UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 6, 2008
CLECO POWER LLC
(Exact name of registrant as specified in its charter)
Louisiana |
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1- 05663 |
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72-0244480 |
(State or other jurisdiction |
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(Commission File Number) |
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(IRS Employer |
of incorporation) |
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Identification No.) |
2030 Donahue Ferry Road |
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Pineville , Louisiana |
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71360 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: ( 318 ) 484-7400
CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC
(Exact name of registrant as specified in its charter)
Louisiana |
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333-147122 |
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26-1338431 |
(State or other jurisdiction |
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(Commission File Number) |
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(IRS Employer |
of incorporation) |
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Identification No.) |
2605 Highway 28 East |
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Office #12 |
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Pineville , Louisiana |
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71360 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: ( 318 ) 484-7400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry Into a Material Definitive Agreement.
In connection with the issuance and sale of $180,600,000 initial principal amount of 2008 Senior Secured Storm Recovery Bonds (the Bonds) of Cleco Katrina/Rita Hurricane Recovery Funding LLC (the Company), the Company and its sole member, Cleco Power LLC (Cleco Power) are entering into the agreements described below on March 6, 2008. The descriptions of these agreements are qualified in their entirety by reference to the agreements themselves, which are filed as exhibits to this report and incorporated in this Item 1.01 by reference.
Storm Recovery Property Sale Agreement
This agreement provides for the purchase by the Company of Cleco Powers storm recovery property for approximately $176,000,000, which generally consists of the rights and interests under a financing order issued by the Louisiana Public Service Commission, including the right to impose, bill, charge, collect and receive storm recovery charges and to recover storm recovery charges in amounts sufficient to pay principal and interest and to make other deposits in connection with the Bonds. Cleco Power as seller agrees to indemnify the Company and the trustee of the Bonds, on behalf of the Bondholders, for certain tax matters and for breaches of its representations, warranties and covenants in the agreement.
Servicing Agreement
This agreement provides that Cleco Power, as servicer, will manage, service, administer and make collections in respect of the storm recovery property. The servicers duties include calculating and billing storm recovery charges, obtaining meter reads, collecting the storm recovery charges, remitting the storm recovery charges to the trustee for the Bonds and petitioning the Louisiana Public Service Commission for adjustments to the storm recovery charges as necessary. Cleco Powers annual servicing fee will be 0.05% of the initial principal amount of the Bonds. Cleco Power as servicer agrees to indemnify the Company and the trustee of the Bonds, for itself and on behalf of the Bondholders, for the servicers willful misconduct, bad faith or negligence in the performance of, or reckless disregard of, its duties and for breaches of its representations, warranties and covenants in the agreement.
Administration Agreement
Under this agreement, Cleco Power will provide administrative services to the Company, and the Company will pay Cleco Power a fixed fee for performing these services, plus all reimbursable expenses.
Item 8.01 Other Events.
In connection with the closing of the issuance of the Bonds, the Company and Cleco Power are filing with this report certain agreements and instruments listed under Item 9.01 below.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibits 10.1, 10.2 and 10.3 are filed by the Company and Cleco Power; the remaining exhibits are filed separately by the Company.
1.1 Underwriting Agreement relating to the Bonds dated February 28, 2008
4.1 Indenture dated as of March 6, 2008
4.2 First Supplemental Indenture relating to the Bonds dated as of March 6, 2008
4.3 Form of Bond (included in Exhibit 4.2)
5.1 Opinion of Phelps Dunbar, L.L.P. relating to the legality of the Bonds
10.1 Storm Recovery Property Sale Agreement dated as of March 6, 2008
10.2 Storm Recovery Property Servicing Agreement dated as of March 6, 2008
10.3 Administration Agreement dated as of March 6, 2008
99.1 Opinion of Phelps Dunbar, L.L.P. relating to constitutionality of certain matters
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: March 6, 2008
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CLECO POWER LLC |
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By: |
/s/ Kathleen F. Nolen |
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Kathleen F. Nolen |
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Senior Vice President and Chief Financial |
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Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: March 6, 2008
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CLECO KATRINA/RITA HURRICANE |
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RECOVERY FUNDING LLC |
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By: |
/s/ Terry L. Taylor |
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Terry L. Taylor |
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Secretary and Manager |
INDEX TO EXHIBITS
Exhibit Number |
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Exhibit Description |
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1.1 |
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Underwriting Agreement relating to the Bonds dated February 28, 2008 |
|
|
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4.1 |
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Indenture dated as of March 6, 2008 |
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|
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4.2 |
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First Supplemental Indenture relating to the Bonds dated as of March 6, 2008 |
|
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4.3 |
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Form of Bond (included in Exhibit 4.2) |
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|
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5.1 |
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Opinion of Phelps Dunbar, L.L.P. relating to the legality of the Bonds |
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|
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10.1 |
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Storm Recovery Property Sale Agreement dated as of March 6, 2008 |
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10.2 |
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Storm Recovery Property Servicing Agreement dated as of March 6, 2008 |
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10.3 |
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Administration Agreement dated as of March 6, 2008 |
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99.1 |
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Opinion of Phelps Dunbar, L.L.P. relating to constitutionality of certain matters |
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:
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).
3
8
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 Underwriters retention, and/or expected pricing parameters of the Bonds).
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).
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 NASDs 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:
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.
15
17
18
19
20
21
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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.
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25
26
27
28
To the Issuer: |
Cleco Katrina/Rita Hurricane Recovery Funding LLC |
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2605 Highway 28 East #12 |
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Pineville, Louisiana 71360 |
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Attention: President |
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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.
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Very truly yours, |
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CLECO POWER LLC |
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By: |
/s/ Kathleen F. Nolen |
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Name: |
Kathleen F. Nolen |
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Title: |
Senior Vice President, CFO & |
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Treasurer |
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CLECO KATRINA/RITA HURRICANE
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By: |
/s/ Keith D. Crump |
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Name: |
Keith D. Crump |
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Title: |
Vice President & Manager |
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The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date specified in Schedule I hereto. |
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CREDIT SUISSE SECURITIES (USA) LLC |
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By: |
/s/ Stephen Viscovich |
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Name: |
Stephen Viscovich |
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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
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Total Principal Amount of Tranche |
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Bond Rate |
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Per Tranche A-1 Bond |
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$ |
113,000,000 |
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4.41 |
% |
Per Tranche A-2 Bond |
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$ |
67,600,000 |
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5.61 |
% |
Total |
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$ |
180,600,000 |
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Aggregate price to be paid to the Issuer by the Underwriters for the Bonds: |
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$179,620,871 |
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Underwriters fees: |
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$812,700 |
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Original Issue Discount (if any): |
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$166,429 |
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Redemption provisions: |
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None |
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Other provisions: |
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None |
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Closing Date, Time and Location: |
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March 6, 2008, 10:00 a.m.; offices of Baker Botts L.L.P. |
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I-1
SCHEDULE II
Principal Amount of Bonds to be Purchased
Underwriter |
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Tranche A-1 |
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Tranche A-2 |
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Total |
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Credit Suisse Securities (USA) LLC |
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$ |
83,264,000 |
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$ |
49,810,000 |
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$ |
133,074,000 |
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Wachovia Capital Markets, LLC |
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14,868,000 |
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8,895,000 |
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23,763,000 |
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|||
DEPFA First Albany Securities LLC |
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14,868,000 |
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8,895,000 |
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23,763,000 |
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Total |
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$ |
113,000,000 |
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$ |
67,600,000 |
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$ |
180,600,000 |
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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
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE |
2 |
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SECTION 1.01. |
DEFINITIONS |
2 |
SECTION 1.02. |
INCORPORATION BY REFERENCE OF THE TRUST INDENTURE ACT |
2 |
SECTION 1.03. |
RULES OF CONSTRUCTION |
2 |
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ARTICLE II THE STORM RECOVERY BONDS |
3 |
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SECTION 2.01. |
FORM |
3 |
SECTION 2.02. |
EXECUTION, AUTHENTICATION AND DELIVERY |
4 |
SECTION 2.03. |
DENOMINATIONS; STORM RECOVERY BONDS ISSUABLE IN SERIES |
4 |
SECTION 2.04. |
TEMPORARY STORM RECOVERY BONDS |
6 |
SECTION 2.05. |
REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE |
6 |
SECTION 2.06. |
MUTILATED, DESTROYED, LOST OR STOLEN STORM RECOVERY BONDS |
8 |
SECTION 2.07. |
PERSONS DEEMED OWNER |
9 |
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 |
9 |
SECTION 2.09. |
CANCELLATION |
10 |
SECTION 2.10. |
AMOUNT; AUTHENTICATION AND DELIVERY OF STORM RECOVERY BONDS |
11 |
SECTION 2.11. |
BOOK-ENTRY STORM RECOVERY BONDS |
13 |
SECTION 2.12. |
NOTICES TO CLEARING AGENCY |
14 |
SECTION 2.13. |
DEFINITIVE STORM RECOVERY BONDS |
14 |
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ARTICLE III COVENANTS |
15 |
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SECTION 3.01. |
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST |
15 |
SECTION 3.02. |
MAINTENANCE OF OFFICE OR AGENCY |
15 |
SECTION 3.03. |
MONEY FOR PAYMENTS TO BE HELD IN TRUST |
16 |
SECTION 3.04. |
EXISTENCE |
17 |
SECTION 3.05. |
PROTECTION OF TRUST ESTATE |
17 |
SECTION 3.06. |
OPINIONS AS TO TRUST ESTATE |
18 |
SECTION 3.07. |
PERFORMANCE OF OBLIGATIONS; COMMISSION FILINGS |
18 |
SECTION 3.08. |
NEGATIVE COVENANTS |
20 |
SECTION 3.09. |
ANNUAL STATEMENT AS TO COMPLIANCE |
21 |
SECTION 3.10. |
ISSUER MAY CONSOLIDATE, ETC |
21 |
SECTION 3.11. |
SUCCESSOR OR TRANSFEREE |
22 |
SECTION 3.12. |
NO OTHER BUSINESS |
22 |
i
SECTION 3.13. |
NO BORROWING |
22 |
SECTION 3.14. |
GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES |
22 |
SECTION 3.15. |
CAPITAL EXPENDITURES |
23 |
SECTION 3.16. |
RESTRICTED PAYMENTS |
23 |
SECTION 3.17. |
NOTICE OF EVENTS OF DEFAULT |
23 |
SECTION 3.18. |
INTENTIONALLY OMITTED |
23 |
SECTION 3.19. |
INSPECTION |
23 |
SECTION 3.20. |
SALE AGREEMENT, ADMINISTRATION AGREEMENT AND SERVICING AGREEMENT COVENANTS |
23 |
SECTION 3.21. |
TAXES |
26 |
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ARTICLE IV SATISFACTION AND DISCHARGE; DEFEASANCE |
26 |
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SECTION 4.01. |
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE |
26 |
SECTION 4.02. |
CONDITIONS TO DEFEASANCE |
28 |
SECTION 4.03. |
APPLICATION OF TRUST MONEY |
30 |
SECTION 4.04. |
REPAYMENT OF MONEYS HELD BY PAYING AGENT |
30 |
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ARTICLE V REMEDIES |
30 |
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SECTION 5.01. |
EVENTS OF DEFAULT |
30 |
SECTION 5.02. |
ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT |
31 |
SECTION 5.03. |
COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE |
32 |
SECTION 5.04. |
REMEDIES; PRIORITIES |
35 |
SECTION 5.05. |
OPTIONAL PRESERVATION OF THE TRUST ESTATE |
36 |
SECTION 5.06. |
LIMITATION OF PROCEEDINGS |
36 |
SECTION 5.07. |
UNCONDITIONAL RIGHTS OF STORM RECOVERY BONDHOLDERS TO RECEIVE PRINCIPAL, PREMIUM, IF ANY, AND INTEREST |
37 |
SECTION 5.08. |
RESTORATION OF RIGHTS AND REMEDIES |
37 |
SECTION 5.09. |
RIGHTS AND REMEDIES CUMULATIVE |
38 |
SECTION 5.10. |
DELAY OR OMISSION NOT A WAIVER |
38 |
SECTION 5.11. |
CONTROL BY STORM RECOVERY BONDHOLDERS |
38 |
SECTION 5.12. |
WAIVER OF PAST DEFAULTS |
39 |
SECTION 5.13. |
UNDERTAKING FOR COSTS |
39 |
SECTION 5.14. |
WAIVER OF STAY OR EXTENSION LAWS |
39 |
SECTION 5.15. |
ACTION ON STORM RECOVERY BONDS |
40 |
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ARTICLE VI THE TRUSTEE |
40 |
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SECTION 6.01. |
DUTIES AND LIABILITIES OF TRUSTEE |
40 |
SECTION 6.02. |
RIGHTS OF TRUSTEE |
41 |
SECTION 6.03. |
INDIVIDUAL RIGHTS OF TRUSTEE |
42 |
SECTION 6.04. |
TRUSTEES DISCLAIMER |
42 |
SECTION 6.05. |
NOTICE OF DEFAULTS |
43 |
SECTION 6.06. |
REPORTS BY TRUSTEE TO HOLDERS |
43 |
ii
SECTION 6.07. |
COMPENSATION AND INDEMNITY |
44 |
SECTION 6.08. |
REPLACEMENT OF TRUSTEE |
45 |
SECTION 6.09. |
SUCCESSOR TRUSTEE BY MERGER |
46 |
SECTION 6.10. |
APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE |
46 |
SECTION 6.11. |
ELIGIBILITY; DISQUALIFICATION |
47 |
SECTION 6.12. |
PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER |
48 |
SECTION 6.13. |
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE |
48 |
SECTION 6.14. |
RIGHTS OF THE AUTHENTICATING AGENT, STORM RECOVERY BOND REGISTRAR, PAYING AGENT, AND SECURITIES INTERMEDIARY |
48 |
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ARTICLE VII STORM RECOVERY BONDHOLDERS LISTS AND REPORTS |
50 |
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SECTION 7.01. |
ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF STORM RECOVERY BONDHOLDERS |
50 |
SECTION 7.02. |
PRESERVATION OF INFORMATION; COMMUNICATIONS TO STORM RECOVERY BONDHOLDERS |
51 |
SECTION 7.03. |
REPORTS BY ISSUER |
51 |
SECTION 7.04. |
REPORTS BY TRUSTEE |
52 |
SECTION 7.05. |
PROVISION OF SERVICER REPORTS |
52 |
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ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES |
53 |
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SECTION 8.01. |
COLLECTION OF MONEY |
53 |
SECTION 8.02. |
COLLECTION ACCOUNT |
53 |
SECTION 8.03. |
RELEASE OF TRUST ESTATE |
58 |
SECTION 8.04. |
ISSUER OPINION OF COUNSEL |
59 |
SECTION 8.05. |
REPORTS BY INDEPENDENT ACCOUNTANTS |
59 |
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ARTICLE IX SUPPLEMENTAL INDENTURES |
60 |
|
SECTION 9.01. |
SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF STORM RECOVERY BONDHOLDERS |
60 |
SECTION 9.02. |
SUPPLEMENTAL INDENTURES WITH CONSENT OF STORM RECOVERY BONDHOLDERS |
61 |
SECTION 9.03. |
EXECUTION OF SUPPLEMENTAL INDENTURES |
63 |
SECTION 9.04. |
EFFECT OF SUPPLEMENTAL INDENTURE |
63 |
SECTION 9.05. |
CONFORMITY WITH TRUST INDENTURE ACT |
63 |
SECTION 9.06. |
REFERENCE IN STORM RECOVERY BONDS TO SUPPLEMENTAL INDENTURES |
63 |
SECTION 9.07. |
LPSC CONSENT |
64 |
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|
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ARTICLE X REDEMPTION OF STORM RECOVERY BONDS |
64 |
|
SECTION 10.01. |
MANDATORY REDEMPTION BY ISSUER |
64 |
SECTION 10.02. |
FORM OF REDEMPTION NOTICE |
65 |
SECTION 10.03. |
PAYMENT OF REDEMPTION PRICE |
65 |
iii
ARTICLE XI MISCELLANEOUS |
66 |
|
SECTION 11.01. |
COMPLIANCE CERTIFICATES AND OPINIONS, ETC |
66 |
SECTION 11.02. |
FORM OF DOCUMENTS DELIVERED TO TRUSTEE |
66 |
SECTION 11.03. |
ACTS OF STORM RECOVERY BONDHOLDERS |
67 |
SECTION 11.04. |
NOTICES, ETC |
67 |
SECTION 11.05. |
NOTICES TO STORM RECOVERY BONDHOLDERS; WAIVER |
68 |
SECTION 11.06. |
ALTERNATE PAYMENT AND NOTICE PROVISIONS |
69 |
SECTION 11.07. |
NOTICES TO LUXEMBOURG STOCK EXCHANGE |
69 |
SECTION 11.08. |
CONFLICT WITH TRUST INDENTURE ACT |
69 |
SECTION 11.09. |
EFFECT OF HEADINGS AND TABLE OF CONTENTS |
69 |
SECTION 11.10. |
SUCCESSORS AND ASSIGNS |
70 |
SECTION 11.11. |
SEPARABILITY |
70 |
SECTION 11.12. |
BENEFITS OF INDENTURE |
70 |
SECTION 11.13. |
LEGAL HOLIDAYS |
70 |
SECTION 11.14. |
GOVERNING LAW |
70 |
SECTION 11.15. |
COUNTERPARTS |
70 |
SECTION 11.16. |
ISSUER OBLIGATION |
70 |
SECTION 11.17. |
NO PETITION |
70 |
SCHEDULE 1. |
FORM OF SEMIANNUAL SERVICERS 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 |
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iv
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318, INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:
TRUST INDENTURE ACT SECTION |
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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) |
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Not Addressed |
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Section 314(b)(2) |
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3.06 |
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Section 314(c)(1) |
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11.01 |
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Section 314(c)(2) |
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11.01 |
v
TRUST INDENTURE ACT SECTION |
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INDENTURE SECTION(S) |
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Section 314(c)(3) |
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11.02 |
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Section 314(d) |
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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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Section 315(e) |
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5.13 |
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Section 316(a) |
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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) |
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5.12 |
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Section 316(a)(2) |
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Not Applicable |
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Section 316(b) |
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5.07 |
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Section 316(c) |
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Not Addressed |
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Section 317(a)(1) |
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5.03 |
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Section 317(a)(2) |
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5.03 |
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Section 317(b) |
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3.03 |
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Section 318(a) |
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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:
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.
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SECTION 2.01. FORM. The Storm Recovery Bonds and the Trustees 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.
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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.
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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:
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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
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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 Holders 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
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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 Managers 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
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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.
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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.
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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 Issuers 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:
(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;
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(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.
(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.
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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 Owners 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:
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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.
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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
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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:
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
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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:
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
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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.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; COMMISSION FILINGS.
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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 Servicers 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.
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SECTION 3.08. NEGATIVE COVENANTS. So long as any Storm Recovery Bonds are Outstanding, the Issuer shall not:
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 Officers
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Certificate (a copy of which the Issuer will deliver to each Rating Agency and the LPSC) stating, as to the Manager signing such Issuer Officers Certificate, that
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:
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SECTION 3.11. SUCCESSOR OR TRANSFEREE.
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 Issuers 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 anothers 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.
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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 Officers 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 3.19. INSPECTION. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Trustee, during the Issuers 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 Issuers affairs, finances and accounts with the Issuers 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.
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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.
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE.
(A) either
(1) all Storm Recovery Bonds of such Series theretofore authenticated and delivered (other than (i) Storm Recovery Bonds that
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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 Officers 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.
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.
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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:
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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.
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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.
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):
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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
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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:
(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
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.
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(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
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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.
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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):
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.
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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:
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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
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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
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
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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 Holders 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 Trustees 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
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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.
SECTION 6.01. DUTIES AND LIABILITIES OF TRUSTEE.
(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.
(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.
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SECTION 6.02. RIGHTS OF TRUSTEE.
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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. TRUSTEES 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 Issuers 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 Trustees 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.
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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.
(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;
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(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.
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 Trustees 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 Trustees 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 Trustees 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
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Issuer need not reimburse any expense or indemnify against any Loss incurred by the Trustee (i) through the Trustees 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 Issuers and the Trustees 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
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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 Issuers 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.
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(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.
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 Moodys, 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.
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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:
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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.
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.
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SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO STORM RECOVERY BONDHOLDERS.
SECTION 7.03. REPORTS BY ISSUER.
(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;
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(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.
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 Servicers Certificate, Annual Accountants 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 Servicers Certificate, Annual Accountants Report or other report shall be available with the Issuers listing agent in Luxembourg appointed pursuant to the second paragraph of Section 3.02.
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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.
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(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 intermediarys 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 Moodys 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.
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(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 Servicers 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.
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(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 Issuers 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;
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(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
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(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).
SECTION 8.03. RELEASE OF TRUST ESTATE.
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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.
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF STORM RECOVERY BONDHOLDERS.
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(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.
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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.
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:
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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
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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 Issuers 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 Issuers 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 Trustees 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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(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 Officers 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.
(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.
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 Holders address appearing in the Storm Recovery Bond Register.
All notices of redemption shall state:
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 Issuers 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.
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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 Officers 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:
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.
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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 Issuers 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 Trustees 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.
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:
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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 Moodys: Moodys Investors Service, Inc., Attention: ABS Monitoring Department, 99 Church Street, New York, New York 10007; (ii) in the case of Standard & Poors: Standard & Poors, 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.
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 Trustees 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
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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
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By: |
/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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U.S. BANK NATIONAL ASSOCIATION, as
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By: |
/s/ Melissa A. Rosal |
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Name: |
Melissa A. Rosal |
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Title: |
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.
By: |
/s/ Melissa A. Rosal |
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Name: |
Melissa A. Rosal |
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Title: |
Vice President |
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SCHEDULE 1
SEMIANNUAL SERVICERS CERTIFICATE
[INTENTIONALLY OMITTED]
1
EXHIBIT A
SERVICING CRITERIA TO BE ADDRESSED BY INDENTURE TRUSTEE IN ASSESSMENT OF COMPLIANCE
Reg AB
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Servicing Criteria |
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Applicable
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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 partys 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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Reg AB
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Servicing Criteria |
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Applicable
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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 trustees 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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Reg AB
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Servicing Criteria |
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Applicable
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1122(d)(3)(iii) |
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Disbursements made to an investor are posted within two (2) business days to the Servicers investor records, or such other number of days specified in the transaction agreements. |
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X |
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1122(d)(3)(iv) |
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Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements. |
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X |
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Pool Asset Administration |
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1122(d)(4)(i) |
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Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents. |
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1122(d)(4)(ii) |
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Pool assets and related documents are safeguarded as required by the transaction agreements. |
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1122(d)(4)(iii) |
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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. |
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1122(d)(4)(iv) |
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Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicers 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. |
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1122(d)(4)(v) |
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The Servicers records regarding the pool assets agree with the Servicers records with respect to an obligors unpaid principal balance. |
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1122(d)(4)(vi) |
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Changes with respect to the terms or status of an obligors 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. |
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1122(d)(4)(vii) |
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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. |
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Reg AB
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Servicing Criteria |
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Applicable
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1122(d)(4)(viii) |
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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 entitys 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). |
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1122(d)(4)(ix) |
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Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents. |
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1122(d)(4)(x) |
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Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligors 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. |
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1122(d)(4)(xi) |
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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. |
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1122(d)(4)(xii) |
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Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the Servicers funds and not charged to the obligor, unless the late payment was due to the obligors error or omission. |
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1122(d)(4)(xiii) |
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Disbursements made on behalf of an obligor are posted within two (2) business days to the obligors records maintained by the Servicer, or such other number of days specified in the transaction agreements. |
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1122(d)(4)(xiv) |
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Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements. |
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Reg AB
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Servicing Criteria |
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Applicable
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1122(d)(4)(xv) |
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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. |
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*With respect to its custodial functions relating to the Collection Account.
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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 Accountants 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
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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.
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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.
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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 Agencys 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 & Poors, A2 by Moodys 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 & Poors, P-1 by Moodys 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.
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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 Moodys, Standard & Poors and, if Fitch provides a rating thereon, Fitch of at least Aa3, AA and AA, respectively, or (ii) a certificate of deposit rating from Moodys and Standard & Poors 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 Moodys and Standard & Poors 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 Moodys, Standard & Poors 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),
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(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 Moodys, A-1+ by Standard & Poors 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 Moodys, A-1+ by Standard & Poors 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 Moodys, 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 Moodys (and, if Fitch provides a rating thereon, AA- by Fitch) and a short-term unsecured debt rating of at least P-1 by Moodys 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.
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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
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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;
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(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 Officers 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.
Moodys means Moodys Investors Service, Inc., or any successor thereto.
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Officers Certificate means, in respect of any Person, an officers certificate signed by an Authorized Officer of such Person; provided that unless otherwise specified, any reference in the Indenture to an Officers Certificate shall be to an Officers 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 Sellers 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,
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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 pledgees 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
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(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 Moodys, 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 officers 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 Servicers 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 & Poors or S&P means Standard & Poors, 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 Sellers 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 Sellers 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 issuers option.
15
Exhibit 4.2
CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC
Issuer
and
U.S. BANK NATIONAL ASSOCIATION
Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of March 6, 2008
2008 Senior Secured Storm Recovery Bonds
This FIRST SUPPLEMENTAL INDENTURE dated as of March 6, 2008 (this Supplement ), by and among Cleco Katrina/Rita Hurricane Recovery Funding LLC, a Louisiana limited liability company (the Issuer ), and U.S. Bank National Association, in its capacity as trustee (the Trustee ), is entered into pursuant to the Indenture dated as of even date herewith between the Issuer and the Trustee (the Indenture ).
PRELIMINARY STATEMENT; GRANTING CLAUSE
Section 9.01 of the Indenture provides, among other things, that the Issuer and the Trustee may at any time and from time to time enter into one or more Supplemental Indentures for the purpose of authorizing the issuance by the Issuer of a Series of Storm Recovery Bonds and specifying the terms thereof. The Issuer has duly authorized the execution and delivery of this Supplement and the creation of Storm Recovery Bonds with an initial aggregate principal amount of $180,600,000 to be known as the Issuers 2008 Senior Secured Storm Recovery Bonds (the 2008 Senior Secured Storm Recovery Bonds ). All acts and all things necessary to make the 2008 Senior Secured Storm Recovery Bonds, when duly executed by the Issuer and authenticated by or on behalf of the Trustee as provided in the Indenture and this Supplement and issued by the Issuer, the valid, binding and legal obligations of the Issuer and to make this Supplement a valid and enforceable supplement to the Indenture have been done, performed and fulfilled and the execution and delivery hereof have been in all respects duly and lawfully authorized. The Issuer and the Trustee are executing and delivering this Supplement in order to provide for the 2008 Senior Secured Storm Recovery Bonds. In connection with the execution and delivery of this Supplement, the Issuer undertakes and confirms that it will not issue any Storm Recovery Bonds other than the 2008 Senior Secured Storm Recovery Bonds provided for hereby.
The Series Trust Estate shall consist of, and the Issuer hereby absolutely and irrevocably Grants to the Trustee, as trustee for the benefit of the Holders of the 2008 Senior Secured Storm Recovery Bonds issued and outstanding, all of the Issuers right, title and interest whether now owned or hereafter acquired (and whether now existing or hereafter arising), in, to and under (a) the Storm Recovery Property relating to the 2008 Senior Secured Storm Recovery Bonds purchased by the Issuer pursuant to the Sale Agreement relating to the 2008 Senior Secured Storm Recovery Bonds and all proceeds thereof, including all of the rights and interest of the Issuer under Financing Order No. U-29157-B dated September 17, 2007 (Docket No. U-29157), (b) the Sale Agreement relating to the 2008 Senior Secured Storm Recovery Bonds, (c) the Bill of Sale delivered by the Seller pursuant to the Sale Agreement relating to the 2008 Senior Secured Storm Recovery Bonds, (d) the Servicing Agreement relating to the 2008 Senior Secured Storm Recovery Bonds, (e) the Administration Agreement, (f) the Collection Account 2008 Senior Secured Storm Recovery Bonds and all subaccounts thereof (including, without limitation, the General Subaccount, the Capital Subaccount and the Excess Funds Subaccount relating to the 2008 Senior Secured Storm Recovery Bonds) and all cash, securities, instruments, investment property or other assets credited to or deposited in that Collection Account or any subaccount thereof from time to time or purchased with funds therefrom, and all financial assets and securities entitlements carried therein or credited thereto, (g) all other property of whatever kind owned from time to time by the Issuer other than any cash released to the Issuer by the Trustee pursuant to Section 8.02 of the Indenture, (h) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and (i) all payments on or
under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property of any or all of the foregoing, all cash proceeds, accounts, accounts receivable, general intangibles, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, payment intangibles, letter-of-credit rights, investment property, commercial tort claims, documents, rights to payment of any and every kind, and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing. This Supplement covers the foregoing described portion of the Storm Recovery Property described in the Financing Order.
Such Grant is made to the Trustee to have and to hold in trust to secure the payment of principal of and premium, if any, and interest on, and any other amounts (including all fees, expenses, counsel fees and other amounts due and owing to the Trustee) owing in respect of, the 2008 Senior Secured Storm Recovery Bonds equally and ratably without prejudice, preference, priority or distinction, except as expressly provided in the Indenture and this Supplement and to secure performance by the Issuer of all of the Issuers obligations under the Indenture and this Supplement with respect to the 2008 Senior Secured Storm Recovery Bonds, all as provided in the Indenture and this Supplement; provided , however , that in no event shall the proceeds of the issuance of the 2008 Senior Secured Storm Recovery Bonds constitute a portion of the Series Trust Estate. The Indenture and this Supplement constitute a security agreement within the meaning of the Securitization Act and under the UCC to the extent that the provisions of the UCC are applicable hereto. The Issuer authorizes the Trustee to file a financing statement covering the Series Trust Estate, either as described above or by using more general terms as permitted by Section 9-504 of the UCC.
The Trustee, as trustee on behalf of the Holders of the Storm Recovery Bonds, acknowledges such Grant, accepts the trusts hereunder in accordance with the provisions hereof and agrees to perform its duties as set forth in the Indenture and this Supplement.
All terms used in this Supplement that are defined in the Indenture, either directly or by reference therein, have the meanings assigned to such terms in the Indenture, except to the extent such terms are defined or modified in this Supplement or the context clearly requires otherwise.
SECTION 2.01. Authorized Denominations means $1,000 and integral multiples thereof, except for one Storm Recovery Bond of each Tranche which may be of a smaller denomination.
2
SECTION 2.02. Expected Amortization Schedule means Schedule A to this Supplement.
SECTION 2.03. Expected Final Payment Date means, with respect to any Tranche of the 2008 Senior Secured Storm Recovery Bonds, the expected final payment date therefor, as specified in Article IV of this Supplement.
SECTION 2.04. Final Maturity Date means, with respect to any Tranche of the 2008 Senior Secured Storm Recovery Bonds, the final maturity date thereof, as specified in Article IV of this Supplement.
SECTION 2.05. Interest Rate has the meaning set forth in Article IV of this Supplement.
SECTION 2.06. Payment Date has the meaning set forth in Section 5.01 of this Supplement.
SECTION 2.07. Record Date shall mean, with respect to any Payment Date, the close of business on the Business Day immediately prior to such Payment Date.
SECTION 2.08. Required Capital Amount has the meaning set forth in Section 5.04 of this Supplement.
SECTION 2.09. Series Issuance Date has the meaning set forth in Section 3.02 of this Supplement.
SECTION 3.01. DESIGNATION. The 2008 Senior Secured Storm Recovery Bonds shall be designated generally as the Issuers 2008 Senior Secured Storm Recovery Bonds and further denominated as Tranche A-1 or Tranche A-2, as applicable.
SECTION 3.02. SERIES ISSUANCE DATE. The 2008 Senior Secured Storm Recovery Bonds that are authenticated and delivered by the Trustee to or upon the written order of the Issuer on March 6, 2008 (the Series Issuance Date ) shall have as their date of authentication March 6, 2008.
SECTION 3.03. BOOK-ENTRY. Upon original issuance, the 2008 Senior Secured Storm Recovery Bonds 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, pursuant to Section 2.11 of the Indenture. The 2008 Senior Secured Storm Recovery Bonds will not be listed on any securities exchange.
3
SECTION 3.04. NO ADDITIONAL SERIES. The Issuer hereby covenants and agrees that the 2008 Senior Secured Storm Recovery Bonds are the only Storm Recovery Bonds that the Issuer will issue and that no additional series of Storm Recovery Bonds will be issued by the Issuer.
Tranche |
|
Initial Principal
|
|
Expected Final
|
|
Final
|
|
Interest Rate |
|
||
A-1 |
|
|
$ |
113,000,000 |
|
3/1/2017 |
|
3/1/2020 |
|
4.41 |
% |
A-2 |
|
|
$ |
67,600,000 |
|
3/1/2020 |
|
3/1/2023 |
|
5.61 |
% |
SECTION 5.01. PAYMENT DATES. The Payment Dates for the 2008 Senior Secured Storm Recovery Bonds are March 1 and September 1 of each year or, if any such date is not a Business Day, the next succeeding Business Day, commencing on March 1, 2009, and continuing until the earlier of repayment of such Tranche in full and the applicable Final Maturity Date.
4
SECTION 5.02. EXPECTED AMORTIZATION SCHEDULE FOR PRINCIPAL. Unless an Event of Default has occurred and is continuing and the unpaid principal amount of all Tranches of 2008 Senior Secured Storm Recovery Bonds has been declared to be due and payable together with accrued and unpaid interest thereon, on each Payment Date the Trustee shall distribute to the Holders of record of the 2008 Senior Secured Storm Recovery Bonds as of the related Record Date amounts payable in respect of the 2008 Senior Secured Storm Recovery Bonds pursuant to Section 8.02(d) of the Indenture as Principal, so that the outstanding Principal balance as of such Payment Date (after giving effect to all payments of Principal, if any, made on such Payment Date) has been reduced to the extent possible to the Principal balance specified in the Expected Amortization Schedule but not less than such Principal balance. Unless an Event of Default has occurred and is continuing and the unpaid principal amount of all Tranches of 2008 Senior Secured Storm Recovery Bonds has been declared to be due and payable together with accrued and unpaid interest thereon, payments of Principal on any Tranche A-2 2008 Senior Secured Storm Recovery Bonds shall not be made on any Payment Date until the Principal balance of the Tranche A-1 2008 Senior Secured Storm Recovery Bonds has been reduced to zero; provided , however , that payments of Principal on the Tranche A-2 2008 Senior Secured Storm Recovery Bonds may be made on the Payment Date that the Principal balance of the Tranche A-1 2008 Senior Secured Storm Recovery Bonds has been reduced to zero.
SECTION 5.03. INTEREST. Interest will be payable on each Tranche of the 2008 Senior Secured Storm Recovery Bonds on each Payment Date as follows:
provided , however , that, with respect to the initial Payment Date or if no payment has yet been made, Interest on the outstanding principal balance shall accrue from and including the Series Issuance Date to, but excluding, the following Payment Date, and thereafter from and including the previous Payment Date to, but excluding, the applicable Payment Date until the Storm Recovery Bonds have been paid in full, at the interest rate indicated in Article IV.
SECTION 5.04. REQUIRED CAPITAL AMOUNT. The Required Capital Amount for the 2008 Senior Secured Storm Recovery Bonds shall be $903,000, which is equal to 0.5% of the initial outstanding principal balance of the 2008 Senior Secured Storm Recovery Bonds.
SECTION 5.05. PREMIUM. There will be no early redemption of the 2008 Senior Secured Storm Recovery Bonds, and therefore no Premium will be payable in connection with the early redemption of the 2008 Senior Secured Storm Recovery Bonds.
5
The 2008 Senior Secured Storm Recovery Bonds shall be issuable in the Authorized Denominations.
The 2008 Senior Secured Storm Recovery Bonds shall not be subject to mandatory or optional redemption.
No credit enhancement (other than the Excess Funds Account, the Required Capital Amount and any adjustments to the Storm Recovery Charges approved by the LPSC as provided in the Financing Order) is provided for the 2008 Senior Secured Storm Recovery Bonds.
The Trustee shall deliver or cause to be delivered the 2008 Senior Secured Storm Recovery Bonds in accordance with Section 3.03 when authenticated in accordance with Section 2.02 of the Indenture. Each 2008 Senior Secured Storm Recovery Bond shall be in the form of Exhibit A hereto, which is incorporated herein by reference.
6
SECTION 10.01. CONFIRMATION OF INDENTURE. As supplemented by this Supplement, the Indenture is in all respects ratified and confirmed and the Indenture, as so supplemented by this Supplement, shall be read, taken, and construed as one and the same instrument.
SECTION 10.02. EFFECTS OF HEADINGS. The Article and Section headings herein are for convenience only and shall not affect the construction hereof.
SECTION 10.03. COUNTERPARTS. This Supplement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.
SECTION 10.04. GOVERNING LAW. THIS SUPPLEMENT SHALL BE 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 10.05. RIGHTS OF TRUSTEE AND OTHERS. The Trustee, the authenticating agent, the Storm Recovery Bond Registrar and the Paying Agent shall be entitled to the same rights, protections, immunities, and indemnities set forth in the Indenture as if specifically set forth herein.
7
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Supplement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
|
CLECO KATRINA/RITA HURRICANE |
|||
|
|
RECOVERY FUNDING LLC, |
||
|
|
as Issuer |
||
|
|
|||
|
|
|||
|
By: |
/s/ Keith D. Crump |
|
|
|
|
Name: Keith D. Crump |
||
|
|
Title: Vice President and Manager |
||
|
|
|||
|
|
|||
|
U.S. BANK NATIONAL ASSOCIATION, |
|||
|
|
not in its individual capacity but solely as |
||
|
|
Trustee on behalf of the Storm Recovery |
||
|
|
Bondholders |
||
|
|
|||
|
By: |
/s/ Melissa A. Rosal |
|
|
|
|
Name: Melissa A. Rosal |
||
|
|
Title: Vice President |
||
8
SCHEDULE A
EXPECTED AMORTIZATION SCHEDULE
OUTSTANDING PRINCIPAL BALANCE PER TRANCHE
Payment Date |
|
Tranche A-1
|
|
Tranche A-2
|
|
||
InitialPrincipal
|
|
$ |
113,000,000 |
|
$ |
67,600,000 |
|
3/1/2009 |
|
$ |
104,649,570 |
|
$ |
67,600,000 |
|
9/1/2009 |
|
$ |
99,454,071 |
|
$ |
67,600,000 |
|
3/1/2010 |
|
$ |
93,562,218 |
|
$ |
67,600,000 |
|
9/1/2010 |
|
$ |
87,975,644 |
|
$ |
67,600,000 |
|
3/1/2011 |
|
$ |
81,693,110 |
|
$ |
67,600,000 |
|
9/1/2011 |
|
$ |
75,706,837 |
|
$ |
67,600,000 |
|
3/1/2012 |
|
$ |
69,009,620 |
|
$ |
67,600,000 |
|
9/1/2012 |
|
$ |
62,598,482 |
|
$ |
67,600,000 |
|
3/1/2013 |
|
$ |
55,469,160 |
|
$ |
67,600,000 |
|
9/1/2013 |
|
$ |
48,629,834 |
|
$ |
67,600,000 |
|
3/1/2014 |
|
$ |
41,048,576 |
|
$ |
67,600,000 |
|
9/1/2014 |
|
$ |
33,753,650 |
|
$ |
67,600,000 |
|
3/1/2015 |
|
$ |
25,700,493 |
|
$ |
67,600,000 |
|
9/1/2015 |
|
$ |
17,929,465 |
|
$ |
67,600,000 |
|
3/1/2016 |
|
$ |
9,383,556 |
|
$ |
67,600,000 |
|
9/1/2016 |
|
$ |
1,115,062 |
|
$ |
67,600,000 |
|
3/1/2017 |
|
|
|
$ |
59,654,571 |
|
|
9/1/2017 |
|
|
|
$ |
50,818,616 |
|
|
3/1/2018 |
|
|
|
$ |
41,119,002 |
|
|
9/1/2018 |
|
|
|
$ |
31,625,433 |
|
|
3/1/2019 |
|
|
|
$ |
21,243,639 |
|
|
9/1/2019 |
|
|
|
$ |
11,054,868 |
|
|
3/1/2020 |
|
|
|
|
|
Exhibit A to First Supplemental Indenture |
|||||||
|
|
|
|||||
REGISTERED |
$ |
|
|||||
|
|
|
|||||
No. |
|
|
|
|
|||
|
|
|
|||||
SEE REVERSE FOR CERTAIN DEFINITIONS |
|||||||
|
|||||||
|
CUSIP NO. |
|
|
||||
THE PRINCIPAL OF THIS TRANCHE [ ] 2008 SENIOR SECURED STORM RECOVERY BOND WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS TRANCHE [ ] 2008 SENIOR SECURED STORM RECOVERY BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE HOLDER OF THIS TRANCHE [ ] 2008 SENIOR SECURED STORM RECOVERY BOND HEREBY COVENANTS AND AGREES THAT PRIOR TO THE DATE THAT IS ONE YEAR AND ONE DAY AFTER THE PAYMENT IN FULL OF THE TRANCHE [ ] 2008 SENIOR SECURED STORM RECOVERY BONDS, IT WILL NOT INSTITUTE AGAINST OR JOIN ANY OTHER PERSON IN INSTITUTING AGAINST THE ISSUER ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY OR LIQUIDATION PROCEEDINGS OR OTHER SIMILAR PROCEEDINGS UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES.
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 TRANCHE [ ] 2008 SENIOR SECURED STORM RECOVERY BOND.
CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC
2008 SENIOR SECURED STORM RECOVERY BONDS, Tranche [ ].
Bond Rate |
|
Initial
|
|
Expected Final
|
|
Final
|
|
||
|
|
|
|
|
|
|
|
||
|
|
% |
$ |
|
|
|
|
|
|
Cleco Katrina/Rita Hurricane Recovery Funding LLC, a limited liability company organized and existing under the laws of the State of Louisiana (herein referred to as the Issuer), for value received, hereby promises to pay to the registered holder under Section 2.05 of the Indenture (Registered Holder), or registered assigns, the Initial Principal Amount shown above in semiannual installments on the Payment Dates (as defined below) and in the amounts specified on the reverse hereof or, if less, the amounts determined pursuant to Section 8.02(d) of the Indenture referred to on the reverse hereof, in each year, commencing on the date determined as provided on the reverse hereof and ending on or before the Final Maturity Date of this
A-1
Tranche [ ] 2008 Senior Secured Storm Recovery Bond, to pay the entire unpaid principal hereof on such Final Maturity Date and to pay Interest, at the Bond Rate shown above, on each March 1 and September 1, or if any such day is not a Business Day, the next succeeding Business Day, commencing on March 1, 2009 and continuing until the earlier of the payment of the Principal hereof and the Final Maturity Date of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond (each a Payment Date), on the Principal amount of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond outstanding from time to time. Interest on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond will accrue for each Payment Date from the most recent Payment Date on which Interest has been paid to but excluding such Payment Date or, if no Interest has yet been paid, from March 6, 2008. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such Principal of and Interest on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond shall be paid in the manner specified on the reverse hereof.
The Principal of and Interest on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Tranche [ ] 2008 Senior Secured Storm Recovery Bond shall be applied first to Interest due and payable on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond as provided above and then to the unpaid Principal of and premium, if any, on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond, all in the manner set forth in Section 8.02(d) of the Indenture.
This Tranche [ ] 2008 Senior Secured Storm Recovery Bond is a storm recovery bond as such term is defined in the Securitization Act. Principal and Interest on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond are payable from and secured primarily by the Storm Recovery Property authorized by the Financing Order.
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
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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.
In addition, 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.
The Issuer acknowledges that the purchase of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond by the Registered Holder or the purchase of an beneficial interest in this Tranche [ ] 2008 Senior Secured Storm Recovery Bond by a Person is made in reliance on such pledges by the State of Louisiana and the LPSC.
Reference is made to the further provisions of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond.
Unless the certificate of authentication hereon has been executed by the Trustee whose name appears below by manual signature, this Tranche [ ] 2008 Senior Secured Storm Recovery Bond shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.
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Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (DTC), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
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IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by an Authorized Officer of the Issuer.
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TRUSTEES CERTIFICATE OF AUTHENTICATION
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This is one of the Tranche [ ] 2008 Senior Secured Storm Recovery Bonds designated above and referred to in the within-mentioned Indenture. |
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U.S. BANK NATIONAL ASSOCIATION, |
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as Authenticating Agent] |
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REVERSE OF STORM RECOVERY BOND
This Tranche [ ] 2008 Senior Secured Storm Recovery Bond is one of a duly authorized issue of Storm Recovery Bonds of the Issuer (herein called the 2008 Senior Secured Storm Recovery Bonds), which are issuable in one or more Tranches, in which this Tranche [ ] 2008 Senior Secured Storm Recovery Bond represents an interest, including the Tranche [ ] 2008 Senior Secured Storm Recovery Bond (herein called the Tranche [ ] 2008 Senior Secured Storm Recovery Bond), all issued and to be issued under an indenture dated as of March 6, 2008, and a supplemental indenture thereto dated as of even date therewith (such supplemental indenture, as supplemented or amended, the Supplement and, collectively with such indenture, as supplemented or amended, the Indenture), each between the Issuer and U.S. Bank National Association, as Trustee (the Trustee, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the Series Trust Estate pledged, the nature and extent of the security and the respective rights, obligations and immunities thereunder of the Issuer, the Trustee and the Storm Recovery Bondholders. All terms used in this Tranche [ ] 2008 Senior Secured Storm Recovery Bond that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in the Indenture.
The Tranche [ ] 2008 Senior Secured Storm Recovery Bond and the other Tranche of 2008 Senior Secured Storm Recovery Bonds issued by the Issuer are and will be equally and ratably secured by the Series Trust Estate pledged as security therefor as provided in the Indenture or the Supplement.
The Principal of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond shall be payable on each Payment Date only to the extent that amounts in the Collection Account are available therefor, and only until the outstanding Principal balance thereof on such Payment Date (after giving effect to all payments of Principal, if any, made on such Payment Date) has been reduced to the Principal balance specified in the Expected Amortization Schedule which is attached to the Supplement as Schedule A, unless payable earlier because an Event of Default shall have occurred and be continuing and the Trustee or the Storm Recovery Bondholders representing not less than a majority of the Outstanding Amount of the 2008 Senior Secured Storm Recovery Bonds have declared the 2008 Senior Secured Storm Recovery Bonds to be immediately due and payable in accordance with Section 5.02 of the Indenture. However, actual Principal payments may be made in less than expected amounts and at later than expected times as determined pursuant to Section 8.02(d) of the Indenture and Section 5.02 of the Supplement. The entire unpaid Principal amount of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond shall be due and payable on the Final Maturity Date of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond. Notwithstanding the foregoing, the entire unpaid Principal amount of the 2008 Senior Secured Storm Recovery Bonds shall be due and payable, if not then previously paid, on the date on which an Event of Default shall have occurred and be continuing and the Trustee or the Storm Recovery Bondholders representing a majority of the Outstanding Amount of the 2008 Senior Secured Storm Recovery Bonds have declared the 2008 Senior Secured Storm Recovery Bonds to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. All Principal payments on the Tranche [ ] 2008 Senior Secured Storm Recovery Bonds shall be made pro rata to the Tranche [ ] 2008 Storm Recovery
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Bondholders entitled thereto based on the respective Principal amounts of the 2008 Senior Secured Storm Recovery Bonds held by them.
Payments of Interest on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond due and payable on each Payment Date, together with the installment of Principal or premium, if any, due on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond on such Payment Date shall be made by check mailed first-class, postage prepaid, to the Person whose name appears as the Holder of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond in the 2008 Senior Secured Storm Recovery Bond Register as of the close of business on the Record Date or in such other manner as may be provided in the Supplement, except that with respect to Tranche [ ] 2008 Senior Secured Storm Recovery Bonds registered on the Record Date in the name of a Clearing Agency, payments will be made by wire transfer in immediately available funds to the account designated by such Clearing Agency and except for the final installment of Principal and premium, if any, payable with respect to this Tranche [ ] 2008 Senior Secured Storm Recovery Bond on a Payment Date which shall be payable as provided below. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears in the 2008 Senior Secured Storm Recovery Bond Register as of the applicable Record Date without requiring that this Tranche [ ] 2008 Senior Secured Storm Recovery Bond be submitted for notation of payment. Any reduction in the Principal amount of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond (or any one or more predecessors to such 2008 Senior Secured Storm Recovery Bond) effected by any payments made on any Payment Date shall be binding upon all future Storm Recovery Bondholders of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond and of any Tranche [ ] 2008 Senior Secured Storm Recovery Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid Principal amount of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond on a Payment Date, then the Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Holder hereof as of the second preceding Record Date to such Payment Date by notice mailed no later than five days prior to such final Payment Date and shall specify that such final installment will be payable to the Holder hereof as of the Record Date immediately preceding such final Payment Date and only upon presentation and surrender of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond and shall specify the place where this Tranche [ ] 2008 Senior Secured Storm Recovery Bond may be presented and surrendered for payment of such installment.
The Issuer shall pay Interest on overdue installments of Interest on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond at the Bond Rate for Tranche [ ] to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond may be registered in the 2008 Senior Secured Storm Recovery Bond Register upon surrender of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an Eligible Guarantor Institution, and thereupon one or more new Tranche [ ] 2008 Senior Secured Storm
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Recovery Bond of any Authorized Denominations and in the same aggregate unpaid Principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange.
Prior to the due presentment for registration of transfer of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Tranche [ ] 2008 Senior Secured Storm Recovery Bond is registered (as of the day of determination) as the owner hereof for the purpose of receiving payments of Principal of and premium, if any, and Interest on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond and for all other purposes whatsoever, whether or not this Tranche [ ] 2008 Senior Secured Storm Recovery Bond be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Storm Recovery Bondholders under the Indenture at any time by the Issuer with the consent of the Storm Recovery Bondholders representing a majority of the Outstanding Amount of all 2008 Senior Secured Storm Recovery Bonds at the time Outstanding of each Tranche to be affected. The Indenture also contains provisions permitting the Storm Recovery Bondholders representing specified percentages of the Outstanding Amount of the 2008 Senior Secured Storm Recovery Bonds, on behalf of all Storm Recovery Bondholders, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Storm Recovery Bondholders of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond (or any one or more predecessors of such 2008 Senior Secured Storm Recovery Bonds) shall be conclusive and binding upon such Storm Recovery Bondholder and upon all future Storm Recovery Bondholders of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond and of any Tranche [ ] 2008 Senior Secured Storm Recovery Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Tranche [ ] 2008 Senior Secured Storm Recovery Bond. The Indenture also permits the Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of the Storm Recovery Bondholders.
The term Issuer as used in this Tranche [ ] 2008 Senior Secured Storm Recovery Bond includes any successor to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate.
The Tranche [ ] 2008 Senior Secured Storm Recovery Bond are issuable only in registered form in Authorized Denominations as provided in the Indenture and the Supplement, subject to certain limitations therein set forth.
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THIS TRANCHE [ ] 2008 SENIOR SECURED STORM RECOVERY BOND, THE INDENTURE AND THE SUPPLEMENT 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 AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
No reference herein to the Indenture and no provision of this Tranche [ ] 2008 Senior Secured Storm Recovery Bond or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the Principal of and Interest on this Tranche [ ] 2008 Senior Secured Storm Recovery Bond at the times, place, and rate, and in the coin or currency herein prescribed.
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ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee .
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(name and address of assignee)
the Tranche [ ] 2008 Senior Secured Storm Recovery Bond and all rights thereunder, and hereby irrevocably constitutes and appoints
(name and address of appointee)
attorney, to transfer said Tranche [ ] 2008 Senior Secured Storm Recovery Bond on the books kept for registration thereof, with full power of substitution in the premises.
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Signature Guaranteed: |
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* NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the Tranche [ ] 2008 Senior Secured Storm Recovery Bond in every particular, without alteration, enlargement or any change whatsoever.
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Exhibit 5.1
New Orleans, LA
Baton Rouge, LA
Houston, TX
London, England
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Canal Place 365 Canal Street · Suite 2000 New Orleans, Louisiana 70130-6534 (504) 566-1311 Fax (504) 568-9130
www.phelpsdunbar.com
March 6, 2008 |
Jackson, MS
Tupelo, MS
Gulfport, MS
Tampa, FL
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Cleco Katrina/Rita Hurricane Recovery Funding
LLC 12922-152
2605 Highway 28 East
Office Number 12
Pinevile, LA 71360-5226
Cleco Power LLC
2030 Donahue Ferry Road
Pineville, LA 71360-5226
Re: Cleco Katrina/Rita Hurricane Recovery Funding LLC:
Exhibit 5.1
(Legality) [Form 8-K]
Ladies and Gentlemen:
We have acted as counsel to Cleco Katrina/Rita Hurricane Recovery Funding LLC, a Louisiana limited liability company (the Issuer ), in connection with its offering and sale of $180,600,000.00 aggregate principal amount of its 2008 Senior Secured Storm Recovery Bonds (the Storm Recovery Bonds ). The Issuer and Cleco Power LLC, a Louisiana limited liability company ( Cleco Power ), in its capacity as sponsor for the Issuer, each filed with the Securities and Exchange Commission a registration statement on Form S-3 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 preliminary prospectus supplement, both then subject to completion (collectively, the Registration Statement ), relating to the proposed issuance of up to $181,000,000.00 in aggregate principal amount of Storm Recovery Bonds of the Issuer. At your request, this opinion is being furnished to you for filing as Exhibit 5.1 to the Issuers Current Report on Form 8-K of even date herewith.
DOCUMENTS EXAMINED
For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of the following:
(a) The Articles of Organization of the Issuer, dated October 29, 2007, (the Articles ) as filed in the office of the Secretary of State of the State of Louisiana on October 30, 2007;
(b) The Limited Liability Company Operating Agreement of the Issuer, dated as of October 29 , 2007 (the LLC Agreement ), by Cleco Power LLC, as the sole member (the Member ) and the Issuer;
(c) A Certificate of Good Standing for the Issuer, dated March 6, 2008, obtained from the Louisiana Secretary of State;
(d) The Indenture and the First Supplemental Indenture (as so supplemented, the Indenture ) each dated as of March 6, 2008, and each between the Issuer and U.S. Bank National Association, as trustee, pursuant to which the Storm Recovery Bonds are issued;
(e) The Sale Agreement dated as of March 6, 2008, between the Issuer and Cleco Power, as Seller;
(f) The Servicing Agreement dated as of March 6, 2008, between the Issuer and Cleco Power, as Servicer;
(g) The Underwriting Agreement dated as of February 28, 2008, among the Issuer, Cleco Power and the Underwriters of the Storm Recovery Bonds (the Underwriting Agreement );
(h) The Registration Statement ; and
(i) The Financing Order No. U-29157-B approved by the Louisiana Public Service Commission on September 12, 2007, issued on September 17, 2007, pertaining to the Issuer and Cleco Power in Docket No. U-29157 (the Financing Order ).
Capitalized terms used herein and not otherwise defined are used as defined in the Prospectus.
For purposes of this opinion, we have not reviewed any document (other than the documents listed in paragraphs (a) through (i) above) that is referred to in or incorporated by reference into any document reviewed by us.
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RELIANCE AND ASSUMPTIONS
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, and the conformity to original documents of all documents submitted to us as certified or photostatic copies or by facsimile or email, and the authenticity of the originals of such latter documents.
For purposes of this opinion, we have assumed (i) except to the extent provided in paragraph 1 below, that each of the parties to the documents examined by us has been duly organized or formed, as the case may be, and is validly existing in good standing under the laws of the jurisdiction governing its organization or formation, (ii) that there are no proceedings pending or contemplated for the merger, consolidation, conversion, dissolution, liquidation or termination of the Issuer, (iii) except to the extent provided in paragraph 2 below, that each of the parties to such documents has the requisite power and authority, corporate or other, to enter into and perform its obligations under such documents, and (iv) except to the extent provided in paragraph 3 below, that each of the parties to such documents has duly authorized, executed and delivered such documents. We have further assumed that there are no documents or agreements between or among the parties to the documents reviewed by us which alter or are inconsistent with the provisions of such documents and which would have an effect on the opinions expressed in this opinion letter.
For purposes of this Opinion, we have further assumed that the Registration Statement has become effective, the Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended, the LLC Agreement constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the admission of members to, and the creation, operation, dissolution and termination of, the Issuer, the LLC Agreement and the Articles are in full force and effect and have not been amended, and no amendment of the LLC Agreement or the Articles is pending or has been proposed.
We have examined and relied upon originals, or copies of originals, certified or otherwise identified to our satisfaction as such records of the Issuer and such agreements, certificates of public officials, certificates of officers, managers or other representatives of the Issuer and other instruments as we deemed advisable, and examined such questions of law and satisfied ourselves to such matters of fact as we deemed relevant or necessary as a basis for this letter. As to any facts material to the opinions expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Issuer or others.
OPINIONS
Based upon the foregoing assumptions and subject to the other limitations, assumptions and qualifications set forth below, we are of the opinion that:
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1. The Issuer has been duly organized and is validly existing in good standing as a limited liability company under the laws of the State of Louisiana.
2. Under the Louisiana Limited Liability Issuer Law (La. R.S. 12:1301, et seq.) (the LLC Law ), and the LLC Agreement, the Issuer has the limited liability company power and authority to execute and deliver the Indenture and to issue the Storm Recovery Bonds, and to perform its obligations under the Indenture and the Storm Recovery Bonds.
3. The execution and delivery by the Issuer of the Indenture and the Storm Recovery Bonds, and the performance by the Issuer of its obligations thereunder, have been duly authorized by all necessary limited liability company action on the part of the Issuer.
4. When properly executed, authenticated and issued in accordance with the Indenture and delivered against payment of the purchase price provided for in the Underwriting Agreement, and upon satisfaction of all other conditions contained in the Indenture and the Underwriting Agreement, the Storm Recovery Bonds will constitute legal, valid and binding obligations of the Issuer and the Storm Recovery Bonds will be enforceable against the Issuer in accordance with their terms, except to the extent enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws of general applicability relating to or affecting the rights of creditors generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law), including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing which among other effects may limit the availability of certain remedies, such as injunctive relief and specific performance.
EXCEPTIONS AND QUALIFICATIONS
This opinion is limited to the laws of the State of Louisiana (excluding the securities and blue sky laws of the State of Louisiana), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws (including federal bankruptcy law) and rules and regulations relating thereto or the laws of any other state or any foreign jurisdiction or any matters of municipal or other local law. Our opinions are rendered only with respect to Louisiana laws and rules, regulations and orders thereunder that are currently in effect. In rendering the opinions set forth herein, we express no opinion concerning (i) the creation, attachment, perfection or priority of any security interest, lien or other encumbrance, or (ii) the nature or validity of title to any property.
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
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responsibility or obligation to consider this opinions 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.
We are furnishing this opinion to you solely in connection with the issuance of the Storm Recovery Bonds described above, and this opinion may be relied upon only by you, and is not to be used, relied on, circulated, quoted or otherwise referred to for any other purpose. However, we hereby consent to the filing of this opinion as an exhibit to your Current Report on Form 8-K of even date herewith and to the references to this Firm in the Prospectus dated February 26, 2008, and the Prospectus Supplement dated February 28, 2008, under the section captioned Legal Matters. In giving such consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations of the Commission thereunder.
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Yours very truly, |
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/s/ Phelps Dunbar, L.L.P. |
5
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 |
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Section 1.01 |
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Definitions |
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Section 1.02 |
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Other Definitional Provisions |
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ARTICLE II CONVEYANCE OF THE STORM RECOVERY PROPERTY |
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Section 2.01 |
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Conveyance of the Storm Recovery Property |
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Section 2.02 |
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Conditions to Conveyance of the Storm Recovery Property |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER |
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Section 3.01 |
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Organization and Good Standing |
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Section 3.02 |
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Due Qualification |
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Section 3.03 |
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Power and Authority |
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Section 3.04 |
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Binding Obligation |
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Section 3.05 |
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No Violation |
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Section 3.06 |
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No Proceedings |
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Section 3.07 |
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Approvals |
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Section 3.08 |
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The Storm Recovery Property |
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Section 3.09 |
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Solvency |
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Section 3.10 |
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The Financing Order |
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Section 3.11 |
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State Action |
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Section 3.12 |
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No Court Order |
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Section 3.13 |
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Approvals Concerning the Storm Recovery Property |
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Section 3.14 |
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Assumptions |
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Section 3.15 |
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Creation of the Storm Recovery Property |
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Section 3.16 |
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Prospectus |
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Section 3.17 |
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Nature of Representations and Warranties |
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Section 3.18 |
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Waivers of Legal Warranties |
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ARTICLE IV COVENANTS OF THE SELLER |
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Section 4.01 |
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Sellers Existence |
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Section 4.02 |
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No Liens or Conveyances |
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Section 4.03 |
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Delivery of Collections |
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Section 4.04 |
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Notice of Liens |
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Section 4.05 |
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Compliance With Law |
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Section 4.06 |
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Covenants Related to the Storm Recovery Property |
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Section 4.07 |
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Protection of Title |
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Section 4.08 |
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Taxes |
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Section 4.09 |
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Filings Pursuant to Financing Order |
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Section 4.10 |
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Issuance Advice Letter |
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Section 4.11 |
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Tariff |
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Section 4.12 |
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Notice of Breach to Rating Agencies, Etc. |
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Section 4.13 |
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Use of Proceeds |
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Section 4.14 |
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Further Assurances |
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ARTICLE V ADDITIONAL UNDERTAKINGS OF SELLER |
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SECTION 5.01 LIABILITY OF THE SELLER; INDEMNITIES |
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Section 5.02 |
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Merger or Consolidation of, or Assumption of the Obligations of, the Seller |
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Section 5.03 |
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Limitation on Liability of the Seller and Others |
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ARTICLE VI MISCELLANEOUS PROVISIONS |
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Section 6.01 |
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Amendment |
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Section 6.02 |
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Notices |
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Section 6.03 |
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Assignment by the Seller |
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Section 6.04 |
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Assignment to the Indenture Trustee |
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Section 6.05 |
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Limitations on Rights of Others |
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Section 6.06 |
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Severability |
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Section 6.07 |
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Separate Counterparts |
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Section 6.08 |
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Headings |
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Section 6.09 |
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Governing Law |
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Section 6.10 |
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Nonpetition Covenants |
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APPENDIX A |
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DEFINITIONS |
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SCHEDULE 1 |
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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:
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.
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Section 2.01 Conveyance of the Storm Recovery Property.
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:
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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.
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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 Sellers 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 Sellers 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 Issuers 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 Sellers 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 Sellers knowledge, any other Person:
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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.
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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).
Section 3.09 Solvency. After giving effect to the sale of the Storm Recovery Property hereunder, the Seller:
Section 3.10 The Financing Order.
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Section 3.11 State Action.
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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 Sellers rights and interests under the Financing Order and the Issuers 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.
(1) the right to impose, bill, charge, collect and receive the Storm Recovery Charges, including the right to receive Storm Recovery
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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 Sellers 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.
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
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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.
Section 4.01 Sellers 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 Sellers 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 Sellers 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.
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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 Issuers or the Indenture Trustees interests in the Storm Recovery Property or under any of the Basic Documents or the Sellers performance of its obligations hereunder or under any of the other Basic Documents.
Section 4.06 Covenants Related to the Storm Recovery Property.
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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:
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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 Sellers 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 Sellers 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.
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.
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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:
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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
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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.
Section 6.01 Amendment.
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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
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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 Issuers 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.
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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
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as Issuer, |
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By: |
/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: |
/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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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.
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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.
Moodys means Moodys Investors Service, Inc., or any successor thereto.
Officers 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 Moodys, 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 & Poors or S&P, means Standard & Poors, 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 Sellers 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 Sellers 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 Issuers 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
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as Issuer, |
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CLECO POWER LLC, |
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as Seller, |
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By: |
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SCHEDULE 1
to
BILL OF SALE
Storm Recovery Property
All of Sellers 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 Sellers 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
ARTICLE I DEFINITIONS |
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SECTION 1.01. DEFINITIONS |
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SECTION 1.02. OTHER DEFINITIONAL PROVISIONS |
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ARTICLE II APPOINTMENT AND AUTHORIZATION OF SERVICER |
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SECTION 2.01. APPOINTMENT OF THE SERVICER; ACCEPTANCE OF APPOINTMENT |
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SECTION 2.02. AUTHORIZATION |
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SECTION 2.03. DOMINION AND CONTROL OVER STORM RECOVERY PROPERTY |
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ARTICLE III BILLING AND OTHER SERVICES |
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SECTION 3.01. DUTIES OF THE SERVICER |
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SECTION 3.02. SERVICING AND MAINTENANCE STANDARDS |
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SECTION 3.03. ANNUAL REPORTS ON COMPLIANCE WITH REGULATION AB |
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SECTION 3.04. ANNUAL REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM REPORT |
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SECTION 3.05. MONITORING OF THIRD-PARTY COLLECTORS |
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ARTICLE IV SERVICES RELATED TO STORM RECOVERY CHARGE ADJUSTMENTS AND ALLOCATION ADJUSTMENTS |
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SECTION 4.01. STORM RECOVERY CHARGE ADJUSTMENTS |
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SECTION 4.02. LIMITATION OF LIABILITY |
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ARTICLE V THE STORM RECOVERY PROPERTY |
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SECTION 5.01. CUSTODY OF STORM RECOVERY PROPERTY RECORDS |
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SECTION 5.02. DUTIES OF SERVICER AS CUSTODIAN |
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SECTION 5.03. CUSTODIANS INDEMNIFICATION |
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SECTION 5.04. EFFECTIVE PERIOD AND TERMINATION |
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ARTICLE VI THE SERVICER |
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SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF THE SERVICER |
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SECTION 6.02. INDEMNITIES OF THE SERVICER; RELEASE OF CLAIMS |
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SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE SERVICER |
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SECTION 6.04. ASSIGNMENT OF THE SERVICERS OBLIGATIONS |
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SECTION 6.05. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS |
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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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SECTION 6.08. COMPLIANCE WITH APPLICABLE LAW |
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SECTION 6.09. SERVICER EXPENSES |
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SECTION 6.10. APPOINTMENTS |
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SECTION 6.11. NO SERVICER ADVANCES |
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SECTION 6.12. REMITTANCES |
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SECTION 6.13. SERVICERS CERTIFICATE |
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SECTION 6.14. PROTECTION OF TITLE |
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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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SECTION 7.02. NOTICE OF SERVICER DEFAULT |
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SECTION 7.03. WAIVER OF PAST DEFAULTS |
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SECTION 7.04. APPOINTMENT OF SUCCESSOR |
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SECTION 7.05. COOPERATION WITH SUCCESSOR |
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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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SECTION 8.04. LIMITATIONS ON RIGHTS OF OTHERS |
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SECTION 8.05. SEVERABILITY |
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SECTION 8.06. SEPARATE COUNTERPARTS |
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SECTION 8.07. HEADINGS |
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SECTION 8.08. GOVERNING LAW |
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SECTION 8.09. ASSIGNMENT TO THE TRUSTEE |
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SECTION 8.10. NONPETITION COVENANTS |
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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 - SERVICERS CERTIFICATE
ANNEX 1 TO SERVICING AGREEMENT
APPENDIX A - MASTER DEFINITIONS
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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 LPSCs 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:
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.
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 Servicers 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 Servicers 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:
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 Issuers 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.
SECTION 3.01. DUTIES OF THE SERVICER. The Servicer, as agent for the Issuer (to the extent provided herein), shall have the following duties:
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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.
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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:
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except where the failure to comply with any of the foregoing would not materially and adversely affect the Issuers or the Trustees 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 Servicers 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.
SECTION 3.04. ANNUAL REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM REPORT.
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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:
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The Servicer shall update the records described above no less frequently than quarterly.
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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.
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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:
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:
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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.
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SECTION 5.03. CUSTODIANS 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 ATTORNEYS FEES AND EXPENSES).
SECTION 5.04. EFFECTIVE PERIOD AND TERMINATION. The Servicers 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 Servicers 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.
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SECTION 6.02. INDEMNITIES OF THE SERVICER; RELEASE OF CLAIMS.
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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 SERVICERS BREACH.
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SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE SERVICER. Any Person:
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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:
(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;
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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 SERVICERS OBLIGATIONS. The Servicer will not voluntarily assign or outsource its obligations hereunder except with the LPSCs 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 Servicers 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 Servicers 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 Servicers 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
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Servicing Fee) in accordance with Section 8.02(d) of the Indenture. The Servicers 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 Servicers 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.
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.
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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 Powers 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.
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SECTION 6.13. SERVICERS 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 Servicers 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 Powers 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 Powers LPSCs jurisdictional customers.
SECTION 7.01. SERVICER DEFAULT. If any one of the following events (a Servicer Default) occurs and is continuing:
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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 Issuers 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,
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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 Powers rights as a Servicer shall not terminate Cleco Powers 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.
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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.
SECTION 8.01. AMENDMENT.
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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
or, as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.
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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 Issuers 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
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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 courts 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,
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 Servicers giving prompt written notice thereof to the LPSC, the Issuer and the Trustee.
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
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By: |
/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: |
/s/ Kathleen F. Nolen |
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Name: Kathleen F. Nolen |
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Title: Senior Vice President and Chief Financial Officer |
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: |
/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 Servicers 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 SERVICERS 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:
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a. Principal |
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Aggregate |
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i. |
Tranche A-1 |
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ii. |
Tranche A-2 |
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v. |
Total: |
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b. Interest |
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Aggregate |
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i. |
Tranche A-1 |
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ii. |
Tranche A-2 |
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v. |
Total: |
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i. |
Tranche A-1 |
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ii. |
Tranche A-2 |
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v. |
Total: |
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i. |
Tranche A-1 |
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ii. |
Tranche A-2 |
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v. |
Total: |
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i. |
Tranche A-1 |
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ii. |
Tranche A-2 |
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v. |
Total: |
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i. |
Trustee Fees and Expenses: |
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ii. |
Servicing Fee: |
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iii. |
Administration Fee: |
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iv. |
Other Operating Expenses: |
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v. |
Total: |
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i. |
Operating Expenses (payable pursuant to Section 8.02(d)(4) of the Indenture): |
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ii. |
Funding of Capital Subaccount (to required amount): |
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iii. |
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. |
Operating Expenses and Indemnity Amounts payable pursuant to Section 8.02(d)(8) of the Indenture: |
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v. |
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. |
Total: |
i. |
Total: |
i. |
Total: |
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Semi-Annual Servicers 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: |
EXHIBIT B-1
FORM OF SERVICERS 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 Servicers 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 Powers annual report on Form 10-K (such fiscal year, the Assessment Period ):
Regulation
AB
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Servicing Criteria |
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Applicable
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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) |
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If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third partys performance and compliance with such servicing activities. |
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Not applicable; no servicing activities were outsourced. |
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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 pool assets are maintained. |
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Not applicable; documents do not provide for a back-up servicer. |
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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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Not applicable; LPSC rules impose credit standards on retail electric providers who handle customer collections and govern performance requirements of utilities. |
Regulation
AB
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Servicing Criteria |
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Applicable
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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 business days of receipt, or such other number of days specified in the transaction agreements. |
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Applicable |
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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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Applicable |
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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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Applicable, but no current assessment required; no advances by the Servicer are permitted under 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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Applicable, but no current assessment is required since transaction accounts are maintained by and in the name of the Trustee. |
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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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Applicable, but no current assessment required; all custodial accounts are maintained by the Trustee. |
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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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Not applicable; all transfers made by wire transfer. |
Regulation
AB
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Servicing Criteria |
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Applicable
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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 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. |
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Applicable; assessment below. |
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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 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 trustees records as to the total unpaid principal balance and number of pool assets serviced by the Servicer. |
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Applicable; assessment below. |
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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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Applicable; assessment below. |
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1122(d)(3)(iii) |
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Disbursements made to an investor are posted within two business days to the Servicers investor records, or such other number of days specified in the transaction agreements. |
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Applicable |
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Regulation
AB
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Servicing Criteria |
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Applicable
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1122(d)(3)(iv) |
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Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements. |
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Applicable; assessment below. |
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Pool Asset Administration |
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1122(d)(4)(i) |
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Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents. |
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Applicable; assessment below. |
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1122(d)(4)(ii) |
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Pool assets and related documents are safeguarded as required by the transaction agreements. |
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Applicable; assessment below. |
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1122(d)(4)(iii) |
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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. |
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Not applicable; no removals or substitutions of Storm Recovery property are contemplated or allowed under the transaction documents. |
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1122(d)(4)(iv) |
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Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicers 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. |
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Applicable; assessment below. |
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1122(d)(4)(v) |
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The Servicers records regarding the pool assets agree with the Servicers records with respect to an obligors unpaid principal balance. |
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Not applicable; because underlying obligation (Storm Recovery charge) is not an interest bearing instrument |
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1122(d)(4)(vi) |
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Changes with respect to the terms or status of an obligors 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. |
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Applicable; assessment below |
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Regulation
AB
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Servicing Criteria |
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Applicable
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1122(d)(4)(vii) |
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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. |
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Applicable; assessment below. |
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1122(d)(4)(viii) |
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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 entitys 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). |
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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. |
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1122(d)(4)(ix) |
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Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents. |
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Not applicable; Storm Recovery charges are not interest bearing instruments. |
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1122(d)(4)(x) |
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Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligors 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. |
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Not Applicable; Servicer does not maintain deposit accounts for obligors. |
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Regulation
AB
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Servicing Criteria |
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Applicable
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1122(d)(4)(xi) |
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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. |
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Not applicable; Servicer does not make payments on behalf of obligors. |
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1122(d)(4)(xii) |
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Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the Servicers funds and not charged to the obligor, unless the late payment was due to the obligors error or omission. |
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Not applicable; Servicer cannot make advances of its own funds on behalf of customers under the transaction documents. |
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1122(d)(4)(xiii) |
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Disbursements made on behalf of an obligor are posted within two business days to the obligors records maintained by the Servicer, or such other number of days specified in the transaction agreements. |
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Not applicable; Servicer cannot make advances of its own funds on behalf of customers to pay principal or interest on the bonds. |
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1122(d)(4)(xiv) |
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Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements. |
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Applicable; assessment below. |
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1122(d)(4)(xv) |
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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. |
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Not applicable; no external enhancement is required under the transaction documents. |
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3. To the best of the undersigneds 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 Powers 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 Powers annual report on Form 10-K.
Executed as of this day of , .
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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 undersigneds 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 ,
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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 [ ]:
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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 Customers 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 Powers 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 Customers 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
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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 Customers usage (which may be based on data obtained from such Customers 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 Customers 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 Customers 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 Servicers 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 Servicers 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.
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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 Servicers Policies and Practices, or if not prescribed by applicable LPSC Regulations or tariffs or the Servicers 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.
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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 Servicers 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
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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 Customers or any and each Third-Party Collectors 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 Servicers 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
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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 Servicers 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
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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.
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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 Accountants 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.
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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 Powers (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.
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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:
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Insolvency Event means, with respect to a specified Person,
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.
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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.
Moodys means Moodys Investors Service Inc., or any successor thereto.
Officers Certificate means a certificate signed, in the case of Cleco Power, by:
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 Sellers 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:
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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 pledgees 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) Issuers 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 .
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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 Moodys, Fitch and Standard & Poors. 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 officers knowledge of and familiarity with the particular subject.
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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 Servicers 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 Servicers 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
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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 & Poors or S&P means Standard & Poors, 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 Sellers 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 Sellers remaining portion of those proceeds.
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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.
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Exhibit 10.3
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, dated as of March 6, 2008 (this Administration Agreement), is by and between CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC, a Louisiana limited liability company, as Issuer (the Issuer), and CLECO POWER LLC, a Louisiana limited liability company (Cleco Power), as Administrator (in such capacity, the Administrator). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in Appendix A to the Indenture more fully described below.
W I T N E S S E T H:
WHEREAS, the Issuer is issuing its 2008 Senior Secured Storm Recovery Bonds (the Bonds) pursuant to the Indenture, dated as of the date hereof and a First Supplemental Indenture thereto, also dated as of the date hereof (the First Supplement) (as amended, supplemented or otherwise modified and in effect from time to time, the Indenture), between the Issuer and U.S. Bank National Association, as the Trustee;
WHEREAS, the Issuer has entered into certain agreements in connection with the issuance of the Bonds, including (i) the Indenture and the First Supplement, (ii) the Storm Recovery Property Servicing Agreement, dated as of the date hereof (the Servicing Agreement), between the Issuer and Cleco Power, as Servicer, (iii) the Storm Recovery Property Sale Agreement, dated as of the date hereof (the Sale Agreement), between the Issuer and Cleco Power, as Seller, and (iv) the DTC Agreement relating to the Bonds (the Indenture, the First Supplement, the Servicing Agreement, the Sale Agreement and the DTC Agreement, as such agreements may be amended and supplemented from time to time, being referred to hereinafter collectively as the Initial Related Agreements);
WHEREAS, pursuant to the Initial Related Agreements, the Issuer is required to perform certain duties in connection with the Initial Related Agreements, the Bonds and the Trust Estate pledged to the Trustee pursuant to the Indenture;
WHEREAS, the Issuer may from time to time enter into and be required to perform certain duties under additional agreements similar to the Initial Related Agreements (together with the Initial Related Agreements, the Related Agreements);
WHEREAS, the Issuer has no employees, other than its officers, and does not intend to hire any employees, and consequently desires to have the Administrator perform certain of the duties of the Issuer referred to in the preceding clauses and to provide such additional services consistent with the terms of this Administration Agreement and the Related Agreements as the Issuer may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services and the facilities required thereby and is willing to perform such services and provide such facilities for the Issuer on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
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In providing the services under this Section 1 and as otherwise provided under this Administration Agreement, the Administrator will not knowingly take any actions on behalf of the Issuer which (i) the Issuer is prohibited from taking under the Related Agreements, or (ii) would cause the Issuer to be in violation of any federal, state or local law or the Issuer LLC Agreement.
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The work to be performed under this Administration Agreement is part of the Issuers business and is an integral part of and is essential to the business and operations of the Issuer. For purposes of the Louisiana Workers Compensation Act, the Issuer is deemed to be the statutory employer of the Administrators employees who perform the services under this Administration Agreement. Although the Issuer is to be granted the protections that are afforded a statutory employer under Louisiana law, this provision is included for the sole purpose of establishing a statutory employer relationship between the Issuer and the Administrators personnel within the meaning of La. R.S. 23:1061(A) and is not intended to create an employer / employee relationship as between the Issuer and the Administrators personnel for any other purpose. The Administrator shall be and remain primarily responsible for the payment of workers compensation benefits to the Administrators personnel and shall not be entitled to seek contribution for any such payments from the Issuer, and the Administrator further shall indemnify and hold harmless the Issuer and at the Issuers option defend the Issuer for any payment to the Administrators personnel of workers compensation benefits or from any claim for such benefits or any other employee claim.
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(b) Subject to Sections 8(e) and 8(f), the Administrator may resign its duties hereunder by providing the Issuer with at least sixty (60) days prior written notice.
(c) Subject to Sections 8(e) and 8(f), the Issuer may remove the Administrator without cause by providing the Administrator with at least sixty (60) days prior written notice.
(d) Subject to Sections 8(e) and 8(f), at the sole option of the Issuer, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator if any of the following events shall occur:
The Administrator agrees that if any of the events specified in clauses (ii) or (iii) of this Section 8(d) shall occur, it shall give written notice thereof to the Issuer and the Trustee as soon as practicable but in any event within seven (7) days after the happening of such event.
(e) No resignation or removal of the Administrator pursuant to this Section 8(e) shall be effective until a successor Administrator has been appointed by the Issuer, and such successor
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Administrator has agreed in writing to be bound by the terms of this Administration Agreement in the same manner as the Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be effective only after satisfaction of the Rating Agency Condition with respect to the proposed appointment.
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Cleco Katrina/Rita
Hurricane Recovery Funding LLC
2605 Hwy. 28 East
Office Number 12,
Pineville, Louisiana 71360-5226
Attention: Manager
Cleco Power LLC
2030 Donahue Ferry Road,
Pineville, Louisiana 71360-5226
Attention: Treasurer
or to such other address as either party shall have provided to the other party in writing. Any notice required to be in writing hereunder shall be deemed given if such notice is mailed by certified mail, postage prepaid, or hand-delivered to the address of such party as provided above.
(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 Officers Certificate stating that the proposed amendment has been approved by all parties to this Administration Agreement; and
(iii) a statement identifying the person to whom the LPSC or its staff is to address its consent to the proposed amendment.
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(i) the date proposed by the parties to the amendment, or
(ii) 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.
Following delivery of a notice to the LPSC by the Administrator under Section 13(a) above, the Administrator and Issuer may at any time withdraw from the LPSC further consideration of any notification of a proposed amendment.
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IN WITNESS WHEREOF, the parties have caused this Administration Agreement to be duly executed and delivered as of the day and year first above written.
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CLECO KATRINA/RITA HURRICANE
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as Issuer |
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By: |
/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 Administrator, |
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By: |
/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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Exhibit 99.1
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:
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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 ).
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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.
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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).
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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 Commissions 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
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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 Commissions 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
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themselves are invalid and void under the reserved powers doctrine as beyond the States 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 LPSCs 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 LPSCs Powers
The LPSC is a creature of the Louisiana Constitution of 1974. It is a commission in the states 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 LPSCs 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 legislatures acts or omissions can not subtract from the Commissions 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 LPSCs 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.
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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 LPSCs 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 LPSCs 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 Blacks 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 bodys ability to bind itself contractually in a manner that surrenders an essential attribute of its sovereignty. Under this doctrine, if a contract limits a states 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) Webs 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 claimants 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 claimants 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 Assn v. DeBenedictis , 480 U.S. 470, 493 (1987).
(30) Monsanto, 467 U.S. at 1005 (quoting Webbs 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 Assn 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 employers 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).
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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 ).
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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 LPSCs 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 propertys 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 LPSCs constitutional jurisdiction, and therefore not a compensable taking).
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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 States 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 states 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 states 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 legislatures 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 LPSCs 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 courts 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).
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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 acts] 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 Legislatures 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 legislatures 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 LPSCs 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 Assn v. Blaisdell , 290 U.S. 398, 429-35 (1934). In Board of Commrs 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).
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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 States ability to bind itself contractually in a manner which surrenders an essential attribute of its sovereignty. Under this doctrine, if a contract limits a states 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 states 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 States 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 Assn 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 factors 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.
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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).
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the States 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 States 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 States 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 Courts 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 Governments 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).
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contracting party. One issue in Winstar was whether the contract claim was barred by the sovereign acts doctrine, i.e., the governments 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 courts 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 partys 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 Commrs 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.
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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) DAntonio 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 ).
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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 legislations 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 Courts 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).
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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 legislatures 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 Legislatures adjustment of the rights and responsibilities of the contracting parties was both appropriate and reasonable. The Legislatures 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 States 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.
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assertion, and considered the States 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 states 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 Commrs v. Department of Natural Resources , 496 So.2d 281, 289 (La. 1986) ( Board of Commrs ) (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 states 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 states 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).
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the LPSCs 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 states 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 states 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 states 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 Commrs , 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 LPSCs 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 States procedures is not necessary if a plaintiff can demonstrate such procedures are inadequate or unavailable, Louisianas 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 courts 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 Commn 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 Acts 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 States 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 Dept 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 LIRCs 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 Louisianas Eleventh Amendment immunity suggest that all Louisiana executive departments have Eleventh Amendment immunity. Vogt v. Board of Commrs of the Orleans Levee District , 294 F.3d 684, 692 (5th Cir. 2002); Champagne v. Jefferson Parish Sheriffs 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 states 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 States 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 Dept 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 Louisianas 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 Commn 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).
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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 courts 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 States 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 claimants insolvency or the closure of the claimants 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 governments 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).
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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 states 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. Commn 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 Councils retail rate order is needed to determine whether it is facially pre-empted by FERCs 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).
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exercise of a state district courts 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 LPSCs 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).
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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 LPSCs later interpretation of the initial order, in contrast to the normal deference accorded to the LPSCs 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
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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 states 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 courts judgment as to the reasonableness of the governmental action. The Louisiana Supreme Courts 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 states 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 Courts standard of review of LPSC actions incorporates the constitutional principles involved in the Contract Clause and Takings Clauses, regardless of whether the Courts 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 LPSCs 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 Commissions 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 LPSCs 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 ).
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* * * * *
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 Courts 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 states 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 Courts ultimate holding in vacating the LPSCs order was based on the conclusion that the LPSCs 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 companys 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 Louisianas 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 ).
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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 Courts 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 [LPSCs] 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 LPSCs] rationale has some merit to it, but unfortunately it is flawed because it leaves out a crucial component of the calculation. That component is Conocos 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.
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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 Courts holding was to vacate the LPSCs 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 Conocos 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 LPSCs rate-making powers. In a rate-making case, a utilitys fuel adjustment clause was modified. The Louisiana Supreme Court began by noting that the LPSCs 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 LPSCs 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 governments 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).
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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 LPSCs construction of its own rule: First, because the [LPSC]s action infringes to some extent upon the stock owners 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 Louisianas 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.
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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 states 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 states 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 states power being exercised are not dispositive, but they contain an element of truth.(186) The issue is not the states 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 LPSCs 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.
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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 States 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 States 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 states 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 Assn , 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 Legislatures 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 Legislatures 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).
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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 utilitys 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 states 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 .
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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 Bondholders 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 States 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.
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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 Louisianas 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.
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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.
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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 opinions 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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