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