RECEIVABLES SALE
AGREEMENT
CONSUMERS ENERGY COMPANY,
as Originator
CONSUMERS RECEIVABLES FUNDING II,
LLC,
as Buyer
RECEIVABLES SALE
AGREEMENT
THIS
RECEIVABLES SALE AGREEMENT, dated as of May 22, 2003, is by
and between CONSUMERS ENERGY COMPANY, a Michigan corporation
(“ Originator ”), and CONSUMERS RECEIVABLES
FUNDING II, LLC, a Delaware limited liability company (“
Buyer ”). Unless defined elsewhere herein, capitalized
terms used in this Agreement shall have the meanings assigned to
such terms in Exhibit I .
Originator
now owns, and from time to time hereafter will own, Receivables.
Originator wishes to sell and assign to Buyer, and Buyer wishes to
purchase from Originator, all of Originator’s right, title
and interest in and to such Receivables, together with the Related
Security and Collections with respect thereto.
Originator
and Buyer intend the transactions contemplated hereby to be true
sales of the Receivables from Originator to Buyer, providing Buyer
with the full benefits of ownership of the Receivables, and
Originator and Buyer do not intend these transactions to be, or for
any purpose to be characterized as, loans from Buyer to
Originator.
Buyer
will sell undivided interests in the Receivables and in the
associated Related Security and Collections pursuant to that
certain Receivables Purchase Agreement dated as of May 22,
2003 (as the same may from time to time hereafter be amended,
supplemented, restated or otherwise modified, the “
Purchase Agreement ”) among Buyer, Originator, as
Servicer, Falcon Asset Securitization Corporation (“
Conduit ”), the financial institutions from time to
time party thereto (the “ Financial Institutions
”) and Bank One, NA (Main Office Chicago) or any successor
agent appointed pursuant to the terms of the Purchase Agreement, as
administrative agent for the Conduit and such Financial
Institutions (in such capacity, the “ Administrative
Agent ”).
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1.1
Purchases of Receivables .
(a) Effective
on the date hereof, in consideration for the Purchase Price and
upon the terms and subject to the conditions set forth herein,
Originator does hereby sell, assign, transfer, set-over and
otherwise convey to Buyer, without recourse (except to the
extent
expressly
provided herein), and Buyer does hereby purchase from Originator,
all of Originator’s right, title and interest in and to all
Receivables existing as of the close of business on the Business
Day immediately prior to the date hereof and all Receivables
thereafter arising through and including the Termination Date,
together, in each case, with all Related Security relating thereto
and all Collections thereof. In accordance with the preceding
sentence, on the date hereof Buyer shall acquire all of
Originator’s right, title and interest in and to all
Receivables existing as of the close of business on the Business
Day immediately prior to the date hereof and thereafter arising
through and including the Termination Date, together with all
Related Security relating thereto and all Collections thereof.
Buyer shall be obligated to pay the Purchase Price for each
Receivable, its Related Security and Collections in accordance with
Section 1.2 . In connection with the payment of the
Purchase Price for any Receivables purchased hereunder, Buyer may
request that Originator deliver, and Originator shall deliver, such
approvals, opinions, information, reports or documents as Buyer may
reasonably request.
(b) It
is the intention of the parties hereto that each Purchase of
Receivables made hereunder shall constitute a sale of “
accounts ” (as such term is used in Article 9 of
the UCC), which sale is absolute and irrevocable and provides Buyer
with the full benefits of ownership of the Receivables. Except for
the Purchase Price Credits owed pursuant to Section 1.3
, the sales of Receivables hereunder are made without recourse to
Originator; provided , however , that
(i) Originator shall be liable to Buyer for all
representations, warranties and covenants made by Originator
pursuant to the terms of the Transaction Documents to which
Originator is a party, and (ii) such sale does not constitute
and is not intended to result in an assumption by Buyer or any
assignee thereof of any obligation of Originator or any other
Person arising in connection with the Receivables, the related
Contracts and/or other Related Security or any other obligations of
Originator. In view of the intention of the parties hereto that the
Purchases of Receivables made hereunder shall constitute sales of
such Receivables rather than loans secured thereby, Originator
agrees to note in its financial statements that its Receivables
have been sold to Buyer. Upon the request of Buyer or the
Administrative Agent (as Buyer’s assignee), Originator will
execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate to
perfect and maintain the perfection of Buyer’s ownership
interest in the Receivables and the Related Security and
Collections with respect thereto, or as Buyer or the Administrative
Agent (as Buyer’s assignee) may reasonably
request.
Section 1.2
Payment for the Purchases .
(a) The
Purchase Price for the Purchase of Receivables in existence on the
close of business on the Business Day immediately preceding the
date hereof (the “ Initial Cutoff Date ”) shall
be payable in full by Buyer to Originator on the date hereof, and
shall be paid to Originator in the following manner:
(i) by delivery of
immediately available funds, to the extent of funds made available
to Buyer in connection with its subsequent sale of an interest in
such Receivables to the Purchasers under the Purchase Agreement;
provided that a portion of such funds shall be offset by
amounts owed by Originator to Buyer on account of the issuance of
equity having a total value of not less than the Required Capital
Amount, and
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(ii) the balance,
by delivery of the proceeds of a subordinated revolving loan from
Originator to Buyer (a “ Subordinated Loan ”) in
an amount not to exceed the least of (A) the remaining unpaid
portion of such Purchase Price, (B) the maximum Subordinated
Loan that could be borrowed without rendering Buyer’s Net
Worth less than the Required Capital Amount and (C) the
maximum Subordinated Loan that could be borrowed without rendering
the Net Value less than the aggregate outstanding principal balance
of the Subordinated Loans (including the Subordinated Loan proposed
to be made on such date).
Each Receivable
coming into existence after the Initial Cutoff Date shall be sold
to the Buyer on the Business Day occurring immediately after the
day such Receivable is originated and the Purchase Price for such
Receivable shall be due and owing in full by Buyer to Originator or
its designee on such Business Day (except that Buyer may, with
respect to any such Purchase Price, offset against such Purchase
Price any amounts owed by Originator to Buyer hereunder and which
have become due but remain unpaid) and shall be paid to Originator
in the manner provided in the following paragraphs (b),
(c) and (d).
(b) With
respect to any Receivables sold hereunder after the date hereof, on
the first Business Day after such Receivable is originated, such
Receivable shall be sold to Buyer and on such date of Purchase,
Buyer shall pay the Purchase Price therefor in accordance with
Section 1.2(d) and in the following manner:
first , by
delivery of immediately available funds, to the extent of funds
available to Buyer from its subsequent sale of an interest in the
Receivables to the Administrative Agent for the benefit of the
Purchasers under the Purchase Agreement or other cash on
hand;
second ,
by delivery of the proceeds of a Subordinated Loan, provided that
the making of any such Subordinated Loan shall be subject to the
provisions set forth in Section 1.2(a)(ii) ;
and
third ,
unless Originator has declared the Termination Date to have
occurred pursuant to Section 5.2 , by accepting a
contribution to its capital in an amount equal to the remaining
unpaid balance of such Purchase Price.
Subject to the
limitations set forth in Section 1.2(a)(ii) ,
Originator irrevocably agrees to advance each Subordinated Loan
requested by Buyer on or prior to the Termination Date. The
Subordinated Loans shall be evidenced by, and shall be payable in
accordance with the terms and provisions of the Subordinated Note
and shall be payable solely from funds which Buyer is not required
under the Purchase Agreement to set aside for the benefit of, or
otherwise pay over to, the Administrative Agent or the Purchasers.
Originator is hereby authorized by Buyer to endorse on the schedule
attached to the Subordinated Note an appropriate notation
evidencing the date and amount of each advance thereunder, as well
as the date of each payment with respect thereto, provided that the
failure to make such notation shall not affect any obligation of
the Buyer thereunder.
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(c) From
and after the Termination Date, Originator shall not be obligated
to (but may, at its option) sell Receivables to Buyer unless
Originator reasonably determines that the Purchase Price therefor
will be satisfied with funds available to Buyer from sales of
interests in the Receivables pursuant to the Purchase Agreement,
Collections, proceeds of Subordinated Loans, other cash on hand or
otherwise.
(d) Although
the Purchase Price for each Receivable coming into existence after
the Initial Cutoff Date shall be paid in full by Buyer to
Originator on the date such Receivable is purchased, a precise
reconciliation of the Purchase Price between Buyer and Originator
shall be effected on a monthly basis on Settlement Dates with
respect to all Receivables sold during the same Calculation Period
most recently ended prior to such Settlement Date and based on the
information contained in the Monthly Report delivered by the
Servicer pursuant to Article VIII of the Purchase Agreement
for such Calculation Period. Although such reconciliation shall be
effected on Settlement Dates, increases or decreases in the amount
owing under the Subordinated Note made pursuant to Section
1.2(b) and any contribution of capital by Originator to Buyer
made pursuant to Section 1.2(b) shall be deemed to have
occurred and shall be effective as of the date that the Purchase
Price is paid. On each Settlement Date, Originator shall determine
the net increase or the net reduction in the outstanding principal
amount of its Subordinated Note occuring during the immediately
preceding Calculation Period and shall account for such net
increase or net reduction in its books and records. Originator
hereby agrees that within three (3) Business Days after Buyer
so requests, Originator will provide Buyer with a current report of
daily sales giving rise to Receivables purchased hereunder and a
current daily report of Collections received.
(e) Each
contribution of a Receivable by Originator to Buyer shall be deemed
to be a Purchase of such Receivable by Buyer for all purposes of
this Agreement. Buyer hereby acknowledges that Originator shall
have no obligations to make further capital contributions to Buyer,
in respect of Originator’s equity interest in Buyer or
otherwise, in order to provide funds to pay the Purchase Price to
Originator under this Agreement or for any other reason.
Section 1.3
Purchase Price Credit Adjustments .
(a) If
on any day the Outstanding Balance of a Receivable is:
(i) reduced as a
result of any defective or rejected goods or services, any discount
or any adjustment or otherwise by Originator (other than cash
Collections on account of the Receivables),
(ii) reduced or
canceled as a result of a setoff in respect of any claim by any
Person (whether such claim arises out of the same or a related
transaction or an unrelated transaction), or
(b) if
any of the representations and warranties set forth in
Article II were not true with respect to any Receivable
on the date of its Purchase hereunder,
then, in such
event, Buyer shall be entitled to a credit (each, a “
Purchase Price Credit ”) against the Purchase Price
otherwise payable hereunder in an amount equal to the amount of
such reduction or cancellation in the case of clause (a) or
the Outstanding Balance of such Receivable
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in the case of
clause (b). If such Purchase Price Credit exceeds the Purchase
Price for the Receivables sold on such day, then Originator shall
pay the remaining amount of such Purchase Price Credit in cash
within five (5) Business Days thereafter, provided that
if the Termination Date has not occurred, Originator shall be
allowed to deduct the remaining amount of such Purchase Price
Credit from any indebtedness owed to it under the Subordinated Note
to the extent permitted thereunder.
Section 1.4
Payments and Computations, Etc . All amounts to be paid or
deposited by Buyer hereunder shall be paid or deposited in
accordance with the terms hereof on the day when due in immediately
available funds to the account of Originator designated from time
to time by Originator or as otherwise directed by Originator. In
the event that any payment owed by any Person hereunder becomes due
on a day that is not a Business Day, then such payment shall be
made on the next succeeding Business Day. If any Person fails to
pay any amount hereunder when due, such Person agrees to pay, on
demand, the Default Fee in respect thereof until paid in full;
provided , however , that such Default Fee shall not
at any time exceed the maximum rate permitted by applicable law.
All computations of interest payable hereunder shall be made on the
basis of a year of 360 days for the actual number of days
(including the first but excluding the last day)
elapsed.
Section 1.5
Transfer of Records .
(a) In
connection with the Purchases of Receivables hereunder, Originator
hereby sells, transfers, assigns and otherwise conveys to Buyer all
of Originator’s right and title to and interest in the
Records relating to all Receivables sold hereunder, without the
need for any further documentation in connection with the
Purchases. In connection with such transfer, Originator hereby
grants to each of Buyer, the Administrative Agent and the Servicer
an irrevocable, non-exclusive license to use, without royalty or
payment of any kind, all software used by Originator to account for
the Receivables, to the extent necessary to administer the
Receivables, whether such software is owned by Originator or is
owned by others and used by Originator under license agreements
with respect thereto, provided that should the consent of
any licensor of such software be required for the grant of the
license described herein to be effective, Originator hereby agrees
that upon the request of Buyer (or the Administrative Agent as
Buyer’s assignee), Originator will use its reasonable efforts
to obtain the consent of such third-party licensor. The license
granted hereby shall be irrevocable, and shall terminate on the
date this Agreement terminates in accordance with its
terms.
(b) Originator
(i) shall take such action reasonably requested by Buyer
and/or the Administrative Agent (as Buyer’s assignee), from
time to time hereafter, that may be necessary or appropriate to
ensure that Buyer and its assigns under the Purchase Agreement have
an enforceable ownership interest in the Records relating to the
Receivables purchased from Originator hereunder, and
(ii) shall use its reasonable efforts to ensure that Buyer,
the Administrative Agent and the Servicer each has an enforceable
right (whether by license or sublicense or otherwise) to use all of
the computer software used to account for the Receivables and/or to
recreate such Records.
Section 1.6
Characterization .
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(a) If,
notwithstanding the intention of the parties expressed in
Section 1.1(b) , any sale or contribution by Originator
to Buyer of Receivables hereunder shall be characterized as a
secured loan and not a sale or such sale shall for any reason be
ineffective or unenforceable, then this Agreement shall be deemed
to constitute a security agreement under the UCC and other
applicable law. For this purpose and without being in derogation of
the parties’ intention that the sale of Receivables hereunder
shall constitute a true sale thereof, Originator hereby grants to
Buyer a valid and perfected security interest in all of
Originator’s right, title and interest, now owned or
hereafter acquired, in, to and under all Receivables now existing
and hereafter arising, and in all Collections, Related Security and
Records with respect thereto, each Lock-Box and Collection Account,
all other rights and payments relating to the Receivables and all
proceeds of the foregoing to secure the prompt and complete payment
of a loan deemed to have been made in an amount equal to the
Purchase Price of the Receivables originated by Originator together
with all other obligations of Originator hereunder, which security
interest shall be prior to all other Adverse Claims thereto. After
the occurrence of a Termination Event, Buyer and its assigns shall
have, in addition to the rights and remedies which they may have
under this Agreement, all other rights and remedies provided to a
secured creditor after default under the UCC and other applicable
law, which rights and remedies shall be cumulative. Originator
hereby authorizes the Buyer (or its assigns), within the meaning of
Section 9-509 of any applicable enactment of the UCC, as
secured party, to file without the signature of the debtor, the UCC
financing statements contemplated hereby.
(b) Originator
acknowledges that Buyer, pursuant to the Purchase Agreement, shall
assign to the Administrative Agent, for the benefit of the
Administrative Agent and the Purchasers thereunder, all of its
rights, remedies, powers and privileges under this Agreement and
that the Administrative Agent may further assign such rights,
remedies, powers and privileges to the extent permitted by the
Purchase Agreement. The Originator agrees that the Administrative
Agent, as the assignee of the Buyer, shall, subject to the terms of
the Purchase Agreement, have the right to enforce this Agreement
and to exercise directly all of Buyer’s rights and remedies
under this Agreement (including, without limitation, the right to
give or withhold any consents or approvals of Buyer to be given or
withheld hereunder, and , in any case without regard to whether
specific reference is made to Buyer’s assigns in the
provisions of this Agreement which set forth such rights and
remedies) and Originator agrees to cooperate fully with the
Administrative Agent and the Purchasers in the exercise of such
rights and remedies. Originator further agrees to give to the
Administrative Agent copies of all notices it is required to give
to Buyer hereunder.
REPRESENTATIONS AND
WARRANTIES
Section 2.1
Representations and Warranties of Originator . Originator
hereby represents and warrants to Buyer on the date hereof and on
the date of each Purchase hereunder that:
(a)
Corporate Existence and Power . Originator is a corporation
duly organized, validly existing and in good standing under the
laws of its state of incorporation.
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(b)
Power and Authority; Due Authorization Execution and
Delivery . The execution and delivery by Originator of this
Agreement and each other Transaction Document to which it is a
party, and the performance of its obligations hereunder and
thereunder and, Originator’s use of the proceeds of the
Purchases made hereunder, are within its corporate powers and
authority and have been duly authorized by all necessary corporate
action on its part.
(c)
No Conflict . The execution and delivery by Originator of
this Agreement and each other Transaction Document to which it is a
party, and the performance of its obligations hereunder and
thereunder do not contravene or violate (i) its certificate or
articles of incorporation or by-laws (ii) any law, rule or
regulation applicable to it, including, without limitation, the
Public Utility Holding Company Act of 1935, as amended,
(iii) any restrictions under any material agreement, contract
or instrument to which it is a party or by which it or any of its
property is bound, or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property,
and do not result in the creation or imposition of any Adverse
Claim on assets of Originator or its Subsidiaries (except as
created hereunder); and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(d)
Governmental Authorization . Other than (i) the filing
of the financing statements required hereunder or (ii) such
authorizations, approvals, notices, filings or other actions as
have been obtained, made or taken prior to the date hereof, no
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is
required for the due execution and delivery by Originator of this
Agreement and each other Transaction Document to which it is a
party and the performance of its obligations hereunder and
thereunder.
(e)
Actions, Suits . Except (i) to the extent described in
Originator’s Annual Report on Form 10-K for the year ended
December 31, 2002, as filed with the SEC, and (ii) such
other similar actions, suits and proceedings predicated on the
occurrence of the same events giving rise to any actions, suits and
proceedings described in the Annual Reports referred to in the
foregoing clause (i), there are no actions, suits or proceedings
pending, or to the best of Originator’s knowledge,
threatened, against or affecting Originator, or any of its
properties, in or before any court, arbitrator or other body, that
(i) relate to the transactions under this Agreement or (ii)
could reasonably be expected to have a Material Adverse Effect.
Originator is not in default with respect to any order of any
court, arbitrator or governmental body.
(f)
Binding Effect . This Agreement and each other Transaction
Document to which Originator is a party constitute the legal, valid
and binding obligations of Originator enforceable against
Originator in accordance with their respective terms, except as
such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or
limiting creditors’ rights generally and by general
principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law).
(g)
Accuracy of Information . All information heretofore
furnished by Originator or any of its Affiliates to Buyer (or its
assigns) for purposes of or in connection with this Agreement, any
of the other Transaction Documents or any transaction contemplated
hereby or thereby is, and all such information hereafter furnished
by Originator or any of its Affiliates to Buyer (or its assigns)
will be, true and accurate in every material respect on the date
such
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information is
stated or certified and does not and will not contain any material
misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not materially
misleading.
(h)
Use of Proceeds . No proceeds of the Purchases hereunder
will be used (i) for a purpose that violates, or would be
inconsistent with, Regulation T, U or X promulgated by the
Board of Governors of the Federal Reserve System from time to time
or (ii) to acquire any security in any transaction which is
subject to Section 12, 13 or 14 of the Securities Exchange Act
of 1934, as amended.
(i)
Good Title . Immediately prior to the time each Receivable
is purchased, Originator shall be the legal and beneficial owner of
each such Receivable and Related Security with respect thereto,
free and clear of any Adverse Claim, except as created by the
Transaction Documents.
(j)
Perfection . This Agreement, together with the filing of the
financing statements contemplated hereby, is effective to, and
shall, upon each Purchase hereunder, transfer to Buyer (and Buyer
shall acquire from Originator) (i) legal and equitable title
to, with the right to sell and encumber each Receivable, whether
now existing or hereafter arising, together with the Collections
with respect thereto, and (ii) all of Originator’s
right, title and interest in the Related Security associated with
each such Receivable, in each case, free and clear of any Adverse
Claim, except as created by the Transaction Documents. There have
been duly filed all financing statements or other similar
instruments or documents necessary under the UCC (or any comparable
law) of all appropriate jurisdictions to perfect Buyer’s
ownership interest in the Receivables, the Related Security and the
Collections.
(k)
Places of Business and Locations of Records . The principal
places of business and chief executive office of Originator and the
offices where it keeps all of its Records are located at the
address(es) listed on Exhibit II or such other
locations of which Buyer has been notified in accordance with
Section 4.2(a) in jurisdictions where all action
required by Section 4.2(a) has been taken and
completed. Originator is a corporation incorporated solely in the
State of Michigan. Originator’s Michigan organizational
identification number and Federal Employer Identification Number
are correctly set forth on Exhibit II .
(l)
Collections . The conditions and requirements set forth in
Section 4.1(i) have at all times been satisfied and
duly performed. The names and addresses of all Collection Banks,
together with the account numbers of the Collection Accounts of
Originator at each Collection Bank and the special zip code number
of each Lock-Box, are listed on Exhibit III .
Originator has not granted any Person, other than the Buyer (or its
assigns) as contemplated by this Agreement and the Intercreditor
Agreement, dominion and control of any Lock-Box or Collection
Account, or the right to take dominion and control of any such
Lock-Box or Collection Account at a future time or upon the
occurrence of a future event.
(m)
Material Adverse Effect . The Originator represents and
warrants that since December 31, 2002, no event has occurred
that would have a material adverse effect on (A) the financial
condition or operations of Originator and its Subsidiaries, taken
as a whole, (B) the
8
ability of
Originator to perform its obligations under the Transaction
Documents, or (C) the collectibility of the Receivables
generally or any material portion of the Receivable.
(n)
Names . Originator has not used any corporate names, trade
names or assumed names other than the name in which it has executed
this Agreement and as listed on Exhibit II .
(o)
Ownership of Buyer . Originator owns, directly or
indirectly, 100% of the issued and outstanding membership interests
of Buyer, free and clear of any Adverse Claim. There are no
options, warrants or other rights to acquire securities of
Buyer.
(p)
Public Utility Holding Company Act; Investment Company Act .
Originator is exempt from the registration requirements of the
Public Utility Holding Company Act of 1935, as amended, or any
successor statute. Originator is not an “ investment
company ” within the meaning of the Investment Company
Act of 1940, as amended, or any successor statute.
(q)
Compliance with Law . Originator has complied in all
respects with all applicable laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be
subject, except where the failure to so comply could not reasonably
be expected to have a Material Adverse Effect. Each Receivable,
together with the Contract related thereto, does not contravene any
laws, rules or regulations applicable thereto ( including ,
without limitation , laws, rules and regulations relating to
truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy),
and no part of such Contract is in violation of any such law, rule
or regulation.
(r)
Compliance with Credit and Collection Policy . Originator
has complied in all material respects with the Credit and
Collection Policy with regard to each Receivable and the related
Contract, and has not made any change to such Credit and Collection
Policy, other than as permitted under Section 4.2 and
in compliance with the notification requirements of
Section 4.1(a)(vii) .
(s)
Payments to Originator . With respect to each Receivable
transferred to Buyer hereunder, the Purchase Price received by
Originator constitutes reasonably equivalent value in consideration
therefor and such transfer was not made for or on account of an
antecedent debt. No transfer by Originator of any Receivable
hereunder is or may be voidable under any section of the Bankruptcy
Reform Act of 1978 (11 U.S.C. §§ 101 et seq .), as
amended.
(t)
Enforceability of Contracts . Each Contract with respect to
each Receivable is effective to create, and has created, a legal,
valid and binding obligation of the related Obligor to pay the
Outstanding Balance of the Receivable created thereunder and any
accrued interest thereon, enforceable against the Obligor in
accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or
other similar laws relating to or limiting creditors’ rights
generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at
law).
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(u)
Eligible Receivables; Nature of Receivables . Each
Receivable included in the Net Receivables Balance as an Eligible
Receivable on the date of Purchase hereunder was an Eligible
Receivable on such date.
(v)
Accounting . In the case of Originator, Originator is
treating the conveyance of the ownership interest in the
Receivables and the Collections as a sale for the purposes of
GAAP.
(w)
Bonds . All debt evidenced or secured by the bonds issued
pursuant to and secured by any of the Supplement Indentures First
through Sixty-Seventh, Seventy-Sixth, Seventy-Eighth, Eighty-First,
Eighty-Second, and Eighty-Fourth through Eighty-Sixth, such
Supplement Indentures having been made and entered into by and
between Originator (formerly Consumers Power Company) and JPMorgan
Chase Bank (as successor trustee to City Bank Farmers Trust
Company, the “Trustee”), as Trustee under that certain
Indenture (as the same has been amended, restated, supplemented or
otherwise modified from time to time, the “1945
Indenture”) dated as of September 1, 1945 between
Consumers Power Company and City Bank Farmers Trust Company, has
been satisfied in full and Originator has been released from all
liability therefor.
Section 3.1
Conditions Precedent to Initial Purchase . The initial
Purchase under this Agreement is subject to the conditions
precedent that (a) Buyer shall have received on or before the
date of such Purchase those documents listed on
Schedule A and (b) all of the conditions to the
initial purchase under the Purchase Agreement shall have been
satisfied or waived in accordance with the terms
thereof.
Section 3.2
Conditions Precedent to Subsequent Payments . Buyer’s
obligation to pay for Receivables coming into existence after the
Initial Cutoff Date shall be subject to the further conditions
precedent that: (a) the Termination Date shall not have
occurred; and (b) Buyer (or its assigns) shall have received
such other approvals, opinions or documents as it may reasonably
request if such Person reasonably believes there has been a change
in law or circumstance that affects the status or characteristics
of the Receivables, Related Security or Collections, or the
Buyer’ s (and its assignees’) first priority perfected
security interest in the Receivables, Related Security and
Collections. Originator represents and warrants that the
representations and warranties set forth in Article II
are true and correct on and as of the date each Receivable came
into existence as though made on and as of such date.
Section 4.1
Affirmative Covenants of Originator . Until the date on
which this Agreement terminates in accordance with its terms,
Originator hereby covenants as set forth below:
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(a)
Financial Reporting . Originator will maintain, for itself
and each of its Subsidiaries, a system of accounting established
and administered in accordance with GAAP, and furnish to Buyer (and
its assigns):
(i) Annual
Reporting . Within 120 days after the close of each of
Originator’s fiscal years, a copy of the Annual Report on
Form 10-K (or any successor form) for Originator for such year,
including therein the consolidated balance sheet of Originator and
its consolidated Subsidiaries as at the end of such year and the
consolidated statements of income, cash flows and common
stockholder’s equity of Originator and its consolidated
Subsidiaries as at the end of and for such year, or statements
providing substantially similar information, in each case certified
by independent public accountants of recognized national standing
selected by Originator (and not objected to by the Administrative
Agent), together with a certificate of such accounting firm
addressed to the Administrative Agent stating that, in the course
of its examination of the consolidated financial statements of
Originator and its consolidated Subsidiaries, which examination was
conducted by such accounting firm in accordance with GAAP,
(1) such accounting firm has obtained no knowledge that a
Termination Event, insofar as such Termination Event related to
accounting or financial matters, has occurred and is continuing, or
if, in the opinion of such accounting firm, such a Termination
Event has occurred and is continuing, a statement as to the nature
thereof, and (2) such accounting firm has examined a
certificate prepared by Originator setting forth the computations
made by Originator in determining, as of the end of such fiscal
year, the ratios specified in Section 9.1(k) of the Purchase
Agreement, which certificate shall be attached to the certificate
of such accounting firm, and such accounting firm confirms that
such computations accurately reflect such ratios.
(ii) Quarterly
Reporting . Within 60 days after the close of the first
three (3) quarterly periods of each of its fiscal years,
balance sheets of Originator and its consolidated Subsidiaries as
at the close of each such period and statements of income and
retained earnings and a statement of cash flows for Originator and
its consolidated Subsidiaries for the period from the beginning of
such fiscal year to the end of such quarter, all certified by its
chief financial officer.
(iii)
Compliance Certificate . Together with the financial
statements required hereunder, a compliance certificate in
substantially the form of Exhibit IV signed by
Originator’s Responsible Officer and dated the date of such
annual financial statement or such quarterly financial statement,
as the case may be.
(iv)
Shareholders Statements and Reports . Promptly upon the
furnishing thereof to the shareholders of Originator copies of all
financial statements, reports and proxy statements (other than
those which relate solely to employee benefit plans) so furnished
which Originator files with the SEC.
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(v) Bond
Servicing Reports; SEC Filings . Promptly upon the execution,
delivery or filing thereof, (i) copies of all reports,
statements, notices and certificates delivered or received by the
Originator (in its capacity as “Servicer” under the
Servicing Agreement or otherwise) pursuant to Sections 3.05,
3.06, 3.07, 6.02, Annex 1 and Annex 2 of the Servicing Agreement
(excluding any “Daily Servicer’s Report”
delivered pursuant to Annex 2 of the Servicing Agreement), (ii)
copies of all reports and notices delivered to the holders of the
Securitization Bonds, (iii) copies of all amendments, waivers
or other modifications to any of the Basic Documents (as defined in
the Servicing Agreement), (iv) copies of all reports which the
Servicer sends to the holders of any of its securities or its
creditors generally and (v) copies of all registration
statements and annual, quarterly, monthly or other regular reports
which Originator or any of its Subsidiaries files with the
SEC.
(vi) Copies of
Notices . Promptly upon its receipt of any notice, request for
consent, financial statements, certification, report or other
communication under or in connection with any Transaction Document
from any Person other than Buyer, the Administrative Agent or
Conduit, copies of the same.
(vii) Change in
Credit and Collection Policy . At least thirty (30) days prior
to the effectiveness of any material change in or material
amendment to the Credit and Collection Policy, a copy of the Credit
and Collection Policy then in effect and a notice
(A) indicating such change or amendment, and (B) if such
proposed change or amendment be would reasonably likely to
adversely affect the collectibility of the Receivable or decrease
the credit quality of any newly created Receivables, requesting the
Buyer’s consent thereto, such consent not to be unreasonably
withheld.
(viii) Other
Information . Promptly, from time to time, such other
information, documents, records or reports relating to the
Receivables or the condition or operations, financial or otherwise,
of Originator as Buyer (and its assigns) may from time to time
reasonably request in order to protect the interests of Buyer (and
its assigns) under or as contemplated by this Agreement (including,
without limitation, any information relevant to the calculation and
allocations described in the Servicing Agreement and the
Intercreditor Agreement).
(b)
Notices . Originator will notify the Buyer (and its assigns)
in writing of any of the following promptly upon learning of the
occurrence thereof, describing the same and, if applicable, the
steps being taken with respect thereto:
(i) Termination
Events or Potential Termination Events . The occurrence of each
Termination Event and each Potential Termination Event, by a
statement of a Responsible Officer of Originator.
(ii) Judgment
and Proceedings . (A) The entry of any judgment or decree
against Originator if the aggregate amount of all judgments and
decrees then outstanding against Originator exceeds $25,000,000,
and (B) the institution
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of any
litigation, arbitration proceeding or governmental proceeding
against Originator which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse
Effect.
(iii) Material
Adverse Effect . The occurrence of any event or condition that
has, or could reasonably be expected to have, a Material Adverse
Effect.
(iv) Downgrade
of the Originator . Any downgrade in the rating of any
Indebtedness of the Originator by S&P or by Moody’s,
setting forth the Indebtedness affected and the nature of such
change.
(v) Servicer
Default . The occurrence of any event or circumstance which
constitutes a Servicer Default (as defined in the Servicing
Agreement) or which, with the giving of notice or the passage of
time, would become a Servicer Default.
(c)
Compliance with Laws and Preservation of Corporate Existence
. Originator will comply in all respects with all applicable laws,
rules, regulations, orders, writs, judgments, injunctions, decrees
or awards to which it may be subject, except where the failure to
so comply could not reasonably be expected to have a Material
Adverse Effect. Originator will preserve and maintain its corporate
existence, rights and franchises in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing as
a foreign corporation in each jurisdiction in which such
qualification is necessary in view of its businesses and operations
or the ownership of its properties, provided that Originator
shall not be required to preserve any such right or franchise or to
remain so qualified unless the failure to do so could reasonably be
expected to have a Material Adverse Effect.
(d)
Audits . Originator will furnish to Buyer (and its assigns)
from time to time such information with respect to it and the
Receivables as Buyer (or its assigns) may reasonably request.
Originator will, from time to time during regular business hours as
requested by Buyer (or its assigns), upon reasonable notice,
subject to any necessary approval of the Nuclear Regulatory
Commission, and at the sole cost of the Originator (within the
limitations of Section 7.1(d) of the Purchase Agreement),
permit Buyer (and its assigns) or their respective agents or
representatives, (i) to examine and make copies of and
abstracts from all Records in the possession or under the control
of Originator relating to the Receivables, the Related Security,
the Securitization Property and the Servicing Agreement, including,
without limitation, the related Contracts, and (ii) to visit
the offices and properties of Originator for the purpose of
examining such materials described in clause (i) above, and to
discuss matters relating to Originator’s financial condition
or the Receivables and the Related Security or Originator’s
performance under any of the Transaction Documents or
Originator’s performance under the Contracts and, in each
case, with any of the officers or employees of Originator having
knowledge of such matters.
(e)
Keeping and Marking of Records and Books .
(i) Originator
will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate
records
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evidencing
Receivables in the event of the destruction of the originals
thereof), and keep and maintain all documents, books, records and
other information reasonably necessary or advisable for the
collection of all Receivables and the performance of the
Originator’s duties under the Transaction Documents and the
Servicing Agreement (including, without limitation,
(A) records adequate to permit the immediate identification of
each new Receivable and all Collections of and adjustments to each
existing Receivable and (B) the performance of the
calculations and allocations required by the Intercreditor
Agreement and the Servicing Agreement). Originator will give Buyer
(and its assigns) notice of any material change in the
administrative and operating procedures referred to in the previous
sentence.
(ii) Originator
will (A) on or prior to the date hereof, mark its master data
processing records and other books and records relating to the
Receivables with a legend, acceptable to Buyer (and its assigns),
describing Buyer’s ownership interests in the Receivables and
further describing the Purchaser Interests of the Administrative
Agent (on behalf of the Purchasers) under the Purchase Agreement
and (B) at any time after the occurrence of a Termination
Event, upon the request of the Administrative Agent, deliver to
Buyer (or its assigns as directed by the Administrative Agent) all
Contracts (including, without limitation, all multiple originals of
any such Contract) relating to the Receivables, provided ,
that the requirements of this clause (B) shall apply solely to
any Contract consisting of or evidenced by an instrument or chattel
paper.
(f)
Compliance with Contracts and Credit and Collection Policy .
Originator will timely and fully (i) perform and comply with
all provisions, covenants and other promises required to be
observed by it under the Contracts related to the Receivables,
except where the failure to so perform or comply could not
reasonably be expected to have a Material Adverse Effect, and (ii)
comply in all respects with the Credit and Collection Policy in
regard to each Receivable and the related Contract, except where
the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
(g)
Ownership . Originator will take all necessary action to
establish and maintain, irrevocably in Buyer, (i) legal and
equitable title to the Receivables and the associated Collections
and (ii) all of Originator’s right, title and interest
in the Related Security associated with such Receivable, in each
case, free and clear of any Adverse Claims other than Adverse
Claims in favor of Buyer (and its assigns) ( including ,
without limitation , the filing of all financing statements
or other similar instruments or documents necessary under the UCC
(or any comparable law) of all appropriate jurisdictions to perfect
Buyer’s interest in such Receivables, Related Security and
Collections and such other action to perfect, protect or more fully
evidence the interest of Buyer as Buyer (or its assigns) may
reasonably request).
(h)
Purchasers’ Reliance . Originator acknowledges that
the Administrative Agent and the Purchasers are entering into the
transactions contemplated by the Purchase Agreement in reliance
upon Buyer’s identity as a legal entity that is separate from
Originator or any Affiliates thereof (each a “ CMS
Entity ”). Therefore, from and after the date of
execution and delivery of this Agreement, Originator will take all
reasonable steps including, without
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limitation, all
steps that Buyer or any assignee of Buyer may from time to time
reasonably request to maintain Buyer’s identity as a separate
legal entity and to make it manifest to third parties that Buyer is
an entity with assets and liabilities distinct from those of any
CMS Entity and not just a division of a CMS Entity. Without
limiting the generality of the foregoing and in addition to the
other covenants set forth herein, Originator (i) will not hold
itself out to third parties as liable for the debts of Buyer nor
purport to own the Receivables and other assets acquired by Buyer
and (ii) will take all other actions reasonably necessary on
its part to ensure that Buyer is at all times in compliance with
the covenants set forth in Section 7.1(i) of the
Purchase Agreement.
(i)
Collections . Originator will cause (i) all checks
representing Collections and Securitization Charge Collections to
be remitted to a Lock-Box , (ii) all other amounts in respect
of Collections and Securitization Charge Collections to be
deposited directly to a Collection Account, (iii) all proceeds
from all Lock-Boxes to be deposited by the Originator into a
Collection Account, (iv) all funds in each Collection Account
which is not a Specified Account to be remitted to a Specified
Account as soon as is reasonably practicable and (v) each
Specified Account to be subject at all times to a Collection
Account Agreement that is in full force and effect. In the event
any payments relating to Receivables are remitted directly to
Originator or any Affiliate of Originator, Originator will remit
(or will cause all such payments to be remitted) directly to a
Collection Bank for deposit into a Collection Account within two
(2) Business Days following receipt thereof, and, at all times
prior to such remittance, Originator will itself hold or, if
applicable, will cause such payments to be held in trust for the
exclusive benefit of Buyer and its assigns. Originator will
transfer exclusive ownership, dominion and control of each Lock-Box
and Collection Account to Buyer and will not grant the right to
take dominion and control of any Lock-Box or Collection Account at
a future time or upon the occurrence of a future event to any
Person, except to Buyer (and its assigns) as contemplated by this
Agreement and the Purchase Agreement and the Intercreditor
Agreement. Upon not less than thirty (30) days prior written
notice to the Buyer and the Originator, the Administrative Agent
may, in its reasonable discretion, designate additional Collection
Accounts as Specified Accounts and such Specified Accounts shall be
subject to the requirement set forth in clause (v) above. On
the date which is thirty (30) days after the first day of a
Level Three Enhancement Period, all Collection Accounts shall be
Specified Accounts and such Specified Accounts shall be subject to
the requirement set forth in clause (v) above.
(j)
Taxes . Originator will pay and discharge before the same
shall become delinquent, all taxes and governmental charges imposed
upon it or its property, provided that Originator shall not be
required to pay or discharge any such tax or governmental charge
(i) which is being contested by it in good faith and by proper
procedures or (ii) the non-payment of which will not have a
Material Adverse Effect.
(k)
Insurance . Originator will maintain in effect, as
Originator’s expense, such casualty and liability insurance
as Originator deems appropriate in its good faith business
judgment.
(l)
Performance under Servicing Agreement . Originator will
perform and comply with all obligations of the Originator as the
“Servicer” under the Servicing Agreement,
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including,
without limitation, its duties and responsibilities relating to the
calculations and allocations required by the Intercreditor
Agreement and the Servicing Agreement.
(m)
Financing Statements for Supplement Indentures . Originator
shall cause the collateral description in each UCC-1 Financing
Statement filed pursuant to any Supplement Indenture to expressly
exclude all Receivables, all Related Security, all Collections,
each Lock-Box, each Collection Account and the proceeds thereof in
a manner acceptable to the Administrative Agent and the
Buyer.
Section 4.2
Negative Covenants of Originator . Until the date on which
this Agreement terminates in accordance with its terms, Originator
hereby covenants that:
(a)
Name Change, Offices and Records . Originator will not
(i) make any change to its name (within the meaning of
Section 9-507(c) of any applicable enactment of the UCC),
identity, corporate structure or location of its books and records
unless, at least thirty (30) days prior to the effective date
of any such name change, change in corporate structure, or change
in location of its books and records, Originator notifies Buyer
(and its assigns) thereof and delivers to the Administrative Agent
such financing statements (Forms UCC-1 and UCC-3) authorized or
executed by Originator (if required under applicable law) which
Buyer (or its assigns) may reasonably request to reflect such name
change, location change, or change in corporate structure, together
with such other documents and instruments that Buyer (or its
assigns) may reasonably request in connection therewith and has
taken all other steps to ensure that Buyer (and its assigns)
continues to have a first priority, perfected ownership or security
interest in the Receivables, the Related Security related thereto
and any Collections thereon, or (ii) change its jurisdiction
of organization unless the Buyer (and its assigns) shall have
received from the Originator, prior to such change, (A) those items
described in clause (i) hereof, and (B) if Buyer (or its
assigns) shall so request, an opinion of counsel, in form and
substance reasonably satisfactory to such Person, as to such
organization and the Originator’s valid existence and good
standing and the perfection and priority of Buyer’s ownership
interest or security interest in the Receivables, the Related
Security and Collections.
(b)
Change in Payment Instructions to Obligors . Originator will
not add or terminate any bank as a Collection Bank, or make any
change in the instructions to Obligors regarding payments to be
made to any Lock-Box or Collection Account, unless Buyer (and its
assigns) shall have received, at least ten (10) days before
the proposed effective date therefor, (i) written
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