Exhibit (10)(pp)
Execution Copy
AMENDMENT NO. 18
TO
RECEIVABLES PURCHASE AGREEMENT
          THIS AMENDMENT NO. 18 TO RECEIVABLES PURCHASE AGREEMENT (this
“Amendment”) dated as of February 12, 2010, is entered into among CONSUMERS
RECEIVABLES FUNDING II, LLC (“Seller”), CONSUMERS ENERGY COMPANY, in its
capacity as Servicer (in such capacity, the “Servicer”), FALCON ASSET
SECURITIZATION COMPANY LLC (“Falcon”), and JPMORGAN CHASE BANK, N.A. (as
successor by merger to Bank One, NA (Main Office Chicago)) (“JPMorgan”), as a
Financial Institution and as Administrative Agent (in such capacity, the
“Administrative Agent”). Capitalized terms used herein without definition shall
have the meanings ascribed thereto in the “Purchase Agreement” referred to
below.
PRELIMINARY STATEMENTS
          A. Reference is made to that certain Receivables Purchase Agreement
dated as of May 22, 2003 among Seller, Servicer, Falcon and JPMorgan, as a
Financial Institution and the Administrative Agent (as amended prior to the date
hereof and as the same may be further amended, restated, supplemented or
modified from time to time, the “Purchase Agreement”).
          B. The parties hereto have agreed to amend certain provisions of the
Purchase Agreement upon the terms and conditions set forth herein.
     SECTION 1. Amendment. Subject to the satisfaction of the conditions
precedent set forth in Section 3 hereof, the parties hereto hereby agree to
amend the Purchase Agreement as follows:
     (a) Section 7.1(b) of the Purchase Agreement is hereby amended to add the
following clause (ix) after clause (viii):
     (ix) Appointment of Independent Manager. The decision to appoint a new
manager of Seller as the “Independent Manager” for purposes of this Agreement,
such notice to be issued not less than ten (10) days prior to the effective date
of such appointment and to certify that the designated Person satisfies the
criteria set forth in the definition herein of “Independent Manager.”
     (b) Section 7.1(i) of the Purchase Agreement is amended to (i) delete the
word “and” appearing at the end of clause (xii), (ii) delete the “.” appearing
at the end of clause (xiii) and replace it with “; and” and (iii) add the
following clause (xiv) after clause (xiii):
     (xiv) maintain its Certificate of Formation and Limited Liability Company
Agreement in conformity with this Agreement, such that it does not amend,
restate, supplement or otherwise modify its Certificate of Formation or

 

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Limited Liability Company Agreement in any respect that would impair its ability
to comply with the terms or provisions of any of the Transaction Documents,
including, without limitation, Section 7.1(i) of this Agreement;
     (c) Section 7.1(u) of the Purchase Agreement is deleted and replaced with
the following:
     (u) Certification of Receivables Classification.. In connection with the
delivery of each Monthly Report, the Servicer shall certify to the
Administrative Agent that it has made diligent inquiry and that the accounts
receivable included in such report as Receivables are identified on the books
and records of the Originator and the Seller with the account code “Account
1460000 Customer Receivables” or “Account 1460201 — A/R Other”.
     (d) Section 9.1(f) of the Purchase Agreement is deleted and replaced with
the following:
     (f) As at the end of any Accrual Period:
     (i) the average of the Dilution Ratios as of the end of such Accrual Period
and the two preceding Accrual Periods shall exceed 2.0%, or
     (ii) the average of the Loss-to-Liquidation Ratios as of the end of such
Accrual Period and the two preceding Accrual Periods shall exceed 2.5%, or
     (iii) the average of the Past Due Ratios as of the end of such Accrual
Period and the two preceding Accrual Periods shall exceed (A) 12.0% for any
Accrual Period occurring in May through November of any calendar year or
(B) 8.5% for any Accrual Period occurring in December through April of any
calendar year, or
     (iv) the average of the Days Sales Outstanding Ratios as of the end of such
Accrual Period and the two preceding Accrual Periods shall exceed 55 days.
     (e) Section 9.1 of the Purchase Agreement is amended to add the following
clause (n) after clause (m):
     (n) At any time on or after February 12, 2010, any Person shall be
appointed as an Independent Manager of Seller without prior notice thereof
having been given to the Administrative Agent in accordance with
Section7.1(b)(ix) or without the written acknowledgement by the Administrative
Agent that such Person conforms, to the reasonable satisfaction of the
Administrative Agent, with the criteria set forth in the definition herein of
“Independent Manager.”

 

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     (f) Section 10.3 of the Purchase Agreement is hereby deleted in its
entirety and replaced with the following:
     Section 10.3 Increased Cost and Reduced Return. If any Regulatory Change
(i) subjects any Funding Source to any charge or withholding on or with respect
to any Funding Agreement or a Funding Source’s obligations under a Funding
Agreement, or on or with respect to the Receivables, or changes the basis of
taxation of payments to any Funding Source of any amounts payable under any
Funding Agreement (except for changes in the rate of tax on the overall net
income of a Funding Source or taxes excluded by Section 10.1) or (ii) imposes,
modifies or deems applicable any reserve, assessment, insurance charge, special
deposit or similar requirement against assets of, deposits with or for the
account of a Funding Source, or credit extended by a Funding Source pursuant to
a Funding Agreement or (iii) imposes any other condition the result of which is
to increase the cost to a Funding Source of performing its obligations under a
Funding Agreement, or to reduce the rate of return on a Funding Source’s capital
as a consequence of its obligations under a Funding Agreement, or to reduce the
amount of any sum received or receivable by a Funding Source under a Funding
Agreement or to require any payment calculated by reference to the amount of
interests or loans held or interest received by it, then, upon presentation to
Seller of a certificate setting forth the basis for such determination and the
additional amounts reasonably determined by the Administrative Agent to
reasonably compensate such Funding Source for the period of up to 90 days prior
to the date on which such certificate is delivered to Seller, Seller shall pay
to the Administrative Agent, for the benefit of the relevant Funding Source,
such amounts charged to such Funding Source or such amounts to otherwise
compensate such Funding Source for such increased cost or such reduction. The
term “Regulatory Change” shall mean (i) the adoption after the date hereof of
any applicable law, rule or regulation (including any applicable law, rule or
regulation regarding capital adequacy) or any change therein after the date
hereof, (ii) any change after the date hereof in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency, or (iii) the compliance,
after the date hereof, by any Funding Source with the final rule titled
Risk-Based Capital Guidelines; Capital Adequacy Guidelines; Capital Maintenance:
Regulatory Capital; Impact of Modifications to Generally Accepted Accounting
Principles; Consolidation of Asset-Backed Commercial Paper Programs; and Other
Related Issues, adopted by the United States bank regulatory agencies on
December 15, 2009, or any rules or regulations promulgated in connection
therewith by any such agency.
     (g) Section 10.5 of the Purchase Agreement is hereby deleted in its
entirety and replaced with the following:

 

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     Section 10.5 Accounting Based Consolidation Event. Upon demand by the
Administrative Agent, Seller shall pay to the Administrative Agent, for the
benefit of the relevant Funding Source, such amounts as such Funding Source
reasonably determines will compensate or reimburse such Funding Source for any
(i) fee, expense or increased cost charged to, incurred or otherwise suffered by
such Funding Source, (ii) reduction in the rate of return on such Funding
Source’s capital or reduction in the amount of any sum received or receivable by
such Funding Source or (iii) internal capital charge or other imputed cost
determined by such Funding Source to be allocable to Seller or the transactions
contemplated in this Agreement, in each case resulting from or in connection
with the consolidation, for financial and/or regulatory accounting purposes, of
all or any portion of the assets and liabilities of Conduit that are subject to
this Agreement or any other Transaction Document with all or any portion of the
assets and liabilities of an Funding Source. Amounts under this Section 10.5 may
be demanded at any time without regard to the timing of issuance of any
financial statement by Conduit or by any Funding Source.
     (h) The following new Section 13.18 is hereby added to the Purchase
Agreement immediately following Section 13.17 of the Purchase Agreement.
     Section 13.18 Required Ratings. The Administrative Agent shall have the
right at any time to request that public ratings of the facility evidenced by
this Agreement of at least A-/A3 (the “Required Ratings”) be obtained from two
credit rating agencies acceptable to the Administrative Agent. Each of Seller
and Servicer agree that they shall cooperate with the Administrative Agent’s
efforts to obtain the Required Ratings, and shall provide the Administrative
Agent, for distribution to the applicable credit rating agencies, any
information reasonably requested by such credit rating agencies for purposes of
providing the Required Ratings. Any such request (a “Ratings Request”) shall be
in writing, and if the Required Ratings are not obtained within 60 days
following the date of such Ratings Request (the “Ratings Request Due Date”)
(unless the failure to obtain the Required Ratings is solely the result of the
Administrative Agent’s failure to provide the credit rating agencies with
sufficient information to permit the credit rating agencies to perform their
analysis, and is not the result of Seller or Servicer’s failure to cooperate or
provide sufficient information to the Administrative Agent), (i) upon written
notice by the Administrative Agent to Seller within 90 days after the Ratings
Request Due Date, the Amortization Date shall occur, and (ii) outstanding
Capital shall thereafter bear interest at a rate per annum equal to 2.00% above
the Alternate Base Rate. The Administrative Agent or the relevant Purchasers
shall pay the initial fees payable to the credit rating agencies for providing
the Required Ratings.
     (i) Exhibit I to the Purchase Agreement is hereby amended to delete the
definitions “Amortization Date” “Applicable Stress Factor”, “Dilution Horizon
Factor”, “Funding Source”, “Independent Manager”, “Liquidity Termination Date”
and “Receivable” and replace them with the following:

 

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     “Amortization Date” means the earliest to occur of (i) the day on which any
of the conditions precedent set forth in Section 6.2 are not satisfied, (ii) the
Business Day immediately prior to the occurrence of an Amortization Event set
forth in Section 9.1(d), (iii) the Business Day specified in a written notice
from the Administrative Agent following the occurrence of any other Amortization
Event, (iv) the Liquidity Termination Date, (iv) the date which is at least
fifteen (15) Business Days after the Administrative Agent’s receipt of written
notice from Seller that it wishes to terminate the facility evidenced by this
Agreement, provided that any prepayment resulting from such declaration of the
Amortization Date shall be subject to the provisions of Section 2.1 and (v) the
Business Day specified in a written notice from the Administrative Agent to
Seller in accordance with Section 13.18.
     “Applicable Stress Factor” means 2.25.
     “Dilution Horizon Factor” means, at any time, a fraction, the numerator of
which equals the sum of (a) the aggregate Original Balance of all Billed
Receivables originated during the two most recently ended Accrual Periods and
(b) the aggregate Original Balance of all Unbilled Receivables as of the end of
the most recently ended Accrual Period, and the denominator of which equals the
Net Receivables Balance as of the end of the most recently ended Accrual Period.
     “Funding Source” means (i) any Financial Institution, (ii) any insurance
company, bank or other funding entity providing liquidity, credit enhancement or
back-up purchase support or facilities to Conduit, (iii) any agent,
administrator or manager of Conduit, (iv) any bank holding company in respect of
any of the foregoing or (v) any Conduit or any entity that is consolidated with
any Conduit for financial and/or regulatory accounting purposes.
     “Independent Manager” means, with respect to Seller, a manager who (i) is
not, and within the previous five years was not (except solely by virtue of such
Person’s serving as, or being an Affiliate of any other Person serving as, an
independent director or manager, as applicable, of Consumers or any
bankruptcy-remote special purpose entity that is an Affiliate of Consumers or
Seller,) (a) a stockholder, member, partner, director, officer, employee,
Affiliate, customer, supplier, creditor or independent contractor of, or any
Person that has received any benefit in any form whatever from (other than in
such manager’s capacity as a ratepayer or customer of Consumers in the ordinary
course of business), or any Person that has provided any service in any form
whatsoever to, or any major creditor (or any Affiliate of any major creditor)
of, Seller, Consumers, or any of their Affiliates, or (b) any Person owning
beneficially, directly or indirectly, any outstanding shares of common stock,
any limited liability company interests or any partnership interests, as
applicable, of Seller, Consumers or any of their Affiliates, or of any major
creditor (or any Affiliate of any major creditor) of any of the foregoing, or a
stockholder, member, partner,

 

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director, officer, employee, Affiliate, customer, supplier, creditor or
independent contractor of, or any Person that has received any benefit in any
form whatever from (other than in such Person’s capacity as a ratepayer or
customer of Consumers in the ordinary course of business), or any Person that
has provided any service in any form whatever to, such beneficial owner or any
of such beneficial owner’s Affiliates, or (c) a member of the immediate family
of any person described above; provided that the indirect or beneficial
ownership of stock 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; (ii) has prior experience as an
independent director or independent manager for a corporation or limited
liability company whose charter documents required the unanimous consent of all
independent directors or independent managers, as applicable, thereof before
such corporation or limited liability company could consent to the institution
of bankruptcy or insolvency proceedings against it or could file a petition
seeking relief under any applicable federal or state law relating to bankruptcy
and (iii) has at least three years of employment experience with one or more
entities that provide, in the ordinary course of their respective businesses,
advisory, management or placement services to issuers of securitization or
structured finance instruments, agreements or securities. For purposes of this
definition, “major creditor” shall mean a natural person or business entity to
which Seller, Consumers or any of their Affiliates has outstanding indebtedness
for borrowed money or credit on open account in a sum sufficiently large as
would reasonably be expected to influence the judgment of the proposed
Independent Manager adversely to the interests of Seller when the interests of
that Person are adverse to those of Seller.
     “Liquidity Termination Date” means February 11, 2011.
     “Receivable” means all indebtedness and other obligations owed to Seller,
CRF I or Originator (at the time it arises, and before giving effect to any
transfer or conveyance under the applicable Sale Agreement or hereunder) or in
which Seller, CRF I or Originator has a security interest or other interest,
including, without limitation, any indebtedness, obligation or interest
constituting an account, chattel paper, instrument or general intangible,
arising in connection with the sale of goods, electricity or gas or the
rendering of services by Originator, and which is identified on the books and
records of the Originator or Seller (including its accounting system) with the
account code “Account 1460000 Customer Receivables” or “Account 1460201 — A/R
Other” (or, in each case, any subsequent or replacement account code used to
identify similar indebtedness or other similar obligations owed to Seller or
Originator), and further includes, without limitation, the obligation to pay any
Finance Charges with respect thereto. Indebtedness and other rights and
obligations arising from any one transaction, including, without limitation,
indebtedness and other rights and obligations represented by an individual
invoice, shall constitute a Receivable separate from a Receivable consisting of
the indebtedness and other rights and

 

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obligations arising from any other transaction; provided, that any indebtedness,
rights or obligations referred to in the immediately preceding sentence shall be
a Receivable regardless of whether the account debtor, Seller, CRF I or
Originator treats such indebtedness, rights or obligations as a separate payment
obligation. Notwithstanding the foregoing, “Receivable” does not include
(i) Transferred Securitization Property or (ii) the books and records relating
solely to the Transferred Securitization Property; provided that the
determination of what constitutes collections of the Securitization Charges in
respect of Transferred Securitization Property shall be made in accordance with
the allocation methodology specified in Annex 2 to the Servicing Agreement.
     (j) Exhibit I to the Purchase Agreement is hereby amended to delete the
percentage “10%” in clause (i) of the definition of “Dilution Percentage” and
replace it with “6%”.
     (k) Exhibit IV to the Purchase Agreement is hereby replaced in its entirety
with Exhibit IV attached hereto.
     SECTION 2. Representations and Warranties. Each of the Seller and the
Servicer hereby represents and warrants to each of the other parties hereto, as
to itself that:
     (a) it has all necessary corporate or company power and authority to
execute and deliver this Amendment and to perform its obligations under the
Purchase Agreement as amended hereby, the execution and delivery of this
Amendment and the performance of its obligations under the Purchase Agreement as
amended hereby has been duly authorized by all necessary corporate or company
action on its part and this Amendment constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms; and
     (b) on the date hereof, before and after giving effect to this Amendment,
(i) other than as waived pursuant to this Amendment, no Amortization Event or
Potential Amortization Event has occurred and is continuing and (ii) the
aggregate Purchaser Interests do not exceed the Applicable Maximum Purchaser
Interest.
     SECTION 3. Conditions Precedent. This Amendment shall become effective on
the first Business Day (the “Effective Date”) on which (i) the Administrative
Agent or its counsel has received four (4) counterpart signature pages to each
of this Amendment and the Fee Letter of even date herewith, in each case,
executed by each of the parties hereto and (ii) the Administrative Agent has
received the Amendment Fee (as such term is defined in the Fee Letter).
     SECTION 4. Reference to and Effect on the Transaction Documents.
     (a) Upon the effectiveness of this Amendment, (i) each reference in the
Purchase Agreement to “this Receivables Purchase Agreement”, “this Agreement”,
“hereunder”, “hereof”, “herein” or words of like import shall mean and be a
reference to

 

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the Purchase Agreement as amended or otherwise modified hereby, and (ii) each
reference to the Purchase Agreement in any other Transaction Document or any
other document, instrument or agreement executed and/or delivered in connection
therewith, shall mean and be a reference to the Purchase Agreement as amended or
otherwise modified hereby.
     (b) Except as specifically amended, terminated or otherwise modified above,
the terms and conditions of the Purchase Agreement, of all other Transaction
Documents and any other documents, instruments and agreements executed and/or
delivered in connection therewith, shall remain in full force and effect and are
hereby ratified and confirmed.
     (c) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Administrative Agent or
any Purchaser under the Purchase Agreement or any other Transaction Document or
any other document, instrument or agreement executed in connection therewith,
nor constitute a waiver of any provision contained therein.
     SECTION 5. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument. Delivery of an executed counterpart of a signature page to this
Amendment by facsimile or other electronic format shall be effective as delivery
of a manually executed counterpart of this Amendment.
     SECTION 6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401
OF THE GENERAL OBLIGATIONS LAW OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO THE
LAW OF CONFLICTS) OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
     SECTION 7. Headings. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
     SECTION 8. Fees and Expenses. Seller hereby confirms its agreement to pay
on demand all reasonable costs and expenses of the Administrative Agent or
Purchasers in connection with the preparation, execution and delivery of this
Amendment and any of the other instruments, documents and agreements to be
executed and/or delivered in connection herewith, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel to the Administrative
Agent or Purchasers with respect thereto.
[Remainder of Page Deliberately Left Blank]

 

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers as of the date first above
written.

            CONSUMERS RECEIVABLES FUNDING II, LLC
      By:   /s/ Laura L. Mountcastle         Name:   Laura L. Mountcastle       
Title:   President, Chief Executive Officer, Chief Financial Officer and
Treasurer        CONSUMERS ENERGY COMPANY, as Servicer
      By:   /s/ Laura L. Mountcastle         Name:   Laura L. Mountcastle       
Title:   Vice President and Treasurer   

Signature Page to Amendment No. 18

 

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            FALCON ASSET SECURITIZATION COMPANY LLC
      By:   JPMorgan Chase Bank, N.A., its attorney-in-fact             By:  
/s/ Patrick Menichillo         Name:   Patrick Menichillo        Title:   Vice
President        JPMORGAN CHASE BANK, N.A., as a Financial
Institution and Administrative Agent
      By:   /s/ Patrick Menichillo         Name:   Patrick Menichillo       
Title:   Vice President   

Signature Page to Amendment No. 18

 

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EXHIBIT IV
NAMES OF COLLECTION BANKS; COLLECTION ACCOUNTS; LOCK-BOXES
JP Morgan Chase Bank
717 Travis, TX2-S084
Houston, TX 77002
Contact: Nina Lacy
Phone: 713-216-2227
Collection Account: 1242263
Comerica Bank
500 Woodward Avenue, 9th Floor, MC3268
Detroit, MI 48226
Contact: Stacie McVeigh
Phone: 313-222-4515
Collection Account: 1076119914
Bank of America
540 W Madison St, Suite 1622
Chicago, IL 60661
Contact: Gabrielle Serrao
Phone: 800-699-7188 ext. 49452
Specified Accounts: 4825285820
Collection Account: 1054516142
Wachovia Bank
10401 Deerwood Park Blvd — FL0117
South Building, 3rd Floor
Jacksonville, FL 32256
Contact: Carol Grant
Phone: 800-590-7868 team 662 ext. 4
Collection Account: 2000032635920
Lock-Box Zip Code
Lansing, MI 48937-0001