EXHIBIT 10.56
EXECUTION COPY
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT (this "Agreement"), dated as of May 1, 2002, by
and between CONSUMERS ENERGY COMPANY, a Michigan corporation (the "Seller"),
MICHIGAN TRANSCO HOLDINGS, LIMITED PARTNERSHIP, a Michigan limited partnership
(the "Buyer"), and MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC, a Michigan
limited liability company ("Transco"). Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Membership Interest Purchase Agreement, dated as of October 24,
2001, between the Buyer and the Seller (the "Membership Interest Purchase
Agreement").
WITNESSETH:
WHEREAS, the Seller and the Buyer have entered into the Membership Interest
Purchase Agreement pursuant to which, inter alia, the Seller shall sell,
transfer and deliver to the Buyer, and the Buyer shall purchase and accept from
the Seller, the Interests upon the terms and conditions set forth in the
Membership Interest Purchase Agreement;
WHEREAS, from and after the Closing Date, the Buyer and Transco will be
engaged, directly or indirectly, in the operation of the Purchased Assets in the
business of the transmission (as such term is described in FERC Order Number
888) ("Transmission") of electricity (the "Business"); and
WHEREAS, as a condition precedent to the obligations of the Buyer and any
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the Buyer (an
"Affiliate") to consummate the transactions contemplated by the Membership
Interest Purchase Agreement and the other Transaction Agreements, the Seller
shall execute and deliver to the Buyer and Transco at the Closing this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and in the Membership Interest Purchase Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound, the parties hereto agree
as follows:
ARTICLE I
NON-COMPETITION BY SELLER
Section 1.01 Acknowledgments of Seller. The Seller acknowledges and agrees
that (a) prior to the date hereof, the Seller has developed and has been
integral to the operation of the Purchased Assets and the conduct of the
Business; (b) the Seller is in possession of and may have continued access to
trade secrets of and confidential information relating to the Purchased Assets
and the Business; (c) from and after the Closing, the Buyer and Transco will be
engaged directly or indirectly in the Business and the operation of the
Purchased Assets; (d) the agreements and covenants contained in this Agreement
are essential to protect the Business including, without
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limitation, the goodwill of the Business which, along with the Purchased Assets,
are being acquired by the Buyer and Transco pursuant to the Membership Interest
Purchase Agreement; (e) the Buyer would not consummate the transactions
contemplated by the Membership Interest Purchase Agreement and the other
Transaction Agreements but for such agreements and covenants; and (f) the Seller
has received and will continue to receive substantial consideration from the
Buyer and Transco pursuant to the terms of the Membership Interest Purchase
Agreement and the other Transaction Agreements and the transactions contemplated
hereby and thereby.
Section 1.02 Non-Compete. (a) The Seller agrees on behalf of itself and its
Subsidiaries (as defined in this Section 1.02) and Affiliates that for the
period commencing on the date of this Agreement and ending on the date which is
five (5) years after the Closing Date (the "Restricted Period"), the Seller
shall not, and shall cause its Subsidiaries and Affiliates not to, directly or
indirectly, whether or not for compensation, anywhere in the Restricted
Territory, (i) promote, participate or engage in the Business or (ii) own of
record, have any beneficial interest in, except for pre-payments by the Seller
or its Subsidiaries and Affiliates for Transmission upgrades required by the
Buyer, promote, control, manage or participate in any Person that engages in or
otherwise competes in the Business.
(b) For purposes of this Agreement, (i) the term "Restricted Territory"
shall mean the service area in which the Seller and its Subsidiaries and
Affiliates conducted the Business at any time prior to the Closing Date and (ii)
the term "Subsidiary" shall mean any corporation, joint venture, partnership,
limited liability company or other entity of which the Seller, directly or
indirectly, owns or controls capital stock or other equity interests
representing more than fifty percent (50%) of the general voting power of such
entity.
Section 1.03 Successors in Interest. In the event that the Seller sells,
transfers or leases all or substantially all of its assets, or is not the
surviving corporation in any merger, consolidation or other business combination
in which it may enter with any Person, in any case prior to the termination of
the Restricted Period, the Seller will cause such purchaser or surviving
corporation, as the case may be, to assume by written agreement (a copy of which
shall be provided to the Buyer) the Seller's obligations under this Agreement
and such assumption will be a condition precedent to the consummation of any
such transaction. The parties understand and agree that nothing in this
Agreement shall prohibit the Seller or any purchaser or surviving corporation or
Affiliates or Subsidiaries of such purchaser or surviving corporation
contemplated by this Section 1.03 from engaging in the business of the
Transmission of electricity, electric capacity or energy at any time in any
territory outside of the Restricted Territory.
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ARTICLE II
ENFORCEMENT
Section 2.01 Remedies. (a) The Seller acknowledges and agrees that any
breach of any of the provisions of this Agreement by the Seller or any of its
Subsidiaries or Affiliates will cause irreparable and substantial injury to the
Buyer, Transco and/or the Business and that money damages would not provide an
adequate remedy to the Buyer, Transco or any of their Affiliates, as the case
may be, and, in recognition of this fact, agrees that, in the event of such
breach, and in addition to any remedies at law it may have, the Buyer, Transco
and/or any of their Affiliates, without posting any bond, shall be entitled to
obtain equitable relief in the form of specific performance, a temporary
restraining order, a temporary or permanent injunction or any other equitable
remedy that may be available.
(b) All of the remedies expressly provided for in this Agreement are
cumulative of any and all other remedies that the Buyer, Transco or any of their
Affiliates might have at law or in equity. In addition to the remedies provided
for in this Agreement, the Buyer, Transco and any of their Affiliates shall be
entitled to avail themselves of all such other remedies as might now or
hereafter exist at law or in equity for compensation and for the specific
enforcement of the covenants and agreements of the Seller contained herein.
Resort to any remedy provided for in this Agreement or by law shall not prevent
the concurrent or subsequent use of any other appropriate remedy or remedies and
shall not preclude recovery by the Buyer, Transco or any of their Affiliates of
monetary damages.
Section 2.02 Necessity of Restrictions. The parties acknowledge and agree
that the covenants and agreements contained in this Agreement have been
negotiated in good faith by the parties, are reasonable and are not more
restrictive or broader than necessary to protect the interests of the Buyer,
Transco, any of their Affiliates and/or the Business, and would not achieve
their intended purpose if they were on different terms or for a period of time
shorter than the period of time provided herein or applied in more restrictive
geographical areas than are provided herein. Each party further acknowledges
that the Buyer would not enter into the Membership Interest Purchase Agreement
or the other Transaction Agreements (and consummate the transactions
contemplated hereby or thereby) in the absence of the covenants and agreements
contained in this Agreement and that such covenants and agreements are essential
to protect the Business and the operation of the Purchased Assets including,
without limitation, the goodwill associated therewith.
Section 2.03 Severability. The Seller and each of the Buyer and Transco
expressly understands and agrees that although the parties consider the
covenants and agreements contained in this Agreement to be reasonable, if a
final non-appealable judicial determination is made by a court of competent
jurisdiction that (a) either the time or territory restrictions contained in
this Agreement is an unenforceable provision or restriction against the Seller
or its Subsidiaries or Affiliates, such provisions and restrictions of this
Agreement shall not be rendered void but shall be deemed amended without any
action on the part of any party hereto to apply as to such maximum time and
territory and to such maximum extent as such court may judicially determine or
indicate to be enforceable and (b) any other term or provision of this Agreement
is unenforceable, all other conditions and provisions of this Agreement shall
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nevertheless remain in full force and effect and such unenforceable term or
provision will be interpreted so as to best accomplish the intent of the parties
within the limits of Applicable Law.
ARTICLE III
MISCELLANEOUS
Section 3.01 Notices. All notices, requests, claims, demands and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be delivered by hand or sent by confirmed facsimile (with
original to follow by first class mail, postage prepaid) or sent, postage
prepaid by registered or certified mail or internationally recognized overnight
courier service and shall be deemed given when so delivered by hand, or
facsimile, or if mailed, five (5) days after mailing (two (2) business day in
the case of overnight courier service) at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to the Buyer or Transco, to
Michigan Electric Transmission Company, LLC.
000 Xxxx Xxxxx
Xxxxx X
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Executive Vice President and Chief Operating Officer
Telecopy: (000) 000-0000
with a copy to:
Pillsbury Winthrop LLP
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxx, Esq.
Telecopy: (000)000-0000
(b) if to the Seller, to
Consumers Energy Company
000 Xxxxxxxx Xxxxxx
Xxxxxxx. Xxxxxxxx 00000
Attention: President
Telecopy: (000)000-0000
Section 3.02 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to
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the other parties.
Section 3.03 Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement together with the other Transaction Agreements supersedes any other
agreement, whether written or oral, that may have been made or entered into by
any party or any of their respective Subsidiaries or Affiliates (or by any
director, officer or representative thereof) with respect to the subject matter
hereof and thereof. This Agreement together with the other Transaction
Agreements constitutes the entire agreement by and between the parties hereto
and thereto with respect to the subject matter hereof and thereof and there are
not agreements or commitments by or between such parties or their Subsidiaries
or Affiliates with respect to the subject matter hereof or thereof except as
expressly set forth herein or therein.
(b) Nothing in this Agreement, express or implied, is intended to confer on
any Person other than the parties hereto and their respective permitted
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
Section 3.04 Amendments. No modification or amendment of this Agreement and
no waiver of any of the terms or conditions hereof shall be valid or binding
unless made in writing and executed by all of the parties hereto.
Section 3.05 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that the Buyer or Transco may, in
its sole discretion, assign any of or all of its rights, interests and
obligations under this Agreement to any Affiliate of Trans-Elect, Inc., but no
such assignment shall relieve the Buyer or Transco, as the case may be, of any
of its obligations under this Agreement. Any purported assignment in violation
of this Section 3.05 shall be void. Subject to the preceding sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 3.06 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Michigan.
Section 3.07 Interpretation. In the event of an ambiguity or question of
intent or interpretation, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the extent to which any such
party or its counsel participated in the drafting of any provision hereof or by
virtue of the extent to which any such provision is inconsistent with any prior
draft hereof.
Section 3.08 Headings. The headings in this Agreement are for reference
only, and will not affect the interpretation of this Agreement.
Section 3.09 Waiver. The failure of the Buyer or Transco to enforce at any
time any of the provisions of this Agreement shall in no way be construed to be
a waiver of any such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of the Buyer or Transco thereafter to
enforce each and every such provision. No waiver of any breach of or
non-compliance with this Agreement shall be held to be a waiver of any other or
subsequent breach or non-compliance.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
CONSUMERS ENERGY COMPANY
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: President
MICHIGAN TRANSCO HOLDINGS,
LIMITED PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Board Member of its
General Partner
MICHIGAN ELECTRIC TRANSMISSION
COMPANY, LLC
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
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