Document:

Exhibit 4.2

 

CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC

 

Issuer

 

and

 

U.S. BANK NATIONAL ASSOCIATION

 

Trustee

 

FIRST SUPPLEMENTAL INDENTURE

 

Dated as of March 6, 2008

 

 

2008 Senior Secured Storm Recovery Bonds

 

 

This FIRST SUPPLEMENTAL INDENTURE dated as of March 6,
2008 (this “Supplement”), by and among Cleco Katrina/Rita Hurricane
Recovery Funding LLC, a Louisiana limited liability company (the “Issuer”),
and U.S. Bank National Association, in its capacity as trustee (the “Trustee”),
is entered into pursuant to the Indenture dated as of even date herewith
between the Issuer and the Trustee (the “Indenture”).

 

PRELIMINARY STATEMENT; GRANTING CLAUSE

 

Section 9.01 of the Indenture provides, among
other things, that the Issuer and the Trustee may at any time and from time to
time enter into one or more Supplemental Indentures for the purpose of
authorizing the issuance by the Issuer of a Series of Storm Recovery Bonds
and specifying the terms thereof. The Issuer has duly authorized the execution
and delivery of this Supplement and the creation of Storm Recovery Bonds with
an initial aggregate principal amount of $180,600,000 to be known as the Issuer’s
2008 Senior Secured Storm Recovery Bonds (the “2008 Senior Secured Storm
Recovery Bonds”). All acts and all things necessary to make the 2008 Senior
Secured Storm Recovery Bonds, when duly executed by the Issuer and
authenticated by or on behalf of the Trustee as provided in the Indenture and
this Supplement and issued by the Issuer, the valid, binding and legal
obligations of the Issuer and to make this Supplement a valid and enforceable
supplement to the Indenture have been done, performed and fulfilled and the
execution and delivery hereof have been in all respects duly and lawfully
authorized. The Issuer and the Trustee are executing and delivering this
Supplement in order to provide for the 2008 Senior Secured Storm Recovery
Bonds.  In connection with the execution
and delivery of this Supplement, the Issuer undertakes and confirms that it
will not issue any Storm Recovery Bonds other than the 2008 Senior Secured
Storm Recovery Bonds provided for hereby.

 

The “Series Trust Estate” shall consist
of, and the Issuer hereby absolutely and irrevocably Grants to the Trustee, as
trustee for the benefit of the Holders of the 2008 Senior Secured Storm
Recovery Bonds issued and outstanding, all of the Issuer’s right, title and
interest whether now owned or hereafter acquired (and whether now existing or
hereafter arising), in, to and under (a) the Storm Recovery Property
relating to the 2008 Senior Secured Storm Recovery Bonds purchased by the
Issuer pursuant to the Sale Agreement relating to the 2008 Senior Secured Storm
Recovery Bonds and all proceeds thereof, including all of the rights and
interest of the Issuer under Financing Order No. U-29157-B dated September 17,
2007 (Docket No. U-29157), (b) the Sale Agreement relating to the
2008 Senior Secured Storm Recovery Bonds, (c) the Bill of Sale delivered
by the Seller pursuant to the Sale Agreement relating to the 2008 Senior
Secured Storm Recovery Bonds, (d) the Servicing Agreement relating to the
2008 Senior Secured Storm Recovery Bonds, (e) the Administration
Agreement, (f) the Collection Account 2008 Senior Secured Storm Recovery
Bonds and all subaccounts thereof (including, without limitation, the General
Subaccount, the Capital Subaccount and the Excess Funds Subaccount relating to
the 2008 Senior Secured Storm Recovery Bonds) and all cash, securities,
instruments, investment property or other assets credited to or deposited in
that Collection Account or any subaccount thereof from time to time or
purchased with funds therefrom, and all financial assets and securities
entitlements carried therein or credited thereto, (g) all other property
of whatever kind owned from time to time by the Issuer other than any cash
released to the Issuer by the Trustee pursuant to Section 8.02 of the
Indenture, (h) all present and future claims, demands, causes and choses
in action in respect of any or all of the foregoing and (i) all payments
on or 

 

 

under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing, including all proceeds of
the conversion, voluntary or involuntary, into cash or other liquid property of
any or all of the foregoing, all cash proceeds, accounts, accounts receivable,
general intangibles, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, payment intangibles,
letter-of-credit rights, investment property, commercial tort claims,
documents, rights to payment of any and every kind, and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing.  This Supplement covers the
foregoing described portion of the Storm Recovery Property described in the
Financing Order.

 

Such Grant is made to the Trustee to have and to hold
in trust to secure the payment of principal of and premium, if any, and
interest on, and any other amounts (including all fees, expenses, counsel fees
and other amounts due and owing to the Trustee) owing in respect of, the 2008
Senior Secured Storm Recovery Bonds equally and ratably without prejudice,
preference, priority or distinction, except as expressly provided in the
Indenture and this Supplement and to secure performance by the Issuer of all of
the Issuer’s obligations under the Indenture and this Supplement with respect
to the 2008 Senior Secured Storm Recovery Bonds, all as provided in the
Indenture and this Supplement; provided, however, that in no
event shall the proceeds of the issuance of the 2008 Senior Secured Storm
Recovery Bonds constitute a portion of the Series Trust Estate.  The Indenture and this Supplement constitute
a security agreement within the meaning of the Securitization Act and under the
UCC to the extent that the provisions of the UCC are applicable hereto.  The Issuer authorizes the Trustee to file a
financing statement covering the Series Trust Estate, either as described
above or by using more general terms as permitted by Section 9-504 of the
UCC.

 

The Trustee, as trustee on behalf of the Holders of
the Storm Recovery Bonds, acknowledges such Grant, accepts the trusts hereunder
in accordance with the provisions hereof and agrees to perform its duties as
set forth in the Indenture and this Supplement.

 

ARTICLE I

 

DEFINITIONS

 

All terms used in this Supplement that are defined in
the Indenture, either directly or by reference therein, have the meanings assigned
to such terms in the Indenture, except to the extent such terms are defined or
modified in this Supplement or the context clearly requires otherwise.

 

ARTICLE II

 

OTHER DEFINITIONAL
PROVISIONS

 

SECTION 2.01.      “Authorized Denominations” means
$1,000 and integral multiples thereof, except for one Storm Recovery Bond of
each Tranche which may be of a smaller denomination.

 

2

 

SECTION 2.02.      “Expected Amortization Schedule”
means Schedule A to this Supplement.

 

SECTION 2.03.      “Expected Final Payment Date”
means, with respect to any Tranche of the 2008 Senior Secured Storm Recovery
Bonds, the expected final payment date therefor, as specified in Article IV
of this Supplement.

 

SECTION 2.04.      “Final Maturity Date” means, with
respect to any Tranche of the 2008 Senior Secured Storm Recovery Bonds, the
final maturity date thereof, as specified in Article IV of this
Supplement.

 

SECTION 2.05.      “Interest Rate” has the meaning set
forth in Article IV of this Supplement.

 

SECTION 2.06.      “Payment Date” has the meaning set
forth in Section 5.01 of this Supplement.

 

SECTION 2.07.      “Record Date” shall mean, with respect to any Payment
Date, the close of business on the Business Day immediately prior to such
Payment Date.

 

SECTION 2.08.      “Required Capital Amount” has the
meaning set forth in Section 5.04 of this Supplement.

 

SECTION 2.09.      “Series Issuance Date” has the
meaning set forth in Section 3.02 of this Supplement.

 

ARTICLE III

DESIGNATION; SERIES ISSUANCE DATE; SOLE SERIES

 

SECTION 3.01.      DESIGNATION.  The 2008 Senior Secured Storm Recovery Bonds
shall be designated generally as the Issuer’s 2008 Senior Secured Storm
Recovery Bonds and further denominated as Tranche A-1 or Tranche A-2, as
applicable.

 

SECTION 3.02.      SERIES ISSUANCE DATE.  The 2008 Senior Secured Storm Recovery Bonds
that are authenticated and delivered by the Trustee to or upon the written
order of the Issuer on March 6, 2008 (the “Series Issuance Date”)
shall have as their date of authentication March 6, 2008.

 

SECTION 3.03.      BOOK-ENTRY.  Upon original issuance, the 2008 Senior Secured Storm
Recovery Bonds will
be issued in the form of a typewritten Storm Recovery Bond or Storm Recovery
Bonds representing the Book-Entry Storm Recovery Bonds, to be delivered to DTC
(or its custodian), as the initial Clearing Agency, by, or on behalf of, the
Issuer, pursuant to Section 2.11 of the Indenture.  The 2008 Senior Secured Storm
Recovery Bonds will not be listed on any securities exchange.

 

3

 

SECTION 3.04.      NO ADDITIONAL SERIES.  The Issuer hereby covenants and agrees that
the 2008 Senior Secured Storm Recovery Bonds are the only Storm Recovery Bonds
that the Issuer will issue and that no additional series of Storm Recovery
Bonds will be issued by the Issuer.

 

ARTICLE IV

INITIAL PRINCIPAL BALANCE; INTEREST RATE; EXPECTED

FINAL PAYMENT DATE; FINAL MATURITY DATE

 

(a)           The
Storm Recovery Bonds of each Tranche of the 2008 Senior Secured Storm Recovery
Bonds shall have the initial principal balance, Expected Final Payment Date and
Final Maturity Date and bear interest at the interest rate (the “Interest
Rate”) as set forth below:

 

	
  Tranche

  	
   

  	
  Initial Principal

  Balance

  	
   

  	
  Expected Final

  Payment Date

  	
   

  	
  Final

  Maturity Date

  	
   

  	
  Interest Rate

  	
   

  
	
  A-1

  	
   

  	
   

  	
  $

  	
  113,000,000

  	
   

  	
  3/1/2017

  	
   

  	
  3/1/2020

  	
   

  	
  4.41

  	
  %

  
	
  A-2

  	
   

  	
   

  	
  $

  	
  67,600,000

  	
   

  	
  3/1/2020

  	
   

  	
  3/1/2023

  	
   

  	
  5.61

  	
  %

  

 

(b)           The
Expected Final Payment Date for each Tranche of the 2008 Senior Secured Storm
Recovery Bonds will be the date when the outstanding principal balance of that
Tranche will be reduced to zero if payments are made according to the Expected
Amortization Schedule for that Tranche. 
The Final Maturity Date for each Tranche of the 2008 Senior Secured
Storm Recovery Bonds will be the date when the Issuer is required to pay the
entire remaining unpaid principal balance, if any, of all outstanding 2008
Senior Secured Storm Recovery Bonds of that Tranche.

 

(c)           Interest
on the 2008 Senior Secured Storm Recovery Bonds will be paid before Principal
of the 2008 Senior Secured Storm Recovery Bonds.  If there is a shortfall in the amounts
available in the Collection Account to make interest payments, the Trustee will
distribute Interest Pro Rata to each Outstanding Tranche of 2008 Senior Secured
Storm Recovery Bonds based on the amount of Interest payable on each
Outstanding Tranche.  Interest on the
2008 Senior Secured Storm Recovery Bonds will be calculated on the basis of a
360-day year of twelve 30-day months.

 

ARTICLE V

PAYMENT DATES; EXPECTED AMORTIZATION SCHEDULE

FOR PRINCIPAL; INTEREST; REQUIRED CAPITAL AMOUNT; WATERFALL CAPS

 

SECTION 5.01.      PAYMENT DATES.  The “Payment Dates” for the 2008
Senior Secured Storm Recovery Bonds are March 1 and September 1 of
each year or, if any such date is not a Business Day, the next succeeding
Business Day, commencing on March 1, 2009, and continuing until the
earlier of repayment of such Tranche in full and the applicable Final Maturity
Date.

 

4

 

SECTION 5.02.      EXPECTED AMORTIZATION SCHEDULE FOR
PRINCIPAL.  Unless an Event of Default
has occurred and is continuing and the unpaid principal amount of all Tranches
of 2008 Senior Secured Storm Recovery Bonds has been declared to be due and
payable together with accrued and unpaid interest thereon, on each Payment Date
the Trustee shall distribute to the Holders of record of the 2008 Senior
Secured Storm Recovery Bonds as of the related Record Date amounts payable in
respect of the 2008 Senior Secured Storm Recovery Bonds pursuant to Section 8.02(d) of
the Indenture as Principal, so that the outstanding Principal balance as of
such Payment Date (after giving effect to all payments of Principal, if any,
made on such Payment Date) has been reduced to the extent possible to the
Principal balance specified in the Expected Amortization Schedule but not less
than such Principal balance.  Unless an
Event of Default has occurred and is continuing and the unpaid principal amount
of all Tranches of 2008 Senior Secured Storm Recovery Bonds has been declared
to be due and payable together with accrued and unpaid interest thereon,
payments of Principal on any Tranche A-2 2008 Senior Secured Storm Recovery
Bonds shall not be made on any Payment Date until the Principal balance of the
Tranche A-1 2008 Senior Secured Storm Recovery Bonds has been reduced to zero; provided,
however, that payments of Principal on the Tranche A-2 2008 Senior
Secured Storm Recovery Bonds may be made on the Payment Date that the Principal
balance of the Tranche A-1 2008 Senior Secured Storm Recovery Bonds has been
reduced to zero.

 

SECTION 5.03.      INTEREST. 
Interest will be payable on each Tranche of the 2008 Senior Secured
Storm Recovery Bonds on each Payment Date as follows:

 

(a)           if
there has been a payment default, any Interest payable but unpaid on any prior
Payment Date, together with Interest on such unpaid Interest, if any, and

 

(b)           accrued
Interest on the principal balance of each Tranche of the 2008 Senior Secured
Storm Recovery Bonds as of the close of business on the preceding Payment Date,
or the date of the original issuance of the Tranche of the 2008 Senior Secured
Storm Recovery Bonds, as applicable, after giving effect to all payments of
Principal made on the preceding Payment Date;

 

provided, however,  that, with respect to the initial Payment Date
or if no payment has yet been made, Interest on the outstanding principal
balance shall accrue from and including the Series Issuance Date to, but
excluding, the following Payment Date, and thereafter from and including the
previous Payment Date to, but excluding, the applicable Payment Date until the
Storm Recovery Bonds have been paid in full, at the interest rate indicated in Article IV.

 

SECTION 5.04.      REQUIRED CAPITAL AMOUNT.  The “Required Capital Amount” for the
2008 Senior Secured Storm Recovery Bonds shall be $903,000, which is equal to
0.5% of the initial outstanding principal balance of the 2008 Senior Secured
Storm Recovery Bonds.

 

SECTION 5.05.      PREMIUM. 
There will be no early redemption of the 2008 Senior Secured Storm
Recovery Bonds, and therefore no Premium will be payable in connection with the
early redemption of the 2008 Senior Secured Storm Recovery Bonds.

 

5

 

SECTION 5.06.      WATERFALL
CAPS.  The amount payable to the Trustee with
respect to expenses and Indemnity Amounts related to the 2008
Senior Secured Storm Recovery Bonds pursuant to Section 8.02(d)(i) of the Indenture shall not
exceed $50,000 during any calendar year.

 

SECTION 5.07.      INVESTMENT
EARNINGS ON THE CAPITAL SUBACCOUNT.  In
accordance with the Financing Order, the rate of return on capital invested by
Cleco Power in the Issuer shall equal 5.61% per annum, the interest rate on the
Tranche A-2 2008 Senior Secured Storm Recovery Bonds, which rate of return is
the rate referred to in Section 8.02(d)(x) of the Indenture.

 

SECTION 5.08.      INITIAL
SUBACCOUNTS.  The initial subaccounts in the Collection
Account for the 2008 Senior Secured Storm Recovery Bonds shall be the General
Subaccount, the Capital Subaccount and the Excess Funds Subaccount.

 

ARTICLE VI

AUTHORIZED DENOMINATIONS

 

The 2008 Senior Secured Storm Recovery Bonds shall be
issuable in the Authorized Denominations.

 

ARTICLE VII

REDEMPTION

 

The 2008 Senior Secured
Storm Recovery Bonds shall not be subject to mandatory or optional redemption.

 

ARTICLE VIII

CREDIT ENHANCEMENT

 

No credit enhancement (other than the Excess Funds
Account, the Required Capital Amount and any adjustments to the Storm Recovery
Charges approved by the LPSC as provided in the Financing Order) is provided
for the 2008 Senior Secured Storm Recovery Bonds.

 

ARTICLE IX

DELIVERY AND PAYMENT FOR THE 2008 SENIOR SECURED STORM RECOVERY

BONDS; FORM OF THE 2008 SENIOR SECURED STORM RECOVERY BONDS

 

The Trustee shall deliver or cause to be delivered the
2008 Senior Secured Storm Recovery Bonds in accordance with Section 3.03
when authenticated in accordance with Section 2.02 of the Indenture.  Each 2008 Senior Secured Storm Recovery Bond
shall be in the form of Exhibit A hereto, which is incorporated herein by
reference.

 

6

 

ARTICLE X

MISCELLANEOUS

 

SECTION 10.01.    CONFIRMATION OF INDENTURE.  As supplemented by this Supplement, the
Indenture is in all respects ratified and confirmed and the Indenture, as so
supplemented by this Supplement, shall be read, taken, and construed as one and
the same instrument.

 

SECTION 10.02.    EFFECTS OF HEADINGS.  The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.

 

SECTION 10.03.    COUNTERPARTS.  This Supplement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and
the same instrument.

 

SECTION 10.04.    GOVERNING LAW.  THIS SUPPLEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS, EXCEPT THAT THE OBLIGATIONS OF THE TRUSTEE
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.

 

SECTION 10.05.    RIGHTS OF TRUSTEE AND OTHERS.  The Trustee, the authenticating agent, the
Storm Recovery Bond Registrar and the Paying Agent shall be entitled to the
same rights, protections, immunities, and indemnities set forth in the
Indenture as if specifically set forth herein.

 

7

 

IN WITNESS
WHEREOF, the Issuer and the Trustee have caused this Supplement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.

 

	
   

  	
  CLECO KATRINA/RITA HURRICANE

  
	
   

  	
   

  	
  RECOVERY FUNDING LLC,

  
	
   

  	
   

  	
  as Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Keith D. Crump

  	
   

  
	
   

  	
   

  	
  Name: Keith D. Crump

  
	
   

  	
   

  	
  Title: Vice President and Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION,

  
	
   

  	
   

  	
  not in its individual capacity but solely as

  
	
   

  	
   

  	
  Trustee on behalf of the Storm Recovery

  
	
   

  	
   

  	
  Bondholders

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Melissa A. Rosal

  	
   

  
	
   

  	
   

  	
  Name: Melissa A. Rosal

  
	
   

  	
   

  	
  Title: Vice President

  
					

 

8

 

SCHEDULE A

 

EXPECTED
AMORTIZATION SCHEDULE

 

OUTSTANDING
PRINCIPAL BALANCE PER TRANCHE

 

	
  Payment Date

  	
   

  	
  Tranche A-1

  Balance

  	
   

  	
  Tranche A-2

  Balance

  	
   

  
	
  InitialPrincipal

  Balance

  	
   

  	
  $

  	
  113,000,000

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  3/1/2009

  	
   

  	
  $

  	
  104,649,570

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  9/1/2009

  	
   

  	
  $

  	
  99,454,071

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  3/1/2010

  	
   

  	
  $

  	
  93,562,218

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  9/1/2010

  	
   

  	
  $

  	
  87,975,644

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  3/1/2011

  	
   

  	
  $

  	
  81,693,110

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  9/1/2011

  	
   

  	
  $

  	
  75,706,837

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  3/1/2012

  	
   

  	
  $

  	
  69,009,620

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  9/1/2012

  	
   

  	
  $

  	
  62,598,482

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  3/1/2013

  	
   

  	
  $

  	
  55,469,160

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  9/1/2013

  	
   

  	
  $

  	
  48,629,834

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  3/1/2014

  	
   

  	
  $

  	
  41,048,576

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  9/1/2014

  	
   

  	
  $

  	
  33,753,650

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  3/1/2015

  	
   

  	
  $

  	
  25,700,493

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  9/1/2015

  	
   

  	
  $

  	
  17,929,465

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  3/1/2016

  	
   

  	
  $

  	
  9,383,556

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  9/1/2016

  	
   

  	
  $

  	
  1,115,062

  	
   

  	
  $

  	
  67,600,000

  	
   

  
	
  3/1/2017

  	
   

  	
  —

  	
   

  	
  $

  	
  59,654,571

  	
   

  
	
  9/1/2017

  	
   

  	
  —

  	
   

  	
  $

  	
  50,818,616

  	
   

  
	
  3/1/2018

  	
   

  	
  —

  	
   

  	
  $

  	
  41,119,002

  	
   

  
	
  9/1/2018

  	
   

  	
  —

  	
   

  	
  $

  	
  31,625,433

  	
   

  
	
  3/1/2019

  	
   

  	
  —

  	
   

  	
  $

  	
  21,243,639

  	
   

  
	
  9/1/2019

  	
   

  	
  —

  	
   

  	
  $

  	
  11,054,868

  	
   

  
	
  3/1/2020

  	
   

  	
  —

  	
   

  	
  —

  	
   

  

 

 

	
  Exhibit A to First
  Supplemental Indenture

  
	
   

  	
   

  	
   

  
	
  REGISTERED

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  No.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SEE REVERSE FOR CERTAIN
  DEFINITIONS

  
	
   

  
	
   

  	
  CUSIP NO.

  	
   

  	
   

  
								

 

THE PRINCIPAL OF THIS TRANCHE [ 
] 2008 SENIOR SECURED STORM RECOVERY BOND WILL BE
PAID IN INSTALLMENTS AS SET FORTH HEREIN. 
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS TRANCHE [  ] 2008 SENIOR SECURED STORM
RECOVERY BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.  THE HOLDER OF THIS TRANCHE [  ] 2008 SENIOR SECURED STORM
RECOVERY BOND HEREBY COVENANTS AND AGREES THAT PRIOR TO THE DATE THAT IS ONE
YEAR AND ONE DAY AFTER THE PAYMENT IN FULL OF THE  TRANCHE [  ] 2008 SENIOR SECURED STORM
RECOVERY BONDS, IT WILL NOT INSTITUTE AGAINST OR JOIN ANY OTHER PERSON IN
INSTITUTING AGAINST THE ISSUER ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT,
INSOLVENCY OR LIQUIDATION PROCEEDINGS OR OTHER SIMILAR PROCEEDINGS UNDER THE
LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES.

 

NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING
POWER OF THE STATE OF LOUISIANA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF,
OR INTEREST ON, THIS TRANCHE [  ] 2008
SENIOR SECURED STORM RECOVERY BOND.

 

CLECO KATRINA/RITA HURRICANE RECOVERY FUNDING LLC

 

2008
SENIOR SECURED STORM RECOVERY BONDS, Tranche [  
].

 

	
  Bond Rate

  	
   

  	
  Initial

  Principal Amount

  	
   

  	
  Expected Final

  Payment Date

  	
   

  	
  Final

  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  %

  	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
										

 

 

Cleco Katrina/Rita Hurricane Recovery Funding LLC, a
limited liability company organized and existing under the laws of the State of
Louisiana (herein referred to as the “Issuer”), for value received, hereby
promises to pay to the registered holder under Section 2.05 of the
Indenture (“Registered Holder”), or registered assigns, the Initial Principal
Amount shown above in semiannual installments on the Payment Dates (as defined
below) and in the amounts specified on the reverse hereof or, if less, the
amounts determined pursuant to Section 8.02(d) of the Indenture
referred to on the reverse hereof, in each year, commencing on the date
determined as provided on the reverse hereof and ending on or before the Final
Maturity Date of this

 

A-1

 

Tranche [  ]
2008 Senior Secured Storm Recovery Bond, to pay the entire unpaid principal
hereof on such Final Maturity Date and to pay Interest, at the Bond Rate shown
above, on each March 1 and September 1, or if any such day is not a
Business Day, the next succeeding Business Day, commencing on March 1,
2009 and continuing until the earlier of the payment of the Principal hereof
and the Final Maturity Date of this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond (each a “Payment Date”), on
the Principal amount of this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond outstanding from time to
time.  Interest on this Tranche [  ] 2008 Senior Secured Storm Recovery Bond
will accrue for each Payment Date from the most recent Payment Date on which
Interest has been paid to but excluding such Payment Date or, if no Interest
has yet been paid, from March 6, 2008. 
Interest will be computed on the basis of a 360-day year of twelve
30-day months.  Such Principal of and
Interest on this Tranche [  ] 2008
Senior Secured Storm Recovery Bond shall be paid in the manner specified on the
reverse hereof.

 

The Principal of and Interest on this
Tranche [  ] 2008 Senior Secured
Storm Recovery Bond are payable in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts.  All payments made by the
Issuer with respect to this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond shall be applied first to
Interest due and payable on this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond as provided above and then to
the unpaid Principal of and premium, if any, on this Tranche [  ] 2008 Senior Secured Storm Recovery Bond,
all in the manner set forth in Section 8.02(d) of the Indenture.

 

This Tranche [ 
] 2008 Senior Secured Storm Recovery Bond is a “storm recovery bond” as
such term is defined in the Securitization Act. 
Principal and Interest on this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond are payable from and secured
primarily by the Storm Recovery Property authorized by the Financing Order.

 

The Securitization Act provides that the State of
Louisiana pledges “to and agrees with bondholders, the owners of storm recovery
property, and other financing parties that the state will not:

 

(1) Alter the provisions of this Part [the
Securitization Act] which authorize the commission to create a contract right
by the issuance of a financing order, to create storm recovery  property, and to make the storm recovery
charges imposed by a financing order  irrevocable, binding, and nonbypassable charges;

 

(2) Take or permit any action that impairs or
would impair the value of the storm recovery property; or

 

(3) Except as allowed under this
Section and except for adjustments under  any true-up mechanism
established by the commission, reduce, alter, or impair storm  recovery
charges that are to be imposed, collected, and remitted for the benefit of the  bondholders and
other financing parties until any and all principal, interest,  premium,
financing costs and other fees, expenses, or charges incurred, and any  contracts to be
performed, in connection with the related storm recovery bonds have  been paid and
performed in full. Nothing in this Paragraph shall preclude limitation  or alteration
if and when full compensation is made by law for the full

 

A-2

 

protection of  the storm
recovery charges collected pursuant to a financing order and full protection  of the holders
of storm recovery bonds and any assignee or financing party.”

 

In addition, the Financing Order provides that the
LPSC “covenants, pledges and agrees it thereafter shall not amend,
modify, or rescind the Financing Order by any subsequent action, or reduce,
impair, postpone, terminate, or otherwise adjust the storm recovery charges
approved in the Financing Order, or in any way reduce or impair the value of
the storm recovery property created by the Financing Order, except as may be
contemplated by a refinancing authorized in strict accordance with the
Securitization Act by a subsequent order of the Commission or by the periodic
true up adjustments authorized by the Financing Order, until the indefeasible
payment in full of the storm recovery bonds and the related financing costs.”

 

The Issuer acknowledges that
the purchase of this Tranche [  ] 2008 Senior Secured Storm Recovery Bond by
the Registered Holder or the purchase of an beneficial interest in this
Tranche [  ] 2008 Senior Secured
Storm Recovery Bond by a Person is made in reliance on such pledges by the
State of Louisiana and the LPSC.

 

Reference is made to the further provisions of this
Tranche [  ] 2008 Senior Secured Storm
Recovery Bond set forth on the reverse hereof, which shall have the same effect
as though fully set forth on the face of this Tranche [  ] 2008 Senior Secured Storm Recovery Bond.

 

Unless the certificate of authentication hereon has
been executed by the Trustee whose name appears below by manual signature, this
Tranche [  ] 2008 Senior Secured
Storm Recovery Bond shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.

 

A-3

 

Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation (“DTC”),
to Issuer or its agent for registration of transfer, exchange, or payment, and
any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.

 

A-4

 

IN WITNESS WHEREOF, the Issuer has caused this instrument
to be signed, manually or in facsimile, by an Authorized Officer of the Issuer.

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  
	
   

  	
  CLECO KATRINA/RITA HURRICANE

  
	
   

  	
   

  	
  RECOVERY FUNDING LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

A-5

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

	
  Dated:

  	
   

  	
  , 200

  	
   

  	
   

  	
   

  
	
   

  
	
  This is one of the
  Tranche [  ] 2008 Senior Secured Storm
  Recovery Bonds designated above and referred to in the within-mentioned
  Indenture.

  
	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION,

  
	
   

  	
   

  	
  not in its individual capacity but solely as

  Trustee on behalf of the Storm Recovery

  Bondholders

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [By:  [    ],

  
	
   

  	
   

  	
  as Authenticating Agent]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
								

 

A-6

 

REVERSE OF STORM RECOVERY BOND

 

This Tranche [ 
] 2008 Senior Secured Storm Recovery Bond is one of a duly authorized
issue of Storm Recovery Bonds of the Issuer (herein called the “2008 Senior
Secured Storm Recovery Bonds”), which are issuable in one or more Tranches, in
which this Tranche [  ] 2008 Senior
Secured Storm Recovery Bond represents an interest, including the
Tranche [  ] 2008 Senior Secured
Storm Recovery Bond (herein called the “Tranche [  ] 2008 Senior Secured Storm Recovery Bond”),
all issued and to be issued under an indenture dated as of March 6, 2008,
and a supplemental indenture thereto dated as of even date therewith (such
supplemental indenture, as supplemented or amended, the “Supplement” and,
collectively with such indenture, as supplemented or amended, the “Indenture”),
each between the Issuer and U.S. Bank National Association, as Trustee (the “Trustee,”
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a statement of the Series Trust Estate pledged, the nature and extent of
the security and the respective rights, obligations and immunities thereunder
of the Issuer, the Trustee and the Storm Recovery Bondholders.  All terms used in this Tranche [  ] 2008 Senior Secured Storm Recovery Bond
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in the Indenture.

 

The Tranche [ 
] 2008 Senior Secured Storm Recovery Bond and the other Tranche of 2008
Senior Secured Storm Recovery Bonds issued by the Issuer are and will be
equally and ratably secured by the Series Trust Estate pledged as security
therefor as provided in the Indenture or the Supplement.

 

The Principal of this Tranche [  ] 2008 Senior Secured Storm Recovery Bond
shall be payable on each Payment Date only to the extent that amounts in the
Collection Account are available therefor, and only until the outstanding
Principal balance thereof on such Payment Date (after giving effect to all
payments of Principal, if any, made on such Payment Date) has been reduced to
the Principal balance specified in the Expected Amortization Schedule which is
attached to the Supplement as Schedule A, unless payable earlier because
an Event of Default shall have occurred and be continuing and the Trustee or
the Storm Recovery Bondholders representing not less than a majority of the
Outstanding Amount of the 2008 Senior Secured Storm Recovery Bonds have
declared the 2008 Senior Secured Storm Recovery Bonds to be immediately due and
payable in accordance with Section 5.02 of the Indenture.  However, actual Principal payments may be
made in less than expected amounts and at later than expected times as
determined pursuant to Section 8.02(d) of the Indenture and Section 5.02
of the Supplement. The entire unpaid Principal amount of this
Tranche [  ] 2008 Senior Secured
Storm Recovery Bond shall be due and payable on the Final Maturity Date of this
Tranche [  ] 2008 Senior Secured Storm
Recovery Bond.  Notwithstanding the
foregoing, the entire unpaid Principal amount of the 2008 Senior Secured Storm
Recovery Bonds shall be due and payable, if not then previously paid, on the
date on which an Event of Default shall have occurred and be continuing and the
Trustee or the Storm Recovery Bondholders representing a majority of the
Outstanding Amount of the 2008 Senior Secured Storm Recovery Bonds have
declared the 2008 Senior Secured Storm Recovery Bonds to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture.  All Principal payments on the
Tranche [  ] 2008 Senior Secured
Storm Recovery Bonds shall be made pro rata to the Tranche [  ] 2008 Storm Recovery 

 

A-7

 

Bondholders entitled thereto based on the respective
Principal amounts of the 2008 Senior Secured Storm Recovery Bonds held by them.

 

Payments of Interest on this Tranche [  ] 2008 Senior Secured Storm Recovery Bond due
and payable on each Payment Date, together with the installment of Principal or
premium, if any, due on this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond on such Payment Date shall be
made by check mailed first-class, postage prepaid, to the Person whose name
appears as the Holder of this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond in the 2008 Senior Secured
Storm Recovery Bond Register as of the close of business on the Record Date or
in such other manner as may be provided in the Supplement, except that with
respect to Tranche [  ] 2008 Senior
Secured Storm Recovery Bonds registered on the Record Date in the name of a
Clearing Agency, payments will be made by wire transfer in immediately
available funds to the account designated by such Clearing Agency and except
for the final installment of Principal and premium, if any, payable with
respect to this Tranche [  ] 2008
Senior Secured Storm Recovery Bond on a Payment Date which shall be payable as
provided below.  Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it
appears in the 2008 Senior Secured Storm Recovery Bond Register as of the
applicable Record Date without requiring that this Tranche [  ] 2008 Senior Secured Storm Recovery Bond be
submitted for notation of payment.  Any
reduction in the Principal amount of this Tranche [  ] 2008 Senior Secured Storm Recovery Bond (or
any one or more predecessors to such 2008 Senior Secured Storm Recovery Bond)
effected by any payments made on any Payment Date shall be binding upon all
future Storm Recovery Bondholders of this Tranche [  ] 2008 Senior Secured Storm Recovery Bond and
of any Tranche [  ] 2008 Senior
Secured Storm Recovery Bond issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof, whether or not noted hereon.  If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
Principal amount of this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond on a Payment Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the second preceding Record Date to such Payment
Date by notice mailed no later than five days prior to such final Payment Date
and shall specify that such final installment will be payable to the Holder
hereof as of the Record Date immediately preceding such final Payment Date and
only upon presentation and surrender of this Tranche [  ] 2008 Senior Secured Storm Recovery Bond and
shall specify the place where this Tranche [  ] 2008 Senior Secured Storm Recovery Bond may
be presented and surrendered for payment of such installment.

 

The Issuer shall pay Interest on overdue installments
of Interest on this Tranche [  ]
2008 Senior Secured Storm Recovery Bond at the Bond Rate for
Tranche [  ] to the extent lawful.

 

As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Tranche [  ] 2008 Senior Secured Storm Recovery Bond may
be registered in the 2008 Senior Secured Storm Recovery Bond Register upon surrender
of this Tranche [  ] 2008 Senior
Secured Storm Recovery Bond for registration of transfer at the office or
agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an Eligible Guarantor Institution,
and thereupon one or more new Tranche [ 
] 2008 Senior Secured Storm 

 

A-8

 

Recovery Bond of any Authorized Denominations and in
the same aggregate unpaid Principal amount will be issued to the designated
transferee or transferees.  No service
charge will be charged for any registration of transfer or exchange of this
Tranche [  ] 2008 Senior Secured
Storm Recovery Bond, but the transferor may be required to pay a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange.

 

Prior to the due presentment for registration of
transfer of this Tranche [  ] 2008
Senior Secured Storm Recovery Bond, the Issuer, the Trustee and any agent of
the Issuer or the Trustee may treat the Person in whose name this
Tranche [  ] 2008 Senior Secured
Storm Recovery Bond is registered (as of the day of determination) as the owner
hereof for the purpose of receiving payments of Principal of and premium, if
any, and Interest on this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond and for all other purposes
whatsoever, whether or not this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.

 

The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Storm Recovery Bondholders
under the Indenture at any time by the Issuer with the consent of the Storm
Recovery Bondholders representing a majority of the Outstanding Amount of all
2008 Senior Secured Storm Recovery Bonds at the time Outstanding of each
Tranche to be affected.  The Indenture
also contains provisions permitting the Storm Recovery Bondholders representing
specified percentages of the Outstanding Amount of the 2008 Senior Secured
Storm Recovery Bonds, on behalf of all Storm Recovery Bondholders, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences.  Any such consent or waiver by the Storm
Recovery Bondholders of this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond (or any one or more
predecessors of such 2008 Senior Secured Storm Recovery Bonds) shall be
conclusive and binding upon such Storm Recovery Bondholder and upon all future
Storm Recovery Bondholders of this Tranche [  ] 2008 Senior Secured Storm Recovery Bond and
of any Tranche [  ] 2008 Senior
Secured Storm Recovery Bond issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Tranche [ 
] 2008 Senior Secured Storm Recovery Bond.  The Indenture also permits the Trustee to
amend or waive certain terms and conditions set forth in the Indenture without
the consent of the Storm Recovery Bondholders.

 

The term “Issuer” as used in this Tranche [  ] 2008 Senior Secured Storm Recovery Bond
includes any successor to the Issuer under the Indenture.

 

The Issuer is permitted by the Indenture, under
certain circumstances, to merge or consolidate.

 

The Tranche [ 
] 2008 Senior Secured Storm Recovery Bond are issuable only in
registered form in Authorized Denominations as provided in the Indenture and
the Supplement, subject to certain limitations therein set forth.

 

A-9

 

THIS TRANCHE [  ] 2008 SENIOR SECURED STORM RECOVERY BOND,
THE INDENTURE AND THE SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF LOUISIANA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

No reference herein to the Indenture and no provision
of this Tranche [  ] 2008 Senior Secured
Storm Recovery Bond or of the Indenture shall alter or impair the obligation of
the Issuer, which is absolute and unconditional, to pay the Principal of and
Interest on this Tranche [  ] 2008
Senior Secured Storm Recovery Bond at the times, place, and rate, and in the coin
or currency herein prescribed.

 

A-10

 

ASSIGNMENT

 

Social Security or taxpayer I.D. or other identifying
number of assignee  
                     .

 

FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto                    

 

(name
and address of assignee)

 

the Tranche [  ]
2008 Senior Secured Storm Recovery Bond and all rights thereunder, and hereby
irrevocably constitutes and appoints

 

(name
and address of appointee)

 

attorney, to transfer said Tranche [  ] 2008 Senior Secured Storm Recovery Bond on
the books kept for registration thereof, with full power of substitution in the
premises.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  *

  
	
   

  	
   

  	
  Signature Guaranteed:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

*              NOTE:  The signature to this assignment must
correspond with the name of the registered owner as it appears on the face of
the Tranche [  ] 2008 Senior Secured
Storm Recovery Bond in every particular, without alteration, enlargement or any
change whatsoever.

 

A-11Exhibit 10.1

 

STORM RECOVERY PROPERTY SALE
AGREEMENT

 

between

 

CLECO KATRINA/RITA HURRICANE
RECOVERY FUNDING LLC

 

Issuer

 

and

 

CLECO POWER LLC

 

Seller

 

Dated as of March 6,
2008

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I
  DEFINITIONS

  	
  1

  
	
  Section 1.01

  	
   

  	
  Definitions

  	
  1

  
	
  Section 1.02

  	
   

  	
  Other Definitional Provisions

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  II CONVEYANCE OF THE STORM RECOVERY PROPERTY

  	
  2

  
	
  Section 2.01

  	
   

  	
  Conveyance of the Storm Recovery Property

  	
  2

  
	
  Section 2.02

  	
   

  	
  Conditions to Conveyance of the Storm Recovery
  Property

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  III REPRESENTATIONS AND WARRANTIES OF SELLER

  	
  3

  
	
  Section 3.01

  	
   

  	
  Organization and Good Standing

  	
  4

  
	
  Section 3.02

  	
   

  	
  Due Qualification

  	
  4

  
	
  Section 3.03

  	
   

  	
  Power and Authority

  	
  4

  
	
  Section 3.04

  	
   

  	
  Binding Obligation

  	
  4

  
	
  Section 3.05

  	
   

  	
  No Violation

  	
  4

  
	
  Section 3.06

  	
   

  	
  No Proceedings

  	
  4

  
	
  Section 3.07

  	
   

  	
  Approvals

  	
  5

  
	
  Section 3.08

  	
   

  	
  The Storm Recovery Property

  	
  5

  
	
  Section 3.09

  	
   

  	
  Solvency

  	
  6

  
	
  Section 3.10

  	
   

  	
  The Financing Order

  	
  6

  
	
  Section 3.11

  	
   

  	
  State Action

  	
  7

  
	
  Section 3.12

  	
   

  	
  No Court Order

  	
  8

  
	
  Section 3.13

  	
   

  	
  Approvals Concerning the Storm Recovery Property

  	
  8

  
	
  Section 3.14

  	
   

  	
  Assumptions

  	
  8

  
	
  Section 3.15

  	
   

  	
  Creation of the Storm Recovery Property

  	
  8

  
	
  Section 3.16

  	
   

  	
  Prospectus

  	
  9

  
	
  Section 3.17

  	
   

  	
  Nature of Representations and Warranties

  	
  9

  
	
  Section 3.18

  	
   

  	
  Waivers of Legal Warranties

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IV COVENANTS OF THE SELLER

  	
  10

  
	
  Section 4.01

  	
   

  	
  Seller’s Existence

  	
  10

  
	
  Section 4.02

  	
   

  	
  No Liens or Conveyances

  	
  10

  
	
  Section 4.03

  	
   

  	
  Delivery of Collections

  	
  10

  
	
  Section 4.04

  	
   

  	
  Notice of Liens

  	
  11

  
	
  Section 4.05

  	
   

  	
  Compliance With Law

  	
  11

  
	
  Section 4.06

  	
   

  	
  Covenants Related to the Storm Recovery Property

  	
  11

  
	
  Section 4.07

  	
   

  	
  Protection of Title

  	
  12

  
	
  Section 4.08

  	
   

  	
  Taxes

  	
  13

  
	
  Section 4.09

  	
   

  	
  Filings Pursuant to Financing Order

  	
  13

  
	
  Section 4.10

  	
   

  	
  Issuance Advice Letter

  	
  13

  
	
  Section 4.11

  	
   

  	
  Tariff

  	
  13

  
	
  Section 4.12

  	
   

  	
  Notice of Breach to Rating Agencies, Etc.

  	
  13

  
	
  Section 4.13

  	
   

  	
  Use of Proceeds

  	
  14

  
	
  Section 4.14

  	
   

  	
  Further Assurances

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V
  ADDITIONAL UNDERTAKINGS OF SELLER

  	
  14

  
	
  SECTION 5.01
  LIABILITY OF THE SELLER; INDEMNITIES

  	
  14

  
	
  Section 5.02

  	
   

  	
  Merger or Consolidation of, or Assumption of the
  Obligations of, the Seller

  	
  16

  
	
  Section 5.03

  	
   

  	
  Limitation on Liability of the Seller and Others

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VI MISCELLANEOUS PROVISIONS

  	
  18

  
	
  Section 6.01

  	
   

  	
  Amendment

  	
  18

  
						

 

i

 

	
  Section 6.02

  	
   

  	
  Notices

  	
  19

  
	
  Section 6.03

  	
   

  	
  Assignment by the Seller

  	
  20

  
	
  Section 6.04

  	
   

  	
  Assignment to the Indenture Trustee

  	
  20

  
	
  Section 6.05

  	
   

  	
  Limitations on Rights of Others

  	
  20

  
	
  Section 6.06

  	
   

  	
  Severability

  	
  20

  
	
  Section 6.07

  	
   

  	
  Separate Counterparts

  	
  21

  
	
  Section 6.08

  	
   

  	
  Headings

  	
  21

  
	
  Section 6.09

  	
   

  	
  Governing Law

  	
  21

  
	
  Section 6.10

  	
   

  	
  Nonpetition Covenants

  	
  21

  

 

	
  APPENDIX A

  	
   

  	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1

  	
   

  	
   

  

 

ii

 

STORM RECOVERY PROPERTY SALE
AGREEMENT (this “Agreement”) dated as of March 6, 2008, between CLECO
KATRINA/RITA HURRICANE RECOVERY FUNDING LLC, a Louisiana limited liability
company (the “Issuer”), and CLECO POWER LLC, a Louisiana limited liability
company, as seller (the “Seller”).

 

WHEREAS, the Issuer desires
to purchase the Storm Recovery Property created pursuant to the Securitization
Act and the Financing Order;

 

WHEREAS, the Seller is
willing to sell its rights and interests in and to the Storm Recovery Property
to the Issuer;

 

WHEREAS, the Issuer, in
order to finance the purchase of the Storm Recovery Property, will issue the
Storm Recovery Bonds under the Indenture; and

 

WHEREAS, the Issuer, to
secure its obligations under the Storm Recovery Bonds and the Indenture, will
pledge its right, title and interest in the Storm Recovery Property and this
Agreement to the Indenture Trustee for the benefit of the Storm Recovery
Bondholders.

 

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

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01           Definitions.     Capitalized
terms used herein and not otherwise defined herein have the meanings assigned
to them in Appendix A to this Agreement.

 

Section 1.02           Other
Definitional Provisions.

 

(a)           “Agreement”
means this Storm Recovery Property Sale Agreement, as the same may be amended
and supplemented from time to time.

 

(b)           Non-capitalized
terms used herein which are defined in the Securitization Act, as the context
requires, have the meanings assigned to such terms in the Securitization Act,
but without giving effect to amendments to the Securitization Act after the
date hereof which have a material adverse effect on the Issuer or the Storm
Recovery Bondholders.

 

(c)           All terms
defined in this Agreement shall have such defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.

 

(d)           The words
“hereof,” “herein,” “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; Section, Schedule and Exhibit references
contained in this Agreement are references to Sections, Schedules and Exhibits
in or to 

 

1

 

this Agreement unless otherwise specified; and the
term “including” shall mean “including without limitation.”

 

(e)           The definitions
contained in this Agreement are applicable to the singular as well as the
plural forms of such terms.

 

ARTICLE II

 

CONVEYANCE OF THE STORM
RECOVERY PROPERTY

 

Section 2.01           Conveyance
of the Storm Recovery Property.

 

(a)           In
consideration of the Issuer’s payment to or upon the order of the Seller of $176,000,000
(the “Purchase Price”), subject to the satisfaction or waiver of the conditions
specified in Section 2.02, the Seller does hereby irrevocably sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse
(subject, for the avoidance of doubt,  to
the express obligations of the Seller herein) or warranty, except as set forth
herein, all right, title and interest of the Seller in and to the Storm
Recovery Property as identified in the Bill of Sale delivered pursuant to Section 2.02(i) on
or prior to the Transfer Date (such sale, transfer, assignment, setting over and
conveyance of the Storm Recovery Property to include, to the fullest extent
permitted by the Securitization Act, the right to impose, collect and receive
the Storm Recovery Charges, as the same may be adjusted from time to time).  Such sale, transfer, assignment, setting over
and conveyance of the Storm Recovery Property is hereby expressly stated to be
a sale or other absolute transfer and, pursuant to Section 1230(1) of
the Securitization Act and other applicable law, is a true sale and is not a
secured transaction and title and ownership has passed to the Issuer.  The preceding sentence is the statement
referred to in Section 1230 of the Securitization Act.  The Seller agrees and confirms that upon
payment of the Purchase Price and the execution and delivery of this Agreement
and the Bill of Sale, the sale, transfer and assignment hereunder shall be
effective and the Seller shall have no right, title or interest in, to or under
the Storm Recovery Property.

 

(b)           Subject to the
satisfaction or waiver of conditions specified in Section 2.02, the Issuer
does hereby purchase the Storm Recovery Property from the Seller for the
consideration set forth in Section 2.01(a).

 

(c)           The Seller and
the Issuer each acknowledge and agree that the purchase price for the Storm
Recovery Property sold pursuant to this Agreement is equal to its fair market
value at the time of sale.

 

Section 2.02           Conditions
to Conveyance of the Storm Recovery Property.   The obligation
of the Seller to sell, and the obligation of the Issuer to purchase the Storm
Recovery Property on the Transfer Date shall be subject to and conditioned upon
the satisfaction or waiver of each of the following conditions:

 

(i)            on or prior to the Transfer Date, the Seller shall
deliver to the Issuer a duly executed Bill of Sale identifying the Storm
Recovery Property, substantially in the form of Exhibit A hereto;

 

2

 

(ii)           as of the Transfer Date, the representations and
warranties of the Seller in this Agreement shall be true and correct in all
material respects and no material breach by the Seller of its covenants in this
Agreement shall exist and the Seller shall have delivered to the Issuer and the
Indenture Trustee an Officer’s Certificate to such effect and no Servicer
Default shall have occurred and be continuing;

 

(iii)          as of the Transfer Date:

 

(A)          the Issuer shall have sufficient funds available to pay the
Purchase Price, and

 

(B)          all conditions set forth in the Indenture to the issuance
of the Storm Recovery Bonds intended to provide such funds shall have been
satisfied or waived.

 

(iv)          on or prior to the Transfer Date, the Seller shall have
taken all actions required under the Securitization Act, the Financing Order
and other applicable law for the Issuer to have ownership of the Storm Recovery
Property, free and clear of all Liens other than Liens created by the Issuer
pursuant to the Indenture; and the Issuer, or the Servicer on behalf of the
Issuer, shall have taken any action required for the Issuer to grant the
Indenture Trustee a first priority perfected security interest in the Trust
Estate and maintain such security interest as of such date (including all
actions required under the Securitization Act, the Financing Order and the
Uniform Commercial Code as enacted in the State of Louisiana and each other
applicable jurisdiction (the “UCC”));

 

(v)           the Seller shall have delivered to each Rating Agency and
to the Issuer any Opinions of Counsel requested by the Rating Agencies;

 

(vi)          the Seller shall have delivered to the Indenture Trustee
and the Issuer an Officer’s Certificate confirming the satisfaction of each
relevant condition precedent specified in this Section 2.02; and

 

(vii)         the Seller shall have received the Purchase Price in funds
immediately available on the Transfer Date.

 

ARTICLE III

 

REPRESENTATIONS AND
WARRANTIES OF SELLER

 

As of the Transfer Date, the
Seller makes the following representations and warranties on which the Issuer
has relied and will rely in acquiring the Storm Recovery Property. The
following representations and warranties are made under existing law as in
effect as of the Transfer Date.  The
Seller shall not be in breach of any representation or warranty herein as a
result of a change in law occurring after the Transfer Date, including by means
of legislative enactment, constitutional amendment or voter initiative.  The representations and warranties shall
survive the sale of the Storm Recovery Property to the Issuer and the pledge
thereof on the Transfer Date to the Indenture Trustee pursuant to the
Indenture.

 

3

 

Section 3.01           Organization and Good
Standing.   The Seller is a limited liability company
duly organized and in good standing under the laws of the State of Louisiana,
with limited liability company power and authority to own its properties and to
conduct its business as currently owned or conducted.

 

Section 3.02           Due Qualification.   The
Seller is duly qualified to do business as a foreign limited liability company
in good standing, and has obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or the conduct of its
business requires such qualifications, licenses or approvals (except where the
failure to so qualify or obtain such licenses and approvals would not be
reasonably likely to have a material adverse effect on the Seller’s business,
operations, assets, revenues or properties).

 

Section 3.03           Power and Authority.   The
Seller has the limited liability company power and authority to obtain the
Financing Order and to execute and deliver this Agreement and to carry out its
terms; the Seller has the limited liability company power and authority to own
the rights and interests under the Financing Order, and to sell and assign the
rights and interests under the Financing Order and in the Storm Recovery
Property to the Issuer; and the execution, delivery and performance of this
Agreement have been duly authorized by the Seller by all necessary limited
liability company action.

 

Section 3.04           Binding Obligation.   This
Agreement constitutes a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, subject to
bankruptcy, receivership, insolvency, reorganization, moratorium, fraudulent
transfer and other laws relating to or affecting creditors’ or secured parties’
rights generally from time to time in effect and to general principles of
equity (including concepts of materiality, reasonableness, good faith and fair
dealing), regardless of whether considered in a proceeding in equity or at law.

 

Section 3.05           No Violation.   The
consummation of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof do not: (i) conflict with or result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the articles of organization or
limited liability company operating agreement of the Seller, or any indenture,
mortgage, credit agreement or other agreement or instrument to which the Seller
is a party or by which it or its properties is bound; (ii) result in the
creation or imposition of any Lien upon any of the Seller’s properties pursuant
to the terms of any such indenture, agreement or other instrument (except for
any Lien created by the Issuer under the Basic Documents in favor of the Storm
Recovery Bondholders and in accordance with Section 1231 of the
Securitization Act); or (iii) violate any existing law or any existing
order, rule or regulation applicable to the Seller of any Governmental
Authority having jurisdiction over the Seller or its properties.

 

Section 3.06           No Proceedings.   Except
as disclosed in the Issuer’s prospectus dated February 26, 2008 and the
related prospectus supplement dated February 28, 2008 relating to the
Storm Recovery Bonds (together, the “Prospectus”), there are no proceedings
pending and, to the Seller’s knowledge, (x) there are no proceedings
threatened and (y) there are no investigations pending or threatened
before any Governmental Authority having jurisdiction over the Seller or its
properties involving or relating to the Seller or the Issuer or, to the Seller’s
knowledge, any other Person:

 

4

 

(i)            asserting the invalidity of this Agreement, any of the
other Basic Documents, the Storm Recovery Bonds, the Securitization Act or the
Financing Order;

 

(ii)           seeking to prevent the issuance of the Storm Recovery
Bonds or the consummation of any of the transactions contemplated by this
Agreement or any of the other Basic Documents;

 

(iii)          seeking any determination or ruling that could reasonably
be expected to materially and adversely affect the performance by the Seller of
its obligations under, or the validity or enforceability of, this Agreement,
any of the other Basic Documents or the Storm Recovery Bonds; or

 

(iv)          challenging the Seller’s treatment of the Storm Recovery
Bonds as debt of  the Seller for federal
or state income, gross receipts or franchise tax purposes.

 

Section 3.07           Approvals.   Except
for continuation filings under the UCC and the Securitization Act, no approval,
authorization, consent, order or other action of, or filing with, any
Governmental Authority is required under an applicable law, rule or regulation
in connection with the execution and delivery by the Seller of this Agreement,
the performance by the Seller of the transactions contemplated hereby or the
fulfillment by the Seller of the terms hereof, except those that have been
obtained or made and those that the Seller, in its capacity as Servicer under
the Servicing Agreement, is required to make in the future pursuant to the
Servicing Agreement.

 

Section 3.08           The Storm Recovery
Property.

 

(a)           Information. 
Subject to Section 3.14, all written information, as amended or
supplemented from time to time prior to the date this representation is made,
provided by the Seller to the Issuer with respect to the Storm Recovery
Property (including the Financing Order and the Issuance Advice Letter) is correct
in all material respects.

 

(b)           Effect of Transfer. 
It is the intention of the parties hereto that (other than for United
States federal income tax purposes and, to the extent consistent with
applicable state tax laws, state income and franchise tax purposes) the sale,
transfer, assignment, setting over and conveyance herein contemplated
constitutes a sale or other absolute transfer of all right, title and interest
of the Seller in and to the Storm Recovery Property from the Seller to the
Issuer.  Upon execution and delivery of
this Agreement and the Bill of Sale and payment of the Purchase Price, the
Seller will have no right, title or interest in, to or under the Storm Recovery
Property; and that such Storm Recovery Property would not be a part of the
estate of the Seller as debtor in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law.

 

(c)           Transfer Filings.

 

(i)            The Seller is the sole owner of all the rights and
interests under the Financing Order to be sold to the Issuer on the Transfer
Date.

 

(ii)           On the Transfer Date, immediately upon the sale hereunder,
the  Storm Recovery Property will have
been validly sold, assigned, transferred, set 

 

5

 

over and conveyed to the
Issuer free and clear of all Liens (except for any Lien created by the Issuer
under the Basic Documents in favor of the Storm Recovery Bondholders and in
accordance with Section 1231 of the Securitization Act).

 

(iii)          All actions or filings (including filings with the
Louisiana UCC Filing Officer in accordance with the rules prescribed under
the Securitization Act and the UCC) necessary in any jurisdiction to give the
Issuer a perfected ownership interest (subject to any Lien created by the Issuer
under the Basic Documents in favor of the Storm Recovery Bondholders and in
accordance with Section 1231 of the Securitization Act) in the Storm
Recovery Property and to grant to the Indenture Trustee a first priority
perfected security interest in the Storm Recovery Property, free and clear of
all Liens of the Seller or anyone else (except for any Lien created by the
Issuer under the Basic Documents in favor of the Storm Recovery Bondholders and
in accordance with Section 1231 of the Securitization Act), have been
taken or made.

 

Section 3.09           Solvency.   After
giving effect to the sale of the Storm Recovery Property hereunder, the Seller:

 

(i)            is solvent and expects to remain solvent,

 

(ii)           is adequately capitalized to conduct its business and
affairs considering its size and the nature of its business and intended
purposes,

 

(iii)          is not engaged and does not expect to engage in a business
for which its remaining property represents an unreasonably small portion of
its capital,

 

(iv)          reasonably believes that it will be able to pay its debts
as they come due, and

 

(v)           is able to pay its debts as they come due and does not
intend to incur, or believes that it will incur, indebtedness that it will not
be able to repay at its maturity.

 

Section 3.10           The Financing
Order.

 

(a)           The Financing Order was issued by the Louisiana Commission
on September 17, 2007 in accordance with the Securitization Act; the
Financing Order and the process by which it was issued comply with all
applicable laws, rules and regulations of the State of Louisiana and the
federal laws of the United States, and the Financing Order is final,
non-appealable and in full force and effect.

 

(b)           As of the date of issuance of the Storm Recovery Bonds,
the Storm Recovery Bonds will be entitled to the protections provided by the
Securitization Act and the Financing Order, the Issuance Advice Letter and the
Storm Recovery Charges authorized therein will have become irrevocable and not
subject to reduction, impairment or adjustment by further action of the
Louisiana Commission, except as permitted by Section 1228(c)(4) of the
Securitization Act, and the Issuance Advice Letter has been filed in accordance
with the Financing Order.  The Issuance
Advice Letter and the Tariff

 

6

 

                have been filed in accordance with the
Financing Order and an officer of the Seller has provided the certification to
the Louisiana Commission required by the Issuance Advice Letter.  The initial Storm Recovery Charges and the
final terms of the Storm Recovery Bonds set forth in the Issuance Advice Letter
have become effective.  No other
approval, authorization, consent, order or other action of, or filing with any
Governmental Authority is required in connection with the creation of the Storm
Recovery Property transferred on such date, except those that have been
obtained or made.

 

Section 3.11         State Action.

 

(a)           Under the
Securitization Act, the State of Louisiana has pledged that it will not take or
permit any action that would impair the value of the Storm Recovery Property
or, except as permitted in Section 1228(c)(4) of the Securitization
Act, reduce, alter or impair the Storm Recovery Charges until the principal,
interest and premium, if any, and any other charges incurred and contracts to
be performed in connection with the Storm Recovery Bonds, have been paid and
performed in full.

 

(b)           Under the laws of the
State of Louisiana and the federal laws of the United States, a reviewing court
of competent jurisdiction would hold that (x) the State of Louisiana could
not constitutionally take any action of a legislative character, including the
repeal or amendment of the Securitization Act, which would substantially limit,
alter or impair the Storm Recovery Property or other rights vested in the Storm
Recovery Bondholders pursuant to the Financing Order, or substantially limit,
alter, impair or reduce the value or amount of the Storm Recovery Property,
unless such action is a reasonable and necessary exercise of the State of
Louisiana’s sovereign powers based on reasonable conditions and of a character
reasonable and appropriate to the emergency or other significant and legitimate
public purpose justifying such action, and, (y) under the takings clauses
of the State of Louisiana and United States Constitutions, if the court
concludes that the Storm Recovery Property is protected by the takings clauses,
the State of Louisiana could not repeal or amend the Securitization Act or take
any other action in contravention of its pledge referred to in subsection (a) above
without paying just compensation to the Storm Recovery Bondholders, as
determined by a court of competent jurisdiction, if doing so would constitute a
permanent appropriation of a substantial property interest of the Storm
Recovery Bondholders in the Storm Recovery Property and deprive the Storm
Recovery Bondholders of their reasonable expectations arising from their
investments in the Storm Recovery Bonds; however, there is no assurance that,
even if a court were to award just compensation, it would be sufficient to pay
the full amount of principal of and interest on the Storm Recovery Bonds.

 

(c)           Under the laws of the
State of Louisiana and the United States Constitution, a Louisiana state court
reviewing an appeal of Louisiana Commission action of a legislative character
would conclude that the Louisiana Commission Pledge (i) creates a binding
contractual obligation of the State of Louisiana for purposes of the contract
clauses of the United States and Louisiana Constitutions, and (ii) provides
a basis upon which the Storm Recovery Bondholders could challenge successfully
any action of the Louisiana Commission of a legislative character, including
the rescission or amendment of the Financing Order, that such court determines
violates the Louisiana 

 

7

 

Commission Pledge in a manner that
substantially reduces, limits or impairs the value of the Storm Recovery
Property or the Storm Recovery Charges, prior to the time that the Storm
Recovery Bonds are paid in full and discharged, unless there is a judicial
finding that the Louisiana Commission action clearly is exercised for a public
end and is reasonably necessary to the accomplishment of that public end so as
not to be arbitrary, capricious or an abuse of authority.  There is no assurance, however, that, even if
a court were to award just compensation it would be sufficient to pay the full
amount of principal and interest on the Storm Recovery Bonds.

 

Section 3.12           No
Court Order.   There is no order by any court providing for
the revocation, alteration, limitation or other impairment of the
Securitization Act, the Financing Order, the Issuance Advice Letter, the Storm
Recovery Property or the Storm Recovery Charges or any rights arising under any
of them or that seeks to enjoin the performance of any obligations under the
Financing Order.

 

Section 3.13           Approvals
Concerning the Storm Recovery Property.   Under the laws of
the State of Louisiana and the federal laws of the United States, no other
approval, authorization, consent, order or other action of, or filing with any
Governmental Authority is required in connection with the creation or transfer
of the Seller’s rights and interests under the Financing Order and the Issuer’s
purchase of the Storm Recovery Property from the Seller, except those that have
been obtained or made.

 

Section 3.14           Assumptions.   Based
on information available to the Seller on the date hereof, the assumptions used
in calculating the Storm Recovery Charges in the Issuance Advice Letter are
reasonable and made in good faith; however, notwithstanding the foregoing, THE SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
THAT BILLED STORM RECOVERY CHARGES WILL BE ACTUALLY COLLECTED FROM CUSTOMERS,
OR THAT AMOUNTS ACTUALLY COLLECTED ARISING FROM THE STORM RECOVERY CHARGES WILL
IN FACT BE SUFFICIENT TO MEET THE PAYMENT OBLIGATIONS ON THE STORM RECOVERY
BONDS OR THAT THE ASSUMPTIONS USED IN CALCULATING SUCH STORM RECOVERY CHARGES
WILL IN FACT BE REALIZED.

 

Section 3.15           Creation
of the Storm Recovery Property.

 

(a)           Upon the effectiveness
of the Financing Order, the transfer of the Seller’s rights and interests under
the Financing Order related to the Storm Recovery Bonds and the Issuer’s
purchase of the Storm Recovery Property from the Seller pursuant to this
Agreement, the Storm Recovery Property will constitute a present contract right
vested in the Issuer.

 

(b)           Upon the effectiveness
of the Financing Order, the Issuance Advice Letter and the Tariff, the transfer
of the Seller’s rights and interests under the Financing Order and the Issuer’s
purchase of the Storm Recovery Property from the Seller pursuant to this
Agreement, the Storm Recovery Property includes:

 

(1)           the right to impose,
bill, charge, collect and receive the Storm Recovery Charges, including the
right to receive Storm Recovery 

 

8

 

Charges in amounts and at times
sufficient to pay principal and interest on the Storm Recovery Bonds,

 

(2)           all rights and interest
of the Seller under the Financing Order, except the rights of Seller to earn
and receive a rate of return on its invested capital in the Issuer, to receive
administration and servicer fees, to withdraw funds from its restricted storm
recovery reserve funded by the proceeds from the sale of the Storm Recovery
Property, or to use the Seller’s remaining portion of those proceeds,

 

(3)           the rights to file for
periodic adjustments of the Storm Recovery Charges as provided in the Financing
Order, and

 

(4)           all revenues, collections,
claims, rights to payments, payments, money, or proceeds arising from the
rights and interests resulting from the Storm Recovery Charges.

 

(c)           Upon the effectiveness
of the Issuance Advice Letter and the Tariff, the transfer of the Seller’s
rights and interests under the Financing Order and the Issuer’s purchase of the
Storm Recovery Property from the Seller on the Transfer Date pursuant to this
Agreement, the Storm Recovery Property will not be subject to any Lien created
by a previous indenture.

 

Section 3.16           Prospectus.   As
of the date hereof, the information describing the Seller under the caption “The
Seller, Initial Servicer and Sponsor” in the Prospectus is true and correct in
all material respects.

 

Section 3.17           Nature
of Representations and Warranties.   The representations and
warranties set forth in Section 3.08 and Section 3.10 through Section 3.16,
insofar as they involve conclusions of law, are made not on the basis that the
Seller purports to be a legal expert or to be rendering legal advice, but
rather to reflect the parties’ good faith understanding of the legal basis on
which the parties are entering into this Agreement and the other Basic
Documents and the basis on which the Storm Recovery Bondholders are purchasing
the Storm Recovery Bonds, and to reflect the parties’ agreement that, if such
understanding turns out to be incorrect or inaccurate, the Seller will be
obligated to indemnify the Issuer and its permitted assigns (to the extent
required by and in accordance with Section 5.01), and that the Issuer and
its permitted assigns will be entitled to enforce any rights and remedies under
the Basic Documents on account of such inaccuracy to the same extent as if the
Seller had breached any other representations or warranties hereunder.

 

Section 3.18           Waivers
of Legal Warranties.   The Seller makes no representation or
warranty, express or implied, as to the solvency of any Customer on the
Transfer Date or as to the future solvency of any Customer.  Further, the Issuer waives any right to
rescind this Agreement or any conveyance pursuant to this Agreement in case of
insolvency of any Customer, regardless of any actual or implied knowledge by
Seller at any time of the insolvency of any Customer.  Additionally, the Issuer agrees that this
Agreement is not subject to a 

 

9

 

suspensive condition under
Louisiana Civil Code Article 2450, notwithstanding that the imposition and
collection of Storm Recovery Charges depends upon future acts such as the
Servicer performing its servicing functions relating to the collection of Storm
Recovery Charges, the future provision of electric service to Customers, and
the future consumption by Customers of electricity.

 

ARTICLE IV

COVENANTS OF THE SELLER

 

Section 4.01           Seller’s
Existence.   Subject to Section 5.02, so long as any of
the Storm Recovery Bonds are outstanding, the Seller (i) shall keep in
full force and effect its existence and remain in good standing under the laws
of the state of its organization, and shall obtain and preserve its
qualification to do business in each jurisdiction in which such qualification
is or will be necessary to protect the validity and enforceability of this
Agreement and each other instrument or agreement to which the Seller is a party
necessary to the proper administration of this Agreement and the transactions
contemplated hereby and (ii) hereby agrees to continue to operate its
system to provide transmission and distribution delivery service to its
customers; and, to the extent that any interest in Storm Recovery Property
created by this Financing Order is assigned, sold or transferred to another
assignee, the Seller shall enter into a contract with that assignee that
requires the Seller to continue to operate its transmission and distribution
delivery system to provide service to the Seller’s Louisiana
Commission-jurisdictional customers; and further (in each case) the Seller will
undertake to collect, account and remit amounts in respect of the Storm
Recovery Charges for the benefit and account of such assignee (or its financing
party); provided, however, that this provision shall not prohibit the Seller
from selling, assigning, or otherwise divesting its transmission system or
distribution system (or any portions thereof) providing service to the Seller’s
Louisiana Commission-jurisdictional customers, by any method whatsoever,
including those specified in the Financing Order pursuant to which an entity
becomes a successor, so long as the entities acquiring either such system or
portion thereof agree to continue operating such facilities to provide service
to Louisiana Commission-jurisdictional customers.

 

Section 4.02           No
Liens or Conveyances.   Except for the conveyances hereunder
or any Lien under the Basic Documents pursuant to Section 1231 of the
Securitization Act for the benefit of the Indenture Trustee and the Storm
Recovery Bondholders, the Seller shall not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien
on, any of the Storm Recovery Property, whether now existing or hereafter
created, or any interest therein. The Seller shall not at any time assert any
Lien against or with respect to the Storm Recovery Property, and shall defend
the right, title and interest of the Issuer and the Indenture Trustee, as
assignee of the Issuer, in, to and under the Storm Recovery Property against
all claims of third parties claiming through or under the Seller.

 

Section 4.03           Delivery of Collections.   In the
event that the Seller receives collections in respect of the Storm Recovery
Charges or the proceeds thereof other than in its capacity as the Servicer, the
Seller agrees to pay to the Servicer, on behalf of the Issuer, all payments
received by it in respect thereof as soon as

 

10

 

practicable
after receipt thereof. Prior to such remittance to the Servicer by the Seller,
the Seller agrees that such amounts are held by it in trust for the Issuer and
the Indenture Trustee. If the Seller becomes a party to any future trade
receivables purchase and sale arrangement or similar arrangement under which it
sells all or any portion of its accounts receivables, the Seller and the other
parties to such arrangement shall enter into an intercreditor agreement in
connection therewith and the terms of the documentation evidencing such trade
receivables purchase and sale arrangement or similar arrangement shall
expressly exclude Storm Recovery Charges from any receivables or other assets
pledged or sold under such arrangement.

 

Section 4.04           Notice
of Liens.   The Seller shall notify the Issuer and the
Indenture Trustee promptly after becoming aware of any Lien on the Storm
Recovery Property, other than the conveyance hereunder, any Lien created in
favor of the Storm Recovery Bondholders or any Lien created by the Issuer under
the Indenture.

 

Section 4.05           Compliance
With Law.   The Seller shall comply with its organizational
or governing documents and all laws, treaties, rules, regulations and determinations
of any Governmental Authority applicable to the Seller, except to the extent
that failure to so comply would not materially adversely affect the Issuer’s or
the Indenture Trustee’s interests in the Storm Recovery Property or under any
of the Basic Documents or the Seller’s performance of its obligations hereunder
or under any of the other Basic Documents.

 

Section 4.06           Covenants
Related to the Storm Recovery Property.

 

(a)           So long as any of the
Storm Recovery Bonds are outstanding, the Seller shall:

 

(i)            treat the Storm
Recovery Bonds as debt of the Issuer and not of the Seller, except for
financial reporting or tax purposes;

 

(ii)           disclose in its
financial statements that the Issuer is, and the Seller is not, the owner of
the Storm Recovery Property and that the assets of the Issuer are not available
to pay creditors of the Seller or any of its Affiliates (other than the
Issuer),

 

(iii)          unless, and to the extent, required by applicable law or directed or
required by a Governmental Authority, disclose the effects of all
transactions between the Seller and the Issuer in accordance with generally
accepted accounting principles, and

 

(iv)          not own or purchase any
Storm Recovery Bonds.

 

(b)           So long as any of the
Storm Recovery Bonds are outstanding,

 

(i)            in all proceedings
relating directly or indirectly to the Storm Recovery Property, the Seller
shall: (A) affirmatively certify and confirm that it has sold all of its
rights and interests in and to the Storm Recovery Property to the Issuer (other
than for financial reporting or tax purposes), and (B) not make any
statement or reference in respect of the Storm Recovery Property that is
inconsistent with the ownership thereof by the Issuer (other than for financial
reporting or tax purposes);

 

11

 

(ii)           the Seller shall not
take any action in respect of the Storm Recovery Property except solely in its
capacity as the Servicer thereof pursuant to the Servicing Agreement or as
contemplated by the Basic Documents; and

 

(iii)          neither the Seller nor
the Issuer shall take any action, file any tax return, or make any election
inconsistent with the treatment of the Issuer, for purposes of federal taxes
and, to the extent consistent with applicable state, local and other tax law,
for purposes of state, local and other taxes, as a disregarded entity that is
not separate from the Seller (or, if relevant, from another sole owner of the
Issuer).

 

(c)           The Seller agrees that
upon the sale by the Seller of all of its rights and interests in and to the
Storm Recovery Property to the Issuer pursuant to this Agreement, to the
fullest extent permitted by law, including applicable Louisiana Commission
regulations and the Securitization Act, the Issuer shall have all of the rights
originally held by the Seller with respect to the transferred Storm Recovery
Property, including the right (subject to the terms of the Servicing Agreement)
to exercise any and all rights and remedies to collect any amounts payable by
any customer in respect of the transferred Storm Recovery Property,
notwithstanding any objection or direction to the contrary by the Seller (and
the Seller agrees not to make any such objection or to take any such contrary
action), and any payment to the Servicer by any Person responsible for
remitting Storm Recovery Charges to the Servicer under the terms of the
Financing Order or the Securitization Act or the Tariff shall discharge such
Person’s obligations in respect of the Storm Recovery Property to the extent of
such payment, notwithstanding any objection or direction to the contrary by the
Seller.

 

Section 4.07           Protection
of Title.   The Seller shall execute and file such filings,
and cause to be executed and filed such filings, in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
interests of the Issuer and the Indenture Trustee in the Storm Recovery
Property, including all filings required under the Securitization Act and the
UCC relating to the transfer of the ownership of the rights and interests under
the Financing Order by the Seller to the Issuer and the pledge of the Storm
Recovery Property by the Issuer to the Indenture Trustee. The Seller shall
deliver (or cause to be delivered) to the Issuer and the Indenture Trustee file-stamped
copies of, or filing receipts for, any document filed as provided above, as
soon as available following such filing. 
The Seller shall institute any action or proceeding reasonably necessary
to compel performance by the Louisiana Commission or the State of Louisiana of
any of their obligations or duties under the Securitization Act, the Financing
Order or the Issuance Advice Letter relating to the transfer of the rights and
interests under the Financing Order by the Seller to the Issuer and shall
notify the Indenture Trustee of the institution of any such action.  The Seller agrees to take such legal or
administrative actions, including defending against or instituting and pursuing
legal actions and appearing or testifying at hearings or similar proceedings,
in each case as may be reasonably necessary:

 

(a)           to protect the Issuer
and the Storm Recovery Bondholders from claims, state actions or other actions
or proceedings of third parties which, if successfully pursued, would result in
a breach of any representation set forth in Article III; or

 

12

 

(b)           so long as the Seller
is also the Servicer, to block or overturn any attempts to cause a repeal of,
modification of or supplement to the Securitization Act, the Financing Order,
the Issuance Advice Letter or the rights of Storm Recovery Bondholders by
legislative enactment (including any action of the Louisiana Commission of a
legislative character) or constitutional amendment that would be materially adverse
to the Issuer, the Indenture Trustee or the Storm Recovery Bondholders.

 

The costs of
any such actions or proceedings shall be reimbursed by the Issuer to the Seller
from amounts on deposit in the Collection Account as an Operating Expense (as
such terms are defined in the Indenture) in accordance with the terms of the
Indenture.  The Seller’s obligations
pursuant to this Section 4.07 shall survive and continue notwithstanding
that the payment of Operating Expenses pursuant to the Indenture may be delayed
(it being understood that the Seller may be required to advance its own funds
to satisfy its obligation hereunder). 
The Seller designates the Issuer as its agent and attorney-in-fact to
execute any filings of financing statements, continuation statements or other
instruments required of the Seller pursuant to this Section 4.07, it being
understood that the Issuer shall have no obligation to execute any such
instruments.

 

Section 4.08           Taxes.   So
long as any of the Storm Recovery Bonds are outstanding, the Seller shall pay
all material taxes, assessments and governmental charges imposed upon it or any
of its properties or assets or with respect to any of its franchises,
businesses, income or property before any penalty accrues thereon if the
failure to pay any such taxes, assessments and governmental charges would,
after any applicable grace periods, notices or other similar requirements,
result in a Lien on the Storm Recovery Property; provided that no such tax need
be paid if the Seller or any of its Affiliates is contesting the same in good
faith by appropriate proceedings promptly instituted and diligently conducted
and if the Seller or such Affiliate has established appropriate reserves as
shall be required in conformity with generally accepted accounting principles.

 

Section 4.09           Filings
Pursuant to Financing Order.   The Seller shall comply with
all filing requirements imposed upon the Seller in its capacity as such by the
Financing Order, including making any such post-closing filings.

 

Section 4.10           Issuance Advice Letter.   The
Seller hereby agrees not to withdraw the filing of the Issuance Advice Letter
with the Louisiana Commission.

 

Section 4.11           Tariff.   The
Seller hereby agrees to make all reasonable efforts to keep the Tariff in full
force and effect at all times.

 

Section 4.12           Notice
of Breach to Rating Agencies, Etc..   Promptly after
obtaining knowledge thereof, in the event of a breach in any material respect
(without regard to any materiality qualifier contained in such representation,
warranty or covenant) of any of the Seller’s representations, warranties or
covenants contained herein, the Seller shall promptly notify the Issuer, the
Indenture Trustee and the Rating Agencies of such breach.  For the avoidance of doubt, any breach which would
adversely affect scheduled payments on the Storm Recovery Bonds will be deemed
to be a material breach for purposes of this Section 4.12.

 

13

 

Section 4.13           Use
of Proceeds.   The Seller shall use the proceeds of the sale
of the Storm Recovery Property in accordance with the Financing Order and the
Securitization Act.

 

Section 4.14           Further
Assurances.   Upon the reasonable request of the Issuer, the
Seller shall execute and deliver such further instruments and do such further
acts as may be reasonably necessary to carry out more effectually the
provisions and purposes of this Agreement.

 

ARTICLE V

ADDITIONAL UNDERTAKINGS OF SELLER

 

The Seller
hereby undertakes the obligations contained in this Article V and
acknowledges that the Issuer shall have the right to assign its rights with
respect to such obligations to the Indenture Trustee for the benefit of the
Storm Recovery Bondholders.

 

SECTION 5.01     LIABILITY OF
THE SELLER; INDEMNITIES.

 

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

 

(b)           THE SELLER SHALL INDEMNIFY
THE ISSUER AND THE INDENTURE TRUSTEE, FOR ITSELF AND ON BEHALF OF THE STORM
RECOVERY BONDHOLDERS, AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
MANAGERS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD HARMLESS EACH SUCH
PERSON FROM AND AGAINST, ANY AND ALL TAXES (OTHER THAN ANY TAXES IMPOSED ON
STORM RECOVERY BONDHOLDERS SOLELY AS A RESULT OF THEIR OWNERSHIP OF STORM
RECOVERY BONDS) THAT MAY AT ANY TIME BE IMPOSED ON OR ASSERTED AGAINST ANY
SUCH PERSON UNDER EXISTING LAW AS OF THE TRANSFER DATE AS A RESULT OF THE SALE
AND ASSIGNMENT OF THE SELLER’S RIGHTS AND INTERESTS UNDER THE FINANCING ORDER
BY THE SELLER TO THE ISSUER, THE ACQUISITION OR HOLDING OF THE STORM RECOVERY
PROPERTY BY THE ISSUER OR THE ISSUANCE AND SALE BY THE ISSUER OF THE STORM
RECOVERY BONDS, INCLUDING ANY SALES, GROSS RECEIPTS, TANGIBLE PERSONAL
PROPERTY, PRIVILEGE, FRANCHISE OR LICENSE TAXES, BUT EXCLUDING ANY TAXES
IMPOSED AS A RESULT OF A FAILURE OF SUCH PERSON TO PROPERLY WITHHOLD OR REMIT
TAXES IMPOSED WITH RESPECT TO PAYMENTS ON ANY STORM RECOVERY BOND, IN THE EVENT
AND TO THE EXTENT SUCH TAXES ARE NOT RECOVERABLE AS FINANCING COSTS, IT BEING UNDERSTOOD
THAT THE STORM RECOVERY BONDHOLDERS SHALL BE ENTITLED TO ENFORCE THEIR RIGHTS
AGAINST THE SELLER UNDER THIS SECTION 5.01(B) SOLELY THROUGH A CAUSE
OF ACTION BROUGHT FOR THEIR BENEFIT BY THE INDENTURE TRUSTEE IN ACCORDANCE WITH
THE TERMS OF THE INDENTURE.

 

(c)           THE SELLER SHALL INDEMNIFY
THE ISSUER AND THE INDENTURE TRUSTEE, FOR ITSELF AND ON BEHALF OF THE STORM
RECOVERY BONDHOLDERS, AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
MANAGERS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD HARMLESS EACH SUCH
PERSON FROM AND

 

14

 

AGAINST, ANY AND ALL
LIABILITIES, OBLIGATIONS, CLAIMS, ACTIONS, SUITS OR PAYMENTS OF ANY KIND
WHATSOEVER THAT MAY BE IMPOSED ON OR ASSERTED AGAINST ANY SUCH PERSON
(WHICH MAY INCLUDE, WITHOUT LIMITATION, AN AMOUNT EQUAL TO PRINCIPAL AND
INTEREST ON THE STORM RECOVERY BONDS AS A MEASURE OF SELLER’S INDEMNIFICATION
OBLIGATIONS UNDER THIS SECTION 5.01) TOGETHER WITH ANY REASONABLE COSTS
AND EXPENSES INCURRED BY SUCH PERSON, IN EACH CASE AS A RESULT OF THE SELLER’S
BREACH OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR COVENANTS CONTAINED IN THIS
AGREEMENT.

 

(d)           THE INDEMNIFICATION
OBLIGATIONS OF THE SELLER UNDER THIS SECTION 5.01 SHALL RANK PARI PASSU WITH ALL OTHER GENERAL UNSECURED OBLIGATIONS OF
THE SELLER.

 

(e)           INDEMNIFICATION UNDER THIS SECTION 5.01
SHALL SURVIVE THE RESIGNATION OR REMOVAL OF THE INDENTURE TRUSTEE AND THE
TERMINATION OF THIS AGREEMENT AND SHALL INCLUDE REASONABLE FEES AND EXPENSES OF
INVESTIGATION AND LITIGATION (INCLUDING REASONABLE ATTORNEYS’ FEES AND
EXPENSES).  THE SELLER SHALL NOT
INDEMNIFY ANY PARTY UNDER THIS SECTION 5.01 FOR ANY CHANGES IN LAW AFTER
THE TRANSFER DATE, INCLUDING BY MEANS OF LEGISLATIVE ENACTMENT, CONSTITUTIONAL
AMENDMENT OR VOTER INITIATIVE, OR FOR ANY LIABILITY RESULTING SOLELY FROM A
DOWNGRADE IN ANY RATING OF THE STORM RECOVERY BONDS BY ANY RATING AGENCY.  THE SELLER SHALL NOT INDEMNIFY THE INDENTURE
TRUSTEE OR ITS OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES OR AGENTS UNDER THIS SECTION 5.01
AGAINST ANY LIABILITY, OBLIGATION, CLAIM, ACTION, SUIT OR PAYMENT OF ANY KIND
ARISING OUT OF THE WILLFUL MISCONDUCT, NEGLIGENCE OR BAD FAITH OF ANY SUCH
PERSON.

 

(f)            THE SELLER SHALL NOT BE
REQUIRED TO INDEMNIFY A PARTY UNDER THIS SECTION 5.01 FOR ANY AMOUNT PAID
OR PAYABLE BY SUCH PARTY IN THE SETTLEMENT OF ANY ACTION, PROCEEDING OR
INVESTIGATION WITHOUT THE PRIOR WRITTEN CONSENT OF THE SELLER WHICH CONSENT
SHALL NOT BE UNREASONABLY WITHHELD.

 

(g)           PROMPTLY AFTER RECEIPT BY A
PARTY OF NOTICE OF THE COMMENCEMENT OF ANY ACTION, PROCEEDING OR INVESTIGATION,
SUCH PARTY SHALL, IF A CLAIM IN RESPECT THEREOF IS TO BE MADE AGAINST THE
SELLER UNDER THIS SECTION 5.01, NOTIFY THE SELLER IN WRITING OF THE
COMMENCEMENT THEREOF. FAILURE BY A PARTY TO SO NOTIFY THE SELLER SHALL RELIEVE
THE SELLER FROM THE OBLIGATION TO INDEMNIFY AND HOLD HARMLESS SUCH INDEMNIFIED
PARTY UNDER THIS SECTION 5.01 ONLY TO THE EXTENT THAT THE SELLER SUFFERS
ACTUAL PREJUDICE AS A RESULT OF SUCH FAILURE.

 

(h)           WITH RESPECT TO ANY ACTION,
PROCEEDING OR INVESTIGATION BROUGHT BY A THIRD PARTY FOR WHICH INDEMNIFICATION MAY BE
SOUGHT UNDER SECTION 5.01(C), THE SELLER SHALL BE ENTITLED TO CONDUCT AND
CONTROL, AT ITS EXPENSE AND WITH COUNSEL OF ITS CHOOSING THAT IS REASONABLY
SATISFACTORY TO SUCH INDEMNIFIED PARTY, THE DEFENSE OF ANY SUCH ACTION,
PROCEEDING OR

 

15

 

INVESTIGATION (IN WHICH CASE
THE SELLER SHALL NOT THEREAFTER BE RESPONSIBLE FOR THE FEES AND EXPENSES OF ANY
SEPARATE COUNSEL RETAINED BY THE INDEMNIFIED PARTY EXCEPT AS SET FORTH BELOW);
PROVIDED THAT THE INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO PARTICIPATE IN SUCH
ACTION, PROCEEDING OR INVESTIGATION THROUGH COUNSEL CHOSEN BY IT AND AT ITS OWN
EXPENSE. NOTWITHSTANDING THE SELLER’S ELECTION TO ASSUME THE DEFENSE OF ANY
ACTION, PROCEEDING OR INVESTIGATION, THE INDEMNIFIED PARTY SHALL HAVE THE RIGHT
TO EMPLOY SEPARATE COUNSEL (INCLUDING LOCAL COUNSEL), AND THE SELLER SHALL BEAR
THE REASONABLE FEES, COSTS AND EXPENSES OF SUCH SEPARATE COUNSEL IF (I) THE
DEFENDANTS IN ANY SUCH ACTION INCLUDE BOTH THE INDEMNIFIED PARTY AND THE SELLER
AND THE INDEMNIFIED PARTY SHALL HAVE REASONABLY CONCLUDED THAT THERE MAY BE
LEGAL DEFENSES AVAILABLE TO IT THAT ARE DIFFERENT FROM OR ADDITIONAL TO THOSE
AVAILABLE TO THE SELLER, (II) THE SELLER SHALL NOT HAVE EMPLOYED COUNSEL
REASONABLY SATISFACTORY TO THE INDEMNIFIED PARTY TO REPRESENT THE INDEMNIFIED
PARTY WITHIN A REASONABLE TIME AFTER NOTICE OF THE INSTITUTION OF SUCH ACTION, (III) THE
SELLER SHALL AUTHORIZE THE INDEMNIFIED PARTY TO EMPLOY SEPARATE COUNSEL AT THE
EXPENSE OF THE SELLER OR (IV) IN THE CASE OF THE INDENTURE TRUSTEE, SUCH
ACTION EXPOSES THE INDENTURE TRUSTEE TO A MATERIAL RISK OF CRIMINAL LIABILITY
OR FORFEITURE OR A SERVICER DEFAULT HAS OCCURRED AND IS CONTINUING.  NOTWITHSTANDING THE FOREGOING, THE SELLER
SHALL NOT BE OBLIGATED TO PAY FOR THE FEES, COSTS AND EXPENSES OF MORE THAN ONE
SEPARATE COUNSEL FOR THE INDEMNIFIED PARTIES OTHER THAN ONE LOCAL COUNSEL, IF
APPROPRIATE.

 

NOTWITHSTANDING
THE FOREGOING, IN NO EVENT SHALL ANY SUCH FOREGOING INDEMNITY EXTEND TO THE
COLLECTIBILITY OF THE STORM RECOVERY CHARGES FROM ANY PERSON RESPONSIBLE FOR
REMITTING STORM RECOVERY CHARGES TO THE SERVICER UNDER THE TERMS OF THE
FINANCING ORDER, THE SECURITIZATION ACT OR AN APPLICABLE TARIFF, OR THE
CREDITWORTHINESS OF ANY SUCH PERSON OR THE INABILITY OR FAILURE OF SUCH PERSON
TO TIMELY PAY ALL OR A PORTION OF THE STORM RECOVERY CHARGES.  THE REMEDIES PROVIDED IN THIS AGREEMENT ARE
THE SOLE AND EXCLUSIVE REMEDIES AGAINST THE SELLER FOR BREACH OF ITS
REPRESENTATIONS, WARRANTIES OR COVENANTS IN THIS AGREEMENT.

 

Section 5.02           Merger
or Consolidation of, or Assumption of the Obligations of, the Seller.

 

Any Person:

 

(a)           into which the Seller
may be merged, converted or consolidated and which succeeds to all or
substantially all of the electric transmission and distribution business of the
Seller (or, if the transmission and distribution business is split, any person
which the Louisiana Commission designates in connection with an order relating
to such split),

 

(b)           which results from the
division of the Seller into two or more Persons and which succeeds to all or
substantially all of the electric transmission and distribution 

 

16

 

business of the Seller (or, if the
transmission and distribution business is split, any person which the Louisiana
Commission designates in connection with an order relating to such split),

 

(c)           which may result from
any merger, conversion or consolidation to which the Seller shall be a party
and which succeeds to all or substantially all of the electric transmission and
distribution business of the Seller (or, if the transmission and distribution
business is split, any person which the Louisiana Commission designates in
connection with an order relating to such split),

 

(d)           which may purchase or
otherwise succeed to the properties and assets of the Seller substantially as a
whole and which purchases or otherwise succeeds to all or substantially all of
the electric transmission and distribution business of the Seller (or, if the
transmission and distribution business is split, any person which the Louisiana
Commission designates in connection with an order relating to such split), or

 

(e)           which may otherwise
purchase or succeed to all or substantially all of the electric transmission
and distribution business of the Seller (or, if the transmission and
distribution business is split, any person which the Louisiana Commission
designates in connection with an order relating to such split),

 

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

 

(i)            immediately after
giving effect to such transaction, no representation, warranty or covenant made
pursuant to Article III or Article IV shall have been breached in any
material respect and no Servicer Default, and no event that, after notice or
lapse of time, or both, would become a Servicer Default, shall have occurred
and be continuing,

 

(ii)           the Rating Agencies
shall have received prior written notice of such transaction,

 

(iii)          the Seller shall have
delivered to the Issuer and the Indenture Trustee an Officer’s Certificate and
an Opinion of Counsel each stating that such consolidation, conversion, merger,
division or succession and such agreement of assumption comply with this Section 5.02
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with,

 

(iv)          the Seller shall have
delivered to the Issuer and the Indenture Trustee an Opinion of Counsel either

 

(A)          stating that, in the
opinion of such counsel, all filings to be made by the Seller, including
filings with the Louisiana Commission pursuant to the Securitization Act and
the UCC, that are necessary fully to preserve and protect the respective
interests of the Issuer and the Indenture Trustee in the Storm 

 

17

 

Recovery Property have been
executed and filed, and reciting the details of such filings, or

 

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

 

(v)           the Seller shall have
delivered to the Issuer, the Indenture Trustee and the Rating Agencies an
opinion of independent tax counsel (as selected by, and in form and substance
satisfactory to the Seller, and which may be based on a ruling from the
Internal Revenue Service) to the effect that, for federal income tax purposes,
such transaction will not result in a material adverse federal income tax
consequence to the Issuer, the Indenture Trustee or the Storm Recovery
Bondholders.

 

The Seller
shall not consummate any transaction referred to in clauses (a), (b), (c), (d) or
(e) above except upon execution of the above described agreement of
assumption and compliance with clauses (i), (ii), (iii), (iv) and (v) above.
When any Person acquires the properties and assets of the Seller substantially
as a whole and succeeds to all or substantially all of the electric
transmission and distribution business of the Seller (or, if the transmission
and distribution business is split, any person which the Louisiana Commission
designates in connection with an order relating to such split), or otherwise
becomes the successor to the Seller in accordance with the terms of this Section 5.02,
then upon the satisfaction of all of the other conditions of this Section 5.02,
the Seller shall automatically and without further notice be released from its
obligations hereunder.

 

Section 5.03           Limitation
on Liability of the Seller and Others.   The Seller and any
manager, officer, employee or agent of the Seller may rely in good faith on the
advice of counsel or on any document of any kind, prima facie properly executed
and submitted by any Person, respecting any matters arising hereunder.  Subject to Section 4.07, the Seller
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its obligations under this Agreement, and that
in its opinion may involve it in any expense or liability.

 

ARTICLE VI

 

MISCELLANEOUS PROVISIONS

 

Section 6.01           Amendment.

 

(a)           This Agreement may be
amended in writing by the Seller and the Issuer, provided that (i) the
Rating Agency Condition has been satisfied in connection therewith, (ii) the
Indenture Trustee has consented thereto and (iii) in the case of any
amendment that increases ongoing financing costs as defined in the Financing
Order, the Louisiana Commission has consented thereto or shall be conclusively
deemed to have consented thereto.  Promptly
after the execution of any such amendment or consent, the Issuer shall furnish
written notification of the substance of such amendment or consent to each of
the Rating Agencies.  With respect to the
Louisiana Commission’s consent to any amendment to this Agreement,

 

18

 

(i)            the Seller may submit the amendment to the
Louisiana Commission by delivering to the Louisiana Commission’s executive
counsel a written request for such consent, which request shall contain:

 

(A)          a
reference to Docket No. U-29157 and a statement as to the possible effect
of the amendment on ongoing financing costs;

 

(B)           an
Officer’s Certificate stating that the proposed amendment has been approved by
all relevant parties to this Agreement; and

 

(C)           a
statement identifying the person to whom the Louisiana Commission or its staff
is to address its consent to the proposed amendment or request additional time;

 

(ii)           Any
amendment requiring the consent of the LPSC as provided in this Section 6.01(a) shall
become effective on the later of:

 

(A)          the
date proposed by the parties to the amendment, or

 

(B)           31
days after such submission of the amendment to the LPSC unless the LPSC issues
an order disapproving the amendment within a 30-day period.

 

(b)           Prior to the execution
of any amendment to this Agreement, the Issuer and the Indenture Trustee shall
be entitled to receive and rely upon an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement.  The Issuer and the Indenture Trustee may, but
shall not be obligated to, enter into any such amendment that affects their own
rights, duties or immunities under this Agreement or otherwise.  Following delivery of a notice to the Louisiana
Commission by the Seller under Section 6.01(a) above, the Seller and
Issuer may at any time withdraw from the Louisiana Commission further
consideration of any notification of a proposed amendment.

 

Section 6.02           Notices.   Unless
otherwise specifically provided herein, all demands, notices and communications
upon or to the Seller, the Issuer, the Indenture Trustee, the Louisiana
Commission or the Rating Agencies under this Agreement shall be in writing,
delivered personally, via facsimile, reputable overnight courier or by
certified mail, return-receipt requested, and shall be deemed to have been duly
given upon receipt

 

(a)           in the case of the
Seller, to Cleco Power LLC, 2030 Donahue Ferry Road, Pineville, Louisiana
71360-5226, Attention:  Treasurer,

 

(b)           in the case of the
Issuer, to Cleco Katrina/Rita Hurricane Recovery Funding LLC, 2605 Hwy. 28 East
Office Number 12, Pineville, Louisiana 71360-5226, Attention:  Manager,

 

19

 

(c)           in the case of Moody’s,
to Moody’s Investors Service, Inc., ABS Monitoring Department, 99 Church
Street, New York, New York 10007,

 

(d)           in the case of Standard &
Poor’s, to Standard & Poor’s, a Division of the McGraw-Hill Companies,
55 Water Street, New York, New York 10041, Attention: Asset Backed Surveillance
Department,

 

(e)           in the case of Fitch,
to Fitch, Inc., 1 State Street Plaza, New York, New York 10004, Attention:
ABS Surveillance,

 

(f)            in the case the
Indenture Trustee, at the address provided for notices or communications to the
Indenture Trustee in the Indenture, and

 

(g)           in the case of the
Louisiana Commission, to Galvez Building, 12th Floor, 602 North Fifth Street,
Baton Rouge, Louisiana 70821-9154, Attention: Executive Counsel;

 

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

 

Section 6.03           Assignment by the
Seller.   Notwithstanding anything to the contrary contained
herein, except as provided in Section 5.02, this Agreement may not be
assigned by the Seller.

 

Section 6.04           Assignment
to the Indenture Trustee.   The Seller hereby acknowledges
and consents to any pledge, assignment and grant of a security interest by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of
the Storm Recovery Bondholders of all right, title and interest of the Issuer
in, to and under the Storm Recovery Property and the proceeds thereof and the
assignment of any or all of the Issuer’s rights hereunder to the Indenture
Trustee.  Notwithstanding such
assignment, in no event shall the Indenture Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.

 

Section 6.05           Limitations
on Rights of Others.   The provisions of this Agreement are
solely for the benefit of the Seller, the Issuer and the Indenture Trustee, on
behalf of itself and the Storm Recovery Bondholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.

 

Section 6.06           Severability.   Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

20

 

Section 6.07   Separate Counterparts.   This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.

 

Section 6.08   Headings.  The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.

 

Section 6.09   Governing Law.   THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
LOUISIANA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.

 

Section 6.10   Nonpetition Covenants. 
(a) Notwithstanding any prior termination of this Agreement or the
Indenture, the Seller shall not, prior to the date which is one year and one
day after the termination of the Indenture, petition or otherwise invoke or
cause the Issuer to invoke the process of any Governmental Authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Issuer or any substantial part of the property of the Issuer,
or ordering the winding-up or liquidation of the affairs of the Issuer.

 

(b)    Notwithstanding
any prior termination of this Agreement or the Indenture, the Issuer shall not,
prior to the date which is one year and one day after the termination of the
Indenture, petition or otherwise invoke or cause the Seller to invoke the
process of any Governmental Authority for the purpose of commencing or sustaining
a case against the Seller under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Seller or any substantial part of
the property of the Seller, or ordering the winding-up or liquidation of the
affairs of the Seller.

 

[Rest of page intentionally
left blank]

 

21

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the day and year first above written.

 

	
   

  	
  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 Seller,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kathleen F. Nolen

  
	
   

  	
   

  	
    Name:
  Kathleen F. Nolen

  
	
   

  	
   

  	
    Title:
  Senior Vice President and Chief Financial Officer

  

 

22

 

APPENDIX A -
DEFINITIONS

 

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

 

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

 

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

 

“Agreement” or
the “Sale Agreement” means this Storm Recovery Property Sale Agreement, as the
same may be amended and supplemented from time to time.

 

“Basic
Documents” means the Articles of Organization of the Issuer which was filed
with the Secretary of State of the State of Louisiana on October 30, 2007,
the limited liability company operating agreement of the Issuer, the Sale
Agreement, the Bill of Sale, the Servicing Agreement, the Administration
Agreement, the Indenture and the Series Supplement.

 

“Bill of Sale”
means the Bill of Sale, dated as of March 6, 2008, issued by the Seller to
the Issuer pursuant to the Sale Agreement evidencing the sale of the Storm
Recovery Property by the Seller to the Issuer.

 

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

 

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

 

“Fitch” means
Fitch, Inc., or its successor.

 

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

 

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

 

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

 

A-1

 

 “Issuance Advice Letter” means the issuance
advice letter submitted to the Louisiana Commission on February 29, 2008
by the Seller pursuant to the Financing Order in connection with the issuance
of the Storm Recovery Bonds.

 

“Issuer” means
Cleco Katrina/Rita Hurricane Recovery Funding LLC, a Louisiana limited
liability company, or its successor under the Indenture.

 

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

 

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

 

“Louisiana
Commission Pledge” means  the pledge of
the Louisiana Commission found in Part VI(G) of the Financing Order.

 

“Louisiana UCC
Filing Officer” has the meaning ascribed to such term in the Servicing
Agreement.

 

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

 

“Officer’s
Certificate” means a certificate signed, in the case of the Seller, by any
manager, the chairman of the board, the chief executive officer, the president,
any vice chairman, any executive vice president, senior vice president or vice
president, the treasurer, assistant treasurer, the secretary or any assistant
secretary of the Seller.

 

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

 

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

 

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

 

“Prospectus”
has the meaning specified in Section 3.06 hereof.

 

“Purchase
Price” has the meaning specified in Section 2.01(a) hereof.

 

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

 

A-2

 

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

 

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

 

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

 

“Series Supplement”
means the First Supplemental Indenture dated as of March 6, 2008, among
the Issuer and the Indenture Trustee, which specifies the terms of the Storm
Recovery Bonds.

 

“Servicer”
means Cleco Power, in its capacity as the servicer under the Servicing
Agreement, and each successor to or assignee of Cleco Power (in the same
capacity) pursuant to the relevant sections of the Servicing Agreement.

 

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

 

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

 

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

 

“Storm
Recovery Bond” means any of the 2008 Senior Secured Storm Recovery Bonds issued
by the Issuer pursuant to the Indenture and the Series Supplement.

 

“Storm
Recovery Bondholder” means a Person in whose name a Storm Recovery Bond is
registered on the Storm Recovery Bond Register.

 

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

 

“Storm
Recovery Charges” means the nonbypassable amounts to be charged for the use or
availability of electric services, approved by the Louisiana Commission in the
Financing Order that may be collected by the Seller, its successors, assignees
or other collection agents as provided for in the Financing Order.

 

“Storm
Recovery Property” means all of Seller’s rights and interest under the
Financing Order (including, without limitation, rights to impose, collect and
receive the “storm recovery charges” (as defined in the Securitization Act)
approved in such Financing Order) issued by the Louisiana Commission on September 17,
2007 (Docket No. U-29157) pursuant to the 

 

A-3

 

Securitization Act, except the rights of Seller to earn and receive a
rate of return on its invested capital in the Issuer, to receive administration
and servicer fees, to withdraw funds from its restricted storm recovery reserve
funded by the proceeds from the sale of the Storm Recovery Property, or to use
the Seller’s remaining portion of those proceeds.

 

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

 

“Transfer Date”
means the date on which the Storm Recovery Bonds are to be originally issued in
accordance with Section 2.10 of the Indenture.

 

“Trust Estate”
means the “Series Trust Estate” as such term is defined in the Series Supplement.

 

“UCC” has the
meaning specified in Section 2.02(iv) hereof.

 

A-4

 

EXHIBIT A

 

BILL OF SALE

 

1.             This
Bill of Sale is being delivered pursuant to the Storm Recovery Property Sale
Agreement, dated as of March 6, 2008 (the “Sale Agreement”), between Cleco
Power LLC (the “Seller”) and Cleco Katrina/Rita Hurricane Recovery Funding LLC
(the “Issuer”).  All capitalized terms
used but not defined herein have the respective meanings ascribed thereto in
the Sale Agreement.

 

2.             In
consideration of the Issuer’s payment to the Seller of $176,000,000, receipt of
which is hereby acknowledged, the Seller does hereby irrevocably sell, transfer,
assign, set over and otherwise convey to the Issuer, without recourse or
warranty, except as set forth in the Sale Agreement, all right, title and
interest of the Seller in, to and under the Storm Recovery Property identified
on Schedule 1 hereto (such sale, transfer, assignment, setting over and
conveyance of the Storm Recovery Property includes, to the fullest extent
permitted by the Securitization Act, the right to impose, collect and receive
the Storm Recovery Charges related to the Storm Recovery Property, as the same
may be adjusted from time to time).  Such
sale, transfer, assignment, setting over and conveyance is hereby expressly
stated to be a sale or other absolute transfer and, pursuant to Section 1230(1) of
the Securitization Act and other applicable law, is a true sale and is not a
secured transaction and title and ownership has passed to the Issuer.  The preceding sentence is the statement
referred to in Section 1230 of the Securitization Act.  The Seller agrees and confirms that, after giving
effect to the sale evidenced by this Bill of Sale, the Seller has no right,
title or interest in, to or under the Storm Recovery Property.

 

3.             The
Issuer does hereby purchase the Storm Recovery Property identified on Schedule
1 hereto from the Seller for the consideration set forth in paragraph 2
above.

 

4.             The
Seller and the Issuer each acknowledge and agree that the purchase price for
the Storm Recovery Property sold pursuant to this Bill of Sale and the Sale
Agreement is equal to its fair market value on the date hereof.

 

5.             The
Seller confirms that each of the representations and warranties on the part of
the Seller contained in the Sale Agreement are true and correct in all respects
on the date hereof as if made on the date hereof.

 

6.             This
Bill of Sale may be executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.

 

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

 

A-1

 

IN WITNESS
WHEREOF, the Seller and the Issuer have duly executed this Bill of Sale as of
the 6th day of March 2008.

 

	
   

  	
  CLECO KATRINA/RITA HURRICANE 

  RECOVERY FUNDING LLC,

  
	
   

  	
             as
  Issuer,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CLECO POWER LLC,

  
	
   

  	
             as
  Seller,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  

 

A-2

 

SCHEDULE 1

to

BILL OF SALE

 

Storm Recovery
Property

 

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

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