantial.(67)
The factors that contribute to that determination are briefly reviewed
as follows:
In determining whether an
impairment is substantial, the United States Supreme Court has looked to
several objective factors. Of greatest
concern appears to be the contracting parties’ actual reliance on the abridged
contractual term.(68) Specifically, the
Supreme Court has examined contracts to determine whether the abridged right is
one that was “reasonably relied” on by the complaining party, or one that “substantially
induced” that party “to enter into the contract.” When assessing the presence of the requisite
reliance, the Supreme Court has looked to objective evidence of reliance. For example, the Supreme Court has examined
the terms of the original contract to determine whether the contract – either
explicitly or implicitly – indicated that the abridged term was subject to
impairment by the legislature. The
Supreme Court has also directed that in assessing the parties’ expectations,
and in so determining the extent of the impairment, it must be considered
whether the industry the complaining party has entered has been regulated in
the past. Pervasiveness of prior regulation suggests that –
absent
some affirmative indication to the contrary
– the complaining party had no legitimate
expectation that regulation would cease.
Finally, in determining the parties’ reliance, the cases have focused on
(67) We note, however, that in
U.S. Trust
,
infra
n. 85, the United States Supreme Court found a
substantial impairment where the States of New York and New Jersey repealed
outright an “important security provision” securing repayment of bonds without
any form of compensation to the bondholders, even in the absence of a finding
of the extent of financial loss suffered by the bondholders as a result of the
repeal. 431 U.S. 1, 19 (1977).
See also
Home
Bldg. & Loan Ass’n v. Blaisdell
, 290 U.S. 398, 429-35 (1934).
In Board of Comm’rs v. Department of
Natural Resources
, 496 So.2d 281, 294-95 (La. 1986), the Louisiana Supreme
Court found a state law did not operate as a substantial impairment of
government bonds where there was no modification of a contractual right, a
remedy or a security device, no showing of any danger of a default upon the
bonds, no decline in the value of the bonds in the market, and no showing that
the legislative act took from the bonds the quality of an acceptable investment
for a rational investor.
(68)
City of Charleston v. Public Service
Commission of West Virginia
, 57 F.3d 385, 392 (4th Cir. 1995).
18
the character of the abridged right – whether
it was by its nature “the central undertaking” or “primary consideration” of
the parties.(69) The Supreme Court has
also examined how a contract has been changed, i.e., whether a covenant was
abolished or “merely modified.” The
Supreme Court has also directed that, in determining whether there has been a
substantial impairment, a court should determine whether the abridged right was
“replaced by an arguably comparable security provision.”(70)
Assuming the impairment is
substantial, the next inquiry is whether state action nonetheless is
permissible. The “reserved powers” doctrine
limits the State’s ability to bind itself contractually in a manner which
surrenders an essential attribute of its sovereignty. Under this doctrine, if a contract limits a
state’s “reserved powers” – powers that cannot be contracted away – such contract
is void. That is, even if Louisiana
intended to be contractually bound, it must be within the state’s power to
create that contractual obligation. It
is established that a state cannot contract away its police powers, and
regulation of utilities is one of the police powers of the States. The possible application of this doctrine to
the Transaction is discussed in detail below.(71)
Assuming that a substantial
impairment by the State of contractual rights under the Pledges is not upheld
by a reviewing court under the “reserved powers” doctrine (by the court voiding
the Pledges under that doctrine), then the substantial impairment must be
justified by the State as a legitimate exercise of the State’s police powers in
order to be successfully defended against a challenge pursuant to the Federal
Contract Clause. In
Blaisdell
,(72)
referred to by the United States Supreme Court in
U.S. Trust
as “the
leading case in the modern era of [Federal] Contract Clause interpretation,”
the closely divided Supreme Court found that the economic exigencies of the
time (the Great Depression) justified a Minnesota law which (i) authorized
county courts to extend the period of redemption from foreclosure sales on
mortgages previously made “for such additional time as the court may deem to be
just and equitable,” subject to certain limitations, and (ii) limited
actions for deficiency judgments. The
Supreme Court stated that the “reserved powers” doctrine could not be construed
to “permit the state to adopt as its policy the repudiation of debts or the
destruction of contracts or the denial of means to enforce them.” On the other hand, the Supreme Court also
indicated that the Federal Contract Clause could not be construed:
to
prevent limited and temporary interpositions with respect to the enforcement of
contracts if made necessary by a great public calamity such as fire, flood, or
earthquake. The reservation of state
power appropriate to such extraordinary conditions may be deemed to be as much
a part of all contracts as is the reservation of state power to protect the
public interest in other situations to which we
(69)
Id
. at
392-4.
(70)
United States Trust Co. v. New Jersey
,
431 U.S. 1, 19 (1977).
(71)
See infra
pages 27-28 and pages 41-44.
(72)
Home
Bldg & Loan Ass’n v. Blaisdell
, 290 U.S. 398 (1934) (citations
omitted) (“
Blaisdell
”).
19
have
referred. And, if state power exists to
give temporary relief from the enforcement of contracts in the presence of
disasters due to physical causes such as fire, flood, or earthquake, that power
cannot be said to be nonexistent when the urgent public need demanding such
relief is produced by other and economic causes.(73)
In upholding the Minnesota
law, the Supreme Court relied on the following: (1) the state legislature
declared that an economic emergency existed which threatened the loss of homes
and lands which furnish those persons in possession with necessary shelter and
means of subsistence; (2) the law was not enacted for the benefit of a
favored group but for the protection of a basic interest of society; (3) the
relief provided by the law was appropriately tailored to the emergency; (4) the
conditions on which the period of redemption was extended by the law were
reasonable; and (5) the law was temporary in operation and limited to the
duration of the emergency on which it was based.(74) More recently, the Supreme Court stated in
its
Energy Reserves
(75) opinion that “a significant and legitimate
public purpose” is required to justify a substantial impairment of
contract. Similarly, the Supreme Court
had earlier stated that, to be justifiable, an impairment must deal with “a
broad, generalized economic or social problem.”(76)
To evaluate the public
purpose necessitating the impairment, the context in which the law is enacted
is considered. In
Blaisdell
, the
Supreme Court held that the state legislation was justified as a response to
the quintessential economic emergency, the Great Depression.(77) By contrast, in
Allied Structural
,(78) the Supreme Court held that general concern
about pensions was not by itself a sufficient emergency; nor had the government
declared an official emergency.(79)
Finally, in
Energy Reserves
, the Supreme Court considered that
the Kansas statute at issue had been enacted to protect consumers from the
escalation of natural gas prices caused by recent deregulation.(80) Judgment of this factor’s application to
hypothetical action by the Louisiana Legislature or the LPSC of a legislative
character is impossible without knowledge of the context in which that
legislation or supplemental order is adopted; in any event, a more urgent
context would receive greater deference from the courts than would a
non-emergency.
The Supreme Court has also
noted, on the question of justification, whether the challenged law was passed
to protect broad societal interests or merely to benefit some to the detriment
of others. In
Blaisdell
, the
Supreme Court approved a law treating all debtors and creditors alike. The statute had not been passed “for the mere
advantage of particular individuals
(73)
Id
. at 439-40.
(74)
Allied Structural
, 438 U.S. at 242;
Blaisdell
,
290 U.S. at 444-45.
(75)
Energy Reserves Group, Inc. v. Kansas
Power & Light Co.
, 459 U.S. 400 (1983) (“
Energy
Reserves
”).
(76)
Allied Structural Steel Co. v. Spannaus
,
438 U.S. 234, 250 (1978).
(77)
Blaisdell
, 290 U.S. at 444.
(78)
Allied Structural Steel Co. v. Spannaus
,
438 U.S. 234 (1978) (“
Allied Structural
”).
(79)
Id
. at 249.
(80)
Energy Reserves
, 459 U.S. at 416-17.
20
but for the
protection of a basic interest of society.”(81)
This conclusionary statement, however, was not explained in the
opinion. Again by contrast, in
Allied
Structural
the Supreme Court criticized a law that affected only some
employers (those closing offices in Minnesota) and that took aim “only at those
who had in the past been sufficiently enlightened as voluntarily to agree to
establish pension plans for their employees.”(82)
An important factor is whether
the contracts impaired have only private parties or whether the state is a
party too. In cases of regulation that
concern only private contracts, the courts, when considering the reasonableness
of the measures taken to effect the public purpose, will “defer to legislative
judgment as to the necessity and reasonableness of a particular measure.”(83) However, a different rule ”
perhaps
”(84) applies when the state itself
is a party to the contract, as reflected in the analysis adopted in
United
States Trust Co. v. New Jersey
.(85)
In
U. S. Trust
, the states of New York and New Jersey, to entice
investors to purchase bonds issued by the Port Authority of New York and New
Jersey, entered into a statutory covenant which provided that the states “covenant
and agree” with the bondholders that certain rents and fees collected by the
Port Authority would be used only for limited purposes; in essence, these
states pledged that a particular revenue stream would provide security for
repayment of the bonds.(86) Subsequently,
however, New Jersey repealed that statutory covenant, and the Port Authority
accordingly diverted the previously dedicated revenues to other purposes.(87)
The Supreme Court found that
this action impaired the bondholders contract with the Port Authority and the
pledge given by New Jersey and New York.
In so concluding, the Court first noted that all Federal Contract Clause
cases, as a matter of principle, require the courts to “reconcile the
strictures of the [Federal] Contract Clause with the essential attributes of
sovereign power necessarily reserved by the States to safeguard the welfare of
their citizens.”(88) However, when a
state impairs its own obligations, the focus of this analysis shifts:
The initial inquiry concerns the ability of the State to enter into an
agreement that limits its power to act in the future. As early as Fletcher v. Peck, the Court
considered the argument that “one legislature cannot abridge the powers of a
succeeding legislature.” It is often
stated that “the legislature cannot bargain away the police power of a State.” This doctrine requires a determination of
(81)
Blaisdell
, 290 U.S. at 445.
(82)
Allied Structural
, 438 U.S at
250. The Supreme Court later emphasized
its recognition that the invalidated law may even have been directed at only
one particular employer.
Energy
Reserves
, 459 U.S. at 412 n. 13.
(83)
Energy Reserves
, 459 U.S. at 43
(internal quotation marks and citation omitted).
(84)
National R.R.
, 470 U.S. at 471 n. 24
(emphasis added);
see infra
nn. 92 & 95.
(85) 431 U.S. 1, 97 S.Ct. 1505, 52 L.Ed.2d 92
(1977) (“
U.S. Trust
”).
(86)
Id
. at
9-12.
(87)
U. S. Trust
, 431 U.S. at 12-14.
(88)
Id
. at 21
(internal quotation marks and citations omitted).
21
the State’s power to create irrevocable contract rights in the first
place, rather than an inquiry into the purpose or reasonableness of the
subsequent impairment. In short, the
[Federal] Contract Clause does not require a State to adhere to a contract that
surrenders an essential attribute of its sovereignty.(89)
Considering the pledge of New York and New
Jersey, the Supreme Court found that this pledge was a purely financial
obligation, and thus comprised an enforceable obligation that could be
protected under the Federal Contract Clause.(90) In so holding, the Supreme Court
distinguished situations in which a promise or obligation of the state would
require an abridgement of the police power:
“For example, a revenue bond might be secured by the State’s promise to
continue operating the facility in question; yet such a promise surely could
not validly be construed to bind the State never to close the facility for
health or safety reasons.”(91)
After concluding that enforcing
the pledge of New York and New Jersey would not abridge those states’ police
power, the Supreme Court then proceeded to consider whether the impairment of
the bonds resulting from the states’ action was nonetheless reasonable and
necessary to serve a public purpose. The
Supreme Court noted, however, that contrary to situations where only private
contracts are concerned, “complete deference to a legislative assessment of
reasonableness and necessity is not appropriate because the State’s
self-interest is at stake.”(92) The
Supreme Court then conducted its own review of the public purposes underlying
the repeal of the pledge, and found that repeal of the pledge was neither
necessary to the achievement of those purposes nor reasonable in light of the
circumstances.(93) The Supreme Court
specifically noted that “a State is not free to impose a drastic impairment
when an evident and more moderate course would serve its purposes equally well.”(94)
Both the
Energy Reserves
and
Allied Structural
decisions expressly indicate that when a state is
a contracting party the “stricter standard” of justification set forth in the
U.
S. Trust
opinion should be applicable.(95)
Furthermore, the United States Supreme Court’s opinion in
United
States v. Winstar Corp
,(96) even though not a Federal Contract Clause case,
is consistent with
U.S. Trust
in imposing a more rigorous standard of
justification where the government is a
(89)
Id
. at 23 (citations omitted);
see
pages 27-28 and 41-44.
(90)
Id
. at 24-25.
(91)
Id
. at 25.
(92)
Id
. at 26.
(93)
Id
. at 29-31.
(94)
Id
. at 31.
(95)
Energy Reserves
, 459 U.S.
at 412, 413 n. 14;
Allied Structural
, 438 U.S. at 244 n. 15; supra n.
92.
But see supran
.
84, noting that in the later case of
National R.R.
the Supreme Court
concluded that no alleged impairment by the Government of its own contract
existed and therefore there was “no need to consider
whether
an allegation of a government breach of its own contract warrants application”
of a more rigorous standard of review, and suggested only that the Government’s
impairment of its own obligation “
perhaps
” should
be treated differently. 470 U.S. at 471
and n. 24 (emphasis added).
(96)
518 U.S. 839 (1996).
22
contracting
party. One issue in
Winstar
was
whether the contract claim was barred by the “sovereign acts” doctrine,
i.e.,
the government’s “public and general”
acts cannot amount to a breach of contract.
Although the legislation alleged to constitute a contractual breach had
as its purposes “preventing the collapse of the [thrift] industry, attacking
the root causes of the crisis, and restoring public confidence”,(97) the
Supreme Court held a “sovereign acts” defense was unavailable: “[w]hile our
limited inquiry into the background and evolution of the thrift crisis leaves
us with the understanding that Congress acted to protect the public in the
FIRREA legislation, the extent to which this reform relieved the Government of
its own contractual obligations precludes a finding that the statute is a ‘public
and general’ act for purposes of the sovereign acts defense.”(98)
To recapitulate, whether or not
the state is a party to the contract at issue, the critical determination of
whether an impairment occurs involves a court’s evaluation of the parties’
expectations and actual reliance on the abridged contractual term. In making that determination, the Supreme
Court has looked to several objective factors.
In determining the parties’ reliance, elimination of escalator clauses
in natural gas contracts, lowering the interest rate and delaying the maturity
date in bond contracts, and elimination of the unlimited right to reinstate
ownership of land after default, each has been held not to constitute
substantial impairment of contract rights, in part because the rights abridged
were not in their nature essential to the underlying contract and thus
fundamental to a party’s reliance. In
contrast, statutes causing “a fundamental change” in a pension contract,
repealing a statutory covenant the purpose of which “was to invoke the
constitutional protection of the [Federal] Contract Clause as security against
repeal,” and unilaterally modifying a contract right upon which the parties “especially”
relied, i.e., “the right to compensation at the contractually specified level”
in a public employment contract, have been held substantial impairments because
the rights impaired by subsequent legislation were “important,” “basic,” and “central”
to the underlying contract.(99) While a
determination of impairment will be a fact intensive inquiry, a critical component
will be the Bondholders’ ability to submit convincing evidence that they were
in fact substantially induced to purchase the Bonds on the basis of the rights
set forth in the Pledges.(100)
(97)
Id
. at 856.
(98)
Id
. at 903.
(99)
City of Charleston
,
57 F.3d at 392-393 (citations omitted).
(100) In discussing the earlier
case of
El Paso v. Simmons
, 379 U.S. 497 (1965), which held that a law
shortening the time within which a defaulted land claim could be reinstated did
not violate the Federal Contract Clause, the
Allied Structural
opinion
highlighted as the basis for
El Paso
its quoted conclusion that “[w]e do
not believe that it can seriously be contended that the buyer was substantially
induced to enter into these contracts on the basis” of the altered law. 438 U.S. at 244 n. 14. In
Board of Comm’rs v. Department of
Natural Resources
, 496 So.2d 281, 294 (La. 1986), the Louisiana Supreme
Court doubted the right of a successor bondholder, who purchased the bonds
after and with full knowledge of the allegedly impairing legislative enactment,
to have a cause of action for impairment.
See supra
nn. 67 and 69-70.
23
Louisiana
Contract Clause
The Louisiana Contract Clause
provides that: “No . . . law impairing the obligation of contracts shall be
enacted.”(101) The Louisiana Supreme
Court has described this constitutional provision as “virtually identical” and “substantially
equivalent” to the Federal Contract Clause.(102) Thus the Federal Contract Clause and the
Louisiana Contract Clause are essentially equal, and neither represents a more
significant limitation than the other.
Although the language of the Louisiana Contract Clause is facially
absolute, as with the Federal Contract Clause, its prohibition must be
accommodated to the inherent police power of the state to safeguard the vital
interests of its people.(103) The
Louisiana Supreme Court has detailed as “the appropriate [Louisiana] Contract
Clause standard” the multiple-step analysis as enunciated by the Supreme Court
in
Energy Reserves
, and discussed in detail above.
It is a fundamental principle
that laws existing at the time a contract is entered into are incorporated into
and form a part of the contract as though expressly written therein. It is also well established that the value of
a contract cannot be diminished by subsequent legislation.(104) The repeal of legislation by subsequent
legislation is unconstitutional if it impairs the enforcement of the
obligations of contracts.(105) An
obligation of contract is impaired in a constitutional sense if the means by
which a contract at the time of its execution could be enforced, that is, by
which the parties could be obliged to perform it, are rendered less efficacious
by legislation operating directly upon those means.(106)
The Louisiana Supreme Court has
recently evaluated two Louisiana legislative acts under the Federal and
Louisiana Contract Clauses. In
State
of Louisiana v. All Property and Casualty Insurance Carriers Authorized and
Licensed to do Business in the State of Louisiana
(107), the Louisiana
Supreme Court exercised its supervisory authority in an expedited manner to
find the two 2006 Louisiana legislative acts at issue constitutional. In response to Hurricanes Katrina and Rita,
the Louisiana Legislature enacted two statutes which extend the prescriptive
period (statute of limitations) within which Louisiana citizens may file
certain claims under their insurance policies for losses occasioned by those
hurricanes from one year to (essentially) two years, i.e., a one year
extension. The Louisiana Attorney
General filed suit seeking a declaratory judgment as to the constitutionality
of the legislative acts. The trial court
rejected the insurance companies defendants’ arguments asserting violations of
the Federal and Louisiana Contract
(101) La. Const. Art. I, Sec. 23.
(102)
Smith v. Board of Trustees
, 851 So.2d
1100, 1108 (La. 2003);
Morial v. Smith & Wesson Corp.
, 785
So.2d 1, 12 (La. 2001) (“
Morial
”);
Segura
v. Frank
, 630 So.2d 714, 728 (La. 1994) (“
Segura
”);
see infra
page 25; see,
e.g
.
Metropolitan Life Ins. Co. v. Morris
, 159 So.
388 (La. 1935) (applying
Blaisdell
to uphold a Louisiana mortgage
moratorium law).
(103)
Segura
, 630 So.2d at 728.
(104)
D’Antonio v. Board of Levee Commissioners
of the Orleans Levee District
, 80 So.2d 81, 83 (La. 1955).
(105)
Ranger v. the City of New Orleans
, 34 La. Ann. 1149 (1882).
(106)
Wolff v. New Orleans
, 103 U.S. 358,
365, 367 (1880).
(107) No. 2006-CD-2030, 937 So.2d 313 (La.
2006) (“
Insurance Carriers
”).
24
Clauses.(108) The question at issue was whether the two acts
altering the contractual provisions of insurance policies regarding the time
period in which to bring a claim are constitutional. The Louisiana Supreme Court held that no
unconstitutional impairment had occurred.
The Louisiana Supreme Court
first stated that the Louisiana Contract Clause and the Federal Contract Clause
are virtual identical and substantially equivalent. The Louisiana Supreme Court then noted that
under the pertinent United States Supreme Court jurisprudence, the prohibitions
in the Contract Clauses remain subject to the inherent police power of the
state. The Louisiana Supreme Court then
reiterated that the appropriate analysis under both the Federal Contract Clause
and the Louisiana Contract Clause is the “four-step” analysis enunciated in
Energy
Reserves
:
first, the court must determine whether the state law would, in fact,
impair a contractual relationship; second, if an impairment is found, the court
must determine whether the impairment is of a constitutional dimension; third,
if the state regulation constitutes a substantial impairment, the court must
determine whether a significant and legitimate public purpose justifies the
regulation; finally, if a significant and legitimate public purpose exists, the
court must determine whether the adjustment of the rights and responsibilities
of the contracting parties is based upon reasonable conditions and is of a
character appropriate to the public purpose justifying the legislation’s
adoption.(109)
Regarding the first inquiry,
the Louisiana Supreme Court readily held that the extension of the prescriptive
period would, in fact, constitute an impairment of the contractual relationship
between the defendant insurers and their policyholders. Next, the Louisiana Supreme Court provided
some analysis of the question as to whether the impairment is one of constitutional
dimension. The Louisiana Supreme Court’s
analysis was first to determine the severity of the impairment, which in turn
was measured by determining the extent to which the insurers’ contractual
expectations would be frustrated by the operation of the two legislative
acts. The Louisiana Supreme Court noted
that a contractual impairment may be “substantial” under
Energy Reserves
,
even if the impairment does not rise to the level of total destruction of
contractual expectations. On the other
hand, it also emphasized several times the relevance of whether the industry
the complaining party has entered has been regulated in the past. Nonetheless, even noting that the Louisiana
insurance industry is pervasively regulated, the
(108) The defendants’ other arguments, regarding
standing, procedural due process, and federal supremacy clause preemption as it
relates to federal flood insurance, were all rejected as well.
(109)
Insurance
Carriers
, 937 So.2d at 324, quoting
Segura
, 630 So.2d at 729;
Energy
Reserves
, 459 U.S. at 410-413. As
noted above,
infra
page 15, the courts
are inconsistent as to whether the test has three factors (with subparts) or
four factors.
See
Mary Garvey Algero,
Will A Decision That Has
the Potential to Do so Much Good for the People of Louisiana Set a Harmful
Precedent
, 53 Loy. L.Rev. 47, 60 (2007).
25
Louisiana
Supreme Court found that the contractual obligations of the defendant insurers
were more than minimally altered and thus the impairments were of a constitutional
dimension. “However, we also find that
the impairments constitute considerably less than total destruction of the
insurers’ contractual expectations.
Consequently, when we inquire into the public purpose underlying the
legislation, we will give considerable difference to the legislature’s
judgment.”(110)
Under the third inquiry, the
Louisiana Supreme Court easily found this legislative extension of the
prescriptive period for damage claims to be based upon a significant and
legitimate public purpose, in response to the worst natural disaster to ever
occur in the United States. It
reiterated that:
the public purpose requirement is primarily designated to prevent a
state from embarking on a policy motivated by a simple desire to escape its
financial obligations or to injure others through the repudiation of debts or
the destruction of contracts of [
sic
]
[or] the denial of needs to enforce them.(111)
In the critical fourth inquiry,
the Louisiana Supreme Court concluded that the Louisiana Legislature’s adjustment
of the rights and responsibilities of the contracting parties was both
appropriate and reasonable. The
Legislature’s extension of the prescriptive period for filing claims in these
type of insurance cases was limited in both time and scope. The extension was only for one additional
year (noting that the pertinent time periods in the states neighboring
Louisiana all are greater than one year), and was limited to certain types of
claims. The Legislature addressed this
significant public concern in an appropriate manner in order to avoid mass
confusion and an increase in filings in our courts.(112) The Louisiana Supreme Court reiterated that,
while of constitutional dimension, the substantial impairment in this case was
of the type that may be anticipated in this highly regulated insurance
industry.
Although the Louisiana Supreme
Court in
Insurance Carriers
conducted its analysis on the basis that the
contractual relationships impaired were private ones between the defendant
insurers and their policyholders, and that the State itself was not a
contracting party, the holding was expressly made on the basis that the
legislative acts are constitutional even under the stricter standard of review
applicable when the State is a party to the contract.(113) The insurance carriers argued that the State
should be considered a party to the contract because of the State’s position as
a property owner and property insurance policyholder who may benefit from the
extension of time, and in addition because the State will be assigned the
remaining rights of many Louisiana policyholders under the state program known
as the Louisiana Recovery Authority (The Road Home Program). The Louisiana Supreme Court rejected that
(110)
Insurance Carriers
, 937 So.2d at 325.
See infra
n.
148.
(111)
Id
at 325, citing
Segura
,
630 So.2d at 731, citing
Blaisdell
.
(112)
Id
at 327, n. 13.
(113)
Id
at 326-27.
26
assertion, and
considered the State’s interest as an affected property owner as incidental and
not sufficient to trigger the stricter standard of review. As noted, however, it expressly held that its
conclusion that the legislative acts violate neither the Federal nor the
Louisiana Contract Clauses would be unchanged even under the stricter standard
of review.
Reserved
Powers Doctrine
As mentioned previously, a
fundamental defense to claims under both the Federal and Louisiana Takings
Clauses and the Federal and Louisiana Contract Clauses is that the state action
of a legislative character, notwithstanding that property value has been taken
and contractual rights impaired, nonetheless is permissible as an exercise of
inherent, reserved police power of the state (and any contrary irrevocable
contract right purportedly created by the state is void).
Connolly
requires consideration of
whether legislation destroying existing contractual rights nonetheless is not a
taking because of the subject matter involved, especially when occurring in a
regulated field where distinct investment – backed expectations should not be
recognized. With respect to the Federal
Contract Clause,
U. S. Trust
provides that the reserved powers doctrine
requires a determination of the state’s power to create irrevocable contract
rights in the first place (before reaching the inquiry into the purpose or
reasonableness of the subsequent impairment).(114)
Moreover, the Louisiana
Constitution in Article VI, Section 9(B) provides that “the
police power of the state shall never be abridged.” Although expressed only as a limitation on Article VI
of the Constitution concerning local governmental bodies, this provision has
been interpreted to express a fundamental constitutional precept concerning the
ability of the Legislature to surrender the police power.(115) This principle is applicable to attempts to
surrender or abridge the rate-making power, constitutionally vested in the
LPSC.(116) Rate-making by the LPSC is
undeniably an aspect of the police power for the promotion of the public
welfare.(117) Additionally, United
States Supreme Court precedent supports the extension of this principle to
(114)
U.S. Trust
, 431 U.S. at 23,
supra
n. 89;
Matsuda v. City and County of Honolulu
,
512 F3d 1148, 2008 WL 115138 (9th Cir. Jan 14, 2008).
(115)
Board of Comm’rs v. Department of Natural
Resources
, 496 So.2d 281, 289 (La. 1986) (“
Board of
Comm’rs
”) (“It is a general principle of judicial interpretation
of a state constitution, as well as a specific prohibition of our constitution,
that the legislature may not irrevocably alienate, surrender or abridge the
right to exercise the police power.”) (citations omitted);
accord
,
Ex Parte Steckler
, 154 So. 41, 44 (La. 1934) (“a fundamental rule in
our form of state government is that the Legislature cannot surrender irrevocably
any of the state’s police power.”) (citations omitted). Similarly, the Louisiana Constitution in Article 1,
Section 4 expressly makes the Louisiana Takings Clause subject to the
reasonable exercise of the police power.
Supra
n. 48.
(116)
Baton Rouge Waterworks Co. v. LPSC
,
100 So. 710, 711 (La. 1924) (“It is conceded on well-recognized authority that
the rate-making power, whether exercised by agreement or by the fiat of law, is
within the police power of the state as one of the state’s highest attributes
of sovereignty, and that this power can never be abridged nor irrevocably
surrendered where there is, as in this state, constitutional inhibition.”).
(117)
GSU
, 633 So.2d at 1264;
Conoco
,
520 So.2d at 408;
see supra
. nn. 13 & 61 (rate making is an act
and function legislative, and not judicial, in kind, within the police power of
the state), and
infra
n. 118 (the establishment
of a rate is an act legislative and not judicial in nature,
NOPSI
at
371).
27
the LPSC’s
regulation of utilities, to the extent such an extension is not already
implicit in existing Louisiana jurisprudence.(118)
Although the police power of
the state is best defined on a case by case basis, it has been generally
described as the state’s “inherent power to govern persons and things,
within constitutional limits
, for
promotion of general health, safety, welfare and morals.(119) Nonetheless, the police power extends only to
measures that are reasonable. A measure
taken under the state’s police power is reasonable when the action is, under
all the circumstances, reasonably necessary and designed to accomplish a
purpose properly falling within the scope of the police power. Further, an exercise of the state’s police
power “does not justify an interference with constitutional rights which is
entirely out of proportion to any benefit redounding to the public.”(120) Thus the non-abridgement clause of the
Louisiana Constitution has been construed in a manner consistent with the “reserved
powers” doctrine articulated by the United States Supreme Court in
U. S.
Trust
.(121)
Jurisprudential
Considerations and Injunctions
Challenges to an alleged
impairment or taking may face jurisprudential issues of ripeness and
abstention.(122) A claim under the
Federal Takings Clause is not ripe for
(118)
New Orleans Public Service, Inc. v.
Council of City of New Orleans
, 491 U.S. 350, 109 S.Ct. 2506, 105 L.Ed.2d
298 (1989) (“
NOPSI
”) (“The regulation of
utilities is one of the most important of the functions traditionally
associated with the police power of the states.”) (citations and internal
quotation marks and brackets omitted);
Pacific Gas & Elec. v. State
Energy Resources Conservation
, 461 U.S. 190, 206 (1983).
(119)
Morial
, 785 So.2d
at 15 (citations omitted) (emphasis added).
(120)
Morial
, 785 So.2d
at 15-16.
(121)
See
Board of Comm’rs
, 496 So.2d at 293 (“Into all contracts, whether made
between states and individuals or between individuals only, there enters the
condition, regardless of whether it is carried into express stipulation, that
the state may not bargain away or otherwise be prevented from exercising its
police power, viz., the exercise of the sovereign right of the government to
protect the lives, health, morals, comfort and general welfare of the people.”)
(citations omitted).
See infra
pages 41-44.
(122) The LPSC’s role in issuing the Financing
Order approving the Storm Recovery Charges requires consideration of another
possible jurisdictional limitation, under the Johnson Act, codified at 28
U.S.C. § 1342. The Johnson Act provides
that federal district courts “shall not enjoin, suspend or restrain the
operation of, or compliance with, any order affecting rates chargeable by a
public utility and made by a State administrative agency or a ratemaking body
of a State political subdivision, where:
(1) Jurisdiction
is based solely on diversity of citizenship or repugnance of the order to the
Federal Constitution; and
(2) The
order does not interfere with interstate commerce; and
(3) The
order has been made after reasonable notice and hearing; and
(4) A
plain, speedy and efficient remedy may be had in the courts of such State.” 28 U.S.C. § 1342.
First, this provision applies
only to orders “affecting rates” charged by a public utility; thus, federal
jurisdiction over an action by the LPSC affecting regulation other than
ratemaking would not be barred by the Johnson Act. Even as to orders affecting rates, however,
the order must not interfere with interstate commerce. In the case of an LPSC supplemental order
that effected an impairment or taking, or any rescission, amendment or
violation of the Pledge, the order would virtually by definition affect
interstate commerce, as it would affect the value of the Bonds, either directly
or indirectly through manipulation of the Storm Recovery Charges.
Compare
Nucor
Corp. v. Nebraska
28
consideration
until the state government entity charged with implementing the legislative
action has reached a final decision, and the plaintiff seeks compensation
through the procedures the state has provided for doing so.(123) Injunctions are not available against a state
government to remedy an alleged Federal Takings Clause violation when a suit
for compensation can be brought against the sovereign after the
taking.(124) Although such resort to the
State’s procedures is not necessary if a plaintiff can demonstrate such
procedures are inadequate or unavailable, Louisiana’s procedures for
challenging an order of the LPSC altering or impairing the value of the
Financing Order are both adequate and available. Judicial review of LPSC orders is governed by
Article IV, Section 21(E) of the Louisiana Constitution, which
provides a right of appeal to the East Baton Rouge Parish district court, and
thereafter directly to the Louisiana Supreme Court, in a manner to be
prescribed by the Legislature.(125)
Under the Securitization Act, an aggrieved party or intervenor before the
LPSC has a remedy regarding a supplemental order (pertaining to this Financing
Order), by filing an appeal to the district court no later than fifteen days
after the order becomes effective. The
district court is obliged under the Securitization Act to afford the case
precedence over all other civil cases in the court and to move it to trial as
speedily as possible. Appeal from the
district court’s decision is taken directly to the Louisiana Supreme
Court. Due to the availability of such
state appeal proceedings, and because Louisiana provides for inverse
condemnation proceedings by aggrieved property owners even in the case of
nonphysical regulatory takings, a federal cause of action may not arise under
the Federal Takings Clause until the aggrieved property owner has requested
compensation from the State and resort to that process failed to yield just
compensation.(126)
Public Power
Dist.
, 891 F.2d 1343, 1348 (8th Cir. 1989) (Johnson
Act inapplicable where challenged rate overcharge of nearly $7 million affected
cost of goods of plaintiff, who sold those goods in interstate commerce),
cert.
denied
, 498 U.S. 813, 111 S.Ct. 50, 112 L.Ed.2d 60 (1990). For these reasons, in our view the Johnson
Act should not comprise a bar to federal jurisdiction.
(123)
Williamson County Regional Planning Comm’n
v. Hamilton Bank
, 473 U.S. 172, 186, 194-95 (1985) (“
Williamson
”);
Urban Developers LLC v. City of Jackson
,
468 F.3d 281 (5th Cir. 2006);
DLX, Inc. v. Kentucky
, 381
F.3d 511 (6th Cir. 2004).
(124)
Monsanto
,
supra
n. 20, 467 U.S. at 1016,
Williamson
, 473 U.S. at 194.
(125)
Louisiana Power and Light Co. v. LPSC
,
369 So.2d 1054, 1058 (La. 1979) (Louisiana Constitution “makes it clear that
any judgment of a district court sitting in review of actions” by the LPSC is
directly appealable to the Louisiana Supreme Court).
See
Marco Outdoor Advertising, Inc. v.
Regional Transit Authority
, No. 05-30875, 489 F.3d 669 (5th Cir. 2007)
(dismissing federal claim because Louisiana state courts provide an adequate
procedural remedy for the alleged deprivation of contract property
interest). Although there is no reported
judicial decision addressing this question, we believe that the Securitization
Act’s venue provision will likely apply in this context, instead of the venue
stated in La. R.S. 45:1198.1 which provides that whenever the LPSC seeks the
judicial enforcement of an order entered by it, the suit shall be brought in
the parish of the domicile of the utility not in compliance with the order.
(126) If the action causing the taking is an
action of the Legislature, the pertinent question will be whether there exists
an administrative/judicial procedure for decisions of the state agency or
department charged with enforcing such action.
If no such procedure exists, then immediate resort may be had to a suit
for just compensation in state district court.
If the action is an action of the LPSC, then the Bondholder will first
have to proceed through a final resolution of the state procedure for reviewing
such orders, including appeal to the state district court and then the
Louisiana Supreme Court, as the saga of
Liberty Mutual Insurance Company shows.
Liberty Mutual claimed,
inter
29
Furthermore, the Eleventh
Amendment of the United States Constitution erects a jurisdictional bar of
sovereign immunity to the LPSC or the Louisiana Legislature being sued in a
federal court. The Eleventh Amendment bars
a Bondholder from suing the State in federal court unless the State consents or
Congress has clearly and validly abrogated the State’s sovereign immunity. Thus, under the Eleventh Amendment the State
would be immune from suit or damages resulting from an alleged constitutional
violation of the Federal Contract Clause.(127)
It is not as clear whether the State can assert sovereign immunity to
bar a federal suit claiming compensation under the Federal Takings Clause
brought directly against the State.(128)
As to damages, Louisiana has waived its right to sovereign immunity
concerning claims sounding in tort or contract and seeking to recover for
damage to property under the Louisiana Constitution.(129) We note that, to the extent that any
impairment also constitutes a taking under the Federal or Louisiana Takings
Clauses so as to require the State to pay just compensation, the
alia
, that certain
rate decisions of the Louisiana Insurance Rating Commission (“LIRC”) deprived
it of its property interests. Liberty
Mutual filed suit in federal district court seeking compensation under the
Federal Takings Clause. The federal
Fifth Circuit ordered the claim dismissed as unripe, following
Williamson
.
Liberty Mutual Ins. Co. v. Louisiana Dep’t
of Insurance
, 62 F.3d 115, 117 (5th Cir. 1995). Liberty Mutual then proceeded to prosecute an
inverse condemnation claim in state court.
The Louisiana First Circuit court dismissed this claim as well, noting
that while Louisiana law clearly recognizes an action for inverse condemnation,
Liberty Mutual had still failed to avail itself of the administrative and
judicial remedies available for challenging the order of the LIRC, which are a
prerequisite to any suit for just compensation.
Liberty Mutual Ins. Co. v. LIRC
, 1997-1043 (La. App. 1 Cir.
6/29/98), 713 So.2d 1250, 1253-55,
writ
denied
, 1998-2072 (La. 11/6/98), 728 So.2d 396. Liberty Mutual then filed suit again in
federal court, and the federal district court dismissed this second suit,
noting that Liberty Mutual had still failed to invoke the administrative and
judicial remedies available to challenge the LIRC’s rate decisions. The federal Fifth Circuit affirmed this
dismissal, and found that because the statute of limitations governing inverse
condemnation proceedings had run, the dismissal should be with prejudice.
Liberty Mutual Ins. Co. v. Brown
, 380
F.3d 793, 796-798 (5th Cir. 2004).
(127)
See, e.g.
,
North Carolina v. Temple
,
134 U.S. 22, 25, 30 (1890) (holding that North Carolina enjoys sovereign
immunity from claimed violation of Federal Contract Clause) (citing
Ex Parte
Ayers
, 123 U.S. 443 (1887)). A suit
against a state agency or department is considered a suit against the state
under the Eleventh Amendment of the United States Constitution. The jurisprudential factors determining
whether an entity such as the LPSC is covered by the State of Louisiana’s
Eleventh Amendment immunity suggest that all Louisiana executive departments
have Eleventh Amendment immunity.
Vogt
v. Board of Comm’rs of the Orleans Levee District
, 294 F.3d 684, 692 (5th Cir. 2002);
Champagne v.
Jefferson Parish Sheriff’s Office
, 188 F. 3d 312, 313 (5th Cir. 1999). The LPSC is executive head of the Department
of Public Service within the executive branch.
La. R.S. 36:721;
see
La.
Const. art. IV, sec. 21 (the LPSC is in the executive branch). A suit against individual officers for
injunctive relief might be available under
Ex Parte Young
, as discussed
below.
(128)
A state’s
waiver of sovereign immunity in one form or against one class of claims cannot
necessarily be construed to be waiver of sovereign immunity in other forms or
against other claims.
McElrath v.
United States
, 102 U.S. 426, 440 (1880).
Although federal courts continue to bar federal takings claims against
states brought in federal district court,
DLX, Inc. v. Kentucky
, 381
F.3d 511 (6th Cir. 2004), nonetheless there is some uncertainty as to whether a
State’s declaration of sovereign immunity against a federal takings claim
should have effect.
City of Monterrey
v. Del Monte Dunes at Monterrey Ltd.
, 526 U.S. 687, 713-714 (1999)
(assuming arguendo that the “sovereign immunity rationale retains its vitality
in cases where [the Fifth] Amendment is applicable”).
(129)
See, e.g.
, La. Const. Art. XII, Sec. 10;
La. R.S. 13:5111.
30
availability of such
compensation would constitute an adequate remedy at law and equitable
(injunctive) relief and declaratory relief might be unavailable.(130)
This jurisdictional bar of
sovereign immunity, however, can be circumvented through use of the legal
fiction set forth in
Ex Parte Young
.(131) Under the
Ex Parte Young
“exception”
to the Eleventh Amendment, a state officer may be sued in his official capacity
in federal court as long as the relief sought is prospective only,
i.e.
, declaratory and injunctive
relief,(132) and provided that the complaint alleges an ongoing violation of
federal law.(133) Thus,
(130)
Monsanto
,
467 U.S. at 1016. In cases where the
state is a party to the contract, the question arises as to whether the state
action is a breach of contract, rather than an impairment of contract. The distinction turns upon the availability
of a remedy in damages.
See
, e.g.
,
TM Park Avenue Assoc. v. Pataki
, 214 F.3d 344, 348-49 (2nd
Cir. 2000). “If a contract is merely
breached and the duty to pay damages remains, then the obligation of the
contract remains and there has been no impairment.”
Id
.,
at 349;
accord
,
Horwitz-Mathews,
Inc. v. City of Chicago
, 78 F.3d 1248, 1250-51 (7th Cir. 1996). It should be noted that a claim for damages
against a state officer can be made in federal court through the artifice of an
“individual capacity” suit, in this case against the individual commissioners
of the LPSC and/or the pertinent state enforcement officer.
Alden v. Maine
, 527 U.S. 706, 757, 119
S.Ct. 2240, 144 L.Ed.2d 636 (1999) (“Even a suit for money damages may be
prosecuted against a state officer in his individual capacity for
unconstitutional or wrongful conduct fairly attributable to the officer
himself, so long as the relief is sought not from the state treasury but from
the officer personally.”). However, in
such “individual capacity” lawsuits, a defendant enjoys absolute immunity from
damages if his conduct can be characterized as “legislative” in character.
Bogan v. Scott-Harris
, 523 U.S. 44,
49, 118 S.Ct. 966, 140 L.Ed.2d 79 (1998).
Lower level “enforcement” officials, on the other hand, enjoy only “qualified
immunity;” that is, they are immune from a damages claim in federal court
unless their conduct amounts to a violation of a clearly established
constitutional right and is otherwise objectively unreasonable.
Harlow v. Fitzgerald
, 457 U.S. 800,
818-19, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982).
The only plausible cause of action pertaining to the Transaction to
address such a violation with a damages remedy would be 42 U.S.C. § 1983, which
sounds in tort for purposes of the sovereign immunity analysis. (Louisiana in any event cannot prevent a suit
in state court under § 1983 by a sovereign immunity defense.
Alden v. Maine
, 527 U.S. 706, 756
(1999).) However, given the character of
the anticipated state action, the individual state actors very likely would be
entitled to absolute immunity, as their conduct would be the exercise of legislative
judgment, or at least qualified immunity.
See
Louisiana Farms v.
Louisiana Dep’t of Wildlife and Fisheries
, 95-845 (La. App. 3 Cir.
10/9/96), 685 So.2d 1086, 1092-99,
writ
denied
, 97-0486, 97-0507 (La. 4/4/97), 692 So.2d 420, 422. (The Financing Order prohibits any cause or
right of action for damages against the individual commissioners in reliance
thereon.) Legislative immunity shields
from suit not only legislators, but also officials in the executive branch
(such as the LPSC) when their actions are legislative in nature, and may bar
not only claims for damages but may also apply to bar claims for injunctive
relief brought against state officials in their official capacities under the
Ex
Parte
Young
exception to sovereign immunity.
State Employees Bargaining Agent Coalition
v. Rowland
, No. 06-0616, 2007 WL 1976148 (2nd Cir. 2007). We also note the possible applicability of
Louisiana’s discretionary function immunity statute, which protects state
officers from liability when making policy or exercising discretionary
functions. La. R.S. 9:2798.1;
Commerce
& Industry Ins. Co. v. Grinnell Corp.
, 280 F.3d 566, 570-72 (5th Cir.
2002).
(131)
209 U.S.
123, 28 S.Ct. 441, 52 L.Ed. 714 (1908).
(132)
Conversely,
a federal court is without jurisdiction to impose a damages award upon any
state agency or department for any past violation of federal law, including any
unconstitutional “taking” or “impairment of contracts.”
See
DLX, Inc. v. Kentucky
, 381 F.3d 511, 526-28 (6th Cir. 2004) (discussing
issue).
(133)
Verizon
Maryland, Inc. v. Public Service Comm’n of Maryland
, 535 U.S. 635, 645, 122
S.Ct. 1753, 152 L.Ed.2d 871 (2002);
State Employees Bargaining Agent
Coalition v. Rowland
, No. 06-0616, 2007 WL 1976148 (2nd Cir. 2007).
31
while suit against the LPSC in
federal court likely would be barred by the Eleventh Amendment, a suit against
the individual LPSC commissioners seeking declaratory and injunctive relief to
remedy violations of the Federal Contract Clause and Federal Takings Clause
could be maintained in federal court.(134)
Similarly, as to any action taken by the Louisiana Legislature, while
the Legislature itself would be immune from suit, a suit for prospective
injunctive relief against violations of the federal constitution might be
maintained in federal court against any state executive branch officer charged
with enforcement of the legislative action.(135) In order to obtain injunctive relief, the
plaintiff must show that enforcement of the unconstitutional legislation is
imminent.(136) The provision of
injunctive relief would be subject to judicial discretion, and would require a
showing that (1) immediate and irreparable harm would occur if the
injunction does not issue, (2) the claim for relief is based upon an
established legal right, (3) there is no adequate remedy at law, and (4) the
equities preponderate in favor of the moving party. Also in the court’s discretion, declaratory
relief might be available.(137)
However, a suit in federal district court seeking an injunction or
declaratory relief, at least with respect to LPSC action, before appeal
proceedings in Louisiana state courts are final would cause such prospective
challenge to be questioned as undue interference with state proceedings and
thus appropriate for federal court abstention.(138) One type of federal court abstention that
would be applicable is referred to as “Burford abstention” after the seminal
case of
Burford v. Sun Oil Co.
(139)
“Where timely and adequate state-court review is available, a federal
court sitting in equity must decline to interfere with the proceedings or
orders of state administrative agencies: (1) when there are difficult
questions of state law bearing on policy
(134)
Id
., 535 U.S. at 645-46, 122 S.Ct. at
1760-61.
(135)
Keystone
Bituminous Coal Assoc. v. DeBenedictis
, 480 U.S. 470, 107 S.Ct. 1232, 94
L.Ed.2d 472 (1987) (suit under Federal Takings Clause and Federal Contract
Clause seeking to enjoin Pennsylvania officer from enforcing allegedly
unconstitutional state statute);
Lipscomb v. Columbus Municipal Separate
School District
; 269 F.3d 494 (5th Cir. 2001) (“
Lipscomb
”
).
(136)
Morales
v. TWA
, 504 U.S. 374, 381 (1992).
(137)
28 U.S.C.
§ 2201;
Wilton v. Sevin Falls Co.
, 515 U.S. 277, 282-283
(1995). As noted above,
supra
n. 130, the availability of
injunctive and declaratory relief might be limited where the State’s actions
constitute an unconstitutional taking, or merely a breach of contract (as
opposed to an impairment of contract), for which the aggrieved party can recoup
money damages at law. Furthermore,
federal courts have found that a delay in the receipt of payments until final
judgment is not the type of “irreparable harm” which justifies a preliminary
injunction, absent special countervailing circumstances such as the possibility
that such delay could result in the claimant’s insolvency or the closure of the
claimant’s business.
See
,
e.q.
,
Roland Mach. Co. v. Dresser Indus., Inc.
, 749 F.2d 380, 386 (7th Cir.
1984);
cf
Ridgely
v. Federal Emergency Management Agency
, No. 07-30615, 2008 WL 54799, 512
F.3d 727, (5th Cir. Jan. 4, 2008) (discussing standards for injunction in due
process claim and requiring that government’s procedures be constitutionally
inadequate).
(138)
NOPSI
,
491 U.S. at 359 (“thus, there are some classes of cases in which the
withholding of authorized equitable relief because of undue interference with
state proceedings is the normal thing to do.”)
(internal quotation marks and citation omitted).
See
State of Louisiana v. All Property and
Casualty Insurance Carriers Authorized and Licensed to do Business in the State
of Louisiana
, No. 06-519 (M.D. La. Aug. 17, 2006) (order granting remand to
state court).
(139)
319 U.S. 315
(1943) (“
Burford
”
);
Occidental
Chemical Corp. v. LPSC
, 494 F.Supp 2d 401, 414 (M.D. La. 2007).
32
problems of substantial public
import whose importance transcends the result and the case then at bar or (2) where
the exercise of federal review of the question in the case and in similar cases
would be disruptive of state efforts to establish a coherent policy with
respect to a matter of substantial public concern.”(140) There is a significant possibility that a
federal district court would decide to abstain from deciding constitutional
claims of the Bondholders in favor of the Louisiana state court appeal process,
particularly with reference to action by the LPSC. First, although the claims address federal
constitutional violations, the case itself is of minimal federal significance;
no comprehensive federal scheme is involved, and the constitutional violations
arise from the impairment or deprivation of state-derived property rights,
specifically, those rights recognized by the Securitization Act.(141) Second, Louisiana provides a rapid and
adequate system of judicial review of LPSC orders through a single district
court, and then directly to the Louisiana Supreme Court.(142) Third, federal review would extend beyond the
four corners of the LPSC order, and would have to include the Transaction
Documents, related documents, and state constitutional law, to determine
whether the factors to be consider warrant a conclusion that the federal
constitution was violated.(143) Finally,
because the relief requested would of necessity require the federal court to
countermand the decision of the LPSC, charged with balancing the interests of
the public and utilities in exercising its regulatory/ratemaking function, in
favor of third parties (the Bondholders), federal adjudication could be
considered to “unduly intrude into the processes of state government or
undermine the state’s ability to maintain desired uniformity” of treatment of
its citizens who are customers of various utilities.(144) Under such circumstances, there is a significant
possibility that a federal district court would abstain from adjudicating the
matter in favor of the state court system of administrative/judicial
review.(145)
If Louisiana legislation did
allegedly violate the Federal or Louisiana Contract Clauses, then the
Bondholders also could file suit for injunction in a Louisiana state district
court as an exercise of original jurisdiction, the traditional mode of
challenging unconstitutional legislative acts.(146) Louisiana courts have recognized that it is a
constitutional and proper
(140)
NOPSI
,
491 U.S. at 361 (internal quotation marks and citation omitted).
(141)
Compare
Burford
, 319 U.S. at 331
(claim that Texas oil and gas regulations deprived plaintiffs of due process
was of minimal federal importance).
(142)
Compare
Alabama Pub. Serv. Comm’n v.
Southern R. Co.
, 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002 (1951) (finding
Burford abstention appropriate where state provided statutory right of appeal
to single court, and appellate court had power to review and set aside any
commission order).
(143)
Contrast
NOPSI
, 491 U.S. at 363 (“[N]o
inquiry beyond the four corners of the Council’s retail rate order is needed to
determine whether it is facially pre-empted by FERC’s allocative decree and
relevant provisions of the Federal Power Act.”).
(144)
Id
., at 363.
(145)
Note the
Insurance
Carriers
case discussed above followed a remand to state court by the
federal district court after a hearing, following removal by one defendant
insurance company of the state court declaratory judgment suit.
See supra
n. 138.
(146)
See
Pope v. State of Louisiana
, 1999-2559
(La. 6/29/01), 792 So.2d 713.
Marine Shale Processors, Inc. v. State of
Louisiana, Department of Environmental Quality
, 551 So.2d 643 (La. App. 1
Cir. 1989),
cert.
denied
, 553 So.2d 465 (La. 1989).
33
exercise of a state district
court’s original jurisdiction to issue preliminary and permanent injunctions to
enjoin state officers from violating the United States and Louisiana
constitutions.(147) Any subsequent
legislative enactment modifying the Securitization Act or the Transaction will
be presumed to be constitutional and the party challenging the validity of the
statute will have the burden of overcoming that firmly established presumption
by proving it is unconstitutional.(148)
Additionally, if a LPSC
supplemental order did allegedly violate the Federal or Louisiana Contract
Clauses, the Louisiana Supreme Court has specifically recognized the authority
of a district court having appellate jurisdiction over an LPSC order to
entertain a petition for preliminary injunctive relief and to preliminarily
enjoin the order under review, where such injunction is necessary to avoid
irreparable injury or enjoin a constitutional violation.(149) Significantly, preliminary injunctive relief
is recognized as particularly useful in a rate
decrease
case initiated by the LPSC.(150) The
Louisiana Supreme Court also stated that a showing of irreparable injury is not
necessary when the deprivation of a constitutional right is involved.(151) The breadth of that assertion has been
challenged, however.(152)
It would be advisable for
Bondholders to intervene and raise any constitutional issues as an intervenor
in the LPSC’s proceedings involving any supplemental order pertaining to the
Financing Order. The Securitization Act
specifies that challenges involving legal rights affected by the LPSC orders
within the scope of the Securitization Act are to be heard, as an exercise of
appellate jurisdiction, by the same district court in East Baton Rouge Parish
that would otherwise review LPSC orders.(153)
(147)
See
Star Enterprise v. State through
Department of Revenue
, 95-1980 (La. App. 1 Cir. 6/28/96), 676 So.2d 827,
833,
writ denied
, 96-1983
(La. 3/14/97), 689 So.2d 1383. Louisiana
state courts also have jurisdiction for declaratory judgments. La. Code Civ. Proc. art. 1871.
(148)
Insurance
Carriers
, 937 So.2d at 319;
Usery v. Turner Elkhorn Mining Co.
, 428
U.S. 1, 15 (1976);
c.f.
National
R.R.
, 470 U.S. at 463.
(149)
South
Central Bell Telephone Company v. LPSC
, 555 So.2d 1370 (La. 1990) (“
SCB
”)
(150)
Id
. at 1373; s
ee also
Entergy Gulf States, Inc. v.
LPSC
, 730 So.2d 890, 897 (La. 1999).
(151)
SCB
,
555 So.2d at 1373 (“when a violation of state property guarantees is shown, a
court may enjoin the constitutional violation”).
(152)
Kruger v.
Garden District Association
, 779 So.2d 986 (La. App. 4th Cir. 2001) (“we
take a restrictive review of this judicially created exception” to the need of
showing irreparable injury, perhaps limiting exception to vested “state
property” rights).
(153)
La. R.S.
45:1228(H).
See
Daily Advertiser v. Trans-La (A Division of Atmos
Energy Corp.
), 612 So.2d 7, 12 (La. 1993) (antitrust, contract, breach of
fiduciary duty and fraud claims that concerned manipulation of fuel adjustment
clauses fell within original jurisdiction of LPSC, and district court had no
original jurisdiction over such claims);
CLECO v. LPSC
, 601 So.2d 1383,
1386 (La. 1992) (discussing jurisdictional divide between district court and
LPSC adjudicatory jurisdiction).;
Louisiana Power & Light
, 343 So.2d
1040, 1042 (1977) (“
LP&L
”) (discussing requirement to contest
validity of LPSC action before LPSC).
34
The
Constitutional Claims on Direct Review
An order by the LPSC that
rescinds or amends the Financing Order or otherwise creates an impairment or
taking will be subject, as discussed above, to a right of appeal established by
the Louisiana Constitution in Article IV, Section 21(E). This constitutional right of appeal is
provided to aggrieved parties and intervenors before the LPSC to the state
district court in East Baton Rouge Parish.
The Constitution provides a right of direct appeal to the Louisiana
Supreme Court from any judgment by the district court in connection with the
judicial review of any action taken by the LPSC.(154) The appellate review by the Louisiana Supreme
Court of orders of the LPSC extends to both the law and the facts.(155)
As also discussed above, the
Louisiana Supreme Court, recognizing the constitutional authority of the LPSC,
has established in a long line of cases a standard of judicial review
deferential to LPSC orders. First, there
is a presumption that LPSC orders are legal and proper, and it is the burden of
the party attacking an LPSC order to prove that it is defective.(156) The Louisiana Supreme Court has summarized
this deferential standard of review by observing that “an order of the [LPSC]
should not be overturned on review unless it is arbitrary, capricious, abusive
of its authority, or not reasonably based upon the evidence presented”.(157) However, the LPSC is not entitled to
deference in its interpretation of legislative statutes and judicial decisions.(158) Also, when a LPSC order adopts an agreement
(a joint proposal by LPSC Staff and a utility) between a utility and the LPSC,
the court cannot unjustifiably disregard the parties’ intentions or the plain
language of the agreement to uphold the LPSC’s later interpretation of the
initial order, in contrast to the normal deference accorded to the LPSC’s
interpretation of its own past orders.(159)
Despite this general
deferential standard, the Louisiana Supreme Court has, in a series of
decisions, demonstrated a willingness to overturn LPSC actions that
unreasonably impinge the property rights of third parties. These decisions have in large measure applied
a general rule of reasonableness.(160)
As discussed below in detail, these decisions on
(154)
See supra
page 29 n. 125.
(155)
Louisiana
Power & Light Co. v. LPSC
, 237 So.2d 673, 675 (La. 1970).
(156)
Global
Tel* Link
, 707 So. 2d at 33-34;
LP&L
, 343 So.2d at 1044.
(157)
Washington
St. Tammany Electric Coop. v. LPSC
, 959 So.2d 450, 455 (La. 2007);
Eagle
Water, Inc. v. LPSC
, 947 So.2d 28, 33 (La. 2007);
Entergy Gulf States v.
LPSC
, 730 So.2d 890, 897 (La. 1999).
(158)
Citgo
Petroleum v. LPSC
, 815 So.2d 19, 23 (La. 2002);
Washington – St. Tammany
Electrical Coop. v. LPSC
, 671 So.2d 908, 912 (La. 1996).
(159)
Entergy
Gulf States v. LPSC
, 766 So.2d 521, 527 (La. 2000);
Entergy Gulf States
v. LPSC
, 730 So.2d 890, 897-98 (La. 1999).
(160)
Global
Tel* Link
, 707 So.2d at 33 (a LPSC order is arbitrary and capricious only
when the record does not and could not
reasonably
support its findings);
GSU
,
infra
at n. 175, at 1264 (unreasonable LPSC order);
Central Louisiana Electric
Company v. Louisiana Public Service Commission
, 373 So.2d 123, 132 (La.
1979) (same effect);
Railway Express Agency v. Louisiana Public Service
Commission
, 145 So.2d 18, 33 (La. 1962) (where the findings and conclusions
of the LPSC do not conform to the law and are not supported by the evidence ––
so that the order of
35
reasonableness are influenced
by the consideration of whether an unconstitutional impairment or taking has
occurred, but subsume the constitutional analysis into the concept of
reasonableness. In part, this style of
analysis derives from the jurisprudential balance regarding the state’s police
power, as “the police power extends only to measures that are reasonable”.(161) Similarly, the concluding inquiry of the
analysis of a Federal Contract Clause case under the
Energy Reserves
test ends with the court’s judgment as to the reasonableness of the
governmental action. The Louisiana
Supreme Court’s apparent difference in language in its line of cases reviewing
LPSC actions on appeal by emphasis on “unreasonableness” in practice reflects,
explicit or not, the fourth step of the
Energy Reserves
test as to
whether the challenged legislation is based upon “reasonable” conditions and is
of “appropriate” character (not requiring “necessity”). Further, an exercise of the state’s police
power “does not justify an interference with constitutional rights which is
entirely out of proportion to any benefit redounding to the public”.(162) Thus the Louisiana Supreme Court’s standard
of review of LPSC actions incorporates the constitutional principles involved
in the Contract Clause and Takings Clauses, regardless of whether the Court’s
opinion contains an express enumeration of the traditional constitutional
analysis.
An important case illustrating
this combination of analyses is
Louisiana Gas Service Co. v. LPSC
.(163) The case arose out of a contract between the
Town of Arcadia and a water company wherein the town asked the water company to
construct facilities for industry the town was trying to attract. The water company and the town then jointly
applied for and received from the LPSC an increase in the water rates charged
to the citizens of the town, as such increase was needed to finance the new
construction. Subsequently, however,
some residents of the town complained, and the town went back to the LPSC and
requested that the rates be lowered. The
LPSC lowered the rates, and the water company appealed. The Louisiana Supreme Court, in the first
instance, found that the town had breached its contract with the water
company. Then, the Louisiana Supreme
Court went on to address the LPSC’s order:
We are cognizant that under its powers . . . the [LPSC] was not
inhibited from acting in the public interest; it was not bound by the contract
between the Water Company and the Town of Arcadia. However, the Commission’s action in reducing
the water rates to be paid by the citizens of the Town of Arcadia – provoked at
the instance of some citizens – and
causing
the violation of the obligation of contract
was
unreasonable
and is subject to reversal.
the LPSC is
unreasonable
–– the court may reverse or vacate the LPSC’s order).
See also
,
Eagle Water, Inc. v. LPSC
, 947 So. 2d 28, 33 n.4 (La. 2007) (vacating
LPSC Order as arbitrary and capricious because record evidence necessary to
support decision absent).
(161)
Morial v.
Smith & Wesson Corp.
, 785 So.2d 1, 17-18 (La. 2001) (“
Morial
”).
(162)
Id
. at 15.
Compare
Standard Oil Co. of Louisiana v. Louisiana Public Service Commission
, 97
So. 859, 864 (La. 1923) (in those extreme cases in which some fundamental right
is invaded or denied, the courts may intervene to comply a recognition of
constitutional guarantees).
(163)
162 So.2d
555 (La. 1964) (“
Louisiana Gas Service
”).
36
* * * * *
The final order of the Commission . . . had the effect of bringing
about an annual loss of $13,500.00 to the Water Company . . . . The Water Company was precluded from securing
the minimum $28,500.00 additional revenue required after it had expended and
parted with $116,000.00 for expansion.
We find that the final action of the [LPSC] was
unreasonable
and
arbitrary and
constituted an
abuse of power
subject to reversal by the
court.(164)
The Louisiana Supreme Court
expressly noted in
Louisiana Gas Service
that “the present suit is not
in a real sense a rate case . . . .
Here, we are concerned with a contractual obligation, and a
determination must be made as to whether such obligation was impaired, and if
so whether it could have been impaired.”(165)
The Louisiana Supreme Court’s analysis in
Louisiana Gas Service
initially begins with the Louisiana Contract Clause (under the Louisiana
Constitution of 1921) and the well recognized principle that “the rate-making
power, whether exercised by agreement or by the fiat of law, is within the
police power of the state as one of the state’s highest attributes of
sovereignty, and that his power can never be abridged nor irrevocably
surrendered where there is, as in this state, constitutional inhibition.”(166) Nonetheless, “[t]hough the obligation of
contracts must yield to the proper exercise of the police power, and vested
[contract] rights cannot inhibit the proper exertion of the power, it must be
exercised for an end which is in fact public and the means adopted must be
reasonably adapted to the accomplishment of that end and must not be arbitrary
or oppressive.”(167) The Louisiana
Supreme Court expressly found that the contract existed and was impaired. Nonetheless, as noted above, the Louisiana
Supreme Court’s ultimate holding in vacating the LPSC’s order was based on the
conclusion that the LPSC’s action in reducing rates was unreasonable.
The Louisiana Supreme Court
took the same approach of merging the constitutional analysis into the
reasonableness analysis under the judicial review of LPSC orders in
Conoco, Inc.
v. LPSC
.(168) In
Conoco
, an
oil company helped to finance the construction of a pipeline in return for the
pipeline company’s promise that the oil company, as a shipper on the pipeline,
would be charged a set fee. The LPSC,
however, ordered that the oil company pay a fee higher than the agreed-upon
fee, namely the same fee charged to all other oil companies who used the
pipeline. The oil company appealed the
order.
The Louisiana Supreme Court
began by noting that any person entering into contracts with a public utility
is subject to the uncertainty of regulatory authority, and specifically noted
that Louisiana’s constitutional prohibition against the impairment of contracts
(164)
Id
.
at 564 (citations omitted)
(emphasis added).
(165)
Id
. at 562.
(166)
Id
.
at 563 (citations omitted).
(167)
Id
.
(168)
520 So.2d
404 (La. 1988) (“
Conoco
”).
37
does not vary this
precept.(169) However, the Louisiana
Supreme Court went on, citing the Louisiana Takings, Contract, and Due Process
Clauses, to opine that just because the LPSC had the authority to fix the
pipeline fees “does not mean the [LPSC] is free to change the rates without
carefully considering whether such a change deprives Conoco of due process and
whether such a change is necessary to promote public good.”(170) Thus, the Louisiana Supreme Court held that “[a]
valid contract cannot be modified by the [LPSC] without a clear finding that
the abrogation is exercised for a public end and is reasonably necessary to the
accomplishment of that end.”(171) As the
LPSC had not made the required findings, the Louisiana Supreme Court reversed
and remanded.
The Louisiana Supreme Court
framed the rate-making case in
Conoco
as presenting two issues: first,
whether the contract is impaired by the tariff, and second, if the contract is
impaired, the conflict is between the police power of the state to regulate
public utilities and the constitutional restrictions against the impairment of
obligations. Although contractual
obligations must yield to the rate-making power of the State when the public
interest requires it, the constitutional restrictions against the impairment of
obligations require that contracts not be abrogated without careful
consideration of all the circumstances and a clear showing that the public
interest requires it. The rate-making
power should yield to valid contracts whenever that is possible and consistent
with the public good.(172) The
Louisiana Supreme Court’s concluding analysis again returned to the
reasonableness standard:
Nevertheless, the fact that contracts may be adjusted in appropriate
circumstances does not mean that it is always proper to do so. Though the obligations of contracts must
yield to a proper exercise of the police power, that power must be exercised
for an end which is in fact public, and the means must be reasonably adapted to
the accomplishment of that end and must not be arbitrary or oppressive. Moreover, the [LPSC’s] power and authority to
fix rates is limited always by due process concerns. Property, including obligations under valid
contracts, cannot be
taken
without due process. . . . [The LPSC’s]
rationale has some merit to it, but unfortunately it is flawed because it
leaves out a crucial component of the calculation. That component is Conoco’s
constitutional rights to its property
and
right not to have its
contract impaired
absent necessity. . . .
[W]e also hold the rate-making aspect of the police
power is limited by restrictions against impairing contracts.
A valid contract cannot be
modified
by the [LPSC] without a
clear finding
that the abrogation is
exercised for
(169)
Id
.
at 407.
(170)
Id
. at 408.
(171)
Id
. at 409.
(172)
Id
. at 407.
38
a public end and is
reasonably
necessary to the accomplishment of that end
. In the case at hand, we find that the [LPSC]
failed to consider whether [the oil company] has received just compensation for
its role in constructing the pipeline.(173)
The Louisiana Supreme Court’s holding was to
vacate the LPSC’s order because the LPSC acted unreasonably and arbitrarily,
under the standard that there was an absence of a clear finding by the LPSC
that the abrogation of Conoco’s contract was exercised for public end and was
reasonably necessary to the accomplishment of that end.(174)
In
Gulf States Utilities
Company v. Louisiana Public Service Commission
,(175) the Court summarized
its impairment of contract jurisprudence as applied to the LPSC’s rate-making
powers. In a rate-making case, a utility’s
fuel adjustment clause was modified. The
Louisiana Supreme Court began by noting that the LPSC’s constitutional
jurisdiction affords broad, independent and regulatory powers over public
utilities. Citing
Conoco
and
Louisiana
Gas Service
, the proper exercise of police power was presented as the power
to regulate reasonably the actions of its citizens in order to protect or
promote the public welfare. Contracts
may not be abrogated by the exercise of police power unless it is for public
end and the result is reasonably adapted to that end with careful consideration
of all circumstances and a clear showing that the public interest requires such
abrogation. Finally, the means by which
a contract is impaired pursuant to state powers must not be arbitrary,
unreasonable or oppressive.(176) In
reinstating the modification order by the LPSC, the Louisiana Supreme Court
distinguished
Louisiana Gas Service
as vastly different:
In that case the [LPSC] approved new rates which were expressly
designed to provide revenues for specific capital improvement that the parties
then constructed in reliance on the revenues.
The LPSC’s subsequent disallowance of the rate increase constituted
detriment to the parties and was an
arbitrary
and
unreasonable
abuse of power
.(177)
We particularly note that the
Louisiana Supreme Court, although it expressly decided
Conoco
in light
of the Louisiana Contract Clause, did not give the LPSC order under review the
extreme deference that the precedents suggest is owed to the government’s
action when a Federal or Louisiana Contract Clause claim is adjudicated. Rather,
Conoco
sets forth a heavy
burden for the LPSC to meet in entering orders that “modify” (
not
“substantially impair”) contractual
obligations. When
Conoco
is read
in tandem with
Louisiana Gas Service
, the resulting principle is that in
the narrow context of judicial review of LPSC orders, property rights
(173)
Id
. at 408-409 (emphasis added).
(174)
Id
. at 409.
(175)
633 So.2d 1258 (La. 1994) (“
GSU
”).
(176)
Id
. at 1258-59 (citations omitted).
(177)
Id
. at 1264 (emphasis added).
39
and related constitutional
protections are incorporated into the “reasonableness” review of the courts,
rather than analyzed in light of the particular limitations of the separate and
distinct claims for constitutional violations.
Again, federal and state court jurisprudence under the Federal Contract
Clause and the Louisiana Contract Clause asks only whether the challenged legislature
action is appropriate and reasonable.
More recently, the Louisiana
Supreme Court applied this principle in
Bowie v. LPSC
.(178)
Bowie
involved the application of an
LPSC rule, which restricted the merger by or transfer of assets of a utility,
to a transfer of stock in the utility.
The Louisiana Supreme Court, after finding that the subject matter of
the rule fell within the constitutional jurisdiction of the LPSC to
regulate utilities, nonetheless interpreted the rule more narrowly than
had the LPSC, and based upon this interpretation found it inapplicable to the
case before the bar. The Louisiana
Supreme Court cited two reasons for declining to defer to the LPSC’s
construction of its own rule: “First,
because the [LPSC]’s action infringes to some extent upon the stock owner’s
rights to contract and to dispose of their private property, the rule must
be strictly construed and only applications plainly warranted by its language
may be made;” and “[s]econd, even if the rules could be interpreted to apply
to transfers of closely held corporate stock, under the circumstances of the
present case the [LPSC]’s orders depriving such persons of the right to dispose
of private property would constitute arbitrary action and a violation of the
guarantees of due process.”(179)
Thus
Bowie
, like
Louisiana
Gas Service
and
Conoco
, clearly states that protection of private
property, due process, and similar constitutional concerns are part of the
judicial review process where LPSC orders are concerned. More importantly,
Bowie
is a
demonstration that the deference accorded legislative pronouncements under
Federal and Louisiana Contract Clause analyses has not been applied by the
Louisiana Supreme Court on direct review of an LPSC action.
The LPSC acknowledges in Ordering
Paragraph 52 of the Financing Order that it would be unreasonable, arbitrary
and capricious for the LPSC to take any action contrary to the covenant and
pledge set forth in the Financing Order after issuance of the Bonds.
Conclusion
The outcome of any claim that
the otherwise proper exercise by the State of Louisiana’s police power that
interferes with the value of the Storm Recovery Property is an unconstitutional
impairment or taking and is unreasonable, arbitrary and an abuse of authority
would likely depend on multiple factors, such as the state interest furthered
by that interference, the extent of financial loss to Bondholders caused by
that interference, and the extent to which courts would consider that
Bondholders had a reasonable expectation that changes in government policy,
statutes and orders would not interfere with their investment. In our view, the most
(178)
627 So.2d 164 (La. 1993) (“
Bowie
”).
(179)
Id
. at 169.
40
important determination will be
whether the reserved powers doctrine invalidates the Pledges.(180) The State having intended to bind itself
irrevocably for the term of the Bonds by the Pledges, was it valid for the State
to do so?
Reserved Powers
Doctrine
The reserved powers doctrine as
applied to the Pledges and the Transaction requires an initial inquiry
concerning the ability of the State of Louisiana (through the Legislature and
the LPSC) to enter into agreements that limit its power to act in the future. The reserved powers doctrine has long
established that a state is without power to enter into binding contracts
forbidding the exercise of its police power in the future.(181) It has also been long recognized that
attempts to define the police power have been unsuccessful, and that it is not
always easy to tell on which side of the line which separates contracts that
relate to property rights protected by the Constitution from those not so
protected a particular case is to be put.(182)
Nonetheless, while the scope of these reserved powers has not been
precisely defined by the courts, as a general proposition it is undeniable that
the state’s utility rate-making power is within the reserved police
power.(183) The historical application
of the reserved powers doctrine attempted a distinction among the powers of the
state – the police power and the power of eminent domain could not be
contracted away, but the state could bind itself in the future non-exercise of
the taxing and spending powers.(184) The
core nature of the police power as applied to contracts of a sort themselves
injurious to public morals or public safety or health, such as prohibitions of
lotteries, liquor sales and unsafe commercial operations, admittedly are not
implicated by the Transaction. The
Pledges certainly cannot be construed to contract away any power to regulate
health or safety matters pertaining to the transmission of electricity. But the Supreme Court in
Blaisdell
expressly recognized that the reserved police power extends to economic
matters, and cited the state’s legislative power to regulate, and thus to
modify, utility rates as an illustration.(185)
Ultimately, the Supreme Court
has acknowledged that “formalistic distinctions” as to the nature of the state’s
power being exercised are not dispositive, but they contain an element of
truth.(186) The issue is not the state’s
reserved power to regulate (change) utility rates, but rather the possible
future claim by the state of the police power to regulate (adversely
(180) Louisiana is not unique in this regard. The reserved powers doctrine is equally
critical to this issue regarding subsequent action by a state legislature
harmful to securitization transactions in other states. The Financing Order provides in Conclusion of
Law Paragraph 4 that the LPSC has authority to approve the Financing Order
under the Securitization Act and the LPSC’s constitutional plenary power.
(181)
U. S. Trust
, 431 U.S. at 23-24.
See supra
pages 21-22
and 27-28.
(182)
Stone v. Mississippi
, 101 U.S. 814, at
818, 820-21 (1879);
see
Matsuda
v. City and County of Honolulu
, 512 F3d 1148, 2008 WL 115138 (9th Cir. Jan. 14,
2008).
(183)
Supra
nn.
116-17.
(184)
U.S. Trust
, 431 at 24.
(185)
Blaisdell
, 290 U.S. at 438.
(186)
U.S. Trust
, 431 U.S. at 24.
41
change) the Transaction
(including such aspects as the true-up mechanism) — without
compensation.(187) It is difficult to
predict in advance a circumstance involving an impairment of the Pledges that
involves the State’s ability to legislate for the general public welfare or
morals or to preserve health and safety, as opposed to an impairment justified
by a future economic exigency within the State of Louisiana.(188) Thus the subject matter here is financial,
albeit not the State’s own debt. The
goal (end) of any state action violating the Pledges will be the critical
aspect to be tested. By analogy, purely
financial obligations of the state do not fall within the reserved powers
doctrine, and thus are subject to the Federal Contract Clause.(189) In the same way, for a consideration a state
may, in the exercise of reasonable discretion, surrender a part of the state’s
power of taxation.(190)
Indeed, the rate-making power
is not a state power whose future action must always be unfettered by prior
state actions. As an example, the LPSC
has full authority to fix a rate subject to an automatic revision dependent
upon a future event.(191) Moreover, the
prohibition
(187)
Lipscomb
, 269 F.3d at 504.
(188) The Federal Contract Clause jurisprudence
makes clear that an impairment in response to an economic emergency must be a
reasonable and specific response to the conditions, justifiable by a
significant and legitimate public purpose dealing with a broad, generalized
economic problem.
Energy Reserves
,
459 U.S. at 411;
Allied Structural
, 438 U.S. at 250;
see
Treigle v. Acme Homestead Ass’n
, 297 U.S. 189
(1936) (Louisiana law that modified the existing withdrawal rights of the
members of a building and loan association held invalid under the Federal
Contract Clause);
W. B. Worthen Co. v. Kavanaugh
, 295 U.S. 56 (1935);
Blaisdell
,
290 U.S. at 426. In
W. B.
Worthen
, the United States Supreme Court reversed the decision of the
Arkansas Supreme Court upholding the validity of legislative enactments
(accompanied by a legislative declaration of an emergency) which the United
States Supreme Court viewed as taking “from the mortgage [securing bonds issued
by municipal improvement districts pursuant to state law] the quality of an
acceptable investment for a rational investor” by making it much more difficult
and time consuming to foreclose upon the collateral posted as security for the
mortgage. 295 U.S. at 60. In this instance the Bondholders have the
counter-argument that the Pledges and the Transaction themselves are in direct
response to an emergency.
(189)
Lipscomb
, 269 F.3d at 505, 512.
(190)
Stone
, 101 U.S. at 820. By example, in
Liter v. City of Baton
Rouge
, 245 So.2d 398 (La. 1971) the constitutionality of sales and use
taxes by a political subdivision (city) was challenged on the basis that the
language of the taxing authority granted to the political subdivision was so
plenary and extraordinary as to be equivalent to the surrender and abandonment
of the Legislature’s taxing power. The
Louisiana Supreme Court held that the grant was a permissible delegation. It was then further urged by the challengers
that the statute was unconditional as amounting to a surrender of the
Legislature’s taxing power because the statute authorized the funding of the
sales tax revenues into bonds, and that when they are so funded they cannot be
modified or reduced. The statute
declared that, when the obligations payable from the sales tax revenues shall
have been issued, the statute and the ordinance or resolution imposing the tax
shall be irrevocable until such obligations shall have been paid in full and
shall not be subject to amendment in any manner which would impair or
jeopardize the rights of the holders. It
was argued that these provisions amounted to an impermissable surrender of the
taxing power. The Louisiana Supreme
Court rejected this argument: “We are of the opinion that pledge of taxes for a
limited time does not amount to a ‘surrender’ of the taxing power as that term
is used in the constitution. Of course,
if the irrevocability were unlimited or the period is so long to make it
virtually unlimited, then it is conceivable that such an enactment might be held
to constitute at least a partial surrender of the taxing power. That situation is, however, not presented
here.”
Id
.
at 405.
(191)
United Gas Pipe Line Company v. LPSC
,
164 So.2d 343, 332 (La. 1964).
42
against retroactive rate making
is another example of a limitation on future LPSC action attempting to change a
prior LPSC order. It is a fundamental rule that
utility rates are exclusively prospective in application. One result of this rule is that the LPSC
may not order a rate increase that is retroactive to a time before the date of
the order, so as to recoup prior utility losses.(192) But prohibited retroactive ratemaking also
occurs when a utility is required to refund revenues collected pursuant to its
lawfully established rates. A utility is
entitled to rely on a final rate order, and the revenues collected under the
lawfully imposed rates become the property of the utility and cannot rightfully
be made the subject of a refund.(193) Of
course, normally the utility’s reliance on the final rate order is limited
until a new rate in lieu thereof is fixed by the LPSC(194); normal rate orders
do not contain provisions akin to the LPSC Pledge in the Financing Order.
The critical question thus
becomes whether the LPSC has the power to irrevocably agree that it will not
modify a rate for a specified period of time (more precisely, that it will not
modify its pledge to automatically adjust the Storm Recovery Charges
periodically to fully service the Bonds).
In the Transaction, the LPSC has clearly expressed its intent in the
Financing Order to do so; the question is whether that action is permissible
under the reserved powers doctrine. One
factor impacting this question is that the Financing Order and the
Securitization Act, including the Pledges, are in response to the severe damage
caused by Hurricanes Katrina and Rita, the former causing the largest natural
disaster in American history. Thus the
Pledges can be viewed as an expression of the state’s police power. Every rate order inherently surrenders some
reserved power, due to the prohibition on retroactive rate making. An express agreement by the LPSC to make the
Storm Recovery Charges and the Financing Order irrevocable for a period of time
to induce investors to provide lower cost financing rationally promotes the
core police power of obtaining reasonably reliable service at the lowest
reasonable cost for Louisiana ratepayers.
The Pledges plainly manifest
the intent of the Louisiana Legislature and the LPSC, respectively, to bind the
State. One distinguishing factor
weighing against the Bondholders is that the Bonds are being issued by a
private entity, while in many of the cited cases, such as
U.S. Trust
,
the bonds at issue were issued by a governmental entity. However, the Securitization Act mandates that
Storm Recovery Property, being used to pay and secure the Bonds, can only be
created pursuant to a Financing Order issued by the LPSC – a governmental
agency – pursuant to the express provisions of the Securitization Act – an enactment
of the sovereign Louisiana Legislature.
The issuance of the Pledges and of the Financing Order clearly rests on
authority of the State and thus the issuance of the Bonds is state-sanctioned
in a manner closely analogous to the situation in
U.S. Trust
.
(192)
SCB
,
supra
n. 149, 555 So.2d at 1374.
(193)
Entergy Gulf States v. LPSC
, 737 So.2d
890, 920 (La. 1999).
(194)
Id
.
43
In our view, the Legislative
Pledge and the LPSC Pledge are clearly an inducement offered by the State to
investors to purchase the Bonds. In
other words, the Pledges constitute an agreement by the State not to reduce or
otherwise impair the Storm Recovery Charges that will fund repayment of and
provide the financial security for the Bonds, in order to foster the capital
markets’ acceptance of such Bonds at a significantly lower interest rate for
the benefit of its citizens/ratepayers.
As such, we believe the Pledges are analogous to the type of “financial
contract” involved in
U.S. Trust
, a promise that revenues and reserves
securing the bonds at issue there would not be depleted beyond a certain
level. The courts must consider the
Bondholder’s reasonable expectations with respect to changes in the law. The foreseeability of the change in the law
is of great, and perhaps controlling, importance in Contract Clauses
analysis.(195) The strong history of
state regulation of utility rates is not sufficient to justify voiding the
Pledges under the reserved powers doctrine when the state action leaves the
private party to the impaired contract without
the gains it reasonably expected from the contract.(196) The Pledges are strongly worded statements
specifically crafted to forestall an expectation of change in the law that
would interfere with the collection of the Storm Recovery Charges. The rate-making aspect of the police power is
limited by constitutional restrictions against impairing contracts.(197)
In our opinion, subject to all
of the qualifications, limitations and assumptions set forth in this Opinion,
the Pledges are not an impermissible attempt to “contract away” the police
power of the State of Louisiana, and will not be disregarded under the reserved
powers doctrine so as to preclude a reviewing court of competent jurisdiction
from holding that violation of the terms of the Pledges, in applicable factual
circumstances, is reversible by the courts.
Legislative Pledge
Further, it is our opinion that
the Legislative Pledge by the Louisiana Legislature not to take any action that
impairs the value of the Storm Recovery Property or alter the pertinent
provisions of the Securitization Act unambiguously indicates the State’s intent
to be bound with the Bondholders and, subject to all of the qualifications,
limitations and assumptions set forth in this Opinion, supports the conclusion
that the Legislative Pledge constitutes a binding contractual relationship
between the State and the Bondholders for purposes of the Federal and Louisiana
Contract Clauses. In our opinion, subject
to all of the qualifications, limitations and assumptions set forth in this
Opinion (including the assumption that any impairment be “substantial”), a
reviewing court of competent jurisdiction would hold that the State of
Louisiana could not constitutionally repeal or amend the Securitization Act or
take any other action contravening the Legislative Pledge and creating an
impairment (without, as the Securitization Act requires, providing full
compensation for the full protection of the Storm Recovery Charges
(195)
Chrysler Corp. v. Kolosso Auto Sales, Inc.
,
148 F.3d 892, 894 (7th Cir. 1998).
(196)
Lipscomb
, 269 F.3d at 504;
Chrysler
,
148 F.3d at 895.
(197)
Conoco
at 409.
44
to be collected pursuant to the
Financing Order and full protection of the Bondholders), unless such court
would determine that such impairment clearly is a reasonable and necessary
exercise of the State of Louisiana’s sovereign powers based upon reasonable
conditions and of a character reasonable and appropriate to the emergency or
other significant and legitimate public purpose justifying such action.
Furthermore, it is our opinion,
subject to all of the qualifications, limitations and assumptions set forth in
this Opinion, that a reviewing court of competent jurisdiction would hold, if
it concludes that the Storm Recovery Property is protected by the Takings
Clauses, that the State would be required to pay just compensation to
Bondholders, as determined by such court, if the Louisiana Legislature repealed
or amended the Securitization Act or took any other action contravening the
Legislative Pledge, if the court determines doing so constituted a permanent
appropriation of a substantial property interest of the Bondholders in the Storm
Recovery Property and deprived the Bondholders of their reasonable expectations
arising from their investments in the Bonds.
There is no assurance, however, that, any such award of compensation
would be sufficient to pay the full amount of principal of and interest on the
Bonds.
LPSC Pledge
Further, it is our opinion,
subject to all of the qualifications, limitations and assumptions (including
the assumption that any impairment would be “substantial”) set forth in this
Opinion, that a Louisiana state court reviewing an appeal of LPSC action of a
legislative character would conclude that the LPSC Pledge (i) creates a
binding contractual obligation of the State of Louisiana for purposes of the
Federal Contract Clause and the Louisiana Contract Clause and (ii) provides
a basis upon which the Bondholders could challenge successfully on appeal any
such action by the LPSC of a legislative character, including the rescission or
amendment of the Financing Order, that such court determines violates the LPSC
Pledge in a manner that substantially reduces, limits or impairs the value of
the Storm Recovery Property or the Storm Recovery Charges, prior to the time
that the Bonds are fully paid and discharged, unless there is a judicial
finding that the LPSC action clearly is exercised for a public end and is
reasonably necessary to the accomplishment of that public end so as not to be
arbitrary, capricious or an abuse of authority.
Securitization Act
Further, it is our opinion that
the Securitization Act is constitutional in all material respects under the
United States Constitution. Further, it
is also our opinion, subject to all of the qualifications, limitations and
assumptions set forth in this Opinion, that the State Pledge is not an
impermissible attempt to “contract away” the police power of the State of
Louisiana, and will not be disregarded under the reserved powers doctrine, and
that the Securitization Act is constitutional in all material respects under
the Louisiana Constitution.
45
General
Matters
The
opinions expressed above do not constitute a guarantee of the outcome of any
particular
litigation, and there can be no assurance that an action will not be brought in
federal or state court challenging the provisions of the Securitization Act or
the Financing Order relating to the Bonds.
Moreover, t
he foregoing
opinions should not be construed to imply assurance that a repeal of or
amendment to the Securitization Act or the Financing Order will not be sought
or enacted or adopted, or that any other action by the State of Louisiana will
not occur, any of which might constitute a violation of the Pledges. Furthermore, given the absence of judicial
precedent directly on point, and the relative novelty of the security for the
Bondholders, the outcome of any litigation cannot be predicted with
certainty. In the event of any State
(including LPSC) action of a legislative character which adversely impacts the
rights of the Bondholders, time-consuming and costly litigation may ensue,
adversely affecting, at least temporarily, the price and liquidity of the
Bonds.
We note that judicial analysis
of issues relating to LPSC orders and to the Federal Contract Clause, the
Federal Takings Clause, the Louisiana Contract Clause, and the Louisiana
Takings Clause, and the retroactive effect to be given to judicial decisions,
has typically proceeded on a case-by-case basis and that the courts’
determinations, in most instances, are usually strongly influenced by the facts
and circumstances of the particular case.
We further note that there are no reported controlling judicial
precedents of which we are aware directly on point. Our analysis is necessarily a reasoned
application of judicial decisions involving similar or analogous
circumstances. Moreover, the application
of equitable principles (including the availability of injunctive relief or the
issuance of a stay pending appeal) is subject to the discretion of the court
which is asked to apply them. We cannot
predict the facts and circumstances which will be present in the future and may
be relevant to the exercise of such discretion.
The foregoing opinions are based upon our evaluation of existing
judicial decisions and arguments related to the factual circumstances likely to
exist at the time of a Federal Contract Clause, Federal Takings Clause,
Louisiana Contract Clause, or Louisiana Takings Clause challenge to a law
passed by the Legislature, or a challenge on similar grounds coupled with a
challenge as arbitrary and capricious to a supplemental order adopted by the
LPSC; such precedents and such circumstances could change materially from those
discussed above in this Opinion.
Consequently, there can be no assurance that a court will follow our
reasoning or reach the conclusions which we believe current judicial precedent
supports. It is our and your
understanding that none of the foregoing opinions is intended to be a guaranty
as to what a particular court would actually hold; rather each such opinion is
only an expression as to the decision a court should reach, in a properly
prepared and presented
case, relying on the
facts on which we have relied and giving them proper weight and authority, and
properly applying the law and
what we believe to be the applicable legal
principles under existing judicial precedents.
The recipients of this letter should take these considerations into
account in analyzing the risks associated with the subject Transaction.
46
Both the Securitization Act and
the Financing Order permit the limitation or alteration by the LPSC of the
Financing Order and the Storm Recovery Charges if and when full compensation is
made for the full protection of the Storm Recovery Charges and the full
protection of the holders of the Bonds and any assignee or financing party.
We are members of the Bar of
the State of Louisiana, and express no opinion as to matters which may be
governed by the laws of any jurisdiction other than Louisiana and the federal
laws of the United States of America.
The opinions contained herein
are given only as of the date of this opinion letter. No
opinion is expressed herein as to the
effect of any future acts of the parties or changes in existing law. We undertake no responsibility and disclaim
any obligation to supplement this opinion or otherwise advise you or any other
person of any change after the date hereof in the law (whether constitutional,
statutory or judicial) or the facts presently in effect, even though such
change may alter the scope or substance of the opinions herein expressed or
affect the legal or factual statements or assumptions herein. We shall have no obligation to revise or
reissue this opinion with respect to any transaction which occurs after the
date hereof and we undertake no responsibility or obligation to consider this
opinion’s applicability or correctness to any person other than its
addressees. This letter expresses our
legal opinion as to the foregoing matters based on our professional judgment at
this time; it is not, however, to be construed as a guaranty, nor is it a
warranty that a court considering such matters would not rule in a manner
contrary to the opinions set forth above.
This opinion is furnished to
you solely for your benefit in connection with the issuance of the Bonds and
may be relied upon only by you, and is not to be used, circulated, quoted,
relied upon or
otherwise referred to for any
other purpose or by any other person without our prior express
written
permission.
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Very truly yours,
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/s/ PHELPS DUNBAR, L.L.P.
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PHELPS DUNBAR, L.L.P.
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47
