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

1

 

SECTION 1.01. DEFINITIONS

1

 

SECTION 1.02. OTHER DEFINITIONAL PROVISIONS

1

 

 

 

ARTICLE II APPOINTMENT AND AUTHORIZATION OF SERVICER

2

 

SECTION 2.01. APPOINTMENT OF THE SERVICER; ACCEPTANCE OF APPOINTMENT

2

 

SECTION 2.02. AUTHORIZATION

2

 

SECTION 2.03. DOMINION AND CONTROL OVER STORM RECOVERY PROPERTY

2

 

 

 

ARTICLE III BILLING AND OTHER SERVICES

3

 

SECTION 3.01. DUTIES OF THE SERVICER

3

 

SECTION 3.02. SERVICING AND MAINTENANCE STANDARDS

6

 

SECTION 3.03. ANNUAL REPORTS ON COMPLIANCE WITH REGULATION AB

7

 

SECTION 3.04. ANNUAL REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM REPORT

7

 

SECTION 3.05. MONITORING OF THIRD-PARTY COLLECTORS

8

 

 

 

ARTICLE IV SERVICES RELATED TO STORM RECOVERY CHARGE ADJUSTMENTS AND ALLOCATION
ADJUSTMENTS

11

 

SECTION 4.01. STORM RECOVERY CHARGE ADJUSTMENTS

11

 

SECTION 4.02. LIMITATION OF LIABILITY

13

 

 

 

ARTICLE V THE STORM RECOVERY PROPERTY

14

 

SECTION 5.01. CUSTODY OF STORM RECOVERY PROPERTY RECORDS

14

 

SECTION 5.02. DUTIES OF SERVICER AS CUSTODIAN

14

 

SECTION 5.03. CUSTODIAN’S INDEMNIFICATION

16

 

SECTION 5.04. EFFECTIVE PERIOD AND TERMINATION

16

 

 

 

ARTICLE VI THE SERVICER

16

 

SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF THE SERVICER

16

 

SECTION 6.02. INDEMNITIES OF THE SERVICER; RELEASE OF CLAIMS

18

 

SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF,
THE SERVICER

21

 

SECTION 6.04. ASSIGNMENT OF THE SERVICER’S OBLIGATIONS

23

 

SECTION 6.05. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS

23

 

SECTION 6.06. CLECO POWER NOT TO RESIGN AS SERVICER

24

 

SECTION 6.07. SERVICING FEE

24

 

SECTION 6.08. COMPLIANCE WITH APPLICABLE LAW

25

 

SECTION 6.09. SERVICER EXPENSES

25

 

SECTION 6.10. APPOINTMENTS

25

 

SECTION 6.11. NO SERVICER ADVANCES

25

 

SECTION 6.12. REMITTANCES

25

 

SECTION 6.13. SERVICER’S CERTIFICATE

26

 

SECTION 6.14. PROTECTION OF TITLE

26

 

SECTION 6.15. MAINTENANCE OF OPERATIONS

26

 

i

--------------------------------------------------------------------------------

 

ARTICLE VII SERVICER DEFAULT

26

 

SECTION 7.01. SERVICER DEFAULT

26

 

SECTION 7.02. NOTICE OF SERVICER DEFAULT

28

 

SECTION 7.03. WAIVER OF PAST DEFAULTS

28

 

SECTION 7.04. APPOINTMENT OF SUCCESSOR

28

 

SECTION 7.05. COOPERATION WITH SUCCESSOR

29

 

 

 

ARTICLE VIII MISCELLANEOUS PROVISIONS

29

 

SECTION 8.01. AMENDMENT

29

 

SECTION 8.02. NOTICES

30

 

SECTION 8.03. ASSIGNMENT

31

 

SECTION 8.04. LIMITATIONS ON RIGHTS OF OTHERS

31

 

SECTION 8.05. SEVERABILITY

31

 

SECTION 8.06. SEPARATE COUNTERPARTS

31

 

SECTION 8.07. HEADINGS

31

 

SECTION 8.08. GOVERNING LAW

31

 

SECTION 8.09. ASSIGNMENT TO THE TRUSTEE

31

 

SECTION 8.10. NONPETITION COVENANTS

32

 

SECTION 8.11. TERMINATION

32

 

SECTION 8.12. LPSC CONSENT

32

 

SECTION 8.13. LIMITATION OF LIABILITY

33

 

SCHEDULE A TO SERVICING AGREEMENT

 

EXHIBIT A - SERVICER’S CERTIFICATE

 

ANNEX 1 TO SERVICING AGREEMENT

 

APPENDIX A  -  MASTER DEFINITIONS

 

ii

--------------------------------------------------------------------------------

 

STORM RECOVERY PROPERTY SERVICING AGREEMENT dated as of March 6, 2008 (this
“Agreement”) between CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC, a
Louisiana limited liability company (the “Issuer”), and CLECO POWER LLC, a
Louisiana limited liability company (“Cleco Power”), as the servicer of the
Storm Recovery Property hereunder (together with each successor to Cleco Power
in such capacity pursuant to Section 6.03 or 7.04, the “Servicer”).

 

WHEREAS, pursuant to the Securitization Act and the Financing Order, the Seller
and the Issuer are concurrently entering into the Sale Agreement dated as of the
date hereof pursuant to which the Seller is selling and the Issuer is purchasing
the Storm Recovery Property created pursuant to the Securitization Act and the
Financing Order;

 

WHEREAS the Servicer is willing to service the Storm Recovery Property purchased
from the Seller by the Issuer;

 

WHEREAS the Issuer, in connection with ownership of the Storm Recovery Property,
desires to engage the Servicer to carry out the functions described herein;

 

WHEREAS, the Storm Recovery Charges will be itemized on Customers’ bills and the
SRC Collections initially will be commingled with other funds collected from
Customers;

 

WHEREAS, the Financing Order calls for the Servicer to execute a servicing
agreement with the Issuer pursuant to which the Servicer will be required, among
other things, to impose and collect applicable Storm Recovery Charges for the
benefit and account of the Issuer, to make periodic Storm Recovery Charge
Adjustments required or allowed by the Financing Order, and to account for and
remit the applicable Storm Recovery Charges to the Trustee on behalf and for the
account of the Issuer in accordance with the remittance procedures contained
hereunder without any deduction or surcharge of any kind; and

 

WHEREAS, the Financing Order provides that the LPSC will enforce the obligations
imposed by the Financing Order, the LPSC’s applicable substantive rules, and
applicable statutory provisions.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.01.  DEFINITIONS.  Capitalized terms used but not otherwise defined in
this Agreement have the respective meanings set forth in Appendix A hereto.

 

SECTION 1.02.  OTHER DEFINITIONAL PROVISIONS.

 

(A)           THE WORDS “HEREOF,” “HEREIN,” “HEREUNDER” AND WORDS OF SIMILAR
IMPORT WHEN USED IN THIS AGREEMENT SHALL REFER TO THIS AGREEMENT AS A WHOLE AND
NOT TO ANY PARTICULAR PROVISION OF THIS AGREEMENT; SECTION, APPENDIX, ANNEX,
EXHIBIT AND SCHEDULE REFERENCES

 

--------------------------------------------------------------------------------

 

CONTAINED IN THIS AGREEMENT ARE REFERENCES TO SECTIONS, APPENDICES, ANNEXES,
EXHIBITS AND SCHEDULES IN OR TO THIS AGREEMENT UNLESS OTHERWISE SPECIFIED; AND
THE TERM “INCLUDING” SHALL MEAN “INCLUDING WITHOUT LIMITATION.”

 

(B)           THE DEFINITIONS CONTAINED IN THIS AGREEMENT ARE APPLICABLE TO THE
SINGULAR AS WELL AS THE PLURAL FORMS OF SUCH TERMS.

 

(C)           ALL TERMS DEFINED IN THIS AGREEMENT HAVE THE SAME DEFINED MEANINGS
WHEN USED IN ANY CERTIFICATE OR OTHER DOCUMENT MADE OR DELIVERED PURSUANT TO
THIS AGREEMENT UNLESS OTHERWISE DEFINED THEREIN.

 

ARTICLE II

 

APPOINTMENT AND AUTHORIZATION OF SERVICER

 

SECTION 2.01.  APPOINTMENT OF THE SERVICER; ACCEPTANCE OF APPOINTMENT.  The
Issuer hereby appoints the Servicer, and the Servicer hereby accepts such
appointment, to perform the Servicer’s obligations pursuant to this Agreement on
behalf of and for the benefit of the Issuer or any assignee thereof in
accordance with the terms of this Agreement and applicable law. This appointment
and the Servicer’s acceptance thereof may not be revoked except in accordance
with the express terms of this Agreement.

 

SECTION 2.02.  AUTHORIZATION.  With respect to all or any portion of the Storm
Recovery Property, the Servicer shall be, and hereby is, authorized and
empowered by the Issuer to:

 

(A)           EXECUTE AND DELIVER, ON BEHALF OF ITSELF OR THE ISSUER, AS THE
CASE MAY BE, ANY AND ALL INSTRUMENTS, DOCUMENTS OR NOTICES, AND

 

(B)           ON BEHALF OF ITSELF OR THE ISSUER, AS THE CASE MAY BE, MAKE ANY
FILING AND PARTICIPATE IN PROCEEDINGS RELATED TO THE DUTIES OF THE SERVICER
HEREUNDER WITH ANY GOVERNMENTAL AUTHORITIES, INCLUDING WITH THE LPSC.

 

The Issuer shall furnish the Servicer with all executed documents as have been
prepared by the Servicer for execution by the Issuer, and with such other
documents as may be in the Issuer’s possession, as necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties
hereunder.  Upon the written request of the Servicer, the Issuer shall furnish
the Servicer with any powers of attorney or other documents necessary or
appropriate to enable the Servicer to carry out its duties hereunder.

 

SECTION 2.03.  DOMINION AND CONTROL OVER STORM RECOVERY PROPERTY.
 Notwithstanding any other provision contained herein, the Servicer and the
Issuer agree that the Issuer shall have dominion and control over the Storm
Recovery Property, and the Servicer, in accordance with the terms hereof, is
acting solely as the servicing agent of and custodian for the Issuer with
respect to the Storm Recovery Property and Storm Recovery Property
Documentation.  The Servicer hereby agrees that it shall not take any action
that is not authorized by this Agreement, the Securitization Act or the
Financing Order, that is not consistent with its customary procedures and
practices, or that shall impair the rights of the

 

2

--------------------------------------------------------------------------------

 

Issuer with respect to the Storm Recovery Property, in each case unless such
action is required by law or court or regulatory order.

 

ARTICLE III

 

BILLING AND OTHER SERVICES

 

SECTION 3.01.  DUTIES OF THE SERVICER.  The Servicer, as agent for the Issuer
(to the extent provided herein), shall have the following duties:

 

(A)           DUTIES OF SERVICER GENERALLY.  THE SERVICER SHALL MANAGE, SERVICE,
ADMINISTER AND MAKE COLLECTIONS IN RESPECT OF THE STORM RECOVERY PROPERTY. THE
SERVICER’S DUTIES WILL INCLUDE:

 

(I)            CALCULATING AND BILLING THE STORM RECOVERY CHARGES;

 

(II)           OBTAINING METER READS;

 

(III)          ACCOUNTING FOR COLLECTED STORM RECOVERY CHARGES AND LATE-PAYMENT
PENALTIES;

 

(IV)          INVESTIGATING AND RESOLVING DELINQUENCIES (AND FURNISHING REPORTS
WITH RESPECT TO SUCH DELINQUENCIES TO THE ISSUER);

 

(V)           PROCESSING AND DEPOSITING COLLECTIONS AND MAKING PERIODIC
REMITTANCES;

 

(VI)          FURNISHING PERIODIC REPORTS TO THE ISSUER, THE TRUSTEE, THE LPSC
AND THE RATING AGENCIES;

 

(VII)         MONITORING CUSTOMER PAYMENTS OF STORM RECOVERY CHARGES;

 

(VIII)        NOTIFYING EACH CUSTOMER OF ANY DEFAULTS IN ITS PAYMENT OBLIGATIONS
AND OTHER OBLIGATIONS (INCLUDING ITS CREDIT STANDARDS), AND FOLLOWING SUCH
COLLECTION PROCEDURES AS IT FOLLOWS WITH RESPECT TO COMPARABLE ASSETS THAT IT
SERVICES FOR ITSELF OR OTHERS;

 

(IX)           COLLECTING PAYMENTS OF STORM RECOVERY CHARGES AND PAYMENTS WITH
RESPECT TO STORM RECOVERY PROPERTY FROM ALL PERSONS OR ENTITIES RESPONSIBLE FOR
REMITTING STORM RECOVERY CHARGES AND OTHER PAYMENTS WITH RESPECT TO STORM
RECOVERY PROPERTY TO THE SERVICER UNDER THE FINANCING ORDER, THE SECURITIZATION
ACT, LPSC REGULATIONS OR APPLICABLE TARIFFS AND REMITTING THESE COLLECTIONS TO
THE TRUSTEE;

 

(X)            RESPONDING TO INQUIRIES BY CUSTOMERS, THE LPSC OR ANY OTHER
GOVERNMENTAL AUTHORITY WITH RESPECT TO THE STORM RECOVERY PROPERTY AND THE STORM
RECOVERY CHARGES;

 

(XI)           MAKING ALL FILINGS WITH THE LPSC AND TAKING SUCH OTHER ACTION AS
MAY BE NECESSARY TO PERFECT THE ISSUER’S OWNERSHIP INTERESTS IN AND THE
TRUSTEE’S FIRST PRIORITY

 

3

--------------------------------------------------------------------------------

 

LIEN ON THE STORM RECOVERY PROPERTY AND THE OTHER PORTIONS OF THE SERIES TRUST
ESTATE UNDER THE INDENTURE;

 

(XII)          SELLING, AS THE AGENT FOR THE ISSUER, AS ITS INTEREST MAY APPEAR,
DEFAULTED OR WRITTEN-OFF ACCOUNTS IN ACCORDANCE WITH THE SERVICER’S USUAL AND
CUSTOMARY PRACTICES;

 

(XIII)         TAKING ACTION IN CONNECTION WITH STORM RECOVERY CHARGE
ADJUSTMENTS AND ALLOCATION OF THE CHARGES AMONG VARIOUS CLASSES OF CUSTOMERS AS
IS SET FORTH HEREIN;

 

(XIV)        ANY OTHER DUTIES SPECIFIED FOR A SERVICER UNDER THE FINANCING ORDER
OR OTHER APPLICABLE LAW; AND

 

(XV)         RECONCILING, WITHIN 30 CALENDAR DAYS AFTER BANK STATEMENT CUTOFF
DATE OR SUCH LATER TIME AS IS CONSISTENT WITH THE SERVICER’S USUAL AND CUSTOMARY
PRACTICES THAT DOES NOT MATERIALLY IMPAIR THE ABILITY OF THE SERVICER TO CORRECT
ERRORS, ALL BANK ACCOUNT DEBITS AND CREDITS FOR BANK ACCOUNTS THAT ARE HELD IN
THE NAME OF THE SERVICER (AS SERVICER HEREUNDER) OR OF THE ISSUER THAT RELATE TO
THE SERIES TRUST ESTATE OR THE STORM RECOVERY BONDS.

 

Anything to the contrary notwithstanding, the duties of the Servicer set forth
in this Agreement shall be qualified in their entirety by, and the Servicer
shall at all times comply with, the Financing Order, the Securitization Act and
any LPSC Regulations, and the federal securities laws and the rules and
regulations promulgated thereunder, including Regulation AB, as in effect at the
time such duties are to be performed. Without limiting the generality of this
Section 3.01(a), in furtherance of the foregoing, the Servicer hereby agrees
that it shall also have, and shall comply with, the duties and responsibilities
relating to data acquisition, usage and bill calculation, billing, customer
service functions, collections, payment processing and remittance set forth in
the Issuer Annex hereto, as it may be amended from time to time. For the
avoidance of doubt, the term “usage” when used herein refers to both kilowatt
hour consumption and kilowatt demand.

 

(B)           REPORTING FUNCTIONS.

 

(I)            NOTIFICATION OF LAWS AND REGULATIONS.  UPON ACQUIRING ACTUAL
KNOWLEDGE THEREOF IN THE COURSE OF ITS PERFORMANCE OF DUTIES IN ACCORDANCE WITH
THE TERMS HEREOF, THE SERVICER SHALL IMMEDIATELY NOTIFY THE ISSUER, THE LPSC,
THE TRUSTEE AND EACH RATING AGENCY IN WRITING OF ANY LAWS OR LPSC REGULATIONS,
ORDERS OR DIRECTIONS HEREAFTER PROMULGATED OR LPSC PROCEEDINGS HEREAFTER
INITIATED RELATED TO THE FINANCING ORDER THAT HAVE, OR IN THE CASE OF LPSC
PROCEEDINGS, MAY HAVE A MATERIAL ADVERSE EFFECT ON THE SERVICER’S ABILITY TO
PERFORM ITS DUTIES UNDER THIS AGREEMENT.

 

(II)           OTHER INFORMATION.  UPON THE REASONABLE REQUEST OF THE ISSUER,
THE TRUSTEE, THE LPSC OR ANY RATING AGENCY, THE SERVICER SHALL PROVIDE TO THE
ISSUER, THE TRUSTEE, THE LPSC OR SUCH RATING AGENCY, AS THE CASE MAY BE, ANY
PUBLIC FINANCIAL INFORMATION IN RESPECT OF THE SERVICER, OR ANY MATERIAL
INFORMATION REGARDING THE STORM RECOVERY PROPERTY TO THE EXTENT IT IS REASONABLY
AVAILABLE TO THE SERVICER, THAT MAY BE REASONABLY NECESSARY AND PERMITTED BY LAW
FOR THE ISSUER, THE TRUSTEE, THE LPSC OR SUCH RATING AGENCY TO MONITOR THE
PERFORMANCE BY THE SERVICER HEREUNDER. IN ADDITION, SO LONG AS ANY

 

4

--------------------------------------------------------------------------------

 

OF THE STORM RECOVERY BONDS ARE OUTSTANDING, THE SERVICER SHALL PROVIDE TO THE
ISSUER, TO THE LPSC AND TO THE TRUSTEE, WITHIN A REASONABLE TIME AFTER WRITTEN
REQUEST THEREFOR, ANY INFORMATION AVAILABLE TO THE SERVICER OR REASONABLY
OBTAINABLE BY IT THAT IS NECESSARY TO CALCULATE THE STORM RECOVERY CHARGES
APPLICABLE TO EACH CUSTOMER CLASS.

 

(III)          PREPARATION OF REPORTS. THE SERVICER SHALL PREPARE AND DELIVER
SUCH ADDITIONAL REPORTS AS REQUIRED UNDER THIS AGREEMENT, INCLUDING A COPY OF
EACH SEMI-ANNUAL SERVICER’S CERTIFICATE DESCRIBED IN SECTION 6.13, THE ANNUAL
SERVICER’S REGULATION AB COMPLIANCE CERTIFICATE AND CERTIFICATE OF COMPLIANCE
DESCRIBED IN SECTION 3.03, AND THE ANNUAL ACCOUNTANT’S REPORT DESCRIBED IN
SECTION 3.04. IN ADDITION, THE SERVICER SHALL PREPARE, PROCURE, DELIVER AND/OR
FILE, OR CAUSE TO BE PREPARED, PROCURED, DELIVERED OR FILED, ANY REPORTS,
ATTESTATIONS, EXHIBITS, CERTIFICATES OR OTHER DOCUMENTS REQUIRED TO BE DELIVERED
OR FILED WITH THE SEC (AND/OR ANY OTHER GOVERNMENTAL AUTHORITY) BY THE ISSUER OR
THE SPONSOR UNDER THE FEDERAL SECURITIES OR OTHER APPLICABLE LAWS OR IN
ACCORDANCE WITH THE BASIC DOCUMENTS, INCLUDING, BUT WITHOUT LIMITING THE
GENERALITY OF FOREGOING, FILING WITH THE SEC, IF APPLICABLE, A COPY OR COPIES OF
(I) THE SEMI-ANNUAL SERVICER’S CERTIFICATES DESCRIBED IN SECTION 6.13 (UNDER
FORM 10-D OR ANY OTHER APPLICABLE FORM), (III) THE ANNUAL STATEMENTS OF
COMPLIANCE, ATTESTATION REPORTS AND OTHER CERTIFICATES DESCRIBED IN
SECTION 3.03, AND (IV) THE ANNUAL ACCOUNTANT’S REPORT (AND ANY ATTESTATION
REQUIRED UNDER REGULATION AB) DESCRIBED IN SECTION 3.04. IN ADDITION, THE
APPROPRIATE OFFICER OR OFFICERS OF THE SERVICER SHALL (IN ITS SEPARATE CAPACITY
AS SERVICER) SIGN THE SPONSOR’S ANNUAL REPORT ON FORM 10-K (AND ANY OTHER
APPLICABLE SEC OR OTHER REPORTS, ATTESTATIONS, CERTIFICATIONS AND OTHER
DOCUMENTS), TO THE EXTENT THAT THE SERVICER’S SIGNATURE IS REQUIRED BY, AND
CONSISTENT WITH, THE FEDERAL SECURITIES LAW AND/OR ANY OTHER APPLICABLE LAW.

 

(C)           OPINIONS OF COUNSEL.

 

THE SERVICER SHALL DELIVER TO THE ISSUER, TO THE LPSC AND TO THE TRUSTEE:

 

(I)            PROMPTLY AFTER THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND
OF EACH AMENDMENT HERETO, AN OPINION OF COUNSEL EITHER:

 

(A)          ALL ACTIONS OR FILINGS (INCLUDING FILINGS WITH THE LOUISIANA UCC
FILING OFFICER IN ACCORDANCE WITH THE RULES PRESCRIBED UNDER THE SECURITIZATION
ACT AND THE UCC) NECESSARY TO PERFECT THE LIEN AND SECURITY INTEREST CREATED BY
THE INDENTURE HAVE BEEN TAKEN OR MADE, AND RECITING THE DETAILS OF SUCH ACTIONS
AND FILINGS, OR

 

(B)           NO SUCH ACTIONS OR FILINGS ARE NECESSARY TO PERFECT SUCH LIEN AND
SECURITY INTEREST.

 

(II)           ON OR BEFORE MARCH 31 IN EACH CALENDAR YEAR BEGINNING WITH THE
FIRST CALENDAR YEAR BEGINNING MORE THAN THREE MONTHS AFTER THE SALE DATE, AN
OPINION OF COUNSEL, DATED AS OF A DATE DURING SUCH CALENDAR YEAR, EITHER:

 

(A)          ALL ACTIONS OR FILINGS (INCLUDING FILINGS AND REFILINGS WITH THE
LOUISIANA UCC FILING OFFICER IN ACCORDANCE WITH THE RULES PRESCRIBED UNDER THE
SECURITIZATION ACT AND THE UCC) NECESSARY TO MAINTAIN PERFECTION OF THE LIEN AND

 

5

--------------------------------------------------------------------------------

 

SECURITY INTEREST CREATED BY THE INDENTURE HAVE BEEN TAKEN OR MADE, AND RECITING
THE DETAILS OF SUCH ACTIONS AND FILINGS, OR

 

(B)           NO SUCH ACTIONS OR FILINGS ARE NECESSARY TO MAINTAIN SUCH LIEN AND
SECURITY INTEREST.

 

Each Opinion of Counsel referred to in clause (i) or (ii) above shall specify
any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such Lien and security interests.

 

SECTION 3.02.  SERVICING AND MAINTENANCE STANDARDS.  The Servicer shall, on
behalf of the Issuer:

 

(A)           MANAGE, SERVICE, ADMINISTER AND MAKE COLLECTIONS IN RESPECT OF THE
STORM RECOVERY PROPERTY WITH REASONABLE CARE AND IN MATERIAL COMPLIANCE WITH
APPLICABLE LAW AND REGULATIONS, INCLUDING ALL APPLICABLE LPSC REGULATIONS AND
GUIDELINES, USING THE SAME DEGREE OF CARE AND DILIGENCE THAT THE SERVICER
EXERCISES WITH RESPECT TO SIMILAR ASSETS FOR ITS OWN ACCOUNT;

 

(B)           FOLLOW STANDARDS, POLICIES AND PRACTICES IN PERFORMING ITS DUTIES
AS SERVICER THAT ARE CUSTOMARY IN THE ELECTRIC TRANSMISSION AND DISTRIBUTION
INDUSTRY OR THAT THE LPSC HAS MANDATED AND THAT ARE CONSISTENT WITH THE TERMS
AND PROVISIONS OF THE FINANCING ORDER, TARIFFS AND EXISTING LAW;

 

(C)           USE ALL REASONABLE EFFORTS, CONSISTENT WITH THE SERVICER’S
POLICIES AND PRACTICES, TO ENFORCE AND MAINTAIN THE ISSUER’S AND THE TRUSTEE’S
RIGHTS IN RESPECT OF THE STORM RECOVERY PROPERTY;

 

(D)           CALCULATE STORM RECOVERY CHARGES AND THE ALLOCATION OF STORM
RECOVERY CHARGES AMONG CUSTOMER CLASSES IN COMPLIANCE WITH THE SECURITIZATION
ACT, THE FINANCING ORDER, ANY LPSC ORDER RELATED TO THE STORM RECOVERY CHARGE
ALLOCATION AND ANY APPLICABLE TARIFFS;

 

(E)           USE ALL REASONABLE EFFORTS CONSISTENT WITH THE SERVICER’S POLICIES
AND PRACTICES TO COLLECT ALL AMOUNTS OWED IN RESPECT OF THE STORM RECOVERY
PROPERTY AS THEY BECOME DUE;

 

(F)            MAKE ALL FILINGS REQUIRED UNDER THE SECURITIZATION ACT OR THE
APPLICABLE UCC TO MAINTAIN THE PERFECTED SECURITY INTEREST OF THE TRUSTEE IN THE
STORM RECOVERY PROPERTY AND THE OTHER PORTIONS OF THE SERIES TRUST ESTATE UNDER
THE INDENTURE AND USE ALL REASONABLE EFFORTS TO OTHERWISE ENFORCE AND MAINTAIN
THE TRUSTEE’S RIGHTS IN RESPECT OF THE STORM RECOVERY PROPERTY AND THE OTHER
PORTIONS OF THE SERIES TRUST ESTATE UNDER THE INDENTURE;

 

(G)           PETITION THE LPSC FOR ADJUSTMENTS TO THE STORM RECOVERY CHARGES
THAT THE SERVICER DETERMINES TO BE NECESSARY IN ACCORDANCE WITH THE FINANCING
ORDER; AND

 

(H)           KEEP ON FILE, IN ACCORDANCE WITH CUSTOMARY PROCEDURES, ALL
DOCUMENTS PERTAINING TO THE STORM RECOVERY PROPERTY AND MAINTAIN ACCURATE AND
COMPLETE ACCOUNTS, RECORDS AND COMPUTER SYSTEMS PERTAINING TO THE RELATED STORM
RECOVERY PROPERTY

 

6

--------------------------------------------------------------------------------

 

except where the failure to comply with any of the foregoing would not
materially and adversely affect the Issuer’s or the Trustee’s respective
interests in the Storm Recovery Property. The Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of all or any portion of the Storm Recovery Property,
which, in the Servicer’s judgment, may include the taking of legal action
pursuant to Section 5.02(c) or 5.02(d) hereof or otherwise.

 

SECTION 3.03.  ANNUAL REPORTS ON COMPLIANCE WITH REGULATION AB.

 

(A)           THE SERVICER SHALL DELIVER TO THE ISSUER, THE TRUSTEE AND THE
RATING AGENCIES, ON OR BEFORE THE EARLIER OF (I) MARCH 31 OF EACH YEAR,
BEGINNING MARCH 31, 2009, TO AND INCLUDING THE MARCH 31 SUCCEEDING THE
RETIREMENT OF ALL STORM RECOVERY BONDS OR (II) WITH RESPECT TO EACH CALENDAR
YEAR DURING WHICH CLECO POWER’S ANNUAL REPORT ON FORM 10-K IS REQUIRED TO BE
FILED IN ACCORDANCE WITH THE EXCHANGE ACT AND THE RULES AND REGULATIONS
THEREUNDER, THE DATE ON WHICH THE ANNUAL REPORT ON FORM 10-K IS REQUIRED TO BE
FILED IN ACCORDANCE WITH THE EXCHANGE ACT AND THE RULES AND REGULATIONS
THEREUNDER, CERTIFICATES FROM A RESPONSIBLE OFFICER OF THE SERVICER
(A) CONTAINING, AND CERTIFYING AS TO, THE STATEMENTS OF COMPLIANCE REQUIRED BY
ITEM 1123 (OR ANY SUCCESSOR OR SIMILAR ITEMS OR RULE) OF REGULATION AB, AS THEN
IN EFFECT (THE “REGULATION AB COMPLIANCE CERTIFICATE”), AND (B) CONTAINING, AND
CERTIFYING AS TO, THE STATEMENTS AND ASSESSMENT OF COMPLIANCE REQUIRED BY ITEM
1122(A) (OR ANY SUCCESSOR OR SIMILAR ITEMS OR RULE) OF REGULATION AB, AS THEN IN
EFFECT (THE “CERTIFICATE OF COMPLIANCE”).   THESE CERTIFICATES MAY BE IN THE
FORM OF, OR SHALL INCLUDE THE FORMS ATTACHED HERETO AS EXHIBIT B-1 AND
EXHIBIT B-2 HERETO, WITH, IN THE CASE OF EXHIBIT B-1, SUCH CHANGES AS MAY BE
REQUIRED TO CONFORM TO APPLICABLE SECURITIES LAW.

 

(B)           THE SERVICER SHALL USE COMMERCIALLY REASONABLE EFFORTS TO OBTAIN
FROM EACH OTHER PARTY PARTICIPATING IN THE SERVICING FUNCTION ANY ADDITIONAL
CERTIFICATIONS AS TO THE STATEMENTS AND ASSESSMENT REQUIRED UNDER ITEM 1122 OR
ITEM 1123 OF REGULATION AB TO THE EXTENT REQUIRED IN CONNECTION WITH THE FILING
OF THE ANNUAL REPORT ON FORM 10-K REFERRED TO ABOVE; PROVIDED, HOWEVER, THAT A
FAILURE TO OBTAIN SUCH CERTIFICATIONS SHALL NOT BE A BREACH OF THE SERVICER’S
DUTIES HEREUNDER. THE PARTIES ACKNOWLEDGE THAT THE TRUSTEE’S CERTIFICATIONS
SHALL BE LIMITED TO THE ITEM 1122 CERTIFICATIONS DESCRIBED IN EXHIBIT A OF THE
INDENTURE.

 

SECTION 3.04.  ANNUAL REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM REPORT.

 

(A)           THE SERVICER SHALL CAUSE A REGISTERED INDEPENDENT PUBLIC
ACCOUNTING FIRM (WHICH MAY ALSO PROVIDE OTHER SERVICES TO THE SERVICER OR THE
SELLER) TO PREPARE ANNUALLY, AND THE SERVICER SHALL DELIVER ANNUALLY TO THE
ISSUER, THE LPSC, THE TRUSTEE AND EACH RATING AGENCY, ON OR BEFORE THE EARLIER
OF (A) MARCH 31 OF EACH YEAR, BEGINNING MARCH 31, 2009, TO AND INCLUDING THE
MARCH 31 SUCCEEDING THE RETIREMENT OF ALL STORM RECOVERY BONDS OR (B) WITH
RESPECT TO EACH CALENDAR YEAR DURING WHICH THE SPONSOR’S ANNUAL REPORT ON
FORM 10-K IS REQUIRED TO BE FILED IN ACCORDANCE WITH THE EXCHANGE ACT AND THE
RULES AND REGULATIONS THEREUNDER, THE DATE ON WHICH THE ANNUAL REPORT ON
FORM 10-K IS REQUIRED TO BE FILED IN ACCORDANCE WITH THE EXCHANGE ACT AND THE
RULES AND REGULATIONS THEREUNDER, A REPORT ADDRESSED TO THE SERVICER (THE
“ANNUAL ACCOUNTANT’S REPORT”), WHICH MAY BE INCLUDED AS PART OF THE SERVICER’S
CUSTOMARY AUDITING ACTIVITIES, TO THE EFFECT THAT SUCH FIRM HAS PERFORMED
CERTAIN PROCEDURES, AGREED BETWEEN THE

 

7

--------------------------------------------------------------------------------

 

SERVICER AND SUCH ACCOUNTANTS, IN CONNECTION WITH THE SERVICER’S COMPLIANCE WITH
ITS OBLIGATIONS UNDER THIS AGREEMENT DURING THE PRECEDING CALENDAR YEAR ENDED
DECEMBER 31 (OR, IN THE CASE OF THE FIRST ANNUAL ACCOUNTANT’S REPORT, THE PERIOD
OF TIME FROM THE SALE DATE THROUGH DECEMBER 31, 2008), IDENTIFYING THE RESULTS
OF SUCH PROCEDURES AND INCLUDING ANY EXCEPTIONS NOTED. IN THE EVENT SUCH
ACCOUNTING FIRM REQUIRES THE TRUSTEE OR THE ISSUER TO AGREE OR CONSENT TO THE
PROCEDURES PERFORMED BY SUCH FIRM, THE ISSUER SHALL DIRECT THE TRUSTEE IN
WRITING TO SO AGREE; IT BEING UNDERSTOOD AND AGREED THAT THE TRUSTEE SHALL
DELIVER SUCH LETTER OF AGREEMENT OR CONSENT IN CONCLUSIVE RELIANCE UPON THE
DIRECTION OF THE ISSUER, AND THE TRUSTEE SHALL NOT MAKE ANY INDEPENDENT INQUIRY
OR INVESTIGATION AS TO, AND SHALL HAVE NO OBLIGATION OR LIABILITY IN RESPECT OF,
THE SUFFICIENCY, VALIDITY OR CORRECTNESS OF SUCH PROCEDURES.

 

(B)           THE ANNUAL ACCOUNTANT’S REPORT SHALL ALSO INDICATE THAT THE
ACCOUNTING FIRM PROVIDING SUCH REPORT IS INDEPENDENT OF THE SERVICER IN
ACCORDANCE WITH THE RULES OF THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD, AND
SHALL INCLUDE THE ATTESTATION REPORT REQUIRED UNDER ITEM 1122(B) OF REGULATION
AB (OR ANY SUCCESSOR OR SIMILAR ITEMS OR RULE), AS THEN IN EFFECT. THE ANNUAL
ACCOUNTANT’S REPORT SHALL ALSO INDICATE THAT THE ACCOUNTING FIRM PROVIDING SUCH
REPORT IS INDEPENDENT OF THE SERVICER WITHIN THE MEANING OF THE CODE OF
PROFESSIONAL ETHICS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS.

 

SECTION 3.05.  MONITORING OF THIRD-PARTY COLLECTORS.  If a Third-Party Collector
bills or collects Storm Recovery Charges on behalf of the Issuer, then, from
time to time, until the retirement of the Storm Recovery Bonds, the Servicer
shall, in accordance with the Servicing Standard, take all actions with respect
to such Third-Party Collectors required to be taken by the Servicer as set
forth, if applicable, in any agreement with the Third-Party Collector, the
Tariff, other tariffs and any other LPSC Regulations in effect from time to time
and implement such additional procedures and policies as are necessary to ensure
that the obligations of all Third-Party Collectors in connection with Storm
Recovery Charges are properly enforced in accordance with, if applicable, the
terms of any agreement with the Third-Party Collector, the Tariff, other tariffs
and any other LPSC Regulations in effect from time to time. Such procedures and
policies shall include the following:

 

(A)           MAINTENANCE OF RECORDS AND INFORMATION. IN ADDITION TO ANY ACTIONS
REQUIRED BY THE TARIFF, LPSC REGULATIONS OR OTHER APPLICABLE LAW, THE SERVICER
SHALL:

 

(I)            MAINTAIN ADEQUATE RECORDS FOR PROMPTLY IDENTIFYING AND CONTACTING
EACH THIRD-PARTY COLLECTOR;

 

(II)           MAINTAIN RECORDS OF END-USER CUSTOMERS WHICH ARE BILLED BY
THIRD-PARTY COLLECTORS TO PERMIT PROMPT TRANSFER OF BILLING RESPONSIBILITIES IN
THE EVENT OF DEFAULT BY SUCH THIRD-PARTY COLLECTORS;

 

(III)          MAINTAIN ADEQUATE RECORDS FOR ENFORCING COMPLIANCE BY ALL
THIRD-PARTY COLLECTORS WITH THEIR OBLIGATIONS WITH RESPECT TO STORM RECOVERY
CHARGES; AND

 

(IV)          PROVIDE TO EACH THIRD-PARTY COLLECTOR SUCH INFORMATION NECESSARY
FOR SUCH THIRD-PARTY COLLECTOR TO CONFIRM THE SERVICER’S CALCULATION OF STORM
RECOVERY CHARGES AND REMITTANCES, INCLUDING, IF APPLICABLE, CHARGE-OFF AMOUNTS.

 

8

--------------------------------------------------------------------------------

 

The Servicer shall update the records described above no less frequently than
quarterly.

 

(B)                                 CREDIT AND COLLECTION POLICIES. THE SERVICER
SHALL, TO THE FULLEST EXTENT PERMITTED UNDER THE FINANCING ORDER, USE ALL
REASONABLE EFFORTS CONSISTENT WITH THE SERVICER’S POLICIES AND PRACTICES TO
COLLECT ALL BILLED SRC’S FROM CUSTOMERS AND ANY THIRD-PARTY COLLECTORS AS AND
WHEN THE SAME BECOME DUE. THE SERVICER SHALL, IN ACCORDANCE WITH AND TO THE
EXTENT PERMITTED BY APPLICABLE LPSC REGULATIONS AND THE TERMS OF THE FINANCING
ORDER, INCLUDE AND IMPOSE THE ABOVE-DESCRIBED TERMS IN ALL TARIFFS FILED WITH
THE LPSC WHICH WOULD ALLOW THIRD-PARTY COLLECTORS OR OTHER UTILITIES TO ISSUE
SINGLE BILLS WHICH INCLUDE STORM RECOVERY CHARGES TO CLECO POWER’S CUSTOMERS.
THE SERVICER SHALL PERIODICALLY REVIEW THE NEED FOR MODIFIED OR ADDITIONAL TERMS
BASED UPON, AMONG OTHER THINGS, (I) THE RELATIVE AMOUNT OF SRC COLLECTIONS
RECEIVED THROUGH THIRD-PARTY COLLECTORS RELATIVE TO THE PERIODIC BILLING
REQUIREMENT, (II) THE HISTORICAL PAYMENT AND DEFAULT EXPERIENCE OF EACH
THIRD-PARTY COLLECTOR AND (III) SUCH OTHER CREDIT AND COLLECTION POLICIES TO
WHICH THE THIRD-PARTY COLLECTORS ARE SUBJECT, AND IF PERMITTED BY APPLICABLE
LAW, WILL SET OUT ANY SUCH MODIFIED OR ADDITIONAL TERMS IN A SUPPLEMENTAL TARIFF
FILED WITH THE LPSC.

 

(C)                                  MONITORING OF PERFORMANCE AND PAYMENT BY
THIRD-PARTY COLLECTORS. IN ADDITION TO ANY ACTIONS REQUIRED BY THE TARIFF, LPSC
REGULATIONS OR OTHER APPLICABLE LAW, THE SERVICER SHALL UNDERTAKE TO DO THE
FOLLOWING:

 

(I)                                     THE SERVICER SHALL REQUIRE EACH
THIRD-PARTY COLLECTOR TO REMIT ALL STORM RECOVERY CHARGES (LESS ANY APPLICABLE
CHARGE-OFF ALLOWANCES) THAT SUCH THIRD-PARTY COLLECTOR IS OBLIGATED TO PAY IN
ACCORDANCE WITH THE PROVISIONS OF THE TARIFF, OTHER APPLICABLE TARIFFS AND LPSC
REGULATIONS (WHETHER OR NOT DISPUTED). THE SERVICER SHALL MONITOR COMPLIANCE BY
EACH THIRD-PARTY COLLECTOR AND TAKE PROMPT ACTION TO ENFORCE SUCH REQUIREMENTS.

 

(II)                                  WHERE A THIRD-PARTY COLLECTOR IS
RESPONSIBLE FOR BILLING THE CUSTOMERS, THE SERVICER SHALL, CONSISTENT WITH ITS
CUSTOMARY BILLING PRACTICES, BILL EACH THIRD-PARTY COLLECTOR NO LESS FREQUENTLY
THAN THE BILLING CYCLE OTHERWISE APPLICABLE TO SUCH CUSTOMERS.

 

(III)                               THE SERVICER SHALL WORK WITH THIRD-PARTY
COLLECTORS TO RESOLVE ANY DISPUTES USING THE DISPUTE RESOLUTION PROCEDURES
ESTABLISHED IN THE TARIFF, OTHER APPLICABLE TARIFFS AND ANY LPSC REGULATIONS, IN
ACCORDANCE WITH THE SERVICING STANDARD.

 

(D)                                 ENFORCEMENT OF THIRD-PARTY COLLECTOR
OBLIGATIONS. THE SERVICER SHALL, IN ACCORDANCE WITH THE TERMS OF THE TARIFF,
APPLICABLE AGREEMENTS WITH THIRD-PARTY COLLECTORS AND OTHER APPLICABLE TARIFFS,
ENSURE THAT EACH THIRD-PARTY COLLECTOR REMITS ALL SRC COLLECTIONS WHICH IT IS
OBLIGATED TO REMIT TO THE SERVICER. IN THE EVENT OF ANY DEFAULT BY ANY
THIRD-PARTY COLLECTOR, THE SERVICER SHALL ENFORCE ALL RIGHTS SET FORTH IN AND
TAKE ALL OTHER STEPS PERMITTED BY, IF APPLICABLE, THE APPLICABLE FINANCING
ORDERS, TARIFF, OTHER APPLICABLE TARIFFS AND ANY OTHER LPSC REGULATIONS AS IT
DETERMINES, IN ACCORDANCE WITH THE SERVICING STANDARD, ARE REASONABLY NECESSARY
TO ENSURE THE PROMPT PAYMENT OF SRC COLLECTIONS BY SUCH THIRD-PARTY COLLECTOR
AND TO PRESERVE THE RIGHTS OF THE HOLDERS WITH RESPECT THERETO, INCLUDING, WHERE
APPROPRIATE, TERMINATING THE RIGHT OF ANY THIRD-PARTY COLLECTOR TO BILL AND
COLLECT STORM RECOVERY CHARGES OR

 

9

--------------------------------------------------------------------------------

 

PETITIONING THE LPSC TO IMPOSE SUCH OTHER REMEDIES OR PENALTIES AS MAY BE
AVAILABLE UNDER THE CIRCUMSTANCES. ANY AGREEMENT ENTERED INTO BETWEEN THE
SERVICER AND A DEFAULTED THIRD-PARTY COLLECTOR WILL BE CONSISTENT WITH AND
LIMITED BY THE TERMS OF THIS AGREEMENT AND WILL SATISFY THE RATING AGENCY
CONDITION. IN THE EVENT THE SERVICER HAS ACTUAL KNOWLEDGE THAT A THIRD-PARTY
COLLECTOR IS IN DEFAULT, INCLUDING DUE TO THE DOWNGRADE BY THE RATING AGENCIES
OF ANY PARTY PROVIDING CREDIT SUPPORT FOR SUCH THIRD-PARTY COLLECTOR, THE
SERVICER SHALL PROMPTLY NOTIFY A RESPONSIBLE OFFICER OF THE TRUSTEE IN WRITING
OF THE SAME AND, SHALL, IF APPLICABLE, INSTRUCT THE TRUSTEE EITHER TO:

 

(I)                                     WITHDRAW FROM SUCH THIRD-PARTY
COLLECTOR’S THIRD-PARTY COLLECTOR DEPOSIT ACCOUNT AND DEPOSIT INTO THE
APPLICABLE COLLECTION ACCOUNTS THE LESSER OF (X) THE AMOUNT OF CASH ON DEPOSIT
IN SUCH THIRD-PARTY COLLECTOR DEPOSIT ACCOUNT AND ALLOCABLE TO THE STORM
RECOVERY PROPERTY AT SUCH TIME AND (Y) THE AMOUNT OF ANY STORM RECOVERY CHARGES
THEN DUE AND PAYABLE BY SUCH THIRD-PARTY COLLECTOR; OR

 

(II)                                  MAKE DEMAND UNDER ANY LETTER OF CREDIT,
GUARANTEE OR OTHER CREDIT SUPPORT UP TO THE LESSER OF (X) THE AMOUNT OF SUCH
LETTER OF CREDIT, GUARANTEE OR OTHER CREDIT SUPPORT AND (Y) THE AMOUNT OF ANY
STORM RECOVERY CHARGES THEN DUE AND PAYABLE BY SUCH THIRD-PARTY COLLECTOR, AND
FORWARD THE AMOUNTS RECEIVED, IF ANY, AS A RESULT OF SUCH DEMAND TO THE
APPLICABLE COLLECTION ACCOUNTS.

 

The Trustee shall, within two (2) Business Days of receipt of such written
notice, withdraw such funds from the Third-Party Collector Deposit Account or
make demand under such credit support, as applicable, and deposit such funds
withdrawn or received, as applicable, into the applicable Collection Accounts.

 

(E)                                  MAINTENANCE OF THIRD-PARTY COLLECTOR
DEPOSIT ACCOUNTS. IF ANY THIRD-PARTY COLLECTORS COLLECT STORM RECOVERY CHARGES
THEN THE SERVICER SHALL CAUSE THE ENTITY ACTING AS TRUSTEE TO MAINTAIN AN
ACCOUNT FOR THE THIRD-PARTY COLLECTOR TO HOLD ANY OF (A) A CASH DEPOSIT TO THE
TRUSTEE, (B) A SURETY BOND OR AFFILIATE GUARANTEE OR (C) A LETTER OF CREDIT (A
“THIRD-PARTY COLLECTOR DEPOSIT ACCOUNT”) THAT THE THIRD-PARTY COLLECTOR MAY BE
REQUIRED TO PROVIDE UNDER THE TARIFF, ANY APPLICABLE AGREEMENTS WITH SUCH
THIRD-PARTY COLLECTORS, OTHER APPLICABLE TARIFFS OR APPLICABLE LPSC REGULATION.
THE SERVICER SHALL PROVIDE WRITTEN DIRECTION TO THE TRUSTEE REGARDING THE
ALLOCATION AND RELEASE OF FUNDS ON DEPOSIT IN THE THIRD-PARTY COLLECTOR DEPOSIT
ACCOUNTS, AS PERMITTED OR REQUIRED BY THE INDENTURE, THIS AGREEMENT OR ANY
AGREEMENT WITH THE THIRD-PARTY COLLECTOR, APPLICABLE TARIFF, OTHER APPLICABLE
TARIFFS OR LPSC REGULATIONS. THE TRUSTEE SHALL BE ENTITLED TO CONCLUSIVELY RELY
ON ANY SUCH WRITTEN DIRECTIONS FROM THE SERVICER. THE SERVICER WILL SEEK AND USE
REASONABLE BEST EFFORTS TO OBTAIN, FROM ANY THIRD-PARTY COLLECTOR WHICH WISHES
TO SATISFY ITS CREDIT SUPPORT REQUIREMENTS BY MAKING A DEPOSIT TO A THIRD-PARTY
COLLECTOR DEPOSIT ACCOUNT, A WRITTEN SECURITY AGREEMENT STATING THAT (I) BY
MAKING SUCH DEPOSIT THE THIRD-PARTY COLLECTOR HAS GRANTED A SECURITY INTEREST IN
SUCH DEPOSIT IN FAVOR OF THE TRUSTEE, AND (II) THE TRUSTEE, IN HOLDING SUCH
DEPOSIT AS COLLATERAL, WILL HAVE THE RIGHTS AND REMEDIES OF A SECURED PARTY
UNDER ARTICLE 9 OF THE UCC WITH RESPECT TO SUCH COLLATERAL, AND THE SERVICER
WILL PROMPTLY FORWARD ANY SUCH AGREEMENT TO THE TRUSTEE.

 

(F)                                    AFFILIATED THIRD PARTY COLLECTORS. IN
PERFORMING ITS OBLIGATIONS UNDER THIS SECTION 3.05, THE SERVICER SHALL DEAL WITH
ANY THIRD-PARTY COLLECTORS WHICH ARE AFFILIATES OF THE

 

10

--------------------------------------------------------------------------------

 

SERVICER ON TERMS WHICH ARE NO MORE FAVORABLE IN THE AGGREGATE TO SUCH
AFFILIATED THIRD-PARTY COLLECTOR THAN THOSE USED BY THE SERVICER IN ITS DEALINGS
WITH ANY THIRD-PARTY COLLECTORS THAT ARE NOT AFFILIATES OF THE SERVICER.

 

ARTICLE IV

 

SERVICES RELATED TO STORM RECOVERY CHARGE ADJUSTMENTS AND ALLOCATION ADJUSTMENTS

 

SECTION 4.01. STORM RECOVERY CHARGE ADJUSTMENTS .  From time to time, but at
least semi-annually, until the retirement of the Storm Recovery Bonds, the
Servicer shall identify the need for Storm Recovery Charge Adjustments and shall
take reasonable action to obtain and implement such Storm Recovery Charge
Adjustments, all in accordance with the following:

 

(A)                                  EXPECTED AMORTIZATION SCHEDULE. THE
EXPECTED AMORTIZATION SCHEDULE FOR THE STORM RECOVERY BONDS IS PROVIDED IN THE
SUPPLEMENT.

 

(B)                                 SEMI-ANNUAL STORM RECOVERY CHARGE
ADJUSTMENTS.

 

The Servicer will calculate and make semi-annual Storm Recovery Charge
Adjustments as of each Adjustment Date commencing with the first Adjustment Date
as follows:

 

(I)                                     SUBTRACT THE PRECEDING PERIOD’S STORM
RECOVERY CHARGE REVENUES COLLECTED AND REMITTED FROM THE PRECEDING PERIOD’S
PERIODIC PAYMENT REQUIREMENT TO CALCULATE THE UNDER-COLLECTION OR
OVER-COLLECTION FROM THE PRECEDING PERIOD;

 

(II)                                  CALCULATE THE AMOUNT OF THE STORM RECOVERY
CHARGE ADJUSTMENT, BY (I) CORRECTING ANY UNDER-COLLECTION OR OVER-COLLECTION
CALCULATED IN STEP (I) OVER A PERIOD OF UP TO 12 MONTHS COVERING THE NEXT TWO
SUCCEEDING PAYMENT DATES (IN ORDER TO MITIGATE THE SIZE AND IMPACT OF THE
ADJUSTMENT), USING THE RULES THAT (X) PRINCIPAL PAYMENTS ON THE STORM RECOVERY
BONDS WILL BE BROUGHT ON SCHEDULE OVER THE NEXT TWO SUCCEEDING PAYMENT DATES,
BUT (Y) THE RESULTING PERIODIC BILLING REQUIREMENT ALWAYS MUST BE SUFFICIENT TO
COVER OPERATING EXPENSES AND INTEREST ON THE STORM RECOVERY BONDS ON A TIMELY
BASIS, (II) ADDING ANY AMOUNT CARRIED FORWARD FROM THE PREVIOUS STORM RECOVERY
CHARGE ADJUSTMENT BY THE OPERATION OF STEP (I) ABOVE DURING THE PRECEDING STORM
RECOVERY CHARGE ADJUSTMENT CALCULATION;

 

(III)                               ADD THE AMOUNT CALCULATED IN STEP (II) TO
THE UPCOMING PERIOD’S TRUED-UP PERIODIC BILLING REQUIREMENT TO DETERMINE AN
ADJUSTED PERIODIC BILLING REQUIREMENT FOR THE UPCOMING PERIOD;

 

(IV)                              ADD THE AMOUNT, IF A POSITIVE NUMBER, EQUAL TO
THE DIFFERENCE OF THE RETURN ON CLECO POWER’S INVESTED CAPITAL IN THE ISSUER FOR
THE PRECEDING PERIOD MINUS THE ACTUAL INVESTMENT EARNINGS THEREON FROM THE
TRUSTEE’S ELIGIBLE INVESTMENTS FOR THE PRECEDING PERIOD;

 

11

--------------------------------------------------------------------------------

 

(V)                                 ALLOCATE THE RESULT FROM STEP (IV) USING THE
ALLOCATION FACTORS APPROVED BY THE LPSC IN THE FINANCING ORDER AND DEVELOP
CUSTOMER CLASS SPECIFIC STORM RECOVERY CHARGE RATES BASED ON THOSE ALLOCATED
DOLLAR AMOUNTS; AND

 

(VI)                              FILE THOSE ADJUSTED STORM RECOVERY CHARGE
RATES WITH THE LPSC NOT LESS THAN 15 DAYS PRIOR TO THE FIRST BILLING CYCLE OF
THE MONTH IN WHICH THE REVISED STORM RECOVERY CHARGES WILL BE IN EFFECT.

 

(C)                                  INTERIM STORM RECOVERY CHARGE ADJUSTMENT
REQUEST. THE SERVICER MAY ALSO MAKE INTERIM STORM RECOVERY CHARGE ADJUSTMENTS
MORE FREQUENTLY AT ANY TIME DURING THE TERM OF THE STORM RECOVERY BONDS: (I) IF
THE SERVICER FORECASTS THAT SRC COLLECTIONS WILL BE INSUFFICIENT TO MAKE ALL
SCHEDULED PAYMENTS OF INTEREST AND OTHER FINANCING COSTS IN RESPECT OF THE STORM
RECOVERY BONDS DURING THE CURRENT OR NEXT SUCCEEDING PAYMENT PERIOD OR BRING ALL
PRINCIPAL PAYMENTS ON SCHEDULE OVER THE NEXT TWO SUCCEEDING PAYMENT DATES AND/OR
(II) TO REPLENISH ANY DRAWS UPON THE CAPITAL SUBACCOUNT.

 

(D)                                 NON-STANDARD STORM RECOVERY CHARGE
ADJUSTMENT. THE SERVICER SHALL REQUEST LPSC APPROVAL OF AN AMENDMENT TO THE
STORM RECOVERY CHARGE ADJUSTMENT MECHANISM, A NON-STANDARD STORM RECOVERY CHARGE
ADJUSTMENT (UNDER SUCH PROCEDURES AS SHALL BE PROPOSED BY THE SERVICER AND
APPROVED BY THE LPSC AT THE TIME) THAT IT DEEMS NECESSARY OR APPROPRIATE TO
ADDRESS ANY MATERIAL DEVIATIONS BETWEEN SRC COLLECTIONS AND THE PERIODIC REVENUE
REQUIREMENT. NO SUCH CHANGE SHALL CAUSE ANY OF THE THEN-CURRENT CREDIT RATINGS
OF THE STORM RECOVERY BONDS TO BE SUSPENDED, WITHDRAWN OR DOWNGRADED.

 

(E)                                  NOTIFICATION OF ADJUSTMENT REQUESTS.
WHENEVER THE SERVICER FILES A STORM RECOVERY CHARGE ADJUSTMENT REQUEST WITH THE
LPSC, THE SERVICER SHALL SEND A COPY OF SUCH FILING TO THE ISSUER, EACH TRUSTEE
AND THE RATING AGENCIES CONCURRENTLY THEREWITH AND SUCH OTHER PERSONS AS ARE
ENTITLED TO NOTICE UNDER THE FINANCING ORDER. IF ANY STORM RECOVERY CHARGE
ADJUSTMENT REQUEST DOES NOT BECOME EFFECTIVE ON THE APPLICABLE DATE AS PROVIDED
IN SUCH FILING AND IN ACCORDANCE WITH THE FINANCING ORDER, THE SERVICER SHALL
NOTIFY THE ISSUER, EACH TRUSTEE AND THE RATING AGENCIES BY THE END OF THE SECOND
BUSINESS DAY AFTER SUCH APPLICABLE DATE.

 

(F)                                    REPORTS.

 

(I)                                     SERVICER’S CERTIFICATE. FOR EACH
CALCULATION DATE, THE SERVICER SHALL PROVIDE TO THE ISSUER, THE LPSC, THE
TRUSTEE AND THE RATING AGENCIES A STATEMENT INDICATING:

 

(A)                              THE STORM RECOVERY BOND BALANCE AND THE
PROJECTED STORM RECOVERY BOND BALANCE AS OF THE IMMEDIATELY PRECEDING PAYMENT
DATE,

 

(B)                                THE AMOUNT ON DEPOSIT IN THE CAPITAL
SUBACCOUNT AND THE AMOUNT REQUIRED TO BE ON DEPOSIT IN THE CAPITAL SUBACCOUNT AS
OF THE IMMEDIATELY PRECEDING PAYMENT DATE,

 

(C)                                THE AMOUNT ON DEPOSIT IN THE EXCESS FUNDS
SUBACCOUNT AS OF THE IMMEDIATELY PRECEDING PAYMENT DATE,

 

12

--------------------------------------------------------------------------------

 

(D)                               THE PROJECTED STORM RECOVERY BOND BALANCE ON
THE CALCULATION DATE AND THE SERVICER’S PROJECTION OF THE STORM RECOVERY BOND
BALANCE ON THE PAYMENT DATE IMMEDIATELY PRECEDING THE NEXT SUCCEEDING ADJUSTMENT
DATE,

 

(E)                                 THE REQUIRED CAPITAL SUBACCOUNT BALANCE AND
THE SERVICER’S PROJECTION OF THE AMOUNT ON DEPOSIT IN THE CAPITAL SUBACCOUNT FOR
THE PAYMENT DATE IMMEDIATELY PRECEDING THE NEXT SUCCEEDING ADJUSTMENT DATE, AND

 

(F)                                 THE SERVICER’S PROJECTION OF THE AMOUNT ON
DEPOSIT IN THE EXCESS FUNDS SUBACCOUNT FOR THE PAYMENT DATE IMMEDIATELY
PRECEDING THE NEXT SUCCEEDING ADJUSTMENT DATE.

 

(II)                                  REPORTS TO CUSTOMERS.

 

(A)                              AFTER EACH REVISED STORM RECOVERY CHARGE HAS
GONE INTO EFFECT PURSUANT TO A STORM RECOVERY CHARGE ADJUSTMENT, THE SERVICER
SHALL, TO THE EXTENT AND IN THE MANNER AND TIME FRAME REQUIRED BY APPLICABLE
LPSC REGULATIONS, IF ANY, CAUSE TO BE PREPARED AND DELIVERED TO CUSTOMERS ANY
REQUIRED NOTICES ANNOUNCING SUCH REVISED STORM RECOVERY CHARGES.

 

(B)                                THE SERVICER SHALL COMPLY WITH THE
REQUIREMENTS OF THE FINANCING ORDER AND TARIFF WITH RESPECT TO THE
IDENTIFICATION OF STORM RECOVERY CHARGES ON BILLS. IN ADDITION, AT LEAST ONCE
EACH YEAR, THE SERVICER SHALL  CAUSE TO BE PREPARED AND DELIVERED TO SUCH
CUSTOMERS A NOTICE STATING, IN EFFECT, THAT THE STORM RECOVERY PROPERTY AND THE
STORM RECOVERY CHARGES ARE OWNED BY THE ISSUER AND NOT THE SELLER AND THAT THE
SERVICER IS MERELY THE COLLECTION AGENT FOR THE ISSUER (OR ITS ASSIGNEE OR
PLEDGEE). SUCH NOTICE SHALL BE INCLUDED AS AN INSERT TO OR IN THE TEXT OF THE
BILLS DELIVERED TO SUCH CUSTOMERS.

 

(C)                                THE SERVICING FEE INCLUDES ALL COSTS OF
PREPARATION AND DELIVERY INCURRED IN CONNECTION WITH CLAUSES (A) AND (B) ABOVE,
INCLUDING PRINTING AND POSTAGE COSTS.

 

SECTION 4.02. LIMITATION OF LIABILITY

 

(A)                                  THE ISSUER AND THE SERVICER EXPRESSLY AGREE
AND ACKNOWLEDGE THAT:

 

(I)                                     IN CONNECTION WITH ANY STORM RECOVERY
CHARGE ADJUSTMENT, THE SERVICER IS ACTING SOLELY IN ITS CAPACITY AS THE
SERVICING AGENT OF THE ISSUER HEREUNDER.

 

(II)                                  NEITHER THE SERVICER NOR THE ISSUER SHALL
BE RESPONSIBLE IN ANY MANNER FOR, AND SHALL HAVE NO LIABILITY WHATSOEVER AS A
RESULT OF, ANY ACTION, DECISION, RULING OR OTHER DETERMINATION MADE OR NOT MADE,
OR ANY DELAY (OTHER THAN ANY DELAY RESULTING FROM THE SERVICER’S FAILURE TO FILE
THE REQUESTS REQUIRED BY SECTION 4.01 IN A TIMELY AND CORRECT MANNER OR OTHER
BREACH BY THE SERVICER OF ITS DUTIES UNDER THIS AGREEMENT THAT MATERIALLY AND
ADVERSELY AFFECTS THE STORM RECOVERY CHARGE ADJUSTMENTS), BY THE LPSC IN ANY WAY
RELATED TO THE STORM RECOVERY PROPERTY OR IN CONNECTION WITH ANY STORM RECOVERY
CHARGE ADJUSTMENT.

 

13

--------------------------------------------------------------------------------

 

(III)                               EXCEPT ONLY TO THE EXTENT THAT THE SERVICER
IS LIABLE UNDER SECTION 6.02, (A) THE SERVICER SHALL HAVE NO LIABILITY
WHATSOEVER RELATING TO THE CALCULATION OF THE STORM-RECOVERY CHARGES AND THE
ADJUSTMENTS THERETO, INCLUDING AS A RESULT OF ANY INACCURACY OF ANY OF THE
ASSUMPTIONS MADE IN SUCH CALCULATION REGARDING EXPECTED ELECTRIC ENERGY OR
DEMAND USAGE VOLUMES, THE RATE OF CHARGE-OFFS AND ESTIMATED EXPENSES AND FEES OF
THE ISSUER, SO LONG AS THE SERVICER HAS NOT ACTED IN BAD FAITH OR IN A GROSSLY
NEGLIGENT MANNER IN CONNECTION THEREWITH, AND (B) THE SERVICER SHALL HAVE NO
LIABILITY WHATSOEVER AS A RESULT OF ANY PERSON, INCLUDING THE HOLDERS, NOT
RECEIVING ANY PAYMENT, AMOUNT OR RETURN ANTICIPATED OR EXPECTED IN RESPECT OF
ANY STORM RECOVERY BOND GENERALLY.

 

(B)                                 NOTWITHSTANDING THE FOREGOING, THIS
SECTION 4.02 SHALL NOT RELIEVE THE SERVICER OF ANY LIABILITY UNDER SECTION 6.02
FOR ANY MISREPRESENTATION BY THE SERVICER UNDER SECTION 6.01 OR FOR ANY BREACH
BY THE SERVICER OF ITS OBLIGATIONS UNDER THIS AGREEMENT.

 

ARTICLE V

 

THE STORM RECOVERY PROPERTY

 

SECTION 5.01. CUSTODY OF STORM RECOVERY PROPERTY RECORDS.  To assure
uniform quality in servicing the Storm Recovery Property and to reduce
administrative costs, the Issuer hereby revocably appoints the Servicer, and the
Servicer hereby accepts such appointment, to act as the agent of the Issuer as
custodian of any and all documents and records relating to the Storm Recovery
Property, which are hereby constructively delivered to the Trustee, as pledgee
of the Issuer, with respect to all Storm Recovery Property.

 

SECTION 5.02. DUTIES OF SERVICER AS CUSTODIAN.

 

(A)                                  SAFEKEEPING. THE SERVICER SHALL HOLD THE
STORM RECOVERY PROPERTY AND THE STORM RECOVERY PROPERTY DOCUMENTATION ON BEHALF
OF THE ISSUER AND MAINTAIN SUCH ACCURATE AND COMPLETE ACCOUNTS, RECORDS AND
COMPUTER SYSTEMS PERTAINING TO THE STORM RECOVERY PROPERTY AND STORM RECOVERY
PROPERTY DOCUMENTATION IN ACCORDANCE WITH ITS STANDARD ACCOUNTING PROCEDURES AND
IN SUFFICIENT DETAIL TO PERMIT RECONCILIATION BETWEEN PAYMENTS OR RECOVERIES ON
(OR WITH RESPECT TO) STORM RECOVERY CHARGES AND THE SRC COLLECTIONS FROM TIME TO
TIME REMITTED TO THE TRUSTEE PURSUANT TO THIS AGREEMENT AND AS SHALL ENABLE THE
ISSUER AND THE TRUSTEE, AS APPLICABLE, TO COMPLY WITH THIS AGREEMENT, THE SALE
AGREEMENT AND THE INDENTURE. IN PERFORMING ITS DUTIES AS CUSTODIAN, THE SERVICER
SHALL ACT WITH REASONABLE CARE, USING THAT DEGREE OF CARE AND DILIGENCE THAT THE
SERVICER EXERCISES WITH RESPECT TO COMPARABLE ASSETS THAT THE SERVICER SERVICES
FOR ITSELF OR, IF APPLICABLE, FOR OTHERS. THE SERVICER SHALL CONDUCT, OR CAUSE
TO BE CONDUCTED, PERIODIC AUDITS OF THE STORM RECOVERY PROPERTY DOCUMENTATION
HELD BY IT UNDER THIS AGREEMENT AND OF THE RELATED ACCOUNTS, RECORDS AND
COMPUTER SYSTEMS, IN SUCH A MANNER AS SHALL ENABLE THE ISSUER AND THE TRUSTEE,
AS PLEDGEE OF THE ISSUER, TO VERIFY THE ACCURACY OF THE SERVICER’S RECORD
KEEPING. THE SERVICER SHALL PROMPTLY REPORT TO THE ISSUER, THE TRUSTEE AND THE
RATING AGENCIES ANY FAILURE ON ITS PART TO HOLD THE STORM RECOVERY PROPERTY
DOCUMENTATION AND MAINTAIN ITS ACCOUNTS, RECORDS AND COMPUTER SYSTEMS AS HEREIN
PROVIDED AND PROMPTLY TAKE APPROPRIATE ACTION TO REMEDY ANY SUCH FAILURE.
NOTHING HEREIN SHALL BE DEEMED TO REQUIRE AN INITIAL REVIEW OR ANY PERIODIC
REVIEW BY THE ISSUER OR THE TRUSTEE OF THE STORM RECOVERY PROPERTY
DOCUMENTATION. THE SERVICER’S DUTIES TO HOLD THE STORM RECOVERY PROPERTY
DOCUMENTATION SET FORTH IN THIS SECTION 5.02,

 

14

--------------------------------------------------------------------------------

 

TO THE EXTENT SUCH STORM RECOVERY PROPERTY DOCUMENTATION HAS NOT BEEN PREVIOUSLY
TRANSFERRED TO A SUCCESSOR SERVICER, SHALL TERMINATE ONE YEAR AND ONE DAY AFTER
THE EARLIER OF THE DATE ON WHICH (I) THE SERVICER IS SUCCEEDED BY A SUCCESSOR
PURSUANT TO THE PROVISIONS OF THE AGREEMENT AND (II) NO STORM RECOVERY BONDS ARE
OUTSTANDING.

 

(B)                                 MAINTENANCE AND ACCESS TO RECORDS. THE
SERVICER SHALL MAINTAIN THE STORM RECOVERY PROPERTY DOCUMENTATION AT 2030
DONAHUE FERRY ROAD, PINEVILLE, LOUISIANA OR AT SUCH OTHER OFFICE AS SHALL BE
SPECIFIED TO THE ISSUER, TO THE LPSC AND TO THE TRUSTEE BY WRITTEN NOTICE AT
LEAST THIRTY (30) DAYS PRIOR TO ANY CHANGE IN LOCATION. THE SERVICER SHALL MAKE
AVAILABLE, AS IS REASONABLY REQUIRED FOR THE TRUSTEE TO PERFORM ITS DUTIES AND
OBLIGATIONS UNDER THE INDENTURE AND THE OTHER BASIC DOCUMENTS, FOR INSPECTION,
AUDIT AND COPYING TO THE ISSUER AND THE TRUSTEE OR THEIR RESPECTIVE DULY
AUTHORIZED REPRESENTATIVES, ATTORNEYS OR AUDITORS THE SERVICER’S RECORDS
REGARDING THE STORM RECOVERY PROPERTY, THE STORM RECOVERY CHARGES AND THE STORM
RECOVERY PROPERTY DOCUMENTATION AT SUCH TIMES DURING NORMAL BUSINESS HOURS AS
THE ISSUER OR THE TRUSTEE SHALL REASONABLY REQUEST AND WHICH DO NOT UNREASONABLY
INTERFERE WITH THE SERVICER’S NORMAL OPERATIONS. NOTHING IN THIS
SECTION 5.02(B) SHALL AFFECT THE OBLIGATION OF THE SERVICER TO OBSERVE ANY
APPLICABLE LAW (INCLUDING ANY LSPC REGULATION) PROHIBITING DISCLOSURE OF
INFORMATION REGARDING THE CUSTOMERS, AND THE FAILURE OF THE SERVICER TO PROVIDE
ACCESS TO SUCH INFORMATION AS A RESULT OF SUCH OBLIGATION SHALL NOT CONSTITUTE A
BREACH OF THIS SECTION 5.02(B).

 

(C)                                  RELEASE OF DOCUMENTS. UPON INSTRUCTION FROM
THE TRUSTEE IN ACCORDANCE WITH THE INDENTURE, THE SERVICER SHALL RELEASE ANY
STORM RECOVERY PROPERTY DOCUMENTATION TO THE TRUSTEE, THE TRUSTEE’S AGENT OR THE
TRUSTEE’S DESIGNEE, AS THE CASE MAY BE, AT SUCH PLACE OR PLACES AS THE TRUSTEE
MAY DESIGNATE, AS SOON AS PRACTICABLE.

 

(D)                                 LITIGATION TO DEFEND STORM RECOVERY
PROPERTY. THE SERVICER IS REQUIRED TO INSTITUTE ANY ACTION OR PROCEEDING
REASONABLY NECESSARY TO COMPEL PERFORMANCE BY THE LPSC OR THE STATE OF LOUISIANA
OF ANY OF THEIR RESPECTIVE OBLIGATIONS OR DUTIES UNDER THE SECURITIZATION ACT OR
THE FINANCING ORDER, AS THE CASE MAY BE, WITH RESPECT TO THE STORM RECOVERY
CHARGE ADJUSTMENT, PROVIDED, HOWEVER, THAT IN CIRCUMSTANCES IN WHICH THE
SERVICING PROCEDURES SET OUT IN ANNEX I APPLY, THE PROVISIONS OF THIS
UNDERTAKING DO NOT REQUIRE THE SERVICER TO ACT IN A MANNER DIFFERENT FROM THE
MANNER THAT THE SERVICING PROCEDURES REQUIRE. IN ANY PROCEEDINGS RELATED TO THE
EXERCISE OF THE POWER OF EMINENT DOMAIN BY ANY MUNICIPALITY TO ACQUIRE A PORTION
OF CLECO POWER’S ELECTRIC DISTRIBUTION FACILITIES, INCLUDING UPON THE EXPIRATION
OF ANY FRANCHISE AGREEMENT, THE SERVICER WILL ASSERT THAT THAT THE COURT
ORDERING SUCH CONDEMNATION MUST TREAT SUCH MUNICIPALITY AS A SUCCESSOR TO CLECO
POWER UNDER THE SECURITIZATION ACT AND THE FINANCING ORDER AND THAT CUSTOMERS IN
SUCH MUNICIPALITIES REMAIN RESPONSIBLE FOR PAYMENT OF STORM RECOVERY CHARGES.
THE COSTS OF ANY SUCH ACTIONS OR PROCEEDINGS WOULD BE REIMBURSED BY THE ISSUER
TO THE SERVICER FROM AMOUNTS ON DEPOSIT IN THE COLLECTION ACCOUNT AS AN
OPERATING EXPENSE (AND SHALL NOT BE DEEMED TO CONSTITUTE A PORTION OF THE
SERVICING FEE) IN ACCORDANCE WITH THE TERMS OF SECTION 8.02(D) OF THE INDENTURE.
THE AMOUNT OF ANY RECOVERIES RECEIVED BY THE SERVICER AS A RESULT OF ANY SUCH
ACTION OR PROCEDURES SHALL BE FORWARDED TO THE TRUSTEE FOR DEPOSIT IN THE
COLLECTION ACCOUNT. THE SERVICER’S OBLIGATIONS PURSUANT TO THIS
SECTION 5.02(D) SURVIVE AND CONTINUE NOTWITHSTANDING THAT THE PAYMENT OF
OPERATING EXPENSES PURSUANT TO THE INDENTURE MAY BE DELAYED.

 

15

--------------------------------------------------------------------------------

 

SECTION 5.03. CUSTODIAN’S INDEMNIFICATION.  THE SERVICER AS CUSTODIAN SHALL
INDEMNIFY THE ISSUER, THE INDEPENDENT MANAGERS AND THE TRUSTEE (FOR ITSELF AND
FOR THE BENEFIT OF THE STORM RECOVERY BONDHOLDERS) AND EACH OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD HARMLESS EACH
SUCH PERSON FROM AND AGAINST, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PAYMENTS AND CLAIMS, AND REASONABLE COSTS OR EXPENSES, OF ANY KIND
WHATSOEVER (COLLECTIVELY, “LOSSES”) THAT MAY BE IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST EACH SUCH PERSON AS THE RESULT OF ANY NEGLIGENT ACT OR OMISSION
IN ANY WAY RELATING TO THE MAINTENANCE AND CUSTODY BY THE SERVICER, AS
CUSTODIAN, OF THE STORM RECOVERY PROPERTY DOCUMENTATION; PROVIDED, HOWEVER, THAT
THE SERVICER SHALL NOT BE LIABLE FOR ANY PORTION OF ANY SUCH AMOUNT RESULTING
FROM THE WILLFUL MISCONDUCT, BAD FAITH OR NEGLIGENCE OF THE ISSUER, THE
INDEPENDENT MANAGERS OR THE TRUSTEE, AS THE CASE MAY BE.

 

INDEMNIFICATION UNDER THIS SECTION 5.03 SHALL SURVIVE RESIGNATION OR REMOVAL OF
THE TRUSTEE OR ANY INDEPENDENT MANAGER AND SHALL INCLUDE REASONABLE
OUT-OF-POCKET FEES AND EXPENSES OF INVESTIGATION AND LITIGATION (INCLUDING
REASONABLE ATTORNEY’S FEES AND EXPENSES).

 

SECTION 5.04. EFFECTIVE PERIOD AND TERMINATION.  The Servicer’s appointment as
custodian shall become effective as of the Sale Date and shall continue in full
force and effect until terminated pursuant to this Section 5.04. If the Servicer
shall resign as Servicer in accordance with the provisions of this Agreement or
if all of the rights and obligations of the Servicer shall have been terminated
under Section 7.01, the appointment of the Servicer as custodian shall be
terminated effective as of the date on which the termination or resignation of
the Servicer is effective. Additionally, if not sooner terminated as provided
above, the Servicer’s obligations as custodian shall terminate one year and one
day after the date on which no Storm Recovery Bonds are Outstanding.

 

ARTICLE VI

 

THE SERVICER

 

SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF THE SERVICER.  The Servicer
makes the following representations and warranties as of the Sale Date, on which
the Issuer has relied in acquiring the Storm Recovery Property. The
representations and warranties shall survive the execution and delivery of this
Agreement, the sale of any of the Storm Recovery Property to the Issuer and the
pledge thereof to the Trustee pursuant to the Indenture.

 

(A)                                  ORGANIZATION AND GOOD STANDING. THE
SERVICER IS A LIMITED LIABILITY COMPANY DULY ORGANIZED, VALIDLY EXISTING AND IN
GOOD STANDING UNDER THE LAWS OF THE STATE OF

 

16

--------------------------------------------------------------------------------

 

LOUISIANA, WITH THE LIMITED LIABILITY COMPANY POWER AND AUTHORITY TO CONDUCT ITS
BUSINESS AS SUCH BUSINESS IS PRESENTLY CONDUCTED AND TO EXECUTE, DELIVER AND
CARRY OUT THE TERMS OF THIS AGREEMENT AND HAD AT ALL RELEVANT TIMES AND HAS THE
REQUISITE POWER, AUTHORITY AND LEGAL RIGHT TO SERVICE THE STORM RECOVERY
PROPERTY AND TO HOLD THE STORM RECOVERY PROPERTY DOCUMENTATION AS CUSTODIAN.

 

(B)                                 DUE QUALIFICATION. THE SERVICER IS DULY
QUALIFIED TO DO BUSINESS AND IS IN GOOD STANDING, AND HAS OBTAINED ALL NECESSARY
LICENSES AND APPROVALS, IN ALL JURISDICTIONS IN WHICH IT IS REQUIRED TO DO SO
(EXCEPT WHERE THE FAILURE TO SO QUALIFY WOULD NOT BE REASONABLY LIKELY TO HAVE A
MATERIAL ADVERSE EFFECT ON THE SERVICER’S BUSINESS, OPERATIONS, ASSETS, REVENUES
OR PROPERTIES OR ADVERSELY AFFECT THE SERVICING OF THE STORM RECOVERY PROPERTY).

 

(C)                                  POWER AND AUTHORITY. THE SERVICER HAS THE
LIMITED LIABILITY COMPANY POWER AND AUTHORITY TO EXECUTE AND DELIVER THIS
AGREEMENT AND TO CARRY OUT THE TERMS THEREOF; AND THE EXECUTION, DELIVERY AND
PERFORMANCE OF THIS AGREEMENT HAVE BEEN DULY AUTHORIZED BY THE SERVICER BY ALL
NECESSARY LIMITED LIABILITY COMPANY ACTION.

 

(D)                                 BINDING OBLIGATION. THIS AGREEMENT
CONSTITUTES A LEGAL, VALID AND BINDING OBLIGATION OF THE SERVICER ENFORCEABLE
AGAINST THE SERVICER IN ACCORDANCE WITH ITS TERMS SUBJECT TO APPLICABLE
BANKRUPTCY, RECEIVERSHIP, INSOLVENCY, REORGANIZATION, MORATORIUM AND EQUITABLE
PRINCIPLES, REGARDLESS OF WHETHER CONSIDERED IN A PROCEEDING IN EQUITY OR AT
LAW.

 

(E)                                  NO VIOLATION. THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (TO THE EXTENT APPLICABLE TO THE
SERVICER’S RESPONSIBILITIES THEREUNDER) AND THE FULFILLMENT OF THE TERMS WILL
NOT CONFLICT WITH, RESULT IN ANY BREACH OF ANY OF THE TERMS AND PROVISIONS OF,
OR CONSTITUTE (WITH OR WITHOUT NOTICE OR LAPSE OF TIME) A DEFAULT UNDER, THE
ARTICLES OF ORGANIZATION, BY-LAWS OR ANY MATERIAL INDENTURE OR ANY MATERIAL
AGREEMENT TO WHICH THE SERVICER IS A PARTY OR BY WHICH IT OR ANY OF ITS PROPERTY
IS BOUND OR RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN UPON ANY OF ITS
PROPERTIES PURSUANT TO THE TERMS OF ANY SUCH AGREEMENT (OTHER THAN ANY LIEN THAT
MAY BE GRANTED UNDER THE BASIC DOCUMENTS PURSUANT TO SECTION 1231 OF THE
SECURITIZATION ACT); OR VIOLATE ANY EXISTING LAW OR ANY EXISTING ORDER, RULE OR
REGULATION APPLICABLE TO THE SERVICER.

 

(F)                                    APPROVALS. NO APPROVAL, AUTHORIZATION,
CONSENT, ORDER OR OTHER ACTION OF, OR FILING WITH, ANY GOVERNMENTAL AUTHORITY IS
REQUIRED UNDER AN APPLICABLE LAW, RULE OR REGULATION IN CONNECTION WITH THE
EXECUTION AND DELIVERY BY THE SERVICER OF THIS AGREEMENT, THE PERFORMANCE BY THE
SERVICER OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE FULFILLMENT BY THE
SERVICER OF THE TERMS OF THE AGREEMENT, EXCEPT THOSE THAT HAVE BEEN OBTAINED OR
MADE OR THAT ARE REQUIRED BY THIS AGREEMENT TO BE MADE IN THE FUTURE BY THE
SERVICER, INCLUDING THE ISSUANCE ADVICE LETTER, FILINGS WITH THE LPSC FOR
ADJUSTING STORM RECOVERY CHARGES AND ALLOCATION OF STORM RECOVERY CHARGE
ADJUSTMENTS PURSUANT TO SECTION 4.01 AND FILINGS WITH THE LOUISIANA UCC FILING
OFFICER UNDER THE SECURITIZATION ACT AND THE UCC.

 

17

--------------------------------------------------------------------------------

 

(G)                                 NO PROCEEDINGS. EXCEPT AS DISCLOSED BY THE
SERVICER ON SCHEDULE A HERETO, THERE ARE NO PROCEEDINGS PENDING OR, TO THE
SERVICER’S KNOWLEDGE, THREATENED BEFORE ANY GOVERNMENTAL AUTHORITY HAVING
JURISDICTION OVER THE SERVICER OR ITS PROPERTIES:

 

(I)                                     ASSERTING THE INVALIDITY OF THIS
AGREEMENT OR ANY OF THE OTHER BASIC DOCUMENTS;

 

(II)                                  SEEKING ANY DETERMINATION OR RULING THAT
MIGHT MATERIALLY AND ADVERSELY AFFECT THE PERFORMANCE BY THE SERVICER OF ITS
OBLIGATIONS UNDER, OR THE VALIDITY OR ENFORCEABILITY AGAINST THE SERVICER OF,
THIS AGREEMENT, ANY OF THE OTHER BASIC DOCUMENTS OR THE STORM RECOVERY BONDS;

 

(III)                               RELATING TO THE SERVICER AND WHICH MIGHT
MATERIALLY AND ADVERSELY AFFECT THE FEDERAL INCOME TAX OR STATE INCOME, GROSS
RECEIPTS OR FRANCHISE TAX ATTRIBUTES OF THE STORM RECOVERY BONDS; OR

 

(IV)                              SEEKING TO PREVENT THE ISSUANCE OF THE STORM
RECOVERY BONDS OR THE CONSUMMATION OF ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY OF THE OTHER BASIC DOCUMENTS.

 

(H)                                 REPORTS AND CERTIFICATES. EACH REPORT AND
CERTIFICATE DELIVERED IN CONNECTION WITH ANY FILING MADE TO THE LPSC BY THE
SERVICER ON BEHALF OF THE ISSUER WITH RESPECT TO STORM RECOVERY CHARGES, STORM
RECOVERY CHARGE ADJUSTMENTS OR ALLOCATION OF STORM RECOVERY CHARGES AMONG
CUSTOMER CLASSES WILL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS; PROVIDED,
HOWEVER, THAT TO THE EXTENT ANY SUCH REPORT OR CERTIFICATE IS BASED IN PART UPON
OR CONTAINS ASSUMPTIONS, FORECASTS OR OTHER PREDICTIONS OF FUTURE EVENTS, THE
REPRESENTATION AND WARRANTY OF THE SERVICER WITH RESPECT THERETO WILL BE LIMITED
TO THE REPRESENTATION AND WARRANTY THAT SUCH ASSUMPTIONS, FORECASTS OR OTHER
PREDICTIONS OF FUTURE EVENTS ARE REASONABLE BASED UPON HISTORICAL PERFORMANCE
AND THE FACTS KNOWN TO THE SERVICER ON THE DATE SUCH REPORT OR CERTIFICATE IS
DELIVERED.

 

SECTION 6.02. INDEMNITIES OF THE SERVICER; RELEASE OF CLAIMS.

 

(A)                                  THE SERVICER SHALL BE LIABLE IN ACCORDANCE
HEREWITH ONLY TO THE EXTENT OF THE OBLIGATIONS SPECIFICALLY UNDERTAKEN BY THE
SERVICER UNDER THIS AGREEMENT.

 

(B)                                 THE SERVICER SHALL INDEMNIFY THE ISSUER, THE
TRUSTEE (FOR ITSELF AND ON BEHALF OF THE STORM RECOVERY BONDHOLDERS) AND THE
INDEPENDENT MANAGER AND EACH OF THEIR RESPECTIVE TRUSTEES, MEMBERS, MANAGERS,
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD HARMLESS EACH
SUCH PERSON FROM AND AGAINST, ANY AND ALL LOSSES THAT MAY BE IMPOSED UPON,
INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON AS A RESULT OF:

 

(I)                                    THE SERVICER’S WILLFUL MISCONDUCT, BAD
FAITH OR NEGLIGENCE IN THE PERFORMANCE OF ITS DUTIES OR OBSERVANCE

 

18

--------------------------------------------------------------------------------

 

OF ITS COVENANTS UNDER THIS AGREEMENT OR THE SERVICER’S RECKLESS DISREGARD OF
ITS OBLIGATIONS AND DUTIES UNDER THIS AGREEMENT;

 

(II)                                THE SERVICER’S BREACH OF ANY OF ITS
REPRESENTATIONS OR WARRANTIES IN THIS AGREEMENT; OR

 

(III)                            LITIGATION AND RELATED EXPENSES RELATING TO ITS
STATUS AND OBLIGATIONS AS SERVICER (OTHER THAN ANY PROCEEDINGS THE SERVICER IS
REQUIRED TO INSTITUTE UNDER THIS AGREEMENT);

 

PROVIDED, HOWEVER, THAT THE SERVICER SHALL NOT BE LIABLE FOR ANY LOSSES
RESULTING FROM THE BAD FAITH, WILLFUL MISCONDUCT OR NEGLIGENCE OF ANY PERSON
INDEMNIFIED PURSUANT TO THIS SECTION 6.02 (EACH, AN “INDEMNIFIED PERSON”) OR
RESULTING FROM A BREACH OF A REPRESENTATION OR WARRANTY MADE BY SUCH INDEMNIFIED
PERSON TO THE SERVICER IN ANY BASIC DOCUMENT THAT GIVES RISE TO THE SERVICER’S
BREACH.

 

(C)                                  PROMPTLY AFTER RECEIPT BY AN INDEMNIFIED
PERSON OF WRITTEN NOTICE OF ITS INVOLVEMENT IN ANY ACTION, PROCEEDING OR
INVESTIGATION, SUCH INDEMNIFIED PERSON SHALL, IF A CLAIM FOR INDEMNIFICATION IN
RESPECT THEREOF IS TO BE MADE AGAINST THE SERVICER UNDER THIS SECTION 6.02,
NOTIFY THE SERVICER IN WRITING OF SUCH INVOLVEMENT. FAILURE BY AN INDEMNIFIED
PERSON TO SO NOTIFY THE SERVICER SHALL RELIEVE THE SERVICER FROM THE OBLIGATION
TO INDEMNIFY AND HOLD HARMLESS SUCH INDEMNIFIED PERSON UNDER THIS SECTION 6.02
ONLY TO THE EXTENT THAT THE SERVICER SUFFERS ACTUAL PREJUDICE AS DETERMINED BY A
COURT OF COMPETENT JURISDICTION AS A RESULT OF SUCH FAILURE. WITH RESPECT TO ANY
ACTION, PROCEEDING OR INVESTIGATION BROUGHT BY A THIRD PARTY FOR WHICH
INDEMNIFICATION MAY BE SOUGHT BY AN INDEMNIFIED PERSON UNDER THIS SECTION 6.02,
THE SERVICER SHALL BE ENTITLED TO ASSUME THE DEFENSE OF ANY SUCH ACTION,
PROCEEDING OR INVESTIGATION UNLESS (X) SUCH ACTION, PROCEEDING OR INVESTIGATION
EXPOSES THE INDEMNIFIED PERSON TO A RISK OF CRIMINAL LIABILITY OR FORFEITURE,
(Y) THE SERVICER AND SUCH INDEMNIFIED PERSON HAVE A CONFLICT OF INTEREST IN
THEIR RESPECTIVE DEFENSES OF SUCH ACTION, PROCEEDING OR INVESTIGATION OR
(Z) THERE EXISTS AT THE TIME THE SERVICER WOULD ASSUME SUCH DEFENSE AN ONGOING
SERVICER DEFAULT. UPON ASSUMPTION BY THE SERVICER OF THE DEFENSE OF ANY SUCH
ACTION, PROCEEDING OR INVESTIGATION, THE INDEMNIFIED PERSON SHALL HAVE THE RIGHT
TO PARTICIPATE IN SUCH ACTION OR PROCEEDING AND TO RETAIN ITS OWN COUNSEL
(INCLUDING LOCAL COUNSEL), AND THE SERVICER SHALL BEAR THE REASONABLE FEES,
COSTS AND EXPENSES OF SUCH SEPARATE COUNSEL. THE INDEMNIFIED PERSON SHALL NOT
SETTLE

 

19

--------------------------------------------------------------------------------

 

OR COMPROMISE OR CONSENT TO THE ENTRY OF ANY JUDGMENT WITH RESPECT TO ANY
PENDING OR THREATENED CLAIM, ACTION, SUIT OR PROCEEDING IN RESPECT OF WHICH
INDEMNIFICATION MAY BE SOUGHT UNDER THIS SECTION 6.02 (WHETHER OR NOT THE
SERVICER IS AN ACTUAL OR POTENTIAL PARTY TO SUCH CLAIM OR ACTION) UNLESS THE
SERVICER AGREES IN WRITING TO SUCH SETTLEMENT, COMPROMISE OR CONSENT AND SUCH
SETTLEMENT, COMPROMISE OR CONSENT INCLUDES AN UNCONDITIONAL RELEASE OF THE
SERVICER FROM ALL LIABILITY ARISING OUT OF SUCH CLAIM, ACTION, SUIT OR
PROCEEDING.

 

(D)                                 THE SERVICER SHALL INDEMNIFY THE TRUSTEE AND
ITS RESPECTIVE TRUSTEES, OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND
DEFEND AND HOLD HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL LOSSES
THAT MAY BE IMPOSED UPON, INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON AS A
RESULT OF THE ACCEPTANCE OR PERFORMANCE OF THE TRUSTS AND DUTIES CONTAINED
HEREIN AND IN THE INDENTURE, EXCEPT TO THE EXTENT THAT ANY SUCH LOSS (I) SHALL
BE DUE TO THE WILLFUL MISCONDUCT, BAD FAITH OR NEGLIGENCE OF THE TRUSTEE OR
(II) SHALL ARISE FROM THE TRUSTEE’S BREACH OF ANY OF ITS REPRESENTATIONS OR
WARRANTIES SET FORTH IN THE INDENTURE; PROVIDED, HOWEVER, THAT THE FOREGOING
INDEMNITY IS EXTENDED TO THE TRUSTEE SOLELY IN ITS INDIVIDUAL CAPACITY AND NOT
FOR THE BENEFIT OF THE STORM RECOVERY BONDHOLDERS OR ANY OTHER PERSON. SUCH
AMOUNTS WITH RESPECT TO THE TRUSTEE SHALL BE DEPOSITED AND DISTRIBUTED IN
ACCORDANCE WITH THE INDENTURE.

 

(E)                                  THE SERVICER’S INDEMNIFICATION OBLIGATIONS
UNDER SECTION 6.02(B) AND (D) FOR EVENTS OCCURRING PRIOR TO THE REMOVAL OR
RESIGNATION OF THE TRUSTEE OR ANY INDEPENDENT MANAGER OR THE TERMINATION OF THIS
AGREEMENT SHALL SURVIVE THE RESIGNATION OR REMOVAL OF THE TRUSTEE, ANY
INDEPENDENT MANAGER OR THE TERMINATION OF THIS AGREEMENT AND SHALL INCLUDE
REASONABLE COSTS, FEES AND EXPENSES OF INVESTIGATION AND LITIGATION (INCLUDING
THE ISSUER’S AND THE TRUSTEE’S REASONABLE ATTORNEYS’ FEES AND EXPENSES).
INDEMNIFICATION UNDER THIS SECTION 6.02 SHALL SURVIVE ANY REPEAL OF,
MODIFICATION OF, OR SUPPLEMENT TO, OR JUDICIAL INVALIDATION OF, THE
SECURITIZATION ACT OR ANY FINANCING ORDER.

 

(F)                                    EXCEPT TO THE EXTENT EXPRESSLY PROVIDED
FOR IN THIS AGREEMENT, THE SALE AGREEMENT OR THE FORMATION DOCUMENTS (INCLUDING
THE SERVICER’S CLAIMS WITH RESPECT TO THE SERVICING FEES AND EXPENSES
REIMBURSEMENT AND THE SELLER’S CLAIM FOR PAYMENT OF THE PURCHASE PRICE OF STORM
RECOVERY PROPERTY), THE SERVICER HEREBY RELEASES AND DISCHARGES THE ISSUER
(INCLUDING ITS MEMBERS, MANAGERS, EMPLOYEES AND AGENTS, IF ANY), THE INDEPENDENT
MANAGER, AND THE TRUSTEE (INCLUDING ITS RESPECTIVE

 

20

--------------------------------------------------------------------------------

 

OFFICERS, DIRECTORS AND AGENTS) (COLLECTIVELY, THE “RELEASED PARTIES”) FROM ANY
AND ALL CLAIMS WHATSOEVER, WHICH THE SERVICER, IN ITS CAPACITY AS SERVICER OR
OTHERWISE, SHALL OR MAY HAVE AGAINST ANY SUCH PERSON RELATING TO THE STORM
RECOVERY PROPERTY OR THE SERVICER’S ACTIVITIES WITH RESPECT THERETO OTHER THAN
ANY ACTIONS, CLAIMS AND DEMANDS ARISING OUT OF THE WILLFUL MISCONDUCT, BAD FAITH
OR NEGLIGENCE OF THE RELEASED PARTIES.

 

(G)                                 THE SERVICER AND THE ISSUER HEREBY
ACKNOWLEDGE THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE TRUSTEE
IS A THIRD-PARTY BENEFICIARY OF THIS SECTION 6.02 AND IS ENTITLED TO THE
BENEFITS OF THE INDEMNITY FROM THE SERVICER CONTAINED HEREIN AND TO BRING ANY
ACTION TO ENFORCE SUCH INDEMNIFICATION DIRECTLY AGAINST THE SERVICER.

 

(H)                                 THE SERVICER SHALL INDEMNIFY THE LPSC (FOR
THE BENEFIT OF CUSTOMERS), THE ISSUER, THE TRUSTEE (FOR ITSELF AND ON BEHALF OF
THE STORM RECOVERY BONDHOLDERS), AND EACH OF THEIR RESPECTIVE TRUSTEES, MEMBERS,
MANAGERS, OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD
HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL LOSSES THAT MAY BE
IMPOSED UPON, INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON AS A RESULT OF ANY
INCREASE IN THE SERVICING FEE THAT BECOMES PAYABLE PURSUANT TO
SECTION 6.07(B) OF THIS AGREEMENT AS A RESULT OF A DEFAULT RESULTING FROM THE
SERVICER’S MISCONDUCT,  NEGLIGENCE IN PERFORMANCE OF ITS DUTIES OR OBSERVANCE OF
ITS COVENANTS UNDER THIS AGREEMENT OR TERMINATION FOR CAUSE OF CLECO POWER OR AN
AFFILIATE SERVICER. THE INDEMNIFICATION OBLIGATION SET FORTH IN THIS PARAGRAPH
MAY BE ENFORCED BY THE LPSC BUT IS NOT ENFORCEABLE BY ANY THIRD-PARTY COLLECTOR
OR ANY CUSTOMER. ANY INDEMNITY PAYMENTS UNDER THIS PARAGRAPH FOR THE BENEFIT OF
CUSTOMERS SHALL BE REMITTED TO THE TRUSTEE PROMPTLY FOR DEPOSIT INTO THE
COLLECTION ACCOUNT.

 

SECTION 6.03. MERGER OR CONSOLIDATION OF,  OR ASSUMPTION OF THE OBLIGATIONS OF,
THE SERVICER. Any Person:

 

(A)                                  INTO WHICH THE SERVICER MAY BE MERGED,
CONVERTED OR CONSOLIDATED AND WHICH SUCCEEDS TO ALL OR SUBSTANTIALLY ALL OF THE
ELECTRIC TRANSMISSION AND DISTRIBUTION BUSINESS OF THE SERVICER (OR, IF THE
TRANSMISSION AND DISTRIBUTION BUSINESS IS SPLIT, ANY PERSON WHICH THE LPSC
DESIGNATES IN CONNECTION WITH AN ORDER RELATING TO SUCH SPLIT),

 

(B)                                 WHICH RESULTS FROM THE DIVISION OF THE
SERVICER INTO TWO OR MORE PERSONS AND WHICH SUCCEEDS TO ALL OR SUBSTANTIALLY ALL
OF THE ELECTRIC TRANSMISSION AND DISTRIBUTION BUSINESS OF THE SERVICER (OR, IF
THE TRANSMISSION AND DISTRIBUTION BUSINESS IS SPLIT, ANY PERSON WHICH THE LPSC
DESIGNATES IN CONNECTION WITH AN ORDER RELATING TO SUCH SPLIT),

 

21

--------------------------------------------------------------------------------

 

(C)                                  WHICH MAY RESULT FROM ANY MERGER,
CONVERSION OR CONSOLIDATION TO WHICH THE SERVICER SHALL BE A PARTY AND WHICH
SUCCEEDS TO ALL OR SUBSTANTIALLY ALL OF THE ELECTRIC TRANSMISSION AND
DISTRIBUTION BUSINESS OF THE SERVICER (OR, IF THE TRANSMISSION AND DISTRIBUTION
BUSINESS IS SPLIT, ANY PERSON WHICH THE LPSC DESIGNATES IN CONNECTION WITH AN
ORDER RELATING TO SUCH SPLIT),

 

(D)                                 WHICH MAY PURCHASE OR OTHERWISE SUCCEED TO
THE PROPERTIES AND ASSETS OF THE SERVICER SUBSTANTIALLY AS A WHOLE AND WHICH
PURCHASES OR OTHERWISE SUCCEEDS TO ALL OR SUBSTANTIALLY ALL OF THE ELECTRIC
TRANSMISSION AND DISTRIBUTION BUSINESS OF THE SERVICER (OR, IF THE TRANSMISSION
AND DISTRIBUTION BUSINESS IS SPLIT, ANY PERSON WHICH THE LPSC DESIGNATES IN
CONNECTION WITH AN ORDER RELATING TO SUCH SPLIT), OR

 

(E)                                  WHICH MAY OTHERWISE PURCHASE OR SUCCEED TO
ALL OR SUBSTANTIALLY ALL OF THE ELECTRIC TRANSMISSION AND DISTRIBUTION BUSINESS
OF THE SERVICER (OR, IF THE TRANSMISSION AND DISTRIBUTION BUSINESS IS SPLIT, ANY
PERSON WHICH THE LPSC DESIGNATES IN CONNECTION WITH AN ORDER RELATING TO SUCH
SPLIT),

 

which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Servicer under this Agreement, shall be the
successor to the Servicer under this Agreement without the execution or filing
of any document or any further act by any of the parties to this Agreement;
provided, however, that:

 

(I)                                     IMMEDIATELY AFTER GIVING EFFECT TO SUCH
TRANSACTION, THE REPRESENTATIONS AND WARRANTIES MADE PURSUANT TO SECTION 6.01
SHALL BE TRUE AND CORRECT AND NO SERVICER DEFAULT, AND NO EVENT THAT, AFTER
NOTICE OR LAPSE OF TIME, OR BOTH, WOULD BECOME A SERVICER DEFAULT, SHALL HAVE
OCCURRED AND BE CONTINUING;

 

(II)                                  THE SERVICER SHALL HAVE DELIVERED TO THE
ISSUER, THE LPSC AND THE TRUSTEE AN OFFICERS’ CERTIFICATE AND AN OPINION OF
COUNSEL EACH STATING THAT SUCH CONSOLIDATION, MERGER, CONVERSION, DIVISION OR
SUCCESSION AND SUCH AGREEMENT OF ASSUMPTION COMPLY WITH THIS SECTION 6.03 AND
THAT ALL CONDITIONS PRECEDENT, IF ANY, PROVIDED FOR IN THIS AGREEMENT RELATING
TO SUCH TRANSACTION HAVE BEEN COMPLIED WITH;

 

(III)                               THE SERVICER SHALL HAVE DELIVERED TO THE
ISSUER, THE LPSC AND THE TRUSTEE AN OPINION OF COUNSEL EITHER

 

(A)                              stating that, in the opinion of such counsel,
all filings to be made by the Servicer, including filings with the LPSC pursuant
to the Securitization Act and the UCC, that are necessary fully to preserve and
protect the interests of each of the Issuer and the Trustee in the Storm
Recovery Property have been executed and filed and are in full force and effect,
and reciting the details of such filings or

 

(B)                                stating that, in the opinion of such counsel,
no such action is necessary to preserve and protect such interests;

 

(IV)                              THE RATING AGENCIES SHALL HAVE RECEIVED PRIOR
WRITTEN NOTICE OF SUCH TRANSACTION AND, IF SUCH PERSON IS NOT AN AFFILIATE OF
CLECO POWER, THE RATING AGENCY CONDITION SHALL BE SATISFIED; AND

 

22

--------------------------------------------------------------------------------

 

(V)                                 THE SERVICER SHALL HAVE DELIVERED TO THE
ISSUER, THE LPSC, THE TRUSTEE AND THE RATING AGENCIES AN OPINION OF INDEPENDENT
TAX COUNSEL (AS SELECTED BY, AND IN FORM AND SUBSTANCE SATISFACTORY TO, THE
SERVICER, AND WHICH MAY BE BASED ON A RULING FROM THE INTERNAL REVENUE SERVICE)
TO THE EFFECT THAT, FOR FEDERAL INCOME TAX PURPOSES, SUCH TRANSACTION WILL NOT
RESULT IN A MATERIAL ADVERSE FEDERAL INCOME TAX CONSEQUENCE TO THE ISSUER OR THE
STORM RECOVERY BONDHOLDERS.

 

The Servicer shall not consummate any transaction referred to in clauses (a),
(b), (c), (d) or (e) above except upon execution of the above-described
agreement of assumption and compliance with clauses (i), (ii), (iii), (iv) and
(v) above. When any Person acquires the properties and assets of the Servicer
substantially as a whole or otherwise becomes the successor to the Servicer in
accordance with the terms of this Section 6.03, then upon the satisfaction of
all of the other conditions of this Section 6.03, the Servicer shall
automatically and without further notice be released from its obligations
hereunder.

 

SECTION 6.04. ASSIGNMENT OF THE SERVICER’S OBLIGATIONS.  The Servicer will not
voluntarily assign or outsource its obligations hereunder except with the LPSC’s
prior approval and upon a demonstration that the costs under an alternative
arrangement will be no more than if the Servicer continued to perform such
services itself, or the assignment or outsourcing is to another Affiliate that
will provide such services at the same or lower cost than if the Servicer
continued to perform such services itself, or the assignment or outsourcing is
to a successor entity to the Servicer as the result of a merger or other
restructuring that assumes the Servicer’s responsibilities as the servicer and
administrator.

 

SECTION 6.05. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.  Neither the
Servicer nor any of the managers, officers, employees or agents of the Servicer
shall be liable to the Issuer, its managers, the Storm Recovery Bondholders, the
Trustee or any other person, except as provided under this Agreement, for any
action taken or for refraining from the taking of any action pursuant to this
Agreement or for errors in judgment; provided, however, that this provision
shall not protect the Servicer against any liability that would otherwise be
imposed by reason of willful misconduct, bad faith or negligence in the
performance of its duties under this Agreement. The Servicer and any manager or
officer or employee or agent of the Servicer may rely in good faith on the
advice of counsel or on any document of any kind, prima facie properly executed
and submitted by any Person respecting any matters arising under this Agreement.

 

Except as provided in this Agreement (including but not limited to
Section 5.02(c) and 5.02(d) of this Agreement), the Servicer shall not be under
any obligation to appear in, prosecute or defend any Proceeding that is not
directly related to one of the Servicer’s enumerated duties in this Agreement or
related to its obligation to pay indemnification, and that in its reasonable
opinion may cause it to incur any expense or liability; provided, however, that
the Servicer may, in respect of any Proceeding, undertake any reasonable action
that is not specifically identified in this Agreement as a duty of the Servicer
but that the Servicer may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties to this Agreement and the
interests of the Storm Recovery Bondholders under this Agreement. The Servicer’s
costs and expenses incurred in connection with any such Proceeding shall be
payable from the Collection Account as an Operating Expense (and shall not be
deemed to constitute a portion of the

 

23

--------------------------------------------------------------------------------

 

Servicing Fee) in accordance with Section 8.02(d) of the Indenture. The
Servicer’s obligations pursuant to this Section 6.05 shall survive and continue
notwithstanding the fact that the payment of Operating Expenses pursuant to the
Indenture may be delayed (it being understood that the Servicer may be required
initially to advance its own funds to satisfy its obligations hereunder).

 

SECTION 6.06. CLECO POWER NOT TO RESIGN AS SERVICER.  Subject to the provisions
of Sections 6.03 and 6.04, Cleco Power shall not resign from the obligations and
duties imposed on it as Servicer under this Agreement unless the Servicer
delivers to the Issuer, the Trustee, the LPSC and each Rating Agency written
notice of such resignation at the earliest practicable time and, concurrently
therewith or promptly thereafter, an opinion of Independent legal counsel that
the Servicer’s performance of its duties under this Agreement shall no longer be
permissible under applicable law. No such resignation shall become effective
until a Successor Servicer shall have assumed the servicing obligations and
duties hereunder of the Servicer in accordance with Section 7.04.

 

SECTION 6.07. SERVICING FEE.

 

(A)                                  THE ISSUER AGREES TO PAY THE SERVICER ON
EACH PAYMENT DATE, SOLELY TO THE EXTENT AMOUNTS ARE AVAILABLE THEREFOR IN
ACCORDANCE WITH THE INDENTURE, THE SERVICING FEE WITH RESPECT TO THE STORM
RECOVERY BONDS. FOR SO LONG AS:

 

(I)                                     CLECO POWER OR ONE OF ITS AFFILIATES IS
THE SERVICER,

 

(II)                                  A SUCCESSOR TO CLECO POWER OR ONE OF ITS
AFFILIATES IS THE SERVICER DUE TO THE OPERATION OF THE PROVISIONS OF
SECTION 6.03, OR

 

(III)                               ANY PERSON IS THE SUCCESSOR SERVICER
HEREUNDER PURSUANT TO THE PROVISIONS OF SECTION 6.03 IF THE PREDECESSOR SERVICER
WAS CLECO POWER OR ONE OF ITS AFFILIATES,

 

the amount of the Servicing Fee paid to the Servicer annually shall equal 0.05%
of the Storm Recovery Bond Balance on the Issuance Date and shall be prorated
based on the fraction of a calendar year during which the Servicer provides any
of the services set forth in this Agreement.

 

(B)                                 IN THE EVENT THAT A SUCCESSOR SERVICER NOT
AN AFFILIATE OF CLECO POWER IS APPOINTED IN ACCORDANCE WITH SECTION 7.04, THE
AMOUNT OF SERVICING FEE PAID TO THE SERVICER ANNUALLY SHALL BE AGREED UPON BY
THE SUCCESSOR SERVICER AND THE TRUSTEE BUT SHALL IN NO EVENT EXCEED 0.60% OF THE
STORM RECOVERY BOND BALANCE ON THE ISSUANCE DATE WITHOUT THE CONSENT OF THE LPSC
AND SHALL BE PRORATED BASED ON THE FRACTION OF A CALENDAR YEAR DURING WHICH THE
SUCCESSOR SERVICER PROVIDES ANY OF THE SERVICES SET FORTH IN THIS AGREEMENT. THE
FOREGOING FEES SET FORTH IN SECTION 6.07(A) AND THIS SECTION 6.07(B) CONSTITUTE
A FAIR AND REASONABLE PRICE FOR THE OBLIGATIONS TO BE PERFORMED BY THE SERVICER.
THE SERVICER SHALL HAVE INDEMNIFICATION OBLIGATIONS FOR AN INCREASED SERVICING
FEE UNDER CERTAIN CIRCUMSTANCES, IN ACCORDANCE WITH SECTION 6.02(H).

 

(C)                                  THE SERVICING FEE, TOGETHER WITH ANY
PORTION OF THE SERVICING FEE THAT REMAINS UNPAID FROM PRIOR PAYMENT DATES, WILL
BE PAID SOLELY TO THE EXTENT FUNDS ARE AVAILABLE. THE SERVICING FEE WILL BE PAID
PRIOR TO THE PAYMENT OF OR PROVISION FOR ANY AMOUNTS IN RESPECT OF INTEREST ON
AND PRINCIPAL OF THE STORM RECOVERY BONDS.

 

24

--------------------------------------------------------------------------------

 

SECTION 6.08. COMPLIANCE WITH APPLICABLE LAW.  The Servicer covenants and
agrees, in servicing the Storm Recovery Property, to comply in all material
respects with all laws applicable to, and binding upon, the Servicer and
relating to such Storm Recovery Property the noncompliance with which would have
a material adverse effect on the value of the Storm Recovery Property; provided,
however, that the foregoing is not intended to, and shall not, impose any
liability on the Servicer for noncompliance with any Requirement of Law that the
Servicer is contesting in good faith in accordance with its customary standards
and procedures.

 

SECTION 6.09. SERVICER EXPENSES.  Except as expressly provided elsewhere in this
Agreement, the Servicer will not be reimbursed for any expenses incurred by it
in connection with its activities hereunder, including taxes imposed on the
Servicer and expenses incurred in connection with reports to Storm Recovery
Bondholders, and external information technology costs, bank wire fees and legal
fees related to this Agreement. The Servicer is entitled to receive
reimbursement for its out-of-pocket costs for external accounting as well as for
other items of costs that will be incurred annually to support and service the
Storm Recovery Bonds after issuance, as provided in the Financing Order.

 

SECTION 6.10. APPOINTMENTS. The Servicer may at any time appoint a subservicer
or agent to perform all or any portion of its obligations as Servicer hereunder;
provided, however, that unless such Person is an Affiliate of Cleco Power, the
Rating Agency Condition shall have been satisfied in connection therewith;
provided further that the Servicer shall remain obligated and be liable to the
Issuer for the servicing and administering of the Storm Recovery Property in
accordance with the provisions hereof without diminution of such obligation and
liability by virtue of the appointment of such subservicer or agent and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Storm Recovery Property. The fees and
expenses of the subservicer or agent shall be as agreed between the Servicer and
its subservicer or agent from time to time, and none of the Issuer, the Trustee
or the Storm Recovery Bondholders shall have any responsibility therefor. Any
such appointment shall not constitute a Servicer resignation under Section 6.06.
In the event any subservicer participates in the “servicing function” within the
meaning of Item 1122 of Regulation AB, the Servicer shall be responsible for
obtaining from each subservicer and delivering to the Issuer any assessment of
compliance and attestation required to be delivered by the Servicer under
Section 3.03.

 

SECTION 6.11. NO SERVICER ADVANCES.  The Servicer shall not make any advances of
interest on or principal of the Storm Recovery Bonds.

 

SECTION 6.12. REMITTANCES.  The Servicer shall remit Storm Recovery Charges to
the Trustee each Business Day based on estimated daily collections, using a
weighted average balance of days outstanding on Cleco Power’s retail bills (the
“Daily Remittance”). The Servicer will track the amount billed for Storm
Recovery Charges by customer. The summation of those individual charges on a
daily basis will be remitted to the Trustee on each Business Day, net of
considerations of the timing lag between billing and collection, and as further
adjusted for uncollectible amounts. The Servicer will include in the calculation
of this remittance an allowance for the estimated charged-off amount based on
the prior annual period. Cleco Power will not be required to credit Customers or
the Issuer with any earnings accruing to Cleco Power on transferred and
untransferred daily collections of Storm Recovery Charges.

 

25

--------------------------------------------------------------------------------

 

SECTION 6.13. SERVICER’S CERTIFICATE.  Not later than two (2)  Business Days
prior to each Payment Date, the Servicer shall deliver a written report, for the
Storm Recovery Bonds, substantially in the form of Exhibit A hereto (the
“Semi-Annual Servicer’s Certificate”) to the Issuer, the LPSC, the Trustee and
the Rating Agencies setting forth the transfers and payments to be made in
respect of such Payment Date pursuant to the Indenture and the amounts thereof
and the amounts to be paid to Holders of Storm Recovery Bonds pursuant to the
Indenture.

 

SECTION 6.14. PROTECTION OF TITLE.  The Servicer shall execute and file all
filings, including filings with the Louisiana UCC Filing Officer pursuant to the
Securitization Act and the Louisiana UCC, and cause to be executed and filed all
filings, all in such manner and in such places as may be required by law fully
to preserve, maintain and protect the interests of the Issuer and the Trustee in
the Storm Recovery Property, including all filings required under the
Securitization Act and the Louisiana UCC relating to the transfer of the
ownership or security interest in the Storm Recovery Property by the Seller to
the Issuer or any security interest granted by the Issuer in the Storm Recovery
Property. The Servicer shall deliver (or cause to be delivered) to the Issuer,
the LPSC and the Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.

 

SECTION 6.15. MAINTENANCE OF OPERATIONS.  To the extent that any interest in the
Storm Recovery Property is assigned, sold, or transferred to an assignee, Cleco
Power shall enter into a contract with that assignee that requires Cleco Power
to continue to operate its electric transmission and distribution system in
order to provide electric services to Cleco Power’s customers; provided,
however, that this provision shall not prohibit Cleco Power from selling,
assigning, or otherwise divesting its electric transmission and distribution
systems or any part thereof so long as the entity or entities acquiring such
system agree to continue operating the facilities to provide electric service to
Cleco Power’s LPSC’s jurisdictional customers.

 

ARTICLE VII

 

SERVICER DEFAULT

 

SECTION 7.01. SERVICER DEFAULT.  If any one of the following events (a “Servicer
Default”) occurs and is continuing:

 

(A)                                  ANY FAILURE BY THE SERVICER TO REMIT TO THE
TRUSTEE, ON BEHALF OF THE ISSUER, ANY REQUIRED REMITTANCE BY THE DATE THAT SUCH
REMITTANCE MUST BE MADE THAT CONTINUES UNREMEDIED FOR A PERIOD OF FIVE BUSINESS
DAYS AFTER THE DATE ON WHICH WRITTEN NOTICE THEROF SHALL HAVE BEEN GIVEN TO THE
SERVICER AND THE LPSC BY THE ISSUER OR THE TRUSTEE;

 

26

--------------------------------------------------------------------------------

 

(B)                                 ANY FAILURE BY THE SERVICER TO DULY OBSERVE
OR PERFORM IN ANY MATERIAL RESPECT ANY OTHER COVENANT OR AGREEMENT OF THE
SERVICER SET FORTH IN THIS AGREEMENT (OTHER THAN AS PROVIDED IN
SECTION 7.01(A) OR (C)) OR ANY OTHER BASIC DOCUMENT TO WHICH IT IS A PARTY IN
SUCH CAPACITY, WHICH FAILURE

 

(I)                                     MATERIALLY AND ADVERSELY AFFECTS THE
STORM RECOVERY PROPERTY OR THE TIMELY COLLECTION OF THE STORM RECOVERY CHARGES
OR THE RIGHTS OF THE STORM RECOVERY BONDHOLDERS, AND

 

(II)                                  CONTINUES UNREMEDIED FOR A PERIOD OF 60
DAYS AFTER THE DATE ON WHICH WRITTEN NOTICE THEREOF SHALL HAVE BEEN GIVEN TO THE
SERVICER BY THE TRUSTEE, THE LPSC OR THE ISSUER OR AFTER DISCOVERY OF SUCH
FAILURE BY AN OFFICER OF THE SERVICER, AS THE CASE MAY BE;

 

(C)                                  ANY FAILURE BY THE SERVICER DULY TO
PERFORM ITS OBLIGATIONS UNDER SECTION 4.01(B) OF THIS AGREEMENT IN THE TIME AND
MANNER SET FORTH THEREIN, WHICH FAILURE CONTINUES UNREMEDIED FOR A PERIOD OF
FIVE BUSINESS DAYS;

 

(D)                                 ANY REPRESENTATION OR WARRANTY MADE BY THE
SERVICER IN THIS AGREEMENT PROVES TO HAVE BEEN INCORRECT WHEN MADE, WHICH HAS A
MATERIAL ADVERSE EFFECT ON THE ISSUER OR THE STORM RECOVERY BONDHOLDERS, AND
WHICH MATERIAL ADVERSE EFFECT CONTINUES UNREMEDIED FOR A PERIOD OF 60 DAYS AFTER
THE DATE ON WHICH WRITTEN NOTICE THEREOF SHALL HAVE BEEN GIVEN TO THE SERVICER
BY THE ISSUER OR THE TRUSTEE OR AFTER DISCOVERY OF SUCH FAILURE BY AN OFFICER OF
THE SERVICER, AS THE CASE MAY BE; OR

 

(E)                                  AN INSOLVENCY EVENT OCCURS WITH RESPECT TO
THE SERVICER;

 

then, so long as the Servicer Default shall not have been remedied, the Trustee
may, or shall upon the written instruction of the Majority Holders and with the
Issuer’s consent (which shall not be unreasonably withheld), terminate all the
rights and obligations (other than the indemnification obligations set forth in
Section 6.02 hereof and the obligation under Section 7.04 to continue performing
its functions as Servicer until a Successor Servicer is appointed) of the
Servicer under this Agreement by notice then given in writing to the Servicer (a
“Termination Notice”).

 

In addition, upon a Servicer Default, the Storm Recovery Bondholders and the
Trustee  shall be entitled to (i) apply to the 19th Judicial District Court for
the Parish of East Baton Rouge, Louisiana, for sequestration and payment to the
Trustee of revenues arising with respect to the Storm Recovery Property,
(ii) foreclose on or otherwise enforce the Lien on and security interests in the
Storm Recovery Property and (iii) apply to the LPSC for an order that amounts
arising from the Storm Recovery Charges be transferred to a separate account for
the benefit of the Storm Recovery Bondholders, in accordance with the
Securitization Act.

 

On or after the receipt by the Servicer of a Termination Notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Storm Recovery Property, the related Storm Recovery Charges or otherwise, shall,
upon appointment of a Successor Servicer pursuant to Section 7.04, without
further action, pass to and be vested in such Successor Servicer and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver,

 

27

--------------------------------------------------------------------------------

 

on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such Termination
Notice, whether to complete the transfer of the Storm Recovery Property
Documentation and related documents, or otherwise. The predecessor Servicer
shall cooperate with the Successor Servicer, the Trustee and the Issuer in
effecting the termination of the responsibilities and rights of the predecessor
Servicer under this Agreement, including the transfer to the Successor Servicer
for administration by it of all cash amounts that shall at the time be held by
the predecessor Servicer for remittance, or shall thereafter be received by it
with respect to the Storm Recovery Property or the related Storm Recovery
Charges. As soon as practicable after receipt by the Servicer of such
Termination Notice, the Servicer shall deliver the Storm Recovery Property
Documentation to the Successor Servicer. All reasonable costs and expenses
(including attorneys’ fees and expenses) incurred in connection with
transferring the Storm Recovery Property Documentation to the Successor Servicer
and amending this Agreement to reflect such succession as Servicer pursuant to
this Section shall be paid by the predecessor Servicer upon presentation of
documentation of such costs and expenses. All costs and expenses (including
attorneys’ fees and expenses) incurred in connection with transferring the Storm
Recovery Property Documentation to the Successor Servicer and amending this
Agreement to reflect the succession as Servicer other than pursuant to this
Section shall be paid by the party incurring such costs and expenses.
Termination of Cleco Power’s rights as a Servicer shall not terminate Cleco
Power’s rights or obligations in its individual capacity under the Sale
Agreement (except rights thereunder deriving from its rights as the Servicer
hereunder).

 

SECTION 7.02. NOTICE OF SERVICER DEFAULT.  The Servicer shall deliver to the
Issuer, to the Trustee, to the LPSC, and to each Rating Agency promptly after
having obtained actual knowledge thereof, but in no event later than two
Business Days thereafter, written notice in an Officers’ Certificate of any
event or circumstance which, with the giving of notice or the passage of time,
would become a Servicer Default under Section 7.01.

 

SECTION 7.03. WAIVER OF PAST DEFAULTS.  The Trustee, with the written consent of
the Majority Holders, may waive in writing in whole or in part any default by
the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required remittances to the Trustee
of SRC Collections from Storm Recovery Property in accordance with Section 6.12
of this Agreement. Upon any such waiver of a past default, such default shall
cease to exist, and any Servicer Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.

 

SECTION 7.04. APPOINTMENT OF SUCCESSOR.

 

(A)                                  UPON THE SERVICER’S RECEIPT OF A
TERMINATION NOTICE PURSUANT TO SECTION 7.01 OR THE SERVICER’S RESIGNATION IN
ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, THE SERVICER SHALL CONTINUE TO
PERFORM ITS FUNCTIONS AS SERVICER UNDER THIS AGREEMENT AND SHALL BE ENTITLED TO
RECEIVE THE REQUISITE PORTION OF THE SERVICING FEE AND EXPENSES REIMBURSEMENT,
UNTIL A SUCCESSOR SERVICER SHALL HAVE ASSUMED IN WRITING THE OBLIGATIONS OF THE
SERVICER HEREUNDER AS DESCRIBED BELOW. IN THE EVENT OF THE SERVICER’S REMOVAL OR
RESIGNATION HEREUNDER, THE TRUSTEE AT THE WRITTEN DIRECTION AND WITH THE CONSENT
OF THE MAJORITY HOLDERS SHALL APPOINT A SUCCESSOR

 

28

--------------------------------------------------------------------------------

 

SERVICER WITH THE ISSUER’S PRIOR WRITTEN CONSENT THERETO (WHICH CONSENT SHALL
NOT BE UNREASONABLY WITHHELD), AND THE SUCCESSOR SERVICER SHALL ACCEPT ITS
APPOINTMENT BY A WRITTEN ASSUMPTION IN FORM ACCEPTABLE TO THE ISSUER AND THE
TRUSTEE. IN NO EVENT SHALL THE TRUSTEE BE LIABLE FOR ITS APPOINTMENT OF A
SUCCESSOR SERVICER APPOINTED AT THE WRITTEN  DIRECTION OF THE MAJORITY HOLDERS.
IF, WITHIN 30 DAYS AFTER THE DELIVERY OF THE TERMINATION NOTICE, A NEW SERVICER
SHALL NOT HAVE BEEN APPOINTED AND ACCEPTED SUCH APPOINTMENT, THE TRUSTEE
MAY PETITION THE LPSC OR A COURT OF COMPETENT JURISDICTION TO APPOINT A
SUCCESSOR SERVICER UNDER THIS AGREEMENT. A PERSON SHALL QUALIFY AS A SUCCESSOR
SERVICER ONLY IF:

 

(I)                                     SUCH PERSON IS PERMITTED UNDER LPSC
REGULATIONS TO PERFORM THE DUTIES OF THE SERVICER PURSUANT TO THE SECURITIZATION
ACT, THE FINANCING ORDER AND THIS AGREEMENT,

 

(II)                                  EITHER (A) THE LPSC HAS APPROVED THE
APPOINTMENT OF THE SUCCESSOR SERVICER OR (B) 45 DAYS HAVE LAPSED SINCE THE LPSC
RECEIVED NOTICE OF APPOINTMENT OF THE SUCCESSOR SERVICER AND THE LPSC HAS
NEITHER APPROVED NOR DISAPPROVED THAT APPOINTMENT,

 

(III)                               THE RATING AGENCY CONDITION SHALL HAVE BEEN
SATISFIED, AND

 

(IV)                              SUCH PERSON ENTERS INTO A SERVICING AGREEMENT
WITH THE ISSUER HAVING SUBSTANTIALLY THE SAME PROVISIONS AS THIS AGREEMENT.

 

(B)                                 UPON APPOINTMENT, THE SUCCESSOR SERVICER
SHALL BE THE SUCCESSOR IN ALL RESPECTS TO THE PREDECESSOR SERVICER UNDER THIS
AGREEMENT AND SHALL BE SUBJECT TO ALL THE RESPONSIBILITIES, DUTIES AND
LIABILITIES ARISING THEREAFTER RELATING THERETO PLACED ON THE PREDECESSOR
SERVICER AND SHALL BE ENTITLED TO THE SERVICING FEE AND EXPENSES REIMBURSEMENT
AND ALL THE RIGHTS GRANTED TO THE PREDECESSOR SERVICER BY THE TERMS AND
PROVISIONS OF THIS AGREEMENT.

 

(C)                                  THE SUCCESSOR SERVICER MAY NOT RESIGN
UNLESS IT IS PROHIBITED FROM SERVING AS SUCH BY LAW.

 

SECTION 7.05. COOPERATION WITH SUCCESSOR.  The predecessor Servicer covenants
and agrees with the Issuer that it will, on an ongoing basis, cooperate with the
Issuer and Successor Servicer and provide whatever information is, and take
whatever actions are, reasonably necessary to assist the Successor Servicer in
performing its obligations hereunder.

 

ARTICLE VIII

 

MISCELLANEOUS PROVISIONS

 

SECTION 8.01. AMENDMENT.

 

(A)                                  THIS AGREEMENT MAY BE AMENDED BY THE
SERVICER AND THE ISSUER, WITH THE PRIOR WRITTEN CONSENT OF THE TRUSTEE AND THE
SATISFACTION OF THE RATING AGENCY CONDITION; PROVIDED, HOWEVER, THAT NO
AMENDMENT THAT WOULD INCREASE THE ONGOING FINANCING COSTS, AS DEFINED IN THE
FINANCING ORDER, SHALL BE PERMITTED WITHOUT THE PRIOR APPROVAL OF THE LPSC.
PROMPTLY AFTER THE EXECUTION OF ANY SUCH AMENDMENT OR CONSENT, THE ISSUER SHALL
FURNISH WRITTEN NOTIFICATION OF THE SUBSTANCE OF SUCH AMENDMENT OR CONSENT TO
EACH OF THE RATING AGENCIES.

 

29

--------------------------------------------------------------------------------

 

(B)           NOTWITHSTANDING SECTION 8.01(A) OR ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, THE SERVICER AND THE ISSUER MAY AMEND THE ISSUER ANNEX IN
WRITING WITH PRIOR WRITTEN NOTICE GIVEN TO THE TRUSTEE AND THE RATING AGENCIES,
BUT WITHOUT THE CONSENT OF THE TRUSTEE, ANY RATING AGENCY OR ANY HOLDER, SOLELY
TO ADDRESS CHANGES TO THE SERVICER’S METHOD OF CALCULATING SRC COLLECTIONS AS A
RESULT OF CHANGES TO THE SERVICER’S CURRENT COMPUTERIZED CUSTOMER INFORMATION
SYSTEM; PROVIDED THAT ANY SUCH AMENDMENT SHALL NOT HAVE A MATERIAL ADVERSE
EFFECT ON THE HOLDERS OF THEN OUTSTANDING STORM RECOVERY BONDS.

 

Prior to the execution of any amendment to this Agreement, the Issuer and the
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 3.01.  The
Issuer and the Trustee may, but shall not be obligated to, enter into any such
amendment which affects their own rights, duties or immunities under this
Agreement or otherwise. Notwithstanding Section 8.01(a) or anything to the
contrary in this Agreement, this Agreement shall be amended automatically to
comply with changes in law.

 

SECTION 8.02.  NOTICES.  All demands, notices and communications upon or to the
Servicer, the Issuer, the LPSC, the Trustee or the Rating Agencies under this
Agreement shall be in writing, delivered personally, via facsimile, by reputable
overnight courier or by certified mail, return-receipt requested, and shall be
deemed to have been duly given upon receipt

 

(A)           IN THE CASE OF THE SERVICER, TO CLECO POWER LLC, 2030 DONAHUE
FERRY ROAD, PINEVILLE, LOUISIANA 71360-5226, ATTENTION: TREASURER;

 

(B)           IN THE CASE OF THE ISSUER, TO CLECO KATRINA/RITA HURRICANE
RECOVERY FUNDING LLC, 2605 HWY. 28 EAST, OFFICE NUMBER 12, PINEVILLE, LOUISIANA
71360-5226, ATTENTION: MANAGER;

 

(C)           IN THE CASE OF THE TRUSTEE, AT ITS CORPORATE TRUST OFFICE;

 

(D)           IN THE CASE OF MOODY’S, TO MOODY’S INVESTORS SERVICE, INC., ABS
MONITORING DEPARTMENT, 7 WORLD TRADE CENTER AT 250 GREENWICH STREET, NEW YORK,
NEW YORK 10007;

 

(E)           IN THE CASE OF STANDARD & POOR’S, TO STANDARD & POOR’S, A DIVISION
OF THE MCGRAW-HILL COMPANIES, 55 WATER STREET, NEW YORK, NEW YORK 10041,
ATTENTION: ASSET BACKED SURVEILLANCE DEPARTMENT; AND

 

(F)            IN THE CASE OF FITCH, TO FITCH, INC., 1 STATE STREET PLAZA, NEW
YORK, NEW YORK 10004, ATTENTION: ABS SURVEILLANCE;

 

(G)           IN THE CASE OF THE LPSC, TO GALVEZ BUILDING, 12TH FLOOR, 602 NORTH
FIFTH STREET, BATON ROUGE, LOUISIANA 70821-9154, ATTENTION: EXECUTIVE COUNSEL;

 

or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.

 

30

--------------------------------------------------------------------------------

 

SECTION 8.03.  ASSIGNMENT.  Notwithstanding anything to the contrary contained
herein, except as provided in Sections 6.03  and 6.04 and as provided in the
provisions of this Agreement concerning the resignation or termination of the
Servicer, this Agreement may not be assigned by the Servicer.  Any purported
assignment not in compliance with this Agreement shall be void.

 

SECTION 8.04.  LIMITATIONS ON RIGHTS OF OTHERS.  The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuer and, to the
extent provided herein or in the other Basic Documents, Customers and the other
Persons expressly referred to herein and the Trustee, on behalf of itself and
the Storm Recovery Bondholders, and nothing in this Agreement, whether express
or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Series Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.  Notwithstanding anything to the contrary contained herein, for the
avoidance of doubt, any right, remedy or claim to which any Customer may be
entitled pursuant to the Financing Order and this Agreement may be asserted or
exercised only by the LPSC (or by the Attorney General of the State of Louisiana
in the name of the LPSC) for the benefit of such Customer.

 

SECTION 8.05.  SEVERABILITY.  Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

SECTION 8.06.  SEPARATE COUNTERPARTS.  This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

 

SECTION 8.07.  HEADINGS.  The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.

 

SECTION 8.08.  GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF LOUISIANA, WITHOUT REFERENCE TO ITS CONFLICT OF
LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

SECTION 8.09.  ASSIGNMENT TO THE TRUSTEE.  The Servicer hereby acknowledges and
consents to any pledge, assignment and grant of a security interest by the
Issuer to the Trustee pursuant to the Indenture for the benefit of any Storm
Recovery Bondholders of all right, title and interest of the Issuer in, to and
under the Storm Recovery Property owned by the Issuer and the proceeds thereof
and the assignment of any or all of the Issuer’s rights hereunder to the
Trustee. Notwithstanding such assignment, in no event shall the Trustee have any
liability for the representations, warranties, covenants, agreements or other

 

31

--------------------------------------------------------------------------------

 

obligations of the Issuer, hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer.

 

SECTION 8.10.  NONPETITION COVENANTS.  Notwithstanding any prior termination of
this Agreement or the Indenture, but subject to a court’s rights to order the
sequestration and payment of revenues arising with respect to the Storm Recovery
Property pursuant to Section 1229(F) of the Securitization Act, the Servicer
shall not, prior to the date which is one year and one day after the termination
of the Indenture, petition or otherwise invoke or cause the Issuer to invoke the
process of any Governmental Authority for the purpose of commencing or
sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of the property of the Issuer, or ordering the winding up or
liquidation of the affairs of the Issuer.

 

SECTION 8.11.  TERMINATION. This Agreement shall terminate when all Storm
Recovery Bonds have been retired or redeemed in full.

 

SECTION 8.12.  LPSC CONSENT.  Except as specifically set forth in Section 7.04,
to the extent the consent of the LPSC is required to effect any amendment to or
modification of this Agreement or any provision of this Agreement,

 

(A)           THE SERVICER MAY REQUEST THE CONSENT OF THE LPSC BY DELIVERING TO
THE LPSC’S EXECUTIVE DIRECTOR AND GENERAL COUNSEL A WRITTEN REQUEST FOR SUCH
CONSENT, WHICH REQUEST SHALL CONTAIN:

 

(I)            A REFERENCE TO DOCKET NO. U-29157 AND A STATEMENT AS TO THE
POSSIBLE EFFECT OF THE AMENDMENT ON ONGOING FINANCING COSTS;

 

(II)           AN OFFICER’S CERTIFICATE STATING THAT THE PROPOSED AMENDMENT OR
MODIFICATION HAS BEEN APPROVED BY ALL PARTIES TO THIS AGREEMENT; AND

 

(III)          A STATEMENT IDENTIFYING THE PERSON TO WHOM THE LPSC OR ITS STAFF
IS TO ADDRESS ITS CONSENT TO THE PROPOSED AMENDMENT OR MODIFICATION OR REQUEST
ADDITIONAL TIME;

 

(B)           THE LPSC SHALL, WITHIN 30 DAYS OF RECEIVING THE REQUEST FOR
CONSENT COMPLYING WITH SECTION 8.12(A) ABOVE, EITHER

 

(I)            PROVIDE NOTICE OF ITS CONSENT OR ITS ORDER DENYING CONSENT TO THE
PERSON SPECIFIED IN SECTION 8.12(A)(III) ABOVE, OR

 

(II)           BE CONCLUSIVELY DEEMED, ON THE 31ST DAY AFTER RECEIVING THE
REQUEST FOR CONSENT, TO HAVE CONSENTED TO THE PROPOSED AMENDMENT OR
MODIFICATION.

 

Any amendment or modification requiring the consent of the LPSC as provided in
this Section 8.12 shall become effective on the later of (i) the date proposed
by the parties to such amendment or modification and (ii) the first day after
the expiration of the 30-day period provided for in Section 8.12(b)(ii).

 

32

--------------------------------------------------------------------------------

 

Following the delivery of a notice to the LPSC by the Servicer under
Section 8.12(a), the Servicer and the Issuer shall have the right at any time to
withdraw from the LPSC further consideration of any notification of a proposed
amendment. Such withdrawal shall be evidenced by the Servicer’s giving prompt
written notice thereof to the LPSC, the Issuer and  the Trustee.

 

SECTION 8.13.  LIMITATION OF LIABILITY

 

It is expressly understood and agreed by the parties hereto that this Agreement
is executed and delivered by the Trustee, not individually or personally but
solely as Trustee in the exercise of the powers and authority conferred and
vested in it, and that the Trustee, in acting hereunder, is entitled to all
rights, benefits, protections, immunities and indemnities accorded to it under
the Indenture.

 

33

--------------------------------------------------------------------------------

 

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.

 

 

CLECO KATRINA/RITA HURRICANE
RECOVERY FUNDING LLC, as Issuer

 

 

 

 

 

 

 

By:

/s/ Keith D. Crump

 

 

Name: Keith D. Crump

 

 

Title: Vice President and Manager

 

 

 

 

CLECO POWER LLC, as Servicer

 

 

 

 

 

 

By:

/s/ Kathleen F. Nolen

 

 

Name: Kathleen F. Nolen

 

 

Title: Senior Vice President and Chief Financial Officer

 

 

Acknowledged and Accepted:

U.S. Bank National Association,

not in its individual capacity but solely as

Trustee on behalf of the Holders

of the Storm Recovery Bonds

 

By:

/s/ Melissa A. Rosal

 

 

Name: Melissa A. Rosal

 

Title: Vice President

 

34

--------------------------------------------------------------------------------

 

SCHEDULE A
TO
STORM RECOVERY PROPERTY SERVICING AGREEMENT

 

Proceedings pending or, to the Servicer’s best knowledge, threatened before any
court, federal or State regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties seeking any determination or ruling that might materially and
adversely affect the Storm Recovery Property or the performance by the Servicer
of its obligations under, or the validity or enforceability against the Servicer
of, this Agreement:

 

[None]

 

35

--------------------------------------------------------------------------------

 

EXHIBIT A

 

FORM OF SEMI-ANNUAL SERVICER’S CERTIFICATE

 

Pursuant to Section 6.13 of the Storm Recovery Property Servicing Agreement,
dated as of March 6, 2008 (the “Servicing Agreement”), between CLECO POWER LLC,
as servicer and CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC, the Servicer
does hereby certify, for the                 , 20     Payment Date (the “Current
Payment Date”), as follows:

 

(A)           CAPITALIZED TERMS USED HEREIN HAVE THEIR RESPECTIVE MEANINGS AS
SET FORTH IN THE SERVICING AGREEMENT OR THE INDENTURE. REFERENCES HEREIN TO
CERTAIN SECTIONS AND SUBSECTIONS ARE REFERENCES TO THE RESPECTIVE SECTIONS OF
THE SERVICING AGREEMENT OR THE INDENTURE, AS THE CONTEXT INDICATES.

 

(I)            ALLOCATION OF REMITTANCES AS OF CURRENT PAYMENT DATE ALLOCABLE TO
PRINCIPAL AND INTEREST:

 

 

 

a.   Principal

 

 

 

 

 

 

Aggregate

 

 

 

i.

Tranche A-1

 

 

 

 

ii.

Tranche A-2

 

 

 

 

v.

Total:

 

 

 

 

 

 

b.   Interest

 

 

 

 

 

 

Aggregate

 

 

 

i.

Tranche A-1

 

 

 

 

ii.

Tranche A-2

 

 

 

 

v.

Total:

 

 

(B)           OUTSTANDING AMOUNT OF BONDS PRIOR TO, AND AFTER GIVING EFFECT TO
THE PAYMENT ON THE CURRENT PAYMENT DATE AND THE DIFFERENCE, IF ANY, BETWEEN THE
OUTSTANDING AMOUNT SPECIFIED IN THE EXPECTED AMORTIZATION SCHEDULE (AFTER GIVING
EFFECT TO PAYMENTS TO BE MADE ON SUCH PAYMENT DATE UNDER 1A ABOVE) AND THE
PRINCIPAL BALANCE TO BE OUTSTANDING (FOLLOWING PAYMENT ON CURRENT PAYMENT DATE):

 

--------------------------------------------------------------------------------

 

(I)            PRINCIPAL BALANCE OUTSTANDING (AS OF THE DATE OF THIS
CERTIFICATION):

 

i.

Tranche A-1

 

 

 

 

ii.

Tranche A-2

 

 

 

 

v.

Total:

 

 

(II)           PRINCIPAL BALANCE TO BE OUTSTANDING (FOLLOWING PAYMENT ON CURRENT
PAYMENT DATE):

 

i.

Tranche A-1

 

 

 

 

ii.

Tranche A-2

 

 

 

 

v.

Total:

 

 

(III)          DIFFERENCE BETWEEN (B) ABOVE AND OUTSTANDING AMOUNT SPECIFIED IN
EXPECTED AMORTIZATION SCHEDULE:

 

i.

Tranche A-1

 

 

 

 

ii.

Tranche A-2

 

 

 

 

v.

Total:

 

 

(C)           ALL OTHER TRANSFERS TO BE MADE ON THE CURRENT PAYMENT DATE,
INCLUDING AMOUNTS TO BE PAID TO THE TRUSTEE AND TO THE SERVICER:

 

(I)            OPERATING EXPENSES

 

i.

Trustee Fees and Expenses:

 

 

 

 

ii.

Servicing Fee:

 

 

 

 

iii.

Administration Fee:

 

 

 

 

iv.

Other Operating Expenses:

 

 

 

 

v.

Total:

 

 

(II)           OTHER PAYMENTS

 

--------------------------------------------------------------------------------

 

i.

Operating Expenses (payable pursuant to Section 8.02(d)(4) of the Indenture):

 

 

ii.

Funding of Capital Subaccount (to required amount):

 

 

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.

 

 

iv.

Operating Expenses and Indemnity Amounts payable pursuant to
Section 8.02(d)(8) of the Indenture:

 

 

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)):

 

 

vi.

Total:

 

(D)           ESTIMATED AMOUNTS ON DEPOSIT IN THE CAPITAL SUBACCOUNT AND EXCESS
FUNDS SUBACCOUNT AFTER GIVING EFFECT TO THE FOREGOING PAYMENTS:

 

(I)            CAPITAL SUBACCOUNT

 

i.

Total:

 

(II)           EXCESS FUNDS SUBACCOUNT

 

i.

Total:

 

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
Semi-Annual Servicer’s Certificate this      day of                     .

 

 

CLECO POWER LLC,

 

as Servicer

 

 

 

By:

 

Name:

 

Title:

 

--------------------------------------------------------------------------------

 

EXHIBIT B-1

 

FORM OF SERVICER’S REGULATION AB COMPLIANCE CERTIFICATE

 

The undersigned hereby certifies that he/she is the duly elected and acting
[                    ] of CLECO POWER LLC, as servicer (the “Servicer”) under
the Storm Recovery Property Servicing Agreement dated as of March 6, 2008 (the
“Servicing Agreement”) between the Servicer and CLECO KATRINA/RITA HURRICANE
RECOVERY FUNDING LLC (the “Issuer”) and further that:

 

1.             The undersigned is responsible for assessing the Servicer’s
compliance with the servicing criteria set forth in Item 1122(d) of Regulation
AB (the “Servicing Criteria”).

 

2.             With respect to each of the Servicing Criteria, the undersigned
has made the following assessment of the Servicing Criteria in accordance with
Item 1122(d) of Regulation AB, with such discussion regarding the performance of
such Servicing Criteria during the fiscal year ended                     ,
           and covered by Cleco Power’s annual report on Form 10-K (such fiscal
year, the “Assessment Period”):

 

Regulation AB
Reference

 

Servicing Criteria

 

Applicable
Servicing Criteria

 

 

 

 

 

 

 

General Servicing Considerations

 

 

 

 

 

 

 

1122(d)(1)(i)

 

Policies and procedures are instituted to monitor any performance or other
triggers and events of default in accordance with the transaction agreements.

 

Applicable; assessment below.

 

 

 

 

 

1122(d)(1)(ii)

 

If any material servicing activities are outsourced to third parties, policies
and procedures are instituted to monitor the third party’s performance and
compliance with such servicing activities.

 

Not applicable; no servicing activities were outsourced.

 

 

 

 

 

1122(d)(1)(iii)

 

Any requirements in the transaction agreements to maintain a back-up servicer
for pool assets are maintained.

 

Not applicable; documents do not provide for a back-up servicer.

 

 

 

 

 

1122(d)(1)(iv)

 

A fidelity bond and errors and omissions policy is in effect on the party
participating in the servicing function throughout the reporting period in the
amount of coverage required by and otherwise in accordance with the terms of the
transaction agreements.

 

Not applicable; LPSC rules impose credit standards on retail electric providers
who handle customer collections and govern performance requirements of
utilities.

 

--------------------------------------------------------------------------------

 

Regulation AB
Reference

 

Servicing Criteria

 

Applicable
Servicing Criteria

 

 

 

 

 

 

 

Cash Collection and Administration

 

 

 

 

 

 

 

1122(d)(2)(i)

 

Payments on pool assets are deposited into the appropriate custodial bank
accounts and related bank clearing accounts no more than two business days of
receipt, or such other number of days specified in the transaction agreements.

 

Applicable

 

 

 

 

 

1122(d)(2)(ii)

 

Disbursements made via wire transfer on behalf of an obligor or to an investor
are made only by authorized personnel.

 

Applicable

 

 

 

 

 

1122(d)(2)(iii)

 

Advances of funds or guarantees regarding collections, cash flows or
distributions, and any interest or other fees charged for such advances, are
made, reviewed and approved as specified in the transaction agreements.

 

Applicable, but no current assessment required; no advances by the Servicer are
permitted under the transaction agreements.

 

 

 

 

 

1122(d)(2)(iv)

 

The related accounts for the transaction, such as cash reserve accounts or
accounts established as a form of overcollateralization, are separately
maintained (e.g., with respect to commingling of cash) as set forth in the
transaction agreements.

 

Applicable, but no current assessment is required since transaction accounts are
maintained by and in the name of the Trustee.

 

 

 

 

 

1122(d)(2)(v)

 

Each custodial account is maintained at a federally insured depository
institution as set forth in the transaction agreements. For purposes of this
criterion, “federally insured depository institution” with respect to a foreign
financial institution means a foreign financial institution that meets the
requirements of Rule 13k-1(b)(1) of the Exchange Act.

 

Applicable, but no current assessment required; all “custodial accounts” are
maintained by the Trustee.

 

 

 

 

 

1122(d)(2)(vi)

 

Unissued checks are safeguarded so as to prevent unauthorized access.

 

Not applicable; all transfers made by wire transfer.

 

--------------------------------------------------------------------------------

 

Regulation AB
Reference

 

Servicing Criteria

 

Applicable
Servicing Criteria

1122(d)(2)(vii)

 

Reconciliations are prepared on a monthly basis for all asset-backed securities
related bank accounts, including custodial accounts and related bank clearing
accounts. These reconciliations are (A) mathematically accurate; (B) prepared
within 30 calendar days after the bank statement cutoff date, or such other
number of days specified in the transaction agreements; (C) reviewed and
approved by someone other than the person who prepared the reconciliation; and
(D) contain explanations for reconciling items. These reconciling items are
resolved within 90 calendar days of their original identification, or such other
number of days specified in the transaction agreements.

 

Applicable; assessment below.

 

 

 

 

 

 

 

Investor Remittances and Reporting

 

 

 

 

 

 

 

1122(d)(3)(i)

 

Reports to investors, including those to be filed with the LPSC, are maintained
in accordance with the transaction agreements and applicable LPSC requirements.
Specifically, such reports (A) are prepared in accordance with timeframes and
other terms set forth in the transaction agreements; (B) provide information
calculated in accordance with the terms specified in the transaction agreements;
(C) are filed with the LPSC as required by its rules and regulations; and
(D) agree with investors’ or the trustee’s records as to the total unpaid
principal balance and number of pool assets serviced by the Servicer.

 

Applicable; assessment below.

 

 

 

 

 

1122(d)(3)(ii)

 

Amounts due to investors are allocated and remitted in accordance with
timeframes, distribution priority and other terms set forth in the transaction
agreements.

 

Applicable; assessment below.

 

 

 

 

 

1122(d)(3)(iii)

 

Disbursements made to an investor are posted within two business days to the
Servicer’s investor records, or such other number of days specified in the
transaction agreements.

 

Applicable

 

--------------------------------------------------------------------------------

 

Regulation AB
Reference

 

Servicing Criteria

 

Applicable
Servicing Criteria

1122(d)(3)(iv)

 

Amounts remitted to investors per the investor reports agree with cancelled
checks, or other form of payment, or custodial bank statements.

 

Applicable; assessment below.

 

 

 

 

 

 

 

Pool Asset Administration

 

 

 

 

 

 

 

1122(d)(4)(i)

 

Collateral or security on pool assets is maintained as required by the
transaction agreements or related pool asset documents.

 

Applicable; assessment below.

 

 

 

 

 

1122(d)(4)(ii)

 

Pool assets and related documents are safeguarded as required by the transaction
agreements.

 

Applicable; assessment below.

 

 

 

 

 

1122(d)(4)(iii)

 

Any additions, removals or substitutions to the asset pool are made, reviewed
and approved in accordance with any conditions or requirements in the
transaction agreements.

 

Not applicable; no removals or substitutions of Storm Recovery property are
contemplated or allowed under the transaction documents.

 

 

 

 

 

1122(d)(4)(iv)

 

Payments on pool assets, including any payoffs, made in accordance with the
related pool asset documents are posted to the Servicer’s obligor records
maintained no more than two business days after receipt, or such other number of
days specified in the transaction agreements, and allocated to principal,
interest or other items (e.g., escrow) in accordance with the related pool asset
documents.

 

Applicable; assessment below.

 

 

 

 

 

1122(d)(4)(v)

 

The Servicer’s records regarding the pool assets agree with the Servicer’s
records with respect to an obligor’s unpaid principal balance.

 

Not applicable; because underlying obligation (Storm Recovery charge) is not an
interest bearing instrument

 

 

 

 

 

1122(d)(4)(vi)

 

Changes with respect to the terms or status of an obligor’s pool asset (e.g.,
loan modifications or re-agings) are made, reviewed and approved by authorized
personnel in accordance with the transaction agreements and related pool asset
documents.

 

Applicable; assessment below

 

--------------------------------------------------------------------------------

 

Regulation AB
Reference

 

Servicing Criteria

 

Applicable
Servicing Criteria

1122(d)(4)(vii)

 

Loss mitigation or recovery actions (e.g., forbearance plans, modifications and
deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are
initiated, conducted and concluded in accordance with the timeframes or other
requirements established by the transaction agreements.

 

Applicable; assessment below.

 

 

 

 

 

1122(d)(4)(viii)

 

Records documenting collection efforts are maintained during the period pool
asset is delinquent in accordance with the transaction agreements. Such records
are maintained on at least a monthly basis, or such other period specified in
the transaction agreements, and describe the entity’s activities in monitoring
delinquent pool assets including, for example, phone calls, letters and payment
rescheduling plans in cases where delinquency is deemed temporary (e.g., illness
or unemployment).

 

Applicable, but does not require assessment since no explicit documentation
requirement with respect to delinquent accounts are imposed under the
transactional documents due to availability of “true-up” mechanism.

 

 

 

 

 

1122(d)(4)(ix)

 

Adjustments to interest rates or rates of return for pool assets with variable
rates are computed based on the related pool asset documents.

 

Not applicable; Storm Recovery charges are not interest bearing instruments.

 

 

 

 

 

1122(d)(4)(x)

 

Regarding any funds held in trust for an obligor (such as escrow accounts):
(A) such funds are analyzed, in accordance with the obligor’s pool asset
documents, on at least an annual basis, or such other period specified in the
transaction agreements; (B) interest on such funds is paid, or credited, to
obligors in accordance with applicable pool asset documents and state laws; and
(C) such funds are returned to the obligor within 30 calendar days of full
repayment of the related pool assets, or such other number of days specified in
the transaction agreements.

 

Not Applicable; Servicer does not maintain deposit accounts for obligors.

 

--------------------------------------------------------------------------------

 

Regulation AB
Reference

 

Servicing Criteria

 

Applicable
Servicing Criteria

1122(d)(4)(xi)

 

Payments made on behalf of an obligor (such as tax or insurance payments) are
made on or before the related penalty or expiration dates, as indicated on the
appropriate bills or notices for such payments, provided that such support has
been received by the Servicer at least 30 calendar days prior to these dates, or
such other number of days specified in the transaction agreements.

 

Not applicable; Servicer does not make payments on behalf of obligors.

 

 

 

 

 

1122(d)(4)(xii)

 

Any late payment penalties in connection with any payment to be made on behalf
of an obligor are paid from the Servicer’s funds and not charged to the obligor,
unless the late payment was due to the obligor’s error or omission.

 

Not applicable; Servicer cannot make advances of its own funds on behalf of
customers under the transaction documents.

 

 

 

 

 

1122(d)(4)(xiii)

 

Disbursements made on behalf of an obligor are posted within two business days
to the obligor’s records maintained by the Servicer, or such other number of
days specified in the transaction agreements.

 

Not applicable; Servicer cannot make advances of its own funds on behalf of
customers to pay principal or interest on the bonds.

 

 

 

 

 

1122(d)(4)(xiv)

 

Delinquencies, charge-offs and uncollectible accounts are recognized and
recorded in accordance with the transaction agreements.

 

Applicable; assessment below.

 

 

 

 

 

1122(d)(4)(xv)

 

Any external enhancement or other support, identified in Item 1114(a)(1) through
(3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction
agreements.

 

Not applicable; no external enhancement is required under the transaction
documents.

 

3.             To the best of the undersigned’s knowledge, based on such review,
the Servicer is in compliance in all material respects with the applicable
servicing criteria set forth above as of and for the period ending the end of
the fiscal year ended                   ,            and covered by Cleco
Power’s annual report on Form 10-K. [If not true, include description of any
material instance of noncompliance.]

 

4.             A registered independent public accounting firm has issued to us
an attestation report in accordance with Section 1122(b) of Regulation AB on its
assessment of compliance with the applicable servicing criteria as of and for
the period ending the end of the fiscal year ended                 ,
                 and covered by Cleco Power’s annual report on Form 10-K.

 

--------------------------------------------------------------------------------

 

Executed as of this                             day of                     ,
        .

 

 

 

CLECO POWER LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

--------------------------------------------------------------------------------

 

EXHIBIT B-2

 

FORM OF CERTIFICATE OF COMPLIANCE

The undersigned hereby certifies that he/she is the duly elected and acting
[                     ] of Cleco Power LLC as servicer (the “Servicer”) under
the Storm Recovery Property Servicing Agreement dated as of March 6, 2008 (the
“Servicing Agreement”) between the Servicer and Cleco Katrina/Rita Hurricane
Recovery Funding, LLC (the “Issuer”) and further that:

1.             A review of the activities of the Servicer and of its performance
under the Servicing Agreement during the twelve months ended [              ],
[            ] has been made under the supervision of the undersigned pursuant
to Section 3.03 of the Servicing Agreement; and

2.             To the best of the undersigned’s knowledge, based on such review,
the Servicer has fulfilled all of its obligations in all material respects under
the Servicing Agreement throughout the twelve months ended [             ],
[             ], except as set forth on Annex A hereto.

Executed as of this                    day of                           ,
             

 

 

Cleco Power LLC

 

 

 

By:

 

 

Name:

 

Title:

 

--------------------------------------------------------------------------------

 

ANNEX A

 

to Certificate of Compliance

 

LIST OF SERVICER DEFAULTS

 

The following Servicer Defaults, or events which with the giving of notice, the
lapse of time, or both, would become Servicer Defaults known to the undersigned
occurred during the year ended [                        ]:

 

Nature of Default

 

Status

 

 

 

 

 

 

 

 

 

 

1

--------------------------------------------------------------------------------

 

ANNEX 1
TO
STORM RECOVERY PROPERTY SERVICING AGREEMENT

 

SERVICING PROCEDURES

 

1. Definitions.

 

a. Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Storm Recovery Property Servicing
Agreement (the “Agreement”).

 

b. Whenever used in this Annex I, the following words and phrases shall have the
following meanings:

 

“Applicable MDMA” means with respect to each Customer, any meter data management
agent providing meter reading services for that Customer’s account.

 

“Billed SRCs” means the amounts of Storm Recovery Charges billed by the
Servicer, whether billed directly to Customers by the Servicer or indirectly
through Third-Party Collectors.

 

“Budget Billing Plan” means a payment plan made available by Cleco Power to
Customers, who have had service for an established period of time and meet
established rating standards, that uses averaged demand in calculating periodic
obligations of the Customer.

 

“Days Sales Outstanding” means the average number of days Cleco Power’s monthly
bills to Customers in its service area (or, following the advent of customer
choice, monthly bills to Third-Party Collectors) remain outstanding during the
calendar year immediately preceding the calculation thereof pursuant to
Section 4.01(b)(i) of the Agreement. The initial Days Sales Outstanding shall be
20 days until updated pursuant to Section 4.01(b)(i) of the Agreement.

 

2. Data Acquisition.

 

a. Installation and Maintenance of Meters. Except to the extent that a
Third-Party Collector is responsible for such services, the Servicer shall cause
to be installed, replaced and maintained meters in such places and in such
condition as will enable the Servicer to obtain usage measurements for each
Customer at least once every Billing Period. To the extent a Third-Party
Collector is responsible for such services, but not performing such services,
the Servicer shall take all reasonably necessary actions to obtain usage
measurements for each Customer at least once every Billing Period.

 

b. Meter Reading. At least once each Billing Period, the Servicer shall obtain
usage measurements for each Customer, either directly or if applicable, from the
Applicable MDMA; provided, however, that the Servicer may estimate any
Customer’s usage determined in accordance with applicable LPSC Regulations.

 

c. Cost of Metering. The Issuer shall not be obligated to pay any costs
associated with the routine metering duties set forth in this Section 2,
including the costs of installing, replacing and

 

1

--------------------------------------------------------------------------------

 

maintaining meters, nor shall the Issuer be entitled to any credit against the
Servicing Fee for any cost savings realized by the Servicer as a result of new
metering and/or billing technologies.

 

3. Usage and Bill Calculation.

 

The Servicer (a) shall obtain a calculation of each Customer’s usage (which may
be based on data obtained from such Customer’s meter read or on usage estimates
determined in accordance with applicable LPSC Regulations) at least once each
Billing Period; and (b) shall either (i) determine therefrom each Customer’s
individual Storm Recovery Charges to be included on Bills issued by it to such
Customer or to the Third-Party Collector responsible for billing such Customer,
or (ii) where the Third-Party Collector is responsible for billing the
Customers, allow the Third-Party Collector, rather than the Servicer, to
determine such Customers’ individual Storm Recovery Charges to be included on
such Customers’ Bills based on billing factors provided by the Servicer, and, in
such case, the Servicer shall deliver to the Third-Party Collector such billing
factors as are necessary for the Third-Party Collector to calculate such
Customers’ respective Storm Recovery Charges as such charges may change from
time to time pursuant to the Storm Recovery Charge Adjustments.

 

4. Billing.

 

The Servicer shall implement the Storm Recovery Charges as of the closing date
and shall thereafter bill each Customer or, with respect to Customers billed by
a Third-Party Collector, the Third-Party Collector, for the respective
Customer’s outstanding current and past due Storm Recovery Charges accruing
through the date on which such Storm Recovery Charges may no longer be billed
under the Tariff, all in accordance with the following:

 

a. Frequency of Bills; Billing Practices. In accordance with the Servicer’s
then-existing policies and practices for its own charges, as such policies and
practices may be modified from time to time, the Servicer shall generate and
issue a Bill to each Customer, or, where a Third-Party Collector, if any, is
responsible for billing the Customers, to the Third-Party Collector, for such
Customers’ Storm Recovery Charges once every applicable Billing Period, at the
same time, with the same frequency and on the same Bill as that containing the
Servicer’s own charges to such Customers or Third-Party Collectors, as the case
may be.  In the event that the Servicer makes any material modification to these
practices, it shall notify the Issuer, the Trustee, and the Rating Agencies
prior to the effectiveness of any such modification; provided, however, that the
Servicer may not make any modification that will materially adversely affect the
Holders.

 

b. Format.

 

i. Each Bill issued by the Servicer shall contain the charge corresponding to
the respective Storm Recovery Charges owed by such Customer for the applicable
Billing Period. The Storm Recovery Charges shall be separately identified as
required by and in accordance with the terms of the Financing Order and Tariff.
The Servicer shall provide, and unless prohibited by applicable LPSC
Regulations, shall cause any and each Third-Party Collector to provide,
Customers with the annual notice required by Section 4.01(f)(ii)(B) of the
Servicing Agreement.

 

2

--------------------------------------------------------------------------------

 

ii. If a Third-Party Collector is responsible for billing the Customers, the
Servicer shall deliver to the Third-Party Collector itemized charges for such
Customer setting forth such Customers’ Storm Recovery Charges.

 

iii. The Servicer shall conform to such requirements in respect of the format,
structure and text of Bills delivered to Customers and any Third-Party
Collectors in accordance with, if applicable, the Financing Order, Tariffs,
other applicable tariffs and any other LPSC Regulations and any agreement with
the LPSC staff. To the extent that Bill format, structure and text are not
prescribed by applicable LPSC Regulations or Tariffs, the Servicer shall,
subject to clauses (i) and (ii) above, determine the format, structure and text
of all Bills in accordance with its reasonable business judgment, its Servicer
policies and practices with respect to its own charges and prevailing industry
standards.

 

c. Delivery. The Servicer shall deliver all Bills issued by it (i) by United
States mail in such class or classes as are consistent with the policies and
practices followed by the Servicer with respect to its own charges to its
customers or (ii) by any other means, whether electronic or otherwise, that the
Servicer may from time to time use to present its own charges to its customers.
If a Third-Party Collector is responsible for billing the Customers, the
Servicer shall deliver all Bills to the Third-Party Collector by such means as
are prescribed by applicable LPSC Regulations or tariffs or the Servicer’s
Policies and Practices, or if not prescribed by applicable LPSC Regulations or
tariffs or the Servicer’s Policies and Practices, by such means as are mutually
agreed upon by the Servicer and the Third-Party Collector and are consistent
with LPSC Regulations and the Servicing Standard. The Servicer or any and each
Third-Party Collector, as applicable, shall pay from its own funds all costs of
issuance and delivery of all Bills, including but not limited to printing and
postage costs as the same may increase or decrease from time to time.

 

5. Customer Service Functions.

 

The Servicer shall handle all Customer inquiries and other Customer service
matters according to the same procedures it uses to service Customers with
respect to its own charges.

 

6. Collections; Payment Processing; Remittance.

 

a. Collection Efforts, Policies, Procedures.

 

i. The Servicer shall use reasonable efforts to collect all Billed SRCs from
Customers and any Third-Party Collectors as and when the same become due and
shall follow such collection procedures as it follows with respect to comparable
assets that it services for itself or others, including with respect to the
following:

 

A. The Servicer shall prepare and deliver overdue notices to Customers and any
Third-Party Collectors in accordance with applicable LPSC Regulations and
Servicer Policies and Practices..

 

B. The Servicer shall apply late payment charges to outstanding Customer and
Third-Party Collector balances in accordance with applicable LPSC Regulations
and as required by the Financing Order.

 

3

--------------------------------------------------------------------------------

 

C. In circumstances where the Servicer is allowed to bill Customers directly,
the Servicer shall deliver verbal and written final notices of delinquency and
possible disconnection in accordance with applicable LPSC Regulations and
Servicer Policies and Practices.

 

D. The Servicer shall adhere to and carry out disconnection policies and
termination of any future Third-Party Collector billing in accordance with the
Financing Orders, applicable LPSC Regulations and Servicer Policies and
Practices.

 

E. The Servicer may employ the assistance of collection agents to collect any
past-due Storm Recovery Charges in accordance with Servicer Policies and
Practices, applicable LPSC Regulations and applicable tariffs.

 

F. The Servicer shall apply Customer and any Third-Party Collector deposits to
the payment of delinquent accounts in accordance with applicable LPSC
Regulations and Servicer Policies and Practices and according to the priorities
set forth in Sections 6(b)(ii), (iii), (iv) and (v) of this Annex I.

 

ii. The Servicer shall not waive any late payment charge or any other fee or
charge relating to delinquent payments, if any, or waive, vary or modify any
terms of payment of any amounts payable by a Customer, in each case unless such
waiver or action: (A) would be in accordance with the Servicer’s customary
practices or those of any successor Servicer with respect to comparable assets
that it services for itself and for others; (B) would not materially adversely
affect the rights of the Holders; and (C) would comply with applicable law;
provided, however, that notwithstanding anything in the Agreement or this
Annex I to the contrary, the Servicer is authorized to write off any Billed
SRCs, in accordance with Servicer Policies and Practices, that have remained
outstanding for one hundred eighty (180) days or more.

 

iii. The Servicer shall accept payment from Customers in respect of Billed SRCs
in such forms and methods and at such times and places as it accepts for payment
of its own charges. The Servicer shall accept payment from any Third-Party
Collectors in respect of Billed SRCs in such forms and methods and at such times
and places as the Servicer and any and each Third-Party Collector shall mutually
agree in accordance with, if applicable, the Financing Order, Tariff, other
applicable tariffs, other LPSC Regulations and Servicer Policies and Practices.

 

b. Payment Processing; Allocation; Priority of Payments.

 

i. The Servicer shall post all payments received to Customer accounts as
promptly as practicable, and, in any event, substantially all payments shall be
posted no later than three (3) Business Days after receipt.

 

ii. If any Customer does not pay the full amount of any Bill to the Servicer,
the amount paid by the Customer will be applied to all charges on the Bill,
including without limitation electric service charges and all Storm Recovery
Charges, based, as to a Bill with charges covering more than one month, on the
chronological order of billing, and, as to those charges with the same billing
date, pro-rata. If there is more than one owner of Storm Recovery Property, or
if the sole or any owner of Storm Recovery Property (or pledgee or pledgees) has
issued multiple series of storm recovery bonds, such partial collections
representing Storm Recovery Charges shall be allocated among such owners (or
pledgee or pledgees), and among such series

 

4

--------------------------------------------------------------------------------

 

of storm recovery bonds, pro-rata based upon the amounts billed with respect to
each series of storm recovery bonds, provided that late fees and charges may be
allocated to the Servicer as provided in the tariff.

 

iii. When and if the service area becomes subject to retail competition, the
Servicer shall apply payments received to each Customer’s or any and each
Third-Party Collector’s account in proportion to the charges contained on the
outstanding Bill to such Customer or Third-Party Collector. Any amounts
collected by the Servicer that represent partial payments of the total Bill to a
Customer or any Third-Party Collector shall be allocated as follows: (A) first
to amounts owed to the Issuer, Cleco Power and any other Affiliate of Cleco
Power which is owed “Storm Recovery Charges” as defined in the Securitization
Law (excluding any late fees and interest charges), regardless of age, pro rata
in proportion to their respective percentages of the total amount of their
combined outstanding charges on such Bill; then (B) all late charges shall be
allocated to the Servicer; provided that penalty payments owed on late payments
of Storm Recovery Charges shall be allocated to the Issuer in accordance with
the terms of the Tariffs. If more than one series of Storm Recovery Bonds is
outstanding, the Servicer shall allocate amounts owed to the Issuer ratably
based on the total amount of Storm Recovery Charges on such bill which were
billed in respect of each such series. It is understood that such allocations
may be made on a delayed basis in accordance with the reconciliations described
in Section 6(e) of this Annex I.

 

iv. The Servicer shall hold all over-payments for the benefit of the Issuer and
Cleco Power and shall apply such funds to future Bill charges in accordance with
clauses (ii) and (iii) (as applicable) as such charges become due.

 

v. For Customers on a Budget Billing Plan, the Servicer shall treat SRC
Collections received from such Customers as if such Customers had been billed
for their respective Storm Recovery Charges in the absence of the Budget Billing
Plan; partial payment of a Budget Billing Plan payment shall be allocated
according to clause (ii) or (iii) (as applicable) and overpayment of a Budget
Billing Plan payment shall be allocated according to clause (iv).

 

c. Accounts; Records.

 

The Servicer shall maintain accounts and records as to the Storm Recovery
Property accurately and in accordance with its standard accounting procedures
and in sufficient detail (i) to permit reconciliation between payments or
recoveries with respect to the Storm Recovery Property and the amounts from time
to time remitted to the Collection Accounts in respect of the Storm Recovery
Property and (ii) to permit the SRC Collections held by the Servicer to be
accounted for separately from the funds with which they may be commingled, so
that the dollar amounts of SRC Collections commingled with the Servicer’s funds
may be properly identified and traced.

 

d. Investment of SRC Collections Received.

 

Prior to each Daily Remittance, the Servicer may invest SRC Collections received
at its own risk and (except as required by applicable LPSC Regulations) for its
own benefit. So long as the Servicer complies with its obligations under
Section 6(c) of this Annex I, neither such

 

5

--------------------------------------------------------------------------------

 

investments nor such funds shall be required to be segregated from the other
investment and funds of the Servicer.

 

e. Calculation of Daily Remittance.

 

i. For purposes of calculating the Daily Remittance, (i) all Billed SRCs shall
be estimated to be collected the same number of days after billing as is equal
to the Days Sales Outstanding then in effect (or on the next Business Day) and
(ii) the Servicer will, on each Business Day, remit to the Trustee for deposit
in the applicable Collection Account an amount equal to the product of the
applicable Billed SRCs multiplied by one hundred percent less the system wide
write-off percentage (or if available in the ordinary course of business, gross
write-off percentage for each revenue class) used by the Servicer to calculate
the most recent Periodic Billing Requirement. Such product shall constitute the
amount of estimated SRC Collections for such Business Day. As part of each Storm
Recovery Charge Adjustment, pursuant to Section 4.01 of the Agreement the
Servicer shall calculate the amount of actual SRC Collections for all completed
Collection Periods during the Reconciliation Period as compared to the estimated
SRC Collections forwarded to the applicable Collection Account in respect of
such Reconciliation Period. If the actual SRC Collections exceed the estimated
SRC Collections remitted to the Trustee for the period, the Servicer shall
forward the excess to the Trustee for deposit into the Collection Account on the
next Payment Date.  If the estimated SRC Collection remitted to the Trustee for
the period are greater than the actual SRC Collections for the period, the
Excess Remittance shall be refunded to the Servicer at the next Payment Date
provided however, that no Excess Remittance shall be withdrawn from the
applicable Collection Account if such withdrawal would cause the amounts on
deposit in the applicable General Subaccount or the applicable Excess Funds
Subaccount to be insufficient for the payment of the next installment of
interest or principal due at maturity on the next Payment Date or upon
acceleration on or before the next Payment Date on the Storm Recovery Bonds and
provided further that any amount not refunded to the Servicer as a result of the
preceding proviso, shall be added to the Periodic Payment Requirement for the
ensuing period and paid to the Servicer on the first Payment Date at which such
refund can be made without violating the preceding proviso.

 

ii. On or before the beginning of the first billing cycle in August and February
of each year (or, in the case of any subsequent series, the corresponding date
relating to the Storm Recovery Charge Adjustment for such series) in accordance
with Section 4.01(b) of the Agreement, the Servicer shall, in a timely manner so
as to perform all required calculations under such Section 4.01(b), update the
Days Sales Outstanding and the system-wide write-off percentage (or if available
in the ordinary course of business, gross write-off percentage for each revenue
class) in order to be able to calculate the Periodic Billing Requirement for the
next Storm Recovery Charge Adjustment and to calculate any change in the Daily
Remittances for the next Calculation Period.

 

iii. The Servicer and the Issuer acknowledge that, as contemplated in
Section 8.01(b) of the Agreement, the Servicer may make certain changes to its
current computerized customer information system, which changes, when
functional, would affect the Servicer’s method of calculating the SRC
Collections estimated to have been received by the Servicer during each
Collection Period as set forth in this Annex I. Should these changes to the
computerized customer information system become functional during the term of
the Agreement, the Servicer

 

6

--------------------------------------------------------------------------------

 

and the Issuer agree that they shall review the procedures used to calculate the
SRC Collections estimated to have been received in light of the capabilities of
such new system and shall amend this Annex I in writing to make such
modifications and/or substitutions to such procedures as may be appropriate in
the interests of efficiency, accuracy, cost and/or system capabilities;
provided, however, that the Servicer may not make any modification or
substitution that will materially adversely affect the Holders. As soon as
practicable, and in no event later than sixty (60) Business Days after the date
on which all Customer accounts are being billed under such new system, the
Servicer shall notify the Issuer, the Trustee and the Rating Agencies of the
same.

 

iv. All calculations of collections, each update of the Days Sales Outstanding,
the system-wide write-off percentage (or if available in the ordinary course of
business, gross write-off percentage for each revenue class) and any changes in
procedures used to calculate the estimated SRC Collections pursuant to this
Section 6(e) shall be made in good faith, and in the case of any update pursuant
to clause (ii) above or any change in procedures pursuant to clause (iii) above,
in a manner reasonably intended to provide estimates and calculations that are
at least as accurate as those that would be provided on the closing date
utilizing the initial procedures.

 

f. Remittances.

 

i. The Issuer shall cause to be established the Collection Accounts in the name
of the Trustee in accordance with the Indenture.

 

ii. The Servicer shall make remittances to the Collection Accounts in accordance
with Section 6.13 of the Agreement.

 

iii. In the event of any change of account or change of institution affecting
any Collection Account, the Issuer shall provide written notice thereof to the
Servicer not later than five (5) Business Days from the effective date of such
change.

 

7

--------------------------------------------------------------------------------

 

APPENDIX A

 

DEFINITIONS

 

The definitions contained in this Appendix A are applicable to the singular as
well as the plural forms of such terms.

 

“Adjustment Date” means the date other than an Interim Adjustment Date on which
any Storm Recovery Charge Adjustment (other than an interim (non-semi-annual)
Storm Recovery Charge Adjustment) and/or any adjustment to allocation of storm
recovery charges among customer classes, as applicable, becomes effective.  The
first Adjustment Date will be on or about September 1, 2008, and all subsequent
Adjustment Dates shall be on or about the same day of the sixth month after each
prior adjustment date.

 

“Administration Agreement” means the administration agreement dated as of
March 6, 2008, between Cleco Power, as Administrator, and the Issuer, as the
same may be amended and supplemented from time to time.

 

“Administrator” means Cleco Power as administrator under the Administration
Agreement and each successor to or assignee of Cleco Power in the same capacity.

 

“Affiliate” means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, control, when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms controlling and controlled
have meanings correlative to the foregoing.

 

“Annual Accountant’s Report” has the meaning assigned to that term in
Section 3.04 of the Servicing Agreement.

 

“Articles of Organization” means the articles of organization of the Issuer that
was filed with the Louisiana Secretary of State on October 30, 2007, as the same
may be amended and restated from time to time.

 

“Basic Documents” means the Issuer LLC Agreement, the Articles of Organization,
the Sale Agreement, the Servicing Agreement, the Administration Agreement, the
Indenture, the Supplement, the Underwriting Agreement relating to the Storm
Recovery Bonds and the Bill of Sale.

 

“Bill” means each of the regular monthly bills, summary bills, opening bills and
closing bills issued to Customers or Third-Party Collectors by Cleco Power on
its own behalf and in its capacity as Servicer.

 

“Bill of Sale” has the meaning assigned to that term in the Sale Agreement.

 

“Billing Period” means the period of approximately thirty (30) days for which
the Servicer renders Bills.

 

1

--------------------------------------------------------------------------------

 

“Book-Entry Storm Recovery Bonds” means beneficial interests in the Storm
Recovery Bonds, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 2.11 of the Indenture.

 

“Business Day” means any day other than a Saturday or Sunday or a day on which
banking institutions in the City of New Orleans, Louisiana, Chicago, Illinois,
St. Paul, Minnesota or in the City of New York, New York, are required or
authorized by law or executive order to remain closed.

 

“Calculation Date” means, with respect to the Storm Recovery Bonds, the date on
which the calculations and filings set forth in Section 4.01(b) will be made for
each Storm Recovery Charge Adjustment.  The first Calculation Date will be no
later than August 15, 2008.

 

“Capital Subaccount” has the meaning specified in Section 8.02(a) of the
Indenture.

 

“Cleco Power” means Cleco Power LLC, a Louisiana limited liability company, or
its successor.

 

“Clearing Agency” means an organization registered as a “clearing agency”
pursuant to Section 17A of the Exchange Act.

 

“Clearing Agency Participant” means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.

 

“Collection Account” has the meaning specified in Section 8.02(a) of the
Indenture.

 

“Collection Period” means the period from and including the first day of a
calendar month to but excluding the first day of the next calendar month.

 

“Corporate Trust Office” has the meaning specified in Appendix A to the
Indenture.

 

“Customer Class” means each of the Storm Recovery Charge classes specified in
the Rider SRCA Form of Storm Restoration Cost Adjustment Calculation Appendix
B-1 to the Financing Order.

 

“Customers” means any existing or future LPSC-jurisdictional customer who remain
attached to Cleco Power’s (or its successors) electric transmission or
distribution lines, and who, via such lines, receive any type of service from
Cleco Power (or its successors) under rate schedules or special contracts
approved by the Louisiana commission.

 

“Daily Remittance” has the meaning specified in Section 6.12.

 

“Default” means any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.

 

“Event of Default” has the meaning specified in Section 5.01 of the Indenture.

 

2

--------------------------------------------------------------------------------

 

“Excess Funds Subaccount” has the meaning specified in Section 8.02 of the
Indenture.

 

“Excess Remittance” means the amount, if any, calculated for a particular
Reconciliation Period, by which all estimated SRC Collections remitted to the
Collection Account during such Reconciliation Period exceed actual SRC
Collections received by the Servicer during such Reconciliation Period.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Expected Amortization Schedule” means, with respect to the Storm Recovery
Bonds, or any Tranche thereof, the expected amortization schedule for principal
thereof, as specified in the Supplement.

 

“Financing Order” means the Financing Order issued by the LPSC on September 17,
2007 in Docket No. U-29157 pursuant to the Securitization Act.

 

“Fitch” means Fitch, Inc.; or any successor thereto.

 

“Formation Documents” means, collectively, the Articles of Organization, the
Issuer LLC Agreement and any other document pursuant to which the Issuer is
formed or governed, as the same may be amended and supplemented from time to
time.

 

“General Subaccount” has the meaning specified in Section 8.02 of the Indenture.

 

“Governmental Authority” means any court or any federal or state regulatory
body, administrative agency or governmental instrumentality.

 

“Holder” or “Storm Recovery Bondholder” means the Person in whose name a Storm
Recovery Bond of any Tranche is registered on the Storm Recovery Bond Register.

 

“Indenture” means the indenture, dated as of March 6, 2008, between the Issuer
and the Trustee and the Supplement (including the forms and terms of the Storm
Recovery Bonds established thereunder), as the same may be amended and
supplemented with respect to the Storm Recovery Bonds, from time to time.

 

“Independent” means, when used with respect to any specified Person, that the
Person:

 

(A)                                  IS IN FACT INDEPENDENT OF THE ISSUER, ANY
OTHER OBLIGOR UPON THE STORM RECOVERY BONDS, THE SERVICER AND ANY AFFILIATE OF
ANY OF THE FOREGOING PERSONS,

 

(B)                                 DOES NOT HAVE ANY DIRECT FINANCIAL INTEREST
OR ANY MATERIAL INDIRECT FINANCIAL INTEREST IN THE ISSUER, ANY SUCH OTHER
OBLIGOR, THE SERVICER OR ANY AFFILIATE OF ANY OF THE FOREGOING PERSONS AND

 

(C)                                  IS NOT CONNECTED WITH THE ISSUER, ANY SUCH
OTHER OBLIGOR, THE SERVICER OR ANY AFFILIATE OF ANY OF THE FOREGOING PERSONS AS
AN OFFICER, EMPLOYEE, PROMOTER, UNDERWRITER, TRUSTEE, PARTNER, DIRECTOR OR
PERSON PERFORMING SIMILAR FUNCTIONS.

 

3

--------------------------------------------------------------------------------

 

“Insolvency Event” means, with respect to a specified Person,

 

(A)                                  THE FILING OF A DECREE OR ORDER FOR RELIEF
BY A COURT HAVING JURISDICTION IN THE PREMISES IN RESPECT OF SUCH PERSON OR ANY
SUBSTANTIAL PART OF ITS PROPERTY IN AN INVOLUNTARY CASE UNDER ANY APPLICABLE
FEDERAL OR STATE BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN
EFFECT, OR APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, CUSTODIAN, TRUSTEE,
SEQUESTRATOR OR SIMILAR OFFICIAL FOR SUCH PERSON OR FOR ANY SUBSTANTIAL PART OF
ITS PROPERTY, OR ORDERING THE WINDING-UP OR LIQUIDATION OF SUCH PERSON’S
AFFAIRS, AND SUCH DECREE OR ORDER SHALL REMAIN UNSTAYED AND IN EFFECT FOR A
PERIOD OF 90 CONSECUTIVE DAYS, OR

 

(B)                                 THE COMMENCEMENT BY SUCH PERSON OF A
VOLUNTARY CASE UNDER ANY APPLICABLE FEDERAL OR STATE BANKRUPTCY, INSOLVENCY OR
OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT, OR THE CONSENT BY SUCH PERSON TO
THE ENTRY OF AN ORDER FOR RELIEF IN AN INVOLUNTARY CASE UNDER ANY SUCH LAW, OR
THE CONSENT BY SUCH PERSON TO THE APPOINTMENT OF OR TAKING POSSESSION BY A
RECEIVER, LIQUIDATOR, ASSIGNEE, CUSTODIAN, TRUSTEE, SEQUESTRATOR OR SIMILAR
OFFICIAL FOR SUCH PERSON OR FOR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR THE
MAKING BY SUCH PERSON OF ANY GENERAL ASSIGNMENT FOR THE BENEFIT OF CREDITORS, OR
THE FAILURE BY SUCH PERSON GENERALLY TO PAY ITS DEBTS AS SUCH DEBTS BECOME DUE,
OR THE TAKING OF ACTION BY SUCH PERSON IN FURTHERANCE OF ANY OF THE FOREGOING.

 

“Interim Adjustment Date” means the effective date of any interim
(non-semi-annual) Storm Recovery Charge Adjustment.

 

“Issuance Advice Letter” means the issuance advice letter submitted to the LPSC
by Cleco Power pursuant to the Financing Order in connection with the issuance
of the Storm Recovery Bonds.

 

“Issuance Date” means the date on which the Storm Recovery Bonds, are to be
originally issued in accordance with the Indenture and the Supplement.

 

“Issuer” means Cleco Katrina/Rita Hurricane Recovery Funding LLC, a Louisiana
limited liability company, or any successor thereto pursuant to the Indenture.

 

“Issuer Annex” means Annex 1 of the Servicing Agreement.

 

“Issuer LLC Agreement” means the Limited Liability Company Operating Agreement
between the Issuer and Cleco Power, as sole member, effective as of October 29,
2007, as the same may be amended or supplemented from time to time.

 

“Lien” means a security interest, lien, charge, pledge, equity or encumbrance of
any kind.

 

“Losses” means collectively, any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever.

 

“Louisiana UCC Filing Officer” means the recorder of mortgages of Orleans Parish
(or any successor by law) or the clerk of the court of any other parish in
Louisiana.

 

“LPSC” means the Louisiana Public Service Commission or any successor entity
thereto.

 

4

--------------------------------------------------------------------------------

 

“LPSC Regulations” means any regulations, rules, orders or directives
promulgated, issued or adopted by the LPSC.

 

“Majority Holders” means the Holders of a majority of the Outstanding Amount of
the Storm Recovery Bonds.

 

“Moody’s” means Moody’s Investors Service Inc., or any successor thereto.

 

“Officers’ Certificate” means a certificate signed, in the case of Cleco Power,
by:

 

(A)                                  ANY MANAGER, THE CHAIRMAN OF THE BOARD, THE
CHIEF EXECUTIVE OFFICER, THE PRESIDENT, THE VICE CHAIRMAN OR ANY EXECUTIVE VICE
PRESIDENT, SENIOR VICE PRESIDENT OR VICE PRESIDENT; AND

 

(B)                                 THE TREASURER, ANY ASSISTANT TREASURER, THE
SECRETARY OR ANY ASSISTANT SECRETARY.

 

“Operating Expenses” means, with respect to the Issuer, all fees, costs and
expenses owed by the Issuer with respect to the Storm Recovery Bonds, including
all amounts owed by the Issuer to the Trustee, the Servicing Fee, the
Administration Fee, the costs and expenses incurred by the Seller in connection
with the performance of the Seller’s obligations under Section 4.07 of the Sale
Agreement, the fees relating to the Storm Recovery Bonds, payable by the Issuer
to the independent manager of the Issuer, administrative expenses, including
outside legal and accounting fees, and ratings maintenance fees and all other
costs and expenses recoverable by the Issuer under the terms of the Financing
Order.

 

“Opinion of Counsel” means one or more written opinions of counsel who may be an
employee of or counsel to the Servicer or the Issuer, which counsel shall be
reasonably acceptable to the Trustee, the LPSC, the Issuer or the Rating
Agencies, as applicable, and which shall be in form reasonably satisfactory to
the Trustee, if applicable.

 

“Outstanding” with respect to Storm Recovery Bonds means, as of the date of
determination, all Storm Recovery Bonds theretofore authenticated and delivered
under the Indenture except:

 

(A)                                  STORM RECOVERY BONDS THERETOFORE CANCELED
BY THE STORM RECOVERY BOND REGISTRAR OR DELIVERED TO THE STORM RECOVERY BOND
REGISTRAR FOR CANCELLATION;

 

(B)                                 STORM RECOVERY BONDS OR PORTIONS THEREOF THE
PAYMENT FOR WHICH MONEY IN THE NECESSARY AMOUNT HAS BEEN THERETOFORE DEPOSITED
WITH THE TRUSTEE OR ANY PAYING AGENT IN TRUST FOR THE HOLDERS OF SUCH STORM
RECOVERY BONDS; PROVIDED, HOWEVER, THAT IF SUCH STORM RECOVERY BONDS ARE TO BE
REDEEMED, NOTICE OF SUCH REDEMPTION HAS BEEN DULY GIVEN PURSUANT TO THE
INDENTURE OR PROVISION THEREFOR, SATISFACTORY TO THE TRUSTEE; AND

 

(C)                                  STORM RECOVERY BONDS IN EXCHANGE FOR OR IN
LIEU OF OTHER STORM RECOVERY BONDS WHICH HAVE BEEN AUTHENTICATED AND DELIVERED
PURSUANT TO THE INDENTURE UNLESS PROOF SATISFACTORY TO THE TRUSTEE IS PRESENTED
THAT ANY SUCH STORM RECOVERY BONDS ARE HELD BY A BONA FIDE PURCHASER;

 

5

--------------------------------------------------------------------------------

 

provided that in determining whether the Holders of the requisite Outstanding
Amount of the Storm Recovery Bonds or any Tranche thereof have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or under any Basic Document, Storm Recovery Bonds owned by the Issuer, any other
obligor upon the Storm Recovery Bonds, Cleco Power or any Affiliate of any of
the foregoing Persons shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be fully protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Storm Recovery Bonds that a Responsible Officer of the Trustee
knows to be so owned shall be so disregarded.  Storm Recovery Bonds so owned
that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to
act with respect to such Storm Recovery Bonds and that the pledgee is not the
Issuer, any other obligor upon the Storm Recovery Bonds, the Servicer or any
Affiliate of any of the foregoing Persons.

 

“Outstanding Amount” means the aggregate principal amount of all Outstanding
Storm Recovery Bonds, or, if the context requires, all Outstanding Storm
Recovery Bonds of a Tranche of the Storm Recovery Bonds, Outstanding at the date
of determination.

 

“Paying Agent” means the entity so designated in Section 3.03 of the Indenture
or any other Person that meets the eligibility standards for the Trustee
specified in Section 6.11 of the Indenture and is authorized by the Issuer to
make the payments of Principal of or premium, if any, or Interest on the Storm
Recovery Bonds on behalf of the Issuer.

 

“Payment Date” means, with respect to the Storm Recovery Bonds, or, if
applicable, each Tranche thereof, the date or dates specified as Payment Dates
for such Tranche in the Supplement, provided that if any such date is not a
Business Day, the Payment Date shall be the Business Day immediately succeeding
such date.

 

“Periodic Billing Requirement” means the aggregate dollar amount of Storm
Recovery Charges that must be billed during a given period (i.e., semi-annually,
or such other applicable period) so that the projected SRC Collections will be
sufficient to meet the entire aggregate Periodic Payment Requirement for that
period, given: (i) forecast usage data for the period; (ii) forecast
uncollectibles for the period; and (iii) forecast lags in collection of billed
Storm Recovery Charges for the period. In the Storm Recovery Charge Adjustment
process, the over or under collection from any period will be added to or
subtracted from, as the case may be, the Periodic Billing Requirement for the
upcoming period.

 

“Periodic Payment Requirement” means the required periodic payment for a given
period (i.e., semi-annually, or such other applicable period) due under (or
otherwise payable with respect to) the Storm Recovery Bonds. Each periodic
payment requirement includes: (a) the principal amortization of the Storm
Recovery Bonds in accordance with the Expected Amortization Schedule (including
deficiencies of previously scheduled principal for any reason); (b) periodic
interest on the Storm Recovery Bonds (including any accrued and unpaid
interest); (c) Operating Expenses and (d) Issuer’s return on the capital
investment made by Cleco Power in the Issuer, to the extent that earnings on
investment in the Capital Subaccount are less than the return permitted under
the Financing Order.

 

6

--------------------------------------------------------------------------------

 

“Person” means any individual, corporation, estate, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
business trust, limited liability company, unincorporated organization or
government or any agency or political subdivision thereof.

 

“Proceeding” means any suit in equity, action at law or other judicial or
administrative proceeding.

 

“Projected Storm Recovery Bond Balance” means, as of any date, the anticipated
Outstanding Amount of Storm Recovery Bonds, after giving effect to payment of
the sum of the payment amounts provided for in the Expected Amortization
Schedules for the Storm Recovery Bonds, to be paid on or before such date.

 

“Rating Agency” means any rating agency rating the Storm Recovery Bonds, at the
time of issuance at the request of the Issuer, which initially shall be Moody’s,
Fitch and Standard & Poor’s. If no such organization or successor is any longer
in existence, “Rating Agency” shall be a nationally recognized statistical
rating organization or other comparable Person designated by the Issuer, written
notice of which designation shall be given to the Trustee, the LPSC and the
Servicer.

 

“Rating Agency Condition” means, with respect to any action, the notification in
writing to each Rating Agency of such action, and confirmation from S&P to the
Trustee and the Issuer that such action will not result in a reduction or
withdrawal of the then current rating by such Rating Agency of the Storm
Recovery Bonds.

 

“Reconciliation Period” means, with respect to any Collection Period, the six
month period ending one month prior to each Adjustment Date.

 

“Regulation AB” means the rules of the SEC promulgated under Subpart 229.1100 –
Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such
may be amended from time to time.

 

“Released Parties” has the meaning specified in Section 6.02(f) of the Servicing
Agreement.

 

“Requirement of Law” means any foreign, federal, state or local laws, statutes,
regulations, rules, codes or ordinances enacted, adopted, issued or promulgated
by any Governmental Authority or common law.

 

“Responsible Officer” means, with respect to the Trustee, any officer within the
Corporate Trust Office of the Trustee, including any Vice President, Director,
Managing Officer, associate, Assistant Vice President, Secretary, Assistant
Secretary, or any other officer of the Trustee having direct responsibility for
the administration of this Indenture and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer’s knowledge of and familiarity with the particular subject.

 

7

--------------------------------------------------------------------------------

 

“Sale Agreement” means the Storm Recovery Property Sale Agreement dated as of
March 6, 2008 relating to the Storm Recovery Property, between the Seller and
the Issuer, as the same may be amended and supplemented from time to time.

 

“Sale Date” means the date on which the Seller sells, transfers, assigns and
conveys the Storm Recovery Property to which this Agreement relates to the
Issuer.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Securitization Act” means Act No. 64 of the Louisiana Regular Session of 2006,
the “Louisiana Electric Utility Storm Recovery Securitization Act,” codified at
La. R.S. 45:1226-1236.

 

“Seller” means Cleco Power, or its successor, in its capacity as seller of the
Storm Recovery Property to the Issuer pursuant to the Sale Agreement.

 

“Semi-annual Servicer’s Certificate” means the statement prepared by the
Servicer and delivered to the Trustee with respect to the Storm Recovery Bonds,
on or prior to each Payment Date therefor, the form of which is attached to the
Indenture as Schedule 1.

 

“Series Trust Estate” has the meaning specified in the Supplement.

 

“Servicer” means Cleco Power, as the servicer of the Storm Recovery Property,
and each successor to or assignee of Cleco Power (in the same capacity) pursuant
to Section 6.03, 6.04, or 7.04 of the Servicing Agreement.

 

“Servicer Default” means the occurrence and continuation of one of the events
specified in Section 7.01 of the Servicing Agreement.

 

“Servicer Policies and Practices” means, with respect to the Servicer’s duties
under this Agreement, including Annex I, the policies and practices of the
Servicer applicable to such duties that the Servicer follows with respect to
comparable assets that it services for itself and, if applicable, others.

 

“Servicing Agreement” or this “Agreement” means the Storm Recovery Property
Servicing Agreement dated as of March 6, 2008, between the Issuer and the
Servicer, and acknowledged by the Trustee, relating to the Storm Recovery
Property as the same may be amended and supplemented from time to time.

 

“Servicing Fee” means the fee payable by the Issuer to the Servicer on each
Payment Date with respect to the Storm Recovery Bonds, in an amount specified in
Section 6.07 of the Servicing Agreement.

 

“Servicing Standard” means the obligation of the Servicer to calculate, apply,
remit and reconcile proceeds of the Storm Recovery Property, including SRC
Collections, for the benefit of the Issuer and the Holders (i) with the same
degree of care and diligence as the Servicer applies with respect to payments
owed to it for its own account, (ii) in accordance with all applicable

 

8

--------------------------------------------------------------------------------

 

procedures and requirements established by the LPSC for collection of electric
utility tariffs and (iii) in accordance with the other terms of the Servicing
Agreement.

 

“Sponsor” means Cleco Power in its capacity as the Person who organizes and
initiates an asset-backed securities transaction by selling or transferring
assets, either directly or indirectly, to the Issuer.

 

“SRC Collections” means amounts constituting good funds collected by Servicer
from any Person in respect of Storm Recovery Charges and Storm Recovery
Property.

 

“Standard & Poor’s” or “S&P” means Standard & Poor’s, a division of The
McGraw-Hill Companies, or any successor thereto.

 

“State” means any one of the 50 states of the United States of America or the
District of Columbia.

 

“Storm Recovery Bond” means any of the Senior Secured Storm Recovery Bonds
issued by the Issuer pursuant to the Indenture.

 

“Storm Recovery Bond Balance” means, as of any date, the aggregate Outstanding
Amount of Storm Recovery Bonds on such date.

 

“Storm Recovery Bond Register” has the meaning specified in Section 2.05 of the
Indenture.

 

“Storm Recovery Bond Registrar” means the Trustee, in its capacity as keeper of
the Storm Recovery Bond Register, or any successor to the Trustee in such
capacity.

 

“Storm Recovery Charge Adjustment” means each semi-annual adjustment to Storm
Recovery Charges related to the Storm Recovery Property made in accordance with
Section 4.01 of the Servicing Agreement and the Issuer Annex or in connection
with the redemption or refunding by the Issuer of Storm Recovery Bonds.

 

“Storm Recovery Charges” means the nonbypassable amounts to be charged for the
use or availability of electric services, approved by the LPSC in the Financing
Order to recover Financing Costs, that shall be collected by Cleco Power, its
successors, assignees or other collection agents as provided for in the
Financing Order.

 

“Storm Recovery Property” means all of Seller’s rights and interest under the
Financing Order (including, without limitation, rights to impose, collect and
receive the “storm recovery charges” (as defined in the Securitization Act)
approved in such Financing Order) issued by the Louisiana Commission on
September 17, 2007 (Docket No. U-29157-A) pursuant to the Securitization Act,
except the rights of Seller to earn and receive a rate of return on its invested
capital in the Issuer, to receive administration and servicer fees, to withdraw
funds from its restricted storm recovery reserve funded by the proceeds from the
sale of the Storm Recovery Property, or to use the Seller’s remaining portion of
those proceeds.

 

9

--------------------------------------------------------------------------------

 

“Storm Recovery Property Documentation” means all documents relating to the
Storm Recovery Property, including copies of the Financing Order and all
documents filed with the LPSC in connection with any Storm Recovery Charge
Adjustment.

 

“Successor Servicer” means (i) a successor to Cleco Power pursuant to
Section 6.03 of the Servicing Agreement or (ii) a successor Servicer appointed
by the Trustee pursuant to Section 7.04 of the Servicing Agreement which in each
case will succeed to all the rights and duties of the Servicer under the
Servicing Agreement.

 

“Supplement” means the First Supplemental Indenture dated of even date herewith
to the Indenture that authorizes the Storm Recovery Bonds.

 

“Tariff” means Rider SRCA and Rider SCSA filed by the Seller pursuant to
ordering paragraph 10 of the Financing Order.

 

“Termination Notice” has the meaning specified in Section 7.01 of the Servicing
Agreement.

 

“Third-Party Collector” means each third party, which, pursuant to any tariffs
filed with the LPSC, or any agreement with Cleco Power, is obligated to bill,
collect or remit Storm Recovery Charges.

 

“Tranche” means any one of the tranches of Storm Recovery Bonds, as specified in
the Supplement.

 

“Trustee” means U.S. Bank National Association, as trustee, or its successor or
any successor Trustee under the Indenture.

 

“UCC” means, unless the context otherwise requires, the Uniform Commercial Code,
as in effect in the relevant jurisdiction, as amended from time to time.

 

“Underwriting Agreement” has the meaning specified in the Indenture.

 

10

--------------------------------------------------------------------------------