UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report:
(Date of earliest event reported)
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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| Item 8.01. | Other Events |
On November 17, 2021, Duke Energy Progress, LLC (the “Utility”) and Duke Energy Progress NC Storm Funding LLC (the “Issuing Entity”) entered into an Underwriting Agreement (the “Underwriting Agreement”) with RBC Capital Markets, LLC and Citigroup Global Markets Inc. as representatives of the underwriters identified therein with respect to the purchase and sale of $769,627,000 of Senior Secured Storm Recovery Bonds, Series A (the “Storm Recovery Bonds”), to be issued by the Issuing Entity pursuant to an Indenture and Series Supplement (together, the “Indenture”), each to be dated as of November 24, 2021, which are annexed hereto as Exhibits 4.1 and 4.2, respectively, to this Current Report on Form 8-K. The Storm Recovery Bonds were offered pursuant to the prospectus dated November 17, 2021 (the “Prospectus”). In connection with the issuance of the Storm Recovery Bonds, the Utility and the Issuing Entity also expect to enter into a Storm Recovery Property Servicing Agreement, Storm Recovery Property Purchase and Sale Agreement, and Administration Agreement, which together with the Underwriting Agreement, are annexed hereto as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report on 8-K.
Additionally, effective as of November 15, 2021, the Issuing Entity adopted an Amended and Restated Limited Liability Company Agreement (the “A&R LLC Agreement”) in connection with the issuance of the Storm Recovery Bonds. The A&R LLC Agreement, which is described in the Prospectus, was previously approved by the Utility, the sole member of the Issuing Entity. The description of the A&R LLC Agreement in the Prospectus is not complete and is qualified in its entirety by reference to the full text of the A&R LLC Agreement, which is annexed hereto as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated by reference herein.
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
DUKE ENERGY PROGRESS, LLC | ||
| By: | /s/ Robert T. Lucas III | |
| Robert T. Lucas III | ||
| Dated: November 19, 2021 | Assistant Secretary | |
| DUKE ENERGY PROGRESS NC STORM FUNDING LLC | ||
| By: | /s/ Robert T. Lucas III | |
| Robert T. Lucas III | ||
| Dated: November 19, 2021 | Secretary | |
Exhibit 1.1
EXECUTION VERSION
Duke Energy Progress NC Storm Funding LLC
$769,627,000 SERIES A Storm Recovery Bonds
UNDERWRITING AGREEMENT
November 17, 2021
To the Representatives named in Schedule I hereto
of the Underwriters named in Schedule II hereto
Ladies and Gentlemen:
1. Introduction. Duke Energy Progress NC Storm Funding LLC, a Delaware limited liability company (the “Issuer”), a wholly-owned subsidiary of Duke Energy Progress, LLC, a North Carolina limited liability company (the “Depositor”), proposes to issue and sell $769,627,000 aggregate principal amount of its Series A Storm Recovery Bonds, (the “Bonds”), identified in Schedule I hereto. The Issuer and the Depositor, hereby confirm their agreement with the several Underwriters (as defined below) as set forth herein.
The term “Underwriters” as used herein shall be deemed to mean the several entities named in Schedule II hereto and any underwriter substituted as provided in Section 6 hereof and the term “Underwriter” shall be deemed to mean any one of such Underwriters. The term “Representatives” as used herein shell be deemed to mean the entities named in Schedule I hereto as representatives. All obligations of the Underwriters hereunder are several and not joint. If more than one entity is named in Schedule I hereto, any action under or in respect of this Agreement (“Agreement”) may be taken by such entities jointly as the Representatives or by one of the entities acting on behalf of the Representatives and such action will be binding upon all the Underwriters.
Capitalized terms used and not otherwise defined in this Agreement shall have the meanings given to them in the Indenture (as defined below) attached hereto as Exhibit A.
2. Description of the Bonds. The Bonds will be issued pursuant to an indenture to be dated as of November 24, 2021, as supplemented by one or more series supplements thereto (as so supplemented, the “Indenture”), between the Issuer and The Bank of New York Mellon Trust Company, National Association as indenture trustee (the “Indenture Trustee”). The Bonds will be senior secured obligations of the Issuer and will be supported by storm recovery property (as more fully described in the irrevocable financing order by the North Carolina Utilities Commission (“NCUC”) to the Depositor dated May 10, 2021, relating to the Bonds, which was clarified and corrected by the NCUC in an Order Clarifying and Correcting Financing Order on July 13, 2021 (the “Financing Order”), (the “Storm Recovery Property”), to be sold to the Issuer by the Depositor pursuant to the Storm Recovery Property Purchase and Sale Agreement, to be dated on or about November 24, 2021 between the Depositor and the Issuer (the “Sale Agreement”). The Storm Recovery Property securing the Bonds will be serviced pursuant to the Storm Recovery Property Servicing Agreement, to be dated on or about November 24, 2021 between the Depositor, as servicer, and the Issuer, as owner of the Storm Recovery Property sold to it pursuant to the Sale Agreement (the “Servicing Agreement”).
3. Representations and Warranties of the Issuer. The Issuer represents and warrants to the several Underwriters that:
(a) The Bonds have been registered on Form SF-1 pursuant to guidance from the Securities and Exchange Commission (the “Commission”) and in accordance with such guidance the Issuer and the Bonds meet the requirements for the use of Form SF-1 under the Securities Act of 1933, as amended (the “Securities Act”). The Issuer, in its capacity as co-registrant and issuing entity with respect to the Bonds, and the Depositor, in its capacity as co-registrant and as sponsor for the Issuer, have prepared and filed with the Commission a registration statement on such form on September 3, 2021 (Registration Nos. 333-259315 and 333-259315-01), as amended by Amendment No. 1 thereto filed October 28, 2021 and Amendment No. 2 thereto filed November 1, 2021, including a prospectus, for the registration under the Securities Act of up to $771,525,000 aggregate principal amount of the Bonds. Such registration statement, as amended (“Registration Statement Nos. 333-259315 and 333-259315-01”), has been declared effective by the Commission and no stop order suspending such effectiveness has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Issuer, threatened by the Commission. No storm recovery bonds registered with the Commission under the Securities Act pursuant to Registration Statement Nos 333-259315 and 333-259315-01 have been previously issued. References herein to the term “Registration Statement” shall be deemed to refer to Registration Statement Nos. 333-259315 and 333-259315-01, including any amendment thereto, and any information in a prospectus, as amended or supplemented as of the Effective Date (as defined below), deemed or retroactively deemed to be a part thereof pursuant to Rule 430A under the Securities Act (“Rule 430A”) that has not been superseded or modified. “Registration Statement” without reference to a time means the Registration Statement as of the Applicable Time (as defined below), which the parties agree is the time of the first contract of sale (as used in Rule 159 under the Securities Act) for the Bonds, and shall be considered the “Effective Date” of the Registration Statement relating to the Bonds, and information contained in a form of prospectus (as amended or supplemented as of the Effective Date) that is deemed retroactively to be a part of the Registration Statement pursuant to Rule 430A shall be considered to be included in the Registration Statement as of the time specified in Rule 430A. The final prospectus relating to the Bonds, as filed with the Commission pursuant to Rule 424(b) under the Securities Act is referred to herein as the “Final Prospectus”; and the most recent preliminary prospectus that omitted information to be included upon pricing in a form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act and that was used after the initial effectiveness of the Registration Statement and prior to the Applicable Time is referred to herein as the “Pricing Prospectus”. The Pricing Prospectus and the Issuer Free Writing Prospectuses (as defined below) identified in Part A and Part B of Schedule III hereto, considered together, are referred to herein as the “Pricing Package”.
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(b) At the time the Registration Statement initially became effective, at the time of each amendment (whether by post-effective amendment, incorporated report or form of prospectus) and on the Effective Date relating to the Bonds, the Registration Statement fully complied, and the Final Prospectus, both as of its date and at and as of the Closing Date, and the Indenture, at the Closing Date, will fully comply in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), and, in each case, the applicable instructions, rules and regulations of the Commission thereunder; the Registration Statement, at each of the aforementioned dates, did not and will not contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary to make the statements therein, not misleading; the Final Prospectus, both as of its date and at and as of the Closing Date, will not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that the foregoing representations and warranties in this paragraph (b) shall not apply to statements or omissions made in reliance upon and in conformity with any Underwriter Information as defined in Section 11(e) below or to any statements in or omissions from any Statements of Eligibility on Form T-1 (or amendments thereto) of the Indenture Trustee under the Indenture filed as exhibits to the Registration Statement or to any statements or omissions made in the Registration Statement or the Final Prospectus relating to The Depository Trust Company (“DTC”) Book-Entry System that are based solely on information contained in published reports of the DTC.
(c) As of its date, at the Applicable Time and on the date of its filing, if applicable, the Pricing Prospectus and each Issuer Free Writing Prospectus (when considered together with the Pricing Prospectus), did not include any untrue statement of a material fact nor when considered together, omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that the principal amount of the Bonds, the tranches, expected average lives and sensitivity data, proceeds to Issuer, underwriter allocation for each tranche, selling concession, reallowance discounts, issuance date, the expected amortization schedule, the initial principal balances, the scheduled final payment dates, the final maturity dates, and the expected sinking fund schedule described in the Pricing Prospectus were subject to completion or change based on market conditions, and the interest rate, price to the public and underwriting discounts and commissions for each tranche as well as certain other information dependent on the foregoing and other pricing related information was not included in the Pricing Prospectus). The Pricing Package, at the Applicable Time did not, and at all subsequent times through the completion of the offer and the sale of the Bonds on the Closing Date will not, include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The two preceding sentences do not apply to statements in or omissions from the Pricing Package, the Pricing Term Sheet or any other Issuer Free Writing Prospectus in reliance upon and in conformity with any Underwriter Information. “Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433(h) under the Securities Act, relating to the Bonds, in the form filed or required to be filed with the Commission or, if not required to be filed, in the form required to be retained in the Issuer’s records pursuant to Rule 433(g) of the Securities Act. References to the term “Free Writing Prospectus” shall mean a free writing prospectus, as defined in Rule 405 under the Securities Act. References to the term “Applicable Time” mean 4:40 PM, eastern time, on the date hereof. The Issuer represents, warrants and agrees that it has treated and agrees that it will treat each of the free writing prospectuses listed in Part A and Part B of Schedule III hereto as an Issuer Free Writing Prospectus, and that each such Issuer Free Writing Prospectus has fully complied and will fully comply with the applicable requirements of Rules 164 and 433 under the Securities Act, including timely Commission filing where required, legending and record keeping. The Issuer represents, warrants and agrees that there have been no Issuer Free Writing Prospectuses used in connection with the offering of the Bonds (as contemplated by the Registration Statement, the Pricing Package and the Final Prospectus) other than the materials listed on Schedule III hereto.
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(d) Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the offer and sale of the Bonds on the Closing Date or until any earlier date that the Issuer or the Depositor notified or notifies the Representatives as described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information then contained in the Registration Statement. If at any time following issuance of an Issuer Free Writing Prospectus an event or development has occurred or occurs, the result of which is that such Issuer Free Writing Prospectus conflicts or would conflict with the information then contained in the Registration Statement or includes or would include an untrue statement of a material fact or, when considered together with the Pricing Package, omits or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, (i) the Depositor or the Issuer has promptly notified or will promptly notify the Representatives and (ii) the Depositor or the Issuer has promptly amended or will promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission. The foregoing two sentences do not apply to statements in or omissions from any Issuer Free Writing Prospectus in reliance upon and in conformity with any Underwriter Information.
(e) The Issuer has been duly formed and is validly existing as a limited liability company in good standing under the Limited Liability Company Act of the State of Delaware, as amended, with full limited liability company power and authority to execute, deliver and perform its obligations under this Agreement, the Indenture, the Bonds, the Sale Agreement, the bill of sale contemplated by the Sale Agreement (the “Bill of Sale”), the Servicing Agreement, the Joinder to Intercreditor Agreement to be dated as of the Closing Date among, inter alia, the Issuer, the Depositor and the Indenture Trustee (the “Joinder Intercreditor Agreement”), and the administration agreement to be dated as of the Closing Date between the Issuer and the Depositor (the “Administration Agreement”) and the other agreements and instruments contemplated by the Pricing Package and the Final Prospectus to which the Issuer is a party (collectively, the “Issuer Documents”), to complete the Issuer Transactions (as defined below) and to own its properties and conduct its business as described in the Registration Statement, the Pricing Package and the Final Prospectus; the Issuer has been duly qualified as a foreign limited liability company for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where failure to so qualify or to be in good standing would not, individually or in the aggregate reasonably be expected to have (A) a material adverse effect on business, properties, financial condition or results of operations of the Issuer or (B) a material adverse effect on the performance by the Issuer of this Agreement or any of the Issuer Documents or the consummation of any of the transactions contemplated hereby or thereby (collectively, clauses (A) and (B), an “Issuer Material Adverse Effect”); the Issuer has conducted and will conduct no business in the future that would be inconsistent with the description of the Issuer’s business set forth in the Registration Statement, the Pricing Package and the Final Prospectus; the Issuer is not a party to or bound by any agreement or instrument other than the Issuer Documents and other agreements or instruments incidental to its formation and the Rating Agency Letters (as defined below); the Issuer has no material liabilities or obligations other than those arising out of the transactions contemplated by the Issuer Documents and as described in the Registration Statement, the Pricing Package and the Final Prospectus; the Depositor is the direct and beneficial owner of all of the limited liability company interests of the Issuer; and based on current law, the Issuer is not classified as an association taxable as a corporation for United States federal income tax purposes.
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(f) The Issuer has no subsidiaries within the meaning of Rule 405 at the Securities Act.
(g) The issuance and sale of the Bonds, the execution, delivery and performance by the Issuer of the Bonds, the purchase of the Storm Recovery Property by the Issuer from the Depositor, the execution, delivery and performance by the Issuer of this Agreement and the Issuer Documents, the application of the proceeds from the sale of the Bonds as described under “Use of Proceeds” in each of the Pricing Package, the Registration Statement and the Final Prospectus and the consummation of the transactions contemplated hereby and thereby (collectively, the “Issuer Transactions”), will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, impose any lien, charge or encumbrance upon any property or assets of the Issuer or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument (giving effect to any amendments or terminations thereof as contemplated by the Registration Statement, the Pricing Package and the Final Prospectus) to which the Issuer is a party or by which the Issuer is bound or to which any of the property or assets of the Issuer is subject, except for liens created by the Indenture or the other Issuer Documents, (ii) result in any violation of the provisions of the Issuer’s certificate of formation or limited liability company agreement (collectively, the “Issuer Charter Documents”), or (iii) result in any violation of any statute, law, judgment, order, decree, rule or regulation of any court, regulatory body, administrative agency, arbitrator or governmental agency or body having jurisdiction over the Issuer, or any of its properties or assets, except (in the case of clauses (i) and (iii)) as would not, individually or in the aggregate, be reasonably expected to have an Issuer Material Adverse Effect.
(h) This Agreement has been duly authorized, executed and delivered by the Issuer, which has the necessary limited liability company power and authority to execute, deliver and perform its obligations under this Agreement.
(i) The Issuer (i) is not in violation of the Issuer Charter Documents, (ii) is not in default and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust or other agreement or instrument to which the Issuer is a party or by which it is bound or to which any of its properties is subject, except for any such defaults that would not, individually or in the aggregate, be reasonably expected to have an Issuer Material Adverse Effect, and (iii) is not in violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Issuer, to which it or its property may be subject, except for any such violations that would not, individually or in the aggregate, be reasonably expected to have an Issuer Material Adverse Effect.
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(j) The Indenture has been duly authorized by the Issuer, and, on the Closing Date, will have been duly executed and delivered by the Issuer and will be a valid and binding instrument, enforceable against the Issuer in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). On the Closing Date, the Indenture will (i) comply as to form in all material respects with the requirements of the Trust Indenture Act and (ii) conform in all material respects to the description thereof in the Registration Statement, the Pricing Package and Final Prospectus.
(k) The Bonds have been duly authorized by the Issuer for issuance and sale to the Underwriters pursuant to this Agreement and, when executed by the Issuer and authenticated by the Indenture Trustee in accordance with the Indenture and delivered to the Underwriters against payment therefor in accordance with the terms of this Agreement, will constitute valid and binding obligations of the Issuer entitled to the benefits of the Indenture and enforceable against the Issuer in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Bonds, when issued, will conform in all material respects to the description thereof in the Registration Statement, the Pricing Package and Final Prospectus. The Issuer has all requisite limited liability company power and authority to issue, sell and deliver the Bonds in accordance with and upon the terms and conditions set forth herein and in the Registration Statement, the Pricing Package and Final Prospectus.
(l) There is no litigation or any legal or governmental proceeding to which the Issuer is a party or to which any property of the Issuer is subject or which is pending or, to the knowledge of the Issuer, threatened against the Issuer or any property of the Issuer except as would not, individually or in the aggregate, be reasonably be expected to have an Issuer Material Adverse Effect.
(m) Other than any necessary action or inaction by the NCUC or any filings required by the Financing Act or the Financing Order, no approval, authorization, consent, filing with or order of any court or governmental agency or body (except such as have been already obtained and other than in connection or in compliance with the provisions of applicable blue-sky laws or securities laws of any state, as to which the Issuer makes no representations or warranties under this paragraph (m)), is legally required for the transactions contemplated hereby, including issuance and sale by the Issuer of the Bonds pursuant to this Agreement.
(n) The Issuer is not, and, after giving effect to the sale and issuance of the Bonds and the application of the proceeds thereof as described in the Pricing Package and the Final Prospectus, will not be an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”).
(o) The nationally recognized accounting firm which has performed certain procedures with respect to certain statistical and structural information contained in the Pricing Package and the Final Prospectus, are independent public accountants.
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(p) Each of the Sale Agreement, the Bill of Sale, the Servicing Agreement, the Administration Agreement, and the Joinder Intercreditor Agreement has been duly and validly authorized by the Issuer, and when executed and delivered by the Issuer on or prior to the Closing Date and the other parties thereto, will constitute a valid and legally binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(q) Relying on an exclusion or exemption from the definition of “investment company” under the 1940 Act under Section 3(c)(5)(A) under the 1940 Act, although additional exclusions or exemption may be available, the Issuer is not a “covered fund” for purposes of the regulations adopted to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
(r) The Issuer has complied with the written representations, acknowledgements and covenants (the “17g-5 Representations”) relating to compliance with Rule 17g-5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) set forth in the (i) undertaking, dated as of July 28, 2021, by the Issuer to Moody’s (as defined below) and (ii) letter, dated July 28, 2021, from the Issuer to S&P (as defined below and together with Moody’s, the “Rating Agencies”) (collectively, the “Rating Agency Letters”), other than (x) any noncompliance of the 17g-5 Representations that would not, individually or in the aggregate, be reasonably expected to have a material adverse effect on the rating of the Bonds or the Bonds or (y) any noncompliance arising from the breach by an Underwriter of the representations and warranties and covenants set forth in Section 15 hereof.
(s) Issuer will comply, and has complied, in all material respects, with its diligence and disclosure obligations in respect to the Bonds under Rule 193 of the Securities Act and Items 1111(a)(7) and 1111(a)(8) of Regulation AB.
(t) The Bonds are not subject to the risk retention requirements imposed by Section 15G of the Exchange Act.
(u) At the time of filing the Registration Statement, at the earliest time thereafter that the Issuer made a bona fide offer (within the meaning of Rule 164(h)(2)) of the Bonds and at the date hereof, the Issuer was not and is not an “ineligible issuer”, as defined in Rule 405 of the Rules and Regulations.
(v) Other than the security interest to be granted to the Indenture Trustee under the Indenture, pursuant to the other Issuer Documents, as of the Closing Date, the Issuer has not pledged, assigned, sold or granted as of the Closing Date a security interest in the Storm Recovery Property. As of the Closing Date, all action necessary (including the filing of UCC-1 financing statements) to protect and evidence the Indenture Trustee’s security interest in the Storm Recovery Property in the United States will have been duly and effectively taken (as described in, and subject to any exceptions to be set forth in, the Indenture or any other Issuer Document). As of or within a reasonable time after the Closing Date, no security agreement, financing statement, equivalent security or lien instrument or continuation statement authorized by the Issuer or the Depositor and listing such person as debtor covering all or any part of the Storm Recovery Property shall be on file or of record in any jurisdiction in the United States except (i) in respect of any such security interest of the Depositor that will be released on the Closing Date or (ii) such as may have been filed, recorded or made by such person in favor of the Indenture Trustee on behalf of the Holders of Bonds in connection with the Indenture, and no such person has authorized any such filing.
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(w) The statements made in the Registration Statement, the Pricing Package and the Final Prospectus under the caption “Description of the Storm Recovery Bonds” insofar as it constitutes a summary of the terms of the Bonds, and under captions “Risk Factors,” “The Storm Recovery Property and the Financing Act,” “DEP’s Financing Order,” “The Issuing Entity,” “Duke Energy Progress, LLC,” “Security for the Storm Recovery Bonds,” “Weighted Average Life and Yield Considerations for the Bonds,” “The Sale Agreement,” “The Servicing Agreement,” “Intercreditor Agreement,” “Material U.S. Federal Income Tax Consequences,” “State and Other Tax Consequences,” “ERISA Considerations,” and “Bankruptcy and Creditors’ Rights Issues,” insofar as they purport to constitute summaries of the terms of statutes, rules or regulations, legal or governmental proceedings or contracts and other documents, constitute accurate summaries of the terms of such statutes, rules and regulations, legal and governmental proceedings and contracts and other documents in all material respects subject to the qualifications and limitations set forth therein.
(x) The statements included in the Registration Statement, the Pricing Package and the Final Prospectus under the heading “Weighted Average Life and Yield Considerations For the Bonds—Weighted Average Life Sensitivity” have been derived in the manner described under, and subject to the qualifications and limitations set forth under, the heading “Weighted Average Life and Yield Considerations For the Bonds—Assumptions.” The assumptions used in preparing such statements provide a reasonable basis for presenting the effects of the events described therein and such statements give reasonable effect to those assumptions and events in good faith.
(y) The accountant which has delivered the Initial AUP Letter referred to in Section 9(j) hereof, does not, as of the date of such report, have any material relationships with the Issuer or any of its affiliates other than such material relationships in which it is engaged to render professional services.
(z) The statistical and market-related data included in the Registration Statement, the Pricing Package and the Final Prospectus are based on or derived from sources that the Issuer believes to be reliable in all material respects.
(aa) The Issuer is not a party to any contract, agreement or understanding with any person (other than this Agreement) that would be reasonably likely to give rise to a valid claim against it or the Underwriters for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Bonds.
4. Representations and Warranties of the Depositor. The Depositor represents and warrants to the several Underwriters that:
(a) The Depositor, in its capacity as co-registrant and sponsor with respect to the Bonds, meets the requirements to use Form SF-1 under the Securities Act and has prepared and filed with the Commission the Registration Statement for the registration under the Securities Act of up to $771,525,000 aggregate principal amount of the Bonds. The Registration Statement has been declared effective by the Commission and no stop order suspending such effectiveness has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Depositor, threatened by the Commission. No storm recovery bonds registered with the Commission under the Securities Act pursuant to the Registration Statement have been previously issued.
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(b) At the time the Registration Statement initially became effective, at the time of each amendment (whether by post-effective amendment, incorporated report or form of prospectus) and on the Effective Date relating to the Bonds, the Registration Statement fully complied, and the Final Prospectus, both as of its date and at and as of the Closing Date, and the Indenture, at the Closing Date, will fully comply in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act, and, in each case, the applicable instructions, rules and regulations of the Commission thereunder; the Registration Statement, at each of the aforementioned dates, did not and will not contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary to make the statements therein, not misleading; the Final Prospectus, both as of its date and at and as of the Closing Date, will not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that the foregoing representations and warranties in this paragraph (b) shall not apply to statements or omissions made in reliance upon and in conformity with any Underwriter Information or to any statements in or omissions from any Statements of Eligibility on Form T-1 (or amendments thereto) of the Indenture Trustee under the Indenture filed as exhibits to the Registration Statement or to any statements or omissions made in the Registration Statement or the Final Prospectus relating to DTC Book-Entry System that are based solely on information contained in published reports of the DTC.
(c) As of its date, at the Applicable Time and on the date of its filing, if applicable, the Pricing Prospectus and each Issuer Free Writing Prospectus (when considered together with the Pricing Prospectus), did not include any untrue statement of a material fact nor when considered together, omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that the principal amount of the Bonds, the tranches, proceeds to Issuer, underwriter allocation for each tranche, selling concession, reallowance discounts, issuance date, scheduled payment dates, the initial principal balances, the scheduled final payment dates, the final maturity dates, the expected average lives and sensitivity data, selling concession, reallowance discounts, issuance date, the expected amortization schedule and the expected sinking fund schedule described in the Pricing Prospectus were subject to completion or change based on market conditions, and the servicing fee, the interest rate, price to the public and underwriting discounts and commissions for each tranche as well as certain other information dependent on the foregoing and other pricing related information was not included in the Pricing Prospectus). The Pricing Package, at the Applicable Time did not, and at all subsequent times through the completion of the offer and the sale of the Bonds on the Closing Date will not, include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The two preceding sentences do not apply to statements in or omissions from the Pricing Package, the Pricing Term Sheet or any other Issuer Free Writing Prospectus in reliance upon and in conformity with any Underwriter Information. The Depositor represents, warrants and agrees that it has treated and agrees that it will treat each of the free writing prospectuses listed in Part A and Part B of Schedule III hereto as an Issuer Free Writing Prospectus, and that each such Issuer Free Writing Prospectus has fully complied and will fully comply with the applicable requirements of Rules 164 and 433 under the Securities Act, including timely Commission filing where required, legending and record keeping. The Depositor represents, warrants and agrees that there have been no Issuer Free Writing Prospectuses used in connection with the offering of the Bonds (as contemplated by the Registration Statement, the Pricing Package and the Final Prospectus) other than the materials listed on Schedule III hereto.
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(d) Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the offer and sale of the Bonds on the Closing Date or until any earlier date that the Issuer or the Depositor notified or notifies the Representatives as described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information then contained in the Registration Statement. If at any time following issuance of an Issuer Free Writing Prospectus an event or development has occurred or occurs, the result of which is that such Issuer Free Writing Prospectus conflicts or would conflict with the information then contained in the Registration Statement or includes or would include an untrue statement of a material fact or, when considered together with the Pricing Package, omits or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, (i) the Depositor or the Issuer has promptly notified or will promptly notify the Representatives and (ii) the Depositor or the Issuer has promptly amended or will promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission. The foregoing two sentences do not apply to statements in or omissions from any Issuer Free Writing Prospectus in reliance upon and in conformity with any Underwriter Information.
(e) The Depositor has been duly formed and is validly existing as a limited liability company in good standing under the North Carolina Limited Liability Company Act, with full limited liability company power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the Pricing Package and the Final Prospectus and to complete the Depositor Transactions (as defined below), and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where failure to so qualify or to be in good standing would not, individually or in the aggregate reasonably be expected to have (A) a material adverse effect on the business, financial condition or results of operations of the Depositor and its subsidiaries taken as a whole or (B) a material adverse effect on the performance by the Depositor of this Agreement, the Receivables Amendments (as defined below) or any of the Issuer Documents to which it is a party or the consummation of any of the transactions contemplated hereby or thereby (collectively, clauses (A) and (B), a “Depositor Material Adverse Effect”), and has all requisite power and authority to sell Storm Recovery Property as described in the Pricing Package and to execute, deliver and otherwise perform its obligation under any Issuer Document to which it is a party and the execute the amended and restated limited liability company agreement of the Issuer to be dated as of the Closing Date (the “LLC Agreement”). The Depositor is the direct and beneficial owner of all of the limited liability company interests of the Issuer; and based on current law, the Issuer is not classified as an association taxable as a corporation for United States federal income tax purposes.
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(f) Each significant subsidiary (as defined in Rule 405 under the Securities Act) of the Depositor has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite authority to own or lease its properties and conduct its business and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not, individually or in the aggregate, be reasonably expected to have a Depositor Material Adverse Effect.
(g) The execution, delivery and performance by the Depositor of this Agreement, the Receivables Amendments, and each Issuer Document to which it is a party, the application of the proceeds by the Depositor from the sale of the Storm Recovery Property as described under “Use of Proceeds” in each of the Registration Statement, the Pricing Package and the Final Prospectus and the consummation of the transactions contemplated hereby and thereby (the “Depositor Transactions”), will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, impose any lien, charge or encumbrance upon any property or assets of the Depositor or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument (giving effect to amendments or terminations thereof as contemplated by the Registration Statement, the Pricing Package and the Final Prospectus) to which the Depositor is a party or by which the Depositor is bound or to which any of its properties or assets are subject, (ii) result in any violation of the provisions of the Depositor’s Articles of Organization or Limited Liability Company Operating Agreement (collectively, the “Depositor Charter Documents”), or (iii) result in any violation of any statute, law, judgment, order, decree, rule or regulation of any court, regulatory body, administrative agency, arbitrator or governmental agency or body having jurisdiction over the Depositor, or any of its respective properties or assets, except (in the case of clauses (i) and (iii)) as would not, individually or in the aggregate, be reasonably expected to have a Depositor Material Adverse Effect.
(h) This Agreement has been duly authorized, executed and delivered by the Depositor, which has the necessary limited liability company power and authority to execute, deliver and perform its obligations under this Agreement.
(i) The Depositor is not in violation of or default of and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in (i) the Depositor Charter Documents, (ii) any indenture, mortgage, deed of trust or other agreement or instrument to which the Depositor is a party or by which it is bound or to which any of its properties is subject, except for any such defaults that would not, individually or in the aggregate, be reasonably expected to have a Depositor Material Adverse Effect, and (iii) is not in violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over it to which it or its property may be subject, except for any such violations that would not, individually or in the aggregate, be reasonably expected to have a Depositor Material Adverse Effect.
(j) There is no litigation or any legal or governmental proceeding to which the Depositor or any of its subsidiaries is a party or to which any property of the Depositor or any of its subsidiaries is subject or which is pending or, to the knowledge of the Depositor, threatened against the Depositor or any of its subsidiaries that would, individually or in the aggregate, be reasonably expected to have in a Depositor Material Adverse Effect.
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(k) Other than any necessary action or inaction by the NCUC or any filings required by the Financing Law or the Financing Order, no approval, authorization, consent, filing with or order of any court or governmental agency or body (except such as have been already obtained and other than in connection or in compliance with the provisions of applicable blue-sky laws or securities laws of any state, as to which the Depositor makes no representations or warranties), is legally required for the issuance and sale by the Issuer of the Bonds.
(l) Neither the Issuer nor the Depositor is, and, after giving effect to the sale and issuance of the Bonds and the application of the proceeds thereof as described in the Pricing Package and the Final Prospectus, will be, an “investment company” within the meaning of the 1940 Act.
(m) Relying on an exclusion or exemption from the definition of “investment company” under the 1940 Act under Section 3(c)(5)(A) under the 1940 Act, although additional exclusions or exemption may be available, the Issuer is not a “covered fund” for purposes of the regulations adopted to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
(n) Each of the Sale Agreement, the Bill of Sale, the Servicing Agreement, the Administration Agreement, the Joinder Intercreditor Agreement and the Receivables Amendments has been duly and validly authorized by the Depositor, and when executed and delivered by the Depositor and the other parties thereto will constitute a valid and legally binding obligation of the Depositor enforceable against the Depositor in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(o) There are no North Carolina transfer taxes related to the transfer of the Storm Recovery Property or the issuance and sale of the Bonds to the Underwriters pursuant to this Agreement required to be paid at or prior to the Closing Date by the Depositor or the Issuer.
(p) The nationally recognized accounting firm referenced in Section 3(o) is a firm of independent public accountants with respect to the Depositor as required by the Securities Act and the rules and regulations of the Commission thereunder.
(q) The Depositor, in its capacity as sponsor with the respect to the Bonds, has caused the Issuer to comply with the 17g-5 Representations, other than (x) any noncompliance of the 17g-5 Representations that would not, individually or in the aggregate, be reasonably expected to have a material adverse effect on the rating of the Bonds or the Bonds or (y) any noncompliance arising from the breach by an Underwriter of the representations and warranties and covenants set forth in Section 15 hereof.
(r) The Depositor will comply, and has complied, in all material respects, with its diligence and disclosure obligations in respect to the Bonds under Rule 193 of the Act and Items 1111(a)(7) and 1111(a)(8) of Regulation AB.
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(s) The Bonds are not subject to the risk retention requirements imposed by Section 15G of the Exchange Act.
(t) At the time of filing the Registration Statement, at the earliest time thereafter that the Depositor made a bona fide offer (within the meaning of Rule 164(h)(2)) of the Bonds and at the date hereof, the Depositor was not and is not an “ineligible issuer”, as defined in Rule 405 under the Securities Act.
(u) Other than as provided in the Sale Agreement and Bill of Sale, pursuant to the other Issuer Documents, as of the Closing Date, the Depositor has not pledged, assigned, sold or granted as of the Closing Date a security interest in the Storm Recovery Property. As of the Closing Date, all action necessary (including the filing of UCC-1 financing statements) to protect and evidence the Indenture Trustee’s security interest in the Storm Recovery Property in the United States will have been duly and effectively taken (as described in, and subject to any exceptions to be set forth in, the Indenture or any other Issuer Document). As of or within a reasonable time after the Closing Date, no security agreement, financing statement, equivalent security or lien instrument or continuation statement authorized by the Issuer or the Depositor and listing such person as debtor covering all or any part of the Storm Recovery Property shall be on file or of record in any jurisdiction in the United States except (i) in respect of any such security interest of the Depositor that will be released on the Closing Date or (ii) such as may have been filed, recorded or made by such person in favor of the Indenture Trustee on behalf of the Holders of Bonds in connection with the Indenture, and no such person has authorized any such filing.
(v) The statements made in the Registration Statement, the Pricing Package and the Final Prospectus under the caption “Description of the Storm Recovery Bonds” insofar as it constitutes a summary of the terms of the Bonds, and under captions “Risk Factors,” “The Storm Recovery Property and the Financing Act,” “DEP’s Financing Order,” “The Issuing Entity,” “Duke Energy Progress, LLC,” “Security for the Storm Recovery Bonds,” “Weighted Average Life and Yield Considerations for the Bonds,” “The Sale Agreement,” “The Servicing Agreement,” “Intercreditor Agreement,” “Material U.S. Federal Income Tax Consequences,” “State and Other Tax Consequences,” “ERISA Considerations,” and “Bankruptcy and Creditors’ Rights Issues,” insofar as they purport to constitute summaries of the terms of statutes, rules or regulations, legal or governmental proceedings or contracts and other documents, constitute accurate summaries of the terms of such statutes, rules and regulations, legal and governmental proceedings and contracts and other documents in all material respects subject to the qualifications and limitations set forth therein.
(w) The statements included in the Registration Statement, the Pricing Package and the Final Prospectus under the heading “Weighted Average Life and Yield Considerations For the Bonds—Weighted Average Life Sensitivity” have been derived in the manner described under, and subject to the qualifications and limitations set forth under, the heading “Weighted Average Life and Yield Considerations For the Bonds—Assumptions.” The assumptions used in preparing such statements provide a reasonable basis for presenting the effects of the events described therein and such statements give reasonable effect to those assumptions and events in good faith.
(x) The accountant which has delivered the Initial AUP Letter referred to in Section 9(j) hereof, does not, as of the date of such report, have any material relationships with the Depositor or any of its affiliates other than such material relationships in which it is engaged to render professional services.
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(y) The statistical and market-related data included in the Registration Statement, the Pricing Package and the Final Prospectus are based on or derived from sources that the Depositor believes to be reliable in all material respects.
(z) The Depositor is not a party to any contract, agreement or understanding with any person (other than this Agreement) that would be reasonably likely to give rise to a valid claim against it or the Underwriters for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Bonds.
(aa) The Depositor has no reason to believe that the representations of the Issuer set forth in Section 3 are untrue.
5. Investor Communications.
(a) The Issuer and the Depositor each represents and agrees that, unless it has obtained or obtains the prior consent of the Representatives, and each Underwriter represents and agrees that, unless it has obtained or obtains the prior consent of the Issuer and the Depositor and the Representatives, it has not made and will not make any offer relating to the Bonds that would constitute an Issuer Free Writing Prospectus or Free Writing Prospectus (other than those identified on Schedule III hereto) required to be filed by the Issuer or the Depositor, as applicable, with the Commission or retained by the Issuer or the Depositor, as applicable, under Rule 433 under the Securities Act; provided that the prior written consent of the parties hereto shall be deemed to have been given in respect of the Pricing Term Sheet and each other Free Writing Prospectus specifically identified in Schedule III hereto.
(b) The Depositor and the Issuer (or the Representatives at the direction of the Issuer) will prepare a final pricing term sheet relating to the Bonds (the “Pricing Term Sheet”), containing only information that describes the final pricing terms of the Bonds and otherwise in a form consented to by the Representatives, and will file the Pricing Term Sheet within the period required by Rule 433(d)(5)(ii) under the Securities Act following the date such final pricing terms have been established for all tranches of the offering of the Bonds. The Pricing Term Sheet is an Issuer Free Writing Prospectus for purposes of this Agreement.
(c) Each Underwriter may provide to investors one or more of the Free Writing Prospectuses relating to offering of the Bonds, and the Pricing Term Sheet, subject to the following conditions:
(i) An Underwriter shall not convey or deliver any Written Communication (as defined herein) to any person or entity in connection with the initial offering of the Bonds, unless such Written Communication (A) constitutes a prospectus satisfying the requirements of Rule 430A under the Securities Act, or (B)(i) is made in reliance on Rule 134 under the Securities Act, is an Issuer Free Writing Prospectus listed on Schedule III hereto or is an Underwriter Free Writing Prospectus (as defined below) and (ii) such Written Communication is preceded or accompanied by a prospectus satisfying the requirements of Section 10(a) of the Securities Act. “Written Communication” has the same meaning as that term is defined in Rule 405 under the Securities Act.
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(ii) An “Underwriter Free Writing Prospectus” means any free writing prospectus that contains only preliminary or final terms of the Bonds and is not required to be filed by the Depositor or the Issuer pursuant to Rule 433 under the Securities Act and that contains information substantially the same as the information contained in the Pricing Package or Pricing Term Sheet (which may include, without limitation, (i) the tranche, size, rating, price, CUSIPs, coupon, yield, spread, benchmark, status and/or legal maturity date of the Bonds, the weighted average life, expected first and final scheduled payment dates, trade date, settlement date, transaction parties, credit enhancement, logistical details related to the location and timing of access to the roadshow, ERISA eligibility, legal investment status and payment window of the Bonds and (ii) a column or other entry showing the status of the subscriptions for the Bonds, both for the Bonds as a whole and for each Underwriter’s retention, and/or expected pricing parameters of the Bonds).
(iii) Each Underwriter shall comply with all applicable laws and regulations in connection with the use of Free Writing Prospectuses and Terms Sheets, including, but not limited to Rules 164 and 433 under the Securities Act.
(iv) All Free Writing Prospectuses provided to investors, whether or not filed with the Commission, shall bear a legend including substantially the following statement:
Duke Energy Progress NC Storm Funding LLC and Duke Energy Progress, LLC have filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents that Duke Energy Progress NC Storm Funding LLC and Duke Energy Progress, LLC have filed with the SEC for more complete information about Duke Energy Progress NC Storm Funding LLC and the offering. You may get these documents for free by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, Duke Energy Progress NC Storm Funding LLC, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling RBC Capital Markets, LLC toll free at 1-866-375-6829 or by email at syndicateops2@rbc.com or Citigroup Global Markets Inc. by calling at 1-800-831-9146.
(v) The Issuer and the Representatives shall have the right to require additional specific legends or notations to appear on any Free Writing Prospectus, the right to require changes regarding the use of terminology and the right to determine the types of information appearing therein with the approval of, in the case of the Issuer, Representatives and, in the case of the Representatives, the Issuer (which in either case shall not be unreasonably withheld).
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(vi) Each Underwriter covenants with the Issuer and the Depositor that after the Final Prospectus is available and until the completion of the offer and sale of the Bonds, such Underwriter shall not distribute any written information concerning the Bonds to an investor unless such information is preceded or accompanied by the Final Prospectus or by notice to the investor that the Final Prospectus is available for free by visiting EDGAR on the Commission website at www.sec.gov.
(vii) Each Underwriter covenants that if an Underwriter shall use an Underwriter Free Writing Prospectus that contains information in addition to (x) “issuer information”, including information with respect to the Depositor, as defined in Rule 433(h)(2) under the Securities Act or (y) the information in the Pricing Package, the liability arising from its use of such additional information shall be the sole responsibility of the Underwriter using such Underwriting Free Writing Prospectus unless the Underwriter Free Writing Prospectus (or any information contained therein) was consented to in advance by the Depositor; provided, however, that, for the avoidance of doubt, this clause (vii) shall not be interpreted as tantamount to the indemnification obligations contained in Section 11(b) hereof.
6. Purchase, Sale and Delivery of Notes.
(a) On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Issuer agrees to sell to each of the Underwriters, and each Underwriter agrees, severally and not jointly, to purchase from the Issuer, at a purchase price set forth in Schedule I hereto, the respective principal amounts of Bonds set forth opposite the names of the Underwriters in Schedule II hereto plus the respective principal amounts of additional Bonds that each such Underwriter may become obligated to purchase pursuant to the provisions of Section 6(c) hereof. The Issuer shall pay (in the form of a discount to the principal amount of the offered Bonds) to the Underwriters a commission equal to $3,078,508. The Issuer shall pay 75% of such commission as a fixed fee to the Representatives and the remaining 25% of such commission as a performance based fee to the other Underwriters.
(b) Delivery of the Bonds against payment of the aggregate purchase price therefor by wire transfer in federal funds shall be made at the place, on the date and at the time specified in Schedule I hereto, or at such other place, time and date as shall be agreed upon in writing by the Issuer and the Representatives. The hour and date of such delivery and payment are herein called the “Closing Date”. The Bonds shall be delivered to DTC or to The Bank of New York Mellon Trust Company, National Association, as custodian for DTC, in fully registered global form registered in the name of Cede & Co., for the respective accounts specified by the Representatives not later than the close of business on the business day preceding the Closing Date or such other time as may be agreed upon by the Representatives. The Issuer agrees to make the Bonds available to the Representatives for checking purposes not later than 1:00 P.M. New York Time on the last business day preceding the Closing Date at the place specified for delivery of the Bonds in Schedule I hereto, or at such other place as the Issuer may specify.
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(a) If any Underwriter shall fail or refuse to purchase and pay for the aggregate principal amount of Bonds that such Underwriter has agreed to purchase and pay for hereunder, the Issuer shall promptly give notice to the other Underwriters of the default of such Underwriter, and the other Underwriters shall have the right within 24 hours after the receipt of such notice to determine to purchase, or to procure one or more others, who are members of the Financial Industry Regulatory Authority (“FINRA”) (or, if not members of the FINRA, who are not eligible for membership in the FINRA and who agree (i) to make no sales within the United States, its territories or its possessions or to persons who are citizens thereof or residents therein and (ii) in making sales to comply with the FINRA’s Conduct Rules) and satisfactory to the Issuer, to purchase, upon the terms herein set forth, the aggregate principal amount of Bonds that the defaulting Underwriter had agreed to purchase. If any non-defaulting Underwriter or Underwriters shall determine to exercise such right, such Underwriter or Underwriters shall give written notice to the Issuer of the determination in that regard within 24 hours after receipt of notice of any such default, and thereupon the Closing Date shall be postponed for such period, not exceeding three business days, as the Issuer shall determine.. If in the event of such a default no non-defaulting Underwriter shall give such notice, this Agreement may be terminated by the Issuer, upon notice given to the non-defaulting Underwriters, within a further period of 24 hours. If the Issuer does not elect to terminate this Agreement it shall have the right, irrespective of such default:
(i) to require each non-defaulting Underwriter to purchase and pay for the respective aggregate principal amount of Bonds that it had agreed to purchase hereunder as hereinabove provided and, in addition, the aggregate principal amount of Bonds that the defaulting Underwriter shall have so failed to purchase up to an aggregate principal amount of Bonds equal to 10% of the aggregate principal amount of Bonds that such non-defaulting Underwriter has otherwise agreed to purchase hereunder, and/or
(ii) to procure one or more persons, reasonably acceptable to the Representatives, who are members of the FINRA (or, if not members of the FINRA, who are not eligible for membership in the FINRA and who agree (i) to make no sales within the United States, its territories or its possessions or to persons who are citizens thereof or residents therein and (ii) in making sales to comply with the FINRA’s Conduct Rules), to purchase, upon the terms herein set forth, either all or a part of the aggregate principal amount of Bonds that such defaulting Underwriter had agreed to purchase or that portion thereof that the remaining Underwriters shall not be obligated to purchase pursuant to the foregoing clause (a).
In the event the Issuer shall exercise its rights under (i) and/or (ii) above, the Issuer shall give written notice thereof to the non-defaulting Underwriters within such further period of 24 hours, and thereupon the Closing Date shall be postponed for such period, not exceeding three business days, as the Issuer shall determine.
In the computation of any period of 24 hours referred to in this Section 6, there shall be excluded a period of 24 hours in respect of each Saturday, Sunday or legal holiday that would otherwise be included in such period of time.
Any action taken by the Issuer or the Depositor under this Section 6 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
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7. Offering by the Underwriters. It is understood that the several Underwriters propose to offer the Bonds for sale to the public as set forth in the Registration Statement, the Pricing Package and the Final Prospectus.
8. Covenants.
(a) Covenants of the Issuer. The Issuer covenants and agrees with the several Underwriters that:
(i) The Issuer will promptly deliver to the Representatives and Counsel for the Underwriters a conformed copy of the Registration Statement, certified by an officer of the Issuer to be in the form as originally filed and all amendments thereto, including all consents and exhibits filed therewith. The Issuer will deliver to each of the Underwriters, as soon as practicable after the date hereof, such number of copies of any preliminary prospectus, the Final Prospectus, the Registration Statement, and all amendments of and supplements to such documents, if any, as you may reasonably request. Prior to 10:00 A.M., New York City time, on the second business day next succeeding the date of this Agreement and from time to time thereafter, the Issuer will furnish the Underwriters with copies of the Final Prospectus in New York City in such quantities as you may reasonably request.
(ii) (A) If at any time when a Final Prospectus or Pricing Package (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required to be delivered under the Securities Act, any event shall have occurred as a result of which the Pricing Package (prior to the availability of the Final Prospectus) or the Final Prospectus as then amended or supplemented would, in the reasonable judgment of the Representatives or the Issuer, include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time of delivery of such Pricing Package or Final Prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act), not misleading; (B) if to comply with the Securities Act, the Exchange Act or the related rules and regulations (including, without limitation, Section 11(a) or 12(a)(2) under the Securities Act and Rule 10b-5 under the Exchange Act) it shall be necessary at any time to amend or supplement the Pricing Package, the Final Prospectus or the Registration Statement, or to file any document incorporated by reference in the Registration Statement, the Pricing Package or the Final Prospectus or in any amendment thereof or supplement thereto; or (C) if an event or development has occurred or occurs, the result of which is that such Issuer Free Writing Prospectus conflicts or would conflict with the information then contained in the Registration Statement or includes or would include an untrue statement of a material fact or, when considered together with the Pricing Package, omits or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, then, in each case of (A), (B) or (C), the Issuer will notify the Representatives promptly and prepare and file with the Commission an appropriate amendment, supplement or document (the use of which has been consented to by the Representatives) that will correct such statement or omission or effect such compliance, and will use its best efforts to have any amendment to the Registration Statement declared effective as soon as possible.
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(iii) The Issuer shall prepare the Final Prospectus in a form approved by the Representatives and file such Final Prospectus pursuant to, and within the time period specified in, Rule 424(b) and Rule 430A under the Securities Act. The Issuer will not file any amendment to the Registration Statement or amendment or supplement to the Final Prospectus or amendment or supplement to the Pricing Package during the period when a prospectus relating to the Bonds is required to be delivered under the Securities Act, without reasonable prior notice to the Underwriters or to which Paul, Weiss, Rifkind, Wharton & Garrison LLP, who are acting as counsel for the Underwriters (“Counsel for the Underwriters”), shall reasonably object by written notice to the Issuer within two business days after notification thereof. The Issuer shall notify the Underwriters promptly (and, if requested by the Representatives, confirm such notice in writing) (i) when the Registration Statement and any amendments thereto become effective, (ii) of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for any additional information, (iii) of the Issuer’s intention to file, or prepare any supplement or amendment to, the Registration Statement, any preliminary prospectus, the Final Prospectus or the Pricing Package, (iv) of the delivery to the Commission for filing of any amendment of or supplement to the Registration Statement or the Final Prospectus, including but not limited to Rule 462(b) under the Securities Act, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto, or suspending the use of any preliminary prospectus, the Final Prospectus or the Pricing Package or, in each case, of the initiation or threatening of any proceedings therefore, (vi) of the receipt of any comments from the Commission, and (vii) of the receipt by the Issuer of any notification with respect to the suspension of the qualification of the Bonds for sale in any state or jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose or enter a stop order at any time, the Issuer will use its reasonable best efforts to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such order as soon as possible.
(iv) The Issuer will furnish such proper information as may be lawfully required and otherwise cooperate in qualifying the Bonds for offer and sale under the blue-sky laws of the states of the United States as the Representatives may designate; provided that the Issuer shall not be required to qualify as a foreign limited liability company or dealer in securities, to file any consents to service of process under the laws of any jurisdiction, or meet any other requirements deemed by the Issuer to be unduly burdensome.
(v) The Issuer will, except as herein provided, pay or cause to be paid all expenses in connection with (i) the preparation and filing by it of the Registration Statement, the Pricing Package and Final Prospectus (including any amendments and supplements thereto) and any Issuer Free Writing Prospectuses, (ii) the issuance and delivery of the Bonds as provided in Section 6 hereof (including, without limitation, reasonable documented fees and out-of-pocket disbursements of Counsel for the Underwriters and all trustee, rating agency and NCUC advisor fees), (iii) the qualification of the Bonds under blue-sky laws (including counsel fees not to exceed $5,000), (iv) the printing and delivery to the Underwriters of reasonable quantities of the Registration Statement and, except as provided in Section 8(a)(iv) hereof, of the Pricing Package and Final Prospectus. If the obligation of the Underwriters to purchase the Bonds terminates in accordance with the provisions of Sections 9 or 10 hereof, the Issuer (x) will reimburse (or cause to be reimbursed) the Underwriters for the reasonable documented fees and out-of-pocket disbursements of Counsel for the Underwriters, and (y) will reimburse or cause to be reimbursed the Underwriters for their reasonable documented out-of-pocket expenses (other than fees of counsel covered in clause (x) above), such out-of-pocket expenses in an aggregate amount not exceeding $200,000 incurred in contemplation of the performance of this Agreement. The Issuer shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits.
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(vi) The Issuer shall use all commercially reasonable efforts to cause the conditions precedent set forth in Section 9 hereof to be fulfilled at or prior to the Closing Date.
(vii) For a period commencing on the date hereof and ending on the 15th day after the date of the Final Prospectus, the Issuer agrees not to, directly or indirectly, (i) offer for sale, sell, or otherwise dispose of (or enter into any transaction or device that is designed to, or would be expected to, result in the disposition by any person at any time in the future of) any storm recovery bonds of the Issuer thereof substantially similar to the Bonds (“Similar Debt Securities”) or securities convertible into or exchangeable for Similar Debt Securities, sell or grant options, rights or warrants with respect to Similar Debt Securities or securities convertible into or exchangeable for Similar Debt Securities, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of Similar Debt Securities whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Similar Debt Securities or other securities, in cash or otherwise, (iii) file or cause to be filed a registration statement, including any amendments, with respect to the registration of Similar Debt Securities or securities convertible, exercisable or exchangeable into Similar Debt Securities or (iv) publicly announce an offering of any Similar Debt Securities or securities convertible or exchangeable into Similar Debt Securities, in each case without the prior written consent the Representatives.
(viii) To the extent, if any, that any rating necessary to satisfy the condition set forth in Section 9(n) hereof is conditioned upon the furnishing of documents or the taking of other actions by the Issuer on or after the Closing Date, the Issuer shall furnish such documents and take such other actions to the extent reasonably requested by any Rating Agency.
(ix) For a period from the date of this Agreement until the retirement of the Bonds or until such time as the Underwriters shall cease to maintain a secondary market in the Bonds, whichever occurs first, the Issuer shall file with the Commission, and to the extent permitted by and consistent with the Issuer’s obligations under applicable law, make available on the website associated with the Issuer’s parent, such periodic reports, if any, as are required from time to time under Section 13 or Section 15(d) of the Exchange Act; provided that the Issuer shall not voluntarily suspend or terminate its filing obligations with the Commission unless permitted under applicable law and the terms of the Issuer Documents. The Issuer shall also, to the extent permitted by and consistent with the Issuer’s obligations under applicable law, include in any periodic and other reports to be filed with the Commission as provided above or posted on the website associated with the Issuer’s parent, such information as required by Section 3.07(g) of the Indenture with respect to the Bonds. To the extent that the Issuer’s obligations are terminated or limited by an amendment to Section 3.07(g) of the Indenture, or otherwise, such obligations shall be correspondingly terminated or limited hereunder.
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(x) So long as any of the Bonds are outstanding, the Issuer will furnish to the Representatives, if and to the extent not posted on the Issuer or its affiliate’s website, (A) as soon as available, a copy of each report of the Issuer filed with the Commission under the Exchange Act or mailed to the bondholders (in each case to the extent such reports are not publicly available on the Commission’s website), (B) upon request, a copy of any filings with the NCUC pursuant to the Financing Order including, but not limited to any issuance advice letter or any annual, semi-annual or more frequent true-up adjustment filings, and (C) from time to time, any information (other than confidential or proprietary information) concerning the Issuer as the Representatives may reasonably request.
(xi) So long as the Bonds are rated by any Rating Agency, the Issuer will comply with the 17g-5 Representations, other than (x) any noncompliance of the 17g-5 Representations that would not have a material adverse effect on the rating of the Bonds or the Bonds or (y) any noncompliance arising from the breach by an Underwriter of the representations and warranties and covenants set forth in Section 15 hereof.
(xii) If the Issuer elects to rely upon Rule 462(b) of the Securities Act, the Issuer shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462 by 10:00 p.m. (New York City time), on the date of this Agreement, and the Issuer shall at the time of filing either pay to the Commission the filing fee for the Rule 462 Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Securities Act.
(xiii) The Issuer will not take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Bonds and will not take any action prohibited by Regulation M under the Exchange Act in connection with the distribution of the Bonds contemplated hereby.
(b) Covenants of the Depositor. The Depositor covenants and agrees with the several Underwriters that, to the extent that the Issuer has not already performed such act pursuant to Section 8(a):
(i) To the extent permitted by applicable law and the agreements and instruments that bind the Depositor, the Depositor will use its reasonable best efforts to cause the Issuer to comply with the covenants set forth in Section 8(a) hereof.
(ii) The Depositor will use its reasonable best efforts to prevent the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement and, if issued, to obtain as soon as possible the withdrawal thereof.
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(iii) (A) If at any time when a Final Prospectus or Pricing Package (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required to be delivered under the Securities Act, any event shall have occurred as a result of which the Pricing Package (prior to the availability of the Final Prospectus) or the Final Prospectus as then amended or supplemented would, in the reasonable judgment of the Representatives or the Depositor, include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time of delivery of such Pricing Package or Final Prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act), not misleading; or (B) if to comply with the Securities Act, the Exchange Act or the related rules and regulations (including, without limitation, Section 11(a) or 12(a)(2) under the Securities Act and Rule 10b-5 under the Exchange Act) it shall be necessary at any time to amend or supplement the Pricing Package, the Final Prospectus or the Registration Statement, or to file any document incorporated by reference in the Registration Statement, the Pricing Package or the Final Prospectus or in any amendment thereof or supplement thereto, then, in each case of (A) or (B), the Depositor will notify the Representatives promptly and prepare and file with the Commission an appropriate amendment, supplement or document (the use of which has been consented to by the Representatives) that will correct such statement or omission or effect such compliance, and will use its best efforts to have any amendment to the Registration Statement declared effective as soon as possible.
(iv) The Depositor shall prepare the Final Prospectus in a form approved by the Representatives and file such Final Prospectus pursuant to, and within the time period specified in, Rule 424(b) and Rule 430A under the Securities Act. The Depositor will not file any amendment to the Registration Statement or amendment or supplement to the Final Prospectus or amendment or supplement to the Pricing Package during the period when a prospectus relating to the Bonds is required to be delivered under the Securities Act, without reasonable prior notice to the Underwriters or to which Counsel for the Underwriters shall reasonably object by written notice to the Issuer within two business days after notification thereof. The Depositor shall notify the Underwriters promptly (and, if requested by the Representatives, confirm such notice in writing) (i) when the Registration Statement and any amendments thereto become effective, (ii) of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for any additional information, (iii) of the Depositor’s intention to file, or prepare any supplement or amendment to, the Registration Statement, any preliminary prospectus, the Final Prospectus or the Pricing Package, (iv) of the delivery to the Commission for filing of any amendment of or supplement to the Registration Statement or the Final Prospectus, including but not limited to Rule 462(b) under the Securities Act, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto, or suspending the use of any preliminary prospectus, the Final Prospectus or the Pricing Package or, in each case, of the initiation or threatening of any proceedings therefore, (vi) of the receipt of any comments from the Commission, and (vii) of the receipt by the Issuer of any notification with respect to the suspension of the qualification of the Bonds for sale in any state or jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose or enter a stop order at any time, the Depositor will use reasonable best efforts to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such order as soon as possible.
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(v) The Depositor shall use all commercially reasonable efforts to cause the conditions precedent set forth in Section 9 hereof to be fulfilled at or prior to the Closing Date.
(vi) For a period commencing on the date hereof and ending on the 15th day after the date of the Final Prospectus, the Depositor agrees not to, directly or indirectly, (i) offer for sale, sell, or otherwise dispose of (or enter into any transaction or device that is designed to, or would be expected to, result in the disposition by any person at any time in the future of) any Similar Debt Securities or securities convertible into or exchangeable for Similar Debt Securities, sell or grant options, rights or warrants with respect to Similar Debt Securities or securities convertible into or exchangeable for Similar Debt Securities, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of Similar Debt Securities whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Similar Debt Securities or other securities, in cash or otherwise, (iii) file or cause to be filed a registration statement, including any amendments, with respect to the registration of Similar Debt Securities or securities convertible, exercisable or exchangeable into Similar Debt Securities, or (iv) publicly announce an offering of any Similar Debt Securities or securities convertible or exchangeable into Similar Debt Securities, in each case without the prior written consent the Representatives.
(vii) The Depositor will cause the proceeds for the issuance and sale of the Bonds to be applied for the purposes described in the Pricing Package.
(viii) The Depositor, to the extent not paid for by the Issuer, will pay or cause to paid all reasonable expenses described in Section 8(a)(v) hereof.
(ix) As soon as practicable, but not later than 16 months, after the date hereof, the Depositor will make generally available (by posting on its website or otherwise) to its security holders, an earnings statement (which need not be audited) that will satisfy the provisions of Section 11(a) of the Securities Act.
(x) To the extent, if any, that any rating necessary to satisfy the condition set forth in Section 9(n) hereof is conditioned upon the furnishing of documents or the taking of other actions by the Depositor on or after the Closing Date, the Depositor shall furnish such documents and take such other actions to the extent reasonably requested by any Rating Agency.
(xi) The initial storm recovery charge for the Bonds will be calculated in accordance with the Financing Order.
(xii) So long as any of the Bonds are outstanding, the Depositor, in its capacity as sponsor with respect to the Bonds, will cause the Issuer to furnish to the Representatives, if and to the extent not posted on EDGAR or the Depositor or its affiliate’s website, (A) upon request, a copy of any filings with the NCUC pursuant to the Financing Order including, but not limited to any issuance advice letter, any true-up adjustment filings, and (B) from time to time, any public financial information in respect of the Depositor, or any material information regarding the Storm Recovery Property to the extent it is reasonably available (other than confidential or proprietary information) concerning the Issuer as the Representatives may reasonably request.
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(xiii) So long as the Bonds are rated by a Rating Agency, the Depositor, in its capacity as sponsor with respect to the Bonds, will cause the Issuer to comply with the 17g-5 Representations, other than (x) any noncompliance of the 17g-5 Representations that would not have a material adverse effect on the Bonds or the rating of the Bonds or (y) any noncompliance arising from the breach by an Underwriter of the representations and warranties and covenants set forth in Section 15 hereof.
9. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Bonds shall be subject to the accuracy of the representations and warranties on the part of the Issuer and the Depositor contained in this Agreement, on the part of the Depositor contained in Article III of the Sale Agreement, and on the part of the Depositor contained in Section 6.01 of the Servicing Agreement as of the Closing Date, to the accuracy of the statements of the Issuer and the Depositor made in any certificates pursuant to the provisions hereof, to the performance by the Issuer and the Depositor of their obligations hereunder, and to the following additional conditions:
(a) The Final Prospectus shall have been filed with the Commission pursuant to Rule 424 no later than the second business day following the date hereof. In addition, all material required to be filed by the Issuer or the Depositor pursuant to Rule 433(d) under the Securities Act that was prepared by either of them or that was prepared by any Underwriter and timely provided to the Issuer or the Depositor shall have been filed with the Commission within the applicable time period prescribed for such filing by such Rule 433(d).
(b) No stop order suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for that purpose shall be pending before, or threatened by, the Commission on the Closing Date; and the Underwriters shall have received one or more certificates, dated the Closing Date and signed by an officer of the Depositor and the Issuer, as appropriate, to the effect that no such stop order is in effect and that no proceedings for such purpose are pending before, or to the knowledge of the Depositor or the Issuer, as the case may be, threatened by, the Commission.
(c) McGuire Woods LLP, special North Carolina counsel for the Issuer and the Depositor, shall have furnished to the Representatives their written opinion, in form and substance reasonably satisfactory to the Representatives and Counsel for the Underwriters, dated the Closing Date.
(d) Hunton Andrews Kurth LLP, counsel for the Issuer and the Depositor, shall have furnished to the Representatives its written respective opinions, in form and substance reasonably satisfactory to the Representatives and Counsel for the Underwriters, dated the Closing Date.
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(e) Troutman Pepper Hamilton Sanders LLP, special Delaware counsel for the Issuer, shall have furnished to the Representatives their written opinion, in form and substance reasonably satisfactory to the Representatives and Counsel for the Underwriters, dated the Closing Date.
(f) In-house counsel for the Issuer and the Depositor shall have furnished to the Representatives its written respective opinions, in form and substance reasonably satisfactory to the Representatives and Counsel for the Underwriters, dated the Closing Date.
(g) Hunton Andrews Kurth LLP, counsel for the Issuer and Depositor, shall have furnished to the Representatives a letter, in form and substance reasonably satisfactory to the Representatives and Counsel for the Underwriters, dated the Closing Date regarding negative assurances with respect to the Pricing Package and the Prospectus.
(h) Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel for the Underwriters, shall have furnished to the Representatives a negative assurance letter covering such matters as the Representatives may reasonably require, dated as of the Closing Date.
(i) Emmet, Marvin & Martin LLP, counsel for the Indenture Trustee, shall have furnished to the Representatives their written opinions, in form and substance reasonably satisfactory to the Representatives and Counsel for the Underwriters, dated the Closing Date.
(j) At the time of execution of this Agreement, the Representatives shall have received from an independent accountant a letter (the “Initial AUP Letter”), in form and substance reasonably satisfactory to the Representatives, addressed to the Underwriters and dated the date hereof, concerning certain agreed-upon procedures performed in respect of the information presented in the Registration Statement, the Pricing Package and the Final Prospectus.
(k) With respect to the Initial AUP Letter referred to in the preceding paragraph and delivered to the Representatives concurrently with the execution of this Agreement, the independent accountant referred to in the preceding paragraph shall have furnished to the Representatives a “bring-down letter,” addressed to the Underwriters and dated the Closing Date stating, as of the Closing Date (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in each of the Registration Statement, the Pricing Package or the Final Prospectus, as of a date not more than three (3) days prior to the Closing Date), (i) the conclusions and findings of such firm with respect to the matters covered by the Initial AUP Letter, and (ii) confirming in all material respects the conclusions and findings set forth in the Initial AUP Letter.
(l) The LLC Agreement, the Issuer Documents and any amendment or supplement to any of the foregoing shall have been executed and delivered and the Representatives shall have received true and executed copies of each such document.
(m) All amendments and related documentation with respect to the receivables financing entered into by Duke Energy Progress Receivables LLC, a Delaware limited liability company, Duke Energy Progress, LLC, a North Carolina limited liability company, the financial institutions party thereto as the “Committed Lenders”, “Conduit Lenders” and “Managing Agents”, and MUFG Bank, Ltd. (formerly known as The Bank of Tokyo-Mitsubishi UFJ, Ltd.), as the administrative agent (collectively, the “Receivables Amendments”), in form and substance reasonably satisfactory to the Representatives and Counsel for the Underwriters, shall have been executed and delivered and the Representatives shall have received true and executed copies of each such document.
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(n) At the Closing Date, (i) the Representatives shall have received a letter stating that the Bonds have received the ratings set forth in the Free Writing Prospectus, dated November 17, 2021, by Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”) and (ii) no such rating agency shall have, since the date of this Agreement, downgraded or publicly announced that it has under surveillance or review, with possible negative implications, its ratings of the Bonds.
(o) On or prior to the Closing Date, the Issuer shall have delivered to the Representatives evidence, in form and substance reasonably satisfactory to the Representatives, that appropriate filings have been or are being made in accordance with Sections 62-172, North Carolina General Statutes (the “Financing Act”), the Financing Order and other applicable law reflecting the grant of a security interest by the Issuer in the collateral relating to the Bonds to the Indenture Trustee, including the filing of the requisite financing statements in the office of the Secretary of State of the State of North Carolina and the Secretary of State of the State of Delaware.
(p) The NCUC shall have received all necessary opinions, letters, evidence and certificates required by the Financing Order.
(q) The final issuance advice letter, in a form consistent with the provisions of the Financing Order, shall have been filed with the NCUC and the period during which the NCUC may issue a stop order shall have expired without the issuance thereof.
(r) The Financing Act has been duly enacted by the Legislature of the State of North Carolina and has not been repealed or amended and the Financing Order has been duly adopted by the NCUC, has not been revoked or amended, and is final and not subject to appeal, and, to the knowledge of the Depositor or the Issuer, (A) the validity of the Financing Act and the Financing Order are not the subject of any pending appeal or litigation, (B) there has been no challenge to the constitutionality of the Financing Act or the Financing Order under the Constitution of the State of North Carolina, (C) the Financing Act and the Financing Order have not been amended or repealed by a direct act of the North Carolina Legislature, and (D) voters have not amended the North Carolina Constitution in a manner that amends, repeals, or affects the Financing Act or the Financing Order.
(s) On or prior to the Closing Date, the Depositor shall have funded the capital subaccount of the Issuer with cash in an amount equal to $3,848,135.
(t) The Issuer and the Depositor shall have furnished or caused to be furnished or agree to furnish to the Rating Agencies at the Closing Date such opinions and certificates as the Rating Agencies shall have reasonably requested prior to the Closing Date. Any opinion letters delivered on the Closing Date to the Rating Agencies beyond those being delivered to the Underwriters above shall either (x) include the Underwriters as addressees or (y) be accompanied by reliance letters addressed to the Underwriters referencing such letters.
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(u) The Representatives shall not have discovered and disclosed to the Issuer on or prior to the Closing Date that, in the opinion of the Representatives after consultation with counsel, either (A) the Registration Statement (in the form as of the Effective Date) contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or (B) the Pricing Package (in the form as of the Applicable Time) or the Final Prospectus (in the form as of its date) contains an untrue statement of a material fact or to omits to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.
(v) On or after the date hereof, there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally or of the securities of the Depositor or Duke Energy Corporation, on the New York Stock Exchange; (ii) a general moratorium on commercial banking activities in New York declared by either Federal or New York State authorities or a material disruption in commercial banking services or securities settlement or clearance services in the United States; (iii) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this subsection 9(v) in the reasonable judgment of the Representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Bonds on the terms and in the manner contemplated in the Pricing Package and the Final Prospectus. In such event there shall be no liability on the part of any party to any other party except as otherwise provided in Section 11 hereof and except for the expenses to be borne by the Issuer as provided in Section 8(a)(v) hereof.
(w) The Issuer and the Depositor shall have furnished or caused to be furnished to the Representatives dated as of the Closing Date certificates of the Treasurer or Assistant Treasurer of the Issuer and the Depositor, or other officer reasonably satisfactory to the Representatives, as to such matters as the Representatives may reasonably request, including, without limitation, a statement:
(i) That the representations, warranties and agreements of the Issuer in Sections 3 and 5 and the Depositor in Sections 4 and 5 hereof are true and correct on and as of the Closing Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date), that the Issuer and the Depositor have complied with all their respective agreements contained herein and in any other Issuer Document to which any of them is a party and satisfied all the conditions on their part to be performed or satisfied hereunder or thereunder at or prior to the Closing Date, and that no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are threatened by the Commission;
(ii) To the knowledge of the Issuer and the Depositor, no other materials have been used in connection with the Offering other than the Registration Statement, the Pricing Package, the Final Prospectus, the investor presentation dated November 2021 and the documents and information listed on Schedule III and Schedule IV hereto;
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(iii) Since the respective most recent dates as of which information is given in the Registration Statement, Pricing Package and the Final Prospectus and up to the Closing Date, there shall not have been any material adverse change in the condition of the Issuer and the Depositor, financial or otherwise, except as reflected in or contemplated by the Registration Statement, Pricing Package and the Final Prospectus, and, since such dates and up to the Closing Date, there shall not have been any material transaction entered into by the Issuer or the Depositor other than transactions contemplated by the Registration Statement, Pricing Package and the Final Prospectus and transactions in the ordinary course of business, the effect of which in the Issuer’s or the Depositor’s reasonable judgment, as applicable, is so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Bonds on the terms and in the manner contemplated by the Registration Statement, Pricing Package and the Final Prospectus.
(x) The Bonds shall be eligible for clearance and settlement in the United States through DTC.
All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to Counsel for the Underwriters.
If any of the conditions specified in this Section 9 shall not have been fulfilled when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and Counsel for the Underwriters, all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Issuer in writing or by telephone or facsimile confirmed in writing.
10. Conditions of the Issuer’s Obligations.
The obligation of the Issuer to deliver the Bonds shall be subject to the conditions that no stop order suspending the effectiveness of the Registration Statement shall be in effect at the Closing Date and no proceeding for that purpose shall be pending before, or threatened by, the Commission at the Closing Date and the condition set forth in Section 9(q) shall have been satisfied. In case these conditions shall not have been fulfilled, this Agreement may be terminated by the Issuer upon notice thereof to the Underwriters. Any such termination shall be without liability of any party to any other party except as otherwise provided in Sections 8(a)(v) and 11 hereof.
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11. Indemnification and Contribution.
(a) The Issuer and Depositor agree to jointly and severally indemnify and hold harmless each Underwriter, its respective affiliates, officers, employees and directors, and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act, as follows:
(i) against any and all loss, liability, claim, damage or expense whatsoever joint or several, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto) or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, the Pricing Package, the Final Prospectus (or any amendment or supplement thereto), any Issuer Free Writing Prospectus, any issuer free writing prospectus as defined in Rule 433 under the Securities Act or any materials or information provided to investors by, or with approval of, the Issuer or the Depositor in connection with the offering of the Bonds, including any “roadshow” (as defined in Rule 433 under the Securities Act) or investor presentation made to investors by the Issuer or the Depositor (whether in person or electronically) including, without limitation, the materials listed on Schedule IV hereto, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with Underwriter Information furnished to the Issuer or the Depositor by the Representatives on behalf of the Underwriters expressly for use in the Registration Statement (or any amendment thereto), any preliminary prospectus, the Pricing Package, the Final Prospectus (or any amendment or supplement thereto) or any Issuer Free Writing Prospectus;
(ii) against any and all losses, liabilities, claims, damages and expenses whatsoever to the extent of the aggregate amount paid in settlement of any litigation, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Issuer or the Depositor; and
(iii) against any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) of this Section 11.
In no case shall the Issuer or the Depositor be liable under this indemnity agreement with respect to any claim made against any Underwriter or any such controlling person unless the Issuer or the Depositor shall be notified in writing of the nature of the claim within a reasonable time after the assertion thereof, but failure so to notify the Issuer or the Depositor (i) shall not relieve it from any liability under this Section 11(a) unless and to the extent the failure to provide such notification results in forfeiture by the Issuer or Depositor of any rights and defenses and (ii) shall not relieve it from any liability which it may have otherwise than under subsections 11(a) and 11(d). Each of the Issuer and the Depositor shall be entitled to participate at its own expense in the defense, or, if it so elects, within a reasonable time after receipt of such notice, to assume the defense of any suit brought to enforce any such claim, but if it so elects to assume the defense, such defense shall be conducted by counsel chosen by it and approved by the Underwriter or Underwriters or controlling person or persons, or defendant or defendants in any suit so brought, which approval shall not be unreasonably withheld. In any such suit, any Underwriter or any such controlling person shall have the right to employ its own counsel, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the Issuer and the Depositor and such Underwriter shall have mutually agreed to the employment of such counsel, or (ii) the named parties to any such action (including any impleaded parties) include both such Underwriter or such controlling person and the Issuer or the Depositor and such Underwriter or such controlling person shall have been advised by such counsel that a conflict of interest between the Issuer or the Depositor on one hand and such Underwriter or such controlling person on the other may arise and for this reason it is not desirable for the same counsel to represent both the indemnifying party and also the indemnified party (it being understood, however, that the Issuer and the Depositor shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (and local counsel) for all such Underwriters and all such controlling persons, which firm shall be designated in writing by you). The Issuer and the Depositor agrees to notify you within a reasonable time of the assertion of any claim against it, any of its officers or directors or any person who controls the Issuer or the Depositor within the meaning of Section 15 of the Securities Act, in connection with the sale of the Bonds. For the avoidance of doubt, any indemnity payment required to be paid by the Issuer pursuant to this Section 11 shall not be included in the Periodic Payment Requirement (as defined in the Indenture) nor shall such amounts be included in a True-Up Adjustment (as defined in the Indenture).
29
(b) Each Underwriter, severally and not jointly, agrees that it will indemnify and hold harmless the Issuer and the Depositor, their directors and each of the officers of the Issuer and the Depositor who signed the Registration Statement and each person, if any, who controls the Issuer and the Depositor within the meaning of Section 15 of the Securities Act to the same extent as the indemnity contained in subsection (a) of this Section, but only with respect to statements or omissions made in the Registration Statement (or any amendment thereto), any preliminary prospectus, the Pricing Package, the Final Prospectus (or any amendment or supplement thereto) or any Issuer Free Writing Prospectus, in reliance upon and in conformity with Underwriter Information furnished to the Issuer or the Depositor by the Representatives on behalf of the Underwriters expressly for use in the Registration Statement (or any amendment thereto), any preliminary prospectus, the Pricing Package, the Prospectus (or any amendment or supplement thereto) or any Issuer Free Writing Prospectus. In case any action shall be brought against the Issuer or the Depositor or any person so indemnified based on the Registration Statement (or any amendment thereto), the Preliminary Prospectus, the Pricing Package, the Final Prospectus (or any amendment or supplement thereto) or any Issuer Free Writing Prospectus and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Issuer and the Depositor, and the Issuer, the Depositor and each person so indemnified shall have the rights and duties given to the Underwriters by the provisions of subsection (a) of this Section.
(c) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.
30
(d) If the indemnification provided for in this Section 11 is unavailable to or insufficient to hold harmless an indemnified party in respect of any and all loss, liability, claim, damage and expense whatsoever (or actions in respect thereof) that would otherwise have been indemnified under the terms of such indemnity, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Issuer and the Depositor on the one hand and the Underwriters on the other from the offering of the Bonds. If, however, the allocation provided by the immediately preceding sentence is not available for any reason, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Issuer and the Depositor on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Issuer and the Depositor on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Issuer or Depositor bear to the total compensation received by the Underwriters in respect of the underwriting discount as set forth in the table on the cover page of the Final Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer or the Depositor on the one hand or the Underwriters on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuer and the Depositor and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 11 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The amount paid or payable by an indemnified party as a result of the losses, liabilities, claims, damages or expenses (or actions in respect thereof) referred to above in this Section 11 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section, no Underwriter (except as may be provided in any agreement among the Underwriters relating to the offering of the Bonds) shall be required to contribute any amount in excess of the amount, with respect to the Underwriters, by which the total price at which the Bonds underwritten by it and distributed to the public were offered to the public net of any costs associated therewith, exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute are several in proportion to their respective obligations and not joint.
31
(e) The Underwriters severally confirm and the Issuer and Depositor acknowledge and agree that (i) the statements with respect to the offering of the Bonds by the Underwriters set forth in the second and third sentence of the third paragraph (relating to the sales price for the bonds), second sentence of the fourth paragraph (relating to the resale price or resale liquidity for the bonds), fifth paragraph (relating to overallotment, stabilization and similar activities) of the section entitled “Plan of Distribution” in the Registration Statement, the Pricing Package and the Final Prospectus and (ii) the names of the Underwriters set forth on the front and back cover page of any preliminary prospectus and the Final Prospectus and (iii) the information listed on Schedule II (collectively, “Underwriter Information”) hereto constitute the only information concerning such Underwriters furnished in writing to the Issuer and Depositor by or on behalf of the Underwriters specifically for inclusion in any Free Writing Prospectus, the Registration Statement, the Pricing Package or the Final Prospectus or in any amendment or supplement thereto.
12. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Issuer and the Depositor or their officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter or the Issuer and the Depositor, or any of their officers or directors or any controlling person, and will survive delivery of and payment for the Bonds.
13. Reliance on Your Acts. In all dealings hereunder, the Representatives shall act on behalf of each of the Underwriters, and the Issuer and the Depositor shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by the Representatives.
14. Waiver of Jury Trial. Each of the Issuer and the Depositor and each of the Underwriters hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
15. Representations, Warranties and Covenants of the Underwriters. The Underwriters, severally and not jointly, represent, warrant and agree with the Issuer and the Depositor that, unless the Underwriters obtained, or will obtain, the prior written consent of the Issuer or the Depositor, the Representatives (x) have not delivered, and will not deliver, any Rating Information (as defined below) to any Rating Agency until and unless the Issuer or the Depositor advises the Underwriters that such Rating Information is posted to the Issuer’s website maintained by the Issuer pursuant to paragraph (a)(3)(iii)(B) of Rule 17g-5 under the Exchange Act in the same form as it will be provided to such Rating Agency, and (y) have not participated, and will not participate, with any Rating Agency in any oral communication of any Rating Information without the participation of a representative of the Issuer or the Depositor. For purposes of this Section 15, “Rating Information” means any information provided to a Rating Agency for the purpose of determining an initial credit rating on the Bonds.
32
16. No Advisory or Fiduciary Relationship. Each of the Issuer and the Depositor acknowledges and agrees that (a) the purchase and sale of the Bonds pursuant to this Agreement, including the determination of the offering price of the Bonds and any related discounts and commissions, is an arm’s-length commercial transaction between the Issuer and the Depositor, on the one hand, and the several Underwriters, on the other hand, (b) in connection with the offering and the process leading thereto, each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of either the Issuer or the Depositor, any of their subsidiaries or their respective members, directors, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Issuer or the Depositor with respect to the offering or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Issuer or the Depositor or any of its subsidiaries on other matters) and no Underwriter has any obligation to the Issuer or the Depositor with respect to the offering except the obligations expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Issuer or the Depositor, (e) any duties and obligations that the Underwriters may have to the Issuer or the Depositor shall be limited to those duties and obligations specifically stated herein and (f) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering and each of the Issuer and the Depositor has consulted its own respective legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.
17. Notices. All communications hereunder will be in writing and may be given by United States mail, courier service, telecopy, telefax or facsimile (confirmed by telephone or in writing in the case of notice by telecopy, telefax or facsimile) or any other customary means of communication, and any such communication shall be effective when delivered, or if mailed, three days after deposit in the United States mail with proper postage for ordinary mail prepaid, and if sent to the Representatives, to it at the address specified in Schedule I hereto, in each case, with a copy to Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019, Attention: Jordan E. Yarett (Fax: (212) 492-0126; E-mail: jyarett@paulweiss.com; and if sent to the Issuer, to it at 550 South Tryon Street, DEC 40A, Charlotte, North Carolina 28202, Attention: Treasurer, Fax: (980) 373-3699. Any such communications shall take effect upon receipt thereof. The parties hereto, by notice to the others, may designate additional or different addresses for subsequent communications.
18. Business Day. As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.
19. Successors. This Agreement shall inure to the benefit of and be binding upon the Underwriters and the Issuer and the Depositor and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the parties hereto and their respective successors and the controlling persons, officers and directors referred to in Section 11 and their respective successors, heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and their respective successors and said controlling persons, officers and directors and their respective successors, heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Bonds from any Underwriter shall be deemed to be a successor or assign by reason merely of such purchase.
20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Agreement or any document to be signed in connection with this Agreement shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means.
33
21. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT, THE RELATIONSHIPS OF THE PARTIES AND/OR THE INTERPRETATIONS AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW). EACH OF THE PARTIES HERETO HEREBY AGREES TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
22. Integration. This Agreement supersedes all prior agreements and understandings (whether written or oral) among the Issuer, the Depositor and the Underwriters, or any of them, with respect to the subject matter hereof.
23. Recognition of the U.S. Special Resolution Regimes.
(a) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
34
“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).
“Covered Entity” means any of the following:
(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §252.82(b);
(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §47.3(b); or
(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §382.2(b).
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
35
If the foregoing is in accordance with your understanding, kindly sign and return to us two counterparts hereof, and upon confirmation and acceptance by the Underwriters, this letter and such confirmation and acceptance will become a binding agreement between the Issuer and the Depositor, on the one hand, and each of the Underwriters, on the other hand, in accordance with its terms.
| Very truly yours, | ||
| Duke Energy Progress, LLC | ||
| By: | /s/ Karl W. Newlin | |
| Name: Karl W. Newlin | ||
| Title: Sr. Vice President Corporate Development and Treasurer | ||
| Duke Energy Progress NC Storm Funding LLC | ||
| By: | /s/ Karl W. Newlin | |
| Name: Karl W. Newlin | ||
| Title: Sr. Vice President Corporate Development and Treasurer | ||
The foregoing Agreement is hereby
confirmed and accepted as of
the date first above written.
RBC CAPITAL MARKETS, LLC
Citigroup
Global Markets Inc.
On behalf of each of the Underwriters
| RBC CAPITAL MARKETS, LLC | Citigroup Global Markets Inc. | |||
| By: | /s/ Keith Helwig | By: | /s/ Steffen Lunde | |
| Name: Keith Helwig | Name: Steffen Lunde | |||
| Title: Authorized Signatory | Title: Director | |||
36
SCHEDULE I
Underwriting Agreement dated November 17, 2021
Registration Statement Nos. 333-259315 and 333-259315-01
Representatives:
RBC Capital Markets, LLC
Brookfield Place
200 Vesey Street, 8th Floor
New York, New York 10281
Attention: Keith Helwig
Citigroup Global Markets Inc.
388 Greenwich Street
New York, NY 10013
Attention: Steffen Lunde
Title, Purchase Price and Description of Bonds:
| Title: | Duke Energy Progress NC Storm Funding LLC Series A Storm Recovery Bonds |
| Total
Principal Amount | Bond Rate | Price to Public | Underwriting
Discounts and Commissions | Proceeds
to Issuer | |||||||||||||||||
| Tranche A-1 | $ | 221,000,000 | 1.295 | % | 99.99949 | % | 0.40 | % | $ | 220,114,873 | |||||||||||
| Tranche A-2 | $ | 352,000,000 | 2.387 | % | 99.99827 | % | 0.40 | % | $ | 350,585,910 | |||||||||||
| Tranche A-3 | $ | 196,627,000 | 2.799 | % | 99.99762 | % | 0.40 | % | $ | 195,835,812 | |||||||||||
| Original Issue Discount (if any): | $11,896 |
| Redemption provisions: | None |
| Other provisions: | None |
| Closing Date, Time and Location: | November 24, 2021, 10:00 a.m.; offices of Hunton Andrews Kurth LLP, 200 Park Avenue, New York, New York 10166 |
I-1
SCHEDULE II
Principal Amount of Bonds to be Purchased
| Underwriter | Tranche A-1 | Tranche A-2 | Tranche A-3 | Total | ||||||||||||
| RBC Capital Markets, LLC | $ | 91,715,000 | $ | 146,080,000 | $ | 81,601,000 | $ | 319,396,000 | ||||||||
| Citigroup Global Markets Inc. | $ | 74,035,000 | $ | 117,920,000 | $ | 65,871,000 | $ | 257,826,000 | ||||||||
| Academy Securities, Inc.* | $ | 11,050,000 | $ | 17,600,000 | $ | 9,831,000 | $ | 38,481,000 | ||||||||
| Drexel Hamilton, LLC* | $ | 11,050,000 | $ | 17,600,000 | $ | 9,831,000 | $ | 38,481,000 | ||||||||
| Guggenheim Securities, LLC* | $ | 11,050,000 | $ | 17,600,000 | $ | 9,831,000 | $ | 38,481,000 | ||||||||
| Jefferies LLC* | $ | 11,050,000 | $ | 17,600,000 | $ | 9,831,000 | $ | 38,481,000 | ||||||||
| Loop Capital Markets LLC* | $ | 11,050,000 | $ | 17,600,000 | $ | 9,831,000 | $ | 38,481,000 | ||||||||
| Total | $ | 221,000,000 | $ | 352,000,000 | $ | 196,627,000 | $ | 769,627,000 | ||||||||
* Final allocations to each Underwriter other than the Representatives to be based on performance.
II-1
SCHEDULE III
Schedule of Certain Marketing Materials
1. Pricing Term Sheet containing final economic terms
III-1
SCHEDULE IV
Schedule of Certain Investor Presentations
| 1. | Investor Presentation, dated November 2021 |
IV-1
Exhibit 3.2
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
DUKE ENERGY PROGRESS NC STORM FUNDING LLC
Dated and Effective as of November 15, 2021
TABLE OF CONTENTS
Page
| ARTICLE I | GENERAL PROVISIONS | 1 |
| SECTION 1.01 | Definitions | 1 |
| SECTION 1.02 | Sole Member; Registered Office and Agent | 2 |
| SECTION 1.03 | Other Offices | 2 |
| SECTION 1.04 | Name | 3 |
| SECTION 1.05 | Purpose; Nature of Business Permitted; Powers | 3 |
| SECTION 1.06 | Limited Liability Company Agreement; Certificate of Formation | 4 |
| SECTION 1.07 | Separate Existence | 4 |
| SECTION 1.08 | Limitation on Certain Activities | 7 |
| SECTION 1.09 | No State Law Partnership | 8 |
| ARTICLE II | CAPITAL | 8 |
| SECTION 2.01 | Initial Capital | 8 |
| SECTION 2.02 | Additional Capital Contributions | 8 |
| SECTION 2.03 | Capital Account | 9 |
| SECTION 2.04 | Interest on Capital Account | 9 |
| ARTICLE III | ALLOCATIONS; BOOKS | 9 |
| SECTION 3.01 | Allocations of Income and Loss | 9 |
| SECTION 3.02 | Company to be Disregarded for Tax Purposes | 9 |
| SECTION 3.03 | Books of Account | 10 |
| SECTION 3.04 | Access to Accounting Records | 10 |
| SECTION 3.05 | Annual Tax Information | 10 |
| SECTION 3.06 | Internal Revenue Service Communications | 10 |
| ARTICLE IV | MEMBER | 10 |
| SECTION 4.01 | Powers | 10 |
| SECTION 4.02 | Compensation of Member | 11 |
| SECTION 4.03 | Other Ventures | 12 |
| SECTION 4.04 | Actions by the Member | 12 |
| ARTICLE V | OFFICERS | 12 |
| SECTION 5.01 | Designation; Term; Qualifications | 12 |
| SECTION 5.02 | Removal and Resignation | 13 |
| SECTION 5.03 | Vacancies | 13 |
| SECTION 5.04 | Compensation | 13 |
| ARTICLE VI | MEMBERSHIP INTEREST | 13 |
| SECTION 6.01 | General | 13 |
| SECTION 6.02 | Distributions | 14 |
| SECTION 6.03 | Rights on Liquidation, Dissolution or Winding Up | 14 |
| SECTION 6.04 | Redemption | 14 |
| SECTION 6.05 | Voting Rights | 14 |
| SECTION 6.06 | Transfer of Membership Interests | 14 |
| SECTION 6.07 | Admission of Transferee as Member | 14 |
| ARTICLE VII | MANAGERS | 15 |
| SECTION 7.01 | Managers | 15 |
| SECTION 7.02 | Powers of the Managers | 16 |
| SECTION 7.03 | Compensation | 17 |
| SECTION 7.04 | Removal of Managers | 17 |
| SECTION 7.05 | Resignation of Manager | 17 |
| SECTION 7.06 | Vacancies | 17 |
| SECTION 7.07 | Meetings of the Managers | 17 |
| SECTION 7.08 | Electronic Communications | 17 |
| SECTION 7.09 | Committees of Managers | 18 |
| SECTION 7.10 | Limitations on Independent Managers | 18 |
| ARTICLE VIII | EXPENSES | 18 |
| SECTION 8.01 | Expenses | 18 |
| ARTICLE IX | PERPETUAL EXISTENCE; DISSOLUTION, LIQUIDATION AND WINDING-UP | 19 |
| SECTION 9.01 | Existence | 19 |
| SECTION 9.02 | Dissolution | 19 |
| SECTION 9.03 | Accounting | 20 |
| SECTION 9.04 | Certificate of Cancellation | 20 |
| SECTION 9.05 | Winding Up | 20 |
| SECTION 9.06 | Order of Payment of Liabilities Upon Dissolution | 20 |
| SECTION 9.07 | Limitations on Payments Made in Dissolution | 20 |
| SECTION 9.08 | Limitation on Liability | 20 |
| ARTICLE X | INDEMNIFICATION | 21 |
| SECTION 10.01 | Indemnity | 21 |
| SECTION 10.02 | Indemnity for Actions By or In the Right of the Company | 21 |
| SECTION 10.03 | Indemnity If Successful | 21 |
| SECTION 10.04 | Expenses | 21 |
| SECTION 10.05 | Advance Payment of Expenses | 22 |
| SECTION 10.06 | Other Arrangements Not Excluded | 22 |
ii
| ARTICLE XI | MISCELLANEOUS PROVISIONS | 22 |
| SECTION 11.01 | No Bankruptcy Petition; Dissolution | 22 |
| SECTION 11.02 | Amendments | 23 |
| SECTION 11.03 | Commission Condition | 23 |
| SECTION 11.04 | Governing Law | 24 |
| SECTION 11.05 | Headings | 24 |
| SECTION 11.06 | Severability | 24 |
| SECTION 11.07 | Assigns | 24 |
| SECTION 11.08 | Enforcement by Each Independent Manager | 25 |
| SECTION 11.09 | Waiver of Partition; Nature of Interest | 25 |
| SECTION 11.10 | Benefits of Agreement; No Third-Party Rights | 25 |
EXHIBITS, SCHEDULES AND APPENDIX
| Schedule A | Schedule of Capital Contributions of Member |
| Schedule B | Initial Managers |
| Schedule C | Initial Officers |
| Exhibit A | Management Agreement |
| Appendix A | Definitions |
iii
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF
DUKE ENERGY PROGRESS NC STORM FUNDING LLC
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT (this “Agreement”) of DUKE ENERGY PROGRESS NC STORM FUNDING LLC, a Delaware limited liability company (the “Company”), is made and entered into as of November 15, 2021 by DUKE ENERGY PROGRESS, LLC, a North Carolina limited liability company, (including any additional or successor members of the Company other than Special Members, the “Member”).
WHEREAS, the Member has caused to be filed a Certificate of Formation with the Secretary of State of the State of Delaware to form the Company under and pursuant to the LLC Act and has entered into a Limited Liability Company Agreement of the Company, dated as of August 12, 2021 (the “Original LLC Agreement”); and
WHEREAS, in accordance with the LLC Act, the Member desires to enter into this Agreement to amend and restate in its entirety the Original LLC Agreement and to set forth the rights, powers and interests of the Member with respect to the Company and its Membership Interest therein and to provide for the management of the business and operations of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Member, intending to be legally bound, hereby agrees to amend and restate in its entirety the Original LLC Agreement as follows:
ARTICLE I
GENERAL PROVISIONS
SECTION 1.01 Definitions.
(a) Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in Appendix A attached hereto.
(b) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.
(c) 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; Article, Section, Schedule, Exhibit, Annex and Attachment references contained in this Agreement are references to Articles, Sections, Schedules, Exhibits, Annexes and Attachments in or to this Agreement unless otherwise specified; and the terms “includes” and “including” shall mean “includes without limitation” and “including without limitation”, respectively.
(d) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.
(e) Non-capitalized terms used herein which are defined in the LLC Act, shall, as the context requires, have the meanings assigned to such terms in the LLC Act as of the date hereof, but without giving effect to amendments to the LLC Act.
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SECTION 1.02 Sole Member; Registered Office and Agent.
(a) The initial sole member of the Company shall be Duke Energy Progress, LLC, a North Carolina limited liability company, or any successor as sole member pursuant to Sections 1.02(c), 6.06 and 6.07. The registered office and registered agent of the Company in the State of Delaware shall be The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The Member may change said registered office and agent from one location to another in the State of Delaware. The Member shall provide notice of any such change to the Indenture Trustee.
(b) Upon the occurrence of any event that causes the Member to cease to be a member of the Company (other than upon continuation of the Company without dissolution upon the transfer or assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee or an additional member of the Company pursuant to Sections 6.06 and 6.07), each Person acting as an Independent Manager (as defined herein) pursuant to the terms of this Agreement shall, without any action of any Person and simultaneously with the Member ceasing to be a member of the Company, automatically be admitted to the Company as a Special Member and shall continue the Company without dissolution. No Special Member may resign from the Company or transfer its rights as Special Member unless (i) a successor Special Member has been admitted to the Company as Special Member by executing a counterpart to this Agreement, and (ii) such successor has also accepted its appointment as an Independent Manager pursuant to this Agreement; provided, however, the Special Members shall automatically cease to be members of the Company upon the admission to the Company of a substitute Member. Each Special Member shall be a member of the Company that has no interest in the profits, losses and capital of the Company and has no right to receive any distributions of Company assets (and no Special Member shall be treated as a member of the Company for federal income tax purposes). Pursuant to Section 18-301 of the LLC Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive a limited liability company interest in the Company. A Special Member, in its capacity as Special Member, may not bind the Company. Except as required by any mandatory provision of the LLC Act, each Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including the merger, consolidation or conversion of the Company. In order to implement the admission to the Company of each Special Member, each Person acting as an Independent Manager pursuant to this Agreement shall execute a counterpart to this Agreement. Prior to its admission to the Company as Special Member, each Person acting as an Independent Manager pursuant to this Agreement shall not be a member of the Company. A “Special Member” means, upon such Person’s admission to the Company as a member of the Company pursuant to this Section 1.02(b), a Person acting as an Independent Manager, in such Person’s capacity as a member of the Company. A Special Member shall only have the rights and duties expressly set forth in this Agreement. For purposes of this Agreement, a Special Member is not included within the defined term “Member”.
(c) The Company may admit additional Members with the affirmative vote of a majority of the Managers, which vote must include the affirmative vote of each Independent Manager. Notwithstanding the preceding sentence, it shall be a condition to the admission of any additional Member that the sole Member shall have received an opinion of outside tax counsel (as selected by the Member in form and substance reasonably satisfactory to the Member and the Indenture Trustee) that the admission of such additional Member shall not cause the Company to be treated, for federal income tax purposes, as having more than a “sole owner” and that the Company shall not be treated, for federal income tax purposes, as an entity separate from such “sole owner”.
SECTION 1.03 Other Offices. The Company may have an office at 410 South Wilmington Street Raleigh, North Carolina 27601-1748 or at any other offices that may at any time be established by the Member at any place or places within or outside the State of Delaware. The Member shall provide notice to the Indenture Trustee of any change in the location of the Company’s office.
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SECTION 1.04 Name. The name of the Company shall be “Duke Energy Progress NC Storm Funding LLC”. The name of the Company may be changed from time to time by the Member with ten (10) days’ prior written notice to the Managers and the Indenture Trustee, and the filing of an appropriate amendment to the Certificate of Formation with the Secretary of State as required by the LLC Act.
SECTION 1.05 Purpose; Nature of Business Permitted; Powers. The Company is intended to qualify as an “Assignee” as defined in N.C. Gen. Stat. §62-172(a)(1) of the Storm Recovery Law. The purposes for which the Company is formed are limited to:
(a) acquire, own, hold, administer, service or enter into agreements regarding the receipt and servicing of Storm Recovery Property and other Storm Recovery Bond Collateral, along with certain other related assets with respect to one or more series of Storm Recovery Bonds;
(b) manage, sell, assign, pledge, collect amounts due on or otherwise deal with the Storm Recovery Property and other Storm Recovery Bond Collateral and related assets with respect to one or more series of Storm Recovery Bonds to be so acquired in accordance with the terms of the Basic Documents relating to such series;
(c) negotiate, authorize, execute, deliver, assume the obligations under, and perform its duties under, the Basic Documents and any other agreement or instrument or document relating to the activities set forth in clauses (a) and (b) above; provided, that each party to any such agreement under which material obligations are imposed upon the Company shall covenant that it shall not, prior to the date which is one year and one day after the termination of the Indenture and the payment in full of the Storm Recovery Bonds and any other amounts owed under any Indenture, acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Company 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 Company or any substantial part of the property of the Company; or ordering the winding up or liquidation of the affairs of the Company; and provided, further, that the Company shall be permitted to incur additional indebtedness or other liabilities payable to service providers and trade creditors in the ordinary course of business in connection with the foregoing activities;
(d) file with the U.S. Securities and Exchange Commission one or more registration statements, including any pre-effective or post-effective amendments thereto and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (including any prospectus supplement, prospectus and exhibits contained therein) and file such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents necessary or desirable to register one or more series of Storm Recovery Bonds under the securities or “Blue Sky” laws of various jurisdictions;
(e) authorize, execute, deliver, issue and register one or more series of Storm Recovery Bonds;
(f) make payments on the Storm Recovery Bonds;
(g) pledge its interest in Storm Recovery Property and other Storm Bond Collateral relating to any series of Storm Recovery Bonds to the Indenture Trustee under the related Indenture in order to secure the related series of Storm Recovery Bonds; and
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(h) engage in any lawful act or activity and exercise any powers permitted to limited liability companies formed under the laws of the State of Delaware that, in either case, are incidental to, or necessary, suitable or convenient for the accomplishment of the above-mentioned purposes.
The Company shall engage only in any activities related to the foregoing purposes or required or authorized by the terms of the Basic Documents or other agreements referenced above. The Company shall have all powers reasonably incidental, necessary, suitable or convenient to effect the foregoing purposes, including all powers granted under the LLC Act. The Company, the Member, any Manager (other than an Independent Manager), or any officer of the Company, acting singly or collectively, on behalf of the Company, may enter into and perform the Basic Documents and all registration statements, underwriting agreements, documents, agreements, certificates or financing statements contemplated thereby or related thereto, all without any further act, vote or approval of any Member, Manager or other Person, notwithstanding any other provision of this Agreement, the LLC Act, or other applicable law, rule or regulation.
Notwithstanding any other provision of this Agreement, the LLC Act or other applicable law, any Basic Document executed prior to the date hereof by any Member, Manager or officer on behalf of the Company is hereby ratified and approved in all respects. The authorization set forth in the two preceding sentences shall not be deemed a restriction on the power and authority of the Member or any Manager, including any Independent Manager, to enter into other agreements or documents on behalf of the Company as authorized pursuant to this Agreement and the LLC Act. The Company shall possess and may exercise all the powers and privileges granted by the LLC Act or by any other law or by this Agreement, together with any powers incidental thereto, insofar as such powers and privileges are incidental, necessary, suitable or convenient to the conduct, promotion or attainment of the business purposes or activities of the Company.
SECTION 1.06 Limited Liability Company Agreement; Certificate of Formation. This Agreement shall constitute a “limited liability company agreement” within the meaning of the LLC Act. Kenna Jordan, as an authorized person within the meaning of the LLC Act, has caused a certificate of formation of the Company to be executed and filed in the office of the Secretary of State on August 12, 2021 (such execution and filing being hereby ratified and approved in all respects). The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate of Formation of the Company as provided in the LLC Act.
SECTION 1.07 Separate Existence. Except for financial reporting purposes (to the extent required by generally accepted accounting principles) and for federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, the Member and the Managers shall take all steps necessary to continue the identity of the Company as a separate legal entity and to make it apparent to third Persons that the Company is an entity with assets and liabilities distinct from those of the Member, Affiliates of the Member or any other Person, and that, the Company is not a division of any of the Affiliates of the Company or any other Person. In that regard, and without limiting the foregoing in any manner, the Company shall:
(a) maintain office space separate and clearly delineated from the office space of any Affiliate;
(b) maintain the assets of the Company in such a manner that it is not costly or difficult to segregate, identify or ascertain its individual assets from those of any other Person, including any Affiliate;
(c) maintain a separate telephone number;
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(d) conduct all transactions with Affiliates on an arm’s-length basis;
(e) not guarantee, become obligated for or pay the debts of any Affiliate or hold the credit of the Company out as being available to satisfy the obligations of any Affiliate or other Person (nor, except as contemplated in the Basic Documents, indemnify any Person for losses resulting therefrom), nor, except as contemplated in the Basic Documents, have any of its obligations guaranteed by any Affiliate or hold the Company out as responsible for the debts of any Affiliate or other Person or for the decisions or actions with respect to the business and affairs of any Affiliate, nor seek or obtain credit or incur any obligation to any third party based upon the creditworthiness or assets of any Affiliate or any other Person (i.e. other than based on the assets of the Company) nor allow any Affiliate to do such things based on the credit of the Company;
(f) except as expressly otherwise permitted hereunder or under any of the Basic Documents, not permit the commingling or pooling of the Company’s funds or other assets with the funds or other assets of any Affiliate;
(g) maintain separate deposit and other bank accounts and funds (separately identifiable from those of the Member or any other Person) to which no Affiliate has any access, which accounts shall be maintained in the name and, to the extent not inconsistent with applicable federal tax law, with the tax identification number of the Company;
(h) maintain full books of accounts and records (financial or other) and financial statements separate from those of its Affiliates or any other Person, prepared and maintained in accordance with generally accepted accounting principles (including, all resolutions, records, agreements or instruments underlying or regarding the transactions contemplated by the Basic Documents or otherwise) and audited annually by an independent accounting firm which shall provide such audit to the Indenture Trustee;
(i) pay its own liabilities out of its own funds, including fees and expenses of the Administrator pursuant to the Administration Agreement and the Servicer pursuant to any Servicing Agreement;
(j) not hire or maintain any employees, but shall compensate (either directly or through reimbursement of the Company’s allocable share of any shared expenses) all consultants, agents and Affiliates, to the extent applicable, for services provided to the Company by such consultants, agents or Affiliates, in each case, from the Company’s own funds;
(k) allocate fairly and reasonably the salaries of and the expenses related to providing the benefits of officers shared with the Member, any Special Member or any Manager;
(l) allocate fairly and reasonably any overhead shared with the Member, any Special Member or any Manager;
(m) pay from its own bank accounts for accounting and payroll services, rent, lease and other expenses (or the Company’s allocable share of any such amounts provided by one or more other Affiliates) and not have such operating expenses (or the Company’s allocable share thereof) paid by any Affiliates; provided, that the Member shall be permitted to pay the initial organization expenses of the Company and certain of the expenses related to the transactions contemplated by the Basic Documents as provided therein;
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(n) maintain adequate capitalization to conduct its business and affairs considering the Company’s size and the nature of its business and intended purposes and, after giving effect to the transactions contemplated by the Basic Documents, refrain from engaging in a business for which its remaining property represents an unreasonably small capital;
(o) conduct all of the Company’s business (whether in writing or orally) solely in the name of the Company through the Member and the Company’s Managers, officers and agents and hold the Company out as an entity separate from any Affiliate;
(p) not make or declare any distributions of cash or property to the Member except in accordance with appropriate limited liability company formalities and only consistent with sound business judgment to the extent that it is permitted pursuant to the Basic Documents and not violative of any applicable law;
(q) otherwise practice and adhere to all limited liability company procedures and formalities to the extent required by this Agreement or all other appropriate constituent documents and the laws of its state of formation and all other appropriate jurisdictions;
(r) not appoint an Affiliate or any employee of an Affiliate as an agent of the Company, except as otherwise permitted in the Basic Documents (although such Persons can qualify as a Manager or as an officer of the Company);
(s) not acquire obligations or securities of or make loans or advances to or pledge its assets for the benefit of any Affiliate, the Member or any Affiliate of the Member (other than the Company);
(t) except as expressly provided in the Basic Documents, not permit the Member or any Affiliate to guarantee, pay or become liable for the debts of the Company nor permit any such Person to hold out its creditworthiness as being available to pay the liabilities and expenses of the Company nor, except for the indemnities in this Agreement and the Basic Documents, indemnify any Person for losses resulting therefrom;
(u) maintain separate minutes of the actions of the Member and the Managers, in their capacities as such, including actions with respect to the transactions contemplated by the Basic Documents;
(v) cause (i) all written and oral communications, including letters, invoices, purchase orders, and contracts, of the Company to be made solely in the name of the Company, (ii) the Company to have its own tax identification number (to the extent not inconsistent with applicable federal tax law), stationery, checks and business forms, separate from those of any Affiliate, (iii) all Affiliates not to use the stationery or business forms of the Company, and cause the Company not to use the stationery or business forms of any Affiliate, and (iv) all Affiliates not to conduct business in the name of the Company, and cause the Company not to conduct business in the name of any Affiliate;
(w) direct creditors of the Company to send invoices and other statements of account of the Company directly to the Company and not to any Affiliate and cause the Affiliates to direct their creditors not to send invoices and other statements of accounts of such Affiliates to the Company;
(x) cause the Member to maintain as official records all resolutions, agreements, and other instruments underlying or regarding the transactions contemplated by the Basic Documents;
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(y) disclose, and cause the Member to disclose, in its financial statements the effects of all transactions between the Member and the Company in accordance with generally accepted accounting principles, and in a manner which makes it clear that (i) the Company is a separate legal entity, (ii) the assets of the Company (including the Storm Recovery Property transferred to the Company pursuant to the Sale Agreement) are not assets of any Affiliate and are not available to pay creditors of any Affiliate and (iii) neither the Member nor any other Affiliate is liable or responsible for the debts of the Company;
(z) treat and cause the Member to treat the transfer of Storm Recovery Property from the Member to the Company as a sale under the Storm Recovery Law;
(aa) except as described herein with respect to tax purposes and financial reporting, describe and cause each Affiliate to describe the Company, and hold the Company out as a separate legal entity and not as a division or department of any Affiliate, and promptly correct any known misunderstanding regarding the Company’s identity separate from any Affiliate or any other Person;
(bb) so long as any of the Storm Recovery Bonds are outstanding, treat the Storm Recovery Bonds as debt for all purposes and specifically as debt of the Company, other than for financial reporting, state or federal regulatory or tax purposes;
(cc) solely for purposes of federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Storm Recovery Bonds are outstanding, treat the Storm Recovery Bonds as indebtedness of the Member secured by the Storm Recovery Bond Collateral unless otherwise required by appropriate taxing authorities;
(dd) file its own tax returns, if any, as may be required under applicable law, to the extent (i) not part of a consolidated group filing a consolidated return or returns or (ii) not treated as a division or disregarded entity for tax purposes of another taxpayer, and pay any taxes so required to be paid under applicable law;
(ee) maintain its valid existence in good standing under the laws of the State of Delaware and maintain its qualification to do business under the laws of such other jurisdictions as its operations require;
(ff) not form, or cause to be formed, any subsidiaries;
(gg) comply with all laws applicable to the transactions contemplated by this Agreement and the Basic Documents; and
(hh) cause the Member to observe in all material respects all limited liability company procedures and formalities, if any, required by this Agreement, the laws of the State of Delaware and all other appropriate jurisdictions.
SECTION 1.08 Limitation on Certain Activities. Notwithstanding any other provisions of this Agreement, the Company, and the Member or Managers on behalf of the Company, shall not:
(a) engage in any business or activity other than as set forth in Article I hereof;
(b) without the affirmative vote of the Member and the affirmative vote of all of the Managers, including each Independent Manager, file a voluntary petition for relief under the Bankruptcy Code or similar law, consent to the institution of insolvency or bankruptcy proceedings against the Company or otherwise institute insolvency or bankruptcy proceedings with respect to the Company or take any company action in furtherance of any such filing or institution of a proceeding;
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(c) without the affirmative vote of all Managers, including each Independent Manager, and then only to the extent permitted by the Basic Documents, convert, merge or consolidate with any other Person or sell all or substantially all of its assets or acquire all or substantially all of the assets or capital stock or other ownership interest of any other Person;
(d) take any action, file any tax return, or make any election inconsistent with the treatment of the Company, for purposes of federal income taxes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the Member;
(e) incur any indebtedness or assume or guarantee any indebtedness of any Person (other than the indebtedness incurred under the Basic Documents);
(f) issue any bonds other than the Storm Recovery Bonds contemplated by the Basic Documents or, upon satisfaction of the Rating Agency Condition, additional series of Storm Recovery Bonds pursuant to a Subsequent Financing Order; or
(g) to the fullest extent permitted by law, without the affirmative vote of its Member and the affirmative vote of all Managers, including each Independent Manager, execute any dissolution, liquidation, or winding up of the Company.
So long as any of the Storm Recovery Bonds are outstanding, the Company and the Member shall give written notice to each applicable Rating Agency of any action described in clause (b), (c) or (g) of this Section 1.08 which is taken by or on behalf of the Company with the required affirmative vote of the Member and all Managers as therein described.
SECTION 1.09 No State Law Partnership. No provisions of this Agreement shall be deemed or construed to constitute a partnership (including a limited partnership) or joint venture, or the Member a partner or joint venturer of or with any Manager or the Company, for any purposes.
ARTICLE II
CAPITAL
SECTION 2.01 Initial Capital. The initial capital of the Company shall be the sum of cash contributed to the Company by the Member (the “Capital Contribution”) in the amount set out opposite the name of the Member on Schedule A hereto, as amended from time to time and incorporated herein by this reference.
SECTION 2.02 Additional Capital Contributions. The assets of the Company are expected to generate a return sufficient to satisfy all obligations of the Company under this Agreement and the other Basic Documents and any other obligations of the Company. It is expected that no capital contributions to the Company will be necessary after the purchase of the Storm Recovery Property. On or prior to the date of issuance of the Storm Recovery Bonds, the Member shall make an additional contribution to the Company in an amount equal to at least 0.50% of the initial principal amount thereof or such greater amount as agreed to by the Member in connection with the issuance by the Company of the Storm Recovery Bonds, which amount the Company shall deposit into the Capital Subaccount established by the Indenture Trustee as provided in the Indenture. No capital contribution by the Member to the Company will be made for the purpose of mitigating losses on Storm Recovery Property that has previously been transferred to the Company, and all capital contributions shall be made in accordance with all applicable limited liability company procedures and requirements, including proper record keeping by the Member and the Company. Each capital contribution will be acknowledged by a written receipt signed by any one of the Managers. The Managers acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, such additional contribution will be managed by an investment manager selected by the Indenture Trustee who shall invest such amounts only in investments eligible pursuant to the Basic Documents, and all income earned thereon shall be allocated or paid by the Indenture Trustee in accordance with the provisions of the Indenture.
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SECTION 2.03 Capital Account. A Capital Account shall be established and maintained for the Member on the Company’s books (the “Capital Account”).
SECTION 2.04 Interest on Capital Account. Except for the Return on Invested Capital, no interest shall be paid or credited to the Member on its Capital Account or upon any undistributed profits left on deposit with the Company. Except as provided herein or by law, the Member shall have no right to demand or receive the return of its Capital Contribution.
ARTICLE III
ALLOCATIONS; BOOKS
SECTION 3.01 Allocations of Income and Loss.
(a) Book Allocations. The net income and net loss of the Company shall be allocated entirely to the Member.
(b) Tax Allocations. Because the Company is not making (and will not make) an election to be treated as an association taxable as a corporation under Section 301.7701-3(a) of the Treasury Regulations, and because the Company is a business entity that has a single owner and is not a corporation, it is expected to be disregarded as an entity separate from its owner for federal income tax purposes under Section 301.7701-3(b)(1) of the Treasury Regulations. Accordingly, all items of income, gain, loss, deduction and credit of the Company for all taxable periods will be treated for federal income tax purposes, and for state and local income and other tax purposes to the extent permitted by applicable law, as realized or incurred directly by the Member. To the extent not so permitted, all items of income, gain, loss, deduction and credit of the Company shall be allocated entirely to the Member as permitted by applicable tax law, and the Member shall pay (or indemnify the Company, the Indenture Trustee and each of their officers, managers, employees or agents for, and defend and hold harmless each such person from and against its payment of) any taxes levied or assessed upon all or any part of the Company’s property or assets based on existing law as of the date hereof, including any sales, gross receipts, general corporation, 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). The Indenture Trustee (on behalf of the Secured Parties) shall be a third party beneficiary of the Member’s obligations set forth in this Section 3.01, it being understood that Holders shall be entitled to enforce their rights against the Member under this Section 3.01 solely through a cause of action brought for their benefit by the Indenture Trustee.
SECTION 3.02 Company to be Disregarded for Tax Purposes. The Company shall comply with the applicable provisions of the Code and the applicable Treasury Regulations thereunder in the manner necessary to effect the intention of the parties that the Company be treated, for federal income tax purposes, as a disregarded entity that is not separate from the Member pursuant to Treasury Regulations Section 301.7701-1 et seq. and that the Company be accorded such treatment until its dissolution pursuant to Article IX hereof and shall take all actions, and shall refrain from taking any action, required by the Code or Treasury Regulations thereunder in order to maintain such status of the Company. In addition, for federal income tax purposes, the Company may not claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Storm Recovery Bonds (other than amounts properly withheld from such payments under the Code or other tax laws) or assert any claim against any present or former Holder by reason of the payment of the taxes levied or assessed upon any part of the Storm Recovery Bond Collateral.
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SECTION 3.03 Books of Account. At all times during the continuance of the Company, the Company shall maintain or cause to be maintained full, true, complete and correct books of account in accordance with generally accepted accounting principles, using the fiscal year and taxable year of the Member. In addition, the Company shall keep all records required to be kept pursuant to the LLC Act.
SECTION 3.04 Access to Accounting Records. All books and records of the Company shall be maintained at any office of the Company or at the Company’s principal place of business, and the Member, and its duly authorized representative, shall have access to them at such office of the Company and the right to inspect and copy them at reasonable times.
SECTION 3.05 Annual Tax Information. The Managers shall cause the Company to deliver to the Member all information necessary for the preparation of the Member’s federal income tax return.
SECTION 3.06 Internal Revenue Service Communications. The Member shall communicate and negotiate with the Internal Revenue Service on any federal tax matter on behalf of the Member and the Company.
ARTICLE IV
MEMBER
SECTION 4.01 Powers. Subject to the provisions of this Agreement and the LLC Act, all powers shall be exercised by or under the authority of, and the business and affairs of the Company shall be controlled by, the Member pursuant to Section 4.04. The Member may delegate any or all such powers to the Managers. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the Member shall have the following powers:
(a) To select and remove the Managers and all officers and agents of the Company, prescribe such powers and duties for them as may be consistent with the LLC Act and other applicable law and this Agreement, fix their compensation, and require from them security for faithful service; provided, that, except as provided in Section 7.06, at all times the Company shall have at least one Independent Manager. Prior to issuance of any Storm Recovery Bonds, the Member shall appoint at least one Independent Manager. An “Independent Manager” means an individual who (1) has prior experience as an independent director, independent manager or independent member, (2) is employed by a nationally-recognized company that provides professional Independent Managers and other corporate services in the ordinary course of its business, (3) is duly appointed as an Independent Manager and (4) is not and has not been for at least five years from the date of his or her or its appointment, and will not while serving as Independent Manager, be any of the following:
(i) a member, partner, equity holder, manager, director, officer or employee of the Company or any of its equityholders or Affiliates (other than as an independent director, independent manager or special member of the Company or an Affiliate of the Company that is not in the direct chain of ownership of the Company and that is required by a creditor to be a single purpose bankruptcy remote entity); provided, that the indirect or beneficial ownership of stock of the Member or its Affiliates through a mutual fund or similar diversified investment vehicle with respect to which the owner does not have discretion or control over the investments held by such diversified investment vehicle shall not preclude such owner from being an Independent Manager;
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(ii) a creditor, supplier or service provider (including provider of professional services) to the Company, the Member or any of their respective equityholders or Affiliates (other than a nationally-recognized company that routinely provides professional Independent Managers and other corporate services to the Company, the Member or any of its Affiliates in the ordinary course of its business);
(iii) a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider; or
(iv) a Person that controls (whether directly, indirectly or otherwise) any of (i), (ii) or (iii) above.
A natural person who otherwise satisfies the foregoing definition and satisfies subparagraph (i) by reason of being the independent manager or independent director of a “special purpose entity” affiliated with the Company shall be qualified to serve as an Independent Manager of the Company, provided that the fees that such individual earns from serving as an independent manager or independent director of affiliates of the Company in any given year constitute in the aggregate less than five percent (5%) of such individual’s annual income for that year. For purposes of this paragraph, a “special purpose entity” is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve such entity’s separateness that are substantially similar to the Special Purpose Provisions (as hereinafter defined) of this Agreement.
The Company shall pay each Independent Manager annual fees totaling not more than $5,000 per year (the “Independent Manager Fee”). Such fees shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company. Each Manager, including each Independent Manager, is hereby deemed to be a “manager” within the meaning of Section 18-101(10) of the LLC Act.
Promptly following any resignation or replacement of any Independent Manager, the Member shall give written notice to each applicable Rating Agency of any such resignation or replacement.
(b) Subject to Sections 1.07 and 1.08 and Article VII hereof, to conduct, manage and control the affairs and business of the Company, and to make such rules and regulations therefor consistent with the LLC Act and other applicable law and this Agreement.
(c) To change the registered agent and office of the Company in Delaware from one location to another; to fix and locate from time to time one or more other offices of the Company; and to designate any place within or without the State of Delaware for the conduct of the business of the Company.
SECTION 4.02 Compensation of Member. To the extent permitted by applicable law, the Company shall have authority to reimburse the Member for out-of-pocket expenses incurred by the Member in connection with its service to the Company. It is understood that the compensation paid to the Member under the provisions of this Section 4.02 shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered an Ongoing Financing Cost of the Company subject to the limitations on such expenses set forth in the Financing Order.
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SECTION 4.03 Other Ventures. Notwithstanding any duties (including fiduciary duties) otherwise existing at law or in equity, it is expressly agreed that the Member, the Managers and any Affiliates, officers, directors, managers, stockholders, partners or employees of the Member, may engage in other business ventures of any nature and description, whether or not in competition with the Company, independently or with others, and the Company shall not have any rights in and to any independent venture or activity or the income or profits derived therefrom.
SECTION 4.04 Actions by the Member. All actions of the Member may be taken by written resolution of the Member which shall be signed on behalf of the Member by an authorized officer of the Member and filed with the records of the Company.
ARTICLE V
OFFICERS
SECTION 5.01 Designation; Term; Qualifications.
(a) Officers. Subject to the last sentence of this Section 5.01(a), the Managers may, from time to time, designate one or more Persons to be officers of the Company. Any officer so designated shall have such title and authority and perform such duties as the Managers may, from time to time, delegate to them. Each officer shall hold office for the term for which such officer is designated and until its successor shall be duly designated and shall qualify or until its death, resignation or removal as provided in this Agreement. Any Person may hold any number of offices. No officer need be a Manager, the Member, a Delaware resident, or a United States citizen. The Member hereby appoints the Persons identified on Schedule C to be the officers of the Company.
(b) President. The President shall be the chief executive officer of the Company, shall preside at all meetings of the Managers, shall be responsible for the general and active management of the business of the Company and shall see that all orders and resolutions of the Managers are carried into effect. The President or any other officer authorized by the President or the Managers may execute all contracts, except: (i) where required or permitted by law or this Agreement to be otherwise signed and executed, including Section 1.08; and (ii) where signing and execution thereof shall be expressly delegated by the Managers to some other officer or agent of the Company.
(c) Vice President. In the absence of the President or in the event of the President’s inability to act, the Vice President, if any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Managers, or in the absence of any designation, then in the order of their election), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents, if any, shall perform such other duties and have such other powers as the Managers may from time to time prescribe.
(d) Secretary and Assistant Secretary. The Secretary shall be responsible for filing legal documents and maintaining records for the Company. The Secretary shall attend all meetings of the Managers and record all the proceedings of the meetings of the Company and of the Managers in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or shall cause to be given, notice of all meetings of the Member, if any, and special meetings of the Managers, and shall perform such other duties as may be prescribed by the Managers or the President, under whose supervision the Secretary shall serve. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Managers (or if there be no such determination, then in order of their designation), shall, in the absence of the Secretary or in the event of the Secretary’s inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Managers may from time to time prescribe.
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(e) Treasurer and Assistant Treasurer. The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Manager. The Treasurer shall disburse the funds of the Company as may be ordered by the Manager, taking proper vouchers for such disbursements, and shall render to the President and to the Managers, at its regular meetings or when the Managers so require, an account of all of the Treasurer’s transactions and of the financial condition of the Company. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Managers (or if there be no such determination, then in the order of their designation), shall, in the absence of the Treasurer or in the event of the Treasurer’s inability to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Managers may from time to time prescribe.
(f) Officers as Agents. The officers of the Company, to the extent their powers as set forth in this Agreement or otherwise vested in them by action of the Managers are not inconsistent with this Agreement, are agents of the Company for the purpose of the Company’s business and, subject to Section 1.08, the actions of the officers taken in accordance with such powers shall bind the Company.
(g) Duties of Managers and Officers. Except to the extent otherwise provided herein, each Manager (other than the Independent Managers) and officer of the Company shall have a fiduciary duty of loyalty and care similar to that of directors and officers of business corporations organized under the General Corporation Law of the State of Delaware.
SECTION 5.02 Removal and Resignation. Any officer of the Company may be removed as such, with or without cause, by the Managers at any time. Any officer of the Company may resign as such at any time upon written notice to the Company. Such resignation shall be made in writing and shall take effect at the time specified therein or, if no time is specified therein, at the time of its receipt by the Managers.
SECTION 5.03 Vacancies. Any vacancy occurring in any office of the Company may be filled by the Managers.
SECTION 5.04 Compensation. The compensation, if any, of the officers of the Company shall be fixed from time to time by the Managers. Such compensation shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company subject to the limitations on such expenses set forth in the Financing Order.
ARTICLE VI
MEMBERSHIP INTEREST
SECTION 6.01 General. “Membership Interest” means the limited liability company interest of the Member in the Company. The Membership Interest constitutes personal property and, subject to Section 6.06, shall be freely transferable and assignable in whole but not in part upon registration of such transfer and assignment on the books of the Company in accordance with the procedures established for such purpose by the Managers of the Company.
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SECTION 6.02 Distributions. The Member shall be entitled to receive, out of the assets of the Company legally available therefor, distributions payable in cash in such amounts, if any, as the Managers shall declare. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to the Member on account of its interest in the Company if such distribution would violate the LLC Act or any other applicable law or any Basic Document.
SECTION 6.03 Rights on Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of the Company, the Member shall be entitled to all remaining assets of the Company available for distribution to the Member after satisfaction (whether by payment or reasonable provision for payment) of all liabilities, debts and obligations of the Company.
(b) Neither the sale of all or substantially all of the property or business of the Company, nor the merger or consolidation of the Company into or with another Person or other entity, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this Section 6.03.
SECTION 6.04 Redemption. The Membership Interest shall not be redeemable.
SECTION 6.05 Voting Rights. Subject to the terms of this Agreement, the Member shall have the sole right to vote on all matters as to which members of a limited liability company shall be entitled to vote pursuant to the LLC Act and other applicable law.
SECTION 6.06 Transfer of Membership Interests.
(a) The Member may transfer its Membership Interest, in whole but not in part, but the transferee shall not be admitted as a Member except in accordance with Section 6.07. Until the transferee is admitted as a Member, the Member shall continue to be the sole member of the Company (subject to Section 1.02) and to be entitled to exercise any rights or powers of a Member of the Company with respect to the Membership Interest transferred.
(b) To the fullest extent permitted by law, any purported transfer of any Membership Interest in violation of the provisions of this Agreement shall be wholly void and shall not effectuate the transfer contemplated thereby. Notwithstanding anything contained herein to the contrary and to the fullest extent permitted by law, the Member may not transfer any Membership Interest in violation of any provision of this Agreement or in violation of any applicable federal or state securities laws.
SECTION 6.07 Admission of Transferee as Member.
(a) A transferee of a Membership Interest desiring to be admitted as a Member must execute a counterpart of, or an agreement adopting, this Agreement and, except as permitted by paragraph (b) below, shall not be admitted without unanimous affirmative vote of the Managers, which vote must include the affirmative vote of each Independent Manager. Upon admission of the transferee as a Member, the transferee shall have the rights, powers and duties and shall be subject to the restrictions and liabilities of the Member under this Agreement and the LLC Act. The transferee shall also be liable, to the extent of the Membership Interest transferred, for the unfulfilled obligations, if any, of the transferor Member to make capital contributions to the Company, but shall not be obligated for liabilities unknown to the transferee at the time such transferee was admitted as a Member and that could not be ascertained from this Agreement. Except as set forth in paragraph (b) below, whether or not the transferee of a Membership Interest becomes a Member, the Member transferring the Membership Interest is not released from any liability to the Company under this Agreement or the LLC Act.
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(b) The approval of the Managers, including each Independent Manager, shall not be required for the transfer of the Membership Interest from the Member to any successor pursuant to Section 5.02 of the Sale Agreement or the admission of such Person as a Member. Once the transferee of a Membership Interest pursuant to this paragraph (b) becomes a Member, the prior Member shall cease to be a member of the Company and shall be released from any liability to the Company under this Agreement and the LLC Act.
ARTICLE VII
MANAGERS
SECTION 7.01 Managers.
(a) Subject to Sections 1.07 and 1.08, the business and affairs of the Company shall be managed by or under the direction of two or more Managers designated by the Member. Subject to the terms of this Agreement, the Member may determine at any time in its sole and absolute discretion the number of Managers. Subject in all cases to the terms of this Agreement, the authorized number of Managers may be increased or decreased by the Member at any time in its sole and absolute discretion, upon notice to all Managers; provided, that, except as provided in Section 7.06, at all times the Company shall have at least one Independent Manager. The initial number of Managers shall be three, one of which shall be an Independent Manager. Each Manager designated by the Member shall hold office until a successor is elected and qualified or until such Manager’s earlier death, resignation, expulsion or removal. Each Manager shall execute and deliver the Management Agreement in the form attached hereto as Exhibit A. Managers need not be a Member. The initial Managers designated by the Member are listed on Schedule B hereto.
(b) Each Manager shall be designated by the Member and shall hold office for the term for which designated and until a successor has been designated.
(c) The Managers shall be obliged to devote only as much of their time to the Company’s business as shall be reasonably required in light of the Company’s business and objectives. Subject to Section 7.02, a Manager shall perform his or her duties as a Manager in good faith, in a manner he or she reasonably believes to be in the best interests of the Company, and with such care as an ordinarily prudent Person in a like position would use under similar circumstances.
(d) Except as otherwise provided in this Agreement, the Managers shall act by the affirmative vote of a majority of the Managers. Each Manager shall have the authority to sign duly authorized agreements and other instruments on behalf of the Company without the joinder of any other Manager.
(e) Subject to the terms of this Agreement, any action may be taken by the Managers without a meeting and without prior notice if authorized by the written consent of a majority of the Managers (or such greater number as is required by this Agreement), which written consent shall be filed with the records of the Company.
(f) Every Manager is an agent of the Company for the purpose of its business, and the act of every Manager, including the execution in the Company name of any instrument for carrying on the business of the Company, binds the Company, unless such act is in contravention of this Agreement or unless the Manager so acting otherwise lacks the authority to act for the Company and the Person with whom he or she is dealing has knowledge of the fact that he or she has no such authority.
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(g) To the extent permitted by law, the Managers shall not be personally liable for the Company’s debts, obligations or liabilities.
SECTION 7.02 Powers of the Managers. Subject to the terms of this Agreement, the Managers shall have the right and authority to take all actions which the Managers deem incidental, necessary, suitable or convenient for the day-to-day management and conduct of the Company’s business.
Each Independent Manager may not delegate his, hers or its duties, authorities or responsibilities hereunder. If any Independent Manager resigns, dies or becomes incapacitated, or such position is otherwise vacant, no action requiring the unanimous affirmative vote of the Managers shall be taken until a successor Independent Manager is appointed by the Member and qualifies and approves such action.
To the fullest extent permitted by law, including Section 18-1101(c) of the LLC Act, and notwithstanding any duty otherwise existing at law or in equity, the Independent Managers shall consider only the interests of the Company, including its creditors, in acting or otherwise voting on the matters referred to in Section 1.08. Except for duties to the Company as set forth in the immediately preceding sentence (including duties to the Member and the Company’s creditors solely to the extent of their respective economic interests in the Company but excluding (i) all other interests of the Member, (ii) the interests of other Affiliates of the Company, and (iii) the interests of any group of Affiliates of which the Company is a part), the Independent Managers shall not have any fiduciary duties to the Member, any Manager or any other Person bound by this Agreement; provided, however, the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing. To the fullest extent permitted by law, including Section 18-1101(e) of the LLC Act, an Independent Manager shall not be liable to the Company, the Member or any other Person bound by this Agreement for breach of contract or breach of duties (including fiduciary duties), unless the Independent Manager acted in bad faith or engaged in willful misconduct.
No Independent Manager shall at any time serve as trustee in bankruptcy for any Affiliate of the Company.
Subject to the terms of this Agreement, the Managers may exercise all powers of the Company and do all such lawful acts and things as are not prohibited by the LLC Act, other applicable law or this Agreement directed or required to be exercised or done by the Member. All duly authorized instruments, contracts, agreements and documents providing for the acquisition or disposition of property of the Company shall be valid and binding on the Company if executed by one or more of the Managers.
Notwithstanding the terms of Section 7.01, 7.07 or 7.09 or any provision of this Agreement to the contrary, (x) no meeting or vote with respect to any action described in clause (b), (c) or (g) of Section 1.08 or any amendment to any of the Special Purpose Provisions (as hereinafter defined) shall be conducted unless each Independent Manager is present and (y) neither the Company nor the Member, any Manager or any officer on behalf of the Company shall (i) take any action described in clause (b), (c) or (g) of Section 1.08 or (ii) adopt any amendment to any of the Special Purpose Provisions unless each Independent Manager has consented thereto. The vote or consent of an Independent Manager with respect to any such action or amendment shall not be dictated by the Member or any other Manager or officer of the Company.
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SECTION 7.03 Compensation. To the extent permitted by applicable law, the Company may reimburse any Manager, directly or indirectly, for out-of-pocket expenses incurred by such Manager in connection with its services rendered to the Company. Such compensation shall be determined by the Managers without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company subject to the limitations on such expenses set forth in the Financing Order.
SECTION 7.04 Removal of Managers.
(a) Subject to Section 4.01, the Member may remove any Manager with or without cause at any time.
(b) Subject to Sections 4.01 and 7.05, any removal of a Manager shall become effective on such date as may be specified by the Member and in a notice delivered to any remaining Managers or the Manager designated to replace the removed Manager (except that it shall not be effective on a date earlier than the date such notice is delivered to the remaining Managers or the Manager designated to replace the removed Manager). Should a Manager be removed who is also the Member, the Member shall continue to participate in the Company as the Member and receive its share of the Company’s income, gains, losses, deductions and credits pursuant to this Agreement.
SECTION 7.05 Resignation of Manager. A Manager other than an Independent Manager may resign as a Manager at any time by thirty (30) days’ prior notice to the Member. An Independent Manager may not withdraw or resign as a Manager of the Company without the consent of the Member. No resignation or removal of an Independent Manager, and no appointment of a successor Independent Manager, shall be effective until such successor (i) shall have accepted his or her appointment as an Independent Manager by a written instrument, which may be a counterpart signature page to the Management Agreement in the form attached hereto as Exhibit A, and (ii) shall have executed a counterpart to this Agreement.
SECTION 7.06 Vacancies. Subject to Section 4.01, any vacancies among the Managers may be filled by the Member. In the event of a vacancy in the position of Independent Manager, the Member shall, as soon as practicable, appoint a successor Independent Manager.
Notwithstanding anything to the contrary contained in this Agreement, no Independent Manager shall be removed or replaced unless the Company provides the Indenture Trustee with no less than two (2) Business Days’ prior written notice of (a) any proposed removal of such Independent Manager, and (b) the identity of the proposed replacement Independent Manager, together with a certification that such replacement satisfies the requirements for an Independent Manager set forth in this Agreement.
SECTION 7.07 Meetings of the Managers. The Managers may hold meetings, both regular and special, within or outside the State of Delaware. Regular meetings of the Managers may be held without notice at such time and at such place as shall from time to time be determined by the Managers. Special meetings of the Managers may be called by the President on not less than one day’s notice to each Manager by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President or Secretary in like manner and with like notice upon the written request of any one or more of the Managers.
SECTION 7.08 Electronic Communications. Managers, or any committee designated by the Managers, may participate in meetings of the Managers, or any committee, by means of telephone conference or similar communications equipment that allows all Persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in Person at the meeting. If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.
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SECTION 7.09 Committees of Managers.
(a) The Managers may, by resolution passed by a majority of the Managers, designate one or more committees, each committee to consist of one or more of the Managers. The Managers may designate one or more Managers as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
(b) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another Manager to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Managers, shall have and may exercise all the powers and authority of the Managers in the management of the business and affairs of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Managers. Each committee shall keep regular minutes of its meetings and report the same to the Managers when required.
SECTION 7.10 Limitations on Independent Managers. All right, power and authority of each Independent Manager shall be limited to the extent necessary to exercise those rights and perform those duties specifically set forth in this Agreement.
ARTICLE VIII
EXPENSES
SECTION 8.01 Expenses. Except as otherwise provided in this Agreement or the other Basic Documents, the Company shall be responsible for all expenses and the allocation thereof including without limitation:
(a) all expenses incurred by the Member or its Affiliates in organizing the Company;
(b) all expenses related to the business of the Company and all routine administrative expenses of the Company, including the maintenance of books and records of the Company, and the preparation and dispatch to the Member of checks, financial reports, tax returns and notices required pursuant to this Agreement;
(c) all expenses incurred in connection with any litigation or arbitration involving the Company (including the cost of any investigation and preparation) and the amount of any judgment or settlement paid in connection therewith;
(d) all expenses for indemnity or contribution payable by the Company to any Person;
(e) all expenses incurred in connection with the collection of amounts due to the Company from any Person;
(f) all expenses incurred in connection with the preparation of amendments to this Agreement;
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(g) all expenses incurred in connection with the liquidation, dissolution and winding up of the Company; and
(h) all expenses otherwise allocated in good faith to the Company by the Managers.
ARTICLE IX
PERPETUAL EXISTENCE; DISSOLUTION, LIQUIDATION AND WINDING-UP
SECTION 9.01 Existence.
(a) The Company shall have a perpetual existence. So long as any of the Storm Recovery Bonds are outstanding, the Member shall not be entitled to consent to the dissolution of the Company.
(b) Notwithstanding any provision of this Agreement, the Bankruptcy of the Member or Special Member will not cause such Member or Special Member, respectively, to cease to be a member of the Company, and upon the occurrence of such an event, the business of the Company shall continue without dissolution. For purposes of this Section 9.01(b), “Bankruptcy” means, with respect to any Person (A) if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature, or (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties, or (B) if 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed or if within 90 days after the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated. The foregoing definition of “Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 of the LLC Act. Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company or that causes the Member to cease to be a member of the Company (other than upon continuation of the Company without dissolution upon an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to Sections 6.06 and 6.07), to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining member of the Company or the Member in the Company.
SECTION 9.02 Dissolution. The Company shall be dissolved and its affairs shall be wound up upon the occurrence of the earliest of the following events:
(a) subject to Section 1.08, the election to dissolve the Company made in writing by the Member and each Manager, including each Independent Manager, as permitted under the Basic Documents and after the discharge in full of the Storm Recovery Bonds;
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(b) the termination of the legal existence of the last remaining member of the Company or the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company unless the business of the Company is continued without dissolution in a manner permitted by the LLC Act or this Agreement; or
(c) the entry of a decree of judicial dissolution of the Company pursuant to Section 18-802 of the LLC Act.
SECTION 9.03 Accounting. In the event of the dissolution, liquidation and winding-up of the Company, a proper accounting shall be made of the Capital Account of the Member and of the net income or net loss of the Company from the date of the last previous accounting to the date of dissolution.
SECTION 9.04 Certificate of Cancellation. As soon as possible following the occurrence of any of the events specified in Section 9.02 and the completion of the winding up of the Company, the Person winding up the business and affairs of the Company, as an authorized person, shall cause to be executed a Certificate of Cancellation of the Certificate of Formation and file the Certificate of Cancellation of the Certificate of Formation as required by the LLC Act.
SECTION 9.05 Winding Up. Upon the occurrence of any event specified in Section 9.02, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors. The Member, or if there is no Member, the Managers, shall be responsible for overseeing the winding up and liquidation of the Company, shall take full account of the liabilities of the Company and its assets, shall either cause its assets to be sold or distributed, and if sold as promptly as is consistent with obtaining the fair market value thereof, shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed as provided in Section 9.06.
SECTION 9.06 Order of Payment of Liabilities Upon Dissolution. After determining that all debts and liabilities of the Company, including all contingent, conditional or unmatured liabilities of the Company, in the process of winding-up, including, without limitation, debts and liabilities to the Member in the event it is a creditor of the Company to the extent otherwise permitted by law, have been paid or adequately provided for, the remaining assets shall be distributed in cash or in kind to the Member.
SECTION 9.07 Limitations on Payments Made in Dissolution. Except as otherwise specifically provided in this Agreement, the Member shall only be entitled to look solely to the assets of Company for the return of its positive Capital Account balance and shall have no recourse for its Capital Contribution and/or share of net income (upon dissolution or otherwise) against any Manager.
SECTION 9.08 Limitation on Liability. Except as otherwise provided by the LLC Act and except as otherwise characterized for tax and financial reporting purposes, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member or Manager shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or a Manager.
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ARTICLE X
INDEMNIFICATION
SECTION 10.01 Indemnity. Subject to the provisions of Section 10.04 hereof, to the fullest extent permitted by law, the Company shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Company, by reason of the fact that such Person is or was a Manager, Member, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, partnership, corporation, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with the action, suit or proceeding if such Person acted in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to a criminal action or proceeding, had no reasonable cause to believe such Person’s conduct was unlawful; provided that such Person shall not be entitled to indemnification if such judgment, penalty, fine or other expense was directly caused by such Person’s fraud, gross negligence or willful misconduct or, in the case of an Independent Manager, bad faith or willful misconduct.
SECTION 10.02 Indemnity for Actions By or In the Right of the Company. Subject to the provisions of Section 10.04 hereof, to the fullest extent permitted by law, the Company shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the rights of the Company to procure a judgment in its favor by reason of the fact that such Person is or was a Member, Manager, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by such Person in connection with the defense or settlement of the actions or suit if such Person acted in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Company; provided that such Person shall not be entitled to indemnification if such judgment, penalty, fine or other expense was directly caused by such Person’s fraud, gross negligence or willful misconduct or, in the case of an Independent Manager, bad faith or willful misconduct. Indemnification may not be made for any claim, issue or matter as to which such Person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
SECTION 10.03 Indemnity If Successful. To the fullest extent permitted by law, the Company shall indemnify any Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against expenses, including reasonable attorneys’ fees, actually and reasonably incurred by him or her in connection with the defense of any action, suit or proceeding referred to in Sections 10.01 and 10.02 or in defense of any claim, issue or matter therein, to the extent that such Person has been successful on the merits.
SECTION 10.04 Expenses. Any indemnification under Sections 10.01 and 10.02, as well as the advance payment of expenses permitted under Section 10.05 unless ordered by a court or advanced pursuant to Section 10.05 below, must be made by the Company only as authorized in the specific case upon a determination that indemnification of the Manager, Member, officer, controlling Person, legal representative or agent is proper in the circumstances. The determination must be made:
(a) by the Member if the Member was not a party to the act, suit or proceeding; or
(b) if the Member was a party to the act, suit or proceeding by independent legal counsel in a written opinion.
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SECTION 10.05 Advance Payment of Expenses. The expenses of each Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, incurred in defending a civil or criminal action, suit or proceeding may be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such Person to repay the amount if it is ultimately determined by a court of competent jurisdiction that such Person is not entitled to be indemnified by the Company. The provisions of this Section 10.05 shall not affect any rights to advancement of expenses to which personnel other than the Member or the Managers (other than each Independent Manager) may be entitled under any contract or otherwise by law.
SECTION 10.06 Other Arrangements Not Excluded. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article X:
(a) does not exclude any other rights to which a Person seeking indemnification or advancement of expenses may be entitled under any agreement, decision of the Member, consent or action of the Managers, or otherwise, for either an action of any Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, in the official capacity of such Person or an action in another capacity while holding such position, except that indemnification and advancement, unless ordered by a court pursuant to Section 10.05 above, may not be made to or on behalf of such Person if a final adjudication established that its acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action; and
(b) continues for a Person who has ceased to be a Member, Manager, officer, legal representative or agent and inures to the benefit of the successors, heirs, executors and administrators of such a Person.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01 No Bankruptcy Petition; Dissolution.
(a) To the fullest extent permitted by law, the Member, each Special Member and each Manager hereby covenant and agree (or shall be deemed to have hereby covenanted and agreed) that, prior to the date which is one year and one day after the termination of the Indenture and the payment in full of the Storm Recovery Bonds and any other amounts owed under the Indenture, it will not acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Company 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 Company or any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company; provided, however, that nothing in this Section 11.01 shall constitute a waiver of any right to indemnification, reimbursement or other payment from the Company pursuant to this Agreement. This Section 11.01 is not intended to apply to the filing of a voluntary bankruptcy petition on behalf of the Company which is governed by Section 1.08 of this Agreement.
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(b) To the fullest extent permitted by law, the Member, each Special Member and each Manager hereby covenant and agree (or shall be deemed to have hereby covenanted and agreed) that, until the termination of the Indenture and the payment in full of the Storm Recovery Bonds and any other amounts owed under the Indenture, the Member, such Special Member and such Manager will not consent to, or make application for, or institute or maintain any action for, the dissolution of the Company under Section 18-801 or 18-802 of the LLC Act or otherwise.
(c) In the event that the Member, any Special Member or any Manager takes action in violation of this Section 11.01, the Company agrees that it shall file an answer with the court or otherwise properly contest the taking of such action and raise the defense that the Member, the Special Member or Manager, as the case may be, has agreed in writing not to take such action and should be estopped and precluded therefrom and such other defenses, if any, as its counsel advises that it may assert.
(d) The provisions of this Section 11.01 shall survive the termination of this Agreement and the resignation, withdrawal or removal of the Member, any Special Member or any Manager. Nothing herein contained shall preclude participation by the Member, any Special Member or a Manager in assertion or defense of its claims in any such proceeding involving the Company.
SECTION 11.02 Amendments.
(a) The power to alter, amend or repeal this Agreement shall be only with the consent of the Member, provided, that the Company shall not alter, amend or repeal any provision of Sections 1.02(b) and (c), 1.05, 1.07, 1.08, 3.01(b), 3.02, 6.06, 6.07, 7.02, 7.05, 7.06, 9.01, 9.02, 11.02 and 11.07 of this Agreement or the definition of “Independent Manager” contained herein or the requirement that at all times the Company have at least one Independent Manager (collectively, the “Special Purpose Provisions”) without, in each case, the affirmative vote of a majority of the Managers, which vote must include the affirmative vote of each Independent Manager. So long as any of the Storm Recovery Bonds are outstanding, the Company and the Member shall give written notice to each applicable Rating Agency of any amendment to this Agreement. The effectiveness of any amendment of the Special Purpose Provisions shall be subject to the Rating Agency notice conditions set forth in the Basic Documents (other than an amendment which is necessary: (i) to cure any ambiguity or (ii) to correct or supplement any such provision in a manner consistent with the intent of this Agreement).
(b) The Company’s power to alter or amend the Certificate of Formation shall be vested in the Member. Upon obtaining the approval of any amendment, supplement or restatement as to the Certificate of Formation, the Member on behalf of the Company shall cause a Certificate of Amendment or Amended and Restated Certificate of Formation to be prepared, executed and filed in accordance with the LLC Act.
(c) Notwithstanding anything in this Agreement to the contrary, including Sections 11.02(a) and (b), unless and until the Storm Recovery Bonds are issued and outstanding, the Member may, without the need for any consent or action of, or notice to, any other Person, including any Manager, any officer, the Indenture Trustee or any Rating Agency, alter, amend or repeal this Agreement in any manner.
SECTION 11.03 Commission Condition. Notwithstanding anything to the contrary in Section 11.02, no amendment or modification of this Agreement shall be effective unless the process set forth in this Section 11.03 has been followed.
(a) At least fifteen (15) days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in Section 11.02 above (except that the consent of the Indenture Trustee may be subject to the consent of Holders of the Storm Recovery Bonds if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification), the Member shall have filed in Commission docket E-2, Sub 1262 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:
(i) a reference to Docket No. E-2, Sub 1262;
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(ii) an Officer’s Certificate stating that the proposed amendment or modification has been approved by all parties to this Agreement; and
(iii) a statement identifying the person to whom the Commission or its authorized representative is to address any response to the proposed amendment or modification or to request additional time.
(b) If the Commission, within 15 days of receiving a notification complying with subparagraph (i), shall have an order that the Commission might object to the proposed amendment or modification, then, subject to clause (c) below, such proposed amendment or modification shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed amendment or modification; or
(c) If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification may subsequently become effective upon satisfaction of the other conditions specified in Section 11.03(a).
(d) Following the delivery of an order from the Commission to the Member under subparagraph (b), the Member and the Company shall have the right at any time to withdraw from the Commission further consideration of any proposed amendment. The fact that the Administrator delivers notice to the Commission pursuant to this Section 11.03(b) does not obligate the Administrator to amend the Agreement as provided in the notice.
SECTION 11.04 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, 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 11.05 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 11.06 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 remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.07 Assigns. Each and all of the covenants, terms, provisions and agreements contained in this Agreement shall be binding upon and inure to the benefit of the Member, and its permitted successors and assigns.
24
SECTION 11.08 Enforcement by Each Independent Manager. Notwithstanding any other provision of this Agreement, the Member agrees that this Agreement constitutes a legal, valid and binding agreement of the Member, and is enforceable against the Member by each Independent Manager in accordance with its terms.
SECTION 11.09 Waiver of Partition; Nature of Interest. Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each of the Member and the Special Members hereby irrevocably waives any right or power that such Person might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of the Company. The Member shall not have any interest in any specific assets of the Company, and the Member shall not have the status of a creditor with respect to any distribution pursuant to this Agreement.
SECTION 11.10 Benefits of Agreement; No Third-Party Rights. Except for the Indenture Trustee with respect to the Special Purpose Provisions and Persons entitled to indemnification hereunder, none of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of the Member or Special Member. Nothing in this Agreement shall be deemed to create any right in any Person (other than the Indenture Trustee with respect to the Special Purpose Provisions and Persons entitled to indemnification hereunder) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement is hereby executed by the undersigned as the sole Member of the Company and is effective as of the date first written above.
| DUKE ENERGY PROGRESS, LLC | ||
| By: | /s/ Lynn J. Good | |
| Name: | Lynn J. Good | |
| Title: | Chief Executive Officer | |
| ACKNOWLEDGED AND AGREED: | |
| /s/ Bernard J. Angelo, | |
Bernard J. Angelo |
|
| as Independent Manager |
Signature Page to Limited Liability Company Agreement
SCHEDULE A
SCHEDULE OF CAPITAL CONTRIBUTIONS OF MEMBER
MEMBER’S NAME |
CAPITAL CONTRIBUTION | MEMBERSHIP INTEREST PERCENTAGE |
CAPITAL ACCOUNT | |||||||||
| Duke Energy Progress, LLC | $ | 100 | 100 | % | $ | 100 | ||||||
SCHEDULE A
SCHEDULE B
INITIAL MANAGER
Karl W. Newlin
Cynthia S. Lee
Bernard J. Angelo
SCHEDULE B
SCHEDULE C
INITIAL OFFICERS
| Name | Office |
| Karl W. Newlin | President, Treasurer and Chief Financial Officer |
| Cynthia S. Lee | Controller |
| Robert T. Lucas III | Secretary |
| Christopher R. Bauer | Assistant Treasurer |
| Michael S. Hendershott | Assistant Treasurer |
| Kenna C. Jordan | Assistant Secretary |
| David S. Maltz | Assistant Secretary |
| Nancy M. Wright | Assistant Secretary |
SCHEDULE C
EXHIBIT A
MANAGEMENT AGREEMENT
[filing date]
Duke Energy Progress NC
Storm Funding LLC
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
EXHIBIT A-1-1
Re: Management Agreement — Duke Energy Progress NC Storm Funding LLC
Ladies and Gentlemen:
For good and valuable consideration, each of the undersigned Persons, who have been designated as managers of Duke Energy Progress NC Storm Funding LLC, a Delaware limited liability company (the “Company”), in accordance with the Amended and Restated Limited Liability Company Agreement of the Company, dated as of August 12, 2021 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “LLC Agreement”), hereby agree as follows:
1. Each of the undersigned accepts such Person’s rights and authority as a Manager under the LLC Agreement and agrees to perform and discharge such Person’s duties and obligations as a Manager under the LLC Agreement, and further agrees that such rights, authorities, duties and obligations under the LLC Agreement shall continue until such Person’s successor as a Manager is designated or until such Person’s resignation or removal as a Manager in accordance with the LLC Agreement. Each of the undersigned agrees and acknowledges that it has been designated as a “manager” of the Company within the meaning of the Delaware Limited Liability Company Act.
2. Until a year and one day has passed since the date that the last obligation under the Basic Documents was paid, to the fullest extent permitted by law, each of the undersigned agrees, solely in its capacity as a creditor of the Company on account of any indemnification or other payment owing to the undersigned by the Company, not to acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Company 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 Company or any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company.
3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Capitalized terms used and not otherwise defined herein have the meanings set forth in the LLC Agreement.
This Management Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Management Agreement and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as of the day and year first above written.
EXHIBIT A-1-2
APPENDIX A
DEFINITIONS
As used in this Agreement, the following terms have the following meanings:
“Administration Agreement” means an administration agreement to be entered into between the Company and the Administrator pursuant to which the Administrator will provide certain management services to the Company.
“Administrator” means DEP, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.
“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 specified 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” has the meaning set forth in the preamble to this Agreement.
“Bankruptcy” is defined in Section 9.01(b) of this Agreement.
“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.), as amended from time to time.
“Basic Documents” means the Indenture, the Administration Agreement, the Sale Agreement, the Bill of Sale, the Certificate of Formation, the Original LLC Agreement, this Agreement, the Servicing Agreement, the Series Supplement, the Intercreditor Agreement, any joinder to an existing intercreditor agreement, the Letter of Representations, the Underwriting Agreement and all other documents and certificates delivered in connection therewith.
“Bill of Sale” means the bill of sale in connection with the sale of the Storm Recovery Property pursuant to the Sale Agreement.
“Capital Account” is defined in Section 2.03 of this Agreement.
“Capital Contribution” is defined in Section 2.01 of this Agreement.
“Certificate of Formation” means the Certificate of Formation filed with the Secretary of State on August 12, 2021 pursuant to which the Company was formed.
“Clearing Agency” means an organization registered as a “clearing agency” pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.
“Code” means the Internal Revenue Code of 1986, as amended.
“Collection Account” means the account established and maintained by the Indenture Trustee in connection with the Indenture and any subaccounts contained therein.
“Commission” means the North Carolina Utilities Commission.
EXHIBIT A-1-3
“Company” has the meaning set forth in the preamble to this Agreement.
“DEP” means Duke Energy Progress, LLC, a North Carolina limited liability company, and any of its successors or permitted assigns.
“Financing Order” means the financing order issued by the Commission to DEP on May 10, 2021, Docket No. E-2, Sub 1262, authorizing the creation of the Storm Recovery Property and the Clarifying and Correcting Financing Order on July 13, 2021.
“Governmental Authority” means any nation or government, any U.S. federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.
“Holder” means the Person in whose name a Storm Recovery Bond is registered.
“Indenture” means an Indenture to be entered into between the Company and the Indenture Trustee authorizing the issuance of the Storm Recovery Bonds, as originally executed and, as from time to time supplemented or amended by any supplements or indentures supplemental thereto entered into pursuant to the applicable provisions of the Indenture, as so supplemented or amended, or both, and shall include the forms and terms of the Storm Recovery Bonds established thereunder.
“Indenture Trustee” means The Bank of New York Mellon, a New York banking corporation, as indenture trustee for the benefit of the Secured Parties, or any successor indenture trustee for the benefit of the Secured Parties, under the Indenture.
“Independent Manager” is defined in Section 4.01(a) of this Agreement.
“Independent Manager Fee” is defined in Section 4.01(a) of this Agreement.
“Intercreditor Agreement” means the Intercreditor Agreement, dated December 20, 2013, by and among the Duke Energy Business Services, Inc., Duke Energy Corporate Services Inc., Duke Energy Corporation, Mizuho Bank, Ltd., the Bank of Nova Scotia, the Bank of Tokyo-Mitsubishi UFJ, Ltd., Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress Receivables LLC, Cinergy Receivables Company LLC and Duke Energy Receivables Finance Company, LLC, the Indenture Trustee, the Issuer, Duke Energy Progress, and any subsequent such agreement.
“Letter of Representations” means any applicable agreement between the Company and the applicable Clearing Agency, with respect to such Clearing Agency’s rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Storm Recovery Bonds (as defined in the Indenture).
“LLC Act” means the Delaware Limited Liability Company Act, as amended.
“Manager” means each manager of the Company under this Agreement.
“Member” has the meaning set forth in the preamble to this Agreement.
“Membership Interest” is defined in Section 6.01 of this Agreement.
“Ongoing Financing Cost” means the Financing Costs described as such in the Financing Order or a Subsequent Financing Order, including Operating Expenses and any other costs identified in the Basic Documents; provided, however, that Ongoing Financing Costs do not include the Company’s costs of issuance of the Storm Recovery Bonds.
“Operating Expenses” means all unreimbursed fees, costs and out-of-pocket expenses of the Company, including all amounts owed by the Company to the Indenture Trustee (including indemnitees, legal fees and expense), or any Manager, fees of the Servicer pursuant to the Servicing Agreement, fees of the Administrator pursuant to the Administration Agreement, legal and accounting fees, Rating Agency and related fees (i.e. website provider fees), and any franchise or other taxes owed by the Company, including on investment income in the Collection Account.
EXHIBIT A-1-4
“Original LLC Agreement” has the meaning set forth in the preamble to this Agreement.
“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Government Authority.
“Rating Agency” with respect to any tranche of the Storm Recovery Bonds, means each of Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, or any successors thereto, which provides a rating with respect to the Storm Recovery Bonds. 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 Company, notice of which designation shall be given to the Indenture Trustee and the Servicer.
“Sale Agreement” means a sale agreement to be entered into pursuant to which the Seller will sell its rights and interests in the Storm Recovery Property to the Company.
“Secretary of State” means the Secretary of State of the State of Delaware.
“Secured Parties” means the Indenture Trustee, the Holders and any credit enhancer described in the Series Supplement.
“Seller” means DEP.
“Series Supplement” means the indenture supplemental to the Indenture in the form attached as an exhibit to the Indenture that authorizes the issuance of the Storm Recovery Bonds.
“Servicer” means DEP, as Servicer under the Servicing Agreement, or any successor Servicer to the extent permitted under the Servicing Agreement.
“Servicing Agreement” means a servicing agreement to be entered into pursuant to which the Servicer will service the Storm Recovery Property on behalf of the Company.
“Special Member” is defined in Section 1.02(b) of this Agreement.
“Special Purpose Provisions” is defined in Section 11.02(a) of this Agreement.
“Storm Recovery Bonds” means the Storm Recovery Bonds authorized by the (i) Financing Order or (ii) a Subsequent Financing Order, each and issued under an Indenture.
EXHIBIT A-1-5
“Storm Recovery Bond Collateral” means the Storm Recovery Property created under and pursuant to the Financing Order or a Subsequent Financing Order and the Storm Recovery Law with respect to such series, and transferred by the Seller to the Company pursuant to the related Sale Agreement (including, to the fullest extent permitted by law, the right to impose, collect and receive Storm Recovery Charges, the right to obtain periodic adjustments to the Storm Recovery Charges, and all revenue, collections, claims, rights to payments, payments, money and or proceeds of or arising from the Storm Recovery Charges out of the rights and interests created under the Financing Order), (a) all Storm Recovery Charges related to the Storm Recovery Property with respect to such series, (b) the Sale Agreement and the Bill of Sale executed in connection with such series of Storm Recovery Bonds therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the foregoing Storm Recovery Property and the such series of Storm Recovery Bonds, (c) the Servicing Agreement, the Administration Agreement, the Intercreditor Agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing Storm Recovery Property and such series of Storm Recovery Bonds, (d) the Collection Account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto with respect to such series of Storm Recovery Bonds, (e) all rights to compel the Servicer to file for and obtain adjustments to the Storm Recovery Charges in accordance with Section 62-172(b)(3)d. of the Storm Recovery Law and the related Financing Order, (f) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute Storm Recovery Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property with respect to such series of Storm Recovery Bonds, (g) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations with respect to such series of Storm Recovery Bonds related to the foregoing and (h) all payments on or under, and all proceeds in respect of, any or all of the foregoing with respect to such series of Storm Recovery Bonds.
“Storm Recovery Charge” means any storm recovery charge as defined in Section 62-172(a)(15) of the Storm Recovery Law that is authorized by the Financing Order.
“Storm Recovery Law” means the laws of the State of North Carolina adopted in November 6, 2019 enacted as N.C. Gen. Stat. §62-172, as may be amended from time to time.
“Storm Recovery Property” means all Storm Recovery Property as defined in Section 62-172(a)(17) of the Storm Recovery Law created pursuant to the Financing Order or a Subsequent Financing Order and under the Storm Recovery Law, including the right to impose, bill, collect and receive the Storm Recovery Charges authorized under the Financing Order or a Subsequent Financing Order and to obtain periodic adjustments of the Storm Recovery Charges and all revenue, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in Section 366.95(a)(17)b., regardless of whether such revenues, collections, claims, rights to payment, payments, money, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money, or proceeds.
“Subsequent Financing Order” means with respect to any other series of Storm Recovery Bonds, any other financing order issued by the NCUC with respect to such other series of storm recovery bonds pursuant to the Storm Recovery Law for the benefit of DEP.
“Tariff” means Rider STS-1 filed with the Commission, as the same may be amended, restated, supplemented or otherwise modified from time to time, including, without limitation, with respect to any successor.
“Treasury Regulations” means the regulations, including proposed or temporary regulations, promulgated under the Code.
“Underwriting Agreement” means the Underwriting Agreement, dated expected to be dated November 17, 2021, by and among DEP, the representatives of the several underwriters named therein and the Company.
EXHIBIT A-1-6
Exhibit 4.1
INDENTURE
by and between
DUKE ENERGY PROGRESS NC STORM FUNDING LLC,
Issuer
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION,
Indenture Trustee and Securities Intermediary
Dated as of November 24, 2021
TABLE OF CONTENTS
Page
| ARTICLE I | Definitions AND RULES OF CONSTRUCTION; Incorporation by Reference | 9 | ||
| SECTION 1.01. | Definitions and Rules of Construction | 9 | ||
| SECTION 1.02. | Incorporation by Reference of Trust Indenture Act | 9 | ||
| ARTICLE II | The Storm Recovery Bonds | 9 | ||
| SECTION 2.01. | Form | 9 | ||
| SECTION 2.02. | Denominations: Storm Recovery Bonds | 10 | ||
| SECTION 2.03. | Execution, Authentication and Delivery | 11 | ||
| SECTION 2.04. | Temporary Storm Recovery Bonds | 11 | ||
| SECTION 2.05. | Registration; Registration of Transfer and Exchange of Storm Recovery Bonds | 12 | ||
| SECTION 2.06. | Mutilated, Destroyed, Lost or Stolen Storm Recovery Bonds | 13 | ||
| SECTION 2.07. | Persons Deemed Owner | 14 | ||
| SECTION 2.08. | Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved | 15 | ||
| SECTION 2.09. | Cancellation | 16 | ||
| SECTION 2.10. | Outstanding Amount; Authentication and Delivery of Storm Recovery Bonds | 16 | ||
| SECTION 2.11. | Book-Entry Storm Recovery Bonds | 19 | ||
| SECTION 2.12. | Notices to Clearing Agency | 20 | ||
| SECTION 2.13. | Definitive Storm Recovery Bonds | 21 | ||
| SECTION 2.14. | CUSIP Number | 21 | ||
| SECTION 2.15. | Letter of Representations | 21 | ||
| SECTION 2.16. | Tax Treatment | 21 | ||
| SECTION 2.17. | State Pledge | 22 | ||
| SECTION 2.18. | Security Interests | 22 | ||
| ARTICLE III | Covenants | 23 | ||
| SECTION 3.01. | Payment of Principal, Premium, if any, and Interest | 23 | ||
| SECTION 3.02. | Maintenance of Office or Agency | 23 | ||
| SECTION 3.03. | Money for Payments To Be Held in Trust | 24 | ||
| SECTION 3.04. | Existence | 25 | ||
| SECTION 3.05. | Protection of Collateral | 25 | ||
| SECTION 3.06. | Opinions as to Collateral | 26 | ||
| SECTION 3.07. | Performance of Obligations; Servicing; SEC Filings | 27 | ||
| SECTION 3.08. | Certain Negative Covenants | 29 | ||
| SECTION 3.09. | Annual Statement as to Compliance | 30 | ||
| SECTION 3.10. | Issuer May Consolidate, etc., Only on Certain Terms | 31 | ||
| SECTION 3.11. | Successor or Transferee | 32 | ||
| SECTION 3.12. | No Other Business | 33 | ||
| SECTION 3.13. | No Borrowing | 33 | ||
| SECTION 3.14. | Servicer’s Obligations | 33 | ||
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| SECTION 3.15. | Guarantees, Loans, Advances and Other Liabilities | 33 | ||
| SECTION 3.16. | Capital Expenditures | 33 | ||
| SECTION 3.17. | Restricted Payments | 33 | ||
| SECTION 3.18. | Notice of Events of Default | 34 | ||
| SECTION 3.19. | Further Instruments and Acts | 34 | ||
| SECTION 3.20. | Inspection | 34 | ||
| SECTION 3.21. | Notice of Events of Default | 34 | ||
| SECTION 3.22. | Additional Storm Recovery Bonds | 35 | ||
| SECTION 3.23. | Sale Agreement, Servicing Agreement, Intercreditor Agreement and Administration Agreement Covenants | 36 | ||
| SECTION 3.24. | Taxes | 38 | ||
| SECTION 3.25. | Notices from Holders | 38 | ||
| SECTION 3.26. | Volcker Rule | 38 | ||
| ARTICLE IV | Satisfaction and Discharge; Defeasance | 39 | ||
| SECTION 4.01. | Satisfaction and Discharge of Indenture; Defeasance | 39 | ||
| SECTION 4.02. | Conditions to Defeasance | 40 | ||
| SECTION 4.03. | Application of Trust Money | 42 | ||
| SECTION 4.04. | Repayment of Moneys Held by Paying Agent | 42 | ||
| ARTICLE V | Remedies | 43 | ||
| SECTION 5.01. | Events of Default | 43 | ||
| SECTION 5.02. | Acceleration of Maturity; Rescission and Annulment | 44 | ||
| SECTION 5.03. | Collection of Indebtedness and Suits for Enforcement by Indenture Trustee | 45 | ||
| SECTION 5.04. | Remedies; Priorities | 47 | ||
| SECTION 5.05. | Optional Preservation of the Collateral | 48 | ||
| SECTION 5.06. | Limitation of Suits | 48 | ||
| SECTION 5.07. | Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest | 49 | ||
| SECTION 5.08. | Restoration of Rights and Remedies | 49 | ||
| SECTION 5.09. | Rights and Remedies Cumulative | 49 | ||
| SECTION 5.10. | Delay or Omission Not a Waiver | 50 | ||
| SECTION 5.11. | Control by Holders | 50 | ||
| SECTION 5.12. | Waiver of Past Defaults | 50 | ||
| SECTION 5.13. | Undertaking for Costs | 51 | ||
| SECTION 5.14. | Waiver of Stay or Extension Laws | 51 | ||
| SECTION 5.15. | Action on Storm Recovery Bonds | 51 | ||
| ARTICLE VI | The Indenture Trustee | 52 | ||
| SECTION 6.01. | Duties of Indenture Trustee | 52 | ||
| SECTION 6.02. | Rights of Indenture Trustee | 53 | ||
| SECTION 6.03. | Individual Rights of Indenture Trustee | 56 | ||
| SECTION 6.04. | Indenture Trustee’s Disclaimer | 56 | ||
| SECTION 6.05. | Notice of Defaults | 57 | ||
| SECTION 6.06. | Reports by Indenture Trustee to Holders | 57 | ||
| SECTION 6.07. | Compensation and Indemnity | 58 | ||
| SECTION 6.08. | Replacement of Indenture Trustee and Securities Intermediary | 59 | ||
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| SECTION 6.09. | Successor Indenture Trustee by Merger | 60 | ||
| SECTION 6.10. | Appointment of Co-Trustee or Separate Trustee | 61 | ||
| SECTION 6.11. | Eligibility; Disqualification | 62 | ||
| SECTION 6.12. | Preferential Collection of Claims Against Issuer | 62 | ||
| SECTION 6.13. | Representations and Warranties of Indenture Trustee | 62 | ||
| SECTION 6.14. | Annual Report by Independent Registered Public Accountants | 62 | ||
| SECTION 6.15. | Custody of Collateral | 63 | ||
| SECTION 6.16. | FATCA | 63 | ||
| ARTICLE VII | Holders’ Lists and Reports | 63 | ||
| SECTION 7.01. | Issuer To Furnish Indenture Trustee Names and Addresses of Holders | 63 | ||
| SECTION 7.02. | Preservation of Information; Communications to Holders | 64 | ||
| SECTION 7.03. | Reports by Issuer | 64 | ||
| SECTION 7.04. | Reports by Indenture Trustee | 65 | ||
| ARTICLE VIII | Accounts, Disbursements and Releases | 65 | ||
| SECTION 8.01. | Collection of Money | 65 | ||
| SECTION 8.02. | Collection Account | 66 | ||
| SECTION 8.03. | General Provisions Regarding the Collection Account | 69 | ||
| SECTION 8.04. | Release of Collateral | 70 | ||
| SECTION 8.05. | Opinion of Counsel | 71 | ||
| SECTION 8.06. | Reports by Independent Registered Public Accountants | 71 | ||
| ARTICLE IX | SUPPLEMENTAL INDENTURES | 72 | ||
| SECTION 9.01. | Supplemental Indentures Without Consent of Holders | 72 | ||
| SECTION 9.02. | Supplemental Indentures with Consent of Holders | 73 | ||
| SECTION 9.03. | Commission Condition | 75 | ||
| SECTION 9.04. | Execution of Supplemental Indentures | 76 | ||
| SECTION 9.05. | Effect of Supplemental Indenture | 76 | ||
| SECTION 9.06. | Conformity with Trust Indenture Act | 76 | ||
| SECTION 9.07. | Reference in Storm Recovery Bonds to Supplemental Indentures | 76 | ||
| ARTICLE X | MISCELLANEOUS | 76 | ||
| SECTION 10.01. | Compliance Certificates and Opinions, etc | 76 | ||
| SECTION 10.02. | Form of Documents Delivered to Indenture Trustee | 78 | ||
| SECTION 10.03. | Acts of Holders | 79 | ||
| SECTION 10.04. | Notices, etc., to Indenture Trustee, Issuer and Rating Agencies | 79 | ||
| SECTION 10.05. | Notices to Holders; Waiver | 80 | ||
| SECTION 10.06. | Conflict with Trust Indenture Act | 81 | ||
| SECTION 10.07. | Successors and Assigns | 81 | ||
| SECTION 10.08. | Severability | 81 | ||
| SECTION 10.09. | Benefits of Indenture | 81 | ||
| SECTION 10.10. | Legal Holidays | 81 | ||
| SECTION 10.11. | GOVERNING LAW | 82 | ||
| SECTION 10.12. | Counterparts | 82 | ||
| SECTION 10.13. | Recording of Indenture | 82 | ||
| SECTION 10.14. | No Recourse to Issuer | 82 | ||
| SECTION 10.15. | Basic Documents | 82 | ||
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| SECTION 10.16. | No Petition | 83 | ||
| SECTION 10.17. | Securities Intermediary | 83 | ||
| SECTION 10.18. | Rule 17g-5 Compliance | 83 | ||
| SECTION 10.19. | Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial | 84 | ||
| SECTION 10.20. | Certain Tax Laws | 84 |
EXHIBITS
| Exhibit A | Form of Storm Recovery Bonds |
| Exhibit B | Form of Series Supplement |
| Exhibit C | Servicing Criteria to be Addressed by Indenture Trustee in Assessment of Compliance |
APPENDIX
| Appendix A | Definitions and Rules of Construction |
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TRUST INDENTURE ACT CROSS REFERENCE TABLE
| Trust Indenture Act Section | Indenture Section | |
| 310 | (a)(1) | 6.11 |
| (a)(2) | 6.11 | |
| (a)(3) | 6.10(b)(i) | |
| (a)(4) | Not applicable | |
| (a)(5) | 6.11 | |
| (b) | 6.11 | |
| 311 | (a) | 6.12 |
| (b) | 6.12 | |
| 312 | (a) | 7.01 and 7.02 |
| (b) | 7.02(b) | |
| (c) | 7.02(c) | |
| 313 | (a) | 7.04 |
| (b)(1) | 7.04 | |
| (b)(2) | 7.04 | |
| (c) | 7.03(a) and 7.04 | |
| (d) | Not applicable | |
| 314 | (a) | 3.09, 4.01 and 7.03(a) |
| (b) | 3.06 and 4.01 | |
| (c)(1) | 2.10, 4.01, 8.04(b) and 10.01(a) | |
| (c)(2) | 2.10, 4.01, 8.04(b) and 10.01(a) | |
| (c)(3) | 2.10, 4.01, 4.02 and 10.01(a) | |
| (d) | 2.10, 8.04(b) and 10.01 | |
| (e) | 10.01(a) | |
| (f) | 10.01(a) | |
| 315 | (a) | 6.01(b)(i) and 6.01(b)(ii) |
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| Trust
Indenture Act Section |
Indenture Section | |
| (b) | 6.05 | |
| (c) | 6.01(a) | |
| (d) | 6.01(c)(i), 6.01(c)(ii) and SECTION 6.01(c)(iii) | |
| (e) | 5.13 | |
| 316 | (a) (last sentence) | Appendix A – definition of “Outstanding” |
| (a)(1)(A) | 5.11 | |
| (a)(1)(B) | 5.12 | |
| (a)(2) | Not applicable | |
| (b) | 5.07 | |
| (c) | Appendix A – definition of “Record Date” | |
| 317 | (a)(1) | 5.03(a) |
| (a)(2) | 5.03(c)(iv) | |
| (b) | 3.03 | |
| 318 | (a) | 10.06 |
| (b) | 10.06 | |
| (c) | 10.06 | |
This cross reference table shall not, for any purpose, be deemed to be part of this Indenture.
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This INDENTURE, dated as of November 24, 2021, is by and between DUKE ENERGY PROGRESS NC STORM FUNDING LLC, a Delaware limited liability company, and THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, in its capacity as trustee for the benefit of the Secured Parties and in its separate capacity as a securities intermediary.
In consideration of the mutual agreements herein contained, each party hereto agrees as follows for the benefit of the other party hereto and each of the Holders:
RECITALS OF THE ISSUER
The Issuer has duly authorized the execution and delivery of this Indenture and the creation and issuance of Storm Recovery Bonds issuable hereunder, which will be of substantially the tenor set forth in the Series Supplement to this Indenture duly executed and delivered by the Issuer and the Indenture Trustee.
Storm Recovery Bonds shall be non-recourse obligations and shall be secured by and payable solely out of the proceeds of the Storm Recovery Property and the other Storm Recovery Collateral as provided herein. If and to the extent that such proceeds of the Storm Recovery Property and the other Storm Recovery Collateral are insufficient to pay all amounts owing with respect to the Storm Recovery Bonds, then, except as otherwise expressly provided hereunder, the Holders shall have no Claim in respect of such insufficiency against the Issuer or the Indenture Trustee, and the Holders, by their acceptance of the Storm Recovery Bonds, waive any such Claim.
All things necessary to (a) make the Storm Recovery Bonds, when executed by the Issuer and authenticated and delivered by the Indenture Trustee hereunder and duly issued by the Issuer, valid obligations, and (b) make this Indenture a valid agreement of the Issuer, in each case, in accordance with their respective terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Issuer, in consideration of the premises herein contained and of the purchase of Storm Recovery Bonds by the Holders and of other good and lawful consideration, the receipt and sufficiency of which are hereby acknowledged, and to secure, equally and ratably without prejudice, priority or distinction, except as specifically otherwise set forth in this Indenture, the payment of the Storm Recovery Bonds, the payment of all other amounts due under or in connection with this Indenture (including all fees, expenses, counsel fees and other amounts due and owing to the Indenture Trustee) and the performance and observance of all of the covenants and conditions contained herein or in the Storm Recovery Bonds, has hereby executed and delivered this Indenture and by these presents does hereby and by the Series Supplement will convey, grant, assign, transfer and pledge, in each case, in and unto the Indenture Trustee, its successors and assigns forever, for the benefit of the Secured Parties, all and singular the property described in the Series Supplement(such property herein referred to as “Storm Recovery Collateral” or “Collateral.”
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AND IT IS HEREBY COVENANTED, DECLARED AND AGREED between the parties hereto that all Storm Recovery Bonds are to be issued, countersigned and delivered and that all of the Collateral is to be held and applied, subject to the further covenants, conditions, releases, uses and trusts hereinafter set forth, and the Issuer, for itself and any successor, does hereby covenant and agree to and with the Indenture Trustee and its successors in said trust, for the benefit of the Secured Parties, as follows:
ARTICLE I
Definitions AND RULES OF CONSTRUCTION; Incorporation by Reference
SECTION 1.01. Definitions and Rules of Construction. Capitalized terms used but not otherwise defined in this Indenture shall have the respective meanings given to such terms in Appendix A, which is hereby incorporated by reference into this Indenture as if set forth fully in this Indenture. Not all terms defined in Appendix A are used in this Indenture. The rules of construction set forth in Appendix A shall apply to this Indenture and are hereby incorporated by reference into this Indenture as if set forth fully in this Indenture.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the Trust Indenture Act, that provision is incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings:
“indenture securities” means the Storm Recovery Bonds.
“indenture security holder” means a Holder.
“indenture to be qualified” means this Indenture.
“indenture trustee” or “institutional trustee” means the Indenture Trustee.
“obligor” on the indenture securities means the Issuer and any other obligor on the indenture securities.
All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.
ARTICLE II
The Storm Recovery Bonds
SECTION 2.01. Form. The Storm Recovery Bonds and the Indenture Trustee’s certificate of authentication shall be in substantially the forms set forth in Exhibit A, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or by the related Series Supplement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing the Storm Recovery Bonds, as evidenced by their execution of the Storm Recovery Bonds.
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The Storm Recovery Bonds shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing the Storm Recovery Bonds, as evidenced by their execution of the Storm Recovery Bonds.
Each Storm Recovery Bond shall be dated the date of its authentication.
SECTION 2.02. Denominations: Storm Recovery Bonds. The Storm Recovery Bonds shall be issuable in the Authorized Denominations specified in the Series Supplement.
The Storm Recovery Bonds shall, at the election of and as authorized by a Responsible Officer of the Issuer, and set forth in the Series Supplement, be issued in one or more tranches, and shall be designated generally as the “Series A Senior Secured Storm Recovery Bonds” of the Issuer, with such further particular designations added or incorporated in such title for the Storm Recovery Bonds of any particular tranche as a Responsible Officer of the Issuer may determine. All Storm Recovery Bonds shall be identical in all respects except for the denominations thereof, the Holder thereof, the numbering thereon and the legends thereon, unless such Storm Recovery Bonds are comprised of one or more tranches, in which case all of such Storm Recovery Bonds of the same tranche shall be identical in all respects except for the denominations thereof, the Holder thereof, the numbering thereon, the legends thereon and the CUSIP number thereon. All Storm Recovery Bonds and of a particular tranche shall be in all respects equally and ratably entitled to the benefits hereof without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Indenture.
The Storm Recovery Bonds shall be created by the Series Supplement authorized by a Responsible Officer of the Issuer, which shall specify and establish the terms and provisions thereof, including the following (which terms and provisions may differ as between tranches):
(a) designation of the tranches thereof;
(b) the principal amount of each tranche;
(c) the Bond Interest Rate of each tranche thereof or the formula, if any, used to calculate Bond Interest Rate or Bond Interest Rates for each tranche thereof;
(d) the Payment Dates for each tranche thereof;
(e) the Scheduled Payment Dates for each tranche;
(f) the Scheduled Final Payment Date(s) of each tranche;
(g) the Final Maturity Date of each tranche;
(h) the issuance date;
(i) the Authorized Denominations;
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(j) the Expected Sinking Fund Schedule of each tranche;
(k) the place or places for the payment of interest, principal and premium, if any;
(l) any additional Secured Parties;
(m) the identity of the Indenture Trustee;
(n) the Storm Recovery Charges and the Storm Recovery Collateral;
(o) whether or not the Storm Recovery Bonds are to be Book-Entry Storm Recovery Bonds and the extent to which Section 2.11 should apply; and
(p) any other terms of the Storm Recovery Bonds (or tranches thereof) that are not inconsistent with the provisions of this Indenture and as to which the Rating Agency Condition is satisfied.
SECTION 2.03. Execution, Authentication and Delivery. The Storm Recovery Bonds shall be executed on behalf of the Issuer by any of its Responsible Officers. The signature of any such Responsible Officer on the Storm Recovery Bonds may be manual, electronic or facsimile.
Storm Recovery Bonds bearing the manual, electronic or facsimile signature of individuals who were at any time Responsible Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of the Storm Recovery Bonds or did not hold such offices at the date of the Storm Recovery Bonds.
At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Storm Recovery Bonds executed by the Issuer to the Indenture Trustee pursuant to an Issuer Order for authentication; and the Indenture Trustee shall authenticate and deliver the Storm Recovery Bonds as in this Indenture provided and not otherwise.
No Storm Recovery Bond shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Storm Recovery Bond a certificate of authentication substantially in the form provided for therein executed by the Indenture Trustee by the manual, electronic or facsimile signature of one of its authorized signatories, and such certificate upon any Storm Recovery Bond shall be conclusive evidence, and the only evidence, that such Storm Recovery Bond has been duly authenticated and delivered hereunder.
SECTION 2.04. Temporary Storm Recovery Bonds. Pending the preparation of Definitive Storm Recovery Bonds pursuant to Section 2.13, the Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee shall authenticate and deliver, Temporary Storm Recovery Bonds that are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the Definitive Storm Recovery Bonds in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture and the related Series Supplement as the officers executing the Storm Recovery Bonds may determine, as evidenced by their execution of the Storm Recovery Bonds.
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If Temporary Storm Recovery Bonds are issued, the Issuer will cause Definitive Storm Recovery Bonds to be prepared without unreasonable delay. After the preparation of Definitive Storm Recovery Bonds, the Temporary Storm Recovery Bonds shall be exchangeable for Definitive Storm Recovery Bonds upon surrender of the Temporary Storm Recovery Bonds at the office or agency of the Issuer to be maintained as provided in Section 3.02, without charge to the Holder. Upon surrender for cancellation of any one or more Temporary Storm Recovery Bonds, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor a like principal amount of Definitive Storm Recovery Bonds of authorized denominations. Until so delivered in exchange, the Temporary Storm Recovery Bonds shall in all respects be entitled to the same benefits under this Indenture as Definitive Storm Recovery Bonds.
SECTION 2.05. Registration; Registration of Transfer and Exchange of Storm Recovery Bonds. The Issuer shall cause to be kept a register (the “Storm Recovery Bond Register”) in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Storm Recovery Bonds and the registration of transfers of Storm Recovery Bonds. The Indenture Trustee shall be “Storm Recovery Bond Registrar” for the purpose of registering the Storm Recovery Bonds and transfers of Storm Recovery Bonds as herein provided. Upon any resignation of any Storm Recovery Bond Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Storm Recovery Bond Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as Storm Recovery Bond Registrar, the Issuer will give the Indenture Trustee prompt written notice of the appointment of such Storm Recovery Bond Registrar and of the location, and any change in the location, of the Storm Recovery Bond Register, and the Indenture Trustee shall have the right to inspect the Storm Recovery Bond Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely conclusively upon a certificate executed on behalf of the Storm Recovery Bond Registrar by a Responsible Officer thereof as to the names and addresses of the Holders and the principal amounts and number of the Storm Recovery Bonds (separately stated by tranche).
Upon surrender for registration of transfer of any Storm Recovery Bond at the office or agency of the Issuer to be maintained as provided in Section 3.02, provided that the requirements of Section 8-401 of the UCC are met, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Storm Recovery Bonds in any Authorized Denominations, of the same tranche and aggregate principal amount.
At the option of the Holder, Storm Recovery Bonds may be exchanged for other Storm Recovery Bonds in any Authorized Denominations, of the same tranche and aggregate principal amount, upon surrender of the Storm Recovery Bonds to be exchanged at such office or agency as provided in Section 3.02. Whenever any Storm Recovery Bonds are so surrendered for exchange, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute, and, upon any such execution, the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, the Storm Recovery Bonds that the Holder making the exchange is entitled to receive.
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All Storm Recovery Bonds issued upon any registration of transfer or exchange of other Storm Recovery Bonds shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Storm Recovery Bonds surrendered upon such registration of transfer or exchange.
Every Storm Recovery Bond presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by: (a) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder thereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an institution that is a member of: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee; and (b) such other documents as the Indenture Trustee may require.
No service charge shall be made to a Holder for any registration of transfer or exchange of Storm Recovery Bonds, but the Issuer or the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge or any fees or expenses of the Indenture Trustee that may be imposed in connection with any registration of transfer or exchange of Storm Recovery Bonds, other than exchanges pursuant to Section 2.04 or Section 2.06 not involving any transfer.
The preceding provisions of this Section 2.05 notwithstanding, the Issuer shall not be required to make, and the Storm Recovery Bond Registrar need not register, transfers or exchanges of any Storm Recovery Bond that has been submitted within 15 days preceding the due date for any payment with respect to such Storm Recovery Bond until after such due date has occurred.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Storm Recovery Bonds. If (a) any mutilated Storm Recovery Bond is surrendered to the Indenture Trustee or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Storm Recovery Bond and (b) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Storm Recovery Bond Registrar or the Indenture Trustee that such Storm Recovery Bond has been acquired by a Protected Purchaser, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute, and, upon the Issuer’s written request, the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Storm Recovery Bond, a replacement Storm Recovery Bond of like Series, tranche and principal amount, bearing a number not contemporaneously outstanding; provided, however, that, if any such destroyed, lost or stolen Storm Recovery Bond, but not a mutilated Storm Recovery Bond, shall have become or within seven days shall be due and payable, instead of issuing a replacement Storm Recovery Bond, the Issuer may pay such destroyed, lost or stolen Storm Recovery Bond when so due or payable without surrender thereof. If, after the delivery of such replacement Storm Recovery Bond or payment of a destroyed, lost or stolen Storm Recovery Bond pursuant to the proviso to the preceding sentence, a Protected Purchaser of the original Storm Recovery Bond in lieu of which such replacement Storm Recovery Bond was issued presents for payment such original Storm Recovery Bond, the Issuer and the Indenture Trustee shall be entitled to recover such replacement Storm Recovery Bond (or such payment) from the Person to whom it was delivered or any Person taking such replacement Storm Recovery Bond from such Person to whom such replacement Storm Recovery Bond was delivered or any assignee of such Person, except a Protected Purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith.
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Upon the issuance of any replacement Storm Recovery Bond under this Section 2.06, the Issuer and/or the Indenture Trustee may require the payment by the Holder of such Storm Recovery Bond of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee and the Storm Recovery Bond Registrar) in connection therewith.
Every replacement Storm Recovery Bond issued pursuant to this Section 2.06 in replacement of any mutilated, destroyed, lost or stolen Storm Recovery Bond shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Storm Recovery Bond shall be found at any time or enforced by any Person, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Storm Recovery Bonds duly issued hereunder.
The provisions of this Section 2.06 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Storm Recovery Bonds.
SECTION 2.07. Persons Deemed Owner. Prior to due presentment for registration of transfer of any Storm Recovery Bond, the Issuer, the Indenture Trustee, the Storm Recovery Bond Registrar and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Storm Recovery Bond is registered (as of the day of determination) as the owner of such Storm Recovery Bond for the purpose of receiving payments of principal of and premium, if any, and interest on such Storm Recovery Bond and for all other purposes whatsoever, whether or not such Storm Recovery Bond be overdue, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary.
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SECTION 2.08. Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved.
(a) The Storm Recovery Bonds shall accrue interest as provided in applicable Series Supplement at the applicable Bond Interest Rate, and such interest shall be payable on each applicable Payment Date. Any installment of interest, principal or premium, if any, payable on any Storm Recovery Bond that is punctually paid or duly provided for on the applicable Payment Date shall be paid to the Person in whose name such Storm Recovery Bond (or one or more Predecessor Storm Recovery Bonds) is registered on the Record Date for the applicable Payment Date by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder (or by wire transfer to an account maintained by such Holder) in accordance with payment instructions delivered to the Indenture Trustee by such Holder, and, with respect to Book-Entry Storm Recovery Bonds, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Storm Recovery Bond unless and until such Global Storm Recovery Bond is exchanged for Definitive Storm Recovery Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to such Storm Recovery Bond on a Payment Date, which shall be payable as provided below.
(b) The principal of each Storm Recovery Bond of each tranche shall be paid, to the extent funds are available therefor in the Collection Account for such Series, in installments on each Payment Date specified in the Series Supplement; provided, that installments of principal not paid when scheduled to be paid in accordance with the Expected Sinking Fund Schedule shall be paid upon receipt of money available for such purpose, in the order set forth in the Expected Sinking Fund Schedule. Failure to pay principal in accordance with such Expected Sinking Fund Schedule because moneys are not available pursuant to Section 8.02 to make such payments shall not constitute a Default or Event of Default under this Indenture; provided, however, that failure to pay the entire unpaid principal amount of the Storm Recovery Bonds of a tranche upon the Final Maturity Date for the Storm Recovery Bonds of such tranche shall constitute an Event of Default under this Indenture as set forth in Section 5.01. Notwithstanding the foregoing, the entire unpaid principal amount of the Storm Recovery Bonds shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, if the Indenture Trustee or the Holders of Storm Recovery Bonds representing a majority of the Outstanding Amount of Storm Recovery Bonds have declared such Storm Recovery Bonds to be immediately due and payable in the manner provided in Section 5.02. All payments of principal and premium, if any, on such Storm Recovery Bonds shall be made pro rata to the Holders entitled thereto unless otherwise provided in the Series Supplement. The Indenture Trustee shall notify the Person in whose name a Storm Recovery Bond is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and premium, if any, and interest on such Storm Recovery Bond will be paid. Such notice shall be mailed no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of such Storm Recovery Bond and shall specify the place where such Storm Recovery Bond may be presented and surrendered for payment of such installment.
(c) If interest on the Storm Recovery Bonds is not paid when due, such defaulted interest shall be paid (plus interest on such defaulted interest at the applicable Bond Interest Rate to the extent lawful) to the Persons who are Holders on a subsequent Special Record Date, which date shall be at least 15 Business Days prior to the Special Payment Date. The Issuer shall fix or cause to be fixed any such Special Record Date and Special Payment Date, and, at least ten days before any such Special Record Date, the Issuer shall mail to each affected Holder a notice that states the Special Record Date, the Special Payment Date and the amount of defaulted interest (plus interest on such defaulted interest) to be paid.
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SECTION 2.09. Cancellation. All Storm Recovery Bonds surrendered for payment, registration of transfer or exchange shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Storm Recovery Bonds previously authenticated and delivered hereunder that the Issuer may have acquired in any manner whatsoever, and all Storm Recovery Bonds so delivered shall be promptly canceled by the Indenture Trustee. No Storm Recovery Bonds shall be authenticated in lieu of or in exchange for any Storm Recovery Bonds canceled as provided in this Section 2.09, except as expressly permitted by this Indenture. All canceled Storm Recovery Bonds may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time.
SECTION 2.10. Outstanding Amount; Authentication and Delivery of Storm Recovery Bonds. The aggregate Outstanding Amount of Storm Recovery Bonds that may be authenticated and delivered under this Indenture shall not exceed the aggregate of the amount of Storm Recovery Bonds that are authorized in the Financing Order, together with any Subsequent Financing Order, if any, but otherwise shall be unlimited.
Storm Recovery Bonds may at any time be executed by the Issuer and delivered to the Indenture Trustee for authentication and thereupon the same shall be authenticated and delivered by the Indenture Trustee upon Issuer Request and upon delivery by the Issuer to the Indenture Trustee of the following (and if applicable, subject further to the requirements of Section 3.21):
(a) Issuer Action. An Issuer Order authorizing and directing the authentication and delivery of the Storm Recovery Bonds by the Indenture Trustee and specifying the principal amount of Storm Recovery Bonds to be authenticated.
(b) Authorizations. Copies of (i) the Financing Order, which shall be in full force and effect and be Final, (ii) certified resolutions of the Managers or Member of the Issuer authorizing the execution and delivery of the Series Supplement and the execution, authentication and delivery of the Storm Recovery Bonds and (iii) a Series Supplement duly executed by the Issuer.
(c) Opinions. An opinion or opinions, portions of which may be delivered by one or more counsel for the Issuer, portions of which may be delivered by one or more counsel for the Servicer, and portions of which may be delivered by one or more counsel for the Seller, dated the Closing Date, in each case subject to the customary exceptions, qualifications and assumptions contained therein, stating that (i) all conditions precedent provided for in this Indenture relating to (A) the authentication and delivery of the Issuer’s Storm Recovery Bonds and (B) the execution of the Series Supplement to this Indenture dated the Closing Date have been complied with, (ii) the execution of the Series Supplement to this Indenture dated the Closing Date is permitted by this Indenture, (iii) such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto and any other requisite documents, and with respect to the execution and filing of any filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina pursuant to the Storm Recovery Law and the Financing Order, financing statements and continuation statements, as are necessary to perfect and make effective the Lien and the perfected security interest created by this Indenture and Series Supplement, and, based on a review of a current report of a search of the appropriate governmental filing office, no other Lien that can be perfected solely by the filing of financing statements under the applicable Uniform Commercial Code ranks equal or prior to the Lien of the Indenture Trustee in the Storm Recovery Collateral, and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make effective such Lien, together with the other Opinions of Counsel described in Sections 9(c) through 9(i) of the Underwriting Agreement for such Series (other than Sections 9(g) and 9(h) thereof) relating to the Issuer’s Storm Recovery Bonds.
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(d) Authorizing Certificate. An Officer’s Certificate, dated the Closing Date, of the Issuer certifying that (i) the Issuer has duly authorized the execution and delivery of this Indenture and the related Series Supplement and the execution and delivery of the Series of Storm Recovery Bonds and (ii) the Series Supplement is in the form attached thereto and complies with the requirements of Section 2.02.
(e) The Storm Recovery Collateral. The Issuer shall have made or caused to be made all filings with the Commission and the Secretary of State of the State of North Carolina pursuant to the Financing Order and the Storm Recovery Law and all other filings necessary to perfect the Grant of the Storm Recovery Collateral to the Indenture Trustee and the Lien of this Indenture and the Series Supplement, including but not limited to UCC Financing Statements in Delaware or North Carolina as applicable.
(f) Certificates of the Issuer and the Seller.
(i) An Officer’s Certificate from the Issuer, dated as of the Closing Date:
(A) to the effect that (1) the Issuer is not in Default under this Indenture and that the issuance of the Storm Recovery Bonds will not result in any Default or in any breach of any of the terms, conditions or provisions of or constitute a default under the Financing Order or any indenture, mortgage, deed of trust or other agreement or instrument to which the Issuer is a party or by which it or its property is bound or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it or its property may be bound or to which it or its property may be subject and (2) all conditions precedent provided in this Indenture relating to the execution, authentication and delivery of the Storm Recovery Bonds have been complied with;
(B) to the effect that: the Issuer has not assigned any interest or participation in the Storm Recovery Collateral except for the Grant contained in this Indenture and the Series Supplement; the Issuer has the power and right to Grant the Storm Recovery Collateral to the Indenture Trustee as security hereunder and thereunder; and the Issuer, subject to the terms of this Indenture, has Granted to the Indenture Trustee a first priority perfected security interest in all of its right, title and interest in and to such Storm Recovery Collateral free and clear of any Lien arising as a result of actions of the Issuer or through the Issuer, except Permitted Liens;
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(C) to the effect that the Issuer has appointed the firm of Independent registered public accountants as contemplated in Section 8.06;
(D) to the effect that the respective Sale Agreement, Servicing Agreement, Administration Agreement and Intercreditor Agreement are, to the knowledge of the Issuer (and assuming such agreements are enforceable against all parties thereto other than the Issuer and Duke Energy Progress), in full force and effect and, to the knowledge of the Issuer, that no party is in default of its obligations under such agreements;
(E) certifying that the Storm Recovery Bonds have received the ratings from the Rating Agencies if required by the Underwriting Agreement for such Series as a condition to the issuance of such Storm Recovery Bonds; and
(F) stating that (i) all conditions precedent provided for in this Indenture relating to (a) the authentication and delivery of the Issuer’s Storm Recovery Bonds, and (b) the execution of the Series Supplement to this Indenture dated as of the date of this Indenture, have been compiled with, (ii) the execution of the Series Supplement to this Indenture dated as of the date of this Indenture is authorized or permitted by this Indenture, and (iii) the Issuer has delivered the documents required under this Section 2.10 and has otherwise satisfied the requirements set out in this Section 2.10, including, but not limited to, complying with Section 2.10(f)(i) hereof.
(ii) An officer’s certificate from the Seller, dated as of the Closing Date, to the effect that:
(A) in the case of the Storm Recovery Property identified in the Bill of Sale, immediately prior to the conveyance thereof to the Issuer pursuant to the Sale Agreement: the Seller was the original and the sole owner of such Storm Recovery Property, free and clear of any Lien; the Seller had not assigned any interest or participation in such Storm Recovery Property and the proceeds thereof other than to the Issuer pursuant to the Sale Agreement for such Series; the Seller has the power, authority and right to own, sell and assign such Storm Recovery Property and the proceeds thereof to the Issuer; the Seller has its chief executive office in the State of North Carolina; and the Seller, subject to the terms of the Sale Agreement, has validly sold and assigned to the Issuer all of its right, title and interest in and to such Storm Recovery Property and the proceeds thereof, free and clear of any Lien (other than Permitted Liens) and such sale and assignment is absolute and irrevocable and has been perfected;
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(B) in the case of the Storm Recovery Property identified in the Bill of Sale, immediately prior to the conveyance thereof to the Issuer pursuant to the Sale Agreement, the attached copy of the Financing Order, creating such Storm Recovery Property is true and complete and is in full force and effect; and
(C) the Required Capital Level has been deposited or caused to be deposited by the Seller with the Indenture Trustee for crediting to the Capital Subaccount.
(g) [RESERVED]
(h) Requirements of Series Supplement. Such other funds, accounts, documents, certificates, agreements, instruments or opinions as may be required by the terms of the Series Supplement.
(i) Other Requirements. Such other documents, certificates, agreements, instruments or opinions as the Indenture Trustee may reasonably require.
SECTION 2.11. Book-Entry Storm Recovery Bonds. Unless the Series Supplement provides otherwise, all of the Storm Recovery Bonds shall be issued in Book-Entry Form, and the Issuer shall execute and the Indenture Trustee shall, in accordance with this Section 2.11 and the Issuer Order, authenticate and deliver one or more Global Storm Recovery Bonds, evidencing the Storm Recovery Bonds, which (a) shall be an aggregate original principal amount equal to the aggregate original principal amount of the Storm Recovery Bonds to be issued pursuant to the Issuer Order, (b) shall be registered in the name of the Clearing Agency therefor or its nominee, which shall initially be Cede & Co., as nominee for The Depository Trust Company, the initial Clearing Agency, (c) shall be delivered by the Indenture Trustee pursuant to such Clearing Agency’s or such nominee’s instructions and (d) shall bear a legend substantially to the effect set forth in Exhibit A to the Form of Series Supplement.
Each Clearing Agency designated pursuant to this Section 2.11 must, at the time of its designation and at all times while it serves as Clearing Agency hereunder, be a “clearing agency” registered under the Exchange Act and any other applicable statute or regulation.
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No Holder of Storm Recovery Bonds issued in Book-Entry Form shall receive a Definitive Storm Recovery Bond representing such Holder’s interest in any of the Storm Recovery Bonds, except as provided in Section 2.13. Unless (and until) certificated, fully registered Storm Recovery Bonds (the “Definitive Storm Recovery Bonds”) have been issued to the Holders pursuant to Section 2.13 or pursuant to the Series Supplement relating thereto:
(i) the provisions of this Section 2.11 shall be in full force and effect;
(ii) the Issuer, the Servicer, the Paying Agent, the Storm Recovery Bond Registrar and the Indenture Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Storm Recovery Bonds and the giving of instructions or directions hereunder) as the authorized representative of the Holders;
(iii) to the extent that the provisions of this Section 2.11 conflict with any other provisions of this Indenture, the provisions of this Section 2.11 shall control;
(iv) the rights of Holders shall be exercised only through the Clearing Agency and the Clearing Agency Participants and shall be limited to those established by law and agreements between such Holders and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Letter of Representations, unless and until Definitive Storm Recovery Bonds are issued pursuant to Section 2.13, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal of and interest on the Book-Entry Storm Recovery Bonds to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken based upon instruction or directions of the Holders evidencing a specified percentage of the Outstanding Amount of Storm Recovery Bonds, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from the Holders and/or the Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Storm Recovery Bonds and has delivered such instructions to a Responsible Officer of the Indenture Trustee.
SECTION 2.12. Notices to Clearing Agency. Unless and until Definitive Storm Recovery Bonds shall have been issued to Holders pursuant to Section 2.13, whenever notice, payment or other communications to the holders of Book-Entry Storm Recovery Bonds is required under this Indenture, the Indenture Trustee, the Servicer and the Paying Agent, as applicable, shall make all such payments to, and give all such notices and communications specified herein, to the Clearing Agency.
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SECTION 2.13. Definitive Storm Recovery Bonds. If (a) (i) the Issuer advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities under any Letter of Representations and (ii) the Issuer is unable to locate a qualified successor Clearing Agency, (b) the Issuer, at its option, advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) after the occurrence of an Event of Default hereunder, Holders holding Storm Recovery Bonds aggregating a majority of the aggregate Outstanding Amount of Storm Recovery Bonds maintained as Book-Entry Storm Recovery Bonds advise the Indenture Trustee, the Issuer and the Clearing Agency (through the Clearing Agency Participants) in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Holders, the Issuer shall notify the Clearing Agency, the Indenture Trustee and all such Holders in writing of the occurrence of any such event and of the availability of Definitive Storm Recovery Bonds to the Holders requesting the same. Upon surrender to the Indenture Trustee of the Global Storm Recovery Bonds by the Clearing Agency accompanied by registration instructions from such Clearing Agency for registration, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver, Definitive Storm Recovery Bonds in accordance with the instructions of the Clearing Agency. None of the Issuer, the Storm Recovery Bond Registrar, the Paying Agent or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. Upon the issuance of Definitive Storm Recovery Bonds, the Indenture Trustee shall recognize the Holders of the Definitive Storm Recovery Bonds as Holders hereunder without need for any consent or acknowledgement from the Holders.
Definitive Storm Recovery Bonds will be transferable and exchangeable at the offices of the Storm Recovery Bond Registrar.
SECTION 2.14. CUSIP Number. The Issuer in issuing any Storm Recovery Bonds may use a “CUSIP” number and, if so used, the Indenture Trustee shall use the CUSIP number provided to it by the Issuer in any notices to the Holders thereof as a convenience to such Holders; provided, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Storm Recovery Bonds and that reliance may be placed only on the other identification numbers printed on the Storm Recovery Bonds. The Issuer shall promptly notify the Indenture Trustee in writing of any change in the CUSIP number with respect to any Storm Recovery Bond.
SECTION 2.15. Letter of Representations. The Issuer shall comply with the terms of each Letter of Representations applicable to the Issuer.
SECTION 2.16. Tax Treatment. The Issuer and the Indenture Trustee, by entering into this Indenture, and the Holders and any Persons holding a beneficial interest in any Storm Recovery Bond, by acquiring any Storm Recovery Bond or interest therein, (a) express their intention that, solely for the purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purposes of state, local and other taxes, the Storm Recovery Bonds qualify under applicable tax law as indebtedness of the Member secured by the respective Storm Recovery Collateral and (b) solely for the purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Storm Recovery Bonds are outstanding, agree to treat the Storm Recovery Bonds as indebtedness of the Member secured by the respective Storm Recovery Collateral unless otherwise required by appropriate taxing authorities.
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SECTION 2.17. State Pledge. Under the laws of the State of North Carolina in effect on the date hereof, pursuant to N.C. Gen. Stat. § 62-172(k), the State of North Carolina has pledged to agree and work with the Holders, the Indenture Trustee, other Financing Parties that the State of North Carolina will not (a) alter the provisions of N.C. Gen. Stat. § 62-172(k)(1)a. which make the Charges imposed by the Financing Order irrevocable, binding, and nonbypassable charges; (b) take or permit any action that impairs or would impair the value of the Storm Recovery Property or the security for the Storm Recovery Bonds or revises the Storm Recovery Costs for which recovery is authorized; (c) in any way impair the rights and remedies of the Holders, assignees, and other financing parties or (d)or except as authorized under the Storm Recovery Law, reduce, alter, or impair Charges that are to be imposed, collected, and remitted for the benefit of the Holders, the Indenture Trustee 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 Storm Recovery Bonds have been paid and performed in full.
The Issuer hereby acknowledges that the purchase of any Storm Recovery Bond by a Holder or the purchase of any beneficial interest in a Storm Recovery Bond by any Person and the Indenture Trustee’s obligations to perform hereunder are made in reliance on such agreement and pledge by the State of North Carolina.
SECTION 2.18. Security Interests. The Issuer hereby makes the following representations and warranties. Other than the security interests granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not pledged, granted, sold, conveyed or otherwise assigned any interests or security interests in the Collateral and no security agreement, financing statement or equivalent security or Lien instrument listing the Issuer as debtor covering all or any part of the Collateral is on file or of record in any jurisdiction, except such as may have been filed, recorded or made by the Issuer in favor of the Indenture Trustee on behalf of the Secured Parties in connection with this Indenture. This Indenture constitute a valid and continuing lien on, and first priority perfected security interest in, the Storm Recovery Collateral in favor of the Indenture Trustee on behalf of the Secured Parties, which lien and security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing. With respect to all Storm Recovery Collateral, this Indenture, together with the Series Supplement, creates a valid and continuing first priority perfected security interest (as defined in the UCC) in such related Storm Recovery Collateral, which security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing. The Issuer has good and marketable title to the Collateral free and clear of any Lien of any Person other than Permitted Liens. All of the Collateral constitutes Property or accounts, deposit accounts, investment property or general intangibles (as each such term is defined in the UCC), except that proceeds of the Collateral may also take the form of instruments. The Issuer has taken, or caused the Servicer to take, all action necessary to perfect the security interest in the Storm Recovery Collateral granted to the Indenture Trustee, for the benefit of the Secured Parties. The Issuer has filed (or has caused the Servicer to file) all appropriate financing statements in the proper filing offices in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Storm Recovery Collateral granted to the Indenture Trustee. The Issuer has not authorized the filing of and is not aware, after due inquiry, of any financing statements against the Issuer that include a description of the Collateral other than those filed in favor of the Indenture Trustee. The Issuer is not aware of any judgment or tax lien filings against the Issuer. The Collection Account (including all subaccounts thereof other than the Capital Subaccount) constitutes a “securities account” within the meaning of the UCC and the Capital Subaccount constitutes a “deposit account” within the meaning of the UCC. The Issuer has taken all steps necessary to cause the Securities Intermediary of each such securities account to identify in its records the Indenture Trustee as the Person having a security entitlement against the Securities Intermediary in such securities account, no Collection Account is in the name of any Person other than the Indenture Trustee, and the Issuer has not consented to the Securities Intermediary of the Collection Account to comply with entitlement orders of any Person other than the Indenture Trustee. All of the Collateral constituting investment property has been and will have been credited to the Collection Account or a subaccount thereof, and the Securities Intermediary for the Collection Account has agreed to treat all assets credited to the Collection Account (other than cash) as “financial assets” within the meaning of the UCC and cash will be allocated to the Capital Subaccount. Accordingly, the Indenture Trustee has a first priority perfected security interest in the Collection Account, all funds and financial assets on deposit therein, and all securities entitlements relating thereto. The representations and warranties set forth in this Section 2.18 shall survive the execution and delivery of this Indenture and the issuance of any Storm Recovery Bonds, shall be deemed re-made on each date on which any funds in the Collection Account are distributed to the Issuer as provided in Section 8.04 or otherwise released from the Lien of the Indenture and may not be waived by any party hereto except pursuant to a supplemental indenture executed in accordance with Article IX and as to which the Rating Agency Condition has been satisfied.
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ARTICLE III
Covenants
SECTION 3.01. Payment of Principal, Premium, if any, and Interest. The principal of and premium, if any, and interest on the Storm Recovery Bonds shall be duly and punctually paid by the Issuer, or the Servicer on behalf of the Issuer, in accordance with the terms of the Storm Recovery Bonds and this Indenture and the Supplement; provided, that, except on a Final Maturity Date of a tranche or upon the acceleration of the Storm Recovery Bonds following the occurrence of an Event of Default, the Issuer shall only be obligated to pay the principal of such Storm Recovery Bonds on each Payment Date therefor to the extent moneys are available for such payment pursuant to Section 8.02. Amounts properly withheld under the Code, the Treasury regulations promulgated thereunder or other tax laws by any Person from a payment to any Holder of interest or principal or premium, if any, shall be considered as having been paid by the Issuer to such Holder for all purposes of this Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer shall initially maintain in Raleigh, North Carolina an office or agency where Storm Recovery Bonds may be surrendered for registration of transfer or exchange. The Issuer shall give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency. The Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes, and the Corporate Trust Office of the Indenture Trustee shall serve as the offices provided above in this Section 3.02. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders may be made at the office of the Indenture Trustee located at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders.
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SECTION 3.03. Money for Payments To Be Held in Trust. As provided in Section 8.02(a), all payments of amounts due and payable with respect to any Storm Recovery Bonds that are to be made from amounts withdrawn from the Collection Account pursuant to Section 8.02(d) shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account for payments with respect to any Storm Recovery Bonds shall be paid over to the Issuer except as provided in this Section 3.03 and Section 8.02.
Each Paying Agent shall meet the eligibility criteria set forth for any Indenture Trustee under Section 6.11. The Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.03, that such Paying Agent will:
(a) hold all sums held by it for the payment of amounts due with respect to the Storm Recovery Bonds in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;
(b) give the Indenture Trustee unless the Indenture Trustee is the Paying Agent, the Commission and the Rating Agencies written notice of any Default by the Issuer of which it has actual knowledge in the making of any payment required to be made with respect to the Storm Recovery Bonds;
(c) at any time during the continuance of any such Default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent;
(d) immediately, with notice to the Rating Agencies, resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Storm Recovery Bonds if at any time the Paying Agent determines that it has ceased to meet the standards required to be met by a Paying Agent at the time of such determination; and
(e) comply with all requirements of the Code, the Treasury regulations promulgated thereunder and other tax laws with respect to the withholding from any payments made by it on any Storm Recovery Bonds of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money.
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Subject to applicable laws with respect to escheatment of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Storm Recovery Bond and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and be paid to the Issuer upon receipt of an Issuer Request; and, subject to Section 10.14, the Holder of such Storm Recovery Bond shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; provided, however, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer, cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. The Indenture Trustee may also adopt and employ, at the written direction and expense of the Issuer, any other reasonable means of notification of such repayment (including mailing notice of such repayment to Holders whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder).
SECTION 3.04. Existence. The Issuer shall keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other State or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the other Basic Documents, the Storm Recovery Bonds, the Collateral and each other instrument or agreement referenced herein or therein.
SECTION 3.05. Protection of Collateral. The Issuer shall from time to time execute and deliver all such supplements and amendments hereto and all filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina pursuant to the Financing Order or to the Storm Recovery Law and all financing statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action necessary or advisable, to:
(a) maintain or preserve the Lien (and the priority thereof) of this Indenture and each Series Supplement or carry out more effectively the purposes hereof;
(b) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture;
(c) enforce any of the Collateral;
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(d) preserve and defend title to the Collateral and the rights of the Indenture Trustee and the Holders in such Collateral against the Claims of all Persons, including a challenge by any party to the validity or enforceability of the Financing Order, the Storm Recovery Property or any proceeding relating thereto and institute any action or proceeding necessary to compel performance by the Commission or the State of North Carolina of any of its obligations or duties under the Storm Recovery Law, the State Pledge, or the Financing Order; and
(e) pay any and all taxes levied or assessed upon all or any part of the Collateral.
The Indenture Trustee is specifically permitted and authorized, but not required to file financing statements covering the Collateral, including financing statements that describe the Collateral as “all assets” or “all personal property” of the Issuer; provided, however, that such authorization shall not be deemed to be an obligation.
SECTION 3.06. Opinions as to Collateral.
(a) Within 90 days after the beginning of each calendar year beginning with the calendar year beginning January 1, 2023, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel of the Issuer either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents, and with respect to the execution and filing of any filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina pursuant to the Storm Recovery Law and the Financing Order, financing statements and continuation statements, as are necessary to maintain the Lien and the perfected security interest created by this Indenture and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to maintain such Lien. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina, financing statements and continuation statements that will, in the opinion of such counsel, be required within the 12-month period following the date of such opinion to maintain the Lien and the perfected security interest created by this Indenture.
(b) Prior to the effectiveness of any amendment to the applicable Sale Agreement or the applicable Servicing Agreement, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer either (i) stating that, in the opinion of such counsel, all filings, including UCC financing statements and other filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina pursuant to the Storm Recovery Law or the applicable Financing Order have been executed and filed that are necessary fully to preserve and protect the Lien of the Issuer and the Indenture Trustee in the Storm Recovery Property and the Storm Recovery Collateral, respectively, and the proceeds thereof, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (ii) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such Lien.
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SECTION 3.07. Performance of Obligations; Servicing; SEC Filings.
(a) The Issuer (i) shall diligently pursue any and all actions to enforce its rights under each instrument or agreement included in the Collateral and (ii) shall not take any action and shall use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person’s covenants or obligations under any such instrument or agreement or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except, in each case, as expressly provided in this Indenture, the Series Supplement, the Sale Agreement, the Servicing Agreement, the Intercreditor Agreement or such other instrument or agreement.
(b) The Issuer may contract with other Persons selected with due care to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee herein or in an Officer’s Certificate shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer to assist the Issuer in performing its duties under this Indenture.
(c) The Issuer shall punctually perform and observe all of its obligations and agreements contained in this Indenture, the Series Supplement, the other Basic Documents and the instruments and agreements included in the Collateral, including filing or causing to be filed all filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina pursuant to the Storm Recovery Law or the Financing Order, all UCC financing statements and all continuation statements required to be filed by it by the terms of this Indenture, the Series Supplement, the Sale Agreement and the Servicing Agreement in accordance with and within the time periods provided for herein and therein.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer Default under the Servicing Agreement for such Series, the Issuer shall promptly give written notice thereof to the Indenture Trustee, the Commission and the Rating Agencies and shall specify in such notice the response or action, if any, the Issuer has taken or is taking with respect to such Servicer Default. If a Servicer Default shall arise from the failure of the Servicer to perform any of its duties or obligations under the Servicing Agreement with respect to the Storm Recovery Property, the Storm Recovery Collateral or the Storm Recovery Charges, the Issuer shall take all reasonable steps available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination to the Servicer and the Rating Agencies of the Servicer’s rights and powers pursuant to Section 7.01 of the applicable Servicing Agreement, the Indenture Trustee shall, at the written direction either (a) of the Holders evidencing a majority of the Outstanding Amount of the Storm Recovery Bonds of such Series, or (b) of the Commission, appoint a successor Servicer (the “Successor Servicer”), and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Issuer. A Person shall qualify as a Successor Servicer only if such Person satisfies the requirements of the applicable Servicing Agreement and the applicable Intercreditor Agreement. If, within 30 days after the delivery of the notice referred to above, a new Servicer shall not have been appointed, the Indenture Trustee may petition the Commission or a court of competent jurisdiction to appoint a Successor Servicer. In connection with any such appointment, Duke Energy Progress may make such arrangements for the compensation of such Successor Servicer as it and such successor shall agree, subject to the limitations set forth in Section 8.02 and in the Servicing Agreement.
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(f) Upon any termination of the Servicer’s rights and powers pursuant to the Servicing Agreement, the Indenture Trustee shall promptly notify the Issuer, the Holders and the Rating Agencies. As soon as a Successor Servicer is appointed, the Indenture Trustee shall notify the Issuer, the Holders and the Rating Agencies of such appointment, specifying in such notice the name and address of such Successor Servicer.
(g) The Issuer shall (or shall cause the Sponsor to) post on its website (which for this purpose may be the website of any direct or indirect parent company of the Issuer) and, to the extent consistent with the Issuer’s and the Sponsor’s obligations under applicable law, file with or furnish to the SEC in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the following information (other than any such information filed with the SEC and publicly available to investors unless the Issuer specifically requests such items to be posted) with respect to the Outstanding Storm Recovery Bonds, in each case to the extent such information is reasonably available to the Issuer:
(i) statements of any remittances of Charges made to the Indenture Trustee (to be included in a Form 10-D or Form 10-K, or successor forms thereto);
(ii) a statement reporting the balances in the Collection Account and in each subaccount of the Collection Account as of all Payment Dates (to be included on the next Form 10-D filed) and as of the end of each year (to be included on the next Form 10-K filed);
(iii) the Semi-Annual Servicer’s Certificate as required to be submitted pursuant to the Servicing Agreement (to be filed with a Form 10-D, Form 10-K or Form 8-K, or successor forms thereto);
(iv) the Monthly Servicer’s Certificate as required to be submitted pursuant to the Servicing Agreement;
(v) the text (or a link to the website where a reader can find the text) of each filing of a True-Up Adjustment and the results of each such filing;
(vi) any change in the long-term or short-term credit ratings of the Servicer assigned by the Rating Agencies;
(vii) material legislative or regulatory developments directly relevant to the Outstanding Storm Recovery Bonds (to be filed or furnished in a Form 8-K); and
(viii) any reports and other information that the Issuer is required to file with the SEC under the Exchange Act, including but not limited to periodic and current reports related to the Storm Recovery Bonds consistent with the disclosure and reporting regime established in Regulation AB.
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Notwithstanding the foregoing, nothing herein shall preclude the Issuer from voluntarily suspending or terminating its filing obligations as Issuer with the SEC to the extent permitted by applicable law. Any such reports or information delivered to the Indenture Trustee for purposes of this Section 3.07(g) is for informational purposes only, and the Indenture Trustee’s receipt of such reports or information shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the Indenture Trustee is entitled to conclusively rely on an Officer’s Certificate).
(h) The Issuer shall direct the Indenture Trustee to post on the Indenture Trustee’s website for investors (based solely on information set forth in the Annual Servicer’s Certificate) with respect to the Outstanding Storm Recovery Bonds, to the extent such information is set forth in the Annual Servicer’s Certificate, a statement showing the balance of Outstanding Storm Recovery Bonds that reflects the actual payments made on the Storm Recovery Bonds during the applicable period.
The address of the Indenture Trustee’s website for investors is https://gctinvestorreporting.bnymellon.com. The Indenture Trustee shall immediately notify the Issuer, the Holders and the Rating Agencies of any change to the address of the website for investors.
(i) The Issuer shall make all filings required under the Storm Recovery Law relating to the transfer of the ownership or security interest in the Storm Recovery Property other than those required to be made by the Seller or the Servicer pursuant to the Basic Documents.
SECTION 3.08. Certain Negative Covenants. So long as Storm Recovery Bonds are Outstanding, the Issuer shall not:
(a) except as expressly permitted by this Indenture and the other Basic Documents, or in connection with the issuance of Additional Series, sell, transfer, convey, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Collateral, unless in accordance with Article V;
(b) claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Storm Recovery Bonds (other than amounts properly withheld from such payments under the Code, the Treasury regulations promulgated thereunder or other tax laws) or assert any claim against any present or former Holder by reason of the payment of the taxes levied or assessed upon any part of the Collateral;
(c) terminate its existence or dissolve or liquidate in whole or in part, except in a transaction permitted by Section 3.10;
(d) (i) permit the validity or effectiveness of this Indenture or the other Basic Documents to be impaired, or permit the Lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Storm Recovery Bonds under this Indenture except as may be expressly permitted hereby, (ii) permit any Lien (other than the Lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Collateral or any part thereof or any interest therein or the proceeds thereof (other than tax liens arising by operation of law with respect to amounts not yet due) or (iii) permit the Lien of the Indenture not to constitute a valid first priority perfected security interest in the related Storm Recovery Collateral;
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(e) elect to be classified as an association taxable as a corporation for U.S. federal income tax purposes or otherwise take any action, file any tax return or make any election inconsistent with the treatment of the Issuer, for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the sole owner of the Issuer;
(f) change its name, identity or structure or the location of its chief executive office, unless at least ten Business Days prior to the effective date of any such change the Issuer delivers to the Indenture Trustee (with copies to the Rating Agencies) such documents, instruments or agreements, executed by the Issuer, as are necessary to reflect such change and to continue the perfection of the security interest of this Indenture;
(g) take any action that is subject to a Rating Agency Condition without satisfying the Rating Agency Condition;
(h) except to the extent permitted by applicable law, voluntarily suspend or terminate its filing obligations with the SEC as described in Section 3.07(g); or
(i) issue any debt obligations other than storm recovery bonds permitted by this Indenture.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will deliver to the Indenture Trustee, the Commission and the Rating Agencies not later than March 31 of each year (commencing with March 31, 2023), an Officer’s Certificate stating, as to the Responsible Officer signing such Officer’s Certificate, that:
(a) a review of the activities of the Issuer during the preceding 12 months ended December 31 (or, in the case of the first such Officer’s Certificate, since the date hereof) and of performance under this Indenture has been made; and
(b) to the best of such Responsible Officer’s knowledge, based on such review, the Issuer has in all material respects complied with all conditions and covenants under this Indenture throughout such 12-month period (or such shorter period in the case of the first such Officer’s Certificate), or, if there has been a default in the compliance of any such condition or covenant, specifying each such default known to such Responsible Officer and the nature and status thereof.
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SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall (A) be a Person organized and existing under the laws of the United States of America or any State, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture and the Series Supplement on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, and (C) assume all obligations and succeed to all rights of the Issuer under the Sale Agreement, Servicing Agreement and the other Basic Document to which the Issuer is a party;
(ii) immediately after giving effect to such merger or consolidation, no Default, Event of Default or Servicer Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with respect to such merger or consolidation;
(iv) the Issuer shall have delivered to Duke Energy Progress, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to Duke Energy Progress and the Indenture Trustee, and which may be based on a ruling from the Internal Revenue Service (unless the Internal Revenue Service has announced that it will not rule on the issues described in this paragraph)) to the effect that the consolidation or merger will not result in a material adverse U.S. federal or state income tax consequence to the Issuer, Duke Energy Progress, the Indenture Trustee or the then-existing Holders;
(v) any action as is necessary to maintain the Lien and the perfected security interest in the Collateral created by this Indenture shall have been taken as evidenced by an Opinion of Counsel of external counsel of the Issuer delivered to the Indenture Trustee; and
(vi) the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such consolidation or merger and such supplemental indenture comply with this Indenture and the Series Supplement and that all conditions precedent herein provided for in this Section 3.10(a) with respect to such transaction have been complied with (including any filing required by the Exchange Act).
(b) Except as specifically provided herein, the Issuer shall not sell, convey, exchange, transfer or otherwise dispose of any of its properties or assets included in the Collateral, to any Person, unless:
(i) the Person that acquires the properties and assets of the Issuer, the conveyance or transfer of which is hereby restricted, (A) shall be a United States citizen or a Person organized and existing under the laws of the United States of America or any State, (B) expressly assumes, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, (C) expressly agrees by means of such supplemental indenture that all right, title and interest so sold, conveyed, exchanged, transferred or otherwise disposed of shall be subject and subordinate to the rights of Holders, (D) unless otherwise provided in the supplemental indenture referred to in Section 3.10(b)(i)(B), expressly agrees to indemnify, defend and hold harmless the Issuer and the Indenture Trustee against and from any loss, liability or expense arising under or related to this Indenture, the Series Supplement and the Storm Recovery Bonds, (E) expressly agrees by means of such supplemental indenture that such Person (or if a group of Persons, then one specified Person) shall make all filings with the SEC (and any other appropriate Person) required by the Exchange Act in connection with the Collateral and the Storm Recovery Bonds and (F) if such sale, conveyance, exchange, transfer or disposal relates to the Issuer’s rights and obligations under the Sale Agreement or the Servicing Agreement, assumes all obligations and succeeds to all rights of the Issuer under the Sale Agreement and the Servicing Agreement, as applicable;
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(ii) immediately after giving effect to such transaction, no Default, Event of Default or Servicer Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with respect to such transaction;
(iv) the Issuer shall have delivered to Duke Energy Progress, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to Duke Energy Progress, and which may be based on a ruling from the Internal Revenue Service) to the effect that the disposition will not result in a material adverse U.S. federal or state income tax consequence to the Issuer, Duke Energy Progress, the Indenture Trustee or the then-existing Holders;
(v) any action as is necessary to maintain the Lien and the perfected security interest in the Collateral created by this Indenture shall have been taken as evidenced by an Opinion of Counsel of external counsel of the Issuer delivered to the Indenture Trustee; and
(vi) the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such sale, conveyance, exchange, transfer or other disposition and such supplemental indenture comply with this Indenture and that all conditions precedent herein provided for in this Section 3.10(b) with respect to such transaction have been complied with (including any filing required by the Exchange Act).
SECTION 3.11. Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein.
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(b) Except as set forth in Section 6.07, upon a sale, conveyance, exchange, transfer or other disposition of all the assets and properties of the Issuer in accordance with Section 3.10(b), the Issuer will be released from every covenant and agreement of this Indenture and the other Basic Documents to be observed or performed on the part of the Issuer with respect to the Storm Recovery Bonds and the Property immediately following the consummation of such acquisition upon the delivery of written notice to the Indenture Trustee from the Person acquiring such assets and properties stating that the Issuer is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any business other than financing, purchasing, owning, administering, managing and servicing the Property and the other Collateral and the issuance of the Storm Recovery Bonds in the manner contemplated by the Financing Order and this Indenture and the other Basic Documents and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for the Storm Recovery Bonds and any other indebtedness expressly permitted by or arising under the Basic Documents.
SECTION 3.14. Servicer’s Obligations. The Issuer shall enforce the Servicer’s compliance with and performance of all of the Servicer’s material obligations under the Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except as otherwise contemplated by the Sale Agreement, the Servicing Agreement or this Indenture, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another’s payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. Other than the purchase of Storm Recovery Property from the Seller on a Closing Date, the Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).
SECTION 3.17. Restricted Payments. Except as provided in Section 8.04(c), the Issuer shall not, directly or indirectly, (a) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer, (b) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or similar security or (c) set aside or otherwise segregate any amounts for any such purpose; provided, however, that, if no Event of Default shall have occurred and be continuing or would be caused thereby, the Issuer may make, or cause to be made, any such distributions to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer using funds distributed to the Issuer pursuant to Section 8.02(e)(xi) to the extent that such distributions would not cause the balance of the Capital Subaccount to decline below the Required Capital Level. The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the other Basic Documents.
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SECTION 3.18. Notice of Events of Default. The Issuer agrees to give the Indenture Trustee, the Commission and the Rating Agencies prompt written notice of each Default or Event of Default hereunder as provided in Section 5.01, and each default on the part of the Seller or the Servicer of its obligations under the Sale Agreement or the Servicing Agreement, respectively.
SECTION 3.19. Further Instruments and Acts. Upon request of the Indenture Trustee, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture and to maintain the first priority perfected security interest of the Indenture Trustee in the Collateral.
SECTION 3.20. Inspection. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee and any representative of the Commission or Public Staff, during the Issuer’s normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited annually by Independent registered public accountants, and to discuss the Issuer’s affairs, finances and accounts with the Issuer’s officers, employees and Independent registered public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee, the Commission and Public Staff shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. Notwithstanding anything herein to the contrary, the preceding sentence shall not be construed to prohibit (a) disclosure of any and all information that is or becomes publicly known, or information obtained by the Indenture Trustee from sources other than the Issuer, provided such parties are rightfully in possession of such information, (b) disclosure of any and all information (i) if required to do so by any applicable statute, law, rule or regulation, (ii) pursuant to any subpoena, civil investigative demand or similar demand or request of any court or regulatory authority exercising its proper jurisdiction, (iii) in any preliminary or final prospectus, registration statement or other document a copy of which has been filed with the SEC, (iv) to any affiliate, independent or internal auditor, agent, employee or attorney of the Indenture Trustee having a need to know the same, provided that such parties agree to be bound by the confidentiality provisions contained in this Section 3.20, or (v) to any Rating Agency or (c) any other disclosure authorized by the Issuer.
SECTION 3.21. Notice of Events of Default. The Issuer agrees to give the Indenture Trustee, the Commission and the Rating Agencies prompt written notice of each Event of Default hereunder and each default on the part of the Seller or the Servicer of its obligations under the Sale Agreement or the Servicing with respect to the Storm Recovery Property respectively.
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SECTION 3.22. Additional Storm Recovery Bonds.
(a) Following the issuance by the Commission of any Subsequent Financing Order or pursuant to remaining authority under the Financing Order, the Issuer may, in its sole discretion but subject to the terms contained in this Section 3.21, acquire additional and separate storm recovery bond collateral and issue additional storm recovery bonds under any such subsequent indenture that are backed by such separate additional storm recovery bond collateral. Any additional storm recovery bonds may include terms and provisions unique to such additional storm recovery bonds.
(b) In addition to all applicable requirements set forth in any subsequent indenture for any additional storm recovery bonds, the following conditions must be satisfied in connection with any issuance of additional storm recovery bonds:
| (i) | Duke Energy Progress has existing authority under the Financing Order to issue additional storm recovery bonds or Duke Energy Progress requests and receives a subsequent financing order from the Commission to recover additional storm recovery costs through the issuance of additional storm recovery bonds; |
| (ii) | Duke Energy Progress must serve as initial servicer and administrator for such series of the additional storm recovery bonds and that the servicer and the administrator cannot be replaced without the requisite approval of the holders of all series of Storm Recovery Bonds then-Outstanding; |
| (iii) | satisfaction of the Rating Agency Condition; |
| (iv) | each series of the additional storm recovery bonds has recourse only to the storm recovery property created by the Financing Order or any subsequent financing order, as the case may be, and funds on deposit in the trust accounts held by the Indenture Trustee with respect to that series, is nonrecourse to the Storm Recovery Property securing the Storm Recovery Bonds and does not constitute a claim against the Issuer if revenue from the storm recovery charges and funds on deposit in the trust accounts with respect to that series are insufficient to pay such other series in full; |
| (v) | the Issuer has provided to the Indenture Trustee and the Rating Agencies then rating any series of the Issuer’s Outstanding Storm Recovery Bonds an opinion of a nationally recognized law firm experienced in such matters to the effect that such issuance would not result in the Issuer’s substantive consolidation with Duke Energy Progress and that there has been a true sale of the storm recovery property for such series, subject to the customary exceptions, qualifications and assumptions contained therein; |
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| (vi) | transaction documentation for the other series provides that the indenture trustee on behalf of holders of the storm recovery bonds of the other series will not file or join in filing of any bankruptcy petition against the Issuer; |
| (vii) | if holders of such other series are deemed to have any interest in any of the Storm Recovery Bond Collateral dedicated to the Recovery Bonds, holders of such additional storm recovery bonds must agree that their interest in the recovery bond collateral dedicated to the additional storm recovery bonds is only a first priority perfected interest in the assets relating to the additional storm recovery bonds, as the case may be, in accordance with the related intercreditor agreement; |
| (viii) | each series of additional storm recovery bonds will have its own bank accounts or trust accounts and funds for each series of storm recovery bonds shall be remitted in accordance with the related servicing agreement and related intercreditor agreement; |
| (ix) | no series of additional storm recovery bonds will be issued under this Indenture; and |
| (x) | each series will bear its own indenture trustee fees, servicer fees and administration fees. |
SECTION 3.23. Sale Agreement, Servicing Agreement, Intercreditor Agreement and Administration Agreement Covenants.
(a) The Issuer agrees to take all such lawful actions to enforce its rights under the Sale Agreement, the Servicing Agreement, the Intercreditor Agreement, the Administration Agreement and the other Basic Documents, and to compel or secure the performance and observance by the Seller, the Servicer, the Administrator and Duke Energy Progress of each of their respective obligations to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement, the Intercreditor Agreement, the Administration Agreement and the other Basic Documents in accordance with the terms thereof. So long as no Event of Default occurs and is continuing, but subject to Section 3.23(f), the Issuer may exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement, the Intercreditor Agreement and the Administration Agreement; provided, that such action shall not adversely affect the interests of the Holders in any material respect.
(b) If an Event of Default occurs and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing) of the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds of all tranches affected thereby or the Commission, shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, Duke Energy Progress, the Administrator and the Servicer, as the case may be, under or in connection with the Sale Agreement, the Servicing Agreement, the Intercreditor Agreement and the Administration Agreement, including the right or power to take any action to compel or secure performance or observance by the Seller, Duke Energy Progress, the Administrator or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale Agreement, the Servicing Agreement, the Intercreditor Agreement and the Administration Agreement, and any right of the Issuer to take such action shall be suspended.
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(c) Except as set forth in Section 3.23(d), the Administration Agreement, the Sale Agreement, the Servicing Agreement and the Intercreditor Agreement may be amended in accordance with the provisions thereof, so long as the Rating Agency Condition is satisfied in connection therewith, at any time and from time to time, without the consent of the Holders of the Storm Recovery Bonds, but with the acknowledgement of the Indenture Trustee; provided, that the Indenture Trustee shall provide such consent upon receipt of an Officer’s Certificate of the Issuer evidencing satisfaction of such Rating Agency Condition, an Opinion of Counsel of external counsel of the Issuer evidencing that such amendment is in accordance with the provisions of such Basic Document and satisfaction of the Commission Condition (as described in Section 9.03 hereof, or alternatively, if applicable, Section 13(b) of the Administration Agreement, Section 6.01(b) of the Sale Agreement or Section 8.01(b) of the Servicing Agreement).
(d) Except as set forth in Section 3.23(e), if the Issuer, the Seller, Duke Energy Progress, the Administrator, the Servicer or any other party to the respective agreement proposes to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, waiver, supplement, termination or surrender of, the terms of the Sale Agreement, the Administration Agreement, the Servicing Agreement or the Intercreditor Agreement, or waive timely performance or observance by the Seller, Duke Energy Progress, the Administrator, the Servicer or any other party under the Sale Agreement, the Administration Agreement, the Servicing Agreement or the Intercreditor Agreement, in each case in such a way as would materially and adversely affect the interests of any Holder of Storm Recovery Bonds, the Issuer shall first notify the Rating Agencies of the proposed amendment, modification, waiver, supplement, termination or surrender and shall promptly notify the Indenture Trustee, the Commission and the Holders of the Storm Recovery Bonds in writing of the proposed amendment, modification, waiver, supplement, termination or surrender and whether the Rating Agency Condition has been satisfied with respect thereto (or, pursuant to an Issuer Request, the Indenture Trustee shall so notify the Holders of the Storm Recovery Bonds on the Issuer’s behalf). The Indenture Trustee shall consent to such proposed amendment, modification, waiver, supplement, termination or surrender only if the Rating Agency Condition is satisfied and only with the (i) prior written consent of the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds or tranche materially and adversely affected thereby and (ii) satisfaction of the Commission Condition (as described in Section 9.03 hereof, or alternatively, if applicable, Section 13(b) of the Administration Agreement, Section 6.01(b) of the Sale Agreement or Section 8.01(b) of the Servicing Agreement). If any such amendment, modification, waiver, supplement, termination or surrender shall be so consented to by the Indenture Trustee or such Holders, the Issuer agrees to execute and deliver, in its own name and at its own expense, such agreements, instruments, consents and other documents as shall be necessary or appropriate in the circumstances.
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(e) If the Issuer or the Servicer proposes to amend, modify, waive, supplement, terminate or surrender, or to agree to any amendment, modification, supplement, termination, waiver or surrender of, the process for True-Up Adjustments, the Issuer shall notify the Indenture Trustee and the Holders of the Storm Recovery Bonds and, when required, the Commission in writing of such proposal (or, pursuant to an Issuer Request, the Indenture Trustee shall so notify the Holders of the Storm Recovery Bonds on the Issuer’s behalf), and the Indenture Trustee shall consent thereto with the prior written consent of the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds or tranche affected thereby and only if the Rating Agency Condition and Commission Condition have been satisfied with respect thereto.
(f) Promptly following a default by the Seller under the Sale Agreement, by the Administrator under the Administration Agreement or by any party under the Intercreditor Agreement, or the occurrence of a Servicer Default under the Servicing Agreement, and at the Issuer’s expense, the Issuer agrees to take all such lawful actions as the Indenture Trustee may request to compel or secure the performance and observance by each of the Seller, the Administrator or the Servicer, and by such party to the Intercreditor Agreement, of their obligations under and in accordance with the Sale Agreement, the Servicing Agreement, the Administration Agreement and the Intercreditor Agreement, as the case may be, in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with such agreements to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of any default by the Seller, the Administrator or the Servicer, respectively, thereunder and the institution of legal or administrative actions or Proceedings to compel or secure performance of their obligations under the Sale Agreement, the Servicing Agreement for such Series, the Administration Agreement or the Intercreditor Agreement.
SECTION 3.24. Taxes. So long as any of the Storm Recovery Bonds are Outstanding, the Issuer shall pay all taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the Collateral; provided, that no such tax need be paid if the Issuer is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Issuer has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.
SECTION 3.25. Notices from Holders. The Issuer shall promptly transmit any notice received by it from the Holders to the Indenture Trustee.
SECTION 3.26. Volcker Rule. The Issuer is structured so as not to be a “covered fund” under the regulations adopted to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the “Volcker Rule.”
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ARTICLE IV
Satisfaction and Discharge; Defeasance
SECTION 4.01. Satisfaction and Discharge of Indenture; Defeasance.
(a) This Indenture shall cease to be of further effect with respect to the Storm Recovery Bonds, and the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Storm Recovery Bonds, when:
(i) Either:
(A) all Storm Recovery Bonds theretofore authenticated and delivered (other than (1) Storm Recovery Bonds that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.06 and (2) Storm Recovery Bonds for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in the last paragraph of Section 3.03) have been delivered to the Indenture Trustee for cancellation; or
(B) either (1) the Scheduled Final Payment Date has occurred with respect to all Storm Recovery Bonds not theretofore delivered to the Indenture Trustee for cancellation or (2) the Storm Recovery Bonds will be due and payable on their respective Scheduled Final Payment Dates within one year, and, in any such case, the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (i) cash and/or (ii) U.S. Government Obligations that through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Storm Recovery Bonds of such Series not theretofore delivered to the Indenture Trustee for cancellation, Ongoing Financing Costs and all other sums payable hereunder by the Issuer with respect to the Storm Recovery Bonds when scheduled to be paid and to discharge the entire indebtedness on the Storm Recovery Bonds when due;
(ii) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and
(iii) pursuant to Section 10.04, the Issuer has delivered to the Indenture Trustee an Officer’s Certificate, an Opinion of Counsel of external counsel of the Issuer and (if required by the Trust Indenture Act or the Indenture Trustee) an Independent Certificate from a firm of registered public accountants, each meeting the applicable requirements of Section 10.01(a) and each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to the Storm Recovery Bonds have been complied with.
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(b) Subject to Section 4.01(c) and Section 4.02, the Issuer at any time may terminate (i) all its obligations under this Indenture with respect to the Storm Recovery Bonds of any Series (“Legal Defeasance Option”) or (ii) its obligations under Section 3.04, Section 3.05, Section 3.06, Section 3.07, Section 3.08, Section 3.09, Section 3.10, Section 3.12, Section 3.13, Section 3.14, Section 3.15, Section 3.16, Section 3.17, Section 3.18 and Section 3.19 and the operation of Section 5.01(c) with respect to the Storm Recovery Bonds (“Covenant Defeasance Option”). The Issuer may exercise the Legal Defeasance Option with respect to the Storm Recovery Bonds notwithstanding its prior exercise of the Covenant Defeasance Option.
If the Issuer exercises the Legal Defeasance Option, the maturity of the Storm Recovery Bonds may not be accelerated because of an Event of Default. If the Issuer exercises the Covenant Defeasance Option, the maturity of the Storm Recovery Bonds may not be accelerated because of an Event of Default specified in Section 5.01(c).
Upon satisfaction of the conditions set forth herein to the exercise of the Legal Defeasance Option or the Covenant Defeasance Option of the Storm Recovery Bonds, the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of the obligations that are terminated pursuant to such exercise.
(c) Notwithstanding Section 4.01(a) and Section 4.01(b), (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Storm Recovery Bonds, (iii) rights of Holders to receive payments of principal, premium, if any, and interest, (iv) Section 4.03 and Section 4.04, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.07 and the obligations of the Indenture Trustee under Section 4.03) and (vi) the rights of Holders as beneficiaries hereof with respect to the property deposited with the Indenture Trustee payable to all or any of them, each shall survive until the Storm Recovery Bonds as to which this Indenture or certain obligations hereunder have been satisfied and discharged pursuant to Section 4.01(a) or Section 4.01(b). Thereafter the obligations in Section 6.07 and Section 4.04 shall survive.
SECTION 4.02. Conditions to Defeasance. The Issuer may exercise the Legal Defeasance Option or the Covenant Defeasance Option with respect to the Storm Recovery Bonds only if:
(a) the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (i) cash and/or (ii) U.S. Government Obligations that through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Storm Recovery Bonds not therefore delivered to the Indenture Trustee for cancellation and Ongoing Financing Costs and all other sums payable hereunder by the Issuer with respect to the Storm Recovery Bonds when scheduled to be paid and to discharge the entire indebtedness on the Storm Recovery Bonds when due;
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(b) the Issuer delivers to the Indenture Trustee a certificate from a nationally recognized firm of Independent registered public accountants expressing its opinion that the payments of principal of and interest on the deposited U.S. Government Obligations when due and without reinvestment plus any deposited cash will provide cash at such times and in such amounts (but, in the case of the Legal Defeasance Option only, not more than such amounts) as will be sufficient to pay in respect of the Storm Recovery Bonds (i) principal in accordance with the Expected Sinking Fund Schedule therefor, (ii) interest when due and (iii) Ongoing Financing Costs and all other sums payable hereunder by the Issuer with respect to the Storm Recovery Bonds;
(c) in the case of the Legal Defeasance Option, 95 days after the deposit is made and during the 95-day period no Default specified in Section 5.01(e) or Section 5.01(f) occurs that is continuing at the end of the period;
(d) no Default has occurred and is continuing on the day of such deposit and after giving effect thereto;
(e) in the case of an exercise of the Legal Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer stating that (i) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date of execution of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Storm Recovery Bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such legal defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred;
(f) in the case of an exercise of the Covenant Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that the Holders of the Storm Recovery Bonds of such Series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred;
(g) the Issuer delivers to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent to the Legal Defeasance Option or the Covenant Defeasance Option, as applicable, have been complied with as required by this Article IV;
(h) the Issuer delivers to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that: (i) in a case under the Bankruptcy Code in which Duke Energy Progress (or any of its Affiliates, other than the Issuer) is the debtor, the court would hold that the deposited moneys or U.S. Government Obligations would not be in the bankruptcy estate of Duke Energy Progress (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations); and (ii) in the event Duke Energy Progress (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations) were to be a debtor in a case under the Bankruptcy Code, the court would not disregard the separate legal existence of Duke Energy Progress (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations) and the Issuer so as to order substantive consolidation under the Bankruptcy Code of the Issuer’s assets and liabilities with the assets and liabilities of Duke Energy Progress or such other Affiliate; and
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(i) the Rating Agency Condition shall have been satisfied with respect to the exercise of any Legal Defeasance Option or Covenant Defeasance Option.
Notwithstanding any other provision of this Section 4.02, no delivery of moneys or U.S. Government Obligations to the Indenture Trustee shall terminate any obligation of the Issuer to the Indenture Trustee under this Indenture or the Series Supplement or any obligation of the Issuer to apply such moneys or U.S. Government Obligations under Section 4.03 until principal of and premium, if any, and interest on the Storm Recovery Bonds of such Series shall have been paid in accordance with the provisions of this Indenture and the Series Supplement.
SECTION 4.03. Application of Trust Money. All moneys or U.S. Government Obligations deposited with the Indenture Trustee pursuant to Section 4.01 or Section 4.02 shall be held in trust and applied by it, in accordance with the provisions of the Storm Recovery Bonds and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Storm Recovery Bonds for the payment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Servicing Agreement or required by law. Notwithstanding anything to the contrary in this Article IV, the Indenture Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request any moneys or U.S. Government Obligations held by it pursuant to Section 4.02 that, in the opinion of a nationally recognized firm of Independent registered public accountants expressed in a written certification thereof delivered to the Indenture Trustee (and not at the cost or expense of the Indenture Trustee), are in excess of the amount thereof that would be required to be deposited for the purpose for which such moneys or U.S. Government Obligations were deposited; provided, that any such payment shall be subject to the satisfaction of the Rating Agency Condition.
SECTION 4.04. Repayment of Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture or the Covenant Defeasance Option or Legal Defeasance Option with respect to Storm Recovery Bonds, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 3.03 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.
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ARTICLE V
Remedies
SECTION 5.01. Events of Default. “Event of Default” means any one or more of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest on any Storm Recovery Bond when the same becomes due and payable (whether such failure to pay interest is caused by a shortfall in Charges received or otherwise), and such default shall continue for a period of five Business Days;
(b) default in the payment of the then unpaid principal of any Storm Recovery Bond on the Final Maturity Date, or, if applicable, any tranche on the Final Maturity Date for such tranche;
(c) default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than defaults specified in Section 5.01(a) or Section 5.01(b)), and such default shall continue or not be cured, for a period of 30 days after the earlier of (i) the date that there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least 25 percent of the Outstanding Amount of the Storm Recovery Bonds, a written notice specifying such default and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder or (ii) the date that the Issuer has actual knowledge of the default;
(d) any representation or warranty of the Issuer made in this Indenture, a Series Supplement or in any certificate or other writing delivered pursuant hereto or a Series Supplement or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and the circumstance or condition in respect of which such representation or warranty was incorrect shall not have been eliminated or otherwise cured, within 30 days after the earlier of (i) the date that there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least twenty-five (25) percent of the Outstanding Amount of the Storm Recovery Bonds, a written notice specifying such incorrect representation or warranty and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder or (ii) the date the Issuer has actual knowledge of the default;
(e) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Collateral in an involuntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Collateral, or ordering the winding-up or liquidation of the Issuer’s affairs, and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days;
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(f) the commencement by the Issuer of a voluntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case or proceeding under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Collateral, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing; or
(g) any act or failure to act by the State of North Carolina or any of its agencies (including the Commission), officers or employees that violates the State Pledge or is not in accordance with the State Pledge.
The Issuer shall deliver to a Responsible Officer of the Indenture Trustee and to the Rating Agencies, within five days after a Responsible Officer of the Issuer has knowledge of the occurrence thereof, written notice in the form of an Officer’s Certificate of any event (i) that is an Event of Default under Section 5.01(a), Section 5.01(b), Section 5.01(f), or Section 5.01(g)or (ii) that with the giving of notice, the lapse of time, or both, would become an Event of Default under Section 5.01(c), Section 5.01(d) or Section 5.01(e), including, in each case, the status of such Default or Event of Default and what action the Issuer is taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default under Section 5.01(g)) should occur and be continuing, then and in every such case the Indenture Trustee or the Holders representing a majority of the Outstanding Amount of the Storm Recovery Bonds may declare the Storm Recovery Bonds to be immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee and the Commission if given by Holders), and upon any such declaration the unpaid principal amount of the Storm Recovery Bonds, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this Article V provided, the Holders representing a majority of the Outstanding Amount of the Storm Recovery Bonds, by written notice to the Issuer, the Commission and the Indenture Trustee, may rescind and annul such declaration and its consequences if:
(a) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay:
(i) all payments of principal of and premium, if any, and interest on all Storm Recovery Bonds due and owing at such time as if such Event of Default had not occurred and was not continuing and all other amounts that would then be due hereunder or upon the Storm Recovery Bonds if the Event of Default giving rise to such acceleration had not occurred; and
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(ii) all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses; provided, that, the Indenture Trustee shall not be obligated to pay or advance any sums hereunder from its own funds after an Event of Default, disbursements and advances of the Indenture Trustee and its agents and counsel; and
(b) all Events of Default, other than the nonpayment of the principal of the Storm Recovery Bonds of such Series that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right consequent thereto.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.
(a) If an Event of Default under Section 5.01(a) or Section 5.01(b) has occurred and is continuing, subject to Section 10.16, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and, subject to the limitations on recourse set forth herein, may enforce the same against the Issuer or other obligor upon the Storm Recovery Bonds and collect in the manner provided by law out of the property of the Issuer or other obligor upon the Storm Recovery Bonds wherever situated the moneys payable, or the Storm Recovery Collateral and the proceeds thereof, the whole amount then due and payable on the Storm Recovery Bonds for principal, premium, if any, and interest, with interest upon the overdue principal and premium, if any, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the respective rate borne by the Storm Recovery Bonds or the applicable tranche and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel.
(b) If an Event of Default (other than Event of Default under Section 5.01(g)) occurs and is continuing, the Indenture Trustee shall, as more particularly provided in Section 5.04, proceed to protect and enforce its rights and the rights of the Holders, by such appropriate Proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture and the Series Supplement or by law, including foreclosing or otherwise enforcing the Lien of the Collateral securing the Storm Recovery Bonds or applying to the Commission or a court of competent jurisdiction for sequestration of revenues arising with respect to the Property.
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(c) If an Event of Default under Section 5.01(e) or Section 5.01(f) has occurred and is continuing, the Indenture Trustee, irrespective of whether the principal of any Storm Recovery Bonds shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section 5.03, shall be entitled and empowered, by intervention in any Proceedings related to such Event of Default or otherwise:
(i) to file and prove a claim or claims for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Storm Recovery Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee in bankruptcy, a standby trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders allowed in any judicial proceeding relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith.
(d) Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Storm Recovery Bonds or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.
(e) All rights of action and of asserting claims under this Indenture, or under any of the Storm Recovery Bonds, may be enforced by the Indenture Trustee without the possession of any of the Storm Recovery Bonds or the production thereof in any trial or other Proceedings relative thereto, and any such action or proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Storm Recovery Bonds.
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SECTION 5.04. Remedies; Priorities.
(a) If an Event of Default (other than an Event of Default under Section 5.01(g)) shall have occurred and be continuing, the Indenture Trustee may do one or more of the following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Storm Recovery Bonds or under this Indenture with respect thereto, whether by declaration of acceleration or otherwise, and, subject to the limitations on recovery set forth herein, enforce any judgment obtained, and collect from the Issuer or any other obligor moneys adjudged due, upon the Storm Recovery Bonds;
(ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Storm Recovery Collateral;
(iii) exercise any remedies of a secured party under the UCC, the Storm Recovery Law or any other applicable law and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Holders of the Storm Recovery Bonds;
(iv) at the written direction of the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds, either sell the Storm Recovery Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law, or elect that the Issuer maintain possession of all or a portion of the Storm Recovery Collateral pursuant to Section 5.05 and continue to apply the Storm Recovery Charge Collection as if there had been no declaration of acceleration; and
(v) exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, the Administrator or the Servicer under or in connection with, and pursuant to the terms of, the Sale Agreement, the Administration Agreement or the Servicing Agreement;
provided, however, that the Indenture Trustee may not sell or otherwise liquidate any portion of the Storm Recovery Collateral following such an Event of Default, other than an Event of Default described in Section 5.01(a) or Section 5.01(b), unless (A) the Holders of 100 percent of the Outstanding Amount of the Storm Recovery Bonds consent thereto, (B) the proceeds of such sale or liquidation distributable to the Holders are sufficient to discharge in full all amounts then due and unpaid upon the Storm Recovery Bonds for principal, premium, if any, and interest after taking into account payment of all amounts due prior thereto pursuant to the priorities set forth in Section 8.02(e) or (C) the Indenture Trustee determines that the Storm Recovery Collateral will not continue to provide sufficient funds for all payments on the Storm Recovery Bonds as they would have become due if the Storm Recovery Bonds had not been declared due and payable, and the Indenture Trustee obtains the written consent of Holders of at least two-thirds of the Outstanding Amount of the Storm Recovery Bonds. In determining such sufficiency or insufficiency with respect to clause (B) above and clause (C) above, the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Storm Recovery Collateral for such purpose, at Issuer’s expense.
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(b) If an Event of Default under Section 5.01(g) shall have occurred and be continuing, the Indenture Trustee, for the benefit of the Secured Parties, shall be entitled and empowered, to the extent permitted by applicable law, to institute or participate in Proceedings necessary to compel performance of or to enforce the State Pledge and to collect any monetary damages incurred by the Holders or the Indenture Trustee as a result of any such Event of Default, and may prosecute any such Proceeding to final judgment or decree. Such remedy shall be the only remedy that the Indenture Trustee may exercise if the only Event of Default that has occurred and is continuing is an Event of Default under Section 5.01(g).
(c) If the Indenture Trustee collects any money pursuant to this Article V, it shall pay out such money in accordance with the priorities set forth in Section 8.02(e).
SECTION 5.05. Optional Preservation of the Collateral. If the Storm Recovery Bonds have been declared to be due and payable under Section 5.02 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of all or a portion of the related Storm Recovery Collateral. It is the desire of the parties hereto and the Holders that there be at all times sufficient funds for the payment of principal of and premium, if any, and interest on the Storm Recovery Bonds, and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Storm Recovery Collateral. In determining whether to maintain possession of the Storm Recovery Collateral or sell or liquidate the same, the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Storm Recovery Collateral for such purpose.
SECTION 5.06. Limitation of Suits. No Holder of any Storm Recovery Bond shall have any right to institute any Proceeding, judicial or otherwise, to avail itself of any remedies provided in the Storm Recovery Law or to avail itself of the right to foreclose on the Storm Recovery Collateral or otherwise enforce the Lien and the security interest on the Storm Recovery Collateral with respect to this Indenture and the Series Supplement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Holder previously has given written notice to the Indenture Trustee of a continuing Event of Default;
(b) the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder;
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(c) such Holder or Holders have offered to the Indenture Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request;
(d) the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and
(e) no direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds;
it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders, each representing less than a majority of the Outstanding Amount of the Storm Recovery Bonds, the Indenture Trustee in its sole discretion may file a petition with a court of competent jurisdiction to resolve such conflict or determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.07. Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest. Notwithstanding any other provisions in this Indenture, the Holder of any Storm Recovery Bond shall have the right, which is absolute and unconditional, (a) to receive payment of (i) the interest, if any, on such Storm Recovery Bond on the due dates thereof expressed in such Storm Recovery Bond or in this Indenture or (ii) the unpaid principal, if any, of the Storm Recovery Bonds on the Final Maturity Date or Final Maturity Date for such tranche therefor and (b) to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture Trustee or any Holder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Holder, then and in every such case the Issuer, the Indenture Trustee and the Holders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Holders shall continue as though no such Proceeding had been instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
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SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of the Indenture Trustee or any Holder to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Indenture Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Holders, as the case may be.
SECTION 5.11. Control by Holders. The Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds (or, if less than all tranches are affected, the affected tranche) shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Storm Recovery Bonds of such tranche or tranches or exercising any trust or power conferred on the Indenture Trustee with respect to such tranche or tranches; provided, that:
(a) such direction shall not be in conflict with any rule of law or with this Indenture or the Series Supplement and shall not involve the Indenture Trustee in any personal liability or expense;
(b) subject to other conditions specified in Section 5.04, any direction to the Indenture Trustee to sell or liquidate any Storm Recovery Collateral shall be by the Holders representing 100 percent of the Outstanding Amount of the Storm Recovery Bonds;
(c) if the conditions set forth in Section 5.05 have been satisfied and the Indenture Trustee elects to retain the Storm Recovery Collateral pursuant to Section 5.05, then any direction to the Indenture Trustee by Holders representing less than 100 percent of the Outstanding Amount of the Storm Recovery Bonds to sell or liquidate the Storm Recovery Collateral shall be of no force and effect; and
(d) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction;
provided, however, that the Indenture Trustee’s duties shall be subject to Section 6.01, and the Indenture Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Holders not consenting to such action. Furthermore and without limiting the foregoing, the Indenture Trustee shall not be required to take any action for which it reasonably believes that it will not be indemnified to its satisfaction against any cost, expense or liabilities.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of the acceleration of the maturity of the Storm Recovery Bonds as provided in Section 5.02, the Holders representing a majority of the Outstanding Amount of the Storm Recovery Bonds may waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of or premium, if any, or interest on any of the Storm Recovery Bonds or (b) in respect of a covenant or provision hereof that cannot be modified or amended without the consent of the Holder of each Storm Recovery Bond of all tranches affected. In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto.
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Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Storm Recovery Bond by such Holder’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.13 shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Holder, or group of Holders, in each case holding in the aggregate more than ten percent of the Outstanding Amount of the Storm Recovery Bonds of a Series or (c) any suit instituted by any Holder for the enforcement of the payment of (i) interest on any Storm Recovery Bond on or after the due dates expressed in such Storm Recovery Bond and in this Indenture or (ii) the unpaid principal, if any, of any Storm Recovery Bond on or after the Final Maturity Date or Final Maturity Date for such tranche therefor.
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon or plead or, in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
SECTION 5.15. Action on Storm Recovery Bonds. The Indenture Trustee’s right to seek and recover judgment on the Storm Recovery Bonds or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the Lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Holders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or any other assets of the Issuer.
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ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).
(c) The Indenture Trustee may not be relieved from liability for its own negligent action, its own bad faith, its own negligent failure to act or its own willful misconduct, except that:
(i) this Section 6.01(c) does not limit the effect of Section 6.01(b);
(ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it hereunder.
(d) Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to Section 6.01(a), Section 6.01(b) and Section 6.01(c).
(e) The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer.
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(f) Money held in trust by the Indenture Trustee need not be segregated from other funds held by the Indenture Trustee except to the extent required by law or the terms of this Indenture, the Sale Agreement, the Servicing Agreement or the Administration Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section 6.01 and to the provisions of the Trust Indenture Act.
(i) In the event that the Indenture Trustee is also acting as Paying Agent or Storm Recovery Bond Registrar hereunder, the protections of this Article VI shall also be afforded to the Indenture Trustee in its capacity as Paying Agent or Storm Recovery Bond Registrar.
(j) Except for the express duties of the Indenture Trustee with respect to the administrative functions set forth in the Basic Documents, the Indenture Trustee shall have no obligation to administer, service or collect Property or to maintain, monitor or otherwise supervise the administration, servicing or collection of the Storm Recovery Charges.
(k) Under no circumstance shall the Indenture Trustee be liable for any indebtedness of the Issuer, the Servicer or the Seller evidenced by or arising under the Storm Recovery Bonds or the Basic Documents.
(l) Commencing with March 15, 2023, on or before March 15th of each fiscal year ending December 31, so long as the Issuer is required to file Exchange Act reports, the Indenture Trustee shall (i) deliver to the Issuer a report (in form and substance reasonably satisfactory to the Issuer and addressed to the Issuer and signed by an authorized officer of the Indenture Trustee) regarding the Indenture Trustee’s assessment of compliance, during the preceding fiscal year ended December 31, with each of the applicable servicing criteria specified on Exhibit C as required under Rule 13a-18 and Rule 15d-18 under the Exchange Act and Item 1122 of Regulation AB and (ii) deliver to the Issuer a report of an Independent registered public accounting firm reasonably acceptable to the Issuer that attests to and reports on, in accordance with Rule 1-02(a)(3) and Rule 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act, the assessment of compliance made by the Indenture Trustee and delivered pursuant to Section 6.01(l)(i).
SECTION 6.02. Rights of Indenture Trustee.
(a) The Indenture Trustee may conclusively rely and shall be fully protected in relying on any document believed by it to be genuine and to have been signed or presented by the proper person. The Indenture Trustee need not investigate any fact or matter stated in such document.
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(b) Before the Indenture Trustee acts or refrains from acting, it may require and shall be entitled to receive an Officer’s Certificate or an Opinion of Counsel, which counsel may be an employee of or counsel to the Issuer or the Seller and which shall be reasonably satisfactory to the Indenture Trustee, or, in the Indenture Trustee’s sole judgment, external counsel of the Issuer (at no cost or expense to the Indenture Trustee) that such action is required or permitted hereunder. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. The Indenture Trustee shall give prompt written notice to the Issuer, in which case the Issuer shall then give prompt written notice to the Rating Agencies, of the appointment of any such agent, custodian or nominee to whom it delegates any of its express duties under this Indenture; provided, that the Indenture Trustee shall not be obligated to give such notice (i) if the Issuer or the Holders have directed the Indenture Trustee to appoint such agent, custodian or nominee (in which event the Issuer shall give prompt notice to the Rating Agencies of any such direction) or (ii) of the appointment of any agents, custodians or nominees made at any time that an Event of Default of the Issuer has occurred and is continuing.
(d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; provided, however, that the Indenture Trustee’s conduct does not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Storm Recovery Bonds shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to take any action or exercise any of the rights or powers vested in it by this Indenture or any other Basic Document, or to institute, conduct or defend any litigation hereunder or thereunder or in relation hereto or thereto, at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture and the Series Supplement or otherwise, unless it shall have received security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred.
(g) The Indenture Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
(h) Any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or an Issuer Order.
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(i) Whenever in the administration of this Indenture the Indenture Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Indenture Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer’s Certificate.
(j) The Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document.
(k) In no event shall the Indenture Trustee be responsible or liable for special, indirect or consequential loss or damage of any kind whatsoever (including loss of profit) irrespective of whether the Indenture Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
(l) In no event shall the Indenture Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services, it being understood that the Indenture Trustee shall use reasonable efforts that are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.
(m) The Indenture Trustee shall not be deemed to have notice of any Default or Event of Default unless it has actual knowledge or written notice of any event which is in fact such a default is received by a Responsible Officer of the Indenture Trustee at the Corporate Trust Office of the Indenture Trustee, and such notice references the Storm Recovery Bonds and this Indenture.
(n) The rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Indenture Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.
(o) Beyond the exercise of reasonable care in the custody thereof, the Indenture Trustee will have no duty as to any Storm Recovery Bond Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto. The Indenture Trustee will be deemed to have exercised reasonable care in the custody of the Recovery Bond Collateral in its possession if the Recovery Bond Collateral is accorded treatment substantially equal to that which it accords its own property, and the Indenture Trustee will not be liable or responsible for any loss or diminution in the value of any of the Storm Recovery Bond Collateral by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Indenture Trustee in good faith.
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(p) The Indenture Trustee will not be responsible for the existence, genuineness or value of any of the Storm Recovery Bond Collateral or for the validity, sufficiency, perfection, priority or enforceability of the Liens in any of the Storm Recovery Bond Collateral, except to the extent such action or omission constitutes negligence or willful misconduct on the part of the Indenture Trustee. The Indenture Trustee shall not be responsible for the validity of the title of any grantor to the collateral, for insuring the Storm Recovery Bond Collateral or for the payment of taxes, charges, assessments or liens upon the Storm Recovery Bond Collateral or otherwise as to the maintenance of the Storm Recovery Bond Collateral.
(q) In the event that the Indenture Trustee is required to acquire title to an asset for any reason, or take any managerial action of any kind in regard thereto, in order to carry out any fiduciary or trust obligation for the benefit of another, which in the Indenture Trustee’s sole discretion may cause the Indenture Trustee, as applicable, to be considered an “owner or operator” under any environmental laws or otherwise cause the Indenture Trustee to incur, or be exposed to, any environmental liability or any liability under any other federal, state or local law, the Indenture Trustee reserves the right, instead of taking such action, either to resign as Indenture Trustee or to arrange for the transfer of the title or control of the asset to a court appointed receiver. The Indenture Trustee will not be liable to any person for any environmental claims or any environmental liabilities or contribution actions under any federal, state or local law, rule or regulation by reason of the Indenture Trustee’s actions and conduct as authorized, empowered and directed hereunder or relating to any kind of discharge or release or threatened discharge or release of any hazardous materials into the environment.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Storm Recovery Bonds and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. Any Paying Agent, Storm Recovery Bond Registrar, co-registrar or co-paying agent or agent appointed under Section 3.02 may do the same with like rights. However, the Indenture Trustee must comply with Section 6.11 and Section 6.12.
SECTION 6.04. Indenture Trustee’s Disclaimer.
(a) The Indenture Trustee shall not be responsible for and makes no representation (other than as set forth in Section 6.13) as to the validity or adequacy of this Indenture or the Storm Recovery Bonds, it shall not be accountable for the Issuer’s use of the proceeds from the Storm Recovery Bonds, and it shall not be responsible for any statement of the Issuer in this Indenture or in any document issued in connection with the sale of the Storm Recovery Bonds or in the Storm Recovery Bonds other than the Indenture Trustee’s certificate of authentication. The Indenture Trustee shall not be responsible for the form, character, genuineness, sufficiency, value or validity of any of the Collateral (or for the perfection or priority of the Liens thereon), or for or in respect of the Storm Recovery Bonds (other than the certificate of authentication for the Storm Recovery Bonds) or the Basic Documents, and the Indenture Trustee shall in no event assume or incur any liability, duty or obligation to any Holder, other than as expressly provided in this Indenture. The Indenture Trustee shall not be liable for the default or misconduct of the Issuer, the Seller or the Servicer under the Basic Documents or otherwise, and the Indenture Trustee shall have no obligation or liability to perform the obligations of such Persons.
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(b) The Indenture Trustee shall not be responsible for (i) the validity of the title of the Issuer to the Collateral, (ii) insuring the Collateral or (iii) the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Indenture Trustee shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Indenture or any of the other Basic Documents. The Indenture Trustee shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral.
SECTION 6.05. Notice of Defaults. If a Default occurs and is continuing and if it is actually known to a Responsible Officer of the Indenture Trustee or a Responsible Officer of the Indenture Trustee has been notified in writing of such Default, the Indenture Trustee shall deliver to each Rating Agency, to the Commission (pursuant to Section 10.04(e)) and each Holder of Storm Recovery Bonds notice of the Default within ten Business Days after actual notice of such Default was received by a Responsible Officer of the Indenture Trustee (provided that the Indenture Trustee shall give the Rating Agencies prompt notice of any payment default in respect of the Storm Recovery Bonds). Except in the case of a Default in payment of principal of and premium, if any, or interest on any Storm Recovery Bond, the Indenture Trustee may withhold the notice of the Default if and so long as a committee of its Responsible Officers in good faith determines that withholding such notice is in the interests of Holders. In no event shall the Indenture Trustee be deemed to have knowledge of a Default unless a Responsible Officer of the Indenture Trustee shall have actual knowledge of a Default or shall have received written notice thereof.
SECTION 6.06. Reports by Indenture Trustee to Holders.
(a) So long as Storm Recovery Bonds are Outstanding and the Indenture Trustee is the Storm Recovery Bond Registrar and Paying Agent, upon the written request of any Holder or the Issuer, within the prescribed period of time for tax reporting purposes after the end of each calendar year, the Indenture Trustee shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its U.S. federal income and any applicable local or state tax returns. If the Storm Recovery Bond Registrar and Paying Agent is other than the Indenture Trustee, such Storm Recovery Bond Registrar and Paying Agent, within the prescribed period of time for tax reporting purposes after the end of each calendar year, shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its U.S. federal income and any applicable local or state tax returns.
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(b) On or prior to each Payment Date or Special Payment Date therefor, the Indenture Trustee will deliver to each Holder of the Storm Recovery Bonds on such Payment Date or Special Payment Date and the Commission a statement as provided and prepared by the Servicer, which will include (to the extent applicable) the following information (and any other information so specified in the Series Supplement) as to the Storm Recovery Bonds with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:
(i) the amount of the payment to Holders allocable to principal, if any;
(ii) the amount of the payment to Holders allocable to interest;
(iii) the aggregate Outstanding Amount of the Storm Recovery Bonds, before and after giving effect to any payments allocated to principal reported under Section 6.06(b)(i);
(iv) the difference, if any, between the amount specified in Section 6.06(b)(iii) and the Outstanding Amount specified in the related Expected Sinking Fund Schedule;
(v) any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and
(vi) the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments.
(c) The Issuer shall send a copy of each of the Certificate of Compliance delivered to it pursuant to Section 3.03 of the Servicing Agreement and the Annual Accountant’s Report delivered to it pursuant to Section 3.04 of the Servicing Agreement to the Commission, the Rating Agencies, the Indenture Trustee and to the Servicer for posting on the 17g-5 Website in accordance with Rule 17g-5 under the Exchange Act. A copy of such certificate and report may be obtained by any Holder by a request in writing to the Indenture Trustee.
(d) The Indenture Trustee may consult with counsel and the advice or opinion of such counsel with respect to legal matters relating to this Indenture and the Storm Recovery Bonds shall be full and complete authorization and protection from liability with respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. Any reasonable legal fees incurred by the Indenture Trustee shall be payable to the Indenture Trustee from amounts hold in the Collection Account in accordance with the provisions set forth in Section 8.02(e).
SECTION 6.07. Compensation and Indemnity. The Issuer shall pay to the Indenture Trustee from time to time reasonable compensation for its services. The Indenture Trustee’s compensation shall not, to the extent permitted by law, be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee’s agents, counsel, accountants and experts. The Issuer shall indemnify and hold harmless the Indenture Trustee and its officers, directors, employees and agents against any and all cost, damage, loss, liability, tax or expense (including reasonable attorneys’ fees and expenses) incurred by it in connection with the administration and the enforcement of this Indenture, the Series Supplement and the other Basic Documents and the Indenture Trustee’s rights, powers and obligations under this Indenture, the Series Supplement and the other Basic Documents and the performance of its duties hereunder and thereunder and obligations under or pursuant to this Indenture, the Series Supplement and the other Basic Documents other than any such tax on the compensation of the Indenture Trustee for its services as Indenture Trustee. The Indenture Trustee shall notify the Issuer as soon as is reasonably practicable of any claim for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend the claim, the Indenture Trustee may have separate counsel, and the Issuer shall pay the reasonable fees and expenses of such counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee’s own willful misconduct, negligence or bad faith.
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The payment obligations to the Indenture Trustee pursuant to this Section 6.07 shall survive the discharge of this Indenture and Series Supplement or the earlier resignation or removal of the Indenture Trustee. When the Indenture Trustee incurs expenses after the occurrence of a Default specified in Section 5.01(e) or Section 5.01(f) with respect to the Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Code or any other applicable U.S. federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee and Securities Intermediary.
(a) The Indenture Trustee may resign at any time upon 30 days’ prior written notice to the Issuer subject to Section 6.08(c). The Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds may remove the Indenture Trustee by so notifying the Indenture Trustee not less than 31 days prior to the date of removal and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Indenture Trustee or its property;
(iv) the Indenture Trustee otherwise becomes incapable of acting; or
(v) the Indenture Trustee fails to provide to the Issuer any information reasonably requested by the Issuer pertaining to the Indenture Trustee and necessary for the Issuer or the Sponsor to comply with its respective reporting obligations under the Exchange Act and Regulation AB and such failure is not resolved to the Issuer’s and the Indenture Trustee’s mutual satisfaction within a reasonable period of time.
Any removal or resignation of the Indenture Trustee shall also constitute a removal or resignation of the Securities Intermediary.
(b) If the Indenture Trustee gives notice of resignation or is removed or if a vacancy exists in the office of Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall promptly appoint a successor Indenture Trustee and Securities Intermediary.
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(c) A successor Indenture Trustee shall deliver a written acceptance of its appointment as the Indenture Trustee and as the Securities Intermediary to the retiring Indenture Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee and Securities Intermediary, as applicable, under this Indenture and the other Basic Documents. No resignation or removal of the Indenture Trustee pursuant to this Section 6.08 shall become effective until acceptance of the appointment by a successor Indenture Trustee having the qualifications set forth in Section 6.11. Notice of any such appointment shall be promptly given to each Rating Agency by the successor Indenture Trustee. The successor Indenture Trustee shall mail a notice of its succession to Holders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the Storm Recovery Bonds may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section 6.11, any Holder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.
(f) Notwithstanding the replacement of the Indenture Trustee pursuant to this Section 6.08, the Issuer’s obligations under Section 6.07 shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.09. Successor Indenture Trustee by Merger. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Indenture Trustee; provided, however, that, if such successor Indenture Trustee is not eligible under Section 6.11, then the successor Indenture Trustee shall be replaced in accordance with Section 6.08. Notice of any such event shall be promptly given to each Rating Agency by the successor Indenture Trustee.
In case at the time such successor or successors by merger, conversion, consolidation or transfer shall succeed to the trusts created by this Indenture any of the Storm Recovery Bonds shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor trustee and deliver the Storm Recovery Bonds so authenticated; and, in case at that time any of the Storm Recovery Bonds shall not have been authenticated, any successor to the Indenture Trustee may authenticate the Storm Recovery Bonds either in the name of any predecessor hereunder or in the name of the successor to the Indenture Trustee; and in all such cases such certificates shall have the full force that it is anywhere in the Storm Recovery Bonds or in this Indenture provided that the certificate of the Indenture Trustee shall have.
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SECTION 6.10. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the trust created by this Indenture or the Collateral may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the trust created by this Indenture or the Collateral, and to vest in such Person or Persons, in such capacity and for the benefit of the Secured Parties, such title to the Collateral, or any part hereof, and, subject to the other provisions of this Section 6.10, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to Holders of the appointment of any co-trustee or separate trustee shall be required under Section 6.08. Notice of any such appointment shall be promptly given to each Rating Agency and to the Commission by the Indenture Trustee.
(b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Collateral or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then-separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee.
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(d) Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or its attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee shall at all times satisfy the requirements of Section 310(a)(1) of the Trust Indenture Act, Section 310(a)(5) of the Trust Indenture Act and Rule 3a-7 of the Investment Company Act. The Indenture Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and shall have a long-term debt rating from each of S&P and Fitch in one of its generic rating categories that signifies investment grade. The Indenture Trustee shall comply with Section 310(b) of the Trust Indenture Act, including the optional provision permitted by the second sentence of Section 310(b)(9) of the Trust Indenture Act; provided, however, that there shall be excluded from the operation of Section 310(b)(1) of the Trust Indenture Act any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the Trust Indenture Act are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The Indenture Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. An Indenture Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated therein.
SECTION 6.13. Representations and Warranties of Indenture Trustee. The Indenture Trustee hereby represents and warrants that:
(a) the Indenture Trustee is a national banking association validly existing and in good standing under the laws of the United States of America; and
(b) the Indenture Trustee has full power, authority and legal right to execute, deliver and perform its obligations under this Indenture and the other Basic Documents to which the Indenture Trustee is a party and has taken all necessary action to authorize the execution, delivery and performance of obligations by it of this Indenture and such other Basic Documents.
SECTION 6.14. Annual Report by Independent Registered Public Accountants. The Indenture Trustee hereby covenants that it will cooperate fully with the firm of Independent registered public accountants performing the procedures required under Section 3.04 of the Servicing Agreement, it being understood and agreed that the Indenture Trustee will so cooperate in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures.
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SECTION 6.15. Custody of Collateral. The Indenture Trustee shall hold such of the Collateral (and any other collateral that may be granted to the Indenture Trustee) as consists of instruments, deposit accounts, negotiable documents, money, goods, letters of credit and advices of credit in the State of New York. The Indenture Trustee shall hold such of the Collateral as constitute investment property through the Securities Intermediary (which, as of the date hereof, is The Bank of New York Mellon Trust Company). The initial Securities Intermediary hereby agrees (and each future Securities Intermediary shall agree) with the Indenture Trustee that (a) such investment property (other than cash) shall at all times be credited to a securities account of the Indenture Trustee, (b) the Securities Intermediary shall treat the Indenture Trustee as entitled to exercise the rights that comprise each financial asset credited to such securities account, (c) all property (other than cash) credited to such securities account shall be treated as a financial asset, (d) the Securities Intermediary shall comply with entitlement orders originated by the Indenture Trustee without the further consent of any other Person, (e) the Securities Intermediary will not agree with any Person other than the Indenture Trustee to comply with entitlement orders originated by such other Person, (f) such securities accounts and the property credited thereto shall not be subject to any Lien or right of set-off in favor of the Securities Intermediary or anyone claiming through it (other than the Indenture Trustee) and (g) such agreement shall be governed by the internal laws of the State of New York. Terms used in the preceding sentence that are defined in the UCC and not otherwise defined herein shall have the meaning set forth in the UCC. Except as permitted by this Section 6.15 or elsewhere in this Indenture, the Indenture Trustee shall not hold Collateral through an agent or a nominee.
SECTION 6.16. FATCA.
The Issuer agrees (i) to provide the Indenture Trustee with such reasonable information as it has in its possession to enable the Indenture Trustee to determine whether any payments pursuant to the Indenture are subject to the withholding requirements described in Section 1471(b) of the Internal Revenue Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Internal Revenue Code and any regulations, or agreements thereunder or official interpretations thereof (“Applicable Law”), and (ii) that the Indenture Trustee shall be entitled to make any withholding or deduction from payments under the Indenture to the extent necessary to comply with Applicable Law, for which the Indenture Trustee shall not have any liability.
ARTICLE VII
Holders’ Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of Holders. The Issuer will furnish or cause to be furnished to the Indenture Trustee (a) not more than five days after the earlier of (i) each Record Date and (ii) six months after the last Record Date, a list, in such form as the Indenture Trustee may reasonably require, of the names and addresses of the Holders as of such Record Date, and (b) at such other times as the Indenture Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than ten days prior to the time such list is furnished; provided, however, that, so long as the Indenture Trustee is the Storm Recovery Bond Registrar, no such list shall be required to be furnished.
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SECTION 7.02. Preservation of Information; Communications to Holders.
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders contained in the most recent list furnished to the Indenture Trustee as provided in Section 7.01 and the names and addresses of Holders received by the Indenture Trustee in its capacity as Storm Recovery Bond Registrar. The Indenture Trustee may destroy any list furnished to it as provided in Section 7.01 upon receipt of a new list so furnished.
(b) Holders may communicate pursuant to Section 312(b) of the Trust Indenture Act with other Holders with respect to their rights under this Indenture or under the Storm Recovery Bonds. In addition, upon the written request of any Holder or group of Holders or of all Outstanding Storm Recovery Bonds evidencing at least 10 percent of the Outstanding Amount of the Storm Recovery Bonds, as applicable, the Indenture Trustee shall afford the Holder or Holders making such request a copy of a current list of Holders for purposes of communicating with other Holders with respect to their rights hereunder; provided, that the Indenture Trustee gives prior written notice to the Issuer of such request.
(c) The Issuer, the Indenture Trustee and the Storm Recovery Bond Registrar shall have the protection of Section 312(c) of the Trust Indenture Act.
SECTION 7.03. Reports by Issuer.
(a) The Issuer shall:
(i) so long as the Issuer or the Sponsor is required to file such documents with the SEC, provide to the Indenture Trustee and the Commission, within 15 days after the Issuer is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) that the Issuer or the Sponsor may be required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) provide to the Indenture Trustee and the Commission and file with the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall transmit to all Holders described in Section 313(c) of the Trust Indenture Act) and the Commission, such summaries of any information, documents and reports required to be filed by the Issuer pursuant to Section 7.03(a)(i) and Section 7.03(a)(ii) as may be required by rules and regulations prescribed from time to time by the SEC.
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Except as may be provided by Section 313(c) of the Trust Indenture Act, the Issuer may fulfill its obligation to provide the materials described in this Section 7.03(a) by providing such materials in electronic format.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year and will promptly notify the Indenture Trustee regarding any change in fiscal year.
(c) Delivery of such reports, information and documents to the Indenture Trustee is for informational purposes only and the Indenture Trustee’s receipt of such shall not constitute actual or constructive notice or knowledge of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the Indenture Trustee is entitled to rely exclusively on Officer’s Certificates).
SECTION 7.04. Reports by Indenture Trustee. If required by Section 313(a) of the Trust Indenture Act, within 60 days after March 31 of each year, commencing with March 31, 2023, the Indenture Trustee shall send to each Holder as required by Section 313(c) of the Trust Indenture Act a brief report dated as of such date that complies with Section 313(a) of the Trust Indenture Act. The Indenture Trustee also shall comply with Section 313(b) of the Trust Indenture Act; provided, however, that the initial report if required to be so issued shall be delivered not more than 12 months after the initial issuance of the Storm Recovery Bonds.
A copy of each report at the time of its sending to Holders shall be filed by the Servicer with the SEC and each stock exchange, if any, on which the Storm Recovery Bonds are listed. The Issuer shall notify the Indenture Trustee in writing if and when the Storm Recovery Bonds are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture and the other Basic Documents. The Indenture Trustee shall apply all such money received by it as provided in this Indenture within two (2) Business Days. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, subject to Article VI, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V.
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SECTION 8.02. Collection Account.
(a) Prior to the Closing Date issued hereunder, the Issuer shall open or cause to be opened with the Securities Intermediary located at the Indenture Trustee’s office, or at another Eligible Institution, one or more segregated trust accounts in the Indenture Trustee’s name for the deposit of Storm Recovery Charge Collections for Bonds and all other amounts received with respect to the Storm Recovery Collateral servicing the Bonds (the “Collection Account” and collectively, the “Collection Accounts”). The Indenture Trustee shall hold the Collection Account for the benefit of the related Holders, the Indenture Trustee and the other persons indemnified hereunder. There shall be established by the Indenture Trustee in respect of each Collection Account three subaccounts: a general subaccount (the “General Subaccount”); an excess funds subaccount (the “Excess Funds Subaccount”); a capital subaccount (the “Capital Subaccount” and, together with the General Subaccount and the Excess Funds Subaccount, the “Subaccounts”), and a tail-end subaccount (the “Tail-end Subaccount”). For administrative purposes, the Subaccounts may be established by the Securities Intermediary as separate accounts. Such separate accounts will be recognized individually as a Subaccount and collectively as the “Collection Account”. Prior to or concurrently with the issuance of the Storm Recovery Bonds, the Member shall deposit into the Capital Subaccount an amount equal to the Required Capital Level. All amounts in the Collection Account not allocated to any other subaccount shall be allocated to the General Subaccount. Prior to the initial Payment Date, all amounts in the Collection Account (other than funds deposited into the Capital Subaccount up to the Required Capital Level) shall be allocated to the General Subaccount. All references to a Collection Account shall be deemed to include reference to all subaccounts contained therein. Withdrawals from and deposits to each of the foregoing subaccounts of the Collection Account shall be made as set forth in Sections 8.02(d) and 8.02(e). The Collection Account shall at all times be maintained in an Eligible Account and will be under the sole dominion and exclusive control of the Indenture Trustee, through the Securities Intermediary, and only the Indenture Trustee shall have access to the applicable Collection Account for the purpose of making deposits in and withdrawals from the applicable Collection Account in accordance with this Indenture. Funds in a Collection Account shall not be commingled with any other moneys. All moneys deposited from time to time in the Collection Account, all deposits therein pursuant to this Indenture and all investments made in Eligible Investments as directed in writing by the Issuer with such moneys, including all income or other gain from such investments, shall be held by the Securities Intermediary in the Collection Account as part of the Storm Recovery Collateral as herein provided. The Securities Intermediary shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction.
(b) The Securities Intermediary hereby confirms that (i) each Collection Account is, or at inception will be established as, a “securities account” as such term is defined in Section 8-501(a) of the UCC, (ii) it is a “securities intermediary” (as such term is defined in Section 8-102(a)(14) of the UCC) and is acting in such capacity with respect to such accounts, (iii) the Indenture Trustee for the benefit of the Secured Parties is the sole “entitlement holder” (as such term is defined in Section 8-102(a)(7) of the UCC) with respect to such accounts and (iv) no other Person shall have the right to give “entitlement orders” (as such term is defined in Section 8-102(a)(8)) with respect to such accounts. The Securities Intermediary hereby further agrees that each item of property (whether investment property, financial asset, security, instrument or cash) received by it will be credited to the applicable Collection Account and shall be treated by it as a “financial asset” within the meaning of Section 8-102(a)(9) of the UCC. Notwithstanding anything to the contrary, the State of New York shall be deemed to be the jurisdiction of the Securities Intermediary for purposes of Section 8-110 of the UCC, and the Collection Accounts (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York.
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(c) The Indenture Trustee shall have sole dominion and exclusive control over all moneys in the applicable Collection Account through the Securities Intermediary and shall apply such amounts therein as provided in this Section 8.02.
(d) Storm Recovery Charge Collections shall be deposited in the applicable General Subaccount as provided in Section 6.11 of the Servicing Agreement. All deposits to and withdrawals from the Collection Account, all allocations to the subaccounts of the Collection Account and any amounts to be paid to the Servicer under Section 8.02(e) shall be made by the Indenture Trustee in accordance with the written instructions provided by the Servicer in the Monthly Servicer’s Certificate or the Annual Servicer’s Certificate.
(e) On each Payment Date for Bonds, the Indenture Trustee shall apply all amounts on deposit in the applicable Collection Account, including all Investment Earnings thereon, in accordance with the Annual Servicer’s Certificate, in the following priority:
(i) payment of the Indenture Trustee’s fees, expenses and outstanding indemnity amounts shall be paid to the Indenture Trustee (subject to Section 6.07) in an amount not to exceed the amount set forth in the Series Supplement (the “Indenture Trustee Cap”); provided, however, that the Indenture Trustee Cap shall be disregarded and inapplicable upon the acceleration of the Storm Recovery Bonds following the occurrence of an Event of Default;
(ii) payment of the Servicing Fee with respect to such Payment Date, plus any unpaid Servicing Fees for prior Payment Dates shall be paid to the Servicer;
(iii) payment of the allocable share of the Administration Fee for such Payment Date shall be paid to the Administrator and the Independent Manager Fee for such Payment Date shall be paid to the Independent Managers, and in each case with any unpaid Administration Fees or Independent Manager Fees from prior Payment Dates;
(iv) payment of all other ordinary periodic Operating Expenses for such Payment Date not described above shall be paid to the parties to which such Operating Expenses are owed;
(v) payment of Periodic Interest for such Payment Date with respect to such Series, including any overdue Periodic Interest (together with, to the extent lawful, interest on such overdue Periodic Interest at the applicable Bond Interest Rate), with respect to the Storm Recovery Bonds shall be paid to the Holders of Storm Recovery Bonds;
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(vi) payment of the principal required to be paid on the Storm Recovery Bonds of the Series on the Final Maturity Date for such tranche or as a result of an acceleration upon an Event of Default shall be paid to the Holders of Storm Recovery Bonds;
(vii) payment of Periodic Principal for such Payment Date in accordance with the expected sinking fund schedule, including any previously unpaid Periodic Principal, with respect to the Storm Recovery Bonds shall be paid to the Holders of Storm Recovery Bonds, pro rata if there is a deficiency;
(viii) payment of the allocable share of any other unpaid Operating Expenses (including any such amounts owed to the Indenture Trustee, but unpaid due to the limitation in Section 8.02(e)(i)) and any remaining amounts owed pursuant to the Basic Documents shall be paid to the parties to which such Operating Expenses or remaining amounts are owed;
(ix) replenishment of the amount, if any, by which the Required Capital Level exceeds the amount in the Capital Subaccount as of such Payment Date shall be allocated to the Capital Subaccount;
(x) the Return on Invested Capital then due and payable shall be paid to Duke Energy Progress;
(xi) the balance, if any, shall be allocated to the Excess Funds Subaccount; and
(xii) after the Storm Recovery Bonds have been paid in full and discharged, and all of the other foregoing amounts are paid in full, together with all amounts due and payable to the Indenture Trustee under Section 6.07 or otherwise, the balance (including all amounts then held in the Capital Subaccount and the Excess Funds Subaccount), if any, shall be paid to the Issuer, free from the Lien of this Indenture and the applicable Series Supplement and credited to Customers through normal ratemaking processes.
All payments to the Holders of the Storm Recovery Bonds pursuant to Section 8.02(e)(v), Section 8.02(e)(vi) and Section 8.02(e)(vii) shall be made to such Holders pro rata based on the respective amounts of interest and/or principal owed, unless, in the case of a Series of Storm Recovery Bonds comprised of two or more tranches, the Series Supplement provides otherwise. Payments in respect of principal of and premium, if any, and interest on any tranche of Storm Recovery Bonds will be made on a pro rata basis among all the Holders of such tranche. In the case of an Event of Default, then, in accordance with Section 5.04(c), in respect of any application of moneys pursuant to Section 8.02(e)(v) or Section 8.02(e)(vi), moneys will be applied pursuant to Section 8.02(e)(v) and Section 8.02(e)(vi), as the case may be, in such order, on a pro rata basis, based upon the interest or the principal owed.
(f) If on any Payment Date, or, for any amounts payable under Section 8.02(e)(i), Section 8.02(e)(ii), Section 8.02(e)(iii) and Section 8.02(e)(iv), on any Business Day, funds on deposit in the General Subaccount are insufficient to make the payments contemplated by Section 8.02(e)(i), Section 8.02(e)(ii), Section 8.02(e)(iii), Section 8.02(e)(iv), Section 8.02(e)(v), Section 8.02(e)(vi), Section 8.02(e)(vii), Section 8.02(e)(viii) and Section 8.02(e)(ix), the Indenture Trustee shall (i) first, draw from amounts on deposit in the Excess Funds Subaccount, and (ii) second, draw from amounts on deposit in the Capital Subaccount, in each case, up to the amount of such shortfall in order to make the payments contemplated by Section 8.02(e)(i), Section 8.02(e)(ii), Section 8.02(e)(iii), Section 8.02(e)(iv), Section 8.02(e)(v), Section 8.02(e)(vi), Section 8.02(e)(vii) and Section 8.02(e)(viii). In addition, if on any Payment Date funds on deposit in the General Subaccount are insufficient to make the allocations contemplated by Section 8.02(e)(ix), the Indenture Trustee shall draw any amounts on deposit in the Excess Funds Subaccount to make such allocations to the Capital Subaccount.
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(g) On any Business Day upon which the Indenture Trustee receives a written request from the Administrator stating that any Operating Expense payable by the Issuer (but only as described in Section 8.02(e)(i), Section 8.02(e)(ii), Section 8.02(e)(iii) and Section 8.02(e)(iv)) will become due and payable prior to the next Payment Date, and setting forth the amount and nature of such Operating Expense, as well as any supporting documentation that the Indenture Trustee may reasonably request, the Indenture Trustee, upon receipt of such information, will make payment of such Operating Expenses on or before the date such payment is due from amounts on deposit in the General Subaccount, the Excess Funds Subaccount and the Capital Subaccount, in that order and only to the extent required to make such payment.
SECTION 8.03. General Provisions Regarding the Collection Account.
(a) So long as no Default or Event of Default shall have occurred and be continuing, all or a portion of the funds in the Collection Account shall be invested in Eligible Investments and reinvested by the Indenture Trustee upon Issuer Order; provided, however, that such Eligible Investments shall not mature or be redeemed later than the Business Day prior to the next Payment Date or Special Payment Date for the related tranche, if applicable, for the Storm Recovery Bonds. All income or other gain from investments of moneys deposited in the Collection Account shall be deposited by the Indenture Trustee in such Collection Account, and any loss resulting from such investments shall be charged to the Collection Account. The Issuer will not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in any Collection Account unless the security interest Granted and perfected in such account will continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer (at the Issuer’s cost and expense) to such effect. In no event shall the Indenture Trustee be liable for the selection of Eligible Investments or for investment losses incurred thereon. The Indenture Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction. The Indenture Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of written investment direction pursuant to an Issuer Order, in which case such amount shall remain uninvested.
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(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in the Collection Account resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee’s failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give written investment directions for any funds on deposit in the Collection Account to the Indenture Trustee by 11:00 a.m. New York City time (or such other time as may be agreed by the Issuer and Indenture Trustee) on any Business Day or (ii) a Default or Event of Default shall have occurred and be continuing with respect to the Storm Recovery Bonds but the Storm Recovery Bonds shall not have been declared due and payable pursuant to Section 5.02, then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in such Collection Account in Eligible Investments specified in the most recent written investment directions delivered by the Issuer to the Indenture Trustee; provided, that if the Issuer has never delivered written investment directions to the Indenture Trustee, the Indenture Trustee shall not invest or reinvest such funds in any investments.
(d) The parties hereto acknowledge that the Servicer may, pursuant to the Servicing Agreement, select Eligible Investments on behalf of the Issuer.
(e) Except as otherwise provided hereunder or agreed in writing among the parties hereto, the Issuer shall retain the authority to institute, participate and join in any plan of reorganization, readjustment, merger or consolidation with respect to the issuer of any Eligible Investments held hereunder, and, in general, to exercise each and every other power or right with respect to each such asset or investment as Persons generally have and enjoy with respect to their own assets and investment, including power to vote upon any Eligible Investments.
SECTION 8.04. Release of Collateral.
(a) So long as the Issuer is not in default hereunder and no Default hereunder would occur as a result of such action, the Issuer, through the Servicer, may collect, sell or otherwise dispose of written-off receivables, at any time and from time to time in the ordinary course of business, without any notice to, or release or consent by, the Indenture Trustee, but only as and to the extent permitted by the Basic Documents; provided, however, that any and all proceeds of such dispositions shall become Collateral and be deposited to the General Subaccount immediately upon receipt thereof by the Issuer or any other Person, including the Servicer. Without limiting the foregoing, the Servicer, may, at any time and from time to time without any notice to, or release or consent by, the Indenture Trustee, sell or otherwise dispose of any Collateral previously written-off as a defaulted or uncollectible account in accordance with the terms of the Servicing Agreement and the requirements of the proviso in the preceding sentence.
(b) The Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the Lien of this Indenture, or convey the Indenture Trustee’s interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article VIII shall be bound to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. The Indenture Trustee shall release property from the Lien of this Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer Request accompanied by an Officer’s Certificate, an Opinion of Counsel of external counsel of the Issuer (at the Issuer’s cost and expense) and (if required by the Trust Indenture Act) Independent Certificates in accordance with Section 314(c) of the Trust Indenture Act and Section 314(d)(1) of the Trust Indenture Act meeting the applicable requirements of Section 10.01.
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(c) The Indenture Trustee shall, at such time as there are no Storm Recovery Bonds Outstanding and all sums payable to the Indenture Trustee pursuant to Section 6.07 or otherwise have been paid, release any remaining portion of the Storm Recovery Collateral that secured the Storm Recovery Bonds from the Lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds or investments then on deposit in or credited to the Collection Account.
SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall receive at least seven days’ notice when requested by the Issuer to take any action pursuant to Section 8.04, accompanied by copies of any instruments involved, and the Indenture Trustee shall also require, as a condition to such action, an Opinion of Counsel of external counsel of the Issuer, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Storm Recovery Bonds or the rights of the Holders in contravention of the provisions of this Indenture and any Series Supplement; provided, however, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Collateral. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action.
SECTION 8.06. Reports by Independent Registered Public Accountants. As of the date hereof, the Issuer shall appoint a firm of Independent registered public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture and the Series Supplement. In the event such firm requires the Indenture Trustee to agree to the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree, it being understood and agreed that the Indenture Trustee will deliver such letter of agreement in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures. Upon any resignation by, or termination by the Issuer of, such firm, the Issuer shall provide written notice thereof to the Indenture Trustee and shall promptly appoint a successor thereto that shall also be a firm of Independent registered public accountants of recognized national reputation. If the Issuer shall fail to appoint a successor to a firm of Independent registered public accountants that has resigned or been terminated within 15 days after such resignation or termination, the Indenture Trustee shall promptly notify the Issuer of such failure in writing. If the Issuer shall not have appointed a successor within ten days thereafter, the Indenture Trustee shall promptly appoint a successor firm of Independent registered public accountants of recognized national reputation; provided, that the Indenture Trustee shall have no liability with respect to such appointment. The fees of such Independent registered public accountants and its successor shall be payable by the Issuer.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Holders.
(a) Without the consent of the Holders of any Storm Recovery Bonds but with prior notice to the Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property, including the Collateral, at any time subject to the Lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the Lien of this Indenture, or to subject to the Lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Storm Recovery Bonds;
(iii) to add to the covenants of the Issuer, for the benefit of the Secured Parties, or to surrender any right or power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture, including any Series Supplement, that may be inconsistent with any other provision herein or in any supplemental indenture, including any Series Supplement, or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; provided, that (A) such action shall not, as evidenced by an Opinion of Counsel of external counsel of the Issuer, adversely affect in any material respect the interests of the Holders of the Storm Recovery Bonds and (B) the Rating Agency Condition shall have been satisfied with respect thereto;
(vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Storm Recovery Bonds and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI;
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(vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the Trust Indenture Act and to add to this Indenture such other provisions as may be expressly required by the Trust Indenture Act;
(viii) to qualify the Storm Recovery Bonds for registration with a Clearing Agency;
(ix) to satisfy any Rating Agency requirements;
(x) to set forth the terms of a series of Storm Recovery Bonds that has not therefore been authorized; and
(xi) to authorize the appointment of any fiduciary for any tranche required or advisable with the listing of any tranche on any stock exchange and otherwise amend this Indenture to incorporate changes requested or required by any government authority, stock exchange authority or fiduciary or any tranche in connection with such listing.
The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Storm Recovery Bonds, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Storm Recovery Bonds under this Indenture; provided, however, that (i) such action shall not, as evidenced by an Opinion of Counsel of nationally recognized counsel of the Issuer experienced in structured finance transactions, adversely affect in any material respect the interests of the Holders and (ii) the Rating Agency Condition shall have been satisfied with respect thereto.
SECTION 9.02. Supplemental Indentures with Consent of Holders. The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies and with the consent of the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds of each tranche to be affected, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Storm Recovery Bonds under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Storm Recovery Bond of each tranche affected thereby:
(i) change the date of payment of any installment of principal of or premium, if any, or interest on any Storm Recovery Bond of such tranche, or reduce the principal amount thereof, the interest rate thereon or premium, if any, with respect thereto;
(ii) change the provisions of this Indenture and the Series Supplement relating to the application of collections on, or the proceeds of the sale of, the Collateral to payment of principal of or premium, if any, or interest on the Storm Recovery Bonds of such tranche, or change any place of payment where, or the coin or currency in which, any Storm Recovery Bond of such tranche or the interest thereon is payable;
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(iii) reduce the percentage of the Outstanding Amount of the Storm Recovery Bonds or of a tranche thereof, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture;
(iv) reduce the percentage of the Outstanding Amount of the Storm Recovery Bonds required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the Storm Recovery Collateral pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 or any provision of the other Basic Documents similarly specifying the rights of the Holders to consent to modification thereof, except to increase any percentage specified herein or to provide that those provisions of this Indenture or the other Basic Documents referenced in this Section 9.02 cannot be modified or waived without the consent of the Holder of each Outstanding Storm Recovery Bond affected thereby;
(vi) modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest, principal or premium, if any, due on any Storm Recovery Bond on any Payment Date (including the calculation of any of the individual components of such calculation) or change the Expected Sinking Fund Schedule or Final Maturity Date of Storm Recovery Bonds;
(vii) decrease the Required Capital Level with respect to any Series;
(viii) permit the creation of any Lien ranking prior to or on a parity with the Lien of this Indenture with respect to any part of the Collateral or, except as otherwise permitted or contemplated herein, terminate the Lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Storm Recovery Bond of the security provided by the Lien of this Indenture;
(ix) cause any material adverse U.S. federal income tax consequence to the Seller, the Issuer, the Managers, the Indenture Trustee or the then-existing Holders; or
(x) impair the right to institute suit for the enforcement of the provisions of this Indenture regarding payment or application of funds.
It shall not be necessary for any Act of Holders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.02, the Issuer shall mail to the Rating Agencies a copy of such supplemental indenture and to the Holders of the Storm Recovery Bonds to which such supplemental indenture relates either a copy of such supplemental indenture or a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
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SECTION 9.03. Commission Condition. Notwithstanding anything to the contrary in this Section 9.01 or 9.02, no indenture or indentures supplemental to this Indenture, shall be effective except upon satisfaction of the conditions precedent in this Section 9.03.
(a) At least 15 days prior to the effectiveness of any such Supplemental Indenture or other action and after obtaining the other necessary approvals set forth in Section 9.02 (except that the consent of the Indenture Trustee may be subject to the consent of the Holders if such consent is required or sought by the Indenture Trustee in connection with such Supplemental Indenture) or prior to the effectiveness of any waiver of a default approved by the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds as provided in Section 5.12, the Servicer shall have filed in Commission docket E-2, Sub 1262 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:
(i) a reference to Docket No. E-2, Sub 1262;
(ii) an Officer’s Certificate stating that the proposed Supplemental Indenture has been approved by all parties to this Indenture or alternatively, the waiver of default has been approved by the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds; and
(iii) a statement identifying the person to whom the Commission is to address any response to the proposed Supplemental Indenture or to request additional time.
(b) If the Commission, within 15 days (subject to extension as provided in Section 9.03(c)) of receiving a notification complying with Section 9.03(a), shall have issued an order that the Commission might object to the proposed Supplemental Indenture, or to the waiver of default, then, subject to clause (c) below, such proposed amendment or modification, or the waiver of default, shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed Supplemental Indenture.
(c) If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification or waiver of default, as the case may be, may subsequently become effective upon satisfaction of the other conditions specified in Section 9.01 or 9.02.
(d) Following the delivery of an order from the Commission to the Servicer under subparagraph (iii), the Servicer and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any proposed Supplemental Indenture, modification or waiver of default. The fact that the Servicer delivers notice to the Commission pursuant to this Section 9.03 does not obligate the Servicer to amend the Indenture as provided in the notice.
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SECTION 9.04. Execution of Supplemental Indentures. In executing any supplemental indenture permitted by this Article IX or the modifications thereby of the trust created by this Indenture, the Indenture Trustee shall be fully protected in relying upon an Opinion of Counsel stating that the execution of such supplemental indenture is authorized and permitted by this Indenture and all conditions precedent, if any, provided for in this Indenture relating to such supplemental indenture or modification have been satisfied. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s own rights, duties, liabilities or immunities under this Indenture or otherwise. All fees and expenses in connection with any such supplemental indenture shall be paid by the requesting party.
SECTION 9.05. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to each tranche of Storm Recovery Bonds affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.06. Conformity with Trust Indenture Act. Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the Trust Indenture Act as then in effect so long as this Indenture shall then be qualified under the Trust Indenture Act.
SECTION 9.07. Reference in Storm Recovery Bonds to Supplemental Indentures. Storm Recovery Bonds authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer shall so determine, new Storm Recovery Bonds so modified as to conform, in the opinion of the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Storm Recovery Bonds.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel the amendment is authorized and permitted and all such conditions precedent, if any, have been complied with and (iii) (if required by the Trust Indenture Act) an Independent Certificate from a firm of registered public accountants meeting the applicable requirements of this Section 10.01, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished.
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Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with.
(b) Prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for the release of any property or securities subject to the Lien of this Indenture, the Issuer shall, in addition to any obligation imposed in Section 10.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited.
(c) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signer thereof as to the matters described in Section 10.01(b), the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to Section 10.01(b) and this Section 10.01(c), is ten percent or more of the Outstanding Amount of the Storm Recovery Bonds, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officer’s Certificate is less than the lesser of (A) $25,000 or (B) one percent of the Outstanding Amount of the Storm Recovery Bonds.
(d) Whenever any property or securities are to be released from the Lien of this Indenture other than pursuant to Section 8.02(e), the Issuer shall also furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof.
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(e) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signatory thereof as to the matters described in Section 10.01(d), the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities with respect thereto, or securities released from the Lien of this Indenture (other than pursuant to Section 8.02(e)) since the commencement of the then-current calendar year, as set forth in the certificates required by Section 10.01(d) and this Section 10.01(e), equals 10 percent or more of the Outstanding Amount of the Storm Recovery Bonds, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer’s Certificate is less than the lesser of (A) $25,000 or (B) one percent of the then Outstanding Amount of the Storm Recovery Bonds.
(f) Notwithstanding any other provision of this Section 10.01, the Indenture Trustee may (A) collect, liquidate, sell or otherwise dispose of the Storm Recovery Property and the other Collateral as and to the extent permitted or required by the Basic Documents and (B) make cash payments out of the Collection Account as and to the extent permitted or required by the Basic Documents.
SECTION 10.02. Form of Documents Delivered to Indenture Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of a Responsible Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate of a Responsible Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer or the Issuer stating that the information with respect to such factual matters is in the possession of the Servicer or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer’s compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee’s right to rely conclusively upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI.
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Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 10.03. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing, and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 10.03.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient.
(c) The ownership of Storm Recovery Bonds shall be proved by the Storm Recovery Bond Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Storm Recovery Bonds shall bind the Holder of every Storm Recovery Bond issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Storm Recovery Bond.
SECTION 10.04. Notices, etc., to Indenture Trustee, Issuer and Rating Agencies. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:
(a) in the case of the Issuer, to Duke Energy Progress NC Storm Funding LLC at 410 South Wilmington Street Raleigh, North Carolina 27601-1748, Attention: Managers, Telephone: 704-382-3853;
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(b) in the case of the Indenture Trustee, to the Corporate Trust Office;
(c) In the case of Moody’s, to Moody’s Investor Services, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York, Email: servicereports@moodys.com;
(d) in the case of S&P, to S&P Global Ratings, a division of S&P Global Inc., Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@standardandpoors.com (all such notices to be delivered to S&P in writing by email); and
(e) in the case of the Commission and the Public Staff – North Carolina Utilities Commission, by filing a notice in docket E-2 Sub 1262 with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff.
Each party hereto may, by notice given in accordance herewith to the other party or parties hereto, designate any further or different address to which subsequent notices, reports and other communications shall be sent.
The Indenture Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by the Issuer by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods; provided, however, that (a) subsequent to such transmission of written instructions, the Issuer shall provide the originally executed instructions or directions to the Indenture Trustee in a timely manner, and (b) such originally executed instructions or directions shall be signed by an authorized representative of the Issuer providing such instructions or directions. If the Issuer elects to give the Indenture Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Indenture Trustee in its discretion elects to act upon such instructions, the Indenture Trustee's understanding of such instructions shall be deemed controlling. The Indenture Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Indenture Trustee's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Issuer agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Indenture Trustee, including without limitation the risk of the Indenture Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties.
SECTION 10.05. Notices to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Holder affected by such event, at such Holder’s address as it appears on the Storm Recovery Bond Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given.
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Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder and shall not under any circumstance constitute a Default or Event of Default.
SECTION 10.06. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control.
The provisions of Sections 310 through 317 of the Trust Indenture Act that impose duties on any Person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein.
SECTION 10.07. Successors and Assigns. All covenants and agreements in this Indenture and the Storm Recovery Bonds by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors.
SECTION 10.08. Severability. Any provision in this Indenture or in the Storm Recovery Bonds 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 remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 10.09. Benefits of Indenture. Nothing in this Indenture or in the Storm Recovery Bonds, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 10.10. Legal Holidays. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Storm Recovery Bonds or this Indenture) payment need not be made on such date, but may be made on the next Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date.
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SECTION 10.11. GOVERNING LAW. This Indenture shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws; provided, that the creation, attachment and perfection of any Liens created hereunder in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.
SECTION 10.12. Counterparts. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
SECTION 10.13. Recording of Indenture. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel at the Issuer’s cost and expense (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee or, if requested by the Indenture Trustee, external counsel of the Issuer) to the effect that such recording is necessary either for the protection of the Holders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture.
SECTION 10.14. No Recourse to Issuer. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Storm Recovery Bonds or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (a) the Issuer, other than from the Storm Recovery Collateral, (b) any owner of a membership interest in the Issuer (including Duke Energy Progress) or (c) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Duke Energy Progress) in its respective individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed in writing. Notwithstanding any provision of this Indenture or any Series Supplement to the contrary, Holders shall look only to the Storm Recovery Collateral with respect to any amounts due to the Holders hereunder and under the Storm Recovery Bonds and, in the event such Storm Recovery Collateral is insufficient to pay in full the amounts owed on the Storm Recovery Bonds, shall have no recourse against the Issuer in respect of such insufficiency. Each Holder by accepting a Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Storm Recovery Bonds.
SECTION 10.15. Basic Documents. The Indenture Trustee is hereby authorized and directed to execute and deliver the Servicing Agreement and the Sale Agreement and to execute and deliver any other Basic Document that it is requested to acknowledge and accept, including, upon receipt of an Issuer Request, the Joinder Intercreditor Agreement, dated as of November 24, 2021. Such request shall be accompanied by an Opinion of Counsel of external counsel of the Issuer, upon which the Indenture Trustee may rely conclusively with no duty of independent investigation or inquiry, to the effect that all conditions precedent for the execution of the Intercreditor Agreement have been satisfied. The Intercreditor Agreement shall be binding on the Holders and all Holders are deemed to have consented to the provisions of this Section 10.15.
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SECTION 10.16. No Petition. The Indenture Trustee, by entering into this Indenture, and each Holder, by accepting a Storm Recovery Bond (or interest therein) issued hereunder, hereby covenant and agree that they shall not, prior to the date that is one year and one day after the termination of this Indenture, acquiesce, petition or otherwise invoke or cause the Issuer or any Manager to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer under any bankruptcy or insolvency law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the dissolution, winding up or liquidation of the affairs of the Issuer. Nothing in this Section 10.16 shall preclude, or be deemed to estop, such Holder or the Indenture Trustee (a) from taking or omitting to take any action prior to such date in (i) any case or proceeding voluntarily filed or commenced by or on behalf of the Issuer under or pursuant to any such law or (ii) any involuntary case or proceeding pertaining to the Issuer that is filed or commenced by or on behalf of a Person other than such Holder and is not joined in by such Holder (or any Person to which such Holder shall have assigned, transferred or otherwise conveyed any part of the obligations of the Issuer hereunder) under or pursuant to any such law or (b) from commencing or prosecuting any legal action that is not an involuntary case or proceeding under or pursuant to any such law against the Issuer or any of its properties.
SECTION 10.17. Securities Intermediary. The Securities Intermediary, in acting under this Indenture, is entitled to all rights, benefits, protections, immunities and indemnities accorded to The Bank of New York Mellon Trust Company, National Association, in its capacity as Indenture Trustee under this Indenture.
SECTION 10.18. Rule 17g-5 Compliance.
(a) The Indenture Trustee agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Indenture Trustee to any Rating Agency under this Indenture or any other Basic Document to which it is a party for the purpose of determining or confirming the credit rating of the Storm Recovery Bonds or undertaking credit rating surveillance of the Storm Recovery Bonds shall be provided, substantially concurrently, to the Servicer for posting on a password-protected website (the “17g-5 Website”). The Servicer shall be responsible for posting all of the information on the 17g-5 Website.
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(b) The Indenture Trustee will not be responsible for creating or maintaining the 17g-5 Website, posting any information to the 17g-5 Website or assuring that the 17g-5 Website complies with the requirements of this Indenture, Rule 17g-5 under the Exchange Act or any other law or regulation. In no event shall the Indenture Trustee be deemed to make any representation in respect of the content of the 17g-5 Website or compliance by the 17g-5 Website with this Indenture, Rule 17g-5 under the Exchange Act or any other law or regulation. The Indenture Trustee shall have no obligation to engage in or respond to any oral communications with respect to the transactions contemplated hereby, any transaction documents relating hereto or in any way relating to the Storm Recovery Bonds or for the purposes of determining the initial credit rating of the Storm Recovery Bonds or undertaking credit rating surveillance of the Storm Recovery Bonds with any Rating Agency or any of its respective officers, directors or employees. The Indenture Trustee shall not be responsible or liable for the dissemination of any identification numbers or passwords for the 17g-5 Website, including by the Servicer, the Rating Agencies, a nationally recognized statistical rating organization (“NRSRO”), any of their respective agents or any other party. Additionally, the Indenture Trustee shall not be liable for the use of the information posted on the 17g-5 Website, whether by the Servicer, the Rating Agencies, an NRSRO or any other third party that may gain access to the 17g-5 Website or the information posted thereon.
SECTION 10.19. Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial. Each of the Issuer and the Indenture Trustee and each Holder (by its acceptance of the Storm Recovery Bonds) hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court sitting in The Borough of Manhattan in The City of New York or any U.S. federal court sitting in The Borough of Manhattan in The City of New York in respect of any suit, action or proceeding arising out of or relating to this Indenture and the Storm Recovery Bonds and irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, jurisdiction of the aforesaid courts. Each of the Issuer and the Indenture Trustee irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury.
SECTION 10.20. Certain Tax Laws. In order to comply with applicable tax laws, rules and regulations (inclusive of directives, guidelines and interpretations promulgated by competent authorities) in effect from time to time to which a foreign financial institution, issuer, trustee, paying agent, holder or other institution is or has agreed to be subject related to the Basic Documents, the Issuer agrees (a) to provide to the Indenture Trustee sufficient information about Holders or other applicable parties and/or transactions (including any modification to the terms of such transactions) so as to enable the Indenture Trustee to determine whether it has tax-related obligations under such applicable tax laws, rules and regulations (inclusive of directives, guidelines and interpretations promulgated by competent authorities) and (b) that the Indenture Trustee shall be entitled to make any withholding or deduction from payments under the Basic Documents to the extent necessary to comply with such applicable tax laws, rules and regulations (inclusive of directives, guidelines and interpretations promulgated by competent authorities) for which the Indenture Trustee shall not have any liability.
{SIGNATURE PAGE FOLLOWS}
84
IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Securities Intermediary have caused this Indenture to be duly executed by their respective officers thereunto duly authorized and duly attested, all as of the day and year first above written.
| DUKE ENERGY PROGRESS NC STORM FUNDING LLC, | ||
| as Issuer | ||
| By: | ||
| Name: Chris R. Bauer | ||
| Title: Assistant Treasurer | ||
| The Bank of New York Mellon Trust Company, National Association, | ||
| as Indenture Trustee and as Securities Intermediary | ||
| By: | ||
| Name: | ||
| Title: | ||
Signature Page to
Indenture
| STATE OF NORTH CAROLINA | ) |
| COUNTY OF MECKLENBURG | ) |
The foregoing instrument was acknowledged before me this ____ day of [ ], 2021, by Chris R. Bauer, Assistant Treasurer of Duke Energy Progress NC Storm Funding LLC, a Delaware limited liability company, on behalf of the company.
| __________, Notary Public | ||
| {Seal} | State of North Carolina, County of Mecklenburg | |
| My Commission Expires: __________ | ||
| Acting in the County of Mecklenburg | ||
| STATE OF NEW YORK | ) |
| ss. | |
| COUNTY OF NEW YORK | ) |
The foregoing instrument was acknowledged before me this ____ day of [ ], 2021, by __________________, __________________________ of THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, as Indenture Trustee and Securities Intermediary, on behalf of the bank.
| __________, Notary Public, | ||
| State of New York | ||
| No. __________ | ||
| Qualified in New York County | ||
| Certificate Filed in New York County | ||
| Commission Expires __________ | ||
EXHIBIT A
FORM OF STORM RECOVERY BOND
See attached.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OR ENTITY IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
| No. {_____} | ${__________} |
| tranche Designation {__} | CUSIP No.: {__________} |
THE PRINCIPAL OF THIS SERIES {__}, tranche {__} SENIOR SECURED STORM RECOVERY BOND, (THIS “STORM RECOVERY BOND”) WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS STORM RECOVERY BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THE HOLDER OF THIS STORM RECOVERY BOND HAS NO RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK ONLY TO THE STORM RECOVERY COLLATERAL, AS DESCRIBED IN THE INDENTURE, FOR PAYMENT OF ANY AMOUNTS DUE HEREUNDER. ALL OBLIGATIONS OF THE ISSUER OF THIS STORM RECOVERY BOND UNDER THE TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL HEREOF OR AS OTHERWISE PROVIDED IN SECTION 3.10(b) OR ARTICLE IV OF THE INDENTURE. THE HOLDER OF THIS 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 THIS STORM RECOVERY BOND, 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 PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES. NOTHING IN THIS PARAGRAPH SHALL PRECLUDE, OR BE DEEMED TO ESTOP, SUCH HOLDER (A) FROM TAKING OR OMITTING TO TAKE ANY ACTION PRIOR TO SUCH DATE IN (I) ANY CASE OR PROCEEDING VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE ISSUER UNDER OR PURSUANT TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR PROCEEDING PERTAINING TO THE ISSUER THAT IS FILED OR COMMENCED BY OR ON BEHALF OF A PERSON OTHER THAN SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY PERSON TO WHICH SUCH HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE CONVEYED ANY PART OF THE OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT TO ANY SUCH LAW OR (B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION THAT IS NOT AN INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST THE ISSUER OR ANY OF ITS PROPERTIES.
NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NORTH CAROLINA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, OR INTEREST ON, THIS STORM RECOVERY BOND.
DUKE ENERGY PROGRESS NC STORM FUNDING LLC
SERIES {__} SENIOR SECURED STORM RECOVERY BONDS, tranche {__}
|
BOND |
ORIGINAL |
SCHEDULED |
FINAL | |||
| {____}% | ${__________} | {__________}, 20{__} | {__________}, 20{__} |
Duke Energy Progress NC Storm Funding LLC, a limited liability company created under the laws of the State of Delaware (herein referred to as the “Issuer”), for value received, hereby promises to pay to {__________}, or registered assigns, the Original Principal Amount shown above in annual installments on the Payment Dates and in the amounts specified below or, if less, the amounts determined pursuant to Section 8.02 of the Indenture, in each year, commencing on the date determined as provided below and ending on or before the Final Maturity Date shown above and to pay interest, at the Bond Interest Rate shown above, on each {__________} and {__________} or, if any such day is not a Business Day, the next Business Day, commencing on {__________}, 20{__} and continuing until the earlier of the payment in full of the principal hereof and the Final Maturity Date (each, a “Payment Date”), on the principal amount of this Storm Recovery Bond. Interest on this 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 the date of issuance. Interest will be computed on the basis of {__________}. Such principal of and interest on this Storm Recovery Bond shall be paid in the manner specified below.
The principal of and interest on this 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 Storm Recovery Bond shall be applied first to interest due and payable on this Storm Recovery Bond as provided above and then to the unpaid principal of and premium, if any, on this Storm Recovery Bond, all in the manner set forth in the Indenture.
Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual or electronic signature, this Storm Recovery Bond shall not be entitled to any benefit under the Indenture referred to below or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually, electronically or in facsimile, by its Responsible Officer.
| Date: {__________}, 20{__} | DUKE ENERGY PROGRESS NC STORM FUNDING LLC, | ||
| as Issuer | |||
| By: | |||
| Name: [ ] | |||
| Title: [ ] | |||
INDENTURE TRUSTEE’S
CERTIFICATE OF AUTHENTICATION
Dated: {__________}, 20{__}
This is one of the Series {__}, tranche {__} Senior Secured Storm Recovery Bonds, designated above and referred to in the within-mentioned Indenture.
| THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, | |||
| as Indenture Trustee | |||
| By: | |||
| Name: [ ] | |||
| Title: [ ] | |||
This Senior Secured Storm Recovery Bond, Series {__}, tranche {__} is one of a duly authorized issue of Series {__} Senior Secured Storm Recovery Bonds of the Issuer (herein called the “Series {__} Bonds”), which Bonds are issuable in one or more Series, which Series are issuable in one or more tranches. The Series {__} Bonds consist of {__} tranches, including the tranche {__} Series {__} Senior Secured Storm Recovery Bonds, which include this Senior Secured Storm Recovery Bond (herein called the “tranche {__} Storm Recovery Bonds”), all issued and to be issued under that certain Indenture dated as of [ ], 2021 (as supplemented by the Series Supplement (as defined below), the “Indenture”), between the Issuer and, in its capacity as indenture trustee (the “Indenture Trustee”, which term includes any successor indenture trustee under the Indenture) and in its separate capacity as a securities intermediary (the “Securities Intermediary”, which term includes any successor securities intermediary under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Bonds. For purposes herein, “Series Supplement” means that certain Series Supplement dated as of { , 20 } between the Issuer and the Indenture Trustee. All terms used in this tranche {__} Storm Recovery Bond that are defined in the Indenture, as amended, restated, supplemented or otherwise modified from time to time, shall have the meanings assigned to such terms in the Indenture.
All tranches of Series {__} Bonds are and will be equally and ratably secured by the Storm Recovery Collateral pledged as security therefor as provided in the Indenture.
The principal of this tranche {__} Storm Recovery Bond shall be payable on each Payment Date only to the extent that amounts in the Collection Account for the Series {__} Bonds are available therefor, and only until the outstanding principal balance thereof on the preceding Payment Date (after giving effect to all payments of principal, if any, made on the preceding Payment Date) has been reduced to the principal balance specified in the Expected Sinking Fund Schedule that is attached to the Series Supplement as Schedule A, unless payable earlier because an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Series {__} Bonds to be immediately due and payable in accordance with Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). However, actual principal payments may be made in lesser than expected amounts and at later than expected times as determined pursuant to Section 8.02 of the Indenture. The entire unpaid principal amount of this tranche {__} Storm Recovery Bond shall be due and payable on the Final Maturity Date hereof. Notwithstanding the foregoing, the entire unpaid principal amount of the 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 Indenture Trustee or the Holders of the Bonds representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Storm Recovery Bonds to be immediately due and payable in the manner provided in Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). All principal payments on the tranche {__} Storm Recovery Bonds shall be made pro rata to the Holders of the tranche{__} Storm Recovery Bonds entitled thereto based on the respective principal amounts of the tranche {__} Storm Recovery Bonds held by them.
Payments of interest on this tranche {__} Storm Recovery Bond due and payable on each Payment Date, together with the installment of principal or premium, if any, shall be made by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder of this tranche {__} Storm Recovery Bond (or one or more Predecessor Storm Recovery Bonds) on the 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 Indenture or the Series Supplement, except that (a) upon application to the Indenture Trustee by any Holder owning a Global Storm Recovery Bond evidencing this tranche {__} Storm Recovery Bond not later than the applicable Record Date, payment will be made by wire transfer to an account maintained by such Holder, and (b) if this tranche {__} Storm Recovery Bond is held in Book-Entry Form, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Storm Recovery Bond evidencing this tranche {__} Storm Recovery Bond unless and until such Global Storm Recovery Bond is exchanged for Definitive Storm Recovery Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to this tranche {__} 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 on the Storm Recovery Bond Register as of the applicable Record Date without requiring that this tranche {__} Storm Recovery Bond be submitted for notation of payment. Any reduction in the principal amount of this tranche {__} Storm Recovery Bond (or any one or more Predecessor Storm Recovery Bonds) effected by any payments made on any Payment Date shall be binding upon all future Holders of this tranche {__} Storm Recovery Bond and of any 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 {__} Storm Recovery Bond on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice sent no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of this tranche {__} Storm Recovery Bond and shall specify the place where this tranche {__} Storm Recovery Bond may be presented and surrendered for payment of such installment.
The Issuer shall pay interest on overdue installments of interest at the Bond Interest Rate to the extent lawful.
This tranche {__} Storm Recovery Bond is a “storm recovery bond” as such term is defined in the Storm Recovery Law. Principal and interest due and payable on this tranche {__} Storm Recovery Bond are payable from and secured primarily by Storm Recovery Property created and established by the Financing Order obtained from the North Carolina Utilities Commission pursuant to the Storm Recovery Law. Storm Recovery Property consists of the rights and interests of the Seller in the Financing Order, including the right to impose, bill, collect and receive Storm Recovery Charges, the right to obtain True-Up Adjustments and all revenue, collections, claims, rights to payments, payments, moneys and proceeds arising out of the rights and interests created under the Financing Order.
Under the laws of the State of North Carolina in effect on the date hereof, pursuant to N.C. Gen. Stat. § 62-172(k), the State of North Carolina has pledged to agree and work with the Holders, the Indenture Trustee, other Financing Parties that the State of North Carolina will not (a) alter the provisions of N.C. Gen. Stat. § 62-172(k) which make the Charges imposed by the Financing Order or Subsequent Financing Order irrevocable, binding, and nonbypassable charges; (b) take or permit any action that impairs or would impair the value of Storm Recovery Property or revises the Storm Recovery Costs for which recovery is authorized; (c) in any way impair the rights and remedies of the bondholders, assignees and other financing parties; (d) or except as authorized under the Storm Recovery Law, reduce, alter, or impair Charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, the Indenture Trustee and any 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.
The Issuer and Duke Energy Progress hereby acknowledge that the purchase of this Storm Recovery Bond by the Holder hereof or the purchase of any beneficial interest herein by any Person are made in reliance on the foregoing pledge.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this tranche {__} Storm Recovery Bond may be registered on the Storm Recovery Bond Register upon surrender of this tranche {__} 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) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee, and (b) such other documents as the Indenture Trustee may require, and thereupon one or more new Storm Recovery Bonds of Authorized Denominations and in the same aggregate 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 {__} 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 such registration of transfer or exchange, other than exchanges pursuant to Section 2.04 or Section 2.06 of the Indenture not involving any transfer.
Each Holder, by acceptance of a tranche {__} Storm Recovery Bond, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the tranche {__} Storm Recovery Bonds or under the Indenture or any certificate or other writing delivered in connection therewith, against (a) any owner of a membership interest in the Issuer (including Duke Energy Progress) or (b) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Duke Energy Progress) in its respective individual or corporate capacities, or of any successor or assign of any of them in their individual or corporate capacities, except as any such Person may have expressly agreed in writing. Each Holder by accepting a tranche {__} Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the tranche {__} Storm Recovery Bonds.
Prior to the due presentment for registration of transfer of this tranche {__} Storm Recovery Bond, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this tranche {__} 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 {__} Storm Recovery Bond and for all other purposes whatsoever, whether or not this tranche {__} Storm Recovery Bond be overdue, and none of the Issuer, the Indenture Trustee or 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 Holders of the Storm Recovery Bonds under the Indenture at any time by the Issuer with the consent of the Holders representing a majority of the Outstanding Amount of all Storm Recovery Bonds at the time outstanding of each tranche to be affected and upon the satisfaction of the Rating Agency Condition and Commission Condition. The Indenture also contains provisions permitting the Holders representing specified percentages of the Outstanding Amount of the Storm Recovery Bonds, on behalf of the Holders of all the Storm Recovery Bonds, with the consent of the Commission, 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 Holder of this tranche {__} Storm Recovery Bond (or any one of more Predecessor Storm Recovery Bonds) shall be conclusive and binding upon such Holder and upon all future Holders of this tranche {__} Storm Recovery Bond and of any tranche {__} 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 {__} Storm Recovery Bond. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Storm Recovery Bonds issued thereunder, but with the satisfaction of the Commission Condition.
The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Issuer on a Storm Recovery Bond and (b) certain restrictive covenants and the related Events of Default, upon compliance by the Issuer with certain conditions set forth in the Indenture, which provisions apply to this tranche {__} Storm Recovery Bond.
The term “Issuer” as used in this tranche {__} 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, subject to the rights of the Indenture Trustee and the Holders under the Indenture.
The tranche {__} Storm Recovery Bonds are issuable only in registered form in denominations as provided in the Indenture and the Series Supplement subject to certain limitations therein set forth.
This tranche {__} Storm Recovery Bond, the Indenture and the Series Supplement shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws; provided, that the creation, attachment and perfection of any Liens created under the Indenture in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.
No reference herein to the Indenture and no provision of this tranche {__} Storm Recovery Bond or of the Indenture shall alter or impair the obligation, which is absolute and unconditional, to pay the principal of and interest on this tranche {__} Storm Recovery Bond at the times, place and rate and in the coin or currency herein prescribed.
The Issuer and the Indenture Trustee, by entering into the Indenture, and the Holders and any Persons holding a beneficial interest in any tranche {__} Storm Recovery Bond, by acquiring any tranche {__} Storm Recovery Bond or interest therein, (a) express their intention that, solely for the purpose of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purpose of state, local and other taxes, the tranche {__} Storm Recovery Bonds qualify under applicable tax law as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral and (b) solely for purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the tranche {__} Storm Recovery Bonds are outstanding, agree to treat the tranche {__} Storm Recovery Bonds as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral unless otherwise required by appropriate taxing authorities.
ABBREVIATIONS
The following abbreviations, when used above on this Storm Recovery Bond, shall be construed as though they were written out in full according to applicable laws or regulations.
| TEN COM |
as tenants in common
|
| TEN ENT |
as tenants by the entireties
|
| JT TEN |
as joint tenants with right of survivorship and not as tenants in common |
| UNIF GIFT MIN ACT | Custodian | ||
| (Custodian) | (minor) | ||
| Under Uniform Gifts to Minor Act | (____________________) | ||
| (State) |
Additional abbreviations may also be used though not in the above list.
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 within tranche {__} Storm Recovery Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ____________, attorney, to transfer said tranche {__} Storm Recovery Bond on the books kept for registration thereof, with full power of substitution in the premises.
| Dated: | ||
| Signature Guaranteed: | ||
The signature to this assignment must correspond with the name of the registered owner as it appears on the within tranche {__} Storm Recovery Bond in every particular, without alteration, enlargement or any change whatsoever.
NOTE: Signature(s) must be guaranteed by an institution that is a member of: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee.
EXHIBIT B
FORM OF SERIES SUPPLEMENT
See attached.
This SERIES SUPPLEMENT, dated as of { , 20 } (this “Supplement”), is by and between DUKE ENERGY PROGRESS NC STORM FUNDING LLC, a limited liability company created under the laws of the State of Delaware (the “Issuer”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION (“Bank”), in its capacity as indenture trustee (the “Indenture Trustee”) for the benefit of the Secured Parties under the Indenture dated as of [ ], 2021 (the “Indenture”), by and between the Issuer and THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, in its capacity as Indenture Trustee and in its separate capacity as a securities intermediary.
PRELIMINARY STATEMENT
Section 9.01 of the Indenture provides, among other things, that the Issuer and the Indenture Trustee may at any time enter into an indenture supplemental to the Indenture for the purposes of authorizing the issuance by the Issuer of a Series of the Storm Recovery Bonds and specifying the terms thereof. The Issuer has duly authorized the creation of a Series of the Storm Recovery Bonds with an initial aggregate principal amount of ${__________} to be known as Series {__}Senior Secured Storm Recovery Bonds (the “Series {__} Storm Recovery Bonds”), and the Issuer and the Indenture Trustee are executing and delivering this Supplement in order to provide for the Series {__} Storm Recovery Bonds.
All terms used in this Supplement that are defined in the Indenture, either directly or by reference therein, have the meanings assigned to them therein, except to the extent such terms are defined or modified in this Supplement or the context clearly requires otherwise. In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Supplement shall govern.
GRANTING CLAUSE
With respect to the Series {__} Storm Recovery Bonds, the Issuer hereby Grants to the Indenture Trustee, as Indenture Trustee for the benefit of the Secured Parties of the Series {__} Storm Recovery Bonds, all of the Issuer’s right, title and interest (whether now owned or hereafter acquired or arising) in and to (a) the Storm Recovery Property created under and pursuant to the Financing Order and the Storm Recovery Law, and transferred by the Seller to the Issuer on the date hereof pursuant to the Sale Agreement (including, to the fullest extent permitted by law, the right to impose, bill, charge, collect and receive the Storm Recovery Charges, the right to obtain periodic adjustments to the Storm Recovery Charges, and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests created under the Financing Order), (b) all Storm Recovery Charges related to the Storm Recovery Property, (c) the Sale Agreement and the Bill of Sale executed in connection therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the Storm Recovery Property and the Series {__} Storm Recovery Bonds, (d) the Servicing Agreement, the Administration Agreement, the Intercreditor Agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing Storm Recovery Property and the Series {__} Storm Recovery Bonds, (e) the Collection Account for the Series {__} Storm Recovery Bonds, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, (f) all rights to compel the Servicer to file for and obtain periodic adjustments to the Storm Recovery Charges in accordance with N.C. Gen. Stat. § 62-172(b)(3)b.6. and the Financing Order, (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute Storm Recovery Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (h) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, and (i) all payments on or under, and all proceeds in respect of, any or all of the foregoing (the “Storm Recovery Collateral”), it being understood that the following do not constitute Storm Recovery Collateral: (x) cash that has been released pursuant to the terms of the Indenture, including Section 8.02(e)(x) of the Indenture and, following retirement of all Outstanding Series {__} Storm Recovery Bonds, pursuant to Section 8.02(e)(xii) of the Indenture, (y) amounts deposited with the Issuer on the Closing Date, for payment of costs of issuance with respect to the Series {__} Storm Recovery Bonds (together with any interest earnings thereon) or (z) proceeds from the sale of the Series {__} Storm Recovery Bonds required to pay the purchase price for the Storm Recovery Property and paid pursuant to the Sale Agreement for such Series and upfront Financing Costs, it being understood that such amounts described in clause (x) and clause (y) above shall not be subject to Section 3.17 of the Indenture. For the avoidance of doubt, any Storm Recovery Property created with respect to an Additional Series shall not be Storm Recovery Collateral.
The foregoing Grant is made in trust to secure the Secured Obligations equally and ratably without prejudice, priority or distinction, except as expressly provided in the Indenture, to secure compliance with the provisions of the Indenture with respect to the Series {__} Storm Recovery Bonds, all as provided in the Indenture and to secure the performance by the Issuer of all of its obligations under the Indenture. The Indenture and this Supplement constitute a security agreement within the meaning of the Storm Recovery Law and under the UCC to the extent that the provisions of the UCC are applicable hereto.
The Indenture Trustee, as indenture trustee on behalf of the Secured Parties of the Series {__} Storm Recovery Bonds, acknowledges such Grant and accepts the trusts under this Supplement and the Indenture in accordance with the provisions of this Supplement and the Indenture.
SECTION 1. Designation. The Series {__} Storm Recovery Bonds shall be designated generally as the Storm Recovery Bonds {, and further denominated as tranches {__} through {__}}.
SECTION 2. Initial Principal Amount; Bond Interest Rate; Scheduled Final Payment Date; Final Maturity Date; Required Capital Level. The Series {__} Storm Recovery Bonds {of each tranche} shall have the initial principal amount, bear interest at the rates per annum (the “Bond Interest Rate”) and shall have the Scheduled Final Payment Dates and the Final Maturity Dates set forth below:
|
Weighted Average Life |
Initial |
Bond |
Scheduled |
Final |
| {__} | ${__________} | {____}% | {_____}, 20{__} | {_____}, 20{__} |
| {__} | ${__________} | {____}% | {_____}, 20{__} | {_____}, 20{__} |
| {__} | ${__________} | {____}% | {_____}, 20{__} | {_____}, 20{__} |
The Bond Interest Rate shall be computed by the Issuer on the basis of a 360-day year of twelve 30-day months.
The Required Capital Level for the Series {__} Storm Recovery Bonds shall be equal to {__}% of the initial principal amount thereof.
SECTION 3. Authentication Date; Payment Dates; Expected Sinking Fund Schedule for Principal; Periodic Interest; Book-Entry Storm Recovery Bonds; Indenture Trustee Caps.
(a) Authentication Date. The Series {__} Storm Recovery Bonds that are authenticated and delivered by the Indenture Trustee to or upon the order of the Issuer on {________} (the “Closing Date”) shall have as their date of authentication {________}.
(b) Payment Dates. The “Payment Dates” for the Series {__} Storm Recovery Bonds are {__________} and {__________} of each year or, if any such date is not a Business Day, the next Business Day, commencing on {__________}, 20{__} and continuing until the earlier of repayment of the Series {__} Storm Recovery Bonds in full and the Final Maturity Date.
(c) Expected Sinking Fund Schedule for Principal. Unless an Event of Default shall have occurred and be continuing, on each Payment Date, the Indenture Trustee shall distribute to the Holders of record as of the related Record Date amounts payable pursuant to Section 8.02(e) of the Indenture as principal, in the following order and priority: {(1) to the holders of the Series {__}, tranche {__} Storm Recovery Bonds, until the Outstanding Amount of such Series {__}, tranche {__} Storm Recovery Bonds thereof has been reduced to zero; (2) to the holders of the Series {__}, tranche {__}Storm Recovery Bonds, until the Outstanding Amount of such Series {__}, tranche {__} Storm Recovery Bonds thereof has been reduced to zero; and (3) to the holders of the Series {__}, tranche {__} Storm Recovery Bonds, until the Outstanding Amount of such Series {__}, tranche {__} of Storm Recovery Bonds thereof has been reduced to zero; ; provided, however, that in no event shall a principal payment pursuant to this Section 3(c) on any tranche on a Payment Date be greater than the amount necessary to reduce the Outstanding Amount of such tranche of Storm Recovery Bonds to the amount specified in the Expected Sinking Fund Schedule that is attached as Schedule A hereto for such tranche and Payment Date}.
(d) Periodic Interest. “Periodic Interest” will be payable on {each tranche of} the Series {__} Storm Recovery Bonds on each Payment Date in an amount equal to one-half of the product of (i) the applicable Bond Interest Rate and (ii) the Outstanding Amount of the {related tranche of} Series {__} Storm Recovery Bonds as of the close of business on the preceding Payment Date after giving effect to all payments of principal made to the Holders of the {related tranche of} Series {__} Storm Recovery Bonds on such 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 will accrue from and including the Closing Date to, but excluding, the following Payment Date.
(e) Book-Entry Storm Recovery Bonds. The Series {__} Storm Recovery Bonds shall be Book-Entry Storm Recovery Bonds, and the applicable provisions of Section 2.11 of the Indenture shall apply to the Series {__} Storm Recovery Bonds.
(f) Indenture Trustee Cap. The amount payable with respect to the Series {__} Storm Recovery Bonds pursuant to Section 8.02(e)(i) of the Indenture shall not exceed $200,000 annually; provided, however, that the Indenture Trustee Cap shall be disregarded and inapplicable upon the acceleration of the Storm Recovery Bonds following the occurrence of an Event of Default.
SECTION 4. Authorized Denominations. The Series {__} Storm Recovery Bonds shall be issuable in denominations of {$2,000 and integral multiples of $1,000 in excess thereof, except for one bond, which may be a smaller denomination} (the “Authorized Denominations”).
SECTION 5. Delivery and Payment for the Series {__} Storm Recovery Bonds; Form of the Series {__} Storm Recovery Bonds. The Indenture Trustee shall deliver the Series {__} Storm Recovery Bonds to the Issuer when authenticated in accordance with Section 2.03 of the Indenture. The Series {__} Storm Recovery Bonds {of each tranche} shall be in the form of Exhibit{s} {__} hereto.
SECTION 6. Ratification 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. This Supplement amends, modifies and supplements the Indenture only insofar as it relates to the Series {__} Storm Recovery Bonds.
SECTION 7. Counterparts. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.
SECTION 8. Governing Law. This Supplement shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws; provided, that, except as set forth in Section 8.02(b) of the Indenture, the creation, attachment and perfection of any Liens created under the Indenture in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.
SECTION 9. Issuer Obligation. No recourse may be taken directly or indirectly by the Holders with respect to the obligations of the Issuer on the Series {__} Storm Recovery Bonds, under the Indenture or this Supplement or any certificate or other writing delivered in connection herewith or therewith, against (a) any owner of a beneficial interest in the Issuer (including Duke Energy Progress) or (b) any shareholder, partner, owner, beneficiary, officer, director, employee or agent of the Indenture Trustee, the Managers or any owner of a beneficial interest in the Issuer (including Duke Energy Progress) in its individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed. Each Holder by accepting a Series {__} Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Series {__} Storm Recovery Bonds.
SECTION 10. Indenture Trustee Disclaimer. The Indenture Trustee is not responsible for the validity or sufficiency of this Supplement or for the recitals contained herein.
SECTION 11. Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial. Each of the Issuer and the Indenture Trustee and each Holder (by its acceptance of the Storm Recovery Bonds) hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court sitting in The Borough of Manhattan in The City of New York or any U.S. federal court sitting in The Borough of Manhattan in The City of New York in respect of any suit, action or proceeding arising out of or relating to this Supplement and the Series {__} Storm Recovery Bonds and irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, jurisdiction of the aforesaid courts. Each of the Issuer and the Indenture Trustee irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury.
IN WITNESS WHEREOF, the Issuer and the Indenture 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.
| DUKE ENERGY PROGRESS NC STORM FUNDING LLC, as Issuer |
| By: | ||
| Name: [ ] | ||
| Title: [ ] |
| THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, | |
| not in its individual capacity but solely as Indenture Trustee and as Securities Intermediary |
| By: | ||
| Name: [ ] | ||
| Title: [ ] |
SCHEDULE A
TO SERIES SUPPLEMENT
Expected SINKING FUND Schedule
Outstanding Principal Balance
|
Date |
tranche {__} |
tranche {__} |
tranche {__} | |||
| Closing Date | ${__________} | ${__________} | ${__________} | |||
| {__________}, 20{__} | ${__________} | ${__________} | ${__________} | |||
| {__________}, 20{__} | ${__________} | ${__________} | ${__________} | |||
| {__________}, 20{__} | ${__________} | ${__________} | ${__________} |
EXHIBIT {__}
TO SERIES SUPPLEMENT
FORM OF {Series {__} tranche {__} OF} STORM RECOVERY BONDS
{__________}
EXHIBIT C
SERVICING CRITERIA TO BE ADDRESSED
BY INDENTURE TRUSTEE IN ASSESSMENT OF COMPLIANCE
Regulation AB Reference |
Servicing Criteria | Applicable Indenture Trustee Responsibility |
| General Servicing Considerations | ||
| 1122(d)(1)(i) | Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements. | |
| 1122(d)(1)(ii) | If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities. | |
| 1122(d)(1)(iii) | Any requirements in the transaction agreements to maintain a back-up servicer for the pool assets are maintained. | |
| 1122(d)(1)(iv) | A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements. | |
| 1122(d)(1)(v) | Aggregation of information, as applicable, is mathematically accurate and the information conveyed accurately reflects the information. | |
| Cash Collection and Administration | ||
| 1122(d)(2)(i) | Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements. | X |
| 1122(d)(2)(ii) | Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel. | X |
| 1122(d)(2)(iii) | Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements. | |
| 1122(d)(2)(iv) | The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements. | X |
| 1122(d)(2)(v) | Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) under the Exchange Act. | X |
| 1122(d)(2)(vi) | Unissued checks are safeguarded so as to prevent unauthorized access. | |
| 1122(d)(2)(vii) | Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are: (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements. | |
| Investor Remittances and Reporting | ||
| 1122(d)(3)(i) | Reports to investors, including those to be filed with the SEC, are maintained in accordance with the transaction agreements and applicable SEC requirements. Specifically, such reports: (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the SEC as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of pool assets serviced by the servicer. | |
| 1122(d)(3)(ii) | Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements. | X |
| 1122(d)(3)(iii) | Disbursements made to an investor are posted within two business days to the servicer’s investor records, or such other number of days specified in the transaction agreements. | X |
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Regulation AB Reference |
Servicing Criteria | Applicable Indenture Trustee Responsibility |
| 1122(d)(3)(iv) | Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements. | X |
| Pool Asset Administration | ||
| 1122(d)(4)(i) | Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents. | |
| 1122(d)(4)(ii) | Pool assets and related documents are safeguarded as required by the transaction agreements. | |
| 1122(d)(4)(iii) | Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements. | |
| 1122(d)(4)(iv) | Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents. | |
| 1122(d)(4)(v) | The servicer’s records regarding the pool assets agree with the servicer’s records with respect to an obligor’s unpaid principal balance. | |
| 1122(d)(4)(vi) | Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents. | |
| 1122(d)(4)(vii) | Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements. | |
| 1122(d)(4)(viii) | Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets, including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment). | |
| 1122(d)(4)(ix) | Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents. | |
| 1122(d)(4)(x) | Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements. | |
| 1122(d)(4)(xi) | Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements. | |
| 1122(d)(4)(xii) | Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission. | |
| 1122(d)(4)(xiii) | Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements. | |
| 1122(d)(4)(xiv) | Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements. | |
| 1122(d)(4)(xv) | Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements. |
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APPENDIX A
DEFINITIONS AND RULES OF CONSTRUCTION
| A. | Defined Terms. The following terms have the following meanings: |
“17g-5 Website” is defined in Section 10.18(a) of the Indenture.
“Account Records” is defined in Section 1(a)(i) of the Administration Agreement.
“Act” is defined in Section 10.03(a) of the Indenture.
“Additional Series” means issuance by the Issuer of any series of Storm Recovery Bonds issued after the date hereof, that will be undertaken only if (i) such issuance has been authorized by the Commission, (ii) the Rating Agency Condition has been satisfied and it is a condition of issuance for each Series of Storm Recovery Bonds that such Additional Series receive a rating or ratings as required by the Financing Order or a Subsequent Financing Order, (iii) the Issuer has delivered to the Indenture Trustee an Opinion of Counsel of a nationally recognized firm experienced in such matters to the effect that after such issuance, in the opinion of such counsel, if either or both of Duke Energy Progress or the Seller were to become a debtor in a case under the United States Bankruptcy Code (Title 11, U.S.C.), a federal court exercising bankruptcy jurisdiction and exercising reasonable judgment after full consideration of all relevant factors would not order substantive consolidation of the assets and liabilities of the Issuer with those of the bankruptcy estate of Duke Energy Progress or the Seller, subject to the customary exceptions, qualifications and assumptions contained therein.
“Administration Agreement” means the Administration Agreement, dated as of the date hereof, by and between Duke Energy Progress and the Issuer.
“Administration Fee” is defined in Section 2 of the Administration Agreement.
“Administrator” means Duke Energy Progress, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.
“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 specified 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.
“Amendatory Schedule” means a revision to service riders or any other notice filing filed with the Commission in respect of the Storm Recovery Rate Schedule pursuant to a True-Up Adjustment.
“Annual Accountant’s Report” is defined in Section 3.04(a) of the Servicing Agreement.
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“Authorized Denomination” means, with respect to any Storm Recovery Bond, the authorized denomination therefor specified in the Series Supplement, which shall be at least $2,000 and, except as otherwise provided in the Series Supplement, integral multiples of $1,000 in excess thereof, except for one Storm Recovery bond which may be of a smaller denomination.
“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.).
“Basic Documents” means the Indenture, Series Supplement, the Certificate of Formation, the LLC Agreement, the Administration Agreement, and, the Sale Agreement, Bill of Sale, Servicing Agreement, Intercreditor Agreement, any joinder to an existing intercreditor agreement, Letter of Representations, Underwriting Agreement and all other documents and certificates delivered in connection therewith.
“Bill of Sale” means a bill of sale substantially in the form of Exhibit A to the Sale Agreement delivered pursuant to Section 2.02(a) of the Sale Agreement.
“Billed Storm Recovery Charges” means the amounts of Storm Recovery Charges billed by the Servicer.
“Billing Period” means the period created by dividing the calendar year into 12 consecutive periods of approximately 21 Servicer Business Days.
“Bills” means each of the regular monthly bills, summary bills, opening bills and closing bills issued to Customers by Duke Energy Progress in its capacity as Servicer.
“Bond Interest Rate” means, with respect to any Tranche of Storm Recovery Bonds, the rate at which interest accrues on the Storm Recovery Bonds of such Series or Tranche, as specified in the Series Supplement.
“Book-Entry Form” means, with respect to any Storm Recovery Bond, that such Storm Recovery Bond is not certificated and the ownership and transfers thereof shall be made through book entries by a Clearing Agency as described in Section 2.11 of the Indenture and the Series Supplement pursuant to which such Storm Recovery Bond was issued.
“Book-Entry Storm Recovery Bonds” means any Storm Recovery Bonds issued in Book-Entry Form; provided, however, that, after the occurrence of a condition whereupon book-entry registration and transfer are no longer permitted and Definitive Storm Recovery Bonds are to be issued to the Holder of such Storm Recovery Bonds, such Storm Recovery Bonds shall no longer be “Book-Entry Storm Recovery Bonds”.
“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina, Charlotte, North Carolina or New York, New York are, or DTC or the Corporate Trust Office is, authorized or obligated by law, regulation or executive order to be closed.
“Capital Contribution” means the amount of cash contributed to the Issuer by Duke Energy Progress as specified in the LLC Agreement.
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“Capital Subaccount” is defined in Section 8.02(a) of the Indenture.
“Certificate of Compliance” means the certificate referred to in Section 3.03 of the Servicing Agreement and substantially in the form of Exhibit E to the Servicing Agreement.
“Certificate of Formation” means the Certificate of Formation filed with the Secretary of State of the State of Delaware on August 12, 2021 pursuant to which the Issuer was formed.
“Claim” means a “claim” as defined in Section 101(5) of the Bankruptcy Code.
“Clearing Agency” means an organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act.
“Clearing Agency Participant” means a securities broker, dealer, bank, trust company, clearing corporation or other financial institution or other Person for whom from time to time a Clearing Agency effects book entry transfers and pledges of securities deposited with such Clearing Agency.
“Closing Date” means the date on which the Storm Recovery Bonds are originally issued in accordance with Section 2.10 of the Indenture and the Series Supplement.
“Code” means the Internal Revenue Code of 1986.
“Collateral” is defined in the preamble of the Indenture.
“Collection Account” is defined in Section 8.02(a) of the Indenture for such Series.
“Collection in Full of the Charges” means the day on which the aggregate amounts on deposit in the General Subaccount and the Excess Funds Subaccount are sufficient to pay in full all the Outstanding Storm Recovery Bonds and to replenish any shortfall in the Capital Subaccount.
“Collection Period” means any period commencing on the first Servicer Business Day of any Billing Period and ending on the last Servicer Business Day of such Billing Period.
“Commission” means the North Carolina Utilities Commission.
“Commission Condition” means the satisfaction of any precondition to any amendment or modification to or action under any Basic Documents through the obtaining of Commission consent or acquiescence, as described in the related Basic Document.
“Commission Regulations” means any orders issued or rules or regulations, including temporary regulations, promulgated by the Commission pursuant to North Carolina law.
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“Company Minutes” is defined in Section 1(a)(iv) of the Administration Agreement.
“Corporate Trust Office” means the office of the Indenture Trustee at which, at any particular time, its corporate trust business shall be administered, which office as of the date hereof is located at BNY Mellon Global Corporate Trust, 4655 Salisbury Road, Suite 300, Jacksonville, Florida 32256; Telephone: 904-998-4714; Facsimile: 904-645-1930, or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders of Storm Recovery Bonds and the Issuer, or the principal corporate trust office of any successor trustee designated by like notice.
“Covenant Defeasance Option” is defined in Section 4.01(b) of the Indenture.
“Customer” means any existing or future retail customer (including individuals, corporations, other businesses, and federal, state and local governmental entities) receiving transmission or distribution service from Duke Energy Progress or its successors or assignees under Commission-approved rate schedules or under special contracts, even if such customer elects to purchase electricity from an TPS following a fundamental change in regulation of public utilities in North Carolina.
“Daily Remittance” is defined in Section 6.11(a) of the Servicing Agreement.
“Default” means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.
“Definitive Storm Recovery Bonds” is defined in Section 2.11 of the Indenture.
“Delaware UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of Delaware.
“DTC” means The Depository Trust Company.
“Duke Energy Progress” or “DEP” means Duke Energy Progress, LLC, a North Carolina limited liability company.
“Duke Energy Progress NC Storm Funding LLC” or “DEP NC Storm Funding” means the Issuer.
“Eligible Account” means a segregated non-interest-bearing trust account with an Eligible Institution.
“Eligible Institution” means:
(a) the corporate trust department of the Indenture Trustee, so long as any of the securities of the Indenture Trustee have (i) either a short-term credit rating from Moody’s of at least “P-1”, or a long-term unsecured debt rating from Moody’s of at least “A2”, and (ii) have a credit rating from S&P of at least “A”; or
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(b) a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, or (B) a short-term issuer rating of “A-1” or higher by S&P and “P-1” or higher by Moody’s, and (ii) whose deposits are insured by the Federal Deposit Insurance Corporation.
If so qualified under clause (b) above, the Indenture Trustee may be considered an Eligible Institution for the purposes of clause (a) of this definition.
“Eligible Investments” means instruments or investment property that evidence:
(a) direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;
(b) demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of, bank deposit products of or bankers’ acceptances issued by, any depository institution (including, but not limited to, bank deposit products of the Indenture Trustee, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or state banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit, rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;
(c) commercial paper (including commercial paper of the Indenture Trustee, acting in its commercial capacity, and other than commercial paper of Duke Energy Progress or any of its Affiliates), which at the time of purchase is rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;
(d) investments in money market funds having a rating in the highest investment category granted thereby (including funds for which the Indenture Trustee or any of its Affiliates is investment manager or advisor) from Moody’s and S&P;
(e) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or its agencies or instrumentalities, entered into with Eligible Institutions;
(f) repurchase obligations with respect to any security or whole loan entered into with an Eligible Institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:
(i) a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a “broker/dealer”), the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s, “A-1+” by S&P at the time of entering into such repurchase obligation; or
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(ii) an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s and “A-1+” by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; and
(g) any other investment permitted by each of the Rating Agencies;
in each case maturing not later than the Business Day preceding the next Payment Date or Special Payment Date, if applicable (for the avoidance of doubt, investments in money market funds or similar instruments that are redeemable on demand shall be deemed to satisfy the foregoing requirement). Notwithstanding the foregoing: (1) no securities or investments that mature in 30 days or more shall be “Eligible Investments” unless the issuer thereof has either a short-term unsecured debt rating of at least “P-1” from Moody’s or a long-term unsecured debt rating of at least “A1” from Moody’s and also has a long-term unsecured debt rating of at least “A” from S&P; (2) no securities or investments described in clauses (b) through (d) above that have maturities of more than 30 days but less than or equal to 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (3) no securities or investments described in clauses (b) through (d) above that have maturities of more than 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (4) no securities or investments described in bullet points (b) through (d) above which have a maturity of 60 days or less will be Eligible Investments unless such securities have a rating from S&P of at least “A-1”; and (5) no securities or investments described in bullet points (b) through (d) above which have a maturity of more than 60 days will be Eligible Investments unless such securities have a rating from S&P of at least “AA-”, “A-1+” or “AAAm”.
“Event of Default” is defined in Section 5.01 of the Indenture.
“Excess Funds Subaccount” is defined in Section 8.02(a) of the Indenture.
“Exchange Act” means the Securities Exchange Act of 1934.
“Expected Sinking Fund Schedule” means, with respect to any Tranche, the expected sinking fund schedule related thereto set forth in the Series Supplement.
“Federal Book-Entry Regulations” means 31 C.F.R. Part 357 et seq. (Department of Treasury).
“Final” means, with respect to the Financing Order or Subsequent Financing Order, that the Financing Order has become final, that the Financing Order is not being appealed and that the time for filing an appeal thereof has expired.
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“Final Maturity Date” means, with respect to each Series of Tranche of Storm Recovery Bonds, the final maturity date therefor as specified in the applicable Series Supplement.
“Financing Costs” means all financing costs as defined in Section 62-172(a)(4)of the Storm Recovery Law allowed to be recovered by Duke Energy Progress under the Financing Order.
“Financing Order” means the financing order issued by the Commission to Duke Energy Progress on May 10, 2021, Docket No. E-2, Sub 1262, authorizing the creation of the Storm Recovery Property, which was clarified and corrected by the Commission in an Order Clarifying and Correcting Financing Order on July 13, 2021.
“Financing Party” means any and all of the following: the Holders, the Indenture Trustee, Duke Energy Progress, collateral agents, any party under the Basic Documents, or any other person acting for the benefit of the Holders.
“North Carolina UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of North Carolina.
“General Subaccount” is defined in Section 8.02(a) of the Indenture for such Series.
“Global Storm Recovery Bond” means a Storm Recovery Bond to be issued to the Holders thereof in Book-Entry Form, which Global Storm Bond shall be issued to the Clearing Agency, or its nominee, in accordance with Section 2.11 of the Indenture and the Series Supplement.
“Governmental Authority” means any nation or government, any U.S. federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.
“Grant” means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, grant, transfer, create, grant a lien upon, a security interest in and right of set-off against, deposit, set over and confirm pursuant to the Indenture and the Series Supplement. A Grant of the Collateral shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.
“Holder” means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.
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“Indemnified Losses” is defined in Section 5.03 of the Servicing Agreement.
“Indemnified Party” is defined in Section 6.02(a) of the Servicing Agreement.
“Indemnified Person” is defined in Section 5.01(f) of the Sale Agreement.
“Indenture” means the Indenture, dated as of the date hereof, by and between the Issuer and The Bank of New York Mellon Trust Company, National Association, as Indenture Trustee and as Securities Intermediary.
“Indenture Trustee” means The Bank of New York Mellon Trust Company, National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any other indenture trustee for the benefit of the Secured Parties, under the Indenture.
“Independent” means, when used with respect to any specified Person, that such specified Person (a) is in fact independent of the Issuer, any other obligor on the Storm Recovery Bonds, the Seller, the Servicer and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director (other than as an independent director or manager) or person performing similar functions.
“Independent Certificate” means a certificate to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and consented to by the Indenture Trustee, and such certificate shall state that the signer has read the definition of “Independent” in the Indenture and that the signer is Independent within the meaning thereof.
“Independent Manager” is defined in Section 4.01(a) of the LLC Agreement.
“Independent Manager Fee” is defined in Section 4.01(a) of the LLC Agreement.
“Insolvency Event” means, with respect to a specified Person: (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such specified Person or any substantial part of its property in an involuntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the date hereof or thereafter, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or ordering the winding-up or liquidation of such specified Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such specified Person of a voluntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the Closing Date or thereafter, or the consent by such specified Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such specified Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or the making by such specified Person of any general assignment for the benefit of creditors, or the failure by such specified Person generally to pay its debts as such debts become due, or the taking of action by such specified Person in furtherance of any of the foregoing.
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“Intercreditor Agreement” means the Intercreditor Agreement, dated December 20, 2013, by and among the Duke Energy Business Services, Inc., Duke Energy Corporate Services Inc., Duke Energy Corporation, Mizuho Bank, Ltd., the Bank of Nova Scotia, the Bank of Tokyo-Mitsubishi UFJ, Ltd., Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress Receivables LLC, Cinergy Receivables Company LLC and Duke Energy Receivables Finance Company, LLC, the Indenture Trustee, the Issuer, Duke Energy Progress, and any subsequent such agreement.
“Investment Company Act” means the Investment Company Act of 1940.
“Investment Earnings” means investment earnings on funds deposited in the Collection Account net of losses and investment expenses.
“Issuer” means Duke Energy Progress NC Storm Funding LLC, a Delaware limited liability company, named as such in the Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the Trust Indenture Act, each other obligor on the Storm Recovery Bonds.
“Issuer Documents” is defined in Section 1(a)(iv) of the Administration Agreement.
“Issuer Order” means a written order signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.
“Issuer Request” means a written request signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.
“Legal Defeasance Option” is defined in Section 4.01(b) of the Indenture.
“Letter of Representations” means any applicable agreement between the Issuer and the applicable Clearing Agency, with respect to such Clearing Agency’s rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Storm Recovery Bonds.
“Lien” means a security interest, lien, mortgage, charge, pledge, claim or encumbrance of any kind.
“LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of Duke Energy Progress NC Storm Funding LLC, dated as of August 12, 2021.
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“Losses” means (a) any and all amounts of principal of and interest on the Storm Recovery Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amounts of any deposits by or to the Issuer required to have been made in accordance with the terms of the Basic Documents or the Financing Order that are not made when so required and (b) any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses of any kind whatsoever.
“Manager” means each manager of the Issuer under the LLC Agreement.
“Member” has the meaning specified in the first paragraph of the LLC Agreement.
“Monthly Servicer’s Certificate” is defined in Section 3.01(b)(i) of the Servicing Agreement.
“Moody’s” means Moody’s Investors Service, Inc. References to Moody’s are effective so long as Moody’s is a Rating Agency.
“North Carolina UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of North Carolina.
“NRSRO” is defined in Section 10.19(b) of the Indenture.
“NY UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York.
“Officer’s Certificate” means a certificate signed by a Responsible Officer of the Issuer under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, and delivered to the Indenture Trustee.
“Ongoing Financing Costs” means the Financing Costs described as such in the Financing Order, including Operating Expenses and any other costs identified in the Basic Documents; provided, however, that Ongoing Financing Costs do not include the Issuer’s costs of issuance of the Storm Recovery Bonds.
“Operating Expenses” means all unreimbursed fees, costs and out-of-pocket expenses of the Issuer, including all amounts owed by the Issuer to the Indenture Trustee (including indemnities, legal, audit fees and expenses) or any Manager, the Servicing Fee, the Administration Fee, legal and accounting fees, Rating Agency fees, any Regulatory Assessment Fees and related fees (i.e. website provider fees) and any franchise or other taxes owed by the Issuer, including on investment income in the Collection Account.
“Opinion of Counsel” means one or more written opinions of counsel, who may, except as otherwise expressly provided in the Basic Documents, be employees of or counsel to the party providing such opinion of counsel, which counsel shall be reasonably acceptable to the party receiving such opinion of counsel, and shall be in form and substance reasonably acceptable to such party.
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“Optional Interim True-Up Adjustment” means each adjustment to the Storm Recovery Charges made pursuant to Section 4.01(b)(ii) of the Servicing Agreement.
“Outstanding” means, as of the date of determination, all Storm Recovery Bonds theretofore authenticated and delivered under the Indenture, except:
(a) Storm Recovery Bonds theretofore canceled by the Storm Recovery Bond Registrar or delivered to the Storm Recovery Bond Registrar for cancellation;
(b) Storm Recovery Bonds or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Storm Recovery Bonds; and
(c) Storm Recovery Bonds in exchange for or in lieu of other Storm Recovery Bonds that have been issued pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Storm Recovery Bonds are held by a Protected Purchaser; provided, that, in determining whether the Holders of the requisite Outstanding Amount of the Storm Recovery Bonds or any Tranche thereof have given any request, demand, authorization, direction, notice, consent or waiver under any Basic Document, Storm Recovery Bonds owned by the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding (unless one or more such Persons owns 100% of such Storm Recovery Bonds), except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Storm Recovery Bonds that the Indenture Trustee actually knows to be so owned shall be so disregarded. Storm Recovery Bonds so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Storm Recovery Bonds and that the pledgee is not the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons.
“Outstanding Amount” means the aggregate principal amount of all Storm Recovery Bonds, or, if the context requires, all Storm Recovery Bonds of a Tranche, Outstanding at the date of determination.
“Paying Agent” means, with respect to the Indenture, the Indenture Trustee and any other Person appointed as a paying agent for the Storm Recovery Bonds pursuant to the Indenture.
“Payment Date” means, with respect to any Tranche of Storm Recovery Bonds, the dates specified in the Series Supplement; provided, that if any such date is not a Business Day, the Payment Date shall be the Business Day succeeding such date.
“Periodic Billing Requirement” means, for any Remittance Period, the aggregate amount of Charges calculated by the Servicer as necessary to be billed during such period in order to collect the Periodic Payment Requirement on a timely basis.
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“Periodic Interest” means, with respect to any Payment Date, the periodic interest for such Payment Date as specified in the Series Supplement.
“Periodic Payment Requirement” for any Remittance Period means the total dollar amount of Storm Recovery Charge Collections reasonably calculated by the Servicer in accordance with Section 4.01 of the Servicing Agreement as necessary to be received during such Remittance Period (after giving effect to the allocation and distribution of amounts on deposit in the Excess Funds Subaccount at the time of calculation and that are projected to be available for payments on the Storm Recovery Bonds at the end of such Remittance Period and including any shortfalls in Periodic Payment Requirements for any prior Remittance Period) in order to ensure that, as of the last Payment Date occurring in such Remittance Period, (a) all accrued and unpaid principal of and interest on the Storm Recovery Bonds then due shall have been paid in full on a timely basis, (b) the Outstanding Amount of the Storm Recovery Bonds is equal to the Projected Unpaid Balance on each Payment Date during such Remittance Period, (c) the balance on deposit in the Capital Subaccount equals the Required Capital Level and (d) all other fees and expenses due and owing and required or allowed to be paid under Section 8.02 of the Indenture as of such date shall have been paid in full; provided, that, with respect to any Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment occurring after the date that is one year prior to the last Scheduled Final Payment Date for the Storm Recovery Bonds, the Periodic Payment Requirements shall be calculated to ensure that sufficient Storm Recovery Charges will be collected to retire the Storm Recovery Bonds in full as of the next Payment Date.
“Periodic Principal” means, with respect to any Payment Date, the excess, if any, of the Outstanding Amount of Storm Recovery Bonds over the outstanding principal balance specified for such Payment Date on the Expected Sinking Fund Schedule.
“Permitted Lien” means the Lien created by the Indenture.
“Permitted Successor” is defined in Section 5.02 of the Sale Agreement.
“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Governmental Authority.
“Predecessor Storm Recovery Bond” means, with respect to any particular Storm Recovery Bond, every previous Storm Recovery Bond evidencing all or a portion of the same debt as that evidenced by such particular Storm Recovery Bond, and, for the purpose of this definition, any Storm Recovery Bond authenticated and delivered under Section 2.06 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Storm Recovery Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Storm Recovery Bond.
“Premises” is defined in Section 1(g) of the Administration Agreement.
“Proceeding” means any suit in equity, action at law or other judicial or administrative proceeding.
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“Projected Unpaid Balance” means, as of any Payment Date, the sum of the projected outstanding principal amount of each Tranche of Storm Recovery Bonds for such Payment Date set forth in the Expected Sinking Fund Schedule.
“Protected Purchaser” has the meaning specified in Section 8-303 of the UCC.:
“Public Staff” means the Public Staff of the Commission, an independent agency established in N.C. Gen. Stat. § 62-15 et seq., that represents the interests of the using and consuming public in matters pending before the Commission.
“Rating Agency” means, with respect to any Tranche of Storm Recovery Bonds, any of Moody’s or S&P that provides a rating with respect to the Storm Recovery Bonds. 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, notice of which designation shall be given to the Indenture Trustee and the Servicer.
“Rating Agency Condition” means, with respect to any action, at least ten Business Days’ prior written notification to each Rating Agency of such action, and written confirmation from each of S&P and Moody’s to the Servicer, the Indenture Trustee and the Issuer that such action will not result in a suspension, reduction or withdrawal of the then current rating by such Rating Agency of any Tranche of Storm Recovery Bonds; provided, that, if, within such ten Business Day period, any Rating Agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such Rating Agency is reviewing and considering the notification, then (a) the Issuer shall be required to confirm that such Rating Agency has received the Rating Agency Condition request and, if it has, promptly request the related Rating Agency Condition confirmation and (b) if the Rating Agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five Business Days following such second request, the applicable Rating Agency Condition requirement shall not be deemed to apply to such Rating Agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a Rating Agency’s right to review or consent).
“Record Date” means one Business Day prior to the applicable Payment Date.
“Registered Holder” means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.
“Regulation AB” means the rules of the SEC promulgated under Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123.
“Reimbursable Expenses” is defined in Section 2 of the Administration Agreement and Section 6.06(a) of the Servicing Agreement.
“Released Parties” is defined in Section 6.02(d) of the Servicing Agreement.
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“Remittance Period” means, with respect to any True-Up Adjustment, the period comprised of 6 consecutive Collection Periods beginning with the Collection Period three months prior to when such True-Up Adjustment would go into effect, from the Closing Date to the first Scheduled Payment Date, and for each subsequent period between Scheduled Payment Dates.
“Required Capital Level” means the amount specified as such in the Series Supplement therefor.
“Requirement of Law” means any foreign, U.S. federal, state or local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Authority or common law.
“Responsible Officer” means, with respect to: (a) the Issuer, any Manager or any duly authorized officer; (b) the Indenture Trustee, any officer within the Corporate Trust Office of such trustee (including the President, any Vice President, any Assistant Vice President, any Secretary, any Assistant Treasurer or any other officer of the Indenture Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, and that has direct responsibility for the administration of the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred to because of such officer’s knowledge and familiarity with the particular subject); (c) any corporation (other than the Indenture Trustee), the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer or any other duly authorized officer of such Person who has been authorized to act in the circumstances; (d) any partnership, any general partner thereof; and (e) any other Person (other than an individual), any duly authorized officer or member of such Person, as the context may require, who is authorized to act in matters relating to such Person.
“Return on Invested Capital” means, for any Payment Date with respect to any Remittance Period, the sum of (i) rate of return, payable to Duke Energy Progress, on its Capital Contribution equal to the rate of interest payable on the longest maturing Tranche of Storm Recovery Bonds plus (ii) any Return on Invested Capital not paid on any prior Payment Date.
“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business. References to S&P are effective so long as S&P is a Rating Agency.
“Sale Agreement” means the Storm Recovery Property Purchase and Sale Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Progress , and acknowledged and accepted by the Indenture Trustee.
“Scheduled Final Payment Date” means, with respect to the Storm Recovery Bonds, the date with respect to each tranche when all interest and principal is scheduled to be paid in accordance with the Expected Sinking Fund Schedule, as specified in the Series Supplement. For the avoidance of doubt, the Scheduled Final Payment Date shall be the last Scheduled Payment Date set forth in the Expected Sinking Fund Schedule. The “last Scheduled Final Payment Date” means the Scheduled Final Payment Date of the latest maturing Tranche of Storm Recovery Bonds.
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“Scheduled Payment Date” means, with respect to each Tranche of Storm Recovery Bonds, each Payment Date on which principal for such Tranche is to be paid in accordance with the Expected Sinking Fund Schedule for such Tranche.
“SEC” means the Securities and Exchange Commission.
“Secured Obligations” means the payment of principal of and premium, if any, interest on, and any other amounts owing in respect of, the Storm Recovery Bonds and all fees, expenses, counsel fees and other amounts due and payable to the Indenture Trustee.
“Secured Parties” means the Indenture Trustee, the Holders and any credit enhancer described in a Series Supplement.
“Securities Act” means the Securities Act of 1933.
“Securities Intermediary” means The Bank of New York Mellon Trust Company, a national banking association, solely in the capacity of a “securities intermediary” as defined in the NY UCC and Federal Book-Entry Regulations or any successor securities intermediary under the Indenture.
“Seller” is defined in the preamble to the Sale Agreement.
“Semi-Annual Servicer’s Certificate” is defined in Section 4.01(c)(ii) of the Servicing Agreement.
“Semi-Annual True-Up Adjustment” means each adjustment to the Storm Recovery Charges made in accordance with Section 4.01(b)(i) of the Servicing Agreement.
“Semi-Annual True-Up Adjustment Date” means the first billing cycle of January and July of each year, commencing in July, 2022.
“Series Supplement” means an indenture supplemental to the Indenture in the form attached as Exhibit B to the Indenture that authorizes the issuance of Storm Recovery Bonds.
“Servicer” means Duke Energy Progress, as Servicer under the Servicing Agreement.
“Servicer Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina, Charlotte, North Carolina or New York, New York are authorized or obligated by law, regulation or executive order to be closed, on which the Servicer maintains normal office hours and conducts business.
“Servicer Default” is defined in Section 7.01 of the Servicing Agreement.
“Servicer Policies and Practices” means, with respect to the Servicer’s duties under Exhibit A to the Servicing Agreement, the policies and practices of the Servicer applicable to such duties that the Servicer follows with respect to comparable assets that it services for itself and, if applicable, others.
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“Servicing Agreement” means the Storm Recovery Property Servicing Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Progress, and acknowledged and accepted by the Indenture Trustee.
“Servicing Fee” is defined in Section 6.06(a) of the Servicing Agreement.
“Servicing Standard” means the obligation of the Servicer to calculate, apply, remit and reconcile proceeds of the Property, including Storm Recovery Charge Payments, and all other Collateral for the benefit of the Issuer and the Holders (a) with the same degree of care and diligence as the Servicer applies with respect to payments owed to it for its own account, (b) in accordance with all applicable procedures and requirements established by the Commission for collection of electric utility tariffs and (c) in accordance with the other terms of the Servicing Agreement.
“Special Payment Date” means the date on which, with respect to any Tranche of Storm Recovery Bonds, any payment of principal of or interest (including any interest accruing upon default) on, or any other amount in respect of, the Storm Recovery Bonds of such Series or Tranche that is not actually paid within five days of the Payment Date applicable thereto is to be made by the Indenture Trustee to the Holders.
“Special Record Date” means, with respect to any Special Payment Date, the close of business on the fifteenth day (whether or not a Business Day) preceding such Special Payment Date.
“Sponsor” means Duke Energy Progress, in its capacity as “sponsor” of the Storm Recovery Bonds within the meaning of Regulation AB.
“State” means any one of the fifty states of the United States of America or the District of Columbia.
“State Pledge” means the pledge of the State of North Carolina as set forth in Section 62-172(k) of the Storm Recovery Law.
“Storms” means Hurricanes Florence, Dorian and Michael and Winter Storm Diego.
“Storm Recovery Bonds” means the Series A Senior Secured Storm Recovery Bonds issued by the Issuer on the Closing Date.
“Storm Recovery Charge Collections” means Storm Recovery Charges actually received by the Servicer to be remitted to the Collection Account.
“Storm Recovery Charge Payments” means the payments made by Customers based on the Storm Recovery Charges.
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“Storm Recovery Charge” means any storm-recovery charges as defined in Section 62-172(a)(15) of the Storm Recovery Law that are authorized by the Financing Order.
“Storm Recovery Collateral” means Collateral for the benefit of Storm Recovery Bonds.
“Storm Recovery Costs” means (i) Duke Energy Progress’s deferred asset balance associated with the Storms, including a return on the unrecovered balance, and with respect to the capital investments, including a deferral of depreciation expense and a return on the investment determined by the Commission to be prudently incurred in Docket No. E-7, Sub 1214 plus (ii) carrying costs through the projected issuances date of the Storm Recovery Bonds, calculated at a rate authorized by the Commission, (iii) plus up-front Financing Costs.
“Storm Recovery Law” means the laws of the State of North Carolina adopted in 2019 enacted as Section 62-172, North Carolina Statutes.
“Storm Recovery Property” means all storm recovery property as defined in Section 62-172(a)(17)a. of the Storm Recovery Law created pursuant to the Financing Order or a Subsequent Financing Order and under the Storm Recovery Law, including the right to impose, bill, charge, collect and receive the Storm Recovery Charges authorized under the Financing Order and to obtain periodic adjustments of the Storm Recovery Charges and all revenue, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in Section 62-172(a)(17)b. of the Storm Recovery Law, regardless of whether such revenues, collections, claims, rights to payments, money, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money or proceeds.
“Storm Recovery Property Records” is defined in Section 5.01 of the Servicing Agreement.
“Storm Recovery Rate Class” means one of the four separate rate classes to whom Charges are allocated for ratemaking purposes in accordance with the Financing Order.
“Storm Recovery Rate Schedule” means the Tariff sheets to be filed with the Commission stating the amounts of the Charges, as such Tariff sheets may be amended or modified from time to time pursuant to a True-Up Adjustment.
“Subaccounts” is defined in Section 8.02(a) of the Indenture.
“Subsequent Financing Order” means, a financing order of the Commission under the Storm Recovery Law issued to Duke Energy Progress subsequent to the Financing Order.
“Successor” means any successor to Duke Energy Progress under the Storm Recovery Law, whether pursuant to any bankruptcy, reorganization or other insolvency proceeding or pursuant to any merger, conversion, acquisition, sale or transfer, by operation of law, as a result of electric utility restructuring, or otherwise.
“Successor Servicer” is defined in Section 3.07(e) of the Indenture.
A-17
“Tail-end Subaccount” is defined in Section 8.02(a) of the Indenture.
“Tariff” means the most current version on file with the Commission.
“Tax Returns” is defined in Section 1(a)(iii) of the Administration Agreement.
“Temporary Storm Recovery Bonds” means Storm Recovery Bonds executed and, upon the receipt of an Issuer Order, authenticated and delivered by the Indenture Trustee pending the preparation of Definitive Storm Recovery Bonds pursuant to Section 2.04 of the Indenture.
“Termination Notice” is defined in Section 7.01 of the Servicing Agreement.
“TPS” means a third party supplier which is authorized by law to sell electric service to a customer using the transmission or distribution system of Duke Energy Progress.
“Tranche Maturity Date” means, with respect to any Tranche of Storm Recovery Bonds, the maturity date therefor, as specified in the Series Supplement therefor.
“True-Up Adjustment” means any Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment, as the case may be.
“Trust Indenture Act” means the Trust Indenture Act of 1939 as in force on the Closing Date, unless otherwise specifically provided.
“UCC” means the Uniform Commercial Code as in effect in the relevant jurisdiction.
“Underwriters” means the underwriters who purchase Storm Recovery Bonds of any Series from the Issuer and sell such Storm Recovery Bonds in a public offering.
“Underwriting Agreement” means the Underwriting Agreement, dated November 17, 2021, by and among the Issuer, Duke Energy Progress, and the representatives of the several Underwriters named therein, as the same may be amended, supplemented or modified from time to time, with respect to the issuance of the Storm Recovery Bonds.
“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and that are not callable at the option of the issuer thereof.
“Weighted Average Days Outstanding” means the weighted average number of days Duke Energy Progress monthly bills to Customers remain outstanding during the calendar year preceding the calculation thereof pursuant to Section 4.01(b)(i) of the Servicing Agreement.
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B. Rules of Construction. Unless the context otherwise requires, in each Basic Document to which this Appendix A is attached:
(a) All accounting terms not specifically defined herein shall be construed in accordance with United States generally accepted accounting principles. To the extent that the definitions of accounting terms in any Basic Document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in such Basic Document shall control.
(b) The term “including” means “including without limitation”, and other forms of the verb “include” have correlative meanings.
(c) All references to any Person shall include such Person’s permitted successors and assigns, and any reference to a Person in a particular capacity excludes such Person in other capacities.
(d) Unless otherwise stated in any of the Basic Documents, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and each of the words “to” and “until” means “to but excluding”.
(e) The words “hereof”, “herein” and “hereunder” and words of similar import when used in any Basic Document shall refer to such Basic Document as a whole and not to any particular provision of such Basic Document. References to Articles, Sections, Appendices and Exhibits in any Basic Document are references to Articles, Sections, Appendices and Exhibits in or to such Basic Document unless otherwise specified in such Basic Document.
(f) The various captions (including the tables of contents) in each Basic Document are provided solely for convenience of reference and shall not affect the meaning or interpretation of any Basic Document.
(g) The definitions contained in this Appendix A apply equally to the singular and plural forms of such terms, and words of the masculine, feminine or neuter gender shall mean and include the correlative words of other genders.
(h) Unless otherwise specified, references to an agreement or other document include references to such agreement or document as from time to time amended, restated, reformed, supplemented or otherwise modified in accordance with the terms thereof (subject to any restrictions on such amendments, restatements, reformations, supplements or modifications set forth in such agreement or document) and include any attachments thereto.
(i) References to any law, rule, regulation or order of a Governmental Authority shall include such law, rule, regulation or order as from time to time in effect, including any amendment, modification, codification, replacement or reenactment thereof or any substitution therefor.
(j) The word “will” shall be construed to have the same meaning and effect as the word “shall”.
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(k) The word “or” is not exclusive.
(l) All terms defined in the relevant Basic Document to which this Appendix A is attached shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein.
(m) A term has the meaning assigned to it.
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Exhibit 4.2
This SERIES SUPPLEMENT, dated as of November 24, 2021 (this “Supplement”), is by and between DUKE ENERGY PROGRESS NC STORM FUNDING LLC, a limited liability company created under the laws of the State of Delaware (the “Issuer”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION (“Bank”), in its capacity as indenture trustee (the “Indenture Trustee”) for the benefit of the Secured Parties under the Indenture dated as of November 24, 2021 (the “Indenture”), by and between the Issuer and THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, in its capacity as Indenture Trustee and in its separate capacity as a securities intermediary.
PRELIMINARY STATEMENT
Section 9.01 of the Indenture provides, among other things, that the Issuer and the Indenture Trustee may at any time enter into an indenture supplemental to the Indenture for the purposes of authorizing the issuance by the Issuer of a Series of the Storm Recovery Bonds and specifying the terms thereof. The Issuer has duly authorized the creation of a Series of the Storm Recovery Bonds with an initial aggregate principal amount of $769,627,000 to be known as Series A Senior Secured Storm Recovery Bonds (the “Series A Storm Recovery Bonds”), and the Issuer and the Indenture Trustee are executing and delivering this Supplement in order to provide for the Series A Storm Recovery Bonds.
All terms used in this Supplement that are defined in the Indenture, either directly or by reference therein, have the meanings assigned to them therein, except to the extent such terms are defined or modified in this Supplement or the context clearly requires otherwise. In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Supplement shall govern.
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GRANTING CLAUSE
With respect to the Series A Storm Recovery Bonds, the Issuer hereby Grants to the Indenture Trustee, as Indenture Trustee for the benefit of the Secured Parties of the Series A Storm Recovery Bonds, all of the Issuer’s right, title and interest (whether now owned or hereafter acquired or arising) in and to (a) the Storm Recovery Property created under and pursuant to the Financing Order and the Storm Recovery Law, and transferred by the Seller to the Issuer on the date hereof pursuant to the Sale Agreement (including, to the fullest extent permitted by law, the right to impose, bill, charge, collect and receive the Storm Recovery Charges, the right to obtain periodic adjustments to the Storm Recovery Charges, and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests created under the Financing Order), (b) all Storm Recovery Charges related to the Storm Recovery Property, (c) the Sale Agreement and the Bill of Sale executed in connection therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the Storm Recovery Property and the Series A Storm Recovery Bonds, (d) the Servicing Agreement, the Administration Agreement, the Intercreditor Agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing Storm Recovery Property and the Series A Storm Recovery Bonds, (e) the Collection Account for the Series A Storm Recovery Bonds, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, (f) all rights to compel the Servicer to file for and obtain periodic adjustments to the Storm Recovery Charges in accordance with N.C. Gen. Stat. § 62-172(b)(3)b.6. and the Financing Order, (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute Storm Recovery Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (h) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, and (i) all payments on or under, and all proceeds in respect of, any or all of the foregoing (the “Storm Recovery Collateral”), it being understood that the following do not constitute Storm Recovery Collateral: (x) cash that has been released pursuant to the terms of the Indenture, including Section 8.02(e)(x) of the Indenture and, following retirement of all Outstanding Series A Storm Recovery Bonds, pursuant to Section 8.02(e)(xii) of the Indenture, (y) amounts deposited with the Issuer on the Closing Date, for payment of costs of issuance with respect to the Series A Storm Recovery Bonds (together with any interest earnings thereon) or (z) proceeds from the sale of the Series A Storm Recovery Bonds required to pay the purchase price for the Storm Recovery Property and paid pursuant to the Sale Agreement for such Series and upfront Financing Costs, it being understood that such amounts described in clause (x) and clause (y) above shall not be subject to Section 3.17 of the Indenture. For the avoidance of doubt, any Storm Recovery Property created with respect to an Additional Series shall not be Storm Recovery Collateral.
The foregoing Grant is made in trust to secure the Secured Obligations equally and ratably without prejudice, priority or distinction, except as expressly provided in the Indenture, to secure compliance with the provisions of the Indenture with respect to the Series A Storm Recovery Bonds, all as provided in the Indenture and to secure the performance by the Issuer of all of its obligations under the Indenture. The Indenture and this Supplement constitute a security agreement within the meaning of the Storm Recovery Law and under the UCC to the extent that the provisions of the UCC are applicable hereto.
The Indenture Trustee, as indenture trustee on behalf of the Secured Parties of the Series A Storm Recovery Bonds, acknowledges such Grant and accepts the trusts under this Supplement and the Indenture in accordance with the provisions of this Supplement and the Indenture.
SECTION 1. Designation. The Series A Storm Recovery Bonds shall be designated generally as the Storm Recovery Bonds, and further denominated as tranches A-1 through A-3.
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SECTION 2. Initial Principal Amount; Bond Interest Rate; Scheduled Final Payment Date; Final Maturity Date; Required Capital Level. The Series A Storm Recovery Bonds of each tranche shall have the initial principal amount, bear interest at the rates per annum (the “Bond Interest Rate”) and shall have the Scheduled Final Payment Dates and the Final Maturity Dates set forth below:
| Weighted Average Life | Initial Principal Amount | Bond Interest Rate | Scheduled Final Payment Date | Final Maturity Date | ||||||||||
| 3.6 | $ | 221,000,000 | 1.295 | % | July 1, 2028 | July 1, 2030 | ||||||||
| 11.3 | $ | 352,000,000 | 2.387 | % | July 1, 2037 | July 1, 2039 | ||||||||
| 17.8 | $ | 196,627,000 | 2.799 | % | July 1, 2041 | July 1, 2043 | ||||||||
The Bond Interest Rate shall be computed by the Issuer on the basis of a 360-day year of twelve 30-day months.
The Required Capital Level for the Series A Storm Recovery Bonds shall be equal to 0.5 % of the initial principal amount thereof.
SECTION 3. Authentication Date; Payment Dates; Expected Sinking Fund Schedule for Principal; Periodic Interest; Book-Entry Storm Recovery Bonds; Indenture Trustee Caps.
(a) Authentication Date. The Series A Storm Recovery Bonds that are authenticated and delivered by the Indenture Trustee to or upon the order of the Issuer on November 24, 2021 (the “Closing Date”) shall have as their date of authentication November 24, 2021.
(b) Payment Dates. The “Payment Dates” for the Series A Storm Recovery Bonds are January 1st and July 1st of each year or, if any such date is not a Business Day, the next Business Day, commencing on July 1st, 2022 and continuing until the earlier of repayment of the Series A Storm Recovery Bonds in full and the Final Maturity Date.
(c) Expected Sinking Fund Schedule for Principal. Unless an Event of Default shall have occurred and be continuing, on each Payment Date, the Indenture Trustee shall distribute to the Holders of record as of the related Record Date amounts payable pursuant to Section 8.02(e) of the Indenture as principal, in the following order and priority: (1) to the holders of the Series A, tranche A-1 Storm Recovery Bonds, until the Outstanding Amount of such Series A, tranche A-1 Storm Recovery Bonds thereof has been reduced to zero; (2) to the holders of the Series A, tranche A-2 Storm Recovery Bonds, until the Outstanding Amount of such Series A, tranche A-2 Storm Recovery Bonds thereof has been reduced to zero; and (3) to the holders of the Series A, tranche A-3 Storm Recovery Bonds, until the Outstanding Amount of such Series A, tranche A-3 Storm Recovery Bonds thereof has been reduced to zero; provided, however, that in no event shall a principal payment pursuant to this Section 3(c) on any tranche on a Payment Date be greater than the amount necessary to reduce the Outstanding Amount of such tranche of Storm Recovery Bonds to the amount specified in the Expected Sinking Fund Schedule that is attached as Schedule A hereto for such tranche and Payment Date.
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(d) Periodic Interest. “Periodic Interest” will be payable on each tranche of the Series A Storm Recovery Bonds on each Payment Date in an amount equal to one-half of the product of (i) the applicable Bond Interest Rate and (ii) the Outstanding Amount of the related tranche of Series A Storm Recovery Bonds as of the close of business on the preceding Payment Date after giving effect to all payments of principal made to the Holders of the related tranche of Series A Storm Recovery Bonds on such 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 will accrue from and including the Closing Date to, but excluding, the following Payment Date.
(e) Book-Entry Storm Recovery Bonds. The Series A Storm Recovery Bonds shall be Book-Entry Storm Recovery Bonds, and the applicable provisions of Section 2.11 of the Indenture shall apply to the Series A Storm Recovery Bonds.
(f) Indenture Trustee Cap. The amount payable with respect to the Series A Storm Recovery Bonds pursuant to Section 8.02(e)(i) of the Indenture shall not exceed $200,000 annually; provided, however, that the Indenture Trustee Cap shall be disregarded and inapplicable upon the acceleration of the Storm Recovery Bonds following the occurrence of an Event of Default.
SECTION 4. Authorized Denominations. The Series A Storm Recovery Bonds shall be issuable in denominations of $2,000 and integral multiples of $1,000 in excess thereof, except for one bond, which may be a smaller denomination (the “Authorized Denominations”).
SECTION 5. Delivery and Payment for the Series A Storm Recovery Bonds; Form of the Series A Storm Recovery Bonds. The Indenture Trustee shall deliver the Series A Storm Recovery Bonds to the Issuer when authenticated in accordance with Section 2.03 of the Indenture. The Series A Storm Recovery Bonds of each tranche shall be in the form of Exhibits A-1, A-2 and A-3 hereto.
SECTION 6. Ratification 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. This Supplement amends, modifies and supplements the Indenture only insofar as it relates to the Series A Storm Recovery Bonds.
SECTION 7. Counterparts. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.
SECTION 8. Governing Law. This Supplement shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws; provided, that, except as set forth in Section 8.02(b) of the Indenture, the creation, attachment and perfection of any Liens created under the Indenture in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.
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SECTION 9. Issuer Obligation. No recourse may be taken directly or indirectly by the Holders with respect to the obligations of the Issuer on the Series A Storm Recovery Bonds, under the Indenture or this Supplement or any certificate or other writing delivered in connection herewith or therewith, against (a) any owner of a beneficial interest in the Issuer (including Duke Energy Progress) or (b) any shareholder, partner, owner, beneficiary, officer, director, employee or agent of the Indenture Trustee, the Managers or any owner of a beneficial interest in the Issuer (including Duke Energy Progress) in its individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed. Each Holder by accepting a Series A Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Series A Storm Recovery Bonds.
SECTION 10. Indenture Trustee Disclaimer. The Indenture Trustee is not responsible for the validity or sufficiency of this Supplement or for the recitals contained herein.
SECTION 11. Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial. Each of the Issuer and the Indenture Trustee and each Holder (by its acceptance of the Storm Recovery Bonds) hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court sitting in The Borough of Manhattan in The City of New York or any U.S. federal court sitting in The Borough of Manhattan in The City of New York in respect of any suit, action or proceeding arising out of or relating to this Supplement and the Series A Storm Recovery Bonds and irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, jurisdiction of the aforesaid courts. Each of the Issuer and the Indenture Trustee irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury.
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IN WITNESS WHEREOF, the Issuer and the Indenture 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.
| DUKE ENERGY PROGRESS NC STORM FUNDING LLC, | |||
| as Issuer | |||
| By: | |||
| Name: | Christopher R. Bauer | ||
| Title: | Assistant Treasurer | ||
| THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, | |||
| not in its individual capacity but solely as Indenture Trustee and as Securities Intermediary | |||
| By: | |||
| Name: | [ ] | ||
| Title: | [ ] | ||
SCHEDULE A
TO SERIES SUPPLEMENT
Expected SINKING FUND Schedule*
| Date | tranche A-1 | tranche A-2 | tranche A-3 | |||||||||
| Closing Date | $ | 0 | $ | 0 | $ | 0 | ||||||
| July 1, 2022 | $ | 15,219,001 | $ | 0 | $ | 0 | ||||||
| January 1, 2023 | $ | 16,931,986 | $ | 0 | $ | 0 | ||||||
| July 1, 2023 | $ | 17,019,862 | $ | 0 | $ | 0 | ||||||
| January 1, 2024 | $ | 17,108,196 | $ | 0 | $ | 0 | ||||||
| July 1, 2024 | $ | 17,196,987 | $ | 0 | $ | 0 | ||||||
| January 1, 2025 | $ | 17,286,240 | $ | 0 | $ | 0 | ||||||
| July 1, 2025 | $ | 17,375,955 | $ | 0 | $ | 0 | ||||||
| January 1, 2026 | $ | 17,466,136 | $ | 0 | $ | 0 | ||||||
| July 1, 2026 | $ | 17,556,786 | $ | 0 | $ | 0 | ||||||
| January 1, 2027 | $ | 17,647,905 | $ | 0 | $ | 0 | ||||||
| July 1, 2027 | $ | 17,739,498 | $ | 0 | $ | 0 | ||||||
| January 1, 2028 | $ | 17,831,566 | $ | 0 | $ | 0 | ||||||
| July 1, 2028 | $ | 14,619,882 | $ | 3,304,230 | $ | 0 | ||||||
| January 1, 2029 | $ | 0 | $ | 18,038,268 | $ | 0 | ||||||
| July 1, 2029 | $ | 0 | $ | 18,247,242 | $ | 0 | ||||||
| January 1, 2030 | $ | 0 | $ | 18,458,636 | $ | 0 | ||||||
| July 1, 2030 | $ | 0 | $ | 18,672,479 | $ | 0 | ||||||
| January 1, 2031 | $ | 0 | $ | 18,888,800 | $ | 0 | ||||||
| July 1, 2031 | $ | 0 | $ | 19,107,627 | $ | 0 | ||||||
| January 1, 2032 | $ | 0 | $ | 19,328,989 | $ | 0 | ||||||
| July 1, 2032 | $ | 0 | $ | 19,552,915 | $ | 0 | ||||||
| January 1, 2033 | $ | 0 | $ | 19,779,435 | $ | 0 | ||||||
| July 1, 2033 | $ | 0 | $ | 20,008,580 | $ | 0 | ||||||
| January 1, 2034 | $ | 0 | $ | 20,240,380 | $ | 0 | ||||||
| July 1, 2034 | $ | 0 | $ | 20,474,864 | $ | 0 | ||||||
| January 1, 2035 | $ | 0 | $ | 20,712,066 | $ | 0 | ||||||
| July 1, 2035 | $ | 0 | $ | 20,952,015 | $ | 0 | ||||||
| January 1, 2036 | $ | 0 | $ | 21,194,744 | $ | 0 | ||||||
| July 1, 2036 | $ | 0 | $ | 21,440,286 | $ | 0 | ||||||
| January 1, 2037 | $ | 0 | $ | 21,688,671 | $ | 0 | ||||||
| July 1, 2037 | $ | 0 | $ | 11,909,773 | $ | 10,030,161 | ||||||
| January 1, 2038 | $ | 0 | $ | 0 | $ | 22,216,877 | ||||||
| July 1, 2038 | $ | 0 | $ | 0 | $ | 22,524,692 | ||||||
| January 1, 2039 | $ | 0 | $ | 0 | $ | 22,836,771 | ||||||
| July 1, 2039 | $ | 0 | $ | 0 | $ | 23,153,175 | ||||||
| January 1, 2040 | $ | 0 | $ | 0 | $ | 23,473,961 | ||||||
| July 1, 2040 | $ | 0 | $ | 0 | $ | 23,799,194 | ||||||
| January 1, 2041 | $ | 0 | $ | 0 | $ | 24,128,931 | ||||||
| July 1, 2041 | $ | 0 | $ | 0 | $ | 24,463,238 | ||||||
| Total | $ | 221,000,000 | $ | 352,000,000 | $ | 196,627,000 | ||||||
* Totals may not add up due to rounding.
Outstanding Principal Balance
| Date | tranche A-1 | tranche A-2 | tranche A-3 | |||||||||
| Issuance Date | $ | 221,000,000 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2022 | $ | 205,780,999 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2023 | $ | 188,849,013 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2023 | $ | 171,829,151 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2024 | $ | 154,720,955 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2024 | $ | 137,523,968 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2025 | $ | 120,237,728 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2025 | $ | 102,861,773 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2026 | $ | 85,395,637 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2026 | $ | 67,838,851 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2027 | $ | 50,190,946 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2027 | $ | 32,451,448 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2028 | $ | 14,619,882 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2028 | $ | 0 | $ | 348,695,770 | $ | 196,627,000 | ||||||
| January 1, 2029 | $ | 0 | $ | 330,657,502 | $ | 196,627,000 | ||||||
| July 1, 2029 | $ | 0 | $ | 312,410,260 | $ | 196,627,000 | ||||||
| January 1, 2030 | $ | 0 | $ | 293,951,624 | $ | 196,627,000 | ||||||
| July 1, 2030 | $ | 0 | $ | 275,279,145 | $ | 196,627,000 | ||||||
| January 1, 2031 | $ | 0 | $ | 256,390,345 | $ | 196,627,000 | ||||||
| July 1, 2031 | $ | 0 | $ | 237,282,718 | $ | 196,627,000 | ||||||
| January 1, 2032 | $ | 0 | $ | 217,953,729 | $ | 196,627,000 | ||||||
| July 1, 2032 | $ | 0 | $ | 198,400,814 | $ | 196,627,000 | ||||||
| January 1, 2033 | $ | 0 | $ | 178,621,379 | $ | 196,627,000 | ||||||
| July 1, 2033 | $ | 0 | $ | 158,612,799 | $ | 196,627,000 | ||||||
| January 1, 2034 | $ | 0 | $ | 138,372,419 | $ | 196,627,000 | ||||||
| July 1, 2034 | $ | 0 | $ | 117,897,555 | $ | 196,627,000 | ||||||
| January 1, 2035 | $ | 0 | $ | 97,185,489 | $ | 196,627,000 | ||||||
| July 1, 2035 | $ | 0 | $ | 76,233,474 | $ | 196,627,000 | ||||||
| January 1, 2036 | $ | 0 | $ | 55,038,730 | $ | 196,627,000 | ||||||
| July 1, 2036 | $ | 0 | $ | 33,598,444 | $ | 196,627,000 | ||||||
| January 1, 2037 | $ | 0 | $ | 11,909,773 | $ | 196,627,000 | ||||||
| July 1, 2037 | $ | 0 | $ | 0 | $ | 186,596,839 | ||||||
| January 1, 2038 | $ | 0 | $ | 0 | $ | 164,379,962 | ||||||
| July 1, 2038 | $ | 0 | $ | 0 | $ | 141,855,271 | ||||||
| January 1, 2039 | $ | 0 | $ | 0 | $ | 119,018,500 | ||||||
| July 1, 2039 | $ | 0 | $ | 0 | $ | 95,865,325 | ||||||
| January 1, 2040 | $ | 0 | $ | 0 | $ | 72,391,363 | ||||||
| July 1, 2040 | $ | 0 | $ | 0 | $ | 48,592,169 | ||||||
| January 1, 2041 | $ | 0 | $ | 0 | $ | 24,463,238 | ||||||
| July 1, 2041 | $ | 0 | $ | 0 | $ | 0 | ||||||
EXHIBIT A-1
TO SERIES SUPPLEMENT
FORM OF Series A tranche A-1 OF STORM RECOVERY BONDS
See Attached
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OR ENTITY IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
| No. 1 | $221,000,000 |
| tranche Designation A-1 | CUSIP No.: 26444BAA2 |
THE PRINCIPAL OF THIS SERIES A, tranche A-1 SENIOR SECURED STORM RECOVERY BOND, (THIS “STORM RECOVERY BOND”) WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS STORM RECOVERY BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THE HOLDER OF THIS STORM RECOVERY BOND HAS NO RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK ONLY TO THE STORM RECOVERY COLLATERAL, AS DESCRIBED IN THE INDENTURE, FOR PAYMENT OF ANY AMOUNTS DUE HEREUNDER. ALL OBLIGATIONS OF THE ISSUER OF THIS STORM RECOVERY BOND UNDER THE TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL HEREOF OR AS OTHERWISE PROVIDED IN SECTION 3.10(b) OR ARTICLE IV OF THE INDENTURE. THE HOLDER OF THIS 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 THIS STORM RECOVERY BOND, 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 PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES. NOTHING IN THIS PARAGRAPH SHALL PRECLUDE, OR BE DEEMED TO ESTOP, SUCH HOLDER (A) FROM TAKING OR OMITTING TO TAKE ANY ACTION PRIOR TO SUCH DATE IN (I) ANY CASE OR PROCEEDING VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE ISSUER UNDER OR PURSUANT TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR PROCEEDING PERTAINING TO THE ISSUER THAT IS FILED OR COMMENCED BY OR ON BEHALF OF A PERSON OTHER THAN SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY PERSON TO WHICH SUCH HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE CONVEYED ANY PART OF THE OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT TO ANY SUCH LAW OR (B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION THAT IS NOT AN INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST THE ISSUER OR ANY OF ITS PROPERTIES.
NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NORTH CAROLINA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, OR INTEREST ON, THIS STORM RECOVERY BOND.
DUKE ENERGY PROGRESS NC STORM FUNDING LLC
SERIES A SENIOR SECURED STORM RECOVERY BONDS, tranche A-1
| BOND INTEREST RATE | ORIGINAL PRINCIPAL AMOUNT | SCHEDULED FINAL PAYMENT DATE | FINAL MATURITY DATE | |||||||
| 1.295 | % | $ | 221,000,000 | July 1, 2028 | July 1, 2030 | |||||
Duke Energy Progress NC Storm Funding LLC, a limited liability company created under the laws of the State of Delaware (herein referred to as the “Issuer”), for value received, hereby promises to pay to Cede & Co., or registered assigns, the Original Principal Amount shown above in annual installments on the Payment Dates and in the amounts specified below or, if less, the amounts determined pursuant to Section 8.02 of the Indenture, in each year, commencing on the date determined as provided below and ending on or before the Final Maturity Date shown above and to pay interest, at the Bond Interest Rate shown above, on each January 1st and July 1st or, if any such day is not a Business Day, the next Business Day, commencing on July 1, 2022 and continuing until the earlier of the payment in full of the principal hereof and the Final Maturity Date (each, a “Payment Date”), on the principal amount of this Storm Recovery Bond. Interest on this 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 the date of issuance. Interest will be computed on the basis of 360-day year of twelve 30-day months. Such principal of and interest on this Storm Recovery Bond shall be paid in the manner specified below.
The principal of and interest on this 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 Storm Recovery Bond shall be applied first to interest due and payable on this Storm Recovery Bond as provided above and then to the unpaid principal of and premium, if any, on this Storm Recovery Bond, all in the manner set forth in the Indenture.
Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual or electronic signature, this Storm Recovery Bond shall not be entitled to any benefit under the Indenture referred to below or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually, electronically or in facsimile, by its Responsible Officer.
| Date: November 24, 2021 | DUKE ENERGY PROGRESS NC STORM FUNDING LLC, | ||
| as Issuer | |||
| By: | |||
| Name: | Christopher R. Bauer | ||
| Title: | Assistant Treasurer | ||
INDENTURE TRUSTEE’S
CERTIFICATE OF AUTHENTICATION
Dated: November 24, 2021
This is one of the Series A, tranche A-1 Senior Secured Storm Recovery Bonds, designated above and referred to in the within-mentioned Indenture.
| THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, | |||
| as Indenture Trustee | |||
| By: | |||
| Name: | [ ] | ||
| Title: | [ ] | ||
This Senior Secured Storm Recovery Bond, Series A, tranche A-1 is one of a duly authorized issue of Series A Senior Secured Storm Recovery Bonds of the Issuer (herein called the “Series A Bonds”), which Bonds are issuable in one or more Series, which Series are issuable in one or more tranches. The Series A Bonds consist of three tranches, including the tranche A-1 Series A Senior Secured Storm Recovery Bonds, which include this Senior Secured Storm Recovery Bond (herein called the “tranche A-1 Storm Recovery Bonds”), all issued and to be issued under that certain Indenture dated as of November 24, 2021 (as supplemented by the Series Supplement (as defined below), the “Indenture”), between the Issuer and, in its capacity as indenture trustee (the “Indenture Trustee”, which term includes any successor indenture trustee under the Indenture) and in its separate capacity as a securities intermediary (the “Securities Intermediary”, which term includes any successor securities intermediary under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Bonds. For purposes herein, “Series Supplement” means that certain Series Supplement dated as of November 24, 2021 between the Issuer and the Indenture Trustee. All terms used in this tranche A-1 Storm Recovery Bond that are defined in the Indenture, as amended, restated, supplemented or otherwise modified from time to time, shall have the meanings assigned to such terms in the Indenture.
All tranches of Series A Bonds are and will be equally and ratably secured by the Storm Recovery Collateral pledged as security therefor as provided in the Indenture.
The principal of this tranche A-1 Storm Recovery Bond shall be payable on each Payment Date only to the extent that amounts in the Collection Account for the Series A Bonds are available therefor, and only until the outstanding principal balance thereof on the preceding Payment Date (after giving effect to all payments of principal, if any, made on the preceding Payment Date) has been reduced to the principal balance specified in the Expected Sinking Fund Schedule that is attached to the Series Supplement as Schedule A, unless payable earlier because an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Series A Bonds to be immediately due and payable in accordance with Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). However, actual principal payments may be made in lesser than expected amounts and at later than expected times as determined pursuant to Section 8.02 of the Indenture. The entire unpaid principal amount of this tranche A-1 Storm Recovery Bond shall be due and payable on the Final Maturity Date hereof. Notwithstanding the foregoing, the entire unpaid principal amount of the 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 Indenture Trustee or the Holders of the Bonds representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Storm Recovery Bonds to be immediately due and payable in the manner provided in Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). All principal payments on the tranche A-1 Storm Recovery Bonds shall be made pro rata to the Holders of the tranche A-1 Storm Recovery Bonds entitled thereto based on the respective principal amounts of the tranche A-1 Storm Recovery Bonds held by them.
Payments of interest on this tranche A-1 Storm Recovery Bond due and payable on each Payment Date, together with the installment of principal or premium, if any, shall be made by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder of this tranche A-1 Storm Recovery Bond (or one or more Predecessor Storm Recovery Bonds) on the 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 Indenture or the Series Supplement, except that (a) upon application to the Indenture Trustee by any Holder owning a Global Storm Recovery Bond evidencing this tranche A-1 Storm Recovery Bond not later than the applicable Record Date, payment will be made by wire transfer to an account maintained by such Holder, and (b) if this tranche A-1 Storm Recovery Bond is held in Book-Entry Form, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Storm Recovery Bond evidencing this tranche A-1 Storm Recovery Bond unless and until such Global Storm Recovery Bond is exchanged for Definitive Storm Recovery Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to this tranche A-1 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 on the Storm Recovery Bond Register as of the applicable Record Date without requiring that this tranche A-1 Storm Recovery Bond be submitted for notation of payment. Any reduction in the principal amount of this tranche A-1 Storm Recovery Bond (or any one or more Predecessor Storm Recovery Bonds) effected by any payments made on any Payment Date shall be binding upon all future Holders of this tranche A-1 Storm Recovery Bond and of any 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 A-1 Storm Recovery Bond on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice sent no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of this tranche A-1 Storm Recovery Bond and shall specify the place where this tranche A-1 Storm Recovery Bond may be presented and surrendered for payment of such installment.
The Issuer shall pay interest on overdue installments of interest at the Bond Interest Rate to the extent lawful.
This tranche A-1 Storm Recovery Bond is a “storm recovery bond” as such term is defined in the Storm Recovery Law. Principal and interest due and payable on this tranche A-1 Storm Recovery Bond are payable from and secured primarily by Storm Recovery Property created and established by the Financing Order obtained from the North Carolina Utilities Commission pursuant to the Storm Recovery Law. Storm Recovery Property consists of the rights and interests of the Seller in the Financing Order, including the right to impose, bill, collect and receive Storm Recovery Charges, the right to obtain True-Up Adjustments and all revenue, collections, claims, rights to payments, payments, moneys and proceeds arising out of the rights and interests created under the Financing Order.
Under the laws of the State of North Carolina in effect on the date hereof, pursuant to N.C. Gen. Stat. § 62-172(k), the State of North Carolina has pledged to agree and work with the Holders, the Indenture Trustee, other Financing Parties that the State of North Carolina will not (a) alter the provisions of N.C. Gen. Stat. § 62-172(k) which make the Charges imposed by the Financing Order or Subsequent Financing Order irrevocable, binding, and nonbypassable charges; (b) take or permit any action that impairs or would impair the value of Storm Recovery Property or revises the Storm Recovery Costs for which recovery is authorized; (c) in any way impair the rights and remedies of the bondholders, assignees and other financing parties; (d) or except as authorized under the Storm Recovery Law, reduce, alter, or impair Charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, the Indenture Trustee and any 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.
The Issuer and Duke Energy Progress hereby acknowledge that the purchase of this Storm Recovery Bond by the Holder hereof or the purchase of any beneficial interest herein by any Person are made in reliance on the foregoing pledge.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this tranche A-1 Storm Recovery Bond may be registered on the Storm Recovery Bond Register upon surrender of this tranche A-1 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) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee, and (b) such other documents as the Indenture Trustee may require, and thereupon one or more new Storm Recovery Bonds of Authorized Denominations and in the same aggregate 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 A-1 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 such registration of transfer or exchange, other than exchanges pursuant to Section 2.04 or Section 2.06 of the Indenture not involving any transfer.
Each Holder, by acceptance of a tranche A-1 Storm Recovery Bond, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the tranche A-1 Storm Recovery Bonds or under the Indenture or any certificate or other writing delivered in connection therewith, against (a) any owner of a membership interest in the Issuer (including Duke Energy Progress) or (b) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Duke Energy Progress) in its respective individual or corporate capacities, or of any successor or assign of any of them in their individual or corporate capacities, except as any such Person may have expressly agreed in writing. Each Holder by accepting a tranche A-1 Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the tranche A-1 Storm Recovery Bonds.
Prior to the due presentment for registration of transfer of this tranche A-1 Storm Recovery Bond, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this tranche A-1 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 A-1 Storm Recovery Bond and for all other purposes whatsoever, whether or not this tranche A-1 Storm Recovery Bond be overdue, and none of the Issuer, the Indenture Trustee or 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 Holders of the Storm Recovery Bonds under the Indenture at any time by the Issuer with the consent of the Holders representing a majority of the Outstanding Amount of all Storm Recovery Bonds at the time outstanding of each tranche to be affected and upon the satisfaction of the Rating Agency Condition and Commission Condition. The Indenture also contains provisions permitting the Holders representing specified percentages of the Outstanding Amount of the Storm Recovery Bonds, on behalf of the Holders of all the Storm Recovery Bonds, with the consent of the Commission, 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 Holder of this tranche A-1 Storm Recovery Bond (or any one of more Predecessor Storm Recovery Bonds) shall be conclusive and binding upon such Holder and upon all future Holders of this tranche A-1 Storm Recovery Bond and of any tranche A-1 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 A-1 Storm Recovery Bond. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Storm Recovery Bonds issued thereunder, but with the satisfaction of the Commission Condition.
The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Issuer on a Storm Recovery Bond and (b) certain restrictive covenants and the related Events of Default, upon compliance by the Issuer with certain conditions set forth in the Indenture, which provisions apply to this tranche A-1 Storm Recovery Bond.
The term “Issuer” as used in this tranche A-1 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, subject to the rights of the Indenture Trustee and the Holders under the Indenture.
The tranche A-1 Storm Recovery Bonds are issuable only in registered form in denominations as provided in the Indenture and the Series Supplement subject to certain limitations therein set forth.
This tranche A-1 Storm Recovery Bond, the Indenture and the Series Supplement shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws; provided, that the creation, attachment and perfection of any Liens created under the Indenture in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.
No reference herein to the Indenture and no provision of this tranche A-1 Storm Recovery Bond or of the Indenture shall alter or impair the obligation, which is absolute and unconditional, to pay the principal of and interest on this tranche A-1 Storm Recovery Bond at the times, place and rate and in the coin or currency herein prescribed.
The Issuer and the Indenture Trustee, by entering into the Indenture, and the Holders and any Persons holding a beneficial interest in any tranche A-1 Storm Recovery Bond, by acquiring any tranche A-1 Storm Recovery Bond or interest therein, (a) express their intention that, solely for the purpose of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purpose of state, local and other taxes, the tranche A-1 Storm Recovery Bonds qualify under applicable tax law as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral and (b) solely for purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the tranche A-1 Storm Recovery Bonds are outstanding, agree to treat the tranche A-1 Storm Recovery Bonds as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral unless otherwise required by appropriate taxing authorities.
ABBREVIATIONS
The following abbreviations, when used above on this Storm Recovery Bond, shall be construed as though they were written out in full according to applicable laws or regulations.
| TEN COM | as tenants in common |
| TEN ENT | as tenants by the entireties |
| JT TEN | as joint tenants with right of survivorship and not as tenants in common |
| UNIF GIFT MIN ACT | ___________________ Custodian ______________________ |
| (Custodian) (minor) | |
Under Uniform Gifts to Minor Act (____________________) (State) |
Additional abbreviations may also be used though not in the above list.
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 within tranche A-1 Storm Recovery Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ____________, attorney, to transfer said tranche A-1 Storm Recovery Bond on the books kept for registration thereof, with full power of substitution in the premises.
| Dated: ________________ | |
| Signature Guaranteed: | |
The signature to this assignment must correspond with the name of the registered owner as it appears on the within tranche A-1 Storm Recovery Bond in every particular, without alteration, enlargement or any change whatsoever.
NOTE: Signature(s) must be guaranteed by an institution that is a member of: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee.
EXHIBIT A-2
TO SERIES SUPPLEMENT
FORM OF Series A tranche A-2 OF STORM RECOVERY BONDS
See Attached
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OR ENTITY IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
| No. 2 | $352,000,000 |
| tranche Designation A-2 | CUSIP No.: 26444BAB0 |
THE PRINCIPAL OF THIS SERIES A, tranche A-2 SENIOR SECURED STORM RECOVERY BOND, (THIS “STORM RECOVERY BOND”) WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS STORM RECOVERY BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THE HOLDER OF THIS STORM RECOVERY BOND HAS NO RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK ONLY TO THE STORM RECOVERY COLLATERAL, AS DESCRIBED IN THE INDENTURE, FOR PAYMENT OF ANY AMOUNTS DUE HEREUNDER. ALL OBLIGATIONS OF THE ISSUER OF THIS STORM RECOVERY BOND UNDER THE TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL HEREOF OR AS OTHERWISE PROVIDED IN SECTION 3.10(b) OR ARTICLE IV OF THE INDENTURE. THE HOLDER OF THIS 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 THIS STORM RECOVERY BOND, 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 PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES. NOTHING IN THIS PARAGRAPH SHALL PRECLUDE, OR BE DEEMED TO ESTOP, SUCH HOLDER (A) FROM TAKING OR OMITTING TO TAKE ANY ACTION PRIOR TO SUCH DATE IN (I) ANY CASE OR PROCEEDING VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE ISSUER UNDER OR PURSUANT TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR PROCEEDING PERTAINING TO THE ISSUER THAT IS FILED OR COMMENCED BY OR ON BEHALF OF A PERSON OTHER THAN SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY PERSON TO WHICH SUCH HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE CONVEYED ANY PART OF THE OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT TO ANY SUCH LAW OR (B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION THAT IS NOT AN INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST THE ISSUER OR ANY OF ITS PROPERTIES.
NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NORTH CAROLINA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, OR INTEREST ON, THIS STORM RECOVERY BOND.
DUKE ENERGY PROGRESS NC STORM FUNDING LLC
SERIES A SENIOR SECURED STORM RECOVERY BONDS, tranche A-2
| BOND INTEREST RATE | ORIGINAL PRINCIPAL AMOUNT | SCHEDULED FINAL PAYMENT DATE | FINAL MATURITY DATE | |||||||
| 2.387 | % | $ | 352,000,000 | July 1, 2037 | July 1, 2039 | |||||
Duke Energy Progress NC Storm Funding LLC, a limited liability company created under the laws of the State of Delaware (herein referred to as the “Issuer”), for value received, hereby promises to pay to Cede & Co., or registered assigns, the Original Principal Amount shown above in annual installments on the Payment Dates and in the amounts specified below or, if less, the amounts determined pursuant to Section 8.02 of the Indenture, in each year, commencing on the date determined as provided below and ending on or before the Final Maturity Date shown above and to pay interest, at the Bond Interest Rate shown above, on each January 1st and July 1st or, if any such day is not a Business Day, the next Business Day, commencing on July 1, 2022 and continuing until the earlier of the payment in full of the principal hereof and the Final Maturity Date (each, a “Payment Date”), on the principal amount of this Storm Recovery Bond. Interest on this 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 the date of issuance. Interest will be computed on the basis of 360-day year of twelve 30-day months. Such principal of and interest on this Storm Recovery Bond shall be paid in the manner specified below.
The principal of and interest on this 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 Storm Recovery Bond shall be applied first to interest due and payable on this Storm Recovery Bond as provided above and then to the unpaid principal of and premium, if any, on this Storm Recovery Bond, all in the manner set forth in the Indenture.
Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual or electronic signature, this Storm Recovery Bond shall not be entitled to any benefit under the Indenture referred to below or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually, electronically or in facsimile, by its Responsible Officer.
| Date: November 24, 2021 | DUKE ENERGY PROGRESS NC STORM FUNDING LLC, | |
| as Issuer | ||
| By: | ||
| Name: Christopher R. Bauer | ||
| Title: Assistant Treasurer | ||
INDENTURE TRUSTEE’S
CERTIFICATE OF AUTHENTICATION
Dated: November 24, 2021
This is one of the Series A, tranche A-2 Senior Secured Storm Recovery Bonds, designated above and referred to in the within-mentioned Indenture.
| THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, as Indenture Trustee | ||
| By: | ||
| Name:[ ] | ||
| Title: [ ] | ||
This Senior Secured Storm Recovery Bond, Series A, tranche A-2 is one of a duly authorized issue of Series A Senior Secured Storm Recovery Bonds of the Issuer (herein called the “Series A Bonds”), which Bonds are issuable in one or more Series, which Series are issuable in one or more tranches. The Series A Bonds consist of three tranches, including the tranche A-2 Series A Senior Secured Storm Recovery Bonds, which include this Senior Secured Storm Recovery Bond (herein called the “tranche A-2 Storm Recovery Bonds”), all issued and to be issued under that certain Indenture dated as of November 24, 2021 (as supplemented by the Series Supplement (as defined below), the “Indenture”), between the Issuer and, in its capacity as indenture trustee (the “Indenture Trustee”, which term includes any successor indenture trustee under the Indenture) and in its separate capacity as a securities intermediary (the “Securities Intermediary”, which term includes any successor securities intermediary under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Bonds. For purposes herein, “Series Supplement” means that certain Series Supplement dated as of November 24, 2021 between the Issuer and the Indenture Trustee. All terms used in this tranche A-2 Storm Recovery Bond that are defined in the Indenture, as amended, restated, supplemented or otherwise modified from time to time, shall have the meanings assigned to such terms in the Indenture.
All tranches of Series A Bonds are and will be equally and ratably secured by the Storm Recovery Collateral pledged as security therefor as provided in the Indenture.
The principal of this tranche A-2 Storm Recovery Bond shall be payable on each Payment Date only to the extent that amounts in the Collection Account for the Series A Bonds are available therefor, and only until the outstanding principal balance thereof on the preceding Payment Date (after giving effect to all payments of principal, if any, made on the preceding Payment Date) has been reduced to the principal balance specified in the Expected Sinking Fund Schedule that is attached to the Series Supplement as Schedule A, unless payable earlier because an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Series A Bonds to be immediately due and payable in accordance with Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). However, actual principal payments may be made in lesser than expected amounts and at later than expected times as determined pursuant to Section 8.02 of the Indenture. The entire unpaid principal amount of this tranche A-2 Storm Recovery Bond shall be due and payable on the Final Maturity Date hereof. Notwithstanding the foregoing, the entire unpaid principal amount of the 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 Indenture Trustee or the Holders of the Bonds representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Storm Recovery Bonds to be immediately due and payable in the manner provided in Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). All principal payments on the tranche A-2 Storm Recovery Bonds shall be made pro rata to the Holders of the tranche A-2 Storm Recovery Bonds entitled thereto based on the respective principal amounts of the tranche A-2 Storm Recovery Bonds held by them.
Payments of interest on this tranche A-2 Storm Recovery Bond due and payable on each Payment Date, together with the installment of principal or premium, if any, shall be made by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder of this tranche A-2 Storm Recovery Bond (or one or more Predecessor Storm Recovery Bonds) on the 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 Indenture or the Series Supplement, except that (a) upon application to the Indenture Trustee by any Holder owning a Global Storm Recovery Bond evidencing this tranche A-2 Storm Recovery Bond not later than the applicable Record Date, payment will be made by wire transfer to an account maintained by such Holder, and (b) if this tranche A-2 Storm Recovery Bond is held in Book-Entry Form, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Storm Recovery Bond evidencing this tranche A-2 Storm Recovery Bond unless and until such Global Storm Recovery Bond is exchanged for Definitive Storm Recovery Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to this tranche A-2 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 on the Storm Recovery Bond Register as of the applicable Record Date without requiring that this tranche A-2 Storm Recovery Bond be submitted for notation of payment. Any reduction in the principal amount of this tranche A-2 Storm Recovery Bond (or any one or more Predecessor Storm Recovery Bonds) effected by any payments made on any Payment Date shall be binding upon all future Holders of this tranche A-2 Storm Recovery Bond and of any 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 A-2 Storm Recovery Bond on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice sent no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of this tranche A-2 Storm Recovery Bond and shall specify the place where this tranche A-2 Storm Recovery Bond may be presented and surrendered for payment of such installment.
The Issuer shall pay interest on overdue installments of interest at the Bond Interest Rate to the extent lawful.
This tranche A-2 Storm Recovery Bond is a “storm recovery bond” as such term is defined in the Storm Recovery Law. Principal and interest due and payable on this tranche A-2 Storm Recovery Bond are payable from and secured primarily by Storm Recovery Property created and established by the Financing Order obtained from the North Carolina Utilities Commission pursuant to the Storm Recovery Law. Storm Recovery Property consists of the rights and interests of the Seller in the Financing Order, including the right to impose, bill, collect and receive Storm Recovery Charges, the right to obtain True-Up Adjustments and all revenue, collections, claims, rights to payments, payments, moneys and proceeds arising out of the rights and interests created under the Financing Order.
Under the laws of the State of North Carolina in effect on the date hereof, pursuant to N.C. Gen. Stat. § 62-172(k), the State of North Carolina has pledged to agree and work with the Holders, the Indenture Trustee, other Financing Parties that the State of North Carolina will not (a) alter the provisions of N.C. Gen. Stat. § 62-172(k) which make the Charges imposed by the Financing Order or Subsequent Financing Order irrevocable, binding, and nonbypassable charges; (b) take or permit any action that impairs or would impair the value of Storm Recovery Property or revises the Storm Recovery Costs for which recovery is authorized; (c) in any way impair the rights and remedies of the bondholders, assignees and other financing parties; (d) or except as authorized under the Storm Recovery Law, reduce, alter, or impair Charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, the Indenture Trustee and any 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.
The Issuer and Duke Energy Progress hereby acknowledge that the purchase of this Storm Recovery Bond by the Holder hereof or the purchase of any beneficial interest herein by any Person are made in reliance on the foregoing pledge.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this tranche A-2 Storm Recovery Bond may be registered on the Storm Recovery Bond Register upon surrender of this tranche A-2 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) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee, and (b) such other documents as the Indenture Trustee may require, and thereupon one or more new Storm Recovery Bonds of Authorized Denominations and in the same aggregate 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 A-2 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 such registration of transfer or exchange, other than exchanges pursuant to Section 2.04 or Section 2.06 of the Indenture not involving any transfer.
Each Holder, by acceptance of a tranche A-2 Storm Recovery Bond, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the tranche A-2 Storm Recovery Bonds or under the Indenture or any certificate or other writing delivered in connection therewith, against (a) any owner of a membership interest in the Issuer (including Duke Energy Progress) or (b) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Duke Energy Progress) in its respective individual or corporate capacities, or of any successor or assign of any of them in their individual or corporate capacities, except as any such Person may have expressly agreed in writing. Each Holder by accepting a tranche A-2 Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the tranche A-2 Storm Recovery Bonds.
Prior to the due presentment for registration of transfer of this tranche A-2 Storm Recovery Bond, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this tranche A-2 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 A-2 Storm Recovery Bond and for all other purposes whatsoever, whether or not this tranche A-2 Storm Recovery Bond be overdue, and none of the Issuer, the Indenture Trustee or 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 Holders of the Storm Recovery Bonds under the Indenture at any time by the Issuer with the consent of the Holders representing a majority of the Outstanding Amount of all Storm Recovery Bonds at the time outstanding of each tranche to be affected and upon the satisfaction of the Rating Agency Condition and Commission Condition. The Indenture also contains provisions permitting the Holders representing specified percentages of the Outstanding Amount of the Storm Recovery Bonds, on behalf of the Holders of all the Storm Recovery Bonds, with the consent of the Commission, 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 Holder of this tranche A-2 Storm Recovery Bond (or any one of more Predecessor Storm Recovery Bonds) shall be conclusive and binding upon such Holder and upon all future Holders of this tranche A-2 Storm Recovery Bond and of any tranche A-2 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 A-2 Storm Recovery Bond. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Storm Recovery Bonds issued thereunder, but with the satisfaction of the Commission Condition.
The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Issuer on a Storm Recovery Bond and (b) certain restrictive covenants and the related Events of Default, upon compliance by the Issuer with certain conditions set forth in the Indenture, which provisions apply to this tranche A-2 Storm Recovery Bond.
The term “Issuer” as used in this tranche A-2 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, subject to the rights of the Indenture Trustee and the Holders under the Indenture.
The tranche A-2 Storm Recovery Bonds are issuable only in registered form in denominations as provided in the Indenture and the Series Supplement subject to certain limitations therein set forth.
This tranche A-2 Storm Recovery Bond, the Indenture and the Series Supplement shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws; provided, that the creation, attachment and perfection of any Liens created under the Indenture in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.
No reference herein to the Indenture and no provision of this tranche A-2 Storm Recovery Bond or of the Indenture shall alter or impair the obligation, which is absolute and unconditional, to pay the principal of and interest on this tranche A-2 Storm Recovery Bond at the times, place and rate and in the coin or currency herein prescribed.
The Issuer and the Indenture Trustee, by entering into the Indenture, and the Holders and any Persons holding a beneficial interest in any tranche A-2 Storm Recovery Bond, by acquiring any tranche A-2 Storm Recovery Bond or interest therein, (a) express their intention that, solely for the purpose of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purpose of state, local and other taxes, the tranche A-2 Storm Recovery Bonds qualify under applicable tax law as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral and (b) solely for purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the tranche A-2 Storm Recovery Bonds are outstanding, agree to treat the tranche A-2 Storm Recovery Bonds as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral unless otherwise required by appropriate taxing authorities.
ABBREVIATIONS
The following abbreviations, when used above on this Storm Recovery Bond, shall be construed as though they were written out in full according to applicable laws or regulations.
| TEN COM | as tenants in common |
| TEN ENT | as tenants by the entireties |
| JT TEN | as joint tenants with right of survivorship and not as tenants in common |
| UNIF GIFT MIN ACT | ___________________ Custodian ______________________ |
| (Custodian) (minor) | |
Under Uniform Gifts to Minor Act (____________________) (State) |
Additional abbreviations may also be used though not in the above list.
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 within tranche A-2 Storm Recovery Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ____________, attorney, to transfer said tranche A-2 Storm Recovery Bond on the books kept for registration thereof, with full power of substitution in the premises.
| Dated: ________________ | |
| Signature Guaranteed: | |
The signature to this assignment must correspond with the name of the registered owner as it appears on the within tranche A-2 Storm Recovery Bond in every particular, without alteration, enlargement or any change whatsoever.
NOTE: Signature(s) must be guaranteed by an institution that is a member of: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee.
EXHIBIT A-3
TO SERIES SUPPLEMENT
FORM OF Series A tranche A-3 OF STORM RECOVERY BONDS
See Attached
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OR ENTITY IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
| No. 3 | $196,627,000 |
| tranche Designation A-3 | CUSIP No.: 26444BAC8 |
THE PRINCIPAL OF THIS SERIES A, tranche A-3 SENIOR SECURED STORM RECOVERY BOND, (THIS “STORM RECOVERY BOND”) WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS STORM RECOVERY BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THE HOLDER OF THIS STORM RECOVERY BOND HAS NO RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK ONLY TO THE STORM RECOVERY COLLATERAL, AS DESCRIBED IN THE INDENTURE, FOR PAYMENT OF ANY AMOUNTS DUE HEREUNDER. ALL OBLIGATIONS OF THE ISSUER OF THIS STORM RECOVERY BOND UNDER THE TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL HEREOF OR AS OTHERWISE PROVIDED IN SECTION 3.10(b) OR ARTICLE IV OF THE INDENTURE. THE HOLDER OF THIS 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 THIS STORM RECOVERY BOND, 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 PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES. NOTHING IN THIS PARAGRAPH SHALL PRECLUDE, OR BE DEEMED TO ESTOP, SUCH HOLDER (A) FROM TAKING OR OMITTING TO TAKE ANY ACTION PRIOR TO SUCH DATE IN (I) ANY CASE OR PROCEEDING VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE ISSUER UNDER OR PURSUANT TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR PROCEEDING PERTAINING TO THE ISSUER THAT IS FILED OR COMMENCED BY OR ON BEHALF OF A PERSON OTHER THAN SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY PERSON TO WHICH SUCH HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE CONVEYED ANY PART OF THE OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT TO ANY SUCH LAW OR (B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION THAT IS NOT AN INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST THE ISSUER OR ANY OF ITS PROPERTIES.
NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NORTH CAROLINA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, OR INTEREST ON, THIS STORM RECOVERY BOND.
DUKE ENERGY PROGRESS NC
STORM FUNDING LLC
SERIES A SENIOR SECURED STORM RECOVERY BONDS, tranche A-3
| BOND INTEREST RATE | ORIGINAL PRINCIPAL AMOUNT | SCHEDULED FINAL PAYMENT DATE | FINAL MATURITY DATE | |||||||
| 2.799 | % | $ | 196,627,000 | July 1, 2041 | July 1, 2043 | |||||
Duke Energy Progress NC Storm Funding LLC, a limited liability company created under the laws of the State of Delaware (herein referred to as the “Issuer”), for value received, hereby promises to pay to Cede & Co., or registered assigns, the Original Principal Amount shown above in annual installments on the Payment Dates and in the amounts specified below or, if less, the amounts determined pursuant to Section 8.02 of the Indenture, in each year, commencing on the date determined as provided below and ending on or before the Final Maturity Date shown above and to pay interest, at the Bond Interest Rate shown above, on each January 1st and July 1st or, if any such day is not a Business Day, the next Business Day, commencing on July 1, 2022 and continuing until the earlier of the payment in full of the principal hereof and the Final Maturity Date (each, a “Payment Date”), on the principal amount of this Storm Recovery Bond. Interest on this 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 the date of issuance. Interest will be computed on the basis of 360-day year of twelve 30-day months. Such principal of and interest on this Storm Recovery Bond shall be paid in the manner specified below.
The principal of and interest on this 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 Storm Recovery Bond shall be applied first to interest due and payable on this Storm Recovery Bond as provided above and then to the unpaid principal of and premium, if any, on this Storm Recovery Bond, all in the manner set forth in the Indenture.
Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual or electronic signature, this Storm Recovery Bond shall not be entitled to any benefit under the Indenture referred to below or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually, electronically or in facsimile, by its Responsible Officer.
| Date: November 24, 2021 | DUKE ENERGY PROGRESS NC STORM FUNDING LLC, | ||
| as Issuer | |||
| By: | |||
| Name: | Christopher R. Bauer | ||
| Title: | Assistant Treasurer | ||
INDENTURE TRUSTEE’S
CERTIFICATE OF AUTHENTICATION
Dated: November 24, 2021
This is one of the Series A, tranche A-3 Senior Secured Storm Recovery Bonds, designated above and referred to in the within-mentioned Indenture.
| THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, | |||
| as Indenture Trustee | |||
| By: | |||
| Name: | [ ] | ||
| Title: | [ ] | ||
This Senior Secured Storm Recovery Bond, Series A, tranche A-3 is one of a duly authorized issue of Series A Senior Secured Storm Recovery Bonds of the Issuer (herein called the “Series A Bonds”), which Bonds are issuable in one or more Series, which Series are issuable in one or more tranches. The Series A Bonds consist of three tranches, including the tranche A-3 Series A Senior Secured Storm Recovery Bonds, which include this Senior Secured Storm Recovery Bond (herein called the “tranche A-3 Storm Recovery Bonds”), all issued and to be issued under that certain Indenture dated as of November 24, 2021 (as supplemented by the Series Supplement (as defined below), the “Indenture”), between the Issuer and, in its capacity as indenture trustee (the “Indenture Trustee”, which term includes any successor indenture trustee under the Indenture) and in its separate capacity as a securities intermediary (the “Securities Intermediary”, which term includes any successor securities intermediary under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Bonds. For purposes herein, “Series Supplement” means that certain Series Supplement dated as of November 24, 2021 between the Issuer and the Indenture Trustee. All terms used in this tranche A-3 Storm Recovery Bond that are defined in the Indenture, as amended, restated, supplemented or otherwise modified from time to time, shall have the meanings assigned to such terms in the Indenture.
All tranches of Series A Bonds are and will be equally and ratably secured by the Storm Recovery Collateral pledged as security therefor as provided in the Indenture.
The principal of this tranche A-3 Storm Recovery Bond shall be payable on each Payment Date only to the extent that amounts in the Collection Account for the Series A Bonds are available therefor, and only until the outstanding principal balance thereof on the preceding Payment Date (after giving effect to all payments of principal, if any, made on the preceding Payment Date) has been reduced to the principal balance specified in the Expected Sinking Fund Schedule that is attached to the Series Supplement as Schedule A, unless payable earlier because an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Series A Bonds to be immediately due and payable in accordance with Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). However, actual principal payments may be made in lesser than expected amounts and at later than expected times as determined pursuant to Section 8.02 of the Indenture. The entire unpaid principal amount of this tranche A-3 Storm Recovery Bond shall be due and payable on the Final Maturity Date hereof. Notwithstanding the foregoing, the entire unpaid principal amount of the 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 Indenture Trustee or the Holders of the Bonds representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Storm Recovery Bonds to be immediately due and payable in the manner provided in Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). All principal payments on the tranche A-3 Storm Recovery Bonds shall be made pro rata to the Holders of the tranche A-3 Storm Recovery Bonds entitled thereto based on the respective principal amounts of the tranche A-3 Storm Recovery Bonds held by them.
Payments of interest on this tranche A-3 Storm Recovery Bond due and payable on each Payment Date, together with the installment of principal or premium, if any, shall be made by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder of this tranche A-3 Storm Recovery Bond (or one or more Predecessor Storm Recovery Bonds) on the 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 Indenture or the Series Supplement, except that (a) upon application to the Indenture Trustee by any Holder owning a Global Storm Recovery Bond evidencing this tranche A-3 Storm Recovery Bond not later than the applicable Record Date, payment will be made by wire transfer to an account maintained by such Holder, and (b) if this tranche A-3 Storm Recovery Bond is held in Book-Entry Form, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Storm Recovery Bond evidencing this tranche A-3 Storm Recovery Bond unless and until such Global Storm Recovery Bond is exchanged for Definitive Storm Recovery Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to this tranche A-3 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 on the Storm Recovery Bond Register as of the applicable Record Date without requiring that this tranche A-3 Storm Recovery Bond be submitted for notation of payment. Any reduction in the principal amount of this tranche A-3 Storm Recovery Bond (or any one or more Predecessor Storm Recovery Bonds) effected by any payments made on any Payment Date shall be binding upon all future Holders of this tranche A-3 Storm Recovery Bond and of any 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 A-3 Storm Recovery Bond on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice sent no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of this tranche A-3 Storm Recovery Bond and shall specify the place where this tranche A-3 Storm Recovery Bond may be presented and surrendered for payment of such installment.
The Issuer shall pay interest on overdue installments of interest at the Bond Interest Rate to the extent lawful.
This tranche A-3 Storm Recovery Bond is a “storm recovery bond” as such term is defined in the Storm Recovery Law. Principal and interest due and payable on this tranche A-3 Storm Recovery Bond are payable from and secured primarily by Storm Recovery Property created and established by the Financing Order obtained from the North Carolina Utilities Commission pursuant to the Storm Recovery Law. Storm Recovery Property consists of the rights and interests of the Seller in the Financing Order, including the right to impose, bill, collect and receive Storm Recovery Charges, the right to obtain True-Up Adjustments and all revenue, collections, claims, rights to payments, payments, moneys and proceeds arising out of the rights and interests created under the Financing Order.
Under the laws of the State of North Carolina in effect on the date hereof, pursuant to N.C. Gen. Stat. § 62-172(k), the State of North Carolina has pledged to agree and work with the Holders, the Indenture Trustee, other Financing Parties that the State of North Carolina will not (a) alter the provisions of N.C. Gen. Stat. § 62-172(k) which make the Charges imposed by the Financing Order or Subsequent Financing Order irrevocable, binding, and nonbypassable charges; (b) take or permit any action that impairs or would impair the value of Storm Recovery Property or revises the Storm Recovery Costs for which recovery is authorized; (c) in any way impair the rights and remedies of the bondholders, assignees and other financing parties; (d) or except as authorized under the Storm Recovery Law, reduce, alter, or impair Charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, the Indenture Trustee and any 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.
The Issuer and Duke Energy Progress hereby acknowledge that the purchase of this Storm Recovery Bond by the Holder hereof or the purchase of any beneficial interest herein by any Person are made in reliance on the foregoing pledge.
As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this tranche A-3 Storm Recovery Bond may be registered on the Storm Recovery Bond Register upon surrender of this tranche A-3 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) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee, and (b) such other documents as the Indenture Trustee may require, and thereupon one or more new Storm Recovery Bonds of Authorized Denominations and in the same aggregate 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 A-3 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 such registration of transfer or exchange, other than exchanges pursuant to Section 2.04 or Section 2.06 of the Indenture not involving any transfer.
Each Holder, by acceptance of a tranche A-3 Storm Recovery Bond, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the tranche A-3 Storm Recovery Bonds or under the Indenture or any certificate or other writing delivered in connection therewith, against (a) any owner of a membership interest in the Issuer (including Duke Energy Progress) or (b) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Duke Energy Progress) in its respective individual or corporate capacities, or of any successor or assign of any of them in their individual or corporate capacities, except as any such Person may have expressly agreed in writing. Each Holder by accepting a tranche A-3 Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the tranche A-3 Storm Recovery Bonds.
Prior to the due presentment for registration of transfer of this tranche A-3 Storm Recovery Bond, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this tranche A-3 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 A-3 Storm Recovery Bond and for all other purposes whatsoever, whether or not this tranche A-3 Storm Recovery Bond be overdue, and none of the Issuer, the Indenture Trustee or 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 Holders of the Storm Recovery Bonds under the Indenture at any time by the Issuer with the consent of the Holders representing a majority of the Outstanding Amount of all Storm Recovery Bonds at the time outstanding of each tranche to be affected and upon the satisfaction of the Rating Agency Condition and Commission Condition. The Indenture also contains provisions permitting the Holders representing specified percentages of the Outstanding Amount of the Storm Recovery Bonds, on behalf of the Holders of all the Storm Recovery Bonds, with the consent of the Commission, 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 Holder of this tranche A-3 Storm Recovery Bond (or any one of more Predecessor Storm Recovery Bonds) shall be conclusive and binding upon such Holder and upon all future Holders of this tranche A-3 Storm Recovery Bond and of any tranche A-3 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 A-3 Storm Recovery Bond. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Storm Recovery Bonds issued thereunder, but with the satisfaction of the Commission Condition.
The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Issuer on a Storm Recovery Bond and (b) certain restrictive covenants and the related Events of Default, upon compliance by the Issuer with certain conditions set forth in the Indenture, which provisions apply to this tranche A-3 Storm Recovery Bond.
The term “Issuer” as used in this tranche A-3 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, subject to the rights of the Indenture Trustee and the Holders under the Indenture.
The tranche A-3 Storm Recovery Bonds are issuable only in registered form in denominations as provided in the Indenture and the Series Supplement subject to certain limitations therein set forth.
This tranche A-3 Storm Recovery Bond, the Indenture and the Series Supplement shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws; provided, that the creation, attachment and perfection of any Liens created under the Indenture in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.
No reference herein to the Indenture and no provision of this tranche A-3 Storm Recovery Bond or of the Indenture shall alter or impair the obligation, which is absolute and unconditional, to pay the principal of and interest on this tranche A-3 Storm Recovery Bond at the times, place and rate and in the coin or currency herein prescribed.
The Issuer and the Indenture Trustee, by entering into the Indenture, and the Holders and any Persons holding a beneficial interest in any tranche A-3 Storm Recovery Bond, by acquiring any tranche A-3 Storm Recovery Bond or interest therein, (a) express their intention that, solely for the purpose of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purpose of state, local and other taxes, the tranche A-3 Storm Recovery Bonds qualify under applicable tax law as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral and (b) solely for purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the tranche A-3 Storm Recovery Bonds are outstanding, agree to treat the tranche A-3 Storm Recovery Bonds as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral unless otherwise required by appropriate taxing authorities.
ABBREVIATIONS
The following abbreviations, when used above on this Storm Recovery Bond, shall be construed as though they were written out in full according to applicable laws or regulations.
| TEN COM | as tenants in common |
| TEN ENT | as tenants by the entireties |
| JT TEN | as joint tenants with right of survivorship and not as tenants in common |
| UNIF GIFT MIN ACT | ___________________ Custodian ______________________ |
| (Custodian) (minor) | |
Under Uniform Gifts to Minor Act (____________________) (State) |
Additional abbreviations may also be used though not in the above list.
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 within tranche A-3 Storm Recovery Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ____________, attorney, to transfer said tranche A-3 Storm Recovery Bond on the books kept for registration thereof, with full power of substitution in the premises.
| Dated: | |||
| Signature Guaranteed: | |||
The signature to this assignment must correspond with the name of the registered owner as it appears on the within tranche A-3 Storm Recovery Bond in every particular, without alteration, enlargement or any change whatsoever.
NOTE: Signature(s) must be guaranteed by an institution that is a member of: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee.
Exhibit 10.1
STORM RECOVERY PROPERTY SERVICING AGREEMENT
by and between
DUKE ENERGY PROGRESS NC STORM FUNDING LLC,
Issuer
and
DUKE ENERGY PROGRESS, LLC,
Servicer
Acknowledged and Accepted by
THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL
ASSOCIATION, as Indenture Trustee
Dated as of November 24, 2021
TABLE OF CONTENTS
| Page | |||
| ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION | 1 | ||
| Section 1.01. | Definitions and Rules of Construction | 1 | |
| ARTICLE II APPOINTMENT AND AUTHORIZATION | 2 | ||
| Section 2.01. | Appointment of Servicer; Acceptance of Appointment | 2 | |
| Section 2.02. | Authorization | 2 | |
| Section 2.03. | Dominion and Control Over the Storm Recovery Property | 2 | |
| ARTICLE III ROLE OF SERVICER | 3 | ||
| Section 3.01. | Duties of Servicer | 3 | |
| Section 3.02. | Servicing and Maintenance Standards | 5 | |
| Section 3.03. | Annual Reports on Compliance with Regulation AB | 6 | |
| Section 3.04. | Annual Report by Independent Registered Public Accountants | 7 | |
| ARTICLE IV SERVICES RELATED TO TRUE-UP ADJUSTMENTS | 7 | ||
| Section 4.01. | True-Up Adjustments | 7 | |
| Section 4.02. | Limitation of Liability | 10 | |
| ARTICLE V THE STORM RECOVERY PROPERTY | 11 | ||
| Section 5.01. | Custody of Storm Recovery Property Records | 11 | |
| Section 5.02. | Duties of Servicer as Custodian | 11 | |
| Section 5.03. | Custodian’s Indemnification | 13 | |
| Section 5.04. | Effective Period and Termination | 13 | |
| Section 5.05. | Third-Party Suppliers | 13 | |
| ARTICLE VI THE SERVICER | 14 | ||
| Section 6.01. | Representations and Warranties of Servicer | 14 | |
| Section 6.02. | Indemnities of Servicer; Release of Claims | 16 | |
| Section 6.03. | Binding Effect of Servicing Obligations | 18 | |
| Section 6.04. | Limitation on Liability of Servicer and Others | 19 | |
| Section 6.05. | Duke Energy Progress Not to Resign as Servicer | 19 | |
| Section 6.06. | Servicing Compensation | 20 | |
| Section 6.07. | Compliance with Applicable Law | 21 | |
| Section 6.08. | Access to Certain Records and Information Regarding Storm Recovery Property | 21 | |
| Section 6.09. | Appointments | 22 | |
| Section 6.10. | No Servicer Advances | 22 | |
| Section 6.11. | Remittances | 22 | |
| Section 6.12. | Maintenance of Operations | 22 | |
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| ARTICLE VII DEFAULT | 23 | ||
| Section 7.01. | Servicer Default | 23 | |
| Section 7.02. | Appointment of Successor | 24 | |
| Section 7.03. | Waiver of Past Defaults | 25 | |
| Section 7.04. | Notice of Servicer Default | 25 | |
| Section 7.05. | Cooperation with Successor | 25 | |
| ARTICLE VIII MISCELLANEOUS PROVISIONS | 26 | ||
| Section 8.01. | Amendment | 26 | |
| Section 8.02. | Maintenance of Accounts and Records | 27 | |
| Section 8.03. | Notices | 27 | |
| Section 8.04. | Assignment | 28 | |
| Section 8.05. | Limitations on Rights of Others | 28 | |
| Section 8.06. | Severability | 29 | |
| Section 8.07. | Separate Counterparts | 29 | |
| Section 8.08. | Governing Law | 29 | |
| Section 8.09. | Assignment to Indenture Trustee | 29 | |
| Section 8.10. | Nonpetition Covenants | 29 | |
| Section 8.11. | Limitation of Liability | 29 | |
| Section 8.12. | Rule 17g-5 Compliance | 29 | |
| Section 8.13. | Indenture Trustee Actions | 30 | |
| EXHIBITS | |
| Exhibit A | Servicing Procedures |
| Exhibit B | Form of Monthly Servicer’s Certificate |
| Exhibit C | Form of Semi-Annual Servicer’s Certificate |
| Exhibit D | Form of Servicer Certificate |
| Exhibit E | Form of Certificate of Compliance |
| Exhibit F | Expected Sinking Fund Schedule |
APPENDIX
| Appendix A | Definitions and Rules of Construction |
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This STORM RECOVERY PROPERTY SERVICING AGREEMENT, dated as of November 24, 2021, is by and between DUKE ENERGY PROGRESS NC STORM FUNDING LLC, a Delaware limited liability company, as Issuer, and DUKE ENERGY PROGRESS, LLC, a North Carolina limited liability company, as servicer, and acknowledged and accepted by THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee.
RECITALS
WHEREAS, pursuant to the Storm Recovery Law and the Financing Order, Duke Energy Progress, in its capacity as seller (the “Seller”), and the Issuer are concurrently entering into the Sale Agreement pursuant to which the Seller is selling and the Issuer is purchasing certain Storm Recovery Property created pursuant to the Storm Recovery Law and the Financing Order described therein;
WHEREAS, in connection with its ownership of the Storm Recovery Property relating to the Storm Recovery Bonds and in order to collect the associated Storm Recovery Charges, the Issuer desires to engage the Servicer to carry out the functions described herein and the Servicer desires to be so engaged;
WHEREAS, the Issuer desires to engage the Servicer to act on its behalf in obtaining True-Up Adjustments from the Commission and the Servicer desires to be so engaged;
WHEREAS, the Storm Recovery Charge Collections initially may be commingled with other funds collected by the Servicer; and
WHEREAS, certain parties may have an interest in such commingled collections, and such parties will have entered into the Intercreditor Agreement, which allows Duke Energy Progress to allocate the collected, commingled funds according to each party’s interest;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.01. Definitions and Rules of Construction. Capitalized terms used but not otherwise defined in this Servicing Agreement shall have the respective meanings given to such terms in Appendix A, which is hereby incorporated by reference into this Servicing Agreement as if set forth fully in this Servicing Agreement. Not all terms defined in Appendix A are used in this Servicing Agreement. The rules of construction set forth in Appendix A shall apply to this Servicing Agreement and are hereby incorporated by reference into this Servicing Agreement as if set forth fully in this Servicing Agreement, however for purposes of this Servicing Agreement, unless otherwise indicated herein, the terms Storm Recovery Charges, Closing Date, Storm Recovery Collateral and Storm Recovery Property mean the Storm Recovery Charges, Closing Date, Storm Recovery Collateral and Storm Recovery Property for the Storm Recovery Bonds.
ARTICLE II
APPOINTMENT AND AUTHORIZATION
Section 2.01. Appointment of Servicer; Acceptance of Appointment. The Issuer hereby appoints the Servicer, as an independent contractor, and the Servicer hereby accepts such appointment, to perform the Servicer’s obligations pursuant to this Servicing Agreement on behalf of and for the benefit of the Issuer or any assignee thereof in accordance with the terms of this Servicing Agreement and applicable law as it applies to the Servicer in its capacity as servicer hereunder. This appointment and the Servicer’s acceptance thereof may not be revoked except in accordance with the express terms of this Servicing Agreement.
Section 2.02. Authorization. With respect to all or any portion of the Storm Recovery Property, the Servicer shall be, and hereby is, authorized and empowered by the Issuer to (a) execute and deliver, on behalf of itself and/or the Issuer, as the case may be, any and all instruments, documents or notices, and (b) on behalf of itself and/or the Issuer, as the case may be, make any filing and participate in proceedings of any kind with any Governmental Authority, including with the Commission. The Issuer shall execute and deliver to the Servicer such documents as have been prepared by the Servicer for execution by the Issuer and shall furnish the Servicer with such other documents as may be in the Issuer’s possession, in each case as the Servicer may determine to be necessary or appropriate to enable it to carry out its servicing and administrative duties hereunder. Upon the Servicer’s written request, the Issuer shall furnish the Servicer with any powers of attorney or other documents necessary or appropriate to enable the Servicer to carry out its duties hereunder.
Section 2.03. Dominion and Control Over the Storm Recovery Property. Notwithstanding any other provision herein, the Issuer shall have dominion and control over the Storm Recovery Property, and the Servicer, in accordance with the terms hereof, is acting solely as the servicing agent and custodian for the Issuer with respect to the Storm Recovery Property and the Storm Recovery Property Records for the Storm Recovery Bonds. The Servicer shall not take any action that is not authorized by this Servicing Agreement or the Financing Order, that is not consistent with its customary procedures and practices or that shall impair the rights of the Issuer or the Indenture Trustee (on behalf of the Holders) in the Storm Recovery Property, in each case unless such action is required by applicable law or court or regulatory order.
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ARTICLE III
ROLE OF SERVICER
Section 3.01. Duties of Servicer. The Servicer, as agent for the Issuer, shall have the following duties:
(a) Duties of Servicer Generally.
(i) The Servicer’s duties in general shall include: management, servicing and administration of the Storm Recovery Property; calculating consumption, billing the Storm Recovery Charges, collecting the Storm Recovery Charges from Customers and posting all collections, responding to inquiries by Customers, the Commission or any other Governmental Authority with respect to the Storm Recovery Property or Storm Recovery Charges; investigating and handling delinquencies (and furnishing reports with respect to such delinquencies to the Issuer), processing and depositing collections and making periodic remittances; furnishing periodic and current reports to the Issuer, the Commission, the Indenture Trustee and the Rating Agencies; making all filings with the Commission and taking such other action as may be necessary to perfect the Issuer’s ownership interests in and the Indenture Trustee’s first priority Lien on the Storm Recovery Property; making all filings and taking such other action as may be necessary to perfect and maintain the perfection and priority of the Indenture Trustee’s Lien on all Storm Recovery Collateral; selling as the agent for the Issuer, as its interests may appear, defaulted or written off accounts in accordance with the Servicer’s usual and customary practices; taking all necessary action in connection with True-Up Adjustments as set forth herein; and performing such other duties as may be specified under the Financing Order to be performed by it. Anything to the contrary notwithstanding, the duties of the Servicer set forth in this Servicing Agreement shall be qualified in their entirety by any Commission Regulations, the Financing Order and the U.S. federal securities laws and the rules and regulations promulgated thereunder, including without limitation, Regulation AB1, as in effect at the time such duties are to be performed. Without limiting the generality of this Section 3.01(a)(i), in furtherance of the foregoing, the Servicer hereby agrees that it shall also have, and shall comply with, the duties and responsibilities relating to data acquisition, consumption and bill calculation, billing, customer service functions, collections, posting, payment processing and remittance set forth in Exhibit A. Any processing and depositing of collections, making of periodic remittances and furnishing of periodic reports set forth in this Section 3.01(a)(i) shall be subject to the provisions of the Intercreditor Agreement.
(b) Reporting Functions.
(i) Monthly Servicer’s Certificate. On or before the last Servicer Business Day of each month, the Servicer shall prepare and deliver to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies a written report substantially in the form of Exhibit B (a “Monthly Servicer’s Certificate”) setting forth certain information relating to Storm Recovery Charge Payments in connection with the Storm Recovery Charges received by the Servicer during the Collection Period preceding such date; provided, however, that, for any month in which the Servicer is required to deliver a Semi-Annual Servicer’s Certificate pursuant to Section 4.01(c)(ii), the Servicer shall prepare and deliver the Monthly Servicer’s Certificate no later than the date of delivery of such Semi-Annual Servicer’s Certificate.
1 Note to Draft: May be edited based on SEC comments.
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(ii) Notification of Laws and Regulations. The Servicer shall immediately notify the Issuer, the Indenture Trustee, and the Rating Agencies in writing of any Requirement of Law or Commission Regulations hereafter promulgated that have a material adverse effect on the Servicer’s ability to perform its duties under this Servicing Agreement.
(iii) Other Information. Upon the reasonable request of the Issuer, the Indenture Trustee, the Commission or any Rating Agency, the Servicer shall provide to the Issuer, the Indenture Trustee, the Commission or such Rating Agency, as the case may be, any public financial information in respect of the Servicer, or any material information regarding the Storm Recovery Property to the extent it is reasonably available to the Servicer, as may be reasonably necessary and permitted by law to enable the Issuer, the Indenture Trustee, the Commission or the Rating Agencies to monitor the performance by the Servicer hereunder; provided however, that any such request by the Indenture Trustee shall not create any obligation for the Indenture Trustee to monitor the performance of the Servicer. In addition, so long as any of the Storm Recovery Bonds are outstanding, the Servicer shall provide the Issuer, the Commission and the Indenture Trustee within a reasonable time after written request therefor, any information available to the Servicer or reasonably obtainable by it that is necessary to calculate the Storm Recovery Charges applicable to each Storm Recovery Rate Class.
(iv) Preparation of Reports. The Servicer shall prepare and deliver such additional reports as required under this Servicing Agreement, including a copy of each Semi-Annual Servicer’s Certificate described in Section 4.01(c)(ii), the annual Certificate of Compliance described in Section 3.03 and the Annual Accountant’s Report described in Section 3.04. In addition, the Servicer shall prepare, procure, deliver and/or file, or cause to be prepared, procured, delivered or filed, any reports, attestations, exhibits, certificates or other documents required to be delivered or filed with the SEC (and/or any other Governmental Authority) by the Issuer or the Depositor under the U.S. federal securities or other applicable laws or in accordance with the Basic Documents, including but without limiting the generality of foregoing, filing with the SEC, if applicable and required by applicable law, a copy or copies of (A) the Monthly Servicer’s Certificates described in Section 3.01(b)(i) (under Form 10-D or any other applicable form), (B) the Semi-Annual Servicer’s Certificates described in Section 4.01(c)(ii) (under Form 10-D or any other applicable form), (C) the annual statements of compliance, attestation reports and other certificates described in Section 3.03 and (D) the Annual Accountant’s Report (and any attestation required under Regulation AB) described in Section 3.04. In addition, the appropriate officer or officers of the Servicer shall (in its separate capacity as Servicer) sign the Depositor’s annual report on Form 10-K (and any other applicable SEC or other reports, attestations, certifications and other documents), to the extent that the Servicer’s signature is required by, and consistent with, the U.S. federal securities laws and/or any other applicable law.
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(c) Opinions of Counsel. The Servicer shall obtain on behalf of the Issuer and deliver to the Issuer and the Indenture Trustee:
(i) promptly after the execution and delivery of this Servicing Agreement and of each amendment hereto, an Opinion of Counsel from external counsel of the Issuer either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the Secretary of State of the State of North Carolina, the Secretary of State of the State of Delaware and all filings pursuant to the UCC, that are necessary under the UCC and the Storm Recovery Law to perfect or maintain, as applicable, the Liens of the Indenture Trustee in the Storm Recovery Property have been authorized, executed and filed, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens; and
(ii) within ninety (90) days after the beginning of each calendar year beginning with the first calendar year beginning more than three months after the date hereof, an Opinion of Counsel, which counsel may be an employee of or counsel to the Issuer or the Servicer and which shall be reasonably satisfactory to the Indenture Trustee, or, in the Indenture Trustee’s sole judgment, external counsel of the Issuer, dated as of a date during such 90-day period, either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the Secretary of State of the State of North Carolina, the Secretary of State of the State of Delaware and all filings pursuant to the UCC, have been authorized, executed and filed that are necessary under the UCC and the Storm Recovery Law to maintain the Liens of the Indenture Trustee in the Storm Recovery Property, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens.
Each Opinion of Counsel referred to in Section 3.01(c)(i) or Section 3.01(c)(ii) above shall specify any action necessary (as of the date of such opinion) to be taken in the following year to perfect or maintain, as applicable, such interest or Lien.
Section 3.02. Servicing and Maintenance Standards. The Servicer will monitor payments and impose collection policies on Customers, as permitted under the Financing Order and the rules of the Commission. On behalf of the Issuer, the Servicer shall: (a) manage, service, administer, bill, charge, collect, receive and post collections in respect of the Storm Recovery Property with reasonable care and in material compliance with each applicable Requirement of Law, including all applicable Commission Regulations and guidelines, using the same degree of care and diligence that the Servicer exercises with respect to similar assets for its own account and, if applicable, for others; (b) follow standards, policies and procedures in performing its duties as Servicer that are customary in the electric distribution industry; (c) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the Storm Recovery Property and to impose, bill, charge, collect, receive and post the Storm Recovery Charges; (d) comply with each Requirement of Law, including all applicable Commission Regulations and guidelines, applicable to and binding on it relating to the Storm Recovery Property; (e) file all reports with the Commission required by the Financing Order; (f) file and maintain the effectiveness of UCC financing statements filed with the Secretary of State of the State of North Carolina with respect to the property transferred under the Sale Agreement; and (g) take such other action on behalf of the Issuer to ensure that the Lien of the Indenture Trustee on the Storm Recovery Collateral remains perfected and of first priority. The Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of all or any portion of the Storm Recovery Property, which, in the Servicer’s judgment, may include the taking of legal action, at the Issuer’s expense but subject to the priority of payments set forth in Section 8.02(e) of the Indenture.
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Section 3.03. Annual Reports on Compliance with Regulation AB.
(a) The Servicer shall deliver to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies, on or before the earlier of (a) March 31 of each year or (b) with respect to each calendar year during which the Depositor’s annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which such annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, certificates from a Responsible Officer of the Servicer (i) containing, and certifying as to, the statements of compliance required by Item 1123 (or any successor or similar items or rule) of Regulation AB, as then in effect, and (ii) containing, and certifying as to, the statements and assessment of compliance required by Item 1122(a) (or any successor or similar items or rule) of Regulation AB, as then in effect. These certificates may be in the form of, or shall include the forms attached as Exhibit D and Exhibit E, with, in the case of Exhibit D, such changes as may be required to conform to the applicable securities law.
(b) The Servicer shall use commercially reasonable efforts to obtain, from each other party participating in the servicing function, any additional certifications as to the statements and assessment required under Item 1122 (or any successor or similar items or rule) or Item 1123 of Regulation AB to the extent required in connection with the filing of the annual report on Form 10-K; provided, however, that a failure to obtain such certifications shall not be a breach of the Servicer’s duties hereunder. The parties acknowledge that the Indenture Trustee’s certifications shall be limited to the Item 1122 certifications described in Exhibit C of the Indenture.
(c) The initial Servicer, in its capacity as Depositor, shall post on its or its parent company’s website and file with or furnish to the SEC, in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the information described in Section 3.07(g) of the Indenture to the extent such information is reasonably available to the Depositor.
(d) Except to the extent permitted by applicable law, the Issuer, shall not voluntarily suspend or terminate its filing obligations as issuing entity with the SEC as described in Section 3.03(c).
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Section 3.04. Annual Report by Independent Registered Public Accountants.
(a) The Servicer, at its own expense in partial consideration of the Servicing Fee paid to it, shall cause a firm of Independent registered public accountants (which may provide other services to the Servicer or the Seller) to prepare annually, and the Servicer shall deliver annually to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies on or before the earlier of (i) March 31 of each year, beginning March 31, 2023, or (ii) with respect to each calendar year during which the Issuer’s annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which such annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, a report (the “Annual Accountant’s Report”) regarding the Servicer’s assessment of compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB during the immediately preceding twelve (12) months ended December 31 (or, in the case of the first Annual Accountant’s Report to be delivered on or before March 31, 2023, the period of time from the date of this Agreement until December 31, 2022), in accordance with paragraph (b) of Rule 13a-18 and Rule 15d-18 of the Exchange Act and Item 1122 of Regulation AB. Such report shall be signed by an authorized officer of the Servicer and shall at a minimum address each of the servicing criteria specified in Exhibit C-1. In the event that the accounting firm providing such report requires the Indenture Trustee to agree or consent to the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree; it being understood and agreed that the Indenture Trustee will deliver such letter of agreement or consent in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee will not make any independent inquiry or investigation as to, and shall have no obligation or liability in respect of the sufficiency, validity or correctness of such procedures.
(b) The Annual Accountant’s Report delivered pursuant to Section 3.04(a) shall also indicate that the accounting firm providing such report is independent of the Servicer in accordance with the rules of the Public Company Accounting Oversight Board and shall include any attestation report required under Item 1122(b) of Regulation AB, as then in effect. The costs of the Annual Accountant’s Report shall be reimbursable as an Operating Expense under the Indenture.
ARTICLE IV
SERVICES RELATED TO TRUE-UP ADJUSTMENTS
Section 4.01. True-Up Adjustments. From time to time, until the Collection in Full of the Charges for the Storm Recovery Bonds, the Servicer shall identify the need for Semi-Annual True-Up Adjustments, and Optional Interim True-Up Adjustments and shall take all reasonable action to obtain and implement such True-Up Adjustments, all in accordance with the following:
(a) Expected Sinking Fund Schedule. The Expected Sinking Fund Schedule for the Storm Recovery Bonds is attached hereto as Exhibit F. If the Expected Sinking Fund Schedule is revised, the Servicer shall send a copy of such revised Expected Sinking Fund Schedule to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies promptly thereafter.
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(b) True-Up Adjustments.
(i) Semi-Annual True-Up Adjustments and Filings. At the beginning of Duke Energy Progress’s billing cycle for January and July, and at least every three months beginning twelve months prior to the Scheduled Final Payment Date for the latest maturing tranche, the Servicer shall: (A) update the data and assumptions underlying the calculation of the Storm Recovery Charges, including projected electricity consumption during the next two Remittance Period for each Storm Recovery Rate Class and including Periodic Principal, interest and estimated expenses and fees of the Issuer to be paid during such period, the Weighted Average Days Outstanding and write-offs; (B) determine the Periodic Payment Requirements and Periodic Billing Requirement for the next two Remittance Period based on such updated data and assumptions; (C) determine the Storm Recovery Charges to be allocated to each Storm Recovery Rate Class during the next two Remittance Period based on such Periodic Billing Requirement and the terms of the Financing Order, the Tariff and any other tariffs filed pursuant thereto; (D) make all required public notices and other filings with the Commission to reflect the revised Storm Recovery Charges, including any Amendatory Schedule; and (E) take all reasonable actions and make all reasonable efforts to effect such Semi-Annual True-Up Adjustment and to enforce the provisions of the Storm Recovery Law and the Financing Order; provided, that, in the case of any Semi-Annual True-Up Adjustment following the Scheduled Final Payment Date for the latest maturing tranche of the Storm Recovery Bonds, the Semi-Annual True-Up Adjustment will be calculated to ensure that the Storm Recovery Charges are sufficient to pay the Storm Recovery Bonds in full on the next Payment Date. The Servicer shall implement the revised Storm Recovery Charges, if any, resulting from such Semi-Annual True-Up Adjustment as of the Semi-Annual True-Up Adjustment Date.
(ii) Optional Interim True-Up Adjustments and Filings. No later than 30 days prior to the first day of the applicable monthly billing cycle, the Servicer shall: (A) update the data and assumptions underlying the calculation of the Storm Recovery Charges, including projected electricity consumption during the next two Remittance Period for each Storm Recovery Rate Class and including Periodic Principal, interest and estimated expenses and fees of the Issuer to be paid during such period, the rate of delinquencies and write-offs; (B) determine the Periodic Payment Requirement and Periodic Billing Requirement for the next two Remittance Period based on such updated data and assumptions; and (C) based upon such updated data and requirements, project whether existing and projected Storm Recovery Charge Collections together with available fund balances in the Excess Funds Subaccount, will be sufficient (x) to make on a timely basis all scheduled payments of Periodic Principal and interest in respect of each Outstanding tranche of Storm Recovery Bonds during such Remittance Period, (y) to pay other Ongoing Financing Costs on a timely basis and (z) to maintain the Capital Subaccount at the Required Capital Level. If the Servicer determines that Storm Recovery Charges will not be sufficient for such purposes, the Servicer shall, no later than the date described in the first sentence of this Section 4.01(b)(ii): (1) determine the Storm Recovery Charges to be allocated to each Storm Recovery Rate Class during the next two Remittance Period based on such Periodic Billing Requirement and the terms of the Financing Order, the Tariff and other tariffs filed pursuant thereto; (2) make all required public notices and other filings with the Commission to reflect the revised Storm Recovery Charges, including any Amendatory Schedule; and (3) take all reasonable actions and make all reasonable efforts to effect such Optional Interim True-Up Adjustment and to enforce the provisions of the Storm Recovery Law and the Financing Order.
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(c) Reports.
(i) Notification of Amendatory Schedule Filings and True-Up Adjustments. Whenever the Servicer files an Amendatory Schedule with the Commission or implements revised Storm Recovery Charges with notice to the Commission without filing an Amendatory Schedule, the Servicer shall send a copy of such filing or notice (together with a copy of all notices and documents that, in the Servicer’s reasonable judgment, are material to the adjustments effected by such Amendatory Schedule or notice) to the Issuer, the Indenture Trustee and the Rating Agencies concurrently therewith. If, for any reason any revised Storm Recovery Charges are not implemented and effective on the applicable date set forth herein, the Servicer shall notify the Issuer, the Indenture Trustee and each Rating Agency by the end of the second Servicer Business Day after such applicable date.
(ii) Semi-Annual Servicer’s Certificate. Not later than five (5) Servicer Business Days prior to each Payment Date or Special Payment Date, the Servicer shall deliver a written report substantially in the form of Exhibit C (the “Semi-Annual Servicer’s Certificate”) to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies, which shall include all of the following information (to the extent applicable and including any other information so specified in the Series Supplement) as to the Storm Recovery Bonds with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:
(A) the amount of the payment to Holders allocable to principal, if any;
(B) the amount of the payment to Holders allocable to interest;
(C) the aggregate Outstanding Amount of the Storm Recovery Bonds, before and after giving effect to any payments allocated to principal reported under Section 4.01(c)(ii)(A);
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(D) the difference, if any, between the amount specified in Section 4.01(c)(ii)(C) and the Outstanding Amount specified in the Expected Sinking Fund Schedule;
(E) any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and
(F) the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments.
(iii) Reports to Customers.
(A) After each revised Storm Recovery Charge has gone into effect pursuant to a True-Up Adjustment, the Servicer shall, to the extent and in the manner and time frame required by any applicable Commission Regulations cause to be prepared and delivered to Customers any required notices announcing such revised Storm Recovery Charges.
(B) The Servicer shall comply with the requirements of the Financing Order with respect to the filing of the Storm Recovery Rate Schedule to ensure that the Storm Recovery Charges are separate and apart from the Servicer’s other charges and appear as a separate line item on the Bills sent to Customers.
Section 4.02. Limitation of Liability.
(a) The Issuer and the Servicer expressly agree and acknowledge that:
(i) In connection with any True-Up Adjustment, the Servicer is acting solely in its capacity as the servicing agent hereunder.
(ii) None of the Servicer, the Issuer or the Indenture Trustee is responsible in any manner for, and shall have no liability whatsoever as a result of, any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the Servicer’s failure to make any filings required by Section 4.01 in a timely and correct manner or any breach by the Servicer of its duties under this Servicing Agreement that adversely affects the Storm Recovery Property or the True-Up Adjustments), by the Commission in any way related to the Storm Recovery Property or in connection with any True-Up Adjustment, the subject of any filings under Section 4.01, any proposed True-Up Adjustment or the approval of any revised Storm Recovery Charges and the scheduled adjustments thereto.
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(iii) Except to the extent that the Servicer is liable under Section 6.02, the Servicer shall have no liability whatsoever relating to the calculation of any revised Storm Recovery Charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculation regarding expected energy consumption volume and the Weighted Average Days Outstanding, write-offs and estimated expenses and fees of the Issuer so long as the Servicer has acted in good faith and has not acted in a negligent manner in connection therewith, nor shall the Servicer have any liability whatsoever as a result of any Person, including the Holders, not receiving any payment, amount or return anticipated or expected or in respect of any Storm Recovery Bond.
(b) Notwithstanding the foregoing, this Section 4.02 shall not relieve the Servicer of liability for any misrepresentation by the Servicer under Section 6.01 or for any breach by the Servicer of its other obligations under this Servicing Agreement.
ARTICLE V
THE STORM RECOVERY PROPERTY
Section 5.01. Custody of Storm Recovery Property Records. To assure uniform quality in servicing the Storm Recovery Property and to reduce administrative costs, the Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts such appointment, to act as the agent of the Issuer as custodian of any and all documents and records that the Seller shall keep on file, in accordance with its customary procedures, relating to the Storm Recovery Property, including copies of the Financing Order and Amendatory Schedules relating thereto and all documents filed with the Commission in connection with any True-Up Adjustment and computational records relating thereto (collectively for the Storm Recovery Bonds, the “Storm Recovery Property Records”), which are hereby constructively delivered to the Indenture Trustee, as pledgee of the Issuer with respect to all Storm Recovery Property.
Section 5.02. Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall hold the Storm Recovery Property Records on behalf of the Issuer and the Indenture Trustee and maintain such accurate and complete accounts, records and computer systems pertaining to the Storm Recovery Property Records as shall enable the Issuer and the Indenture Trustee, as applicable, to comply with this Servicing Agreement, the Sale Agreement and the Indenture. In performing its duties as custodian, the Servicer shall act with reasonable care, using that degree of care and diligence that the Servicer exercises with respect to comparable assets that the Servicer services for itself or, if applicable, for others. The Servicer shall promptly report to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies any failure on its part to hold the Storm Recovery Property Records and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure. Nothing herein shall be deemed to require an initial review or any periodic review by the Issuer or the Indenture Trustee of the Storm Recovery Property Records. The Servicer’s duties to hold the Storm Recovery Property Records set forth in this Section 5.02, to the extent the Storm Recovery Property Records have not been previously transferred to a successor Servicer pursuant to ARTICLE VII, shall terminate one year and one day after the earlier of (i) the date on which the Servicer is succeeded by a successor Servicer in accordance with ARTICLE VII and (ii) the first date on which no Storm Recovery Bonds are Outstanding.
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(b) Maintenance of and Access to Records. The Servicer shall maintain the Storm Recovery Property Records at 410 South Wilmington Street, Raleigh, North Carolina 27601-1748 or at its facility located at Iron Mountain, 3125 Parkside Drive, Charlotte, North Carolina 28208, or at such other office as shall be specified to the Issuer, the Commission, Public Staff and the Indenture Trustee by written notice at least 30 days prior to any change in location. The Servicer shall make available for inspection, audit and copying to the Issuer, the Commission, the Public Staff and the Indenture Trustee or their respective duly authorized representatives, attorneys or auditors the Storm Recovery Property Records at such times during normal business hours as the Issuer, the Commission, the Public Staff or the Indenture Trustee shall reasonably request and that do not unreasonably interfere with the Servicer’s normal operations. Nothing in this Section 5.02(b) shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 5.02(b).
(c) Release of Documents. Upon instruction from the Indenture Trustee in accordance with the Indenture, the Servicer shall release any Storm Recovery Property Records to the Indenture Trustee, the Indenture Trustee’s agent or the Indenture Trustee’s designee, as the case may be, at such place or places as the Indenture Trustee may designate, as soon as practicable. Nothing in this Section 5.02(c) shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 5.02(c).
(d) Defending Storm Recovery Property Against Claims. To the extent not undertaken by the Seller pursuant to Section 4.08 of the Sale Agreement, the Servicer shall negotiate for the retention of legal counsel and such other experts as may be needed to institute and maintain any action or proceeding, on behalf of and in the name of the Issuer, necessary to compel performance by the Commission or the State of North Carolina of any of their obligations or duties under the Storm Recovery Law and the Financing Order, and the Servicer agrees to assist the Issuer and its legal counsel in taking such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, as may be reasonably necessary to attempt to block or overturn any attempts to cause a repeal of, modification of or supplement to the Storm Recovery Law or the Financing Order, or the rights of holders of Storm Recovery Property by legislative enactment, constitutional amendment or other means that would be adverse to Holders or any series of additional Storm Recovery Bonds. In any proceedings related to the exercise of the power of eminent domain by any municipality to acquire a portion of Duke Energy Progress’s electric distribution facilities, the Servicer will assert that the court ordering such condemnation must treat such municipality as a successor to Duke Energy Progress under the Storm Recovery Law and the Financing Order. The costs of any such action shall be payable as an Operating Expense in accordance with the priorities set forth in Section 8.02(d) of the Indenture and any additional indenture. The Servicer’s obligations pursuant to this Section 5.02 shall survive and continue notwithstanding the fact that the payment of Operating Expenses pursuant to Section 8.02 of the Indenture and any supplemental indenture may be delayed; provided, that, the Servicer is obligated to institute and maintain such action or proceedings only if it is being reimbursed on a current basis for its costs and expenses in taking such actions in accordance with Section 8.02 of the Indenture and any additional indenture, and is not required to advance its own funds to satisfy these obligations.
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Section 5.03. Custodian’s Indemnification. The Servicer as custodian shall indemnify the Issuer, any Independent Manager and the Indenture Trustee (for itself and for the benefit of the Holders) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from and against, any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, of any kind whatsoever (collectively, “Indemnified Losses”) that may be imposed on, incurred by or asserted against each such Person as the result of any negligent act or omission in any way relating to the maintenance and custody by the Servicer, as custodian, of the Storm Recovery Property Records; provided, however, that the Servicer shall not be liable for any portion of any such amount resulting from the willful misconduct, bad faith or gross negligence of the Issuer, any Independent Manager or the Indenture Trustee, as the case may be.
Indemnification under this Section 5.03 shall survive resignation or removal of the Indenture Trustee or any Independent Manager and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorneys’ fees and expenses).
Section 5.04. Effective Period and Termination. The Servicer’s appointment as custodian shall become effective as of the Closing Date and shall continue in full force and effect until terminated pursuant to this Section 5.04. If the Servicer shall resign as Servicer in accordance with the provisions of this Servicing Agreement or if all of the rights and obligations of the Servicer shall have been terminated under Section 7.01, the appointment of the Servicer as custodian shall be terminated effective as of the date on which the termination or resignation of the Servicer is effective. Additionally, if not sooner terminated as provided above, the Servicer’s obligations as custodian shall terminate one year and one day after the date on which no Storm Recovery Bonds are Outstanding. Duke Energy Progress shall not resign as Servicer if such resignation does not satisfy the Rating Agency Condition or without consent of the Commission.
Section 5.05. Third-Party Suppliers. So long as any of the Storm Recovery Bonds are Outstanding, the Servicer shall take reasonable efforts to assure that no TPS bills or collects Storm Recovery Charges on behalf of the Issuer unless required by applicable law or regulation and, to the extent permitted by applicable law or regulation, the Rating Agency Condition is satisfied. If an TPS does bill or collect Storm Recovery Charges on behalf of the Issuer, upon the reasonable request of the Issuer, the Commission, the Indenture Trustee, or any Rating Agency, the Servicer shall take reasonable steps to assure that such a TPS provides to the Issuer, the Commission, the Indenture Trustee or the Rating Agencies, as the case may be, any public financial information in respect of such TPS, or any material information regarding the Storm Recovery Property to the extent it is reasonably available to such TPS, as may be reasonably necessary and permitted by law for the Issuer, the Commission, the Indenture Trustee or the Rating Agencies to monitor such TPS’ performance hereunder. In addition, so long as any of the Storm Recovery Bonds are Outstanding, Servicer will use commercially reasonable efforts to ensure that such TPS provide to the Issuer and to the Indenture Trustee, within a reasonable time after written request therefor, any information available to the TPS or reasonably obtainable by it that is necessary to calculate the Storm Recovery Charges.
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ARTICLE VI
THE SERVICER
Section 6.01. Representations and Warranties of Servicer. The Servicer makes the following representations and warranties, as of the Closing Date, and as of such other dates as expressly provided in this Section 6.01, on which the Issuer and the Indenture Trustee are deemed to have relied in entering into this Servicing Agreement relating to the servicing of the Storm Recovery Property, and on which the Commission relied in exercising its rights to review and provide input pursuant to the terms of the Financing Order. The representations and warranties shall survive the execution and delivery of this Servicing Agreement, the sale of the Storm Recovery Property and the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized, validly existing and is in good standing under the laws of the state of its organization, with requisite power and authority to own its properties, to conduct its business as such properties are currently owned and such business is presently conducted by it, to service the Storm Recovery Property and hold the records related to the Storm Recovery Property, and to execute, deliver and carry out the terms of this Servicing Agreement and the Intercreditor Agreement.
(b) Due Qualification. The Servicer is duly qualified to do business, is 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 (including the servicing of the Storm Recovery Property as required under this Servicing Agreement) requires such qualifications, licenses or approvals (except where a failure to qualify would not be reasonably likely to have a material adverse effect on the Servicer’s business, operations, assets, revenues or properties or to its servicing of the Storm Recovery Property).
(c) Power and Authority. The execution, delivery and performance of the terms of this Servicing Agreement and the Intercreditor Agreement have been duly authorized by all necessary action on the part of the Servicer under its organizational or governing documents and laws.
(d) Binding Obligation. Each of this Servicing Agreement and the Intercreditor Agreement constitutes a legal, valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors’ 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.
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(e) No Violation. The consummation of the transactions contemplated by the Servicing Agreement and the Intercreditor Agreement do not conflict with, result in any breach of or constitute (with or without notice or lapse of time) a default under the Servicer’s organizational documents or any indenture or other agreement or instrument to which the Servicer is a party or by which it or any of its property is bound, result in the creation or imposition of any Lien upon the Servicer’s properties pursuant to the terms of any such indenture or agreement or other instrument (other than any Lien that may be granted in favor of the Indenture Trustee for the benefit of Holders under the Basic Documents) or violate any existing law or any existing order, rule or regulation applicable to the Servicer of any Governmental Authority having jurisdiction over the Servicer or its properties.
(f) No Proceedings. To the Servicer’s knowledge, there are no proceedings or investigations pending or, to the Servicer’s knowledge, threatened against the Servicer before any court, federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Servicer or its properties: (i) seeking to prevent issuance of the Storm Recovery Bonds or the consummation of the transactions contemplated by this Servicing Agreement or any of the other Basic Documents, or, if applicable, any supplement to the Indenture or amendment to the Sale Agreement; (ii) seeking any determination or ruling that might materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability against the Servicer of, this Servicing Agreement or any of the other Basic Documents or, if applicable, any supplement to the Indenture or amendment to the Sale Agreement; or (iii) relating to the Servicer and which might materially and adversely affect the treatment of the Storm Recovery Bonds for federal or state income, gross receipts or franchise tax purposes;
(g) Approvals. No governmental approvals, authorizations, consents, orders or other actions or filings with any Governmental Authority are required for the Servicer to execute, deliver and perform its obligations under the Servicing Agreement except those that have previously been obtained or made, those that are required to be made by the Servicer in the future pursuant to Article IV or the Intercreditor Agreement and those that the Servicer may need to file in the future to continue the effectiveness of any financing statements; and
(h) Reports and Certificates. Each report and certificate delivered in connection with any filing made to the Commission by the Servicer on behalf of the Issuer with respect to the Storm Recovery Charges or True-Up Adjustments will constitute a representation and warranty by the Servicer that each such report or certificate, as the case may be, is true and correct in all material respects; provided, however, that, to the extent any such report or certificate is based in part upon or contains assumptions, forecasts or other predictions of future events, the representation and warranty of the Servicer with respect thereto will be limited to the representation and warranty that such assumptions, forecasts or other predictions of future events are reasonable based upon historical performance (and facts known to the Servicer on the date such report or certificate is delivered).
The Servicer, the Indenture Trustee and the Issuer are not responsible as a result of any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the Servicer’s failure to make any filings with the North Carolina Commission required by this Servicing Agreement in a timely and correct manner or any breach by the Servicer of its duties under the Servicing Agreement that adversely affects the Storm Recovery Property or the True-Up Adjustments), by the North Carolina Commission in any way related to the Storm Recovery Property or in connection with any True-Up Adjustment, the subject of any such filings, any proposed True-Up Adjustment or the approval of any revised Storm Recovery Charges and the scheduled adjustments thereto. Except to the extent that the Servicer otherwise is liable under the provisions of this Servicing Agreement, the Servicer shall have no liability whatsoever relating to the calculation of any revised storm recovery charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculations, so long as the Servicer has acted in good faith and has not acted in a negligent manner in connection therewith, nor shall the Servicer have any liability whatsoever as a result of any person or entity, including the Holders, not receiving any payment, amount or return anticipated or expected or in respect of any Storm Recovery Bond generally.
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Section 6.02. Indemnities of Servicer; Release of Claims. The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer under this Servicing Agreement.
(a) The Servicer shall indemnify the Issuer, the Indenture Trustee (for itself and for the benefit of the Holders) and the Independent Manager and each of their respective trustees, officers, directors, employees and agents (each, an “Indemnified Party”), for, and defend and hold harmless each such Person from and against, any and all Indemnified Losses imposed on, incurred by or asserted against any such Person as a result of (i) the Servicer’s willful misconduct, bad faith or negligence in the performance of, or reckless disregard of, its duties or observance of its covenants under the Servicing Agreement and the Intercreditor Agreement, (ii) the Servicer’s material breach of any of its representations or warranties that results in a Servicer Default under this Servicing Agreement or a default under the Intercreditor Agreement; and (iii) litigation and related expenses relating to the Servicer’s status and obligations as Servicer (other than any proceeding the Servicer is required to institute under this Servicing Agreement), except to the extent of Indemnified Losses either resulting from the willful misconduct, bad faith or gross negligence of such Person seeking indemnification hereunder or resulting from a breach of a representation or warranty made by such Person seeking indemnification hereunder in any of the Basic Documents that gives rise to the Servicer’s breach.
(b) For purposes of Section 6.02(a), in the event of the termination of the rights and obligations of Duke Energy Progress (or any successor thereto pursuant to Section 6.03) as Servicer pursuant to Section 7.01, or a resignation by such Servicer pursuant to this Servicing Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a successor Servicer pursuant to Section 7.02.
(c) Indemnification under this Section 6.02 shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Storm Recovery Law or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or any Independent Manager or the termination of this Servicing Agreement and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorneys’ fees and expenses).
(d) Except to the extent expressly provided in this Servicing Agreement or the other Basic Documents (including the Servicer’s claims with respect to the Servicing Fee and the payment of the purchase price of Storm Recovery Property), the Servicer hereby releases and discharges the Issuer, any Independent Manager and the Indenture Trustee, and each of their respective officers, directors and agents (collectively, the “Released Parties”), from any and all actions, claims and demands whatsoever, whenever arising, which the Servicer, in its capacity as Servicer or otherwise, shall or may have against any such Person relating to the Storm Recovery Property or the Servicer’s activities with respect thereto, other than any actions, claims and demands arising out of the willful misconduct, bad faith or gross negligence of the Released Parties.
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(e) The Servicer will credit Customers to the extent there are higher Storm Recovery Charges, including higher servicing fees payable to a Successor Servicer, because of the Servicer’s negligence, recklessness, willful misconduct or termination of the Servicing Agreement for cause, provided, however, that any credit to Customers shall not impact the Storm Recovery Charges or the Storm Recovery Property. The Servicer’s obligation to credit Customers will survive the termination of the servicing agreement.
(f) The Servicer shall not be required to indemnify an Indemnified Party for any amount paid or payable by such Indemnified Party in the settlement of any action, proceeding or investigation without the written consent of the Servicer, which consent shall not be unreasonably withheld. Promptly after receipt by an Indemnified Party of notice (or, in the case of the Indenture Trustee, receipt of notice by a Responsible Officer only) of the commencement of any action, proceeding or investigation, such Indemnified Party shall, if a claim in respect thereof is to be made against the Servicer under this Section 6.02, notify the Servicer in writing of the commencement thereof. Failure by an Indemnified Party to so notify the Servicer shall relieve the Servicer from the obligation to indemnify and hold harmless such Indemnified Party under this Section 6.02 only to the extent that the Servicer suffers actual prejudice as a result of such failure. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this Section 6.02, the Servicer 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 investigation (in which case the Servicer 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 Servicer’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 Servicer 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 Servicer 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 Servicer, (ii) the Servicer 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 Servicer shall authorize the Indemnified Party to employ separate counsel at the expense of the Servicer 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 Servicer 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. The Servicer will not, without the prior written consent of the Indemnified Party, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought under this Section 6.02 (whether or not the Indemnified Party is an actual or potential party to such claim or action) unless such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all liability arising out of such claim, action, suit or proceeding.
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Section 6.03. Binding Effect of Servicing Obligations. The obligations to continue to provide service and to collect and account for Storm Recovery Charges will be binding upon the Servicer, any Successor and any other entity that provides distribution services to a Person that is a North Carolina retail customer of Duke Energy Progress or any Successor so long as the Storm Recovery Charges have not been fully collected and posted. Any Person (a) into which the Servicer may be merged, converted or consolidated and that is a Permitted Successor, (b) that may result from any merger, conversion or consolidation to which the Servicer shall be a party and that is a Permitted Successor, (c) that may succeed to the properties and assets of the Servicer substantially as a whole and that is a Permitted Successor or (d) that otherwise is a Permitted Successor, which Person in any of the foregoing cases executes an agreement of assumption to perform all of the obligations of the Servicer hereunder, shall be the successor to the Servicer under this Servicing Agreement without further act on the part of any of the parties to this Servicing Agreement; provided, however, that (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 6.01 shall have been breached and no Servicer Default and no event that, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (ii) the Servicer shall have delivered to the Issuer, the Commission and the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel from external counsel stating that such consolidation, conversion, merger or succession and such agreement of assumption complies with this Section 6.03 and that all conditions precedent, if any, provided for in this Servicing Agreement relating to such transaction have been complied with, (iii) the Servicer shall have delivered to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies an Opinion of Counsel from external counsel of the Servicer either (A) stating that, in the opinion of such counsel, all filings to be made by the Servicer, including filings with the Commission pursuant to the Storm Recovery Law and the UCC, have been executed and filed and are in full force and effect that are necessary to fully preserve, perfect and maintain the priority of the interests of the Issuer and the Liens of the Indenture Trustee in the Storm Recovery Property and reciting the details of such filings or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interests, (iv) the Servicer shall have delivered to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies an Opinion of Counsel from independent tax counsel stating that, for U.S. federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in a material adverse U.S. federal income tax consequence to the Issuer or the Holders of Storm Recovery Bonds, (v) the Servicer shall have given the Rating Agencies prior written notice of such transaction and (vi) any applicable requirements of the Intercreditor Agreement have been satisfied. When any Person (or more than one Person) acquires the properties and assets of the Servicer substantially as a whole or otherwise becomes the successor, by merger, conversion, consolidation, sale, transfer, lease or otherwise, to all or substantially all the assets of the Servicer in accordance with the terms of this Section 6.03, then, upon satisfaction of all of the other conditions of this Section 6.03, the preceding Servicer shall automatically and without further notice be released from all its obligations hereunder (except for responsibilities for its actions prior to such release).
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Section 6.04. Limitation on Liability of Servicer and Others.
(a) Except as otherwise provided under this Servicing Agreement, neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be liable to the Issuer or any other Person for any action taken or for refraining from the taking of any action pursuant to this Servicing Agreement or for good faith errors in judgment; provided, however, that this provision shall not protect the Servicer or any such Person against any liability that would otherwise be imposed by reason of negligence, recklessness or willful misconduct in the performance of duties or by reason of reckless disregard of obligations and duties under this Servicing Agreement. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising under this Servicing Agreement.
(b) The Servicer acknowledges under the authority granted to Commission pursuant to Chapter 62 of the North Carolina General Statutes that the Commission has authority to enter an order enforcing the provisions of this Servicing Agreement, including without limitation the enforcement of Section 6.02(e) consistent with the Financing Order and Storm Recovery Law.
(c) Except as provided in this Servicing Agreement, including Section 5.02(d), the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action relating to the Storm Recovery Property that is not directly related to one of the Servicer’s enumerated duties in this Servicing Agreement or related to its obligation to pay indemnification, and that in its reasonable opinion may cause it to incur any expense or liability; provided, however, that the Servicer may, in respect of any Proceeding, undertake any action that it is not specifically identified in this Servicing Agreement as a duty of the Servicer but that the Servicer reasonably determines is necessary or desirable in order to protect the rights and duties of the Issuer or the Indenture Trustee under this Servicing Agreement and the interests of the Holders and Customers under this Servicing Agreement.
Section 6.05. Duke Energy Progress Not to Resign as Servicer. Subject to the provisions of Section 6.03, Duke Energy Progress shall not resign from the obligations and duties imposed on it as Servicer under this Servicing Agreement except upon a determination that the performance of its duties under this Servicing Agreement shall no longer be permissible under applicable Requirements of Law. Notice of any such determination permitting the resignation of Duke Energy Progress shall be communicated to the Issuer, the Commission, the Indenture Trustee and each Rating Agency at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time), and any such determination shall be evidenced by an Opinion of Counsel to such effect delivered to the Issuer, the Commission and each Indenture Trustee concurrently with or promptly after such notice. No such resignation shall become effective until a Successor Servicer has been approved by the Commission and has assumed the servicing obligations and duties hereunder of the Servicer in accordance with Section 7.02.
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Section 6.06. Servicing Compensation.
(a) In consideration for its services hereunder, until the Collection in Full of the Charges, the Servicer shall receive an annual fee (the “Servicing Fee”) in an amount equal to (i) 0.05% of the aggregate initial principal amount of all Storm Recovery Bonds plus reimbursable expenses for so long as Duke Energy Progress or an Affiliate of Duke Energy Progress is the Servicer or (ii) if Duke Energy Progress or any of its Affiliates is not the Servicer, an amount agreed upon by the Successor Servicer and the Indenture Trustee, provided, that the annual Servicing Fee shall not exceed 0.60% of the aggregate initial principal amount of all Storm Recovery Bonds, unless the Commission has approved the appointment of the Successor Servicer or the Commission does not act to either approve or disapprove such appointment on or before the date which is 45 days after notice of the proposed appointment of the Successor Servicer is provided to the Commission in the same manner substantially as provided in Section 8.01(c). The Servicing Fee owing shall be calculated based on the initial principal amount of the Storm Recovery Bonds and shall be paid semi-annually, with half of the Servicing Fee being paid on each Payment Date, except for the amount of the Servicing Fee to be paid on the first Payment Date in which the Servicing Fee then due will be calculated based on the number of days that this Servicing Agreement has been in effect. In addition, the Servicer shall be entitled to be reimbursed by the Issuer for filing fees and fees and expenses for attorneys, accountants, printing or other professional services retained by the Issuer and paid for by the Servicer (or procured by the Servicer on behalf of the Issuer and paid for by the Servicer) to meet the Issuer’s obligations under the Basic Documents (“Reimbursable Expenses”). Except for such Reimbursable Expenses, the Servicer shall be required to pay all other costs and expenses incurred by the Servicer in performing its activities hereunder (but, for the avoidance of doubt, excluding any such costs and expenses incurred by Duke Energy Progress in its capacity as Administrator).
(b) The Servicing Fee set forth in Section 6.06(a) shall be paid to the Servicer by the Indenture Trustee, on each Payment Date in accordance with the priorities set forth in Section 8.02(e) of the Indenture, by wire transfer of immediately available funds from the Collection Account to an account designated by the Servicer. Any portion of the Servicing Fee not paid on any such date shall be added to the Servicing Fee payable on the subsequent Payment Date. In no event shall the Indenture Trustee be liable for the payment of any Servicing Fee or other amounts specified in this Section 6.06; provided, that this Section 6.06 does not relieve the Indenture Trustee of any duties it has to allocate funds for payment for such fees under Section 8.02 of the Indenture.
(c) The Servicer and the Issuer acknowledge and agree that the Servicer’s actual collections of Storm Recovery Charges on some days might exceed the Servicer’s deemed collections, and that the Servicer’s actual collections of Storm Recovery Charges on other days might be less than the Servicer’s deemed collections. The Servicer and the Issuer further acknowledge and agree that the amount of these variances are likely to be small and are not likely to be biased in favor of over-remittances or under-remittances. Consequently, so long as the Servicer faithfully makes all daily remittances based on weighted average days sales outstanding, as provided for herein, the Servicer and the Issuer agree that no actual or deemed investment earnings shall be payable in respect of such over-remittances or under-remittances. However, the Servicer shall remit at least annually to the Indenture Trustee, for the benefit of the Issuer, any late charges received from Customers in respect of Storm Recovery Charges.
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(d) The foregoing Servicing Fee constitutes a fair and reasonable compensation for the obligations to be performed by the Servicer. Such Servicing Fee shall be determined without regard to the income of the Issuer, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Issuer and shall be considered a fixed Operating Expense of the Issuer subject to the limitations on such expenses set forth in the Financing Order.
(e) Any services required for or contemplated by the performance of the above-referenced services by the Servicer to be provided by unaffiliated third parties may, if provided for or otherwise contemplated by the Financing Order and if the Issuer deems it necessary or desirable, be arranged by the Issuer or by the Servicer at the direction (which may be general or specific) of the Issuer. Costs and expenses associated with the contracting for such third-party professional services may be paid directly by the Issuer or paid by the Servicer and reimbursed by the Issuer in accordance with Section 6.06(a), or otherwise as the Servicer and the Issuer may mutually arrange.
Section 6.07. Compliance with Applicable Law. The Servicer covenants and agrees, in servicing the Storm Recovery Property, to comply in all material respects with all laws applicable to, and binding upon, the Servicer and relating to the Storm Recovery Property, the noncompliance with which would have a material adverse effect on the value of the Storm Recovery Property; provided, however, that the foregoing is not intended to, and shall not, impose any liability on the Servicer for noncompliance with any Requirement of Law that the Servicer is contesting in good faith in accordance with its customary standards and procedures. It is expressly acknowledged that the payment of fees to the Rating Agencies shall be at the expense of the Issuer and that, if the Servicer advances such payments to the Rating Agencies, the Issuer shall reimburse the Servicer for any such advances.
Section 6.08. Access to Certain Records and Information Regarding Storm Recovery Property. The Servicer shall provide to the Indenture Trustee access to the Storm Recovery Property Records for the Storm Recovery Bonds as is reasonably required for the Indenture Trustee to perform its duties and obligations under the Indenture and the other Basic Documents and shall provide access to such records to the Holders as required by applicable law. Access shall be afforded without charge, but only upon reasonable request and during normal business hours at the offices of the Servicer. Nothing in this Section 6.08 shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 6.08.
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Section 6.09. Appointments. The Servicer may at any time appoint any Person to perform all or any portion of its obligations as Servicer hereunder, including a collection agent acting pursuant to the Intercreditor Agreement; provided, however, that, unless such Person is an Affiliate of Duke Energy Progress, the Rating Agency Condition shall have been satisfied in connection therewith; provided, further, that the Servicer shall remain obligated and be liable under this Servicing Agreement for the servicing and administering of the Storm Recovery Property in accordance with the provisions hereof without diminution of such obligation and liability by virtue of the appointment of such Person and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Storm Recovery Property. The fees and expenses of any such Person shall be as agreed between the Servicer and such Person from time to time, and none of the Issuer, the Indenture Trustee, the Holders or any other Person shall have any responsibility therefor or right or claim thereto. Any such appointment shall not constitute a Servicer resignation under Section 6.05.
Section 6.10. No Servicer Advances. The Servicer shall not make any advances of interest on or principal of the Storm Recovery Bonds.
Section 6.11. Remittances.
(a) The Storm Recovery Charge Collections on any Servicer Business Day (the “Daily Remittance”) shall be calculated according to the procedures set forth in Exhibit A and remitted by the Servicer as soon as reasonably practicable to the General Subaccount of the Collection Account but in no event later than two Servicer Business Days following such Servicer Business Day. Prior to each remittance to the General Subaccount of the Collection Account pursuant to this Section 6.11, the Servicer shall provide written notice (which may be via electronic means, including electronic mail) to the Indenture Trustee and, upon request, to the Issuer of each such remittance (including the exact dollar amount to be remitted). The Servicer shall also, promptly upon receipt, remit to the Collection Account any other proceeds of the Storm Recovery Collateral that it may receive from time to time. Reconciliations of bank statements shall be as set forth in Exhibit A.
(b) The Servicer agrees and acknowledges that it holds all Storm Recovery Charge Payments collected by it and any other proceeds for the Storm Recovery Collateral received by it for the benefit of the Indenture Trustee and the Holders and that all such amounts will be remitted by the Servicer in accordance with this Section 6.11 without any surcharge, fee, offset, charge or other deduction except for and interest earnings permitted by Section 6.06. The Servicer further agrees not to make any claim to reduce its obligation to remit all Storm Recovery Charge Payments collected by it in accordance with this Servicing Agreement.
(c) Unless otherwise directed to do so by the Issuer, the Servicer shall be responsible for selecting Eligible Investments in which the funds in the Collection Account shall be invested pursuant to Section 8.03 of the Indenture.
Section 6.12. Maintenance of Operations. Subject to Section 6.03, Duke Energy Progress agrees to continue, unless prevented by circumstances beyond its control, to operate its electric distribution system to provide service so long as it is acting as the Servicer under this Servicing Agreement.
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ARTICLE VII
DEFAULT
Section 7.01. Servicer Default. If any one or more of the following events (a “Servicer Default”) shall occur and be continuing:
(a) any failure by the Servicer to remit to the Collection Account on behalf of the Issuer any required remittance that shall continue unremedied for a period of five Business Days after written notice of such failure is received by the Servicer from the Issuer or the Indenture Trustee (with a copy of such notice being provided promptly upon receipt by the Servicer to the Commission) or after discovery of such failure by a Responsible Officer of the Servicer;
(b) any failure on the part of the Servicer or, so long as the Servicer is Duke Energy Progress or an Affiliate thereof, any failure on the part of Duke Energy Progress, as the case may be, duly to observe or to perform in any material respect any covenants or agreements of the Servicer or Duke Energy Progress, as the case may be, set forth in this Servicing Agreement (other than as provided in Section 7.01(a) or Section 7.01(c)) or any other Basic Document to which it is a party, which failure shall (i) materially and adversely affect the rights of the Holders and (ii) continue unremedied for a period of 60 days after the date on which (A) written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer or Duke Energy Progress, as the case may be, by the Issuer, the Commission (with a copy to the Indenture Trustee) or to the Servicer or Duke Energy Progress, as the case may be, by the Indenture Trustee or (B) such failure is discovered by a Responsible Officer of the Servicer;
(c) any failure by the Servicer duly to perform its obligations under Section 4.01(b) in the time and manner set forth therein, which failure continues unremedied for a period of five Business Days;
(d) any representation or warranty made by the Servicer in this Servicing Agreement or any other Basic Document shall prove to have been incorrect in a material respect when made, which has a material adverse effect on the Holders and which material adverse effect continues unremedied for a period of 60 days after the date on which (i) written notice thereof, requiring the same to be remedied, shall have been delivered to the Servicer (with a copy to the Indenture Trustee) by the Issuer or the Indenture Trustee (with a copy of such notice being provided promptly upon receipt by the Servicer to the Commission), or (ii) such failure is discovered by a Responsible Officer of the Servicer; or
(e) an Insolvency Event occurs with respect to the Servicer or Duke Energy Progress;
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then, and in each and every case, so long as the Servicer Default shall not have been remedied, either the Indenture Trustee shall, upon the instruction of (i) Holders evidencing a majority of the Outstanding Amount of the Storm Recovery Bonds or by the Commission, subject to the terms of the Intercreditor Agreement, (ii) notice then given in writing to the Servicer (and to the Indenture Trustee if given by the Holders) (a “Termination Notice”), terminate all the rights and obligations (other than the obligations set forth in Section 6.02 and the obligation under Section 7.02 to continue performing its functions as Servicer until a successor Servicer is appointed) of the Servicer under this Servicing Agreement and under the Intercreditor Agreement; provided, however the Indenture Trustee shall not give a Termination Notice upon instruction of the Commission unless the Rating Agency Condition is satisfied. In addition, upon a Servicer Default described in Section 7.01(a), the Holders and the Indenture Trustee as financing parties under the Storm Recovery Law (or any of their representatives) shall be entitled to apply to the Commission or a court of appropriate jurisdiction for an order for sequestration and payment of revenues arising with respect to the Storm Recovery Property. On or after the receipt by the Servicer of a Termination Notice, all authority and power of the Servicer under this Servicing Agreement, whether with respect to the Storm Recovery Bonds, the Storm Recovery Property, the Storm Recovery Charges or otherwise, shall, without further action, pass to and be vested in such successor Servicer as may be appointed under Section 7.02; and, without limitation, the Indenture Trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such Termination Notice, whether to complete the transfer of the Storm Recovery Property Records and related documents, or otherwise. The predecessor Servicer shall cooperate with the successor Servicer, the Issuer and the Indenture Trustee in effecting the termination of the responsibilities and rights of the predecessor Servicer under this Servicing Agreement, including the transfer to the successor Servicer for administration by it of all Storm Recovery Property Records and all cash amounts that shall at the time be held by the predecessor Servicer for remittance, or shall thereafter be received by it with respect to the Storm Recovery Property or the Storm Recovery Charges. As soon as practicable after receipt by the Servicer of such Termination Notice, the Servicer shall deliver the Storm Recovery Property Records to the successor Servicer. In case a successor Servicer is appointed as a result of a Servicer Default, all reasonable costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with transferring the Storm Recovery Property Records to the successor Servicer and amending this Servicing Agreement and the Intercreditor Agreement to reflect such succession as Servicer pursuant to this Section 7.01 shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs and expenses. Termination of Duke Energy Progress as Servicer shall not terminate Duke Energy Progress’s rights or obligations under the Sale Agreement (except rights thereunder deriving from its rights as the Servicer hereunder).
Section 7.02. Appointment of Successor.
(a) Upon the Servicer’s receipt of a Termination Notice pursuant to Section 7.01 or the Servicer’s resignation or removal in accordance with the terms of this Servicing Agreement, the predecessor Servicer shall continue to perform its functions as Servicer under this Servicing Agreement and shall be entitled to receive the requisite portion of the Servicing Fee, until a successor Servicer shall have assumed in writing the obligations of the Servicer hereunder as described below. In the event of the Servicer’s removal or resignation hereunder, the Indenture Trustee may, at the written direction and with the consent of the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds or of the Commission shall, but subject to the provisions of the Intercreditor Agreement, appoint a successor Servicer with the Issuer’s prior written consent thereto (which consent shall not be unreasonably withheld), and the successor Servicer shall accept its appointment by a written assumption in form reasonably acceptable to the Issuer and the Indenture Trustee and provide prompt written notice of such assumption to the Issuer, the Commission and the Rating Agencies. If, within 30 days after the delivery of the Termination Notice, a new Servicer shall not have been appointed, the Indenture Trustee may, at the direction of the Holders of a majority of the Storm Recovery Bonds, petition the Commission or a court of competent jurisdiction to appoint a successor Servicer under this Servicing Agreement. A Person shall qualify as a successor Servicer only if (i) such Person is permitted under Commission Regulations to perform the duties of the Servicer, (ii) the Rating Agency Condition shall have been satisfied, (iii) such Person enters into a servicing agreement with the Issuer having substantially the same provisions as this Servicing Agreement and (iv) such Person agrees to perform the obligations of the Servicer under the Intercreditor Agreement. In no event shall the Indenture Trustee be liable for its appointment of a successor Servicer. The Indenture Trustee’s expenses incurred under this Section 7.02(a) shall be at the sole expense of the Issuer and payable from the Collection Account as provided in Section 8.02 of the Indenture.
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(b) Upon appointment, the successor Servicer shall be the successor in all respects to the predecessor Servicer and shall be subject to all the responsibilities, duties and liabilities arising thereafter placed on the predecessor Servicer and shall be entitled to the Servicing Fee and all the rights granted to the predecessor Servicer by the terms and provisions of this Servicing Agreement.
Section 7.03. Waiver of Past Defaults. The Indenture Trustee, with the written consent of the Holders evidencing a majority of the Outstanding Amount of the Storm Recovery Bonds, may waive in writing any default by the Servicer in the performance of its obligations hereunder and its consequences, except a default in making any required deposits to the Collection Account in accordance with this Servicing Agreement. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Default arising therefrom shall be deemed to have been remedied for every purpose of this Servicing Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereto. Promptly after the execution of any such waiver, the Servicer shall furnish copies of such waiver to each of the Rating Agencies and the Commission.
Section 7.04. Notice of Servicer Default. The Servicer shall deliver to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies, promptly after having obtained knowledge thereof, but in no event later than five Business Days thereafter, written notice of any event that, with the giving of notice or lapse of time, or both, would become a Servicer Default under Section 7.01.
Section 7.05. Cooperation with Successor. The Servicer covenants and agrees with the Issuer that it will, on an ongoing basis, cooperate with the successor Servicer and provide whatever information is, and take whatever actions are, reasonably necessary to assist the successor Servicer in performing its obligations hereunder.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment.
(a) Subject to Section 8.01(c), this Servicing Agreement may be amended in writing by the Servicer and the Issuer with the prior written consent of the Indenture Trustee and the satisfaction of the Rating Agency Condition; provided, that any such amendment may not adversely affect the interest of any Holder in any material respect without the consent of the Holders of a majority of the Outstanding Amount. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.
(b) Prior to the execution of any amendment to this Servicing Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel of external counsel stating that such amendment is authorized and permitted by this Servicing Agreement and all conditions precedent, if any, provided for in this Servicing Agreement relating to such amendment have been satisfied and upon the Opinion of Counsel from external counsel referred to in Section 3.01(c)(i). The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment that affects their own rights, duties, indemnities or immunities under this Servicing Agreement or otherwise.
(c) Notwithstanding anything to the contrary in this Section 8.01, no amendment or modification of this Servicing Agreement, nor any waiver required by Section 7.03 hereof, shall be effective except upon satisfaction of the conditions precedent in this paragraph (c).
(i) At least 15 days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in Section 8.01(a) (except that the consent of the Indenture Trustee may be subject to the consent of the Holders if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification) the Servicer shall have filed in Commission docket E-2, Sub 1262 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:
(A) a reference to Docket No. E-2, Sub 1262;
(B) an Officer’s Certificate stating that the proposed amendment or modification has been approved by all parties to this Servicing Agreement or alternatively, the waiver of default has been approved by the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds; and
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(C) a statement identifying the person to whom the Commission is to address any response to the proposed amendment or to request additional time.
(ii) If the Commission within 15 days (subject to extension as provided in clause (iii)) of receiving a notification complying with subparagraph (i), shall have issued an order that the Commission might object to the proposed amendment or modification, then, except as provided in clause (iv) below, such proposed amendment or modification shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed amendment or modification.
(iii) If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification may subsequently become effective upon satisfaction of the other conditions specified in Section 8.01(a).
(iv) Following the delivery of an order from the Commission to the Servicer under subparagraph (ii), the Servicer and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any proposed amendment, modification or waiver of default. The fact that the Servicer delivers notice to the Commission pursuant to this Section 8.01(a) does not obligate the Servicer to amend this Servicing Agreement as provided in the notice.
Section 8.02. Maintenance of Accounts and Records.
(a) The Servicer shall maintain accounts and records as to the Storm Recovery Property accurately and in accordance with its standard accounting procedures and in sufficient detail to permit reconciliation between Storm Recovery Charge Payments received by the Servicer and Storm Recovery Charge Collections from time to time deposited in the Collection Account.
(b) The Servicer shall permit the Indenture Trustee and its agents at any time during normal business hours, upon reasonable notice to the Servicer and to the extent it does not unreasonably interfere with the Servicer’s normal operations, to inspect, audit and make copies of and abstracts from the Servicer’s records regarding the Storm Recovery Property and the Storm Recovery Charges. Nothing in this Section 8.02(b) shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 8.02(b).
Section 8.03. Notices. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:
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(a) in the case of the Servicer, to Duke Energy Progress LLC, at (i) 410 South Wilmington Street Raleigh, North Carolina 27601-1748, Attention: Director, Rates and Regulatory Strategy, Telephone: 704-382-3853 and (ii) 550 South Tryon Street, Charlotte, North Carolina 28202, Attention: Treasurer, Telephone: 704-382-3853 c/o Assistant Treasurer;
(b) in the case of the Issuer, to Duke Energy Progress NC Storm Funding LLC, at 410 South Wilmington Street Raleigh, North Carolina 27601-1748 Attention: Managers, Telephone: 704-382-3853;
(c) in the case of the Indenture Trustee, to the Corporate Trust Office;
(d) in the case of S&P, to S&P Global Ratings, a S&P Global Inc. business, Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@standardandpoors.com (all such notices to be delivered to S&P in writing by email);
(e) in the case of Moody’s, to Moody’s Investors Service, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: ServicerReports@moodys.com (all such notice to be delivered to Moody’s in writing by email), and solely for purposes of Rating Agency Condition communications: abscormonitoring@moodys.com; and
(f) in the case of the Commission and the Public Staff – North Carolina Utilities Commission, by filing a notice in docket E-2, Sub 1262 with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff.
Each party hereto may, by notice given in accordance herewith to the other party or parties hereto, designate any further or different address to which subsequent notices, reports and other communications shall be sent.
Section 8.04. Assignment. Notwithstanding anything to the contrary contained herein, except as provided in Section 6.03 and as provided in the provisions of this Servicing Agreement concerning the resignation of the Servicer, this Servicing Agreement may not be assigned by the Servicer. Any assignment of this Servicing Agreement is subject to satisfaction of any conditions set forth in the Intercreditor Agreement.
Section 8.05. Limitations on Rights of Others. The provisions of this Servicing Agreement are solely for the benefit of the Servicer and the Issuer and, to the extent provided herein or in the other Basic Documents, the Indenture Trustee and the Holders, and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant provisions of this Servicing Agreement. Nothing in this Servicing Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Storm Recovery Property or Storm Recovery Collateral or under or in respect of this Servicing Agreement or any covenants, conditions or provisions contained herein.
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Section 8.06. Severability. Any provision of this Servicing 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 remainder of such provision (if any) or the remaining provisions hereof (unless such a construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 8.07. Separate Counterparts. This Servicing Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.
Section 8.08. Governing Law. This Servicing Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.
Section 8.09. Assignment to Indenture Trustee. The Servicer hereby acknowledges and consents to the assignment by the Issuer to the Indenture Trustee of any or all of the Issuer’s rights hereunder. 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 delivered pursuant hereto, as to all of which any recourse shall be had solely to the assets of the Issuer subject to the availability of funds therefor under Section 8.02 of the Indenture.
Section 8.10. Nonpetition Covenants. Notwithstanding any prior termination of this Servicing Agreement or the Indenture, the Servicer shall not, prior to the date that is one year and one day after the satisfaction and discharge of the Indenture, acquiesce, petition or otherwise invoke or cause the Issuer to invoke or join with any Person in provoking the process of any Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer for any substantial part of the property of the Issuer or ordering the dissolution, winding up or liquidation of the affairs of the Issuer.
Section 8.11. Limitation of Liability. It is expressly understood and agreed by the parties hereto that this Servicing Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee in the exercise of the powers and authority conferred and vested in it, and that the Indenture Trustee, in acting hereunder, is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.
Section 8.12. Rule 17g-5 Compliance. The Servicer agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Servicer to any Rating Agency under this Servicing Agreement or any other Basic Document to which it is a party for the purpose of determining the initial credit rating of the Storm Recovery Bonds or undertaking credit rating surveillance of the Storm Recovery Bonds with any Rating Agency, or satisfy the Rating Agency Condition, shall be substantially concurrently posted by the Servicer on the 17g-5 Website.
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Section 8.13. Indenture Trustee Actions. In acting hereunder, the Indenture Trustee shall have the rights, protections and immunities granted to it under the Indenture.
{SIGNATURE PAGE FOLLOWS}
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IN WITNESS WHEREOF, the parties hereto have caused this Servicing Agreement to be duly executed by their respective officers as of the day and year first above written.
| DUKE ENERGY PROGRESS NC STORM FUNDING LLC, as Issuer |
|||
| By: | |||
Name: Chris R. Bauer |
|||
Title: Assistant Treasurer |
|||
| DUKE ENERGY PROGRESS, LLC, as Servicer |
|||
| By: | |||
| Name: Chris R. Bauer | |||
| Title: Assistant Treasurer | |||
ACKNOWLEDGED AND ACCEPTED:
THE BANK OF NEW YORK MELLON TRUST COMPANY,
NATIONAL ASSOCIATION,
as Indenture Trustee
| By: | |||
| Name: | |||
| Title: |
Signature Page to Storm Recovery Property Servicing Agreement
EXHIBIT A
SERVICING PROCEDURES
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. Definitions.
Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Servicing Agreement (the “Agreement”).
SECTION 2. Data Acquisition.
(a) Installation and Maintenance of Meters. The Servicer shall cause to be installed, replaced and maintained meters in accordance with the Servicer Policies and Practices.
(b) Meter Reading. In accordance with the Servicer Policies and Practices, the Servicer shall obtain consumption measurements for each Customer or determine any Customer’s consumption on the basis of estimates in accordance with Commission Regulations.
(c) Cost of Metering. The Issuer shall not be obligated to pay any costs associated with the metering duties set forth in this Section 2, including the costs of installing, replacing and maintaining meters, nor shall the Issuer be entitled to any credit against the Servicing Fee for any cost savings realized by the Servicer as a result of new metering and/or billing technologies.
SECTION 3. Consumption and Bill Calculation.
The Servicer shall obtain a calculation of each Customer’s consumption (which may be based on data obtained from such Customer’s meter read or on consumption estimates determined in accordance with Commission Regulations) in accordance with the Servicer Policies and Practices and shall determine therefrom Billed Storm Recovery Charges for the Storm Recovery Bonds.
SECTION 4. Billing.
(a) Commencement of Billing. The Servicer shall implement the Storm Recovery Charges as of the date following Closing Date for the Storm Recovery Bonds and shall thereafter bill each Customer for each Customer’s Billed Storm Recovery Charges for the Storm Recovery Bonds in accordance with the provisions of this Section 4.
(b) Frequency of Bills; Billing Practices. In accordance with the Servicer Policies and Practices, the Servicer shall generate and issue a Bill to each Customer. In the event that the Servicer makes any material modification to the Servicer Policies and Practices, it shall notify the Issuer, the Indenture Trustee and the Rating Agencies as soon as practicable, and in no event later than 30 Servicer Business Days after such modification goes into effect, but the Servicer may not make any modification that will materially adversely affect the Holders.
(c) Format.
(i) The Customer’s Bill will contain a separate line item identifying the monthly charge representing the Storm Recovery Property. The Customer’s Bill shall contain in text or in a footnote, text substantially to the effect that the monthly charge representing Storm Recovery Property has been approved by the Financing Order, and that a portion of the monthly charge is being collected by the Servicer, as servicer, on behalf of the Issuer as owner of the Storm Recovery Property.
(ii) The Servicer shall conform to such requirements in respect of the format, structure and text of Bills delivered to Customers as Commission Regulations shall from time to time prescribe. To the extent that Bill format, structure and text are not prescribed by applicable law or by Commission Regulations, the Servicer shall, subject to clause (i) of this subsection (c), determine the format, structure and text of all Bills in accordance with its reasonable business judgment, the Servicer Policies and Practices and historical practice.
(d) Delivery. Except as provided in the next sentence, the Servicer shall deliver all Bills to Customers (i) by United States mail in such class or classes as are consistent with the Servicer Policies and Practices or (ii) by any other means, whether electronic or otherwise, that the Servicer may from time to time use in accordance with the Servicer Policies and Practices. The Servicer shall pay from its own funds all costs of issuance and delivery of all Bills that it renders, including printing and postage costs as the same may increase or decrease from time to time.
SECTION 5. Customer Service Functions.
The Servicer shall handle all Customer inquiries and other Customer service matters according to the Servicer Policies and Practices.
SECTION 6. Collections; Payment Processing; Remittance.
(a) Collection Efforts, Policies, Procedures.
(i) The Servicer shall collect Billed Storm Recovery Charges for the Storm Recovery Bonds (including late charges in respect of Storm Recovery Charges) from Customers as and when the same become due in accordance with such collection procedures as it follows with respect to comparable assets that it services for itself or others including, in accordance with Commission Regulations and the Servicer Policies and Practices, that:
(A) The Servicer shall prepare and deliver overdue notices to Customers.
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(B) The Servicer shall deliver past-due and shut-off notices.
(C) The Servicer may employ the assistance of collection agents.
(D) The Servicer shall apply Customer deposits to the payment of delinquent accounts.
(ii) The Servicer shall not waive any late payment charge or any other fee or charge relating to delinquent payments, if any, or waive, vary or modify any terms of payment of any amounts payable by a Customer, in each case unless such waiver or action: (A) would be in accordance with the Servicer Policies and Practices and (B) would comply in all material respects with applicable law.
(iii) The Servicer shall accept payment from Customers in respect of Billed Storm Recovery Charges for the Storm Recovery Bonds in such forms and methods and at such times and places in accordance with the Servicer Policies and Practices.
(b) Payment Processing; Allocation; Priority of Payments. The Servicer shall post all payments received to Customer accounts as promptly as practicable, and, in any event, substantially all payments shall be posted no later than two Servicer Business Days after receipt.
(c) Investment of Estimated Storm Recovery Charge Payments Received. Prior to remittance on the applicable remittance date, the Servicer may invest estimated Storm Recovery Charges Payments at its own risk and for its own benefit, and such investments and funds shall not be required to be segregated from the other investments and funds of the Servicer.
(d) Calculation of Daily Remittance.
(i) The Servicer will remit Storm Recovery Charges directly to the Indenture Trustee pursuant to Section 6.11 of the Servicing Agreement. The Servicer will remit Storm Recovery Charges based on estimated collections using a weighted average balance of days outstanding (“ADO”) on Duke Energy Progress’s retail bills. Storm Recovery Charge Collections for the Storm Recovery Bonds remitted will represent the charges estimated to be received for any period based upon the ADO and an estimated system-wide write-off percentage.
(ii) The Storm Recovery Charge Collections for the Storm Recovery Bonds will be remitted by the Servicer to the Indenture Trustee as soon as reasonably practicable to the General Subaccount of the Collection Account on each Servicer Business Day, but in no event later than two Servicer Business Days following such Servicer Business Day. Estimated daily Storm Recovery Charge Collections for the Storm Recovery Bonds will be remitted to the Indenture Trustee on each Servicer Business Day based upon the ADO and estimated write-offs. Each day on which those remittances are made is referred to as a daily remittance date.
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(iii) No less often than semi-annually, the Servicer and the Indenture Trustee will reconcile remittances of estimated Storm Recovery Charge Collections for the Storm Recovery Bonds with actual Storm Recovery Charge Payments for the Storm Recovery Bonds received by the Servicer to more accurately reflect the amount of Billed Storm Recovery Charges for the Storm Recovery Bonds that should have been remitted, based on ADO and the actual system-wide write-off percentage. To the extent the remittances of estimated payments arising from the Storm Recovery Charges exceed the amounts that should have been remitted based on actual system-wide write-offs, the Servicer will be entitled to withhold the excess amount from any subsequent remittance to the Indenture Trustee until the balance of such excess is reduced to zero. To the extent the remittances of estimated payments arising from the Storm Recovery Charges are less than the amount that should have been remitted based on actual system wide write-offs, the Servicer will remit the amount of the shortfall to the Indenture Trustee within two Servicer Business Days. Although the Servicer will remit estimated Storm Recovery Charge Collections for the Storm Recovery Bonds to the Indenture Trustee, the Servicer will not be obligated to make any payments on the Storm Recovery Bonds.
(iv) At least annually, the Servicer also will remit to the Indenture Trustee, for the benefit of the Issuer, any late charges received from Customers with respect to the Storm Recovery Charges.
(v) The Servicer agrees and acknowledges that it holds all Storm Recovery Charge Collections for the Storm Recovery Bonds received by it and any other proceeds for the Storm Recovery Collateral received by it for the benefit of the Indenture Trustee and the Holders and that all such amounts will be remitted by the Servicer without any surcharge, fee, offset, charge or other deduction. The Servicer further agrees not to make any claim to reduce its obligation to remit all Storm Recovery Charge Payments for the Storm Recovery Bonds collected by it in accordance with the Servicing Agreement.
(e) Partial Collections. Upon a partial payment of amounts billed, including amounts billed under special contracts, such partial payments shall be allocated ratably among the Storm Recovery Charges and the Seller’s other billed amounts (including any accrued interest and late fees) based on the ratio of each component of the bill to the total bill. If more than one Series of Storm Recovery Bonds are Outstanding, partial payments allocable to Storm Recovery Charges shall be allocated pro rata based upon the amount of Storm Recovery Charges owing with respect to each series.
(f) No Advances. The Servicer shall not be obligated to advance any of its own funds to the Issuer.
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EXHIBIT B
FORM OF MONTHLY SERVICER’S CERTIFICATE
See Attached
MONTHLY SERVICER’S CERTIFICATE
DUKE ENERGY PROGRESS NC STORM FUNDING LLC
$769,627,000 Senior Secured Storm Recovery Bonds
Pursuant to Section 3.01(b) of the Storm Recovery Property Servicing Agreement dated as of November 24, 2021 by and between Duke Energy Progress, LLC, as Servicer, and Duke Energy Progress NC Storm Funding LLC, as Issuer (the “Servicing Agreement”), the Servicer does hereby certify as follows:
Capitalized terms used but not defined in this Monthly Servicer’s Certificate have their respective meanings as set forth in the Servicing Agreement. References herein to certain sections and subsections are references to the respective sections or subsections of the Servicing Agreement.
Current BILLING MONTH: {__________}
Current BILLING MONTH: {__/__/20__} - {__/__/20__}
| Standard Billing for prior BILLING MONTH | ||||||||
| Residential Total Billed | $ | {__________ | } | |||||
| Residential STORM RECOVERY CHARGE (“SRC”) Billed | $ | {__________ | } | {_.____ | }% | |||
| Small General Service Total Billed | $ | {__________ | } | |||||
| Small General Service SRC Billed | $ | {__________ | } | {_.____ | }% | |||
| Medium General Service Billed | $ | {__________ | } | |||||
| Medium General Service SRC Billed | $ | {__________ | } | {_.____ | }% | |||
| Large General Service Total Billed | $ | {__________ | } | |||||
| Large General Service SRC Billed | $ | {__________ | } | {_.____ | }% | |||
| Lighting Total Billed | $ | {__________ | } | |||||
| Lighting SRC Billed | $ | {__________ | } | {_.____ | }% | |||
| YTD Net Write-offs as a % of Billed Revenue | ||||||||
| Non-Residential Class Customer Write-offs | {_.____ | }% | ||||||
| Residential Class Customer Write-offs | {_.____ | }% | ||||||
| Total Write-offs | {_.____ | }% |
Aggregate SRC Collections
| Total SRC Remitted for BILLING MONTH | ||||||||
| Residential SRC Collected | $ | {__________ | } | |||||
| Small General Service SRC Collected | $ | {__________ | } | |||||
| Medium General Service SRC Collected | $ | {__________ | } | |||||
| Large General Service SRC Collected | $ | {__________ | } | |||||
| Lighting SRC Collected | $ | {__________ | } | |||||
| Sub-Total of SRC Collected | $ | {__________ | } | |||||
| Total SRC Collected and Remitted | $ | {__________ | } | |||||
| Aggregate SRC Remittances for {__________ 20__} BILLING MONTH | $ | {__________ | } | |||||
| Aggregate SRC Remittances for {__________ 20__} BILLING MONTH | $ | {__________ | } | |||||
| Aggregate SRC Remittances for {__________ 20__} BILLING MONTH | $ | {__________ | } | |||||
| Total Current SRC Remittances | $ | {__________ | } |
Current BILLING MONTH: {__/__/20__} - {__/__/20__}
Executed as of this {____} day of {__________} 20{__}.
| Duke Energy Progress, LLC, as Servicer | ||
| By: | ||
| Name: | ||
| Title: | ||
| CC: | DUKE ENERGY PROGRESS NC STORM FUNDING LLC |
EXHIBIT C
FORM OF SEMI-ANNUAL SERVICER’S CERTIFICATE
See attached
SEMI-ANNUAL SERVICER’S CERTIFICATE
Pursuant to Section 4.01(c)(ii) of the Storm Recovery Property Servicing Agreement, dated as of November 24, 2021 (the “Servicing Agreement”), by and between Duke Energy Progress, LLC, as servicer (the “Servicer”), and Duke Energy Progress NC Storm Funding LLC, the Servicer does hereby certify, for the {__________}, 20{__} Payment Date (the “Current Payment Date”), as follows:
Capitalized terms used but not defined herein have their respective meanings as set forth in the Servicing Agreement. References herein to certain sections and subsections are references to the respective sections of the Servicing Agreement or the Indenture, as the context indicates.
Collection Periods: {__________} to {__________}
Payment Date: {__________}, 20{__}
| 1. | Collections Allocable and Aggregate Amounts Available for the Current Payment Date: |
| i. | Remittances for the {__________} Collection Period | $ | {__________ | } | |
| ii. | Remittances for the {__________} Collection Period | $ | {__________ | } | |
| iii. | Remittances for the {__________} Collection Period | $ | {__________ | } | |
| iv. | Remittances for the {__________} Collection Period | $ | {__________ | } | |
| v. | Remittances for the {__________} Collection Period | $ | {__________ | } | |
| vi. | Investment Earnings on Capital Subaccount | $ | {__________ | } | |
| vii. | Investment Earnings on Excess Funds Subaccount | $ | {__________ | } | |
| viii. | Investment Earnings on General Subaccount | $ | {__________ | } | |
| ix. | General Subaccount Balance (sum of i through viii above) | $ | {__________ | } | |
| x. | Excess Funds Subaccount Balance as of prior Payment Date | $ | {__________ | } | |
| xii. | Capital Subaccount Balance as of prior Payment Date | $ | {__________ | } |
| 2. | Outstanding Amounts as of prior Payment Date: |
| i. | Storm Recovery [ ] {__} Outstanding Amount | $ | {__________ | } | |
| ii. | Storm Recovery [ ] {__} Outstanding Amount | $ | {__________ | } | |
| iii. | Storm Recovery [ ] {__} Outstanding Amount | $ | {__________ | } | |
| vi. | Aggregate Outstanding Amount of all Storm Recovery Bonds | $ | {__________ | } |
| 3. | Required Funding/Payments as of Current Payment Date: |
| Principal | Principal Due | ||||
| i. | Storm Recovery [ ] {__} | $ | {__________ | } | |
| ii. | Storm Recovery [ ] {__} | $ | {__________ | } | |
| iii. | Storm Recovery [ ] {__} | $ | {__________ | } | |
| vi. | All Storm Recovery Bonds | $ | {__________ | } | |
| Interest |
| [Tranche/Class] | Interest Rate | Days in Interest Period2 | Principal Balance | Interest Due | ||||||||||
| vii. Storm Recovery [ ] {__} | {__} | % | {_____ | } | $ | {__________ | } | $ | {________ | } | ||||
| viii. Storm Recovery [ ] {__} | {__} | % | {_____ | } | $ | {__________ | } | $ | {________ | } | ||||
| ix. Storm Recovery [ ] {__} | {__} | % | {_____ | } | $ | {__________ | } | $ | {________ | } | ||||
| xii. | All Storm Recovery Bonds | $ | {________ | } | ||||||
| Required Level | Funding Required | |||||||||
| xiii. | Capital Subaccount | $ | {__________ | } | $ | {__________ | } |
| 4. | Allocation of Remittances as of Current Payment Date Pursuant to 8.02(e) of Indenture: |
| i. | Trustee Fees and Expenses; Indemnity Amounts | $ | {__________ | } | |||||
| ii. | Servicing Fee | $ | {__________ | } | |||||
| iii. | Administration Fee | $ | {__________ | } | |||||
| iv. | Operating Expenses | $ | {__________ | } |
| Storm Recovery Bonds | Aggregate | Per $1,000
of Original Principal Amount | |||||||||||
| v. | Semi-Annual Interest (including any past-due for prior periods) | $ | {__________ | } | |||||||||
| 1. | Storm Recovery [ ] {__}Interest Payment | $ | {__________ | } | $ | {__________ | } | ||||||
| 2. | Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | $ | {__________ | } | ||||||
| 3. | Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | $ | {__________ | } | ||||||
| $ | {__________ | } | |||||||||||
| vi. | Principal Due and Payable as a Result of an Event of Default or on Final Maturity Date | $ | {__________ | } | |||||||||
| 1. | Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | $ | {__________ | } | ||||||
| 2. | Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | $ | {__________ | } | ||||||
| 3. | Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | $ | {__________ | } | ||||||
| $ | {__________ | } | |||||||||||
| vii. | Semi-Annual Principal | $ | {__________ | } | |||||||||
| 1. | Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | $ | {__________ | } | ||||||
| 2. | Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | $ | {__________ | } | ||||||
| 3. | Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | $ | {__________ | } | ||||||
| $ | {__________ | } | |||||||||||
2On 30/360 day basis for initial payment date; otherwise use one-half of annual rate.
| viii. | Other unpaid Operating Expenses | $ | {__________ | } | |||||||||
| ix. | Funding of Capital Subaccount (to required level) | $ | {__________ | } | |||||||||
| x. | Capital Subaccount Return to Duke Energy Progress | $ | {__________ | } | |||||||||
| xi. | Deposit to Excess Funds Subaccount | $ | {__________ | } | |||||||||
| xii. | Released to Issuer upon Retirement of all Storm Recovery Bonds | $ | {__________ | } | |||||||||
| xiii. | Aggregate Remittances as of Current Payment Date | $ | {__________ | } |
| 5. | Outstanding Amount and Collection Account Balance as of Current Payment Date (after giving effect to payments to be made on such Payment Date): |
| i. | Storm Recovery [ ] {__} | $ | {__________ | } | |
| ii. | Storm Recovery [ ] {__} | $ | {__________ | } | |
| iii. | Storm Recovery [ ] {__} | $ | {__________ | } | |
| vi. | Aggregate Outstanding Amount of all Storm Recovery Bonds | $ | {__________ | } | |
| vii. | Excess Funds Subaccount Balance | $ | {__________ | } | |
| viii. | Capital Subaccount Balance | $ | {__________ | } | |
| ix. | Aggregate Collection Account Balance | $ | {__________ | } |
| 6. | Subaccount Withdrawals as of Current Payment Date (if applicable, pursuant to Section 8.02(e) of Indenture): |
| i. | Excess Funds Subaccount | $ | {__________ | } | |
| ii. | Capital Subaccount | $ | {__________ | } | |
| iii. | Total Withdrawals | $ | {__________ | } |
| 7. | Shortfalls in Interest and Principal Payments as of Current Payment Date: |
| i. | Semi-annual Interest | ||||
| Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | ||
| Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | ||
| Storm Recovery [ ] {__} Interest Payment | $ | {__________ | } | ||
| Total | $ | {__________ | } | ||
| ii. | Semi-annual Principal | ||||
| Storm Recovery [ ] {__} Principal Payment | $ | {__________ | } | ||
| Storm Recovery [ ] {__} Principal Payment | $ | {__________ | } | ||
| Storm Recovery [ ] {__} Principal Payment | $ | {__________ | } | ||
| Total | $ | {__________ | } |
| 8. | Shortfalls in Payment of Return on Invested Capital as of Current Payment Date: |
| i. | Return on Invested Capital | $ | {__________ | } |
| 9. | Shortfalls in Required Subaccount Levels as of Current Payment Date: |
| i. | Capital Subaccount | $ | {__________ | } |
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Semi-Annual Servicer’s Certificate this {____} day of {__________}, 20{__}.
| Duke Energy Progress, LLC, as Servicer | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT D
FORM OF SERVICER CERTIFICATE
See attached
SERVICER CERTIFICATE
The undersigned hereby certifies that the undersigned is the duly elected and acting {__________} of DUKE ENERGY PROGRESS, LLC, as servicer (the “Servicer”) under the Storm Recovery Property Servicing Agreement dated as of November 24, 2021 (the “Servicing Agreement”) by and between the Servicer and DUKE ENERGY PROGRESS STORM FUNDING LLC, and further certifies that:
1. The undersigned is responsible for assessing the Servicer’s compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB (the “Servicing Criteria”).
2. With respect to each of the Servicing Criteria, the undersigned has made the following assessment of the Servicing Criteria in accordance with Item 1122(d) of Regulation AB, with such discussion regarding the performance of such Servicing Criteria during the fiscal year covered by the Depositor’s annual report on Form 10-K:
| Regulation AB Reference |
Servicing Criteria | Assessment |
| General Servicing Considerations | ||
| 1122(d)(1)(i) | Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements. | Applicable; assessment below. |
| 1122(d)(1)(ii) | If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities. | Not applicable; no servicing activities were outsourced. |
| 1122(d)(1)(iii) | Any requirements in the transaction agreements to maintain a back-up servicer for pool assets are maintained. | Not applicable; transaction agreements do not provide for a back-up servicer. |
| 1122(d)(1)(iv) | A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements. | Not applicable; transaction agreements do not require a fidelity bond or errors and omissions policy. |
| 1122(d)(1)(v) | Aggregation of information, as applicable, is mathematically accurate and the information conveyed accurately reflects the information. | Applicable |
| Cash Collection and Administration | ||
| 1122(d)(2)(i) | Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements. | Applicable. |
| 1122(d)(2)(ii) | Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel. | Applicable. |
| Regulation AB Reference |
Servicing Criteria | Assessment |
| 1122(d)(2)(iii) | Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements. | Applicable; no advances by the Servicer are permitted under the transaction agreements, except for payments of certain indemnities. |
| 1122(d)(2)(iv) | The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements. | Applicable, but no current assessment is required since the related accounts are maintained by the Indenture Trustee. |
| 1122(d)(2)(v) | Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) under the Exchange Act. | Applicable, but no current assessment required; all “custodial accounts” are maintained by the Indenture Trustee. |
| 1122(d)(2)(vi) | Unissued checks are safeguarded so as to prevent unauthorized access. | Not applicable; all payments made by wire transfer. |
| 1122(d)(2)(vii) | Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are: (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements. | Applicable; assessment below. |
| Investor Remittances and Reporting | ||
| 1122(d)(3)(i) | Reports to investors, including those to be filed with the SEC, are maintained in accordance with the transaction agreements and applicable SEC requirements. Specifically, such reports: (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the SEC as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of pool assets serviced by the servicer. | Applicable; assessment below. |
| Regulation AB Reference |
Servicing Criteria | Assessment |
| 1122(d)(3)(ii) | Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements. | Not applicable; investor records maintained by the Indenture Trustee. |
| 1122(d)(3)(iii) | Disbursements made to an investor are posted within two business days to the servicer’s investor records, or such other number of days specified in the transaction agreements. | Applicable. |
| 1122(d)(3)(iv) | Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements. | Applicable; assessment below. |
| Pool Asset Administration | ||
| 1122(d)(4)(i) | Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents. | Applicable; assessment below. |
| 1122(d)(4)(ii) | Pool assets and related documents are safeguarded as required by the transaction agreements. | Applicable; assessment below. |
| 1122(d)(4)(iii) | Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements. | Not applicable; no removals or substitutions of Storm Recovery Property are contemplated or allowed under the transaction documents. |
| 1122(d)(4)(iv) | Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset agreements. | Applicable; assessment below. |
| 1122(d)(4)(v) | The servicer’s records regarding the pool assets agree with the servicer’s records with respect to an obligor’s unpaid principal balance. | Not applicable; because underlying obligation (Storm Recovery Charge) is not an interest-bearing instrument. |
| 1122(d)(4)(vi) | Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents. | Applicable; assessment below. |
| 1122(d)(4)(vii) | Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements. | Applicable; limited assessment below. Servicer actions governed by Commission regulations. |
| Regulation AB Reference |
Servicing Criteria | Assessment |
| 1122(d)(4)(viii) | Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets, including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment). | Applicable, but does not require assessment since no explicit documentation requirement with respect to delinquent accounts are imposed under the transaction agreements due to availability of “true-up” mechanism; and any such documentation is maintained in accordance with applicable North Carolina commission rules and regulations.. |
| 1122(d)(4)(ix) | Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents. | Not applicable; Storm Recovery Charges are not interest-bearing instruments. |
| 1122(d)(4)(x) | Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements. | Not applicable. |
| 1122(d)(4)(xi) | Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements. | Not applicable; Servicer does not make payments on behalf of obligors. |
| 1122(d)(4)(xii) | Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission. | Not applicable; Servicer cannot make advances of its own funds on behalf of customers under the transaction agreements. |
| Regulation AB Reference |
Servicing Criteria | Assessment |
| 1122(d)(4)(xiii) | Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements. | Not applicable; Servicer cannot make advances of its own funds on behalf of customers to pay principal or interest on the bonds. |
| 1122(d)(4)(xiv) | Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements. | Applicable; assessment below. |
| 1122(d)(4)(xv) | Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements. | Not applicable; no external enhancement is required under the transaction agreements. |
3. To the best of the undersigned’s knowledge, based on such review, the Servicer is in compliance in all material respects with the applicable servicing criteria set forth above as of and for the period ended the end of the fiscal year covered by the Issuer’s annual report on Form 10-K. {If not true, include description of any material instance of noncompliance.}
4. {[ ], an independent registered public accounting firm, has issued an attestation report on the Servicer’s assessment of compliance with the applicable servicing criteria as of and for the period ended the end of the fiscal year covered by the Issuer’s annual report on Form 10-K.}
5. Capitalized terms used but not defined herein have their respective meanings as set forth in the Servicing Agreement.
Executed as of this {____} day of {__________}, 20{__}.
| DUKE ENERGY PROGRESS LLC, as Servicer | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT E
FORM OF CERTIFICATE OF COMPLIANCE
See attached
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that the undersigned is the duly elected and acting {__________} of DUKE ENERGY PROGRESS, LLC, as servicer (the “Servicer”) under the Storm Recovery Property Servicing Agreement dated as of November 24, 2021 (the “Servicing Agreement”) by and between the Servicer and DUKE ENERGY PROGRESS NC STORM FUNDING LLC, and further certifies that:
1. A review of the activities of the Servicer and of its performance under the Servicing Agreement during the twelve months ended {__________}, 20{__} has been made under the supervision of the undersigned pursuant to Section 3.03 of the Servicing Agreement.
2. To the undersigned’s knowledge, based on such review, the Servicer has fulfilled all of its obligations in all material respects under the Servicing Agreement throughout the twelve months ended {__________}, 20{__}, except as set forth on EXHIBIT A hereto.
Executed as of this {____} day of {__________}, 20{__}.
| DUKE ENERGY PROGRESS, LLC, as Servicer | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT A
TO
CERTIFICATE OF COMPLIANCE
LIST OF SERVICER DEFAULTS
The following Servicer Defaults, or events that with the giving of notice, the lapse of time, or both, would become Servicer Defaults, known to the undersigned occurred during the twelve months ended {__________}, 20{__}:
| Nature of Default | Status |
| {__________} | {__________} |
EXHIBIT F
EXPECTED SINKING FUND SCHEDULE*
| Date | tranche A-1 | tranche A-2 | tranche A-3 | |||||||||
| Closing Date | $ | 0 | $ | 0 | $ | 0 | ||||||
| July 1, 2022 | $ | 15,219,001 | $ | 0 | $ | 0 | ||||||
| January 1, 2023 | $ | 16,931,986 | $ | 0 | $ | 0 | ||||||
| July 1, 2023 | $ | 17,019,862 | $ | 0 | $ | 0 | ||||||
| January 1, 2024 | $ | 17,108,196 | $ | 0 | $ | 0 | ||||||
| July 1, 2024 | $ | 17,196,987 | $ | 0 | $ | 0 | ||||||
| January 1, 2025 | $ | 17,286,240 | $ | 0 | $ | 0 | ||||||
| July 1, 2025 | $ | 17,375,955 | $ | 0 | $ | 0 | ||||||
| January 1, 2026 | $ | 17,466,136 | $ | 0 | $ | 0 | ||||||
| July 1, 2026 | $ | 17,556,786 | $ | 0 | $ | 0 | ||||||
| January 1, 2027 | $ | 17,647,905 | $ | 0 | $ | 0 | ||||||
| July 1, 2027 | $ | 17,739,498 | $ | 0 | $ | 0 | ||||||
| January 1, 2028 | $ | 17,831,566 | $ | 0 | $ | 0 | ||||||
| July 1, 2028 | $ | 14,619,882 | $ | 3,304,230 | $ | 0 | ||||||
| January 1, 2029 | $ | 0 | $ | 18,038,268 | $ | 0 | ||||||
| July 1, 2029 | $ | 0 | $ | 18,247,242 | $ | 0 | ||||||
| January 1, 2030 | $ | 0 | $ | 18,458,636 | $ | 0 | ||||||
| July 1, 2030 | $ | 0 | $ | 18,672,479 | $ | 0 | ||||||
| January 1, 2031 | $ | 0 | $ | 18,888,800 | $ | 0 | ||||||
| July 1, 2031 | $ | 0 | $ | 19,107,627 | $ | 0 | ||||||
| January 1, 2032 | $ | 0 | $ | 19,328,989 | $ | 0 | ||||||
| July 1, 2032 | $ | 0 | $ | 19,552,915 | $ | 0 | ||||||
| January 1, 2033 | $ | 0 | $ | 19,779,435 | $ | 0 | ||||||
| July 1, 2033 | $ | 0 | $ | 20,008,580 | $ | 0 | ||||||
| January 1, 2034 | $ | 0 | $ | 20,240,380 | $ | 0 | ||||||
| July 1, 2034 | $ | 0 | $ | 20,474,864 | $ | 0 | ||||||
| January 1, 2035 | $ | 0 | $ | 20,712,066 | $ | 0 | ||||||
| July 1, 2035 | $ | 0 | $ | 20,952,015 | $ | 0 | ||||||
| January 1, 2036 | $ | 0 | $ | 21,194,744 | $ | 0 | ||||||
| July 1, 2036 | $ | 0 | $ | 21,440,286 | $ | 0 | ||||||
| January 1, 2037 | $ | 0 | $ | 21,688,671 | $ | 0 | ||||||
| July 1, 2037 | $ | 0 | $ | 11,909,773 | $ | 10,030,161 | ||||||
| January 1, 2038 | $ | 0 | $ | 0 | $ | 22,216,877 | ||||||
| July 1, 2038 | $ | 0 | $ | 0 | $ | 22,524,691 | ||||||
| January 1, 2039 | $ | 0 | $ | 0 | $ | 22,836,771 | ||||||
| July 1, 2039 | $ | 0 | $ | 0 | $ | 23,153,175 | ||||||
| January 1, 2040 | $ | 0 | $ | 0 | $ | 23,473,962 | ||||||
| July 1, 2040 | $ | 0 | $ | 0 | $ | 23,799,194 | ||||||
| January 1, 2041 | $ | 0 | $ | 0 | $ | 24,128,931 | ||||||
| July 1, 2041 | $ | 0 | $ | 0 | $ | 24,463,238 | ||||||
| Total | $ | 221,000,000 | $ | 352,000,000 | $ | 196,627,000 | ||||||
* Totals may not add up due to rounding.
EXPECTED AMORTIZATION SCHEDULE
Outstanding Principal Balance Per Storm Recovery Bond
| Date | tranche A-1 | tranche A-2 | tranche A-3 | |||||||||
| Issuance Date | $ | 221,000,000 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2022 | $ | 205,780,999 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2023 | $ | 188,849,013 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2023 | $ | 171,829,151 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2024 | $ | 154,720,955 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2024 | $ | 137,523,968 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2025 | $ | 120,237,728 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2025 | $ | 102,861,773 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2026 | $ | 85,395,637 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2026 | $ | 67,838,851 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2027 | $ | 50,190,946 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2027 | $ | 32,451,448 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| January 1, 2028 | $ | 14,619,882 | $ | 352,000,000 | $ | 196,627,000 | ||||||
| July 1, 2028 | $ | 0 | $ | 348,695,770 | $ | 196,627,000 | ||||||
| January 1, 2029 | $ | 0 | $ | 330,657,502 | $ | 196,627,000 | ||||||
| July 1, 2029 | $ | 0 | $ | 312,410,260 | $ | 196,627,000 | ||||||
| January 1, 2030 | $ | 0 | $ | 293,951,624 | $ | 196,627,000 | ||||||
| July 1, 2030 | $ | 0 | $ | 275,279,145 | $ | 196,627,000 | ||||||
| January 1, 2031 | $ | 0 | $ | 256,390,345 | $ | 196,627,000 | ||||||
| July 1, 2031 | $ | 0 | $ | 237,282,718 | $ | 196,627,000 | ||||||
| January 1, 2032 | $ | 0 | $ | 217,953,729 | $ | 196,627,000 | ||||||
| July 1, 2032 | $ | 0 | $ | 198,400,814 | $ | 196,627,000 | ||||||
| January 1, 2033 | $ | 0 | $ | 178,621,379 | $ | 196,627,000 | ||||||
| July 1, 2033 | $ | 0 | $ | 158,612,799 | $ | 196,627,000 | ||||||
| January 1, 2034 | $ | 0 | $ | 138,372,419 | $ | 196,627,000 | ||||||
| July 1, 2034 | $ | 0 | $ | 117,897,555 | $ | 196,627,000 | ||||||
| January 1, 2035 | $ | 0 | $ | 97,185,489 | $ | 196,627,000 | ||||||
| July 1, 2035 | $ | 0 | $ | 76,233,474 | $ | 196,627,000 | ||||||
| January 1, 2036 | $ | 0 | $ | 55,038,730 | $ | 196,627,000 | ||||||
| July 1, 2036 | $ | 0 | $ | 33,598,444 | $ | 196,627,000 | ||||||
| January 1, 2037 | $ | 0 | $ | 11,909,773 | $ | 196,627,000 | ||||||
| July 1, 2037 | $ | 0 | $ | 0 | $ | 186,596,839 | ||||||
| January 1, 2038 | $ | 0 | $ | 0 | $ | 164,379,962 | ||||||
| July 1, 2038 | $ | 0 | $ | 0 | $ | 141,855,271 | ||||||
| January 1, 2039 | $ | 0 | $ | 0 | $ | 119,018,500 | ||||||
| July 1, 2039 | $ | 0 | $ | 0 | $ | 95,865,325 | ||||||
| January 1, 2040 | $ | 0 | $ | 0 | $ | 72,391,363 | ||||||
| July 1, 2040 | $ | 0 | $ | 0 | $ | 48,592,169 | ||||||
| January 1, 2041 | $ | 0 | $ | 0 | $ | 24,463,238 | ||||||
| July 1, 2041 | $ | 0 | $ | 0 | $ | 0 | ||||||
APPENDIX A
DEFINITIONS AND RULES OF CONSTRUCTION
A. Defined Terms. The following terms have the following meanings:
“17g-5 Website” is defined in Section 10.18(a) of the Indenture.
“Account Records” is defined in Section 1(a)(i) of the Administration Agreement.
“Act” is defined in Section 10.03(a) of the Indenture.
“Additional Series” means issuance by the Issuer of any series of Storm Recovery Bonds issued after the date hereof, that will be undertaken only if (i) such issuance has been authorized by the Commission, (ii) the Rating Agency Condition has been satisfied and it is a condition of issuance for each Series of Storm Recovery Bonds that such Additional Series receive a rating or ratings as required by the Financing Order or a Subsequent Financing Order, (iii) the Issuer has delivered to the Indenture Trustee an Opinion of Counsel of a nationally recognized firm experienced in such matters to the effect that after such issuance, in the opinion of such counsel, if either or both of Duke Energy Progress or the Seller were to become a debtor in a case under the United States Bankruptcy Code (Title 11, U.S.C.), a federal court exercising bankruptcy jurisdiction and exercising reasonable judgment after full consideration of all relevant factors would not order substantive consolidation of the assets and liabilities of the Issuer with those of the bankruptcy estate of Duke Energy Progress or the Seller, subject to the customary exceptions, qualifications and assumptions contained therein.
“Administration Agreement” means the Administration Agreement, dated as of the date hereof, by and between Duke Energy Progress and the Issuer.
“Administration Fee” is defined in Section 2 of the Administration Agreement.
“Administrator” means Duke Energy Progress, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.
“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 specified 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.
“Amendatory Schedule” means a revision to service riders or any other notice filing filed with the Commission in respect of the Storm Recovery Rate Schedule pursuant to a True-Up Adjustment.
“Annual Accountant’s Report” is defined in Section 3.04(a) of the Servicing Agreement.
A-1
“Authorized Denomination” means, with respect to any Storm Recovery Bond, the authorized denomination therefor specified in the Series Supplement, which shall be at least $2,000 and, except as otherwise provided in the Series Supplement, integral multiples of $1,000 in excess thereof, except for one Storm Recovery bond which may be of a smaller denomination.
“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.).
“Basic Documents” means the Indenture, Series Supplement, the Certificate of Formation, the LLC Agreement, the Administration Agreement, and, the Sale Agreement, Bill of Sale, Servicing Agreement, Intercreditor Agreement, any joinder to an existing intercreditor agreement, Letter of Representations, Underwriting Agreement and all other documents and certificates delivered in connection therewith.
“Bill of Sale” means a bill of sale substantially in the form of Exhibit A to the Sale Agreement delivered pursuant to Section 2.02(a) of the Sale Agreement.
“Billed Storm Recovery Charges” means the amounts of Storm Recovery Charges billed by the Servicer.
“Billing Period” means the period created by dividing the calendar year into 12 consecutive periods of approximately 21 Servicer Business Days.
“Bills” means each of the regular monthly bills, summary bills, opening bills and closing bills issued to Customers by Duke Energy Progress in its capacity as Servicer.
“Bond Interest Rate” means, with respect to any Tranche of Storm Recovery Bonds, the rate at which interest accrues on the Storm Recovery Bonds of such Series or Tranche, as specified in the Series Supplement.
“Book-Entry Form” means, with respect to any Storm Recovery Bond, that such Storm Recovery Bond is not certificated and the ownership and transfers thereof shall be made through book entries by a Clearing Agency as described in Section 2.11 of the Indenture and the Series Supplement pursuant to which such Storm Recovery Bond was issued.
“Book-Entry Storm Recovery Bonds” means any Storm Recovery Bonds issued in Book-Entry Form; provided, however, that, after the occurrence of a condition whereupon book-entry registration and transfer are no longer permitted and Definitive Storm Recovery Bonds are to be issued to the Holder of such Storm Recovery Bonds, such Storm Recovery Bonds shall no longer be “Book-Entry Storm Recovery Bonds”.
“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina, Charlotte, North Carolina or New York, New York are, or DTC or the Corporate Trust Office is, authorized or obligated by law, regulation or executive order to be closed.
“Capital Contribution” means the amount of cash contributed to the Issuer by Duke Energy Progress as specified in the LLC Agreement.
A-2
“Capital Subaccount” is defined in Section 8.02(a) of the Indenture.
“Certificate of Compliance” means the certificate referred to in Section 3.03 of the Servicing Agreement and substantially in the form of Exhibit E to the Servicing Agreement.
“Certificate of Formation” means the Certificate of Formation filed with the Secretary of State of the State of Delaware on August 12, 2021 pursuant to which the Issuer was formed.
“Claim” means a “claim” as defined in Section 101(5) of the Bankruptcy Code.
“Clearing Agency” means an organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act.
“Clearing Agency Participant” means a securities broker, dealer, bank, trust company, clearing corporation or other financial institution or other Person for whom from time to time a Clearing Agency effects book entry transfers and pledges of securities deposited with such Clearing Agency.
“Closing Date” means the date on which the Storm Recovery Bonds are originally issued in accordance with Section 2.10 of the Indenture and the Series Supplement.
“Code” means the Internal Revenue Code of 1986.
“Collateral” is defined in the preamble of the Indenture.
“Collection Account” is defined in Section 8.02(a) of the Indenture for such Series.
“Collection in Full of the Charges” means the day on which the aggregate amounts on deposit in the General Subaccount and the Excess Funds Subaccount are sufficient to pay in full all the Outstanding Storm Recovery Bonds and to replenish any shortfall in the Capital Subaccount.
“Collection Period” means any period commencing on the first Servicer Business Day of any Billing Period and ending on the last Servicer Business Day of such Billing Period.
“Commission” means the North Carolina Utilities Commission.
“Commission Condition” means the satisfaction of any precondition to any amendment or modification to or action under any Basic Documents through the obtaining of Commission consent or acquiescence, as described in the related Basic Document.
“Commission Regulations” means any orders issued or rules or regulations, including temporary regulations, promulgated by the Commission pursuant to North Carolina law.
A-3
“Company Minutes” is defined in Section 1(a)(iv) of the Administration Agreement.
“Corporate Trust Office” means the office of the Indenture Trustee at which, at any particular time, its corporate trust business shall be administered, which office as of the date hereof is located at BNY Mellon Global Corporate Trust, 4655 Salisbury Road, Suite 300, Jacksonville, Florida 32256; Telephone: 904-998-4714; Facsimile: 904-645-1930, or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders of Storm Recovery Bonds and the Issuer, or the principal corporate trust office of any successor trustee designated by like notice.
“Covenant Defeasance Option” is defined in Section 4.01(b) of the Indenture.
“Customer” means any existing or future retail customer (including individuals, corporations, other businesses, and federal, state and local governmental entities) receiving transmission or distribution service from Duke Energy Progress or its successors or assignees under Commission-approved rate schedules or under special contracts, even if such customer elects to purchase electricity from an TPS following a fundamental change in regulation of public utilities in North Carolina.
“Daily Remittance” is defined in Section 6.11(a) of the Servicing Agreement.
“Default” means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.
“Definitive Storm Recovery Bonds” is defined in Section 2.11 of the Indenture.
“Delaware UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of Delaware.
“DTC” means The Depository Trust Company.
“Duke Energy Progress” or “DEP” means Duke Energy Progress, LLC, a North Carolina limited liability company.
“Duke Energy Progress NC Storm Funding LLC” or “DEP NC Storm Funding” means the Issuer.
“Eligible Account” means a segregated non-interest-bearing trust account with an Eligible Institution.
“Eligible Institution” means:
(a) the corporate trust department of the Indenture Trustee, so long as any of the securities of the Indenture Trustee have (i) either a short-term credit rating from Moody’s of at least “P-1”, or a long-term unsecured debt rating from Moody’s of at least “A2”, and (ii) have a credit rating from S&P of at least “A”; or
A-4
(b) a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, or (B) a short-term issuer rating of “A-1” or higher by S&P and “P-1” or higher by Moody’s, and (ii) whose deposits are insured by the Federal Deposit Insurance Corporation.
If so qualified under clause (b) above, the Indenture Trustee may be considered an Eligible Institution for the purposes of clause (a) of this definition.
“Eligible Investments” means instruments or investment property that evidence:
(a) direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;
(b) demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of, bank deposit products of or bankers’ acceptances issued by, any depository institution (including, but not limited to, bank deposit products of the Indenture Trustee, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or state banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit, rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;
(c) commercial paper (including commercial paper of the Indenture Trustee, acting in its commercial capacity, and other than commercial paper of Duke Energy Progress or any of its Affiliates), which at the time of purchase is rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;
(d) investments in money market funds having a rating in the highest investment category granted thereby (including funds for which the Indenture Trustee or any of its Affiliates is investment manager or advisor) from Moody’s and S&P;
(e) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or its agencies or instrumentalities, entered into with Eligible Institutions;
A-5
(f) repurchase obligations with respect to any security or whole loan entered into with an Eligible Institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:
(i) a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a “broker/dealer”), the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s, “A-1+” by S&P at the time of entering into such repurchase obligation; or
(ii) an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s and “A-1+” by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; and
(g) any other investment permitted by each of the Rating Agencies;
in each case maturing not later than the Business Day preceding the next Payment Date or Special Payment Date, if applicable (for the avoidance of doubt, investments in money market funds or similar instruments that are redeemable on demand shall be deemed to satisfy the foregoing requirement). Notwithstanding the foregoing: (1) no securities or investments that mature in 30 days or more shall be “Eligible Investments” unless the issuer thereof has either a short-term unsecured debt rating of at least “P-1” from Moody’s or a long-term unsecured debt rating of at least “A1” from Moody’s and also has a long-term unsecured debt rating of at least “A” from S&P; (2) no securities or investments described in clauses (b) through (d) above that have maturities of more than 30 days but less than or equal to 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (3) no securities or investments described in clauses (b) through (d) above that have maturities of more than 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (4) no securities or investments described in bullet points (b) through (d) above which have a maturity of 60 days or less will be Eligible Investments unless such securities have a rating from S&P of at least “A-1”; and (5) no securities or investments described in bullet points (b) through (d) above which have a maturity of more than 60 days will be Eligible Investments unless such securities have a rating from S&P of at least “AA-”, “A-1+” or “AAAm”.
“Event of Default” is defined in Section 5.01 of the Indenture.
“Excess Funds Subaccount” is defined in Section 8.02(a) of the Indenture.
“Exchange Act” means the Securities Exchange Act of 1934.
“Expected Sinking Fund Schedule” means, with respect to any Tranche, the expected sinking fund schedule related thereto set forth in the Series Supplement.
“Federal Book-Entry Regulations” means 31 C.F.R. Part 357 et seq. (Department of Treasury).
“Final” means, with respect to the Financing Order or Subsequent Financing Order, that the Financing Order has become final, that the Financing Order is not being appealed and that the time for filing an appeal thereof has expired.
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“Final Maturity Date” means, with respect to each Series of Tranche of Storm Recovery Bonds, the final maturity date therefor as specified in the applicable Series Supplement.
“Financing Costs” means all financing costs as defined in Section 62-172(a)(4)of the Storm Recovery Law allowed to be recovered by Duke Energy Progress under the Financing Order.
“Financing Order” means the financing order issued by the Commission to Duke Energy Progress on May 10, 2021, Docket No. E-2, Sub 1262, authorizing the creation of the Storm Recovery Property, which was clarified and corrected by the Commission in an Order Clarifying and Correcting Financing Order on July 13, 2021.
“Financing Party” means any and all of the following: the Holders, the Indenture Trustee, Duke Energy Progress, collateral agents, any party under the Basic Documents, or any other person acting for the benefit of the Holders.
“North Carolina UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of North Carolina.
“General Subaccount” is defined in Section 8.02(a) of the Indenture for such Series.
“Global Storm Recovery Bond” means a Storm Recovery Bond to be issued to the Holders thereof in Book-Entry Form, which Global Storm Bond shall be issued to the Clearing Agency, or its nominee, in accordance with Section 2.11 of the Indenture and the Series Supplement.
“Governmental Authority” means any nation or government, any U.S. federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.
“Grant” means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, grant, transfer, create, grant a lien upon, a security interest in and right of set-off against, deposit, set over and confirm pursuant to the Indenture and the Series Supplement. A Grant of the Collateral shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.
“Holder” means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.
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“Indemnified Losses” is defined in Section 5.03 of the Servicing Agreement.
“Indemnified Party” is defined in Section 6.02(a) of the Servicing Agreement.
“Indemnified Person” is defined in Section 5.01(f) of the Sale Agreement.
“Indenture” means the Indenture, dated as of the date hereof, by and between the Issuer and The Bank of New York Mellon Trust Company, National Association, as Indenture Trustee and as Securities Intermediary.
“Indenture Trustee” means The Bank of New York Mellon Trust Company, National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any other indenture trustee for the benefit of the Secured Parties, under the Indenture.
“Independent” means, when used with respect to any specified Person, that such specified Person (a) is in fact independent of the Issuer, any other obligor on the Storm Recovery Bonds, the Seller, the Servicer and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director (other than as an independent director or manager) or person performing similar functions.
“Independent Certificate” means a certificate to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and consented to by the Indenture Trustee, and such certificate shall state that the signer has read the definition of “Independent” in the Indenture and that the signer is Independent within the meaning thereof.
“Independent Manager” is defined in Section 4.01(a) of the LLC Agreement.
“Independent Manager Fee” is defined in Section 4.01(a) of the LLC Agreement.
“Insolvency Event” means, with respect to a specified Person: (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such specified Person or any substantial part of its property in an involuntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the date hereof or thereafter, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or ordering the winding-up or liquidation of such specified Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such specified Person of a voluntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the Closing Date or thereafter, or the consent by such specified Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such specified Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or the making by such specified Person of any general assignment for the benefit of creditors, or the failure by such specified Person generally to pay its debts as such debts become due, or the taking of action by such specified Person in furtherance of any of the foregoing.
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“Intercreditor Agreement” means the Intercreditor Agreement, dated December 20, 2013, by and among the Duke Energy Business Services, Inc., Duke Energy Corporate Services Inc., Duke Energy Corporation, Mizuho Bank, Ltd., the Bank of Nova Scotia, the Bank of Tokyo-Mitsubishi UFJ, Ltd., Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress Receivables LLC, Cinergy Receivables Company LLC and Duke Energy Receivables Finance Company, LLC, the Indenture Trustee, the Issuer, Duke Energy Progress, and any subsequent such agreement.
“Investment Company Act” means the Investment Company Act of 1940.
“Investment Earnings” means investment earnings on funds deposited in the Collection Account net of losses and investment expenses.
“Issuer” means Duke Energy Progress NC Storm Funding LLC, a Delaware limited liability company, named as such in the Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the Trust Indenture Act, each other obligor on the Storm Recovery Bonds.
“Issuer Documents” is defined in Section 1(a)(iv) of the Administration Agreement.
“Issuer Order” means a written order signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.
“Issuer Request” means a written request signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.
“Legal Defeasance Option” is defined in Section 4.01(b) of the Indenture.
“Letter of Representations” means any applicable agreement between the Issuer and the applicable Clearing Agency, with respect to such Clearing Agency’s rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Storm Recovery Bonds.
“Lien” means a security interest, lien, mortgage, charge, pledge, claim or encumbrance of any kind.
“LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of Duke Energy Progress NC Storm Funding LLC, dated as of August 12, 2021.
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“Losses” means (a) any and all amounts of principal of and interest on the Storm Recovery Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amounts of any deposits by or to the Issuer required to have been made in accordance with the terms of the Basic Documents or the Financing Order that are not made when so required and (b) any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses of any kind whatsoever.
“Manager” means each manager of the Issuer under the LLC Agreement.
“Member” has the meaning specified in the first paragraph of the LLC Agreement.
“Monthly Servicer’s Certificate” is defined in Section 3.01(b)(i) of the Servicing Agreement.
“Moody’s” means Moody’s Investors Service, Inc. References to Moody’s are effective so long as Moody’s is a Rating Agency.
“North Carolina UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of North Carolina.
“NRSRO” is defined in Section 10.19(b) of the Indenture.
“NY UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York.
“Officer’s Certificate” means a certificate signed by a Responsible Officer of the Issuer under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, and delivered to the Indenture Trustee.
“Ongoing Financing Costs” means the Financing Costs described as such in the Financing Order, including Operating Expenses and any other costs identified in the Basic Documents; provided, however, that Ongoing Financing Costs do not include the Issuer’s costs of issuance of the Storm Recovery Bonds.
“Operating Expenses” means all unreimbursed fees, costs and out-of-pocket expenses of the Issuer, including all amounts owed by the Issuer to the Indenture Trustee (including indemnities, legal, audit fees and expenses) or any Manager, the Servicing Fee, the Administration Fee, legal and accounting fees, Rating Agency fees, any Regulatory Assessment Fees and related fees (i.e. website provider fees) and any franchise or other taxes owed by the Issuer, including on investment income in the Collection Account.
“Opinion of Counsel” means one or more written opinions of counsel, who may, except as otherwise expressly provided in the Basic Documents, be employees of or counsel to the party providing such opinion of counsel, which counsel shall be reasonably acceptable to the party receiving such opinion of counsel, and shall be in form and substance reasonably acceptable to such party.
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“Optional Interim True-Up Adjustment” means each adjustment to the Storm Recovery Charges made pursuant to Section 4.01(b)(ii) of the Servicing Agreement.
“Outstanding” means, as of the date of determination, all Storm Recovery Bonds theretofore authenticated and delivered under the Indenture, except:
(a) Storm Recovery Bonds theretofore canceled by the Storm Recovery Bond Registrar or delivered to the Storm Recovery Bond Registrar for cancellation;
(b) Storm Recovery Bonds or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Storm Recovery Bonds; and
(c) Storm Recovery Bonds in exchange for or in lieu of other Storm Recovery Bonds that have been issued pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Storm Recovery Bonds are held by a Protected Purchaser; provided, that, in determining whether the Holders of the requisite Outstanding Amount of the Storm Recovery Bonds or any Tranche thereof have given any request, demand, authorization, direction, notice, consent or waiver under any Basic Document, Storm Recovery Bonds owned by the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding (unless one or more such Persons owns 100% of such Storm Recovery Bonds), except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Storm Recovery Bonds that the Indenture Trustee actually knows to be so owned shall be so disregarded. Storm Recovery Bonds so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Storm Recovery Bonds and that the pledgee is not the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons.
“Outstanding Amount” means the aggregate principal amount of all Storm Recovery Bonds, or, if the context requires, all Storm Recovery Bonds of a Tranche, Outstanding at the date of determination.
“Paying Agent” means, with respect to the Indenture, the Indenture Trustee and any other Person appointed as a paying agent for the Storm Recovery Bonds pursuant to the Indenture.
“Payment Date” means, with respect to any Tranche of Storm Recovery Bonds, the dates specified in the Series Supplement; provided, that if any such date is not a Business Day, the Payment Date shall be the Business Day succeeding such date.
“Periodic Billing Requirement” means, for any Remittance Period, the aggregate amount of Charges calculated by the Servicer as necessary to be billed during such period in order to collect the Periodic Payment Requirement on a timely basis.
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“Periodic Interest” means, with respect to any Payment Date, the periodic interest for such Payment Date as specified in the Series Supplement.
“Periodic Payment Requirement” for any Remittance Period means the total dollar amount of Storm Recovery Charge Collections reasonably calculated by the Servicer in accordance with Section 4.01 of the Servicing Agreement as necessary to be received during such Remittance Period (after giving effect to the allocation and distribution of amounts on deposit in the Excess Funds Subaccount at the time of calculation and that are projected to be available for payments on the Storm Recovery Bonds at the end of such Remittance Period and including any shortfalls in Periodic Payment Requirements for any prior Remittance Period) in order to ensure that, as of the last Payment Date occurring in such Remittance Period, (a) all accrued and unpaid principal of and interest on the Storm Recovery Bonds then due shall have been paid in full on a timely basis, (b) the Outstanding Amount of the Storm Recovery Bonds is equal to the Projected Unpaid Balance on each Payment Date during such Remittance Period, (c) the balance on deposit in the Capital Subaccount equals the Required Capital Level and (d) all other fees and expenses due and owing and required or allowed to be paid under Section 8.02 of the Indenture as of such date shall have been paid in full; provided, that, with respect to any Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment occurring after the date that is one year prior to the last Scheduled Final Payment Date for the Storm Recovery Bonds, the Periodic Payment Requirements shall be calculated to ensure that sufficient Storm Recovery Charges will be collected to retire the Storm Recovery Bonds in full as of the next Payment Date.
“Periodic Principal” means, with respect to any Payment Date, the excess, if any, of the Outstanding Amount of Storm Recovery Bonds over the outstanding principal balance specified for such Payment Date on the Expected Sinking Fund Schedule.
“Permitted Lien” means the Lien created by the Indenture.
“Permitted Successor” is defined in Section 5.02 of the Sale Agreement.
“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Governmental Authority.
“Predecessor Storm Recovery Bond” means, with respect to any particular Storm Recovery Bond, every previous Storm Recovery Bond evidencing all or a portion of the same debt as that evidenced by such particular Storm Recovery Bond, and, for the purpose of this definition, any Storm Recovery Bond authenticated and delivered under Section 2.06 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Storm Recovery Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Storm Recovery Bond.
“Premises” is defined in Section 1(g) of the Administration Agreement.
“Proceeding” means any suit in equity, action at law or other judicial or administrative proceeding.
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“Projected Unpaid Balance” means, as of any Payment Date, the sum of the projected outstanding principal amount of each Tranche of Storm Recovery Bonds for such Payment Date set forth in the Expected Sinking Fund Schedule.
“Protected Purchaser” has the meaning specified in Section 8-303 of the UCC.:
“Public Staff” means the Public Staff of the Commission, an independent agency established in N.C. Gen. Stat. § 62-15 et seq., that represents the interests of the using and consuming public in matters pending before the Commission.
“Rating Agency” means, with respect to any Tranche of Storm Recovery Bonds, any of Moody’s or S&P that provides a rating with respect to the Storm Recovery Bonds. 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, notice of which designation shall be given to the Indenture Trustee and the Servicer.
“Rating Agency Condition” means, with respect to any action, at least ten Business Days’ prior written notification to each Rating Agency of such action, and written confirmation from each of S&P and Moody’s to the Servicer, the Indenture Trustee and the Issuer that such action will not result in a suspension, reduction or withdrawal of the then current rating by such Rating Agency of any Tranche of Storm Recovery Bonds; provided, that, if, within such ten Business Day period, any Rating Agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such Rating Agency is reviewing and considering the notification, then (a) the Issuer shall be required to confirm that such Rating Agency has received the Rating Agency Condition request and, if it has, promptly request the related Rating Agency Condition confirmation and (b) if the Rating Agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five Business Days following such second request, the applicable Rating Agency Condition requirement shall not be deemed to apply to such Rating Agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a Rating Agency’s right to review or consent).
“Record Date” means one Business Day prior to the applicable Payment Date.
“Registered Holder” means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.
“Regulation AB” means the rules of the SEC promulgated under Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123.
“Reimbursable Expenses” is defined in Section 2 of the Administration Agreement and Section 6.06(a) of the Servicing Agreement.
“Released Parties” is defined in Section 6.02(d) of the Servicing Agreement.
“Remittance Period” means, with respect to any True-Up Adjustment, the period comprised of 6 consecutive Collection Periods beginning with the Collection Period three months prior to when such True-Up Adjustment would go into effect, from the Closing Date to the first Scheduled Payment Date, and for each subsequent period between Scheduled Payment Dates.
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“Required Capital Level” means the amount specified as such in the Series Supplement therefor.
“Requirement of Law” means any foreign, U.S. federal, state or local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Authority or common law.
“Responsible Officer” means, with respect to: (a) the Issuer, any Manager or any duly authorized officer; (b) the Indenture Trustee, any officer within the Corporate Trust Office of such trustee (including the President, any Vice President, any Assistant Vice President, any Secretary, any Assistant Treasurer or any other officer of the Indenture Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, and that has direct responsibility for the administration of the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred to because of such officer’s knowledge and familiarity with the particular subject); (c) any corporation (other than the Indenture Trustee), the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer or any other duly authorized officer of such Person who has been authorized to act in the circumstances; (d) any partnership, any general partner thereof; and (e) any other Person (other than an individual), any duly authorized officer or member of such Person, as the context may require, who is authorized to act in matters relating to such Person.
“Return on Invested Capital” means, for any Payment Date with respect to any Remittance Period, the sum of (i) rate of return, payable to Duke Energy Progress, on its Capital Contribution equal to the rate of interest payable on the longest maturing Tranche of Storm Recovery Bonds plus (ii) any Return on Invested Capital not paid on any prior Payment Date.
“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business. References to S&P are effective so long as S&P is a Rating Agency.
“Sale Agreement” means the Storm Recovery Property Purchase and Sale Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Progress , and acknowledged and accepted by the Indenture Trustee.
“Scheduled Final Payment Date” means, with respect to the Storm Recovery Bonds, the date with respect to each tranche when all interest and principal is scheduled to be paid in accordance with the Expected Sinking Fund Schedule, as specified in the Series Supplement. For the avoidance of doubt, the Scheduled Final Payment Date shall be the last Scheduled Payment Date set forth in the Expected Sinking Fund Schedule. The “last Scheduled Final Payment Date” means the Scheduled Final Payment Date of the latest maturing Tranche of Storm Recovery Bonds.
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“Scheduled Payment Date” means, with respect to each Tranche of Storm Recovery Bonds, each Payment Date on which principal for such Tranche is to be paid in accordance with the Expected Sinking Fund Schedule for such Tranche.
“SEC” means the Securities and Exchange Commission.
“Secured Obligations” means the payment of principal of and premium, if any, interest on, and any other amounts owing in respect of, the Storm Recovery Bonds and all fees, expenses, counsel fees and other amounts due and payable to the Indenture Trustee.
“Secured Parties” means the Indenture Trustee, the Holders and any credit enhancer described in a Series Supplement.
“Securities Act” means the Securities Act of 1933.
“Securities Intermediary” means The Bank of New York Mellon Trust Company, a national banking association, solely in the capacity of a “securities intermediary” as defined in the NY UCC and Federal Book-Entry Regulations or any successor securities intermediary under the Indenture.
“Seller” is defined in the preamble to the Sale Agreement.
“Semi-Annual Servicer’s Certificate” is defined in Section 4.01(c)(ii) of the Servicing Agreement.
“Semi-Annual True-Up Adjustment” means each adjustment to the Storm Recovery Charges made in accordance with Section 4.01(b)(i) of the Servicing Agreement.
“Semi-Annual True-Up Adjustment Date” means the first billing cycle of January and July of each year, commencing in July, 2022.
“Series Supplement” means an indenture supplemental to the Indenture in the form attached as Exhibit B to the Indenture that authorizes the issuance of Storm Recovery Bonds.
“Servicer” means Duke Energy Progress, as Servicer under the Servicing Agreement.
“Servicer Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina, Charlotte, North Carolina or New York, New York are authorized or obligated by law, regulation or executive order to be closed, on which the Servicer maintains normal office hours and conducts business.
“Servicer Default” is defined in Section 7.01 of the Servicing Agreement.
“Servicer Policies and Practices” means, with respect to the Servicer’s duties under Exhibit A to the Servicing Agreement, the policies and practices of the Servicer applicable to such duties that the Servicer follows with respect to comparable assets that it services for itself and, if applicable, others.
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“Servicing Agreement” means the Storm Recovery Property Servicing Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Progress, and acknowledged and accepted by the Indenture Trustee.
“Servicing Fee” is defined in Section 6.06(a) of the Servicing Agreement.
“Servicing Standard” means the obligation of the Servicer to calculate, apply, remit and reconcile proceeds of the Property, including Storm Recovery Charge Payments, and all other Collateral for the benefit of the Issuer and the Holders (a) with the same degree of care and diligence as the Servicer applies with respect to payments owed to it for its own account, (b) in accordance with all applicable procedures and requirements established by the Commission for collection of electric utility tariffs and (c) in accordance with the other terms of the Servicing Agreement.
“Special Payment Date” means the date on which, with respect to any Tranche of Storm Recovery Bonds, any payment of principal of or interest (including any interest accruing upon default) on, or any other amount in respect of, the Storm Recovery Bonds of such Series or Tranche that is not actually paid within five days of the Payment Date applicable thereto is to be made by the Indenture Trustee to the Holders.
“Special Record Date” means, with respect to any Special Payment Date, the close of business on the fifteenth day (whether or not a Business Day) preceding such Special Payment Date.
“Sponsor” means Duke Energy Progress, in its capacity as “sponsor” of the Storm Recovery Bonds within the meaning of Regulation AB.
“State” means any one of the fifty states of the United States of America or the District of Columbia.
“State Pledge” means the pledge of the State of North Carolina as set forth in Section 62-172(k) of the Storm Recovery Law.
“Storms” means Hurricanes Florence, Dorian and Michael and Winter Storm Diego.
“Storm Recovery Bonds” means the Series A Senior Secured Storm Recovery Bonds issued by the Issuer on the Closing Date.
“Storm Recovery Charge Collections” means Storm Recovery Charges actually received by the Servicer to be remitted to the Collection Account.
“Storm Recovery Charge Payments” means the payments made by Customers based on the Storm Recovery Charges.
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“Storm Recovery Charge” means any storm-recovery charges as defined in Section 62-172(a)(15) of the Storm Recovery Law that are authorized by the Financing Order.
“Storm Recovery Collateral” means Collateral for the benefit of Storm Recovery Bonds.
“Storm Recovery Costs” means (i) Duke Energy Progress’s deferred asset balance associated with the Storms, including a return on the unrecovered balance, and with respect to the capital investments, including a deferral of depreciation expense and a return on the investment determined by the Commission to be prudently incurred in Docket No. E-7, Sub 1214 plus (ii) carrying costs through the projected issuances date of the Storm Recovery Bonds, calculated at a rate authorized by the Commission, (iii) plus up-front Financing Costs.
“Storm Recovery Law” means the laws of the State of North Carolina adopted in 2019 enacted as Section 62-172, North Carolina Statutes.
“Storm Recovery Property” means all storm recovery property as defined in Section 62-172(a)(17)a. of the Storm Recovery Law created pursuant to the Financing Order or a Subsequent Financing Order and under the Storm Recovery Law, including the right to impose, bill, charge, collect and receive the Storm Recovery Charges authorized under the Financing Order and to obtain periodic adjustments of the Storm Recovery Charges and all revenue, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in Section 62-172(a)(17)b. of the Storm Recovery Law, regardless of whether such revenues, collections, claims, rights to payments, money, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money or proceeds.
“Storm Recovery Property Records” is defined in Section 5.01 of the Servicing Agreement.
“Storm Recovery Rate Class” means one of the four separate rate classes to whom Charges are allocated for ratemaking purposes in accordance with the Financing Order.
“Storm Recovery Rate Schedule” means the Tariff sheets to be filed with the Commission stating the amounts of the Charges, as such Tariff sheets may be amended or modified from time to time pursuant to a True-Up Adjustment.
“Subaccounts” is defined in Section 8.02(a) of the Indenture.
“Subsequent Financing Order” means, a financing order of the Commission under the Storm Recovery Law issued to Duke Energy Progress subsequent to the Financing Order.
“Successor” means any successor to Duke Energy Progress under the Storm Recovery Law, whether pursuant to any bankruptcy, reorganization or other insolvency proceeding or pursuant to any merger, conversion, acquisition, sale or transfer, by operation of law, as a result of electric utility restructuring, or otherwise.
“Successor Servicer” is defined in Section 3.07(e) of the Indenture.
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“Tail-end Subaccount” is defined in Section 8.02(a) of the Indenture.
“Tariff” means the most current version on file with the Commission.
“Tax Returns” is defined in Section 1(a)(iii) of the Administration Agreement.
“Temporary Storm Recovery Bonds” means Storm Recovery Bonds executed and, upon the receipt of an Issuer Order, authenticated and delivered by the Indenture Trustee pending the preparation of Definitive Storm Recovery Bonds pursuant to Section 2.04 of the Indenture.
“Termination Notice” is defined in Section 7.01 of the Servicing Agreement.
“TPS” means a third party supplier which is authorized by law to sell electric service to a customer using the transmission or distribution system of Duke Energy Progress.
“Tranche Maturity Date” means, with respect to any Tranche of Storm Recovery Bonds, the maturity date therefor, as specified in the Series Supplement therefor.
“True-Up Adjustment” means any Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment, as the case may be.
“Trust Indenture Act” means the Trust Indenture Act of 1939 as in force on the Closing Date, unless otherwise specifically provided.
“UCC” means the Uniform Commercial Code as in effect in the relevant jurisdiction.
“Underwriters” means the underwriters who purchase Storm Recovery Bonds of any Series from the Issuer and sell such Storm Recovery Bonds in a public offering.
“Underwriting Agreement” means the Underwriting Agreement, dated November 17, 2021, by and among the Issuer, Duke Energy Progress, and the representatives of the several Underwriters named therein, as the same may be amended, supplemented or modified from time to time, with respect to the issuance of the Storm Recovery Bonds.
“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and that are not callable at the option of the issuer thereof.
“Weighted Average Days Outstanding” means the weighted average number of days Duke Energy Progress monthly bills to Customers remain outstanding during the calendar year preceding the calculation thereof pursuant to Section 4.01(b)(i) of the Servicing Agreement.
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B. Rules of Construction. Unless the context otherwise requires, in each Basic Document to which this Appendix A is attached:
(a) All accounting terms not specifically defined herein shall be construed in accordance with United States generally accepted accounting principles. To the extent that the definitions of accounting terms in any Basic Document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in such Basic Document shall control.
(b) The term “including” means “including without limitation”, and other forms of the verb “include” have correlative meanings.
(c) All references to any Person shall include such Person’s permitted successors and assigns, and any reference to a Person in a particular capacity excludes such Person in other capacities.
(d) Unless otherwise stated in any of the Basic Documents, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and each of the words “to” and “until” means “to but excluding”.
(e) The words “hereof”, “herein” and “hereunder” and words of similar import when used in any Basic Document shall refer to such Basic Document as a whole and not to any particular provision of such Basic Document. References to Articles, Sections, Appendices and Exhibits in any Basic Document are references to Articles, Sections, Appendices and Exhibits in or to such Basic Document unless otherwise specified in such Basic Document.
(f) The various captions (including the tables of contents) in each Basic Document are provided solely for convenience of reference and shall not affect the meaning or interpretation of any Basic Document.
(g) The definitions contained in this Appendix A apply equally to the singular and plural forms of such terms, and words of the masculine, feminine or neuter gender shall mean and include the correlative words of other genders.
(h) Unless otherwise specified, references to an agreement or other document include references to such agreement or document as from time to time amended, restated, reformed, supplemented or otherwise modified in accordance with the terms thereof (subject to any restrictions on such amendments, restatements, reformations, supplements or modifications set forth in such agreement or document) and include any attachments thereto.
(i) References to any law, rule, regulation or order of a Governmental Authority shall include such law, rule, regulation or order as from time to time in effect, including any amendment, modification, codification, replacement or reenactment thereof or any substitution therefor.
(j) The word “will” shall be construed to have the same meaning and effect as the word “shall”.
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(k) The word “or” is not exclusive.
(l) All terms defined in the relevant Basic Document to which this Appendix A is attached shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein.
(m) A term has the meaning assigned to it.
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Exhibit 10.2
STORM RECOVERY PROPERTY PURCHASE AND SALE AGREEMENT
by and between
DUKE ENERGY PROGRESS NC STORM FUNDING LLC,
Issuer
and
Duke Energy Progress, LLC,
Seller
Acknowledged and Accepted by
THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, as Indenture Trustee
Dated as of November 24, 2021
TABLE OF CONTENTS
| Page | |
| ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION | 1 |
| SECTION 1.01. Definitions and Rules of Construction | 1 |
| ARTICLE II CONVEYANCE OF STORM RECOVERY PROPERTY | 2 |
| SECTION 2.01. Conveyance of Storm Recovery Property | 2 |
| SECTION 2.02. Conditions to Conveyance of Storm Recovery Property | 2 |
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER | 4 |
| 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 | 5 |
| SECTION 3.07. Approvals | 5 |
| SECTION 3.08. The Storm Recovery Property | 5 |
| SECTION 3.09. Limitations on Representations and Warranties | 8 |
| ARTICLE IV COVENANTS OF THE SELLER | 9 |
| SECTION 4.01. Existence | 9 |
| SECTION 4.02. No Liens | 9 |
| SECTION 4.03. Use of Proceeds | 9 |
| SECTION 4.04. Delivery of Collections | 9 |
| SECTION 4.05. Notice of Liens | 9 |
| SECTION 4.06. Compliance with Law | 9 |
| SECTION 4.07. Covenants Related to Storm Recovery Bonds and Storm Recovery Property | 10 |
| SECTION 4.08. Protection of Title | 11 |
| SECTION 4.09. Nonpetition Covenants | 11 |
| SECTION 4.10. Taxes | 12 |
| SECTION 4.11. Notice of Breach to Rating Agencies, Etc. | 12 |
| SECTION 4.12. Filing Requirements | 12 |
| SECTION 4.13. Further Assurances | 12 |
| SECTION 4.14. Intercreditor Agreement | 12 |
| SECTION 4.15. Additional Sale of Storm Recovery Property | 12 |
| ARTICLE V THE SELLER | 13 |
| SECTION 5.01. Liability of Seller; Indemnities | 13 |
| SECTION 5.02. Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller | 15 |
| SECTION 5.03. Limitation on Liability of Seller and Others | 15 |
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| ARTICLE VI MISCELLANEOUS PROVISIONS | 16 |
| SECTION 6.01. Amendment | 16 |
| SECTION 6.02. Notices | 17 |
| SECTION 6.03. Assignment | 18 |
| SECTION 6.04. Limitations on Rights of Third Parties | 18 |
| SECTION 6.05. Severability | 18 |
| SECTION 6.06. Separate Counterparts | 18 |
| SECTION 6.07. Governing Law | 19 |
| SECTION 6.08. Assignment to Indenture Trustee | 19 |
| SECTION 6.09. Limitation of Liability | 19 |
| SECTION 6.10. Waivers | 19 |
EXHIBIT
| Exhibit A | Form of Bill of Sale |
APPENDIX
| Appendix A | Definitions and Rules of Construction |
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This STORM RECOVERY PROPERTY PURCHASE AND SALE AGREEMENT, dated as of November 24, 2021, is by and between DUKE ENERGY PROGRESS NC STORM FUNDING LLC, a Delaware limited liability company, and Duke Energy Progress, LLC (the “Seller”), a North Carolina limited liability company, and acknowledged and accepted by THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as indenture trustee.
RECITALS
WHEREAS, the Issuer desires to purchase the Storm Recovery Property created pursuant to the Storm Recovery Law;
WHEREAS, the Seller is willing to sell its rights and interests under the Financing Order to the Issuer, whereupon such rights and interests will become the Storm Recovery Property;
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, among other things, all right, title and interest of the Issuer in and to the Storm Recovery Property and this Sale Agreement to the Indenture Trustee for the benefit of the Secured Parties.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. Definitions and Rules of Construction. Capitalized terms used but not otherwise defined in this Sale Agreement shall have the respective meanings given to such terms in Appendix A, which is hereby incorporated by reference into this Sale Agreement as if set forth fully in this Sale Agreement. Not all terms defined in Appendix A are used in this Sale Agreement. The rules of construction set forth in Appendix A shall apply to this Sale Agreement and are hereby incorporated by reference into this Sale Agreement as if set forth fully in this Sale Agreement, however for purposes of this Sale Agreement, unless otherwise indicated herein, the terms Storm Recovery Charges, Closing Date, Storm Recovery Collateral and Storm Recovery Property mean the Storm Recovery Charges, Closing Date, Storm Recovery Collateral and Storm Recovery Property for the Storm Recovery Bonds.
ARTICLE II
CONVEYANCE OF STORM RECOVERY PROPERTY
SECTION 2.01. Conveyance of Storm Recovery Property.
(a) In consideration of the Issuer’s delivery to or upon the order of the Seller of $769,627,000, subject to 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 or warranty, except as set forth herein, all right, title and interest of the Seller in, to and under the Storm Recovery Property (such sale, transfer, assignment, setting over and conveyance of the Storm Recovery Property includes, to the fullest extent permitted by the Storm Recovery Law and the North Carolina UCC, the assignment of all revenues, collections, claims, rights to payments, payments, money or proceeds arising from the rights and interests specified in the Financing Order, including the right to impose, bill, charge, collect, and receive Storm Recovery Charges related to the Storm Recovery Property, as the same may be adjusted from time to time pursuant to the True-Up Adjustment Mechanism). Such sale, assignment, or other absolute transfer of the Storm Recovery Property or other absolute transfer is hereby expressly stated to be a sale or other absolute transfer and, pursuant to N.C. Gen. Stat. § 62-172(e)(3), shall be treated as an absolute transfer and true sale and not as a pledge of or secured transaction relating to the Seller’s right, title, and interest in, to, and under the Storm Recovery Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and conveyance contemplated hereby the Seller has no right, title or interest in, to or under the Storm Recovery Property to which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right, title and interest in and to the Storm Recovery Property to the Issuer, (ii) as provided in N.C. Gen. Stat. § 62-172(e)(3), all right, title and interest shall have passed to the Issuer and (iii) as provided in N.C. Gen. Stat. § 62-172(e)(3)d., appropriate financing statements shall have been filed and such transfer is perfected against all third parties, including subsequent judicial or other lien creditors. If such sale, transfer, assignment, setting over and conveyance is held by any court of competent jurisdiction not to be a true sale as provided in N.C. Gen. Stat. § 62-172(e)(3), then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of the Storm Recovery Property and as the creation of a security interest (within the meaning of the Storm Recovery Law and the UCC) in the Storm Recovery Property and, without prejudice to its position that it has absolutely transferred all of its rights in the Storm Recovery Property to the Issuer, the Seller hereby grants a security interest in the Storm Recovery Property to the Issuer (and to the Indenture Trustee for the benefit of the Secured Parties) to secure their respective rights under the Basic Documents to receive the Storm Recovery Charges and all other Storm Recovery Property.
(b) Subject to 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).
SECTION 2.02. Conditions to Conveyance of Storm Recovery Property. The obligation of the Seller to sell, and the obligation of the Issuer to purchase, Storm Recovery Property on the Closing Date shall be subject to the satisfaction or waiver of each of the following conditions:
(a) on or prior to the Closing Date, the Seller shall have delivered to the Issuer a duly executed Bill of Sale identifying and conveying the Storm Recovery Property on the Closing Date;
(b) on or prior to the Closing Date, the Seller shall have obtained the Financing Order creating the Storm Recovery Property;
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(c) as of the Closing Date, the Seller is not insolvent and will not have been made insolvent by such sale and the Seller is not aware of any pending insolvency with respect to itself;
(d) as of the Closing Date, (i) the representations and warranties of the Seller in this Sale Agreement must be true and correct with the same force and effect as if made on that date (except to the extent they relate to an earlier date), (ii) on and as of the Closing Date no breach of any covenant or agreement of the Seller contained in this Sale Agreement has occurred and is continuing and (iii) no Servicer Default shall have occurred and be continuing;
(e) as of the Closing Date, (i) the Issuer shall have sufficient funds available to pay the purchase price for the Storm Recovery Property to be conveyed on such date and (ii) all conditions to the issuance of the Storm Recovery Bonds intended to provide such funds set forth in the Indenture and the applicable Series Supplement shall have been satisfied or waived;
(f) on or prior to the Closing Date, the Seller shall have taken all action required to transfer to the Issuer ownership of the Storm Recovery Property on such date, free and clear of all Liens other than Liens created by the Issuer pursuant to the Basic Documents and to perfect such transfer, including filing any statements or filings under the Storm Recovery Law or the North Carolina UCC; 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 Lien and first priority perfected security interest in the Storm Recovery Collateral and maintain such security interest as of the Closing Date;
(g) the Seller shall have received and delivered to the Rating Agencies and the Issuer any Opinions of Counsel required by the Rating Agencies;
(h) the Seller shall have received and delivered to the Issuer and the Indenture Trustee an opinion or opinions of outside tax counsel (as selected by the Seller, and in form and substance reasonably satisfactory to the Issuer and the Indenture Trustee) to the effect that (i) the Issuer will not be subject to U.S. federal income tax as an entity separate from its sole owner and that the Storm Recovery Bonds will be treated as debt of the Issuer’s sole owner for U.S. federal income tax purposes and (ii) for U.S. federal income tax purposes, the issuance of the Storm Recovery Bonds will not result in gross income to the Seller;
(i) on and as of the Closing Date, each of the Certificate of Formation, the LLC Agreement, the Servicing Agreement, this Sale Agreement, the Indenture, the applicable Series Supplement, the Financing Order and the Storm Recovery Law shall be in full force and effect;
(j) the Storm Recovery Bonds shall have received the highest credit ratings possible, as evidenced by a certification from the Seller;
(k) the Seller shall have delivered to the Indenture Trustee, and the Issuer an Officer’s Certificate confirming the satisfaction of each condition precedent specified in this Section 2.02; and
(l) the Seller shall have received the purchase price for the Storm Recovery Property.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to Section 3.09, the Seller makes the following representations and warranties, as of the Closing Date, and the Seller acknowledges that the Issuer has relied thereon in acquiring the Storm Recovery Property. The representations and warranties shall survive the sale and transfer of Storm Recovery Property to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture. The Seller agrees that (i) the Issuer may assign the right to enforce the following representations and warranties to the Indenture Trustee and (ii) the following representations and warranties inure to the benefit of the Issuer and the Indenture Trustee.
SECTION 3.01. Organization and Good Standing. The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the state of North Carolina, with requisite power and authority to own its properties and conduct its business as of the Closing Date.
SECTION 3.02. Due Qualification. The Seller is duly qualified to do business and is 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 shall require 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, the Storm Recovery Property, the Issuer or the Storm Recovery Bonds).
SECTION 3.03. Power and Authority. The Seller has the requisite power and authority to execute and deliver this Sale Agreement and to carry out its terms. The Seller has full power and authority to own the Storm Recovery Property and to sell and assign the Storm Recovery Property to the Issuer and the Seller has duly authorized such sale and assignment to the Issuer by all necessary action. The execution, delivery and performance of obligations under this Sale Agreement have been duly authorized by all necessary action on the part of the Seller under its organizational documents and laws.
SECTION 3.04. Binding Obligation. This Sale 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 or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity, 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 Sale Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the Seller’s organizational documents or any indenture, or other material agreement or instrument to which the Seller is a party or by which it is bound, 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 (other than any Lien that may be granted in the Issuer’s favor or any Lien under the Basic Documents or any Liens created by the Issuer pursuant to the Storm Recovery Law) or violate any existing law or any order, rule or regulation applicable to the Seller issued by any Governmental Authority having jurisdiction over the Seller or its properties. The Storm Recovery Property is not subject to any Lien thereon, other than the Liens created by the Indenture and the Storm Recovery Law.
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SECTION 3.06. No Proceedings. Except as disclosed in Schedule 3.06, there are no proceedings or, to the Seller’s knowledge, investigations pending or proceedings threatened, before any Governmental Authority having jurisdiction over the Seller or its properties: (a) asserting the invalidity of the Basic Documents, the Storm Recovery Bonds, the Storm Recovery Law or the Financing Order; (b) seeking to prevent the issuance of the Storm Recovery Bonds or the consummation of any of the transactions contemplated by the Basic Documents; (c) seeking a 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, the Basic Documents, the related series of Storm Recovery Bonds or the Financing Order; or (d) challenging the Seller’s treatment of the Storm Recovery Bonds as debt of the Seller for U.S. federal income tax purposes.
SECTION 3.07. Approvals. No governmental approvals, authorizations, consents, orders or other actions or filings, other than filings under the Storm Recovery Law or with the Secretary of State of the State of North Carolina or the UCC of Delaware, are required for the Seller to execute, deliver and perform its obligations under this Sale Agreement except those which have previously been obtained or made or are required to be made by the Servicer in the future pursuant to the Servicing Agreement.
SECTION 3.08. The Storm Recovery Property.
(a) Information. Subject to Section 3.08(h), at the Closing Date, all written information, as amended or supplemented from time to time, provided by the Seller to the Issuer with respect to the Storm Recovery Property (including the Expected Sinking Fund Schedule and the Financing Order) is true and correct in all material respects and does not omit any material facts and all historical data for the purpose of calculating the initial storm recovery charges in the issuance advice letter and initial routine true-up adjustment request are true and correct, and the assumptions used for such calculations are reasonable and made in good faith.
(b) True-Sale and Absolute Transfer. The transfer, sale, assignment and conveyance of the Storm Recovery Property constitutes a sale or other absolute transfer of all of the Seller’s right, title and interest in the Storm Recovery Property to the Issuer; upon the execution and delivery of this Sale Agreement and the Bill of Sale on the Closing Date, the Storm Recovery Property shall be validly transferred and sold to the Issuer and the Seller will have no right, title or interest in the Storm Recovery Property and the Storm Recovery Property would not be part of the estate of the Seller as debtor in the event of a filing of a bankruptcy petition by or against the Seller under any bankruptcy law. The Seller hereby represents that no portion of the Storm Recovery Property has been sold, transferred, assigned, pledged or otherwise conveyed by the Seller to any person other than the Issuer, and, to the Seller’s knowledge (after due inquiry), no security agreement, financing statement or equivalent security or lien instrument listing the Seller as debtor covering all or a portion of the Storm Recovery Property is on file or of record in any jurisdiction, except such as may have been file or recorded in favor of the Issuer or the Indenture Trustee in connection with the Basic Documents.
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(c) Title. The Seller is the sole owner of the Storm Recovery Property sold to the Issuer on the Closing Date and such sale is made free and clear of all Liens other than Liens created by the Issuer pursuant to Indenture. All actions or filings, including filings under the Storm Recovery Law and the UCC, necessary to give the Issuer a valid ownership interest in the Storm Recovery Property and to grant the Indenture Trustee a first priority perfected security interest in the Storm Recovery Property, free and clear of all Liens of the Seller or any other Person have been taken or made.
(d) Financing Order; Other Approvals. On the Closing Date, under the laws of the State of North Carolina (including the Storm Recovery Law) and the United States in effect on the Closing Date: (i) The Financing Order has been issued by the Commission in accordance with the Storm Recovery Law, and such order and the process by which it was issued comply with all applicable laws, rules and regulations. The Financing Order has become effective pursuant to the Storm Recovery Law and is, and as of the date of issuance of the Storm Recovery Bonds will be, in full force and effect and final and non-appealable; (ii) the Storm Recovery Bonds will be entitled to the protections provided by the Storm Recovery Law and, accordingly, the Financing Order and the Storm Recovery Charges are irrevocable and not subject to reduction by the Commission, except for the True-Up Adjustments to the Storm Recovery Charges provided for in the Financing Order; (iii) revisions to Duke Energy Progress’s electric tariff to implement the Storm Recovery Charges have been filed and are in full force and effect, such revisions are consistent with the Financing Order, and any electric tariff implemented consistent with a Financing Order issued by the Commission is not subject to modification by the Commission except for True-Up Adjustments made in accordance with the Storm Recovery Law; (iv) the process by which the Financing Order was adopted and approved complies with all applicable laws, rules and regulations; (v) the Financing Order is not subject to appeal and is legally enforceable, and the process by which it was issued complied with all applicable laws, rules and regulations and (vi) no Governmental Approvals, authorizations, consents, orders or other actions or filings, other than filings under the Storm Recovery Law or the UCC of North Carolina or Delaware, are required for the Seller to executed, deliver and perform its obligations under this Sale Agreement except those which have previously been obtained or made or are required to be made by the Servicer in the future pursuant to the Servicing Agreement.
(e) State Action. Under the Storm Recovery Law, the State of North Carolina and its agencies, including the Commission, may not take or permit any action that would impair the value of the Storm Recovery Property or the Storm Recovery Collateral or, except for the True-Up Adjustment, reduce, alter, or impair the Storm Recovery Charges to be imposed, charged, collected and remitted to the Issuer, for the benefit of the Holders of the Storm Recovery Bonds until the principal, interest or other charges incurred or contracts to be performed in connection with the Storm Recovery Bonds are paid or performed in full. Furthermore, under the contract clause of the United States Constitution, any action taken by the State of North Carolina, including the Commission that substantially impairs the rights of the Holders of the Storm Recovery Bonds are likely to be found by a court of competent jurisdiction to be an impairment of contract with respect to the State Pledge, unless such action is a reasonable exercise of the State of North Carolina’s sovereign powers and of a character reasonable and appropriate to further a significant and legitimate public purpose. Under the Takings Clause of the United States Constitution and the Law of the Land Clause of the North Carolina Constitution, the State of North Carolina would likely be required to pay just compensation to the Holders if a court of competent jurisdiction determines that a repeal or amendment of the Storm Recovery Law or any other action taken by the State of North Carolina in contravention of the State Pledge, (a) constitutes a permanent appropriation of a substantial property interest of the Holders in the Storm Recovery Property or (b) substantially impairs the value of the Storm Recovery Property so as to unduly interfere with the reasonable expectations of the Holders arising from their investment in the Storm Recovery Bonds, unless such court finds that just compensation has been provided to the Holders of the Storm Recovery Bonds. Nothing in this paragraph precludes any limitation or alteration if full compensation is made by law for the full protection of the Storm Recovery Charges and of the Holders of the Storm Recovery Bonds or any assignee or party entering into a contract with the Seller.
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(f) No Repeal of the Storm Recovery Law. Apart from amending the Constitution of the State of North Carolina by initiative, the voters of the State of North Carolina do not have initiative powers to amend, repeal or revoke the Storm Recovery Law.
(g) Tax Liens. After due inquiry, the Seller is not aware of any judgment or tax lien filing against the Issuer or the Seller.
(h) Assumptions. On the Closing Date, based upon the information available to the Seller on such date, the assumptions used in calculating the Storm Recovery Charges are reasonable and are made in good faith. Notwithstanding the foregoing, the Seller makes no representation or warranty, express or implied, that amounts actually collected arising from those Storm Recovery Charges will in fact be sufficient to meet the payment obligations on the related Storm Recovery Bonds or that the assumptions used in calculating such Storm Recovery Charges will in fact be realized.
(i) Creation of Storm Recovery Property.
(i) For purposes of the Storm Recovery Law, the Storm Recovery Property constitutes a present property right that will continue to exist until the Storm Recovery Bonds issued pursuant to the Financing Order are paid in full and all Financing Costs of the Storm Recovery Bonds have been recovered in full; and
(ii) the Storm Recovery Property consists of (A) all rights and interest of the Seller under the Financing Order, including the right to impose, bill, charge, collect and receive Storm Recovery Charges; (B) the right under the Financing Order to obtain True-Up Adjustments of the Storm Recovery Charges; and (C) all revenues, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests described in (A) and (B).
(j) Nature of Representations and Warranties. The representations and warranties set forth in this Section 3.08, 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 Sale Agreement and the other Basic Documents and the basis on which the Holders 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 their permitted assigns (to the extent required by and in accordance with Section 5.01), and that the Issuer and their 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.
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(k) Prospectus. As of the date hereof, the information describing the Seller under the caption “DEP’s Review of Storm Recovery Property” and “Duke Energy Progress, LLC–The Depositor, Sponsor, Seller and Servicer” in the prospectus dated November 17, 2021 relating to the Storm Recovery Bonds is true and correct in all material respects.
(l) 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 purpose;
(iii) is not engaged in nor does it expect to engage in a business for which its remaining property represents unreasonably small 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 mature and does not intend to incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity.
(m) No Court Order. There is no order by any court providing for the revocation, alteration, limitation or other impairment of the Storm Recovery Law, the Financing Order, 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.
(n) Survival of Representations and Warranties The representations and warranties set forth in this Section 3.08 shall survive the execution and delivery of this Sale Agreement and may not be waived by any party hereto except pursuant to a written agreement executed in accordance with Article VI and as to which the Rating Agency Condition has been satisfied.
SECTION 3.09. Limitations on Representations and Warranties. Without prejudice to any of the other rights of the parties, the Seller will not be in breach of any representation or warranty as a result of a change in law by means of any legislative enactment, constitutional amendment or voter initiative. Notwithstanding anything in this Sale Agreement to the contrary, the Seller makes no representation that amounts collected will be sufficient to meet the obligations on the Storm Recovery Bonds.
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ARTICLE IV
COVENANTS OF THE SELLER
SECTION 4.01. Existence. Subject to Section 5.02, so long as any of the Storm Recovery Bonds are Outstanding, the Seller (a) will keep in full force and effect its existence and remain in good standing or equivalent status under the laws of the jurisdiction of its organization and (b) will obtain and preserve its qualifications to do business in each jurisdiction in which such qualification is or will be necessary to protect the validity and enforceability of this Sale Agreement and each other instrument or agreement to which the Seller is a party necessary to the proper administration of this Sale Agreement and the transactions contemplated thereby.
SECTION 4.02. No Liens. Except for the conveyances under this Sale Agreement or any Lien for the benefit of the Issuer, the Holders of the Storm Recovery Bonds or the Indenture Trustee, the Seller will 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 existing as of the transfer date or thereafter created, or any interest therein. The Seller will not at any time assert any Lien against or with respect to any Storm Recovery Property, and will defend the right, title and interest of the Issuer and of the Indenture Trustee, on behalf of the Secured Parties, in, to and under the Storm Recovery Property against all claims of third parties claiming through or under the Seller.
SECTION 4.03. Use of Proceeds. The Seller will use the proceeds of the sale of the related Storm Recovery Property in accordance with the Financing Order.
SECTION 4.04. Delivery of Collections. In the event that the Seller receives any Storm Recovery Charge Collections or other payments 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, but in no event later than two Business Days after the Seller becomes aware of such receipt.
SECTION 4.05. Notice of Liens. The Seller shall notify the Issuer and the Indenture Trustee promptly after becoming aware of any Lien on any of the Storm Recovery Property, other than the conveyances hereunder and any Lien pursuant to the Basic Documents, including the Lien in favor of the Indenture Trustee for the benefit of the Holders of the Storm Recovery Bonds.
SECTION 4.06. Compliance with Law. The Seller will materially comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any Governmental Authority applicable to it, 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 under any of the Basic Documents, the timing or amount of Storm Recovery Charges payable by Customers or of Seller’s performance of its material obligations under this Sale Agreement.
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SECTION 4.07. Covenants Related to Storm Recovery Bonds and Storm Recovery Property.
(a) So long as any of the Storm Recovery Bonds are Outstanding, the Seller shall treat the Storm Recovery Property as the Issuer’s property for all purposes other than financial accounting, U.S. federal income tax purposes and state income and franchise tax purposes.
(b) So long as any of the Storm Recovery Bonds are Outstanding, the Seller shall treat such Storm Recovery Bonds as debt of the Issuer and not that of the Seller, except for financial accounting and U.S. federal income tax purposes. For U.S. federal income tax purposes, so long as any of the Storm Recovery Bonds are Outstanding, the Seller agrees to treat such Storm Recovery Bonds as indebtedness of the Seller (as the sole owner of the Issuer) secured by the related Storm Recovery Collateral unless otherwise required by appropriate taxing authorities.
(c) So long as any of the Storm Recovery Bonds are Outstanding, the Seller shall disclose in its financial statements that the Issuer and not the Seller is the owner of the Storm Recovery Property and that the assets of the Issuer are not available to pay creditors of the Seller or its Affiliates (other than the Issuer).
(d) So long as any of the Storm Recovery Bonds are Outstanding, the Seller shall not own or purchase any Storm Recovery Bonds.
(e) So long as the Storm Recovery Bonds are Outstanding, the Seller shall disclose the effects of all transactions between the Seller and the Issuer in accordance with generally accepted accounting principles.
(f) The Seller agrees that, upon the sale by the Seller of the Storm Recovery Property to the Issuer pursuant to this Sale Agreement, (i) to the fullest extent permitted by law, including applicable Commission Regulations and the Storm Recovery Law, the Issuer shall have all of the rights originally held by the Seller with respect to the 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 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 (ii) any payment by any Customer directly to the Issuer shall discharge such Customer’s obligations, if any, in respect of the Storm Recovery Property to the extent of such payment, notwithstanding any objection or direction to the contrary by the Seller.
(g) 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 affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial accounting or tax purposes), (ii) the Seller shall not make any statement or reference in respect of the Storm Recovery Property that is inconsistent with the ownership interest of the Issuer (other than for financial accounting or tax purposes), (iii) 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 otherwise contemplated by the Basic Documents, (iv) 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 U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the Seller (or, if relevant, from another sole owner of the Issuer) and (v) the Seller shall not sell any additional Property pursuant to the Storm Recovery Law unless the Rating Agency Condition has been satisfied.
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SECTION 4.08. Protection of Title. The Seller shall execute and file such filings, including filings with the Secretary of State of the State of North Carolina pursuant to the Storm Recovery Law, and cause to be executed and filed such filings, all in such manner and in such places as may be required by law to fully preserve, maintain, protect and perfect the ownership interest of the Issuer, and the back-up precautionary security interest of the Issuer pursuant to Section 2.01, and the first priority security interest of the Indenture Trustee in the Storm Recovery Property, including all filings (including but not limited to continuation statements) required under the Storm Recovery Law and the UCC relating to the transfer of the ownership of the rights and interest in the Storm Recovery Property by the Seller to the Issuer or the pledge of the Issuer’s interest in the Storm Recovery Property 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 necessary to compel performance by the Commission, the State of North Carolina or any of their respective agents of any of their obligations or duties under the Storm Recovery Law, the Financing Order, or any issuance advice letter for the Storm Recovery Bonds and 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 seek to protect the Issuer and the Secured Parties from claims, state actions or other actions or proceedings of third parties that, if successfully pursued, would result in a breach of any representation set forth in Article III or any covenant set forth in Article IV and (b) to seek to block or overturn any attempts to cause a repeal of, modification of or supplement to the Storm Recovery Law, the Financing Order or any issuance advice letter for the Storm Recovery Bonds, or the rights of Holders of the Storm Recovery Bonds by legislative enactment or constitutional amendment that would be materially adverse to the Issuer or the Secured Parties or that would otherwise cause an impairment of the rights of the Issuer or the Secured Parties. The costs of any such actions or proceedings undertaken by the Seller will be reimbursed by the Issuer as an Operating Expense.
SECTION 4.09. Nonpetition Covenants. Notwithstanding any prior termination of this Sale Agreement or the Indenture, the Seller shall not, prior to the date that is one year and one day after the termination of the Indenture and payment in full of the Storm Recovery Bonds or any other amounts owed under 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 voluntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official or any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the Issuer.
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SECTION 4.10. Taxes. So long as any of the Storm Recovery Bonds are outstanding, the Seller shall, and shall cause each of its Affiliates to, 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, business, income or property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the Storm Recovery Property; provided, that no such tax need be paid if the Seller or one 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 4.11. 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, the Commission and the Rating Agencies of such breach. For the avoidance of doubt, any breach that would adversely affect scheduled payments on the Storm Recovery Bonds will be deemed to be a material breach for purposes of this Section 4.11.
SECTION 4.12. Filing Requirements. The Seller shall comply with all filing requirements, including any post-closing filings, in accordance with the Financing Order.
SECTION 4.13. Further Assurances. Upon the 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 the provisions and purposes of this Sale Agreement with notice to the Commission and Public Staff as provided in Section 6.01, provided, however, that the delivery of such notice shall not delay the implementation of any instrument delivered in accordance with this Section.
SECTION 4.14. Intercreditor Agreement. The Seller shall not continue as or become a party to any (i) trade receivables purchase and sale agreement or similar arrangement under which it sells all or any portion of its accounts receivables owing from North Carolina electric distribution customers unless the Indenture Trustee, the Seller and the other parties to such additional arrangement shall have entered into the 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 Property (including Storm Recovery Charges) from any receivables or other assets pledged or sold under such arrangement or (ii) sale agreement selling to any other Affiliate property consisting of charges similar to the Charges sold pursuant to this Sale Agreement, payable by Customers pursuant to the Storm Recovery Law or any similar law, unless the Seller and the other parties to such arrangement shall have entered into an Intercreditor Agreement in connection with any agreement or similar arrangement described in this Section 4.14.
SECTION 4.15. Additional Sale of Storm Recovery Property. So long as any of the Storm Recovery Bonds are outstanding, the Seller shall not sell any “storm recovery property” (as defined in the Storm Recovery Law) or similar property, to secure another issuance of storm recovery bonds or similar bonds unless the Rating Agency Condition has been satisfied. In the case of a subsequent conveyance of storm recovery property only, on or prior to the issuance date, the seller shall provide DEP NC Storm Funding and the Rating Agencies with a timely additional notice.
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ARTICLE V
THE SELLER
SECTION 5.01. Liability of 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 Sale Agreement.
(b) The Seller shall indemnify the Issuer and the Indenture Trustee (for itself and the benefit of the Holders of the Storm Recovery Bonds) and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Storm Recovery Bond) that may at any time be imposed on or asserted against any such Person as a result of the sale and assignment of the Storm Recovery Property to the Issuer, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Storm Recovery Bond, it being understood that the Holders of Storm Recovery Bonds 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 as set forth in the Indenture.
(c) The Seller shall indemnify the Issuer and the Indenture Trustee (for itself and the benefit of the Holders of the Storm Recovery Bonds) and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Storm Recovery Bond) that may at any time be imposed on or asserted against any such Person as a result of the Issuer’s ownership and assignment of the Storm Recovery Property, the issuance and sale by the Issuer of the Storm Recovery Bonds or the other transactions contemplated in the Basic Documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Storm Recovery Bond.
(d) Indemnification under Sections 5.01(b), 5.01(c), 5.01(d) and 5.01(e) shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorneys’ fees and expenses), except as otherwise expressly provided in this Sale Agreement.
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(e) The Seller shall indemnify the Issuer and the Indenture Trustee (for itself and for the benefit of the Holders of the Storm Recovery Bonds), and each of the Issuer’s and the Indenture Trustee’s respective officers, directors, managers, employees and agents for, and defend and hold harmless each such Person from and against, (i) any and all amounts of principal of and interest on the Storm Recovery Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amount of any deposits to the Issuer required to have been made in accordance with the terms of the Basic Documents which are not made when so required, in each case as a result of the Seller’s breach of any of its representations, warranties or covenants contained in this Sale Agreement, and (ii) any and all Losses that may be imposed on or asserted against any such Person, other than any liabilities, obligations or claims for or payments of principal of or interest on the Storm Recovery Bonds, together with any reasonable costs and expenses actually incurred by such Person, as a result of the Seller’s material breach of any of its representations, warranties or covenants contained in this Sale Agreement, except to the extent of Losses either resulting from the willful misconduct, bad faith or gross negligence of such Indemnified Person or resulting from a breach of a representation or warranty made by such Indemnified Person in any of the Basic Documents that gives rise to Seller’s breach, and provided that, with respect to a material breach of a representation, warranty or covenant, the Seller has first had a 30-day opportunity to cure such breach beginning with the receipt of a notice of breach from the Issuer or the Indenture Trustee and has failed to cure such breach within such period; and provided further that the Holders of the Storm Recovery Bonds shall be entitled to enforce their rights against the Seller under this Section 5.01(e) solely through a cause of action brought for their benefit by the Indenture Trustee.
(f) The Seller shall indemnify the Servicer (if the Servicer is not the Seller) for the costs of any action instituted by the Servicer pursuant to Section 5.02(d) of the Servicing Agreement that are not paid as Operating Expenses in accordance with the priorities set forth in Section 8.02(e) of the Indenture.
(g) The remedies provided in this Sale Agreement are the sole and exclusive remedies against the Seller for breach of its representations and warranties in this Sale Agreement.
(h) Notwithstanding (g) above, if the Seller remains an entity subject to the Commission’s regulatory authority as a public utility (or otherwise for ratemaking purposes), the Seller acknowledges and agrees that the Commission may, subject to the outcome of an appropriate Commission proceeding, take such action as it deems necessary or appropriate under its regulatory authority to require the Seller to provide appropriate redress to Customers as a result of the Seller’s material breach of the Seller's (i) representations or warranties set forth in this Agreement (other than the Seller's representations and warranties set forth in Sections 3.08(d), 3.08(e) and 3.08(i) or (ii) covenants contained in this Agreement (other than the Seller's covenant set forth in the third sentence of Section 4.08).
The Seller acknowledges and agrees that such action by the Commission may include, but is not limited to, adjustments to the Seller’s other regulated rates and charges or credits to Customers provided, however that such adjustments may not impact the Storm Recovery Charges or Storm Recovery Property.
(i) The Seller’s obligations under this Section 5.01 shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Storm Recovery Law or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or the termination of this Sale Agreement and will rank pari passu with other general, unsecured obligations of the Seller. The Seller shall not indemnify any party under this Section 5.01 for any changes in law after the Closing Date, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision.
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SECTION 5.02. Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller. Any Person (a) into which the Seller may be merged or consolidated and which succeeds to all or substantially all of the electric distribution business of the Seller, (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 distribution business of the Seller, (c) which may result from any merger or consolidation to which the Seller shall be a party and which succeeds to all or substantially all of the electric distribution business of the Seller, (d) which may succeed to the properties and assets of the Seller substantially as a whole and which succeeds to all or substantially all of the electric distribution business of the Seller, or (e) which may otherwise succeed to all or substantially all of the electric distribution business of the Seller, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Seller under this Sale 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 Sale Agreement; provided, however, that: (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Article III shall have been breached 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 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, reorganization, merger or succession and such agreement of assumption comply with this Section 5.02 and that all conditions precedent, if any, provided for in this Sale Agreement relating to such transaction have been complied with, (iii) the Seller shall have delivered to the Issuer and the Indenture Trustee an Opinion of Counsel stating that, in the opinion of such counsel, either (A) all filings to be made by the Seller or the Seller, in its capacity as Seller or as Servicer, including filings under the Storm Recovery Law with the Secretary of the State of the State of North Carolina and the UCC, that are necessary or advisable to fully preserve and protect the respective interests of the Issuer and the Indenture Trustee in the Storm Recovery Property have been executed and filed, and reciting the details of such filings, or (B) no such action is necessary to preserve and protect such interests, (iv) the Seller shall have given the Rating Agencies prior written notice of such transaction and (v) the Seller shall have delivered to the Issuer, the Indenture Trustee and the Rating Agencies an Opinion of Counsel from external tax counsel stating that, for U.S. federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in a material U.S. federal income tax consequence to the Issuer, the Seller, the Indenture Trustee or the Holders of Storm Recovery Bonds. When any Person (or more than one Person) acquires the properties and assets of the Seller substantially as a whole or otherwise becomes the successor, whether by merger, conversion, consolidation, sale, transfer, lease, management contract or otherwise, to all or substantially all of the assets of the Seller in accordance with the terms of this Section 5.02, then, upon satisfaction of all of the other conditions of this Section 5.02, the preceding Seller shall automatically and without further notice be released from all of its obligations hereunder.
SECTION 5.03. Limitation on Liability of Seller and Others. The Seller and any director, 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 4.08, 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 Sale Agreement and that in its opinion may involve it in any expense or liability.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. Amendment.
(a) Subject to Section 6.01(b), this Sale Agreement may be amended in writing by the Seller and the Issuer with (a) the prior written consent of the Indenture Trustee (b) the satisfaction of the Rating Agency Condition and (c) if any amendment would adversely affect in any material respect the interest of any Holder of the Storm Recovery Bonds, the consent of a majority of the Holders of each affected tranche of Storm Recovery Bonds. In determining whether a majority of Holders of the Bonds have consented, Bonds owned by the Issuer or any Affiliate of the Issuer shall be disregarded, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such consent, the Indenture Trustee shall only be required to disregard any Bonds it actually knows to be so owned. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.
Prior to the execution of any amendment to this Sale Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and rely upon (i) an Opinion of Counsel, which counsel may be an employee of or counsel to the Issuer or the Seller and which shall be reasonably satisfactory to the Indenture Trustee, or, in the Indenture Trustee’s sole judgment, external counsel of the Seller stating that the execution of such amendment is authorized and permitted by this Sale Agreement and that all conditions precedent provided for in this Sale Agreement relating to such amendment have been complied with and (ii) the Opinion of Counsel referred to in Section 3.01(c)(i) of the Servicing Agreement. The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment that affects the Indenture Trustee’s own rights, duties or immunities under this Sale Agreement or otherwise.
(b) Notwithstanding anything to the contrary in this Section 6.01, no amendment or modification of this Agreement shall be effective except upon satisfaction of the conditions precedent in this paragraph (b).
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(i) At least 15 days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in Section 6.01(a) (except that the consent of the Indenture Trustee may be subject to the consent of the Holders of the Storm Recovery Bonds if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification) the Seller shall have filed in Commission docket E-2, Sub 1262 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:
A. a reference to Docket No. E-2, Sub 1262;
B. an Officer’s Certificate stating that the proposed amendment or modification has been approved by all parties to this Sale Agreement; and
C. a statement identifying the person to whom the Commission is to address any response to the proposed amendment or to request additional time.
(ii) If the Commission, within 15 days (subject to extension as provided in clause (iii)) of receiving a notification complying with subparagraph (i), shall have issued an order that the Commission might object to the proposed amendment or modification, then, except as provided in clause (iv) below, such proposed amendment or modification shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed amendment or modification.
(iii) If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification may subsequently become effective upon satisfaction of the other conditions specified in Section 6.01(a).
(iv) Following the delivery of an order from the Commission to the Seller under subparagraph (ii), the Seller and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any proposed amendment. The fact that the Seller delivers notice to the Commission pursuant to this Section 6.01 does not obligate the Seller to amend the Sale Agreement as provided in the notice.
SECTION 6.02. Notices. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:
(a) in the case of the Seller, to Duke Energy Progress, LLC at (i) 410 South Wilmington Street Raleigh, North Carolina 27601-1748, Attention: Director, Rates and Regulatory Strategy, Telephone: 704-382-3853 in care of (c/o): Director, Rates and Regulatory Planning and (ii) 550 South Tryon Street, Charlotte, North Carolina 28202, Attention: Treasurer, Telephone: 704-382-3853 c/o Assistant Treasurer;
(b) in the case of the Issuer, to Duke Energy Progress NC Storm Funding LLC, at 410 South Wilmington Street Raleigh, North Carolina 27601-1748, Attention: Managers, Telephone: 704-382-3853;
(c) in the case of the Indenture Trustee, to the Corporate Trust Office;
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(d) in the case of S&P, to Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@standardandpoors.com (all such notices to be delivered to S&P in writing by email);
(e) in the case of Moody’s, to Moody’s Investors Service, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: ServicerReports@moodys.com (all such notices to be delivered to Moody’s in writing by email), and solely for purposes of Rating Agency Condition communications: abscormonitoring@moodys.com; and
(f) in the case of the Commission and the Public Staff – North Carolina Utilities Commission, by filing a notice in docket E-2, Sub 1262 with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff.
Each party hereto may, by notice given in accordance herewith to the other party or parties hereto, designate any further or different address to which subsequent notices, reports and other communications shall be sent.
SECTION 6.03. Assignment. Notwithstanding anything to the contrary contained herein, except as provided in Section 5.02, this Sale Agreement may not be assigned by the Seller.
SECTION 6.04. Limitations on Rights of Third Parties. The provisions of this Sale Agreement are solely for the benefit of the Seller, the Issuer, the Indenture Trustee (for the benefit of the Secured Parties) and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant provisions of this Sale Agreement. Nothing in this Sale Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Storm Recovery Property or under or in respect of this Sale Agreement or any covenants, conditions or provisions contained herein. The Seller acknowledges under the authority granted to Commission pursuant to Chapter 62 of the North Carolina General Statutes that the Commission has authority to enter an order enforcing the provisions of this Sale Agreement consistent with the Financing Order and Storm Recovery Law.
SECTION 6.05. Severability. Any provision of this Sale 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 remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 6.06. Separate Counterparts. This Sale 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.
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SECTION 6.07. Governing Law. This Sale Agreement shall be construed in accordance with the laws of the State of North Carolina, 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 6.08. Assignment to Indenture Trustee. The Seller hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Secured Parties of all right, title and interest of the Issuer in, to and under this Sale Agreement, 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 for the benefit of the Secured Parties.
SECTION 6.09. Limitation of Liability. It is expressly understood and agreed by the parties hereto that this Sale Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee on behalf of the Secured Parties, in the exercise of the powers and authority conferred and vested in it. The Indenture Trustee in acting hereunder is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.
SECTION 6.10. Waivers. Any term or provision of this Sale Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof; provided, however, that no such waiver delivered by the Issuer shall be effective unless the Indenture Trustee has given its prior written consent thereto. Any such waiver shall be validly and sufficiently authorized for the purposes of this Sale Agreement if, as to any party, it is authorized in writing by an authorized representative of such party, with prompt written notice of any such waiver to be provided to the Rating Agencies and the Commission. The failure of any party hereto to enforce at any time any provision of this Sale Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Sale Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Sale Agreement shall be held to constitute a waiver of any other or subsequent breach.
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IN WITNESS WHEREOF, the parties hereto have caused this Sale Agreement to be duly executed by their respective officers as of the day and year first above written.
| DUKE ENERGY PROGRESS NC STORM FUNDING LLC | |
| as Issuer |
| By: | ||
| Name: Chris R. Bauer | ||
| Title: Assistant Treasurer |
| DUKE ENERGY PROGRESS, LLC | |
| as Seller |
| By: | ||
| Name: Chris R. Bauer | ||
| Title: Assistant Treasurer |
Acknowledged and Accepted:
THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION,
as Indenture Trustee
| By: | ||
| Name: | ||
| Title: |
Signature Page to Storm Recovery Property Purchase and Sale Agreement
EXHIBIT A
FORM OF BILL OF SALE
See attached
E-A-1
BILL OF SALE
This Bill of Sale is being delivered pursuant to the Storm Recovery Property Purchase and Sale Agreement, dated as of November 24, 2021 (the “Sale Agreement”), by and between Duke Energy Progress, LLC (the “Seller”) and Duke Energy Progress NC Storm Recovery Funding LLC (the “Issuer”). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Sale Agreement.
In consideration of the Issuer’s delivery to or upon the order of the Seller of $769,627,000, 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 and to the Storm Recovery Property created or arising under the Financing Order dated May 10, 2021 issued by the North Carolina Utilities Commission under the Storm Recovery Law (such sale, transfer, assignment, setting over and conveyance of the Storm Recovery Property includes, to the fullest extent permitted by the Storm Recovery Law, the rights and interests of the Seller under the Financing Order, including the right of the Seller and any Successor or assignee of the Seller to impose, bill, charge, collect and receive Storm Recovery Charges, the right to obtain True-Up Adjustments and all revenue, collections, claims, rights to payments, payments, moneys and proceeds arising from the rights and interests specified in the Financing Order). Such sale, transfer, assignment, setting over and conveyance is hereby expressly stated to be a sale or other absolute transfer and, pursuant to N.C. Gen. Stat. § 62-172(e)(3)a., shall be treated as a true sale and not as a pledge of or secured transaction relating to the Seller’s right, title, and interest in, to, and under the Storm Recovery Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and conveyance contemplated hereby the Seller has no right, title or interest in, to, or under the Storm Recovery Property to which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right, title and interest in and to the Storm Recovery Property to the Issuer, (ii) as provided in N.C. Gen. Stat. § 62-172(e)(3), all right, title and interest shall have passed to the Issuer and (iii) as provided in N.C. Gen. Stat. § 62-172(e)(3)d., appropriate financing statements have been filed and such transfer is perfected against all third parties, including subsequent judicial or other lien creditors. If such sale, transfer, assignment, setting over and conveyance is held by any court of competent jurisdiction not to be a true sale as provided in N.C. Gen. Stat. § 62-172(e)(3), then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of the Storm Recovery Property and as the creation of a security interest (within the meaning of the Storm Recovery Law and the UCC) in the Storm Recovery Property and, without prejudice to its position that it has absolutely transferred all of its rights in the Storm Recovery Property to the Issuer, the Seller hereby grants a security interest in the Storm Recovery Property to the Issuer (and to the Indenture Trustee for the benefit of the Secured Parties) to secure their respective rights under the Basic Documents to receive the Storm Recovery Charges and all other Storm Recovery Property.
The Issuer does hereby purchase the Storm Recovery Property from the Seller for the consideration set forth in the preceding paragraph.
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Each of the Seller and the Issuer acknowledges and agrees 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 at the time of sale.
The Seller confirms that (i) 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 and (ii) each condition precedent that must be satisfied under Section 2.02 of the Sale Agreement has been satisfied upon or prior to the execution and delivery of this Bill of Sale by the Seller.
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.
This Bill of Sale shall be construed in accordance with the laws of the State of North Carolina, 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 law.
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IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this Bill of Sale as of this 24th day of November, 2021.
| DUKE ENERGY PROGRESS NC STORM FUNDING LLC, | ||
| as Issuer | ||
| By: | ||
Name: Chris R. Bauer | ||
Title: Assistant Treasurer | ||
| Duke Energy Progress, LLC, | ||
| as Seller | ||
| By: | ||
Name: Chris R. Bauer | ||
Title: Assistant Treasurer | ||
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APPENDIX A
DEFINITIONS AND RULES OF CONSTRUCTION
A. Defined Terms. The following terms have the following meanings:
“17g-5 Website” is defined in Section 10.18(a) of the Indenture.
“Account Records” is defined in Section 1(a)(i) of the Administration Agreement.
“Act” is defined in Section 10.03(a) of the Indenture.
“Additional Series” means issuance by the Issuer of any series of Storm Recovery Bonds issued after the date hereof, that will be undertaken only if (i) such issuance has been authorized by the Commission, (ii) the Rating Agency Condition has been satisfied and it is a condition of issuance for each Series of Storm Recovery Bonds that such Additional Series receive a rating or ratings as required by the Financing Order or a Subsequent Financing Order, (iii) the Issuer has delivered to the Indenture Trustee an Opinion of Counsel of a nationally recognized firm experienced in such matters to the effect that after such issuance, in the opinion of such counsel, if either or both of Duke Energy Progress or the Seller were to become a debtor in a case under the United States Bankruptcy Code (Title 11, U.S.C.), a federal court exercising bankruptcy jurisdiction and exercising reasonable judgment after full consideration of all relevant factors would not order substantive consolidation of the assets and liabilities of the Issuer with those of the bankruptcy estate of Duke Energy Progress or the Seller, subject to the customary exceptions, qualifications and assumptions contained therein.
“Administration Agreement” means the Administration Agreement, dated as of the date hereof, by and between Duke Energy Progress and the Issuer.
“Administration Fee” is defined in Section 2 of the Administration Agreement.
“Administrator” means Duke Energy Progress, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.
“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 specified 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.
“Amendatory Schedule” means a revision to service riders or any other notice filing filed with the Commission in respect of the Storm Recovery Rate Schedule pursuant to a True-Up Adjustment.
“Annual Accountant’s Report” is defined in Section 3.04(a) of the Servicing Agreement.
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“Authorized Denomination” means, with respect to any Storm Recovery Bond, the authorized denomination therefor specified in the Series Supplement, which shall be at least $2,000 and, except as otherwise provided in the Series Supplement, integral multiples of $1,000 in excess thereof, except for one Storm Recovery bond which may be of a smaller denomination.
“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.).
“Basic Documents” means the Indenture, Series Supplement, the Certificate of Formation, the LLC Agreement, the Administration Agreement, and, the Sale Agreement, Bill of Sale, Servicing Agreement, Intercreditor Agreement, any joinder to an existing intercreditor agreement, Letter of Representations, Underwriting Agreement and all other documents and certificates delivered in connection therewith.
“Bill of Sale” means a bill of sale substantially in the form of Exhibit A to the Sale Agreement delivered pursuant to Section 2.02(a) of the Sale Agreement.
“Billed Storm Recovery Charges” means the amounts of Storm Recovery Charges billed by the Servicer.
“Billing Period” means the period created by dividing the calendar year into 12 consecutive periods of approximately 21 Servicer Business Days.
“Bills” means each of the regular monthly bills, summary bills, opening bills and closing bills issued to Customers by Duke Energy Progress in its capacity as Servicer.
“Bond Interest Rate” means, with respect to any Tranche of Storm Recovery Bonds, the rate at which interest accrues on the Storm Recovery Bonds of such Series or Tranche, as specified in the Series Supplement.
“Book-Entry Form” means, with respect to any Storm Recovery Bond, that such Storm Recovery Bond is not certificated and the ownership and transfers thereof shall be made through book entries by a Clearing Agency as described in Section 2.11 of the Indenture and the Series Supplement pursuant to which such Storm Recovery Bond was issued.
“Book-Entry Storm Recovery Bonds” means any Storm Recovery Bonds issued in Book-Entry Form; provided, however, that, after the occurrence of a condition whereupon book-entry registration and transfer are no longer permitted and Definitive Storm Recovery Bonds are to be issued to the Holder of such Storm Recovery Bonds, such Storm Recovery Bonds shall no longer be “Book-Entry Storm Recovery Bonds”.
“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina, Charlotte, North Carolina or New York, New York are, or DTC or the Corporate Trust Office is, authorized or obligated by law, regulation or executive order to be closed.
“Capital Contribution” means the amount of cash contributed to the Issuer by Duke Energy Progress as specified in the LLC Agreement.
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“Capital Subaccount” is defined in Section 8.02(a) of the Indenture.
“Certificate of Compliance” means the certificate referred to in Section 3.03 of the Servicing Agreement and substantially in the form of Exhibit E to the Servicing Agreement.
“Certificate of Formation” means the Certificate of Formation filed with the Secretary of State of the State of Delaware on August 12, 2021 pursuant to which the Issuer was formed.
“Claim” means a “claim” as defined in Section 101(5) of the Bankruptcy Code.
“Clearing Agency” means an organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act.
“Clearing Agency Participant” means a securities broker, dealer, bank, trust company, clearing corporation or other financial institution or other Person for whom from time to time a Clearing Agency effects book entry transfers and pledges of securities deposited with such Clearing Agency.
“Closing Date” means the date on which the Storm Recovery Bonds are originally issued in accordance with Section 2.10 of the Indenture and the Series Supplement.
“Code” means the Internal Revenue Code of 1986.
“Collateral” is defined in the preamble of the Indenture.
“Collection Account” is defined in Section 8.02(a) of the Indenture for such Series.
“Collection in Full of the Charges” means the day on which the aggregate amounts on deposit in the General Subaccount and the Excess Funds Subaccount are sufficient to pay in full all the Outstanding Storm Recovery Bonds and to replenish any shortfall in the Capital Subaccount.
“Collection Period” means any period commencing on the first Servicer Business Day of any Billing Period and ending on the last Servicer Business Day of such Billing Period.
“Commission” means the North Carolina Utilities Commission.
“Commission Condition” means the satisfaction of any precondition to any amendment or modification to or action under any Basic Documents through the obtaining of Commission consent or acquiescence, as described in the related Basic Document.
“Commission Regulations” means any orders issued or rules or regulations, including temporary regulations, promulgated by the Commission pursuant to North Carolina law.
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“Company Minutes” is defined in Section 1(a)(iv) of the Administration Agreement.
“Corporate Trust Office” means the office of the Indenture Trustee at which, at any particular time, its corporate trust business shall be administered, which office as of the date hereof is located at BNY Mellon Global Corporate Trust, 4655 Salisbury Road, Suite 300, Jacksonville, Florida 32256; Telephone: 904-998-4714; Facsimile: 904-645-1930, or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders of Storm Recovery Bonds and the Issuer, or the principal corporate trust office of any successor trustee designated by like notice.
“Covenant Defeasance Option” is defined in Section 4.01(b) of the Indenture.
“Customer” means any existing or future retail customer (including individuals, corporations, other businesses, and federal, state and local governmental entities) receiving transmission or distribution service from Duke Energy Progress or its successors or assignees under Commission-approved rate schedules or under special contracts, even if such customer elects to purchase electricity from an TPS following a fundamental change in regulation of public utilities in North Carolina.
“Daily Remittance” is defined in Section 6.11(a) of the Servicing Agreement.
“Default” means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.
“Definitive Storm Recovery Bonds” is defined in Section 2.11 of the Indenture.
“Delaware UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of Delaware.
“DTC” means The Depository Trust Company.
“Duke Energy Progress” or “DEP” means Duke Energy Progress, LLC, a North Carolina limited liability company.
“Duke Energy Progress NC Storm Funding LLC” or “DEP NC Storm Funding” means the Issuer.
“Eligible Account” means a segregated non-interest-bearing trust account with an Eligible Institution.
“Eligible Institution” means:
(a) the corporate trust department of the Indenture Trustee, so long as any of the securities of the Indenture Trustee have (i) either a short-term credit rating from Moody’s of at least “P-1”, or a long-term unsecured debt rating from Moody’s of at least “A2”, and (ii) have a credit rating from S&P of at least “A”; or
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(b) a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, or (B) a short-term issuer rating of “A-1” or higher by S&P and “P-1” or higher by Moody’s, and (ii) whose deposits are insured by the Federal Deposit Insurance Corporation.
If so qualified under clause (b) above, the Indenture Trustee may be considered an Eligible Institution for the purposes of clause (a) of this definition.
“Eligible Investments” means instruments or investment property that evidence:
(a) direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;
(b) demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of, bank deposit products of or bankers’ acceptances issued by, any depository institution (including, but not limited to, bank deposit products of the Indenture Trustee, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or state banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit, rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;
(c) commercial paper (including commercial paper of the Indenture Trustee, acting in its commercial capacity, and other than commercial paper of Duke Energy Progress or any of its Affiliates), which at the time of purchase is rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;
(d) investments in money market funds having a rating in the highest investment category granted thereby (including funds for which the Indenture Trustee or any of its Affiliates is investment manager or advisor) from Moody’s and S&P;
(e) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or its agencies or instrumentalities, entered into with Eligible Institutions;
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(f) repurchase obligations with respect to any security or whole loan entered into with an Eligible Institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:
(i) a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a “broker/dealer”), the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s, “A-1+” by S&P at the time of entering into such repurchase obligation; or
(ii) an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s and “A-1+” by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; and
(g) any other investment permitted by each of the Rating Agencies;
in each case maturing not later than the Business Day preceding the next Payment Date or Special Payment Date, if applicable (for the avoidance of doubt, investments in money market funds or similar instruments that are redeemable on demand shall be deemed to satisfy the foregoing requirement). Notwithstanding the foregoing: (1) no securities or investments that mature in 30 days or more shall be “Eligible Investments” unless the issuer thereof has either a short-term unsecured debt rating of at least “P-1” from Moody’s or a long-term unsecured debt rating of at least “A1” from Moody’s and also has a long-term unsecured debt rating of at least “A” from S&P; (2) no securities or investments described in clauses (b) through (d) above that have maturities of more than 30 days but less than or equal to 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (3) no securities or investments described in clauses (b) through (d) above that have maturities of more than 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (4) no securities or investments described in bullet points (b) through (d) above which have a maturity of 60 days or less will be Eligible Investments unless such securities have a rating from S&P of at least “A-1”; and (5) no securities or investments described in bullet points (b) through (d) above which have a maturity of more than 60 days will be Eligible Investments unless such securities have a rating from S&P of at least “AA-”, “A-1+” or “AAAm”.
“Event of Default” is defined in Section 5.01 of the Indenture.
“Excess Funds Subaccount” is defined in Section 8.02(a) of the Indenture.
“Exchange Act” means the Securities Exchange Act of 1934.
“Expected Sinking Fund Schedule” means, with respect to any Tranche, the expected sinking fund schedule related thereto set forth in the Series Supplement.
“Federal Book-Entry Regulations” means 31 C.F.R. Part 357 et seq. (Department of Treasury).
“Final” means, with respect to the Financing Order or Subsequent Financing Order, that the Financing Order has become final, that the Financing Order is not being appealed and that the time for filing an appeal thereof has expired.
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“Final Maturity Date” means, with respect to each Series of Tranche of Storm Recovery Bonds, the final maturity date therefor as specified in the applicable Series Supplement.
“Financing Costs” means all financing costs as defined in Section 62-172(a)(4)of the Storm Recovery Law allowed to be recovered by Duke Energy Progress under the Financing Order.
“Financing Order” means the financing order issued by the Commission to Duke Energy Progress on May 10, 2021, Docket No. E-2, Sub 1262, authorizing the creation of the Storm Recovery Property, which was clarified and corrected by the Commission in an Order Clarifying and Correcting Financing Order on July 13, 2021.
“Financing Party” means any and all of the following: the Holders, the Indenture Trustee, Duke Energy Progress, collateral agents, any party under the Basic Documents, or any other person acting for the benefit of the Holders.
“North Carolina UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of North Carolina.
“General Subaccount” is defined in Section 8.02(a) of the Indenture for such Series.
“Global Storm Recovery Bond” means a Storm Recovery Bond to be issued to the Holders thereof in Book-Entry Form, which Global Storm Bond shall be issued to the Clearing Agency, or its nominee, in accordance with Section 2.11 of the Indenture and the Series Supplement.
“Governmental Authority” means any nation or government, any U.S. federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.
“Grant” means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, grant, transfer, create, grant a lien upon, a security interest in and right of set-off against, deposit, set over and confirm pursuant to the Indenture and the Series Supplement. A Grant of the Collateral shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.
“Holder” means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.
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“Indemnified Losses” is defined in Section 5.03 of the Servicing Agreement.
“Indemnified Party” is defined in Section 6.02(a) of the Servicing Agreement.
“Indemnified Person” is defined in Section 5.01(f) of the Sale Agreement.
“Indenture” means the Indenture, dated as of the date hereof, by and between the Issuer and The Bank of New York Mellon Trust Company, National Association, as Indenture Trustee and as Securities Intermediary.
“Indenture Trustee” means The Bank of New York Mellon Trust Company, National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any other indenture trustee for the benefit of the Secured Parties, under the Indenture.
“Independent” means, when used with respect to any specified Person, that such specified Person (a) is in fact independent of the Issuer, any other obligor on the Storm Recovery Bonds, the Seller, the Servicer and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director (other than as an independent director or manager) or person performing similar functions.
“Independent Certificate” means a certificate to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and consented to by the Indenture Trustee, and such certificate shall state that the signer has read the definition of “Independent” in the Indenture and that the signer is Independent within the meaning thereof.
“Independent Manager” is defined in Section 4.01(a) of the LLC Agreement.
“Independent Manager Fee” is defined in Section 4.01(a) of the LLC Agreement.
“Insolvency Event” means, with respect to a specified Person: (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such specified Person or any substantial part of its property in an involuntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the date hereof or thereafter, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or ordering the winding-up or liquidation of such specified Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such specified Person of a voluntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the Closing Date or thereafter, or the consent by such specified Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such specified Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or the making by such specified Person of any general assignment for the benefit of creditors, or the failure by such specified Person generally to pay its debts as such debts become due, or the taking of action by such specified Person in furtherance of any of the foregoing.
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“Intercreditor Agreement” means the Intercreditor Agreement, dated December 20, 2013, by and among the Duke Energy Business Services, Inc., Duke Energy Corporate Services Inc., Duke Energy Corporation, Mizuho Bank, Ltd., the Bank of Nova Scotia, the Bank of Tokyo-Mitsubishi UFJ, Ltd., Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress Receivables LLC, Cinergy Receivables Company LLC and Duke Energy Receivables Finance Company, LLC, the Indenture Trustee, the Issuer, Duke Energy Progress, and any subsequent such agreement.
“Investment Company Act” means the Investment Company Act of 1940.
“Investment Earnings” means investment earnings on funds deposited in the Collection Account net of losses and investment expenses.
“Issuer” means Duke Energy Progress NC Storm Funding LLC, a Delaware limited liability company, named as such in the Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the Trust Indenture Act, each other obligor on the Storm Recovery Bonds.
“Issuer Documents” is defined in Section 1(a)(iv) of the Administration Agreement.
“Issuer Order” means a written order signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.
“Issuer Request” means a written request signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.
“Legal Defeasance Option” is defined in Section 4.01(b) of the Indenture.
“Letter of Representations” means any applicable agreement between the Issuer and the applicable Clearing Agency, with respect to such Clearing Agency’s rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Storm Recovery Bonds.
“Lien” means a security interest, lien, mortgage, charge, pledge, claim or encumbrance of any kind.
“LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of Duke Energy Progress NC Storm Funding LLC, dated as of August 12, 2021.
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“Losses” means (a) any and all amounts of principal of and interest on the Storm Recovery Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amounts of any deposits by or to the Issuer required to have been made in accordance with the terms of the Basic Documents or the Financing Order that are not made when so required and (b) any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses of any kind whatsoever.
“Manager” means each manager of the Issuer under the LLC Agreement.
“Member” has the meaning specified in the first paragraph of the LLC Agreement.
“Monthly Servicer’s Certificate” is defined in Section 3.01(b)(i) of the Servicing Agreement.
“Moody’s” means Moody’s Investors Service, Inc. References to Moody’s are effective so long as Moody’s is a Rating Agency.
“North Carolina UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of North Carolina.
“NRSRO” is defined in Section 10.19(b) of the Indenture.
“NY UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York.
“Officer’s Certificate” means a certificate signed by a Responsible Officer of the Issuer under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, and delivered to the Indenture Trustee.
“Ongoing Financing Costs” means the Financing Costs described as such in the Financing Order, including Operating Expenses and any other costs identified in the Basic Documents; provided, however, that Ongoing Financing Costs do not include the Issuer’s costs of issuance of the Storm Recovery Bonds.
“Operating Expenses” means all unreimbursed fees, costs and out-of-pocket expenses of the Issuer, including all amounts owed by the Issuer to the Indenture Trustee (including indemnities, legal, audit fees and expenses) or any Manager, the Servicing Fee, the Administration Fee, legal and accounting fees, Rating Agency fees, any Regulatory Assessment Fees and related fees (i.e. website provider fees) and any franchise or other taxes owed by the Issuer, including on investment income in the Collection Account.
“Opinion of Counsel” means one or more written opinions of counsel, who may, except as otherwise expressly provided in the Basic Documents, be employees of or counsel to the party providing such opinion of counsel, which counsel shall be reasonably acceptable to the party receiving such opinion of counsel, and shall be in form and substance reasonably acceptable to such party.
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“Optional Interim True-Up Adjustment” means each adjustment to the Storm Recovery Charges made pursuant to Section 4.01(b)(ii) of the Servicing Agreement.
“Outstanding” means, as of the date of determination, all Storm Recovery Bonds theretofore authenticated and delivered under the Indenture, except:
(a) Storm Recovery Bonds theretofore canceled by the Storm Recovery Bond Registrar or delivered to the Storm Recovery Bond Registrar for cancellation;
(b) Storm Recovery Bonds or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Storm Recovery Bonds; and
(c) Storm Recovery Bonds in exchange for or in lieu of other Storm Recovery Bonds that have been issued pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Storm Recovery Bonds are held by a Protected Purchaser; provided, that, in determining whether the Holders of the requisite Outstanding Amount of the Storm Recovery Bonds or any Tranche thereof have given any request, demand, authorization, direction, notice, consent or waiver under any Basic Document, Storm Recovery Bonds owned by the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding (unless one or more such Persons owns 100% of such Storm Recovery Bonds), except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Storm Recovery Bonds that the Indenture Trustee actually knows to be so owned shall be so disregarded. Storm Recovery Bonds so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Storm Recovery Bonds and that the pledgee is not the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons.
“Outstanding Amount” means the aggregate principal amount of all Storm Recovery Bonds, or, if the context requires, all Storm Recovery Bonds of a Tranche, Outstanding at the date of determination.
“Paying Agent” means, with respect to the Indenture, the Indenture Trustee and any other Person appointed as a paying agent for the Storm Recovery Bonds pursuant to the Indenture.
“Payment Date” means, with respect to any Tranche of Storm Recovery Bonds, the dates specified in the Series Supplement; provided, that if any such date is not a Business Day, the Payment Date shall be the Business Day succeeding such date.
“Periodic Billing Requirement” means, for any Remittance Period, the aggregate amount of Charges calculated by the Servicer as necessary to be billed during such period in order to collect the Periodic Payment Requirement on a timely basis.
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“Periodic Interest” means, with respect to any Payment Date, the periodic interest for such Payment Date as specified in the Series Supplement.
“Periodic Payment Requirement” for any Remittance Period means the total dollar amount of Storm Recovery Charge Collections reasonably calculated by the Servicer in accordance with Section 4.01 of the Servicing Agreement as necessary to be received during such Remittance Period (after giving effect to the allocation and distribution of amounts on deposit in the Excess Funds Subaccount at the time of calculation and that are projected to be available for payments on the Storm Recovery Bonds at the end of such Remittance Period and including any shortfalls in Periodic Payment Requirements for any prior Remittance Period) in order to ensure that, as of the last Payment Date occurring in such Remittance Period, (a) all accrued and unpaid principal of and interest on the Storm Recovery Bonds then due shall have been paid in full on a timely basis, (b) the Outstanding Amount of the Storm Recovery Bonds is equal to the Projected Unpaid Balance on each Payment Date during such Remittance Period, (c) the balance on deposit in the Capital Subaccount equals the Required Capital Level and (d) all other fees and expenses due and owing and required or allowed to be paid under Section 8.02 of the Indenture as of such date shall have been paid in full; provided, that, with respect to any Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment occurring after the date that is one year prior to the last Scheduled Final Payment Date for the Storm Recovery Bonds, the Periodic Payment Requirements shall be calculated to ensure that sufficient Storm Recovery Charges will be collected to retire the Storm Recovery Bonds in full as of the next Payment Date.
“Periodic Principal” means, with respect to any Payment Date, the excess, if any, of the Outstanding Amount of Storm Recovery Bonds over the outstanding principal balance specified for such Payment Date on the Expected Sinking Fund Schedule.
“Permitted Lien” means the Lien created by the Indenture.
“Permitted Successor” is defined in Section 5.02 of the Sale Agreement.
“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Governmental Authority.
“Predecessor Storm Recovery Bond” means, with respect to any particular Storm Recovery Bond, every previous Storm Recovery Bond evidencing all or a portion of the same debt as that evidenced by such particular Storm Recovery Bond, and, for the purpose of this definition, any Storm Recovery Bond authenticated and delivered under Section 2.06 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Storm Recovery Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Storm Recovery Bond.
“Premises” is defined in Section 1(g) of the Administration Agreement.
“Proceeding” means any suit in equity, action at law or other judicial or administrative proceeding.
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“Projected Unpaid Balance” means, as of any Payment Date, the sum of the projected outstanding principal amount of each Tranche of Storm Recovery Bonds for such Payment Date set forth in the Expected Sinking Fund Schedule.
“Protected Purchaser” has the meaning specified in Section 8-303 of the UCC.:
“Public Staff” means the Public Staff of the Commission, an independent agency established in N.C. Gen. Stat. § 62-15 et seq., that represents the interests of the using and consuming public in matters pending before the Commission.
“Rating Agency” means, with respect to any Tranche of Storm Recovery Bonds, any of Moody’s or S&P that provides a rating with respect to the Storm Recovery Bonds. 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, notice of which designation shall be given to the Indenture Trustee and the Servicer.
“Rating Agency Condition” means, with respect to any action, at least ten Business Days’ prior written notification to each Rating Agency of such action, and written confirmation from each of S&P and Moody’s to the Servicer, the Indenture Trustee and the Issuer that such action will not result in a suspension, reduction or withdrawal of the then current rating by such Rating Agency of any Tranche of Storm Recovery Bonds; provided, that, if, within such ten Business Day period, any Rating Agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such Rating Agency is reviewing and considering the notification, then (a) the Issuer shall be required to confirm that such Rating Agency has received the Rating Agency Condition request and, if it has, promptly request the related Rating Agency Condition confirmation and (b) if the Rating Agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five Business Days following such second request, the applicable Rating Agency Condition requirement shall not be deemed to apply to such Rating Agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a Rating Agency’s right to review or consent).
“Record Date” means one Business Day prior to the applicable Payment Date.
“Registered Holder” means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.
“Regulation AB” means the rules of the SEC promulgated under Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123.
“Reimbursable Expenses” is defined in Section 2 of the Administration Agreement and Section 6.06(a) of the Servicing Agreement.
“Released Parties” is defined in Section 6.02(d) of the Servicing Agreement.
“Remittance Period” means, with respect to any True-Up Adjustment, the period comprised of 6 consecutive Collection Periods beginning with the Collection Period three months prior to when such True-Up Adjustment would go into effect, from the Closing Date to the first Scheduled Payment Date, and for each subsequent period between Scheduled Payment Dates.
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“Required Capital Level” means the amount specified as such in the Series Supplement therefor.
“Requirement of Law” means any foreign, U.S. federal, state or local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Authority or common law.
“Responsible Officer” means, with respect to: (a) the Issuer, any Manager or any duly authorized officer; (b) the Indenture Trustee, any officer within the Corporate Trust Office of such trustee (including the President, any Vice President, any Assistant Vice President, any Secretary, any Assistant Treasurer or any other officer of the Indenture Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, and that has direct responsibility for the administration of the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred to because of such officer’s knowledge and familiarity with the particular subject); (c) any corporation (other than the Indenture Trustee), the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer or any other duly authorized officer of such Person who has been authorized to act in the circumstances; (d) any partnership, any general partner thereof; and (e) any other Person (other than an individual), any duly authorized officer or member of such Person, as the context may require, who is authorized to act in matters relating to such Person.
“Return on Invested Capital” means, for any Payment Date with respect to any Remittance Period, the sum of (i) rate of return, payable to Duke Energy Progress, on its Capital Contribution equal to the rate of interest payable on the longest maturing Tranche of Storm Recovery Bonds plus (ii) any Return on Invested Capital not paid on any prior Payment Date.
“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business. References to S&P are effective so long as S&P is a Rating Agency.
“Sale Agreement” means the Storm Recovery Property Purchase and Sale Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Progress , and acknowledged and accepted by the Indenture Trustee.
“Scheduled Final Payment Date” means, with respect to the Storm Recovery Bonds, the date with respect to each tranche when all interest and principal is scheduled to be paid in accordance with the Expected Sinking Fund Schedule, as specified in the Series Supplement. For the avoidance of doubt, the Scheduled Final Payment Date shall be the last Scheduled Payment Date set forth in the Expected Sinking Fund Schedule. The “last Scheduled Final Payment Date” means the Scheduled Final Payment Date of the latest maturing Tranche of Storm Recovery Bonds.
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“Scheduled Payment Date” means, with respect to each Tranche of Storm Recovery Bonds, each Payment Date on which principal for such Tranche is to be paid in accordance with the Expected Sinking Fund Schedule for such Tranche.
“SEC” means the Securities and Exchange Commission.
“Secured Obligations” means the payment of principal of and premium, if any, interest on, and any other amounts owing in respect of, the Storm Recovery Bonds and all fees, expenses, counsel fees and other amounts due and payable to the Indenture Trustee.
“Secured Parties” means the Indenture Trustee, the Holders and any credit enhancer described in a Series Supplement.
“Securities Act” means the Securities Act of 1933.
“Securities Intermediary” means The Bank of New York Mellon Trust Company, a national banking association, solely in the capacity of a “securities intermediary” as defined in the NY UCC and Federal Book-Entry Regulations or any successor securities intermediary under the Indenture.
“Seller” is defined in the preamble to the Sale Agreement.
“Semi-Annual Servicer’s Certificate” is defined in Section 4.01(c)(ii) of the Servicing Agreement.
“Semi-Annual True-Up Adjustment” means each adjustment to the Storm Recovery Charges made in accordance with Section 4.01(b)(i) of the Servicing Agreement.
“Semi-Annual True-Up Adjustment Date” means the first billing cycle of January and July of each year, commencing in July, 2022.
“Series Supplement” means an indenture supplemental to the Indenture in the form attached as Exhibit B to the Indenture that authorizes the issuance of Storm Recovery Bonds.
“Servicer” means Duke Energy Progress, as Servicer under the Servicing Agreement.
“Servicer Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina, Charlotte, North Carolina or New York, New York are authorized or obligated by law, regulation or executive order to be closed, on which the Servicer maintains normal office hours and conducts business.
“Servicer Default” is defined in Section 7.01 of the Servicing Agreement.
“Servicer Policies and Practices” means, with respect to the Servicer’s duties under Exhibit A to the Servicing Agreement, the policies and practices of the Servicer applicable to such duties that the Servicer follows with respect to comparable assets that it services for itself and, if applicable, others.
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“Servicing Agreement” means the Storm Recovery Property Servicing Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Progress, and acknowledged and accepted by the Indenture Trustee.
“Servicing Fee” is defined in Section 6.06(a) of the Servicing Agreement.
“Servicing Standard” means the obligation of the Servicer to calculate, apply, remit and reconcile proceeds of the Property, including Storm Recovery Charge Payments, and all other Collateral for the benefit of the Issuer and the Holders (a) with the same degree of care and diligence as the Servicer applies with respect to payments owed to it for its own account, (b) in accordance with all applicable procedures and requirements established by the Commission for collection of electric utility tariffs and (c) in accordance with the other terms of the Servicing Agreement.
“Special Payment Date” means the date on which, with respect to any Tranche of Storm Recovery Bonds, any payment of principal of or interest (including any interest accruing upon default) on, or any other amount in respect of, the Storm Recovery Bonds of such Series or Tranche that is not actually paid within five days of the Payment Date applicable thereto is to be made by the Indenture Trustee to the Holders.
“Special Record Date” means, with respect to any Special Payment Date, the close of business on the fifteenth day (whether or not a Business Day) preceding such Special Payment Date.
“Sponsor” means Duke Energy Progress, in its capacity as “sponsor” of the Storm Recovery Bonds within the meaning of Regulation AB.
“State” means any one of the fifty states of the United States of America or the District of Columbia.
“State Pledge” means the pledge of the State of North Carolina as set forth in Section 62-172(k) of the Storm Recovery Law.
“Storms” means Hurricanes Florence, Dorian and Michael and Winter Storm Diego.
“Storm Recovery Bonds” means the Series A Senior Secured Storm Recovery Bonds issued by the Issuer on the Closing Date.
“Storm Recovery Charge Collections” means Storm Recovery Charges actually received by the Servicer to be remitted to the Collection Account.
“Storm Recovery Charge Payments” means the payments made by Customers based on the Storm Recovery Charges.
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“Storm Recovery Charge” means any storm-recovery charges as defined in Section 62-172(a)(15) of the Storm Recovery Law that are authorized by the Financing Order.
“Storm Recovery Collateral” means Collateral for the benefit of Storm Recovery Bonds.
“Storm Recovery Costs” means (i) Duke Energy Progress’s deferred asset balance associated with the Storms, including a return on the unrecovered balance, and with respect to the capital investments, including a deferral of depreciation expense and a return on the investment determined by the Commission to be prudently incurred in Docket No. E-7, Sub 1214 plus (ii) carrying costs through the projected issuances date of the Storm Recovery Bonds, calculated at a rate authorized by the Commission, (iii) plus up-front Financing Costs.
“Storm Recovery Law” means the laws of the State of North Carolina adopted in 2019 enacted as Section 62-172, North Carolina Statutes.
“Storm Recovery Property” means all storm recovery property as defined in Section 62-172(a)(17)a. of the Storm Recovery Law created pursuant to the Financing Order or a Subsequent Financing Order and under the Storm Recovery Law, including the right to impose, bill, charge, collect and receive the Storm Recovery Charges authorized under the Financing Order and to obtain periodic adjustments of the Storm Recovery Charges and all revenue, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in Section 62-172(a)(17)b. of the Storm Recovery Law, regardless of whether such revenues, collections, claims, rights to payments, money, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money or proceeds.
“Storm Recovery Property Records” is defined in Section 5.01 of the Servicing Agreement.
“Storm Recovery Rate Class” means one of the four separate rate classes to whom Charges are allocated for ratemaking purposes in accordance with the Financing Order.
“Storm Recovery Rate Schedule” means the Tariff sheets to be filed with the Commission stating the amounts of the Charges, as such Tariff sheets may be amended or modified from time to time pursuant to a True-Up Adjustment.
“Subaccounts” is defined in Section 8.02(a) of the Indenture.
“Subsequent Financing Order” means, a financing order of the Commission under the Storm Recovery Law issued to Duke Energy Progress subsequent to the Financing Order.
“Successor” means any successor to Duke Energy Progress under the Storm Recovery Law, whether pursuant to any bankruptcy, reorganization or other insolvency proceeding or pursuant to any merger, conversion, acquisition, sale or transfer, by operation of law, as a result of electric utility restructuring, or otherwise.
“Successor Servicer” is defined in Section 3.07(e) of the Indenture.
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“Tail-end Subaccount” is defined in Section 8.02(a) of the Indenture.
“Tariff” means the most current version on file with the Commission.
“Tax Returns” is defined in Section 1(a)(iii) of the Administration Agreement.
“Temporary Storm Recovery Bonds” means Storm Recovery Bonds executed and, upon the receipt of an Issuer Order, authenticated and delivered by the Indenture Trustee pending the preparation of Definitive Storm Recovery Bonds pursuant to Section 2.04 of the Indenture.
“Termination Notice” is defined in Section 7.01 of the Servicing Agreement.
“TPS” means a third party supplier which is authorized by law to sell electric service to a customer using the transmission or distribution system of Duke Energy Progress.
“Tranche Maturity Date” means, with respect to any Tranche of Storm Recovery Bonds, the maturity date therefor, as specified in the Series Supplement therefor.
“True-Up Adjustment” means any Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment, as the case may be.
“Trust Indenture Act” means the Trust Indenture Act of 1939 as in force on the Closing Date, unless otherwise specifically provided.
“UCC” means the Uniform Commercial Code as in effect in the relevant jurisdiction.
“Underwriters” means the underwriters who purchase Storm Recovery Bonds of any Series from the Issuer and sell such Storm Recovery Bonds in a public offering.
“Underwriting Agreement” means the Underwriting Agreement, dated November 17, 2021, by and among the Issuer, Duke Energy Progress, and the representatives of the several Underwriters named therein, as the same may be amended, supplemented or modified from time to time, with respect to the issuance of the Storm Recovery Bonds.
“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and that are not callable at the option of the issuer thereof.
“Weighted Average Days Outstanding” means the weighted average number of days Duke Energy Progress monthly bills to Customers remain outstanding during the calendar year preceding the calculation thereof pursuant to Section 4.01(b)(i) of the Servicing Agreement.
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B. Rules of Construction. Unless the context otherwise requires, in each Basic Document to which this Appendix A is attached:
(a) All accounting terms not specifically defined herein shall be construed in accordance with United States generally accepted accounting principles. To the extent that the definitions of accounting terms in any Basic Document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in such Basic Document shall control.
(b) The term “including” means “including without limitation”, and other forms of the verb “include” have correlative meanings.
(c) All references to any Person shall include such Person’s permitted successors and assigns, and any reference to a Person in a particular capacity excludes such Person in other capacities.
(d) Unless otherwise stated in any of the Basic Documents, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and each of the words “to” and “until” means “to but excluding”.
(e) The words “hereof”, “herein” and “hereunder” and words of similar import when used in any Basic Document shall refer to such Basic Document as a whole and not to any particular provision of such Basic Document. References to Articles, Sections, Appendices and Exhibits in any Basic Document are references to Articles, Sections, Appendices and Exhibits in or to such Basic Document unless otherwise specified in such Basic Document.
(f) The various captions (including the tables of contents) in each Basic Document are provided solely for convenience of reference and shall not affect the meaning or interpretation of any Basic Document.
(g) The definitions contained in this Appendix A apply equally to the singular and plural forms of such terms, and words of the masculine, feminine or neuter gender shall mean and include the correlative words of other genders.
(h) Unless otherwise specified, references to an agreement or other document include references to such agreement or document as from time to time amended, restated, reformed, supplemented or otherwise modified in accordance with the terms thereof (subject to any restrictions on such amendments, restatements, reformations, supplements or modifications set forth in such agreement or document) and include any attachments thereto.
(i) References to any law, rule, regulation or order of a Governmental Authority shall include such law, rule, regulation or order as from time to time in effect, including any amendment, modification, codification, replacement or reenactment thereof or any substitution therefor.
(j) The word “will” shall be construed to have the same meaning and effect as the word “shall”.
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(k) The word “or” is not exclusive.
(l) All terms defined in the relevant Basic Document to which this Appendix A is attached shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein.
(m) A term has the meaning assigned to it.
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Exhibit 10.3
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT, dated as of November 24, 2021, is entered into by and between Duke Energy Progress, LLC, a North Carolina limited liability company (“DEP”), as administrator, and Duke Energy Progress NC Storm Funding LLC, a Delaware limited liability company.
Capitalized terms used but not otherwise defined in this Administration Agreement shall have the respective meanings given to such terms in Appendix A, which is hereby incorporated by reference into this Administration Agreement as if set forth fully in this Administration Agreement. Not all terms defined in Appendix A are used in this Administration Agreement. The rules of construction set forth in Appendix A shall apply to this Administration Agreement and are hereby incorporated by reference into this Administration Agreement as if set forth fully in this Administration Agreement.
W I T N E S S E T H:
WHEREAS, the Issuer is issuing Storm Recovery Bonds pursuant to the Indenture and the Series Supplement dated the date hereof;
WHEREAS, the Issuer has entered into certain agreements in connection with the issuance of Storm Recovery Bonds, including (a) the Indenture, (b) the Servicing Agreement, (c) the Sale Agreement and (d) the other Basic Documents to which the Issuer is a party;
WHEREAS, pursuant to the Basic Documents, the Issuer is required to perform certain duties in connection with the Basic Documents, the Storm Recovery Bonds and the Storm Recovery Collateral pledged to the Indenture Trustee pursuant to the Indenture and Series Supplement dated the date hereof;
WHEREAS, the Issuer has no employees, other than its officers and managers, and does not intend to hire any employees, and consequently desires to have the Administrator perform certain of the duties of the Issuer referred to above and to provide such additional services consistent with the terms of this Administration Agreement and the other Basic Documents as the Issuer may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services and the facilities required thereby and is willing to perform such services and provide such facilities for the Issuer on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Section 1 Duties of the Administrator; Management Services. The Administrator hereby agrees to provide the following corporate management services to the Issuer and to cause third parties to provide professional services required for or contemplated by such services in accordance with the provisions of this Administration Agreement:
(a) furnish the Issuer with ordinary clerical, bookkeeping and other corporate administrative services necessary and appropriate for the Issuer, including the following services:
(i) maintain at the Premises general accounting records of the Issuer (the “Account Records”), subject to year-end audit, in accordance with generally accepted accounting principles, separate and apart from its own accounting records, prepare or cause to be prepared such quarterly and annual financial statements as may be necessary or appropriate and arrange for year-end audits of the Issuer’s financial statements by the Issuer’s independent accountants;
(ii) prepare and, after execution by the Issuer, file with the SEC and any applicable state agencies documents required to be filed by the Issuer with the SEC and any applicable state agencies, including periodic reports required to be filed under the Exchange Act;
(iii) prepare for execution by the Issuer and cause to be filed such income, franchise or other tax returns of the Issuer as shall be required to be filed by applicable law (the “Tax Returns”) and cause to be paid on behalf of the Issuer from the Issuer’s funds any taxes required to be paid by the Issuer under applicable law;
(iv) prepare or cause to be prepared for execution by the Issuer’s Managers minutes of the meetings of the Issuer’s Managers and such other documents deemed appropriate by the Issuer to maintain the separate limited liability company existence and good standing of the Issuer (the “Company Minutes”) or otherwise required under the Basic Documents (together with the Account Records, the Tax Returns, the Company Minutes, the LLC Agreement and the Certificate of Formation, the “Issuer Documents”) and any other documents deliverable by the Issuer thereunder or in connection therewith; and
(v) hold, maintain and preserve at the Premises (or such other place as shall be required by any of the Basic Documents) executed copies (to the extent applicable) of the Issuer Documents and other documents executed by the Issuer thereunder or in connection therewith;
(b) take such actions on behalf of the Issuer as are necessary or desirable for the Issuer to keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware and obtain and preserve its qualification to do business in each jurisdiction in which it becomes necessary to be so qualified;
(c) take such actions on the behalf of the Issuer as are necessary for the issuance and delivery of Storm Recovery Bonds;
(d) provide for the performance by the Issuer of its obligations under each of the Basic Documents, and prepare, or cause to be prepared, all documents, reports, filings, instruments, notices, certificates and opinions that it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Basic Documents;
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(e) to the full extent allowable under applicable law, enforce each of the rights of the Issuer under the Basic Documents, at the direction of the Indenture Trustee;
(f) provide for the defense, at the direction of the Issuer’s Managers, of any action, suit or proceeding brought against the Issuer or affecting the Issuer or any of its assets;
(g) provide office space (the “Premises”) for the Issuer and such reasonable ancillary services as are necessary to carry out the obligations of the Administrator hereunder, including telecopying, duplicating and word processing services;
(h) undertake such other administrative services as may be appropriate, necessary or requested by the Issuer; and
(i) provide such other services as are incidental to the foregoing or as the Issuer and the Administrator may agree.
In providing the services under this Section 1 and as otherwise provided under this Administration Agreement, the Administrator will not knowingly take any actions on behalf of the Issuer that (i) the Issuer is prohibited from taking under the Basic Documents, or (ii) would cause the Issuer to be in violation of any U.S. federal, state or local law or the LLC Agreement.
In performing its duties hereunder, the Administrator shall use the same degree of care and diligence that the Administrator exercises with respect to performing such duties for its own account and, if applicable, for others.
Section 2 Compensation. As compensation for the performance of the Administrator’s obligations under this Administration Agreement (including the compensation of Persons serving as Manager(s), other than the Independent Manager(s), and officers of the Issuer, but, for the avoidance of doubt, excluding the performance by Duke Energy Progress of its obligations in its capacity as Servicer), the Administrator shall be entitled to $50,000 annually (the “Administration Fee”), payable by the Issuer in full on the first Payment Date following the issuance of the Storm Recovery Bonds and every second Payment Date thereafter. In addition, the Administrator shall be entitled to be reimbursed by the Issuer for all costs and expenses of services performed by unaffiliated third parties and actually incurred by the Administrator in connection with the performance of its obligations under this Administration Agreement in accordance with Section 3 (but, for the avoidance of doubt, excluding any such costs and expenses incurred by Duke Energy Progress in its capacity as Servicer), to the extent that such costs and expenses are supported by invoices or other customary documentation and are reasonably allocated to the Issuer (“Reimbursable Expenses”).
Section 3 Third Party Services. Any services required for or contemplated by the performance of the above-referenced services by the Administrator to be provided by unaffiliated third parties (including independent accountants’ fees and counsel fees) may, if provided for or otherwise contemplated by the Financing Order and if the Issuer deems it necessary or desirable, be arranged by the Issuer or by the Administrator at the direction (which may be general or specific) of the Issuer. Costs and expenses associated with the contracting for such third-party professional services may be paid directly by the Issuer or paid by the Administrator and reimbursed by the Issuer in accordance with Section 2, or otherwise as the Administrator and the Issuer may mutually arrange.
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Section 4 Additional Information to be Furnished to the Issuer. The Administrator shall furnish to the Issuer from time to time such additional information regarding the Storm Recovery Collateral or the Collateral, as applicable, an as the Issuer shall reasonably request.
Section 5 Independence of the Administrator. For all purposes of this Administration Agreement, the Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer, the Administrator shall have no authority, and shall not hold itself out as having the authority, to act for or represent the Issuer in any way and shall not otherwise be deemed an agent of the Issuer.
Section 6 No Joint Venture. Nothing contained in this Administration Agreement (a) shall constitute the Administrator and the Issuer as partners or co-members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (b) shall be construed to impose any liability as such on either of them or (c) shall be deemed to confer on either of them any express, implied or apparent authority to incur any obligation or liability on behalf of the other.
Section 7 Other Activities of Administrator. Nothing herein shall prevent the Administrator or any of its members, managers, officers, employees or affiliates from engaging in other businesses or, in its sole discretion, from acting in a similar capacity as an administrator for any other Person even though such Person may engage in business activities similar to those of the Issuer.
Section 8 Term of Agreement; Resignation and Removal of Administrator.
(a) This Administration Agreement shall continue in force until the payment in full of the Storm Recovery Bonds and any other amount that may become due and payable under the Indenture, upon which event this Administration Agreement shall automatically terminate. Notwithstanding the foregoing, the Administrator’s obligation under Section 11(c) to indemnify DEP Customers shall survive termination of this Administration Agreement.
(b) Subject to Section 8(e) and Section 8(f), the Administrator may resign its duties hereunder by providing the Issuer, the Commission and the Rating Agencies with at least 60 days’ prior written notice.
(c) Subject to Section 8(e) and Section 8(f), the Issuer may remove the Administrator without cause by providing the Administrator, the Commission and the Rating Agencies with at least 60 days’ prior written notice.
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(d) Subject to Section 8(e) and Section 8(f), at the sole option of the Issuer, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator and the Rating Agencies if any of the following events shall occur:
(i) the Administrator shall default in the performance of any of its duties under this Administration Agreement and, after notice of such default, shall fail to cure such default within ten days (or, if such default cannot be cured in such time, shall (A) fail to give within ten days such assurance of cure as shall be reasonably satisfactory to the Issuer and (B) fail to cure such default within 30 days thereafter);
(ii) a court of competent jurisdiction shall enter a decree or order for relief, and such decree or order shall not have been vacated within 60 days, in respect of the Administrator in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or such court shall appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Administrator or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in Section 8(d)(ii) or Section 8(d)(iii) shall occur, it shall give written notice thereof to the Issuer, the Commission and the Indenture Trustee as soon as practicable but in any event within seven days after the happening of such event.
(e) No resignation or removal of the Administrator pursuant to this Section 8 shall be effective until a successor Administrator has been appointed by the Issuer, the Rating Agency Condition shall have been satisfied with respect to the proposed appointment, the Commission Condition set forth in Section 13(b) of this Administration Agreement has been satisfied, and such successor Administrator has agreed in writing to be bound by the terms of this Administration Agreement in the same manner as the Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be effective only after satisfaction of the Rating Agency Condition and the Commission Condition with respect to the proposed appointment.
Section 9 Action upon Termination, Resignation or Removal. Promptly upon the effective date of termination of this Administration Agreement pursuant to Section 8(a), the resignation of the Administrator pursuant to Section 8(b) or the removal of the Administrator pursuant to Section 8(c) or Section 8(d), the Administrator shall be entitled to be paid a pro-rated portion of the annual fee described in Section 2 through the date of termination and all Reimbursable Expenses incurred by it through the date of such termination, resignation or removal. The Administrator shall forthwith upon such termination pursuant to Section 8(a) deliver to the Issuer all property and documents of or relating to the Collateral then in the custody of the Administrator. In the event of the resignation of the Administrator pursuant to Section 8(b) or the removal of the Administrator pursuant to Section 8(c) or Section 8(d), the Administrator shall cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Administrator.
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Section 10 Administrator’s Liability.
(a) Except as otherwise provided herein, the Administrator assumes no liability other than to render or stand ready to render the services called for herein, and neither the Administrator nor any of its members, managers, officers, employees or affiliates shall be responsible for any action of the Issuer or any of the members, managers, officers, employees or affiliates of the Issuer (other than the Administrator itself). The Administrator shall not be liable for nor shall it have any obligation with regard to any of the liabilities, whether direct or indirect, absolute or contingent, of the Issuer or any of the members, managers, officers, employees or affiliates of the Issuer (other than the Administrator itself).
(b) The Administrator acknowledges under the authority granted to Commission pursuant to Chapter 62 of the North Carolina General Statutes that the Commission has authority to enter an order enforcing the provisions of this Administration Agreement consistent with the Financing Order and Storm Recovery Law.
Section 11 Indemnity.
(a) Subject to the priority of payments set forth in the Indenture, the Issuer shall indemnify the Administrator and its shareholders, directors, officers, employees and affiliates against all losses, claims, damages, penalties, judgments, liabilities and expenses (including all expenses of litigation or preparation therefor whether or not the Administrator is a party thereto) that any of them may pay or incur arising out of or relating to this Administration Agreement and the services called for herein; provided, however, that such indemnity shall not apply to any such loss, claim, damage, penalty, judgment, liability or expense resulting from the Administrator’s negligence or willful misconduct in the performance of its obligations hereunder.
(b) The Administrator shall indemnify the Issuer and its members, managers, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including all expenses of litigation or preparation therefor whether or not the Issuer is a party thereto) that any of them may incur as a result of the Administrator’s negligence or willful misconduct in the performance of its obligations hereunder.
(c) The Administrator will credit Customers to the extent there are higher Storm Recovery Charges resulting from the Administrator's negligence, recklessness or willful misconduct, provided, however, that any credit to Customers shall not impact the Storm Recovery Charges or the Storm Recovery Property. This Section 11(c) shall survive the termination of this Administration Agreement, and any amounts paid with respect thereto shall be remitted and deposited with the Indenture Trustee for deposit into the Collection Account, unless otherwise directed by the Commission.
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Section 12 Notices. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:
(b) if to the Issuer, to Duke Energy Progress NC Storm Funding LLC, at 410 South Wilmington Street Raleigh, North Carolina 27601-1748, Attention: Manager, Telephone: 704-382-3853;
(c) if to the Administrator, to Duke Energy Progress, LLC, at 410 South Wilmington Street Raleigh, North Carolina 27601-1748, Attention: Director, Rates and Regulatory Strategy, Telephone: 704-382-3853 in care of (c/o): Director, Rates and Regulatory Planning and at 550 South Tryon Street, Charlotte, North Carolina 28202, Attention: Treasurer, Telephone: 704-382-3853 c/o Assistant Treasurer;
(d) if to the Commission and the Public Staff – North Carolina Commission, by filing a notice in docket E-2, Sub 1262 with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff; and
(e) if to the Indenture Trustee, to the Corporate Trust Office.
Each party hereto may, by notice given in accordance herewith to the other party or parties hereto, designate any further or different address to which subsequent notices, reports and other communications shall be sent.
Section 13 Amendments.
(a) Subject to Section 13(b), this Administration Agreement may be amended from time to time by a written amendment duly executed and delivered by each of the Issuer and the Administrator, with the prior written consent of the Indenture Trustee, the satisfaction of the Rating Agency Condition; provided, that any such amendment may not adversely affect the interest of any Holder in any material respect without the consent of the Holders of a majority of the outstanding principal amount of all Storm Recovery Bonds. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.
(b) Commission Condition. Notwithstanding anything to the contrary in this Section 13, no amendment or modification of this Administration Agreement shall be effective, nor shall any action requiring satisfaction of this condition pursuant to Section 8(e), Section 8(f), or Section 14 of this Administration Agreement be taken or be effective except upon satisfaction of the conditions precedent in this paragraph (b).
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(i) At least 15 days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in Section 13(a) (except that the consent of the Indenture Trustee may be subject to the consent of the Holders of the Storm Recovery Bonds if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification) the Administrator shall have filed in Commission docket E-2, Sub 1262 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:
(A) a reference to Docket No. E-2, Sub 1262;
(B) an Officer’s Certificate stating that the proposed amendment or modification has been approved by all parties to this Administration Agreement; and
(C) a statement identifying the person to whom the Commission is to address any response to the proposed amendment or to request additional time.
(ii) If the Commission, within 15 days of receiving a notification complying with subparagraph (i), shall have an order that the Commission might object to the proposed amendment or modification, then, subject to clause (iii) below, such proposed amendment or modification shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed amendment or modification.
(iii) If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification may subsequently become effective upon satisfaction of the other conditions specified in Section 13(a).
(iv) Following the delivery of an order from the Commission to the Administrator under subparagraph (ii), the Administrator and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any proposed amendment. The fact that the Administrator delivers notice to the Commission pursuant to this Section 13(b) does not obligate the Administrator to amend this Administration Agreement as provided in the notice.
Section 14 Successors and Assigns. This Administration Agreement may not be assigned by the Administrator unless such assignment is previously consented to in writing by the Issuer and the Indenture Trustee and by Order by the Commission and subject to the satisfaction of the Rating Agency Condition in connection therewith. Any assignment with such consent and satisfaction, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Administrator is bound hereunder. Notwithstanding the foregoing, this Administration Agreement may be assigned by the Administrator without the consent of the Issuer, the Commission or the Indenture Trustee and without satisfaction of the Rating Agency Condition to a corporation or other organization that is a successor (by merger, reorganization, consolidation or purchase of assets) to the Administrator, including any Permitted Successor; provided, that such successor or organization executes and delivers to the Issuer and the Commission an agreement in which such corporation or other organization agrees to be bound hereunder by the terms of said assignment in the same manner as the Administrator is bound hereunder. Subject to the foregoing, this Administration Agreement shall bind any successors or assigns of the parties hereto. Upon satisfaction of all of the conditions of this Section 14, the preceding Administrator shall automatically and without further notice be released from all of its obligations hereunder.
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Section 15 Governing Law. This Administration Agreement shall be construed in accordance with the laws of the State of North Carolina, 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 16 Counterparts. This Administration Agreement may be executed in counterparts, each of which when so executed shall be an original, but all of which together shall constitute but one and the same Administration Agreement.
Section 17 Severability. Any provision of this Administration Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 18 Nonpetition Covenant. Notwithstanding any prior termination of this Administration Agreement, the Administrator covenants that it shall not, prior to the date that is one year and one day after payment in full of all Storm Recovery Bonds, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any U.S. 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 its property or ordering the winding up or liquidation of the affairs of the Issuer.
Section 19 Assignment to Indenture Trustee. The Administrator hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Holders pursuant to the Indenture of any or all of the Issuer’s rights hereunder and the assignment of any or all of the Issuer’s rights hereunder to the Indenture Trustee for the benefit of the Holders.
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IN WITNESS WHEREOF, the parties have caused this Administration Agreement to be duly executed and delivered as of the day and year first above written.
| DUKE ENERGY PROGRESS NC STORM FUNDING LLC, | |||
| as Issuer | |||
| By: | |||
| Name: Chris R. Bauer | |||
| Title: | Assistant Treasurer | ||
| DUKE ENERGY PROGRESS, LLC, | |||
| as Administrator | |||
| By: | |||
| Name: Chris R. Bauer | |||
| Title: | Assistant Treasurer | ||
Signature Page to Administration Agreement
APPENDIX A
DEFINITIONS AND RULES OF CONSTRUCTION
A. Defined Terms. The following terms have the following meanings:
“17g-5 Website” is defined in Section 10.18(a) of the Indenture.
“Account Records” is defined in Section 1(a)(i) of the Administration Agreement.
“Act” is defined in Section 10.03(a) of the Indenture.
“Additional Series” means issuance by the Issuer of any series of Storm Recovery Bonds issued after the date hereof, that will be undertaken only if (i) such issuance has been authorized by the Commission, (ii) the Rating Agency Condition has been satisfied and it is a condition of issuance for each Series of Storm Recovery Bonds that such Additional Series receive a rating or ratings as required by the Financing Order or a Subsequent Financing Order, (iii) the Issuer has delivered to the Indenture Trustee an Opinion of Counsel of a nationally recognized firm experienced in such matters to the effect that after such issuance, in the opinion of such counsel, if either or both of Duke Energy Progress or the Seller were to become a debtor in a case under the United States Bankruptcy Code (Title 11, U.S.C.), a federal court exercising bankruptcy jurisdiction and exercising reasonable judgment after full consideration of all relevant factors would not order substantive consolidation of the assets and liabilities of the Issuer with those of the bankruptcy estate of Duke Energy Progress or the Seller, subject to the customary exceptions, qualifications and assumptions contained therein.
“Administration Agreement” means the Administration Agreement, dated as of the date hereof, by and between Duke Energy Progress and the Issuer.
“Administration Fee” is defined in Section 2 of the Administration Agreement.
“Administrator” means Duke Energy Progress, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.
“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 specified 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.
“Amendatory Schedule” means a revision to service riders or any other notice filing filed with the Commission in respect of the Storm Recovery Rate Schedule pursuant to a True-Up Adjustment.
“Annual Accountant’s Report” is defined in Section 3.04(a) of the Servicing Agreement.
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“Authorized Denomination” means, with respect to any Storm Recovery Bond, the authorized denomination therefor specified in the Series Supplement, which shall be at least $2,000 and, except as otherwise provided in the Series Supplement, integral multiples of $1,000 in excess thereof, except for one Storm Recovery bond which may be of a smaller denomination.
“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.).
“Basic Documents” means the Indenture, Series Supplement, the Certificate of Formation, the LLC Agreement, the Administration Agreement, and, the Sale Agreement, Bill of Sale, Servicing Agreement, Intercreditor Agreement ,any joinder to an existing intercreditor agreement, Letter of Representations, Underwriting Agreement and all other documents and certificates delivered in connection therewith.
“Bill of Sale” means a bill of sale substantially in the form of Exhibit A to the Sale Agreement delivered pursuant to Section 2.02(a) of the Sale Agreement.
“Billed Storm Recovery Charges” means the amounts of Storm Recovery Charges billed by the Servicer.
“Billing Period” means the period created by dividing the calendar year into 12 consecutive periods of approximately 21 Servicer Business Days.
“Bills” means each of the regular monthly bills, summary bills, opening bills and closing bills issued to Customers by Duke Energy Progress in its capacity as Servicer.
“Bond Interest Rate” means, with respect to any Tranche of Storm Recovery Bonds, the rate at which interest accrues on the Storm Recovery Bonds of such Series or Tranche, as specified in the Series Supplement.
“Book-Entry Form” means, with respect to any Storm Recovery Bond, that such Storm Recovery Bond is not certificated and the ownership and transfers thereof shall be made through book entries by a Clearing Agency as described in Section 2.11 of the Indenture and the Series Supplement pursuant to which such Storm Recovery Bond was issued.
“Book-Entry Storm Recovery Bonds” means any Storm Recovery Bonds issued in Book-Entry Form; provided, however, that, after the occurrence of a condition whereupon book-entry registration and transfer are no longer permitted and Definitive Storm Recovery Bonds are to be issued to the Holder of such Storm Recovery Bonds, such Storm Recovery Bonds shall no longer be “Book-Entry Storm Recovery Bonds”.
“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina, Charlotte, North Carolina or New York, New York are, or DTC or the Corporate Trust Office is, authorized or obligated by law, regulation or executive order to be closed.
“Capital Contribution” means the amount of cash contributed to the Issuer by Duke Energy Progress as specified in the LLC Agreement.
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“Capital Subaccount” is defined in Section 8.02(a) of the Indenture.
“Certificate of Compliance” means the certificate referred to in Section 3.03 of the Servicing Agreement and substantially in the form of Exhibit E to the Servicing Agreement.
“Certificate of Formation” means the Certificate of Formation filed with the Secretary of State of the State of Delaware on August 12, 2021 pursuant to which the Issuer was formed.
“Claim” means a “claim” as defined in Section 101(5) of the Bankruptcy Code.
“Clearing Agency” means an organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act.
“Clearing Agency Participant” means a securities broker, dealer, bank, trust company, clearing corporation or other financial institution or other Person for whom from time to time a Clearing Agency effects book entry transfers and pledges of securities deposited with such Clearing Agency.
“Closing Date” means the date on which the Storm Recovery Bonds are originally issued in accordance with Section 2.10 of the Indenture and the Series Supplement.
“Code” means the Internal Revenue Code of 1986.
“Collateral” is defined in the preamble of the Indenture.
“Collection Account” is defined in Section 8.02(a) of the Indenture for such Series.
“Collection in Full of the Charges” means the day on which the aggregate amounts on deposit in the General Subaccount and the Excess Funds Subaccount are sufficient to pay in full all the Outstanding Storm Recovery Bonds and to replenish any shortfall in the Capital Subaccount.
“Collection Period” means any period commencing on the first Servicer Business Day of any Billing Period and ending on the last Servicer Business Day of such Billing Period.
“Commission” means the North Carolina Utilities Commission.
“Commission Condition” means the satisfaction of any precondition to any amendment or modification to or action under any Basic Documents through the obtaining of Commission consent or acquiescence, as described in the related Basic Document.
“Commission Regulations” means any orders issued or rules or regulations, including temporary regulations, promulgated by the Commission pursuant to North Carolina law.
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“Company Minutes” is defined in Section 1(a)(iv) of the Administration Agreement.
“Corporate Trust Office” means the office of the Indenture Trustee at which, at any particular time, its corporate trust business shall be administered, which office as of the date hereof is located at BNY Mellon Global Corporate Trust, 4655 Salisbury Road, Suite 300, Jacksonville, Florida 32256; Telephone: 904-998-4714; Facsimile: 904-645-1930, or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders of Storm Recovery Bonds and the Issuer, or the principal corporate trust office of any successor trustee designated by like notice.
“Covenant Defeasance Option” is defined in Section 4.01(b) of the Indenture.
“Customer” means any existing or future retail customer (including individuals, corporations, other businesses, and federal, state and local governmental entities) receiving transmission or distribution service from Duke Energy Progress or its successors or assignees under Commission-approved rate schedules or under special contracts, even if such customer elects to purchase electricity from an TPS following a fundamental change in regulation of public utilities in North Carolina.
“Daily Remittance” is defined in Section 6.11(a) of the Servicing Agreement.
“Default” means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.
“Definitive Storm Recovery Bonds” is defined in Section 2.11 of the Indenture.
“Delaware UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of Delaware.
“DTC” means The Depository Trust Company.
“Duke Energy Progress” or “DEP” means Duke Energy Progress, LLC, a North Carolina limited liability company.
“Duke Energy Progress NC Storm Funding LLC” or “DEP NC Storm Funding” means the Issuer.
“Eligible Account” means a segregated non-interest-bearing trust account with an Eligible Institution.
“Eligible Institution” means:
(a) the corporate trust department of the Indenture Trustee, so long as any of the securities of the Indenture Trustee have (i) either a short-term credit rating from Moody’s of at least “P-1”, or a long-term unsecured debt rating from Moody’s of at least “A2”, and (ii) have a credit rating from S&P of at least “A”; or
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(b) a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, or (B) a short-term issuer rating of “A-1” or higher by S&P and “P-1” or higher by Moody’s, and (ii) whose deposits are insured by the Federal Deposit Insurance Corporation.
If so qualified under clause (b) above, the Indenture Trustee may be considered an Eligible Institution for the purposes of clause (a) of this definition.
“Eligible Investments” means instruments or investment property that evidence:
(a) direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;
(b) demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of, bank deposit products of or bankers’ acceptances issued by, any depository institution (including, but not limited to, bank deposit products of the Indenture Trustee, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or state banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit, rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;
(c) commercial paper (including commercial paper of the Indenture Trustee, acting in its commercial capacity, and other than commercial paper of Duke Energy Progress or any of its Affiliates), which at the time of purchase is rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;
(d) investments in money market funds having a rating in the highest investment category granted thereby (including funds for which the Indenture Trustee or any of its Affiliates is investment manager or advisor) from Moody’s and S&P;
(e) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or its agencies or instrumentalities, entered into with Eligible Institutions;
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(f) repurchase obligations with respect to any security or whole loan entered into with an Eligible Institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:
(i) a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a “broker/dealer”), the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s, “A-1+” by S&P at the time of entering into such repurchase obligation; or
(ii) an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s and “A-1+” by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; and
(g) any other investment permitted by each of the Rating Agencies;
in each case maturing not later than the Business Day preceding the next Payment Date or Special Payment Date, if applicable (for the avoidance of doubt, investments in money market funds or similar instruments that are redeemable on demand shall be deemed to satisfy the foregoing requirement). Notwithstanding the foregoing: (1) no securities or investments that mature in 30 days or more shall be “Eligible Investments” unless the issuer thereof has either a short-term unsecured debt rating of at least “P-1” from Moody’s or a long-term unsecured debt rating of at least “A1” from Moody’s and also has a long-term unsecured debt rating of at least “A” from S&P; (2) no securities or investments described in clauses (b) through (d) above that have maturities of more than 30 days but less than or equal to 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (3) no securities or investments described in clauses (b) through (d) above that have maturities of more than 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (4) no securities or investments described in bullet points (b) through (d) above which have a maturity of 60 days or less will be Eligible Investments unless such securities have a rating from S&P of at least “A-1”; and (5) no securities or investments described in bullet points (b) through (d) above which have a maturity of more than 60 days will be Eligible Investments unless such securities have a rating from S&P of at least “AA-”, “A-1+” or “AAAm”.
“Event of Default” is defined in Section 5.01 of the Indenture.
“Excess Funds Subaccount” is defined in Section 8.02(a) of the Indenture.
“Exchange Act” means the Securities Exchange Act of 1934.
“Expected Sinking Fund Schedule” means, with respect to any Tranche, the expected sinking fund schedule related thereto set forth in the Series Supplement.
“Federal Book-Entry Regulations” means 31 C.F.R. Part 357 et seq. (Department of Treasury).
“Final” means, with respect to the Financing Order or Subsequent Financing Order, that the Financing Order has become final, that the Financing Order is not being appealed and that the time for filing an appeal thereof has expired.
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“Final Maturity Date” means, with respect to each Series of Tranche of Storm Recovery Bonds, the final maturity date therefor as specified in the applicable Series Supplement.
“Financing Costs” means all financing costs as defined in Section 62-172(a)(4)of the Storm Recovery Law allowed to be recovered by Duke Energy Progress under the Financing Order.
“Financing Order” means the financing order issued by the Commission to Duke Energy Progress on May 10, 2021, Docket No. E-2, Sub 1262, authorizing the creation of the Storm Recovery Property, which was clarified and corrected by the Commission in an Order Clarifying and Correcting Financing Order on July 13, 2021.
“Financing Party” means any and all of the following: the Holders, the Indenture Trustee, Duke Energy Progress, collateral agents, any party under the Basic Documents, or any other person acting for the benefit of the Holders.
“North Carolina UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of North Carolina.
“General Subaccount” is defined in Section 8.02(a) of the Indenture for such Series.
“Global Storm Recovery Bond” means a Storm Recovery Bond to be issued to the Holders thereof in Book-Entry Form, which Global Storm Bond shall be issued to the Clearing Agency, or its nominee, in accordance with Section 2.11 of the Indenture and the Series Supplement.
“Governmental Authority” means any nation or government, any U.S. federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.
“Grant” means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, grant, transfer, create, grant a lien upon, a security interest in and right of set-off against, deposit, set over and confirm pursuant to the Indenture and the Series Supplement. A Grant of the Collateral shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.
“Holder” means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.
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“Indemnified Losses” is defined in Section 5.03 of the Servicing Agreement.
“Indemnified Party” is defined in Section 6.02(a) of the Servicing Agreement.
“Indemnified Person” is defined in Section 5.01(f) of the Sale Agreement.
“Indenture” means the Indenture, dated as of the date hereof, by and between the Issuer and The Bank of New York Mellon Trust Company, National Association, as Indenture Trustee and as Securities Intermediary.
“Indenture Trustee” means The Bank of New York Mellon Trust Company, National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any other indenture trustee for the benefit of the Secured Parties, under the Indenture.
“Independent” means, when used with respect to any specified Person, that such specified Person (a) is in fact independent of the Issuer, any other obligor on the Storm Recovery Bonds, the Seller, the Servicer and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director (other than as an independent director or manager) or person performing similar functions.
“Independent Certificate” means a certificate to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and consented to by the Indenture Trustee, and such certificate shall state that the signer has read the definition of “Independent” in the Indenture and that the signer is Independent within the meaning thereof.
“Independent Manager” is defined in Section 4.01(a) of the LLC Agreement.
“Independent Manager Fee” is defined in Section 4.01(a) of the LLC Agreement.
“Insolvency Event” means, with respect to a specified Person: (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such specified Person or any substantial part of its property in an involuntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the date hereof or thereafter, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or ordering the winding-up or liquidation of such specified Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such specified Person of a voluntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the Closing Date or thereafter, or the consent by such specified Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such specified Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or the making by such specified Person of any general assignment for the benefit of creditors, or the failure by such specified Person generally to pay its debts as such debts become due, or the taking of action by such specified Person in furtherance of any of the foregoing.
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“Intercreditor Agreement” means the Intercreditor Agreement, dated December 20, 2013, by and among the Duke Energy Business Services, Inc., Duke Energy Corporate Services Inc., Duke Energy Corporation, Mizuho Bank, Ltd., the Bank of Nova Scotia, the Bank of Tokyo-Mitsubishi UFJ, Ltd., Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress Receivables LLC, Cinergy Receivables Company LLC and Duke Energy Receivables Finance Company, LLC, the Indenture Trustee, the Issuer, Duke Energy Progress, and any subsequent such agreement.
“Investment Company Act” means the Investment Company Act of 1940.
“Investment Earnings” means investment earnings on funds deposited in the Collection Account net of losses and investment expenses.
“Issuer” means Duke Energy Progress NC Storm Funding LLC, a Delaware limited liability company, named as such in the Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the Trust Indenture Act, each other obligor on the Storm Recovery Bonds.
“Issuer Documents” is defined in Section 1(a)(iv) of the Administration Agreement.
“Issuer Order” means a written order signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.
“Issuer Request” means a written request signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.
“Legal Defeasance Option” is defined in Section 4.01(b) of the Indenture.
“Letter of Representations” means any applicable agreement between the Issuer and the applicable Clearing Agency, with respect to such Clearing Agency’s rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Storm Recovery Bonds.
“Lien” means a security interest, lien, mortgage, charge, pledge, claim or encumbrance of any kind.
“LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of Duke Energy Progress NC Storm Funding LLC, dated as of August 12, 2021.
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“Losses” means (a) any and all amounts of principal of and interest on the Storm Recovery Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amounts of any deposits by or to the Issuer required to have been made in accordance with the terms of the Basic Documents or the Financing Order that are not made when so required and (b) any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses of any kind whatsoever.
“Manager” means each manager of the Issuer under the LLC Agreement.
“Member” has the meaning specified in the first paragraph of the LLC Agreement.
“Monthly Servicer’s Certificate” is defined in Section 3.01(b)(i) of the Servicing Agreement.
“Moody’s” means Moody’s Investors Service, Inc. References to Moody’s are effective so long as Moody’s is a Rating Agency.
“North Carolina UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of North Carolina.
“NRSRO” is defined in Section 10.19(b) of the Indenture.
“NY UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York.
“Officer’s Certificate” means a certificate signed by a Responsible Officer of the Issuer under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, and delivered to the Indenture Trustee.
“Ongoing Financing Costs” means the Financing Costs described as such in the Financing Order, including Operating Expenses and any other costs identified in the Basic Documents; provided, however, that Ongoing Financing Costs do not include the Issuer’s costs of issuance of the Storm Recovery Bonds.
“Operating Expenses” means all unreimbursed fees, costs and out-of-pocket expenses of the Issuer, including all amounts owed by the Issuer to the Indenture Trustee (including indemnities, legal, audit fees and expenses) or any Manager, the Servicing Fee, the Administration Fee, legal and accounting fees, Rating Agency fees, any Regulatory Assessment Fees and related fees (i.e. website provider fees) and any franchise or other taxes owed by the Issuer, including on investment income in the Collection Account.
“Opinion of Counsel” means one or more written opinions of counsel, who may, except as otherwise expressly provided in the Basic Documents, be employees of or counsel to the party providing such opinion of counsel, which counsel shall be reasonably acceptable to the party receiving such opinion of counsel, and shall be in form and substance reasonably acceptable to such party.
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“Optional Interim True-Up Adjustment” means each adjustment to the Storm Recovery Charges made pursuant to Section 4.01(b)(ii) of the Servicing Agreement.
“Outstanding” means, as of the date of determination, all Storm Recovery Bonds theretofore authenticated and delivered under the Indenture, except:
(a) Storm Recovery Bonds theretofore canceled by the Storm Recovery Bond Registrar or delivered to the Storm Recovery Bond Registrar for cancellation;
(b) Storm Recovery Bonds or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Storm Recovery Bonds; and
(c) Storm Recovery Bonds in exchange for or in lieu of other Storm Recovery Bonds that have been issued pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Storm Recovery Bonds are held by a Protected Purchaser; provided, that, in determining whether the Holders of the requisite Outstanding Amount of the Storm Recovery Bonds or any Tranche thereof have given any request, demand, authorization, direction, notice, consent or waiver under any Basic Document, Storm Recovery Bonds owned by the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding (unless one or more such Persons owns 100% of such Storm Recovery Bonds), except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Storm Recovery Bonds that the Indenture Trustee actually knows to be so owned shall be so disregarded. Storm Recovery Bonds so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Storm Recovery Bonds and that the pledgee is not the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons.
“Outstanding Amount” means the aggregate principal amount of all Storm Recovery Bonds, or, if the context requires, all Storm Recovery Bonds of a Tranche, Outstanding at the date of determination.
“Paying Agent” means, with respect to the Indenture, the Indenture Trustee and any other Person appointed as a paying agent for the Storm Recovery Bonds pursuant to the Indenture.
“Payment Date” means, with respect to any Tranche of Storm Recovery Bonds, the dates specified in the Series Supplement; provided, that if any such date is not a Business Day, the Payment Date shall be the Business Day succeeding such date.
“Periodic Billing Requirement” means, for any Remittance Period, the aggregate amount of Charges calculated by the Servicer as necessary to be billed during such period in order to collect the Periodic Payment Requirement on a timely basis.
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“Periodic Interest” means, with respect to any Payment Date, the periodic interest for such Payment Date as specified in the Series Supplement.
“Periodic Payment Requirement” for any Remittance Period means the total dollar amount of Storm Recovery Charge Collections reasonably calculated by the Servicer in accordance with Section 4.01 of the Servicing Agreement as necessary to be received during such Remittance Period (after giving effect to the allocation and distribution of amounts on deposit in the Excess Funds Subaccount at the time of calculation and that are projected to be available for payments on the Storm Recovery Bonds at the end of such Remittance Period and including any shortfalls in Periodic Payment Requirements for any prior Remittance Period) in order to ensure that, as of the last Payment Date occurring in such Remittance Period, (a) all accrued and unpaid principal of and interest on the Storm Recovery Bonds then due shall have been paid in full on a timely basis, (b) the Outstanding Amount of the Storm Recovery Bonds is equal to the Projected Unpaid Balance on each Payment Date during such Remittance Period, (c) the balance on deposit in the Capital Subaccount equals the Required Capital Level and (d) all other fees and expenses due and owing and required or allowed to be paid under Section 8.02 of the Indenture as of such date shall have been paid in full; provided, that, with respect to any Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment occurring after the date that is one year prior to the last Scheduled Final Payment Date for the Storm Recovery Bonds, the Periodic Payment Requirements shall be calculated to ensure that sufficient Storm Recovery Charges will be collected to retire the Storm Recovery Bonds in full as of the next Payment Date.
“Periodic Principal” means, with respect to any Payment Date, the excess, if any, of the Outstanding Amount of Storm Recovery Bonds over the outstanding principal balance specified for such Payment Date on the Expected Sinking Fund Schedule.
“Permitted Lien” means the Lien created by the Indenture.
“Permitted Successor” is defined in Section 5.02 of the Sale Agreement.
“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Governmental Authority.
“Predecessor Storm Recovery Bond” means, with respect to any particular Storm Recovery Bond, every previous Storm Recovery Bond evidencing all or a portion of the same debt as that evidenced by such particular Storm Recovery Bond, and, for the purpose of this definition, any Storm Recovery Bond authenticated and delivered under Section 2.06 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Storm Recovery Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Storm Recovery Bond.
“Premises” is defined in Section 1(g) of the Administration Agreement.
“Proceeding” means any suit in equity, action at law or other judicial or administrative proceeding.
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“Projected Unpaid Balance” means, as of any Payment Date, the sum of the projected outstanding principal amount of each Tranche of Storm Recovery Bonds for such Payment Date set forth in the Expected Sinking Fund Schedule.
“Protected Purchaser” has the meaning specified in Section 8-303 of the UCC.:
“Public Staff” means the Public Staff of the Commission, an independent agency established in N.C. Gen. Stat. § 62-15 et seq., that represents the interests of the using and consuming public in matters pending before the Commission.
“Rating Agency” means, with respect to any Tranche of Storm Recovery Bonds, any of Moody’s or S&P that provides a rating with respect to the Storm Recovery Bonds. 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, notice of which designation shall be given to the Indenture Trustee and the Servicer.
“Rating Agency Condition” means, with respect to any action, at least ten Business Days’ prior written notification to each Rating Agency of such action, and written confirmation from each of S&P and Moody’s to the Servicer, the Indenture Trustee and the Issuer that such action will not result in a suspension, reduction or withdrawal of the then current rating by such Rating Agency of any Tranche of Storm Recovery Bonds; provided, that, if, within such ten Business Day period, any Rating Agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such Rating Agency is reviewing and considering the notification, then (a) the Issuer shall be required to confirm that such Rating Agency has received the Rating Agency Condition request and, if it has, promptly request the related Rating Agency Condition confirmation and (b) if the Rating Agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five Business Days following such second request, the applicable Rating Agency Condition requirement shall not be deemed to apply to such Rating Agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a Rating Agency’s right to review or consent).
“Record Date” means one Business Day prior to the applicable Payment Date.
“Registered Holder” means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.
“Regulation AB” means the rules of the SEC promulgated under Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123.
“Reimbursable Expenses” is defined in Section 2 of the Administration Agreement and Section 6.06(a) of the Servicing Agreement.
“Released Parties” is defined in Section 6.02(d) of the Servicing Agreement.
“Remittance Period” means, with respect to any True-Up Adjustment, the period comprised of 6 consecutive Collection Periods beginning with the Collection Period three months prior to when such True-Up Adjustment would go into effect, from the Closing Date to the first Scheduled Payment Date, and for each subsequent period between Scheduled Payment Dates.
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“Required Capital Level” means the amount specified as such in the Series Supplement therefor.
“Requirement of Law” means any foreign, U.S. federal, state or local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Authority or common law.
“Responsible Officer” means, with respect to: (a) the Issuer, any Manager or any duly authorized officer; (b) the Indenture Trustee, any officer within the Corporate Trust Office of such trustee (including the President, any Vice President, any Assistant Vice President, any Secretary, any Assistant Treasurer or any other officer of the Indenture Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, and that has direct responsibility for the administration of the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred to because of such officer’s knowledge and familiarity with the particular subject); (c) any corporation (other than the Indenture Trustee), the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer or any other duly authorized officer of such Person who has been authorized to act in the circumstances; (d) any partnership, any general partner thereof; and (e) any other Person (other than an individual), any duly authorized officer or member of such Person, as the context may require, who is authorized to act in matters relating to such Person.
“Return on Invested Capital” means, for any Payment Date with respect to any Remittance Period, the sum of (i) rate of return, payable to Duke Energy Progress, on its Capital Contribution equal to the rate of interest payable on the longest maturing Tranche of Storm Recovery Bonds plus (ii) any Return on Invested Capital not paid on any prior Payment Date.
“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business. References to S&P are effective so long as S&P is a Rating Agency.
“Sale Agreement” means the Storm Recovery Property Purchase and Sale Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Progress , and acknowledged and accepted by the Indenture Trustee.
“Scheduled Final Payment Date” means, with respect to the Storm Recovery Bonds, the date with respect to each tranche when all interest and principal is scheduled to be paid in accordance with the Expected Sinking Fund Schedule, as specified in the Series Supplement. For the avoidance of doubt, the Scheduled Final Payment Date shall be the last Scheduled Payment Date set forth in the Expected Sinking Fund Schedule. The “last Scheduled Final Payment Date” means the Scheduled Final Payment Date of the latest maturing Tranche of Storm Recovery Bonds.
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“Scheduled Payment Date” means, with respect to each Tranche of Storm Recovery Bonds, each Payment Date on which principal for such Tranche is to be paid in accordance with the Expected Sinking Fund Schedule for such Tranche.
“SEC” means the Securities and Exchange Commission.
“Secured Obligations” means the payment of principal of and premium, if any, interest on, and any other amounts owing in respect of, the Storm Recovery Bonds and all fees, expenses, counsel fees and other amounts due and payable to the Indenture Trustee.
“Secured Parties” means the Indenture Trustee, the Holders and any credit enhancer described in a Series Supplement.
“Securities Act” means the Securities Act of 1933.
“Securities Intermediary” means The Bank of New York Mellon Trust Company, a national banking association, solely in the capacity of a “securities intermediary” as defined in the NY UCC and Federal Book-Entry Regulations or any successor securities intermediary under the Indenture.
“Seller” is defined in the preamble to the Sale Agreement.
“Semi-Annual Servicer’s Certificate” is defined in Section 4.01(c)(ii) of the Servicing Agreement.
“Semi-Annual True-Up Adjustment” means each adjustment to the Storm Recovery Charges made in accordance with Section 4.01(b)(i) of the Servicing Agreement.
“Semi-Annual True-Up Adjustment Date” means the first billing cycle of January and July of each year, commencing in July, 2022.
“Series Supplement” means an indenture supplemental to the Indenture in the form attached as Exhibit B to the Indenture that authorizes the issuance of Storm Recovery Bonds.
“Servicer” means Duke Energy Progress, as Servicer under the Servicing Agreement.
“Servicer Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina, Charlotte, North Carolina or New York, New York are authorized or obligated by law, regulation or executive order to be closed, on which the Servicer maintains normal office hours and conducts business.
“Servicer Default” is defined in Section 7.01 of the Servicing Agreement.
“Servicer Policies and Practices” means, with respect to the Servicer’s duties under Exhibit A to the Servicing Agreement, the policies and practices of the Servicer applicable to such duties that the Servicer follows with respect to comparable assets that it services for itself and, if applicable, others.
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“Servicing Agreement” means the Storm Recovery Property Servicing Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Progress, and acknowledged and accepted by the Indenture Trustee.
“Servicing Fee” is defined in Section 6.06(a) of the Servicing Agreement.
“Servicing Standard” means the obligation of the Servicer to calculate, apply, remit and reconcile proceeds of the Property, including Storm Recovery Charge Payments, and all other Collateral for the benefit of the Issuer and the Holders (a) with the same degree of care and diligence as the Servicer applies with respect to payments owed to it for its own account, (b) in accordance with all applicable procedures and requirements established by the Commission for collection of electric utility tariffs and (c) in accordance with the other terms of the Servicing Agreement.
“Special Payment Date” means the date on which, with respect to any Tranche of Storm Recovery Bonds, any payment of principal of or interest (including any interest accruing upon default) on, or any other amount in respect of, the Storm Recovery Bonds of such Series or Tranche that is not actually paid within five days of the Payment Date applicable thereto is to be made by the Indenture Trustee to the Holders.
“Special Record Date” means, with respect to any Special Payment Date, the close of business on the fifteenth day (whether or not a Business Day) preceding such Special Payment Date.
“Sponsor” means Duke Energy Progress, in its capacity as “sponsor” of the Storm Recovery Bonds within the meaning of Regulation AB.
“State” means any one of the fifty states of the United States of America or the District of Columbia.
“State Pledge” means the pledge of the State of North Carolina as set forth in Section 62-172(k) of the Storm Recovery Law.
“Storms” means Hurricanes Florence, Dorian and Michael and Winter Storm Diego.
“Storm Recovery Bonds” means the Series A Senior Secured Storm Recovery Bonds issued by the Issuer on the Closing Date.
“Storm Recovery Charge Collections” means Storm Recovery Charges actually received by the Servicer to be remitted to the Collection Account.
“Storm Recovery Charge Payments” means the payments made by Customers based on the Storm Recovery Charges.
“Storm Recovery Charge” means any storm-recovery charges as defined in Section 62-172(a)(15) of the Storm Recovery Law that are authorized by the Financing Order.
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“Storm Recovery Collateral” means Collateral for the benefit of Storm Recovery Bonds.
“Storm Recovery Costs” means (i) Duke Energy Progress’s deferred asset balance associated with the Storms, including a return on the unrecovered balance, and with respect to the capital investments, including a deferral of depreciation expense and a return on the investment determined by the Commission to be prudently incurred in Docket No. E-7, Sub 1214 plus (ii) carrying costs through the projected issuances date of the Storm Recovery Bonds, calculated at a rate authorized by the Commission, (iii) plus up-front Financing Costs.
“Storm Recovery Law” means the laws of the State of North Carolina adopted in 2019 enacted as Section 62-172, North Carolina Statutes.
“Storm Recovery Property” means all storm recovery property as defined in Section 62-172(a)(17)a. of the Storm Recovery Law created pursuant to the Financing Order or a Subsequent Financing Order and under the Storm Recovery Law, including the right to impose, bill, charge, collect and receive the Storm Recovery Charges authorized under the Financing Order and to obtain periodic adjustments of the Storm Recovery Charges and all revenue, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in Section 62-172(a)(17)b. of the Storm Recovery Law, regardless of whether such revenues, collections, claims, rights to payments, money, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money or proceeds.
“Storm Recovery Property Records” is defined in Section 5.01 of the Servicing Agreement.
“Storm Recovery Rate Class” means one of the four separate rate classes to whom Charges are allocated for ratemaking purposes in accordance with the Financing Order.
“Storm Recovery Rate Schedule” means the Tariff sheets to be filed with the Commission stating the amounts of the Charges, as such Tariff sheets may be amended or modified from time to time pursuant to a True-Up Adjustment.
“Subaccounts” is defined in Section 8.02(a) of the Indenture.
“Subsequent Financing Order” means, a financing order of the Commission under the Storm Recovery Law issued to Duke Energy Progress subsequent to the Financing Order.
“Successor” means any successor to Duke Energy Progress under the Storm Recovery Law, whether pursuant to any bankruptcy, reorganization or other insolvency proceeding or pursuant to any merger, conversion, acquisition, sale or transfer, by operation of law, as a result of electric utility restructuring, or otherwise.
“Successor Servicer” is defined in Section 3.07(e) of the Indenture.
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“Tail-end Subaccount” is defined in Section 8.02(a) of the Indenture.
“Tariff” means the most current version on file with the Commission.
“Tax Returns” is defined in Section 1(a)(iii) of the Administration Agreement.
“Temporary Storm Recovery Bonds” means Storm Recovery Bonds executed and, upon the receipt of an Issuer Order, authenticated and delivered by the Indenture Trustee pending the preparation of Definitive Storm Recovery Bonds pursuant to Section 2.04 of the Indenture.
“Termination Notice” is defined in Section 7.01 of the Servicing Agreement.
“TPS” means a third party supplier which is authorized by law to sell electric service to a customer using the transmission or distribution system of Duke Energy Progress.
“Tranche Maturity Date” means, with respect to any Tranche of Storm Recovery Bonds, the maturity date therefor, as specified in the Series Supplement therefor.
“True-Up Adjustment” means any Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment, as the case may be.
“Trust Indenture Act” means the Trust Indenture Act of 1939 as in force on the Closing Date, unless otherwise specifically provided.
“UCC” means the Uniform Commercial Code as in effect in the relevant jurisdiction.
“Underwriters” means the underwriters who purchase Storm Recovery Bonds of any Series from the Issuer and sell such Storm Recovery Bonds in a public offering.
“Underwriting Agreement” means the Underwriting Agreement, dated November 17, 2021, by and among the Issuer, Duke Energy Progress, and the representatives of the several Underwriters named therein, as the same may be amended, supplemented or modified from time to time, with respect to the issuance of the Storm Recovery Bonds.
“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and that are not callable at the option of the issuer thereof.
“Weighted Average Days Outstanding” means the weighted average number of days Duke Energy Progress monthly bills to Customers remain outstanding during the calendar year preceding the calculation thereof pursuant to Section 4.01(b)(i) of the Servicing Agreement.
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B. Rules of Construction. Unless the context otherwise requires, in each Basic Document to which this Appendix A is attached:
(a) All accounting terms not specifically defined herein shall be construed in accordance with United States generally accepted accounting principles. To the extent that the definitions of accounting terms in any Basic Document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in such Basic Document shall control.
(b) The term “including” means “including without limitation”, and other forms of the verb “include” have correlative meanings.
(c) All references to any Person shall include such Person’s permitted successors and assigns, and any reference to a Person in a particular capacity excludes such Person in other capacities.
(d) Unless otherwise stated in any of the Basic Documents, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and each of the words “to” and “until” means “to but excluding”.
(e) The words “hereof”, “herein” and “hereunder” and words of similar import when used in any Basic Document shall refer to such Basic Document as a whole and not to any particular provision of such Basic Document. References to Articles, Sections, Appendices and Exhibits in any Basic Document are references to Articles, Sections, Appendices and Exhibits in or to such Basic Document unless otherwise specified in such Basic Document.
(f) The various captions (including the tables of contents) in each Basic Document are provided solely for convenience of reference and shall not affect the meaning or interpretation of any Basic Document.
(g) The definitions contained in this Appendix A apply equally to the singular and plural forms of such terms, and words of the masculine, feminine or neuter gender shall mean and include the correlative words of other genders.
(h) Unless otherwise specified, references to an agreement or other document include references to such agreement or document as from time to time amended, restated, reformed, supplemented or otherwise modified in accordance with the terms thereof (subject to any restrictions on such amendments, restatements, reformations, supplements or modifications set forth in such agreement or document) and include any attachments thereto.
(i) References to any law, rule, regulation or order of a Governmental Authority shall include such law, rule, regulation or order as from time to time in effect, including any amendment, modification, codification, replacement or reenactment thereof or any substitution therefor.
(j) The word “will” shall be construed to have the same meaning and effect as the word “shall”.
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(k) The word “or” is not exclusive.
(l) All terms defined in the relevant Basic Document to which this Appendix A is attached shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein.
(m) A term has the meaning assigned to it.
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