Exhibit 10.1
PROMISSORY NOTE

 

$15,000,000
 Chicago, Illinois
 
 December 6, 2006

 
FOR VALUE RECEIVED, SEMCO ENERGY, INC. (the “Borrower”), HEREBY PROMISES TO PAY
to the order of JPMORGAN CHASE BANK, N.A. (the “Bank”), at its offices located
at 1111 Polaris Parkway, Columbus, Ohio 43240, or at such other place as the
Bank or any holder hereof may from time to time designate, the principal sum of
FIFTEEN MILLION DOLLARS ($15,000,000), or such lesser amount as may constitute
the outstanding balance hereof, in lawful money of the United States, on the
Maturity Date (as hereinafter defined) set forth on the Grid Schedule (or
earlier as hereinafter referred to), and to pay interest in like money at such
office or place from the date hereof on the unpaid principal balance of each
Loan (as hereinafter defined) made hereunder at a rate equal to the Applicable
Interest Rate (as hereinafter defined and computed on the basis of the actual
number of days elapsed on the basis of a 360-day year) for such Loan, which
shall, in the case of Prime Rate Loans (as hereinafter defined) be payable on
the last day of each calendar month and, in the case of Fixed Rate Loans (as
hereinafter defined), be payable on the later of (i) the last day of the
Interest Period relating to such Loan or (ii) the last day of each calendar
month, provided, that, if an Interest Period is greater than three (3) months,
interest shall be payable at three (3) month intervals after such Loan is made,
and further provided that interest shall be payable at the time such Loan shall
be due and payable by acceleration and thereafter, on demand. Interest on any
past due amount, whether at the due date thereof or by acceleration or upon
default, shall be payable at a rate two percent (2%) per annum above the Bank's
Prime Rate which rate shall be computed for actual number of days elapsed on the
basis of a 360-day year and shall be adjusted as of the date of each such
change, but in no event higher than the maximum permitted under applicable law.
“Prime Rate” shall mean the rate of interest as is publicly announced by the
Bank from time to time as its Prime Rate.

Interest/Grid Schedule

The Bank is authorized to enter on the Grid Schedule attached hereto (i) the
amount of each Loan made from time to time hereunder, (ii) the date on which
each Loan is made, (iii) the date on which each Loan shall be due and payable to
the Bank, provided that all Loans outstanding will be due and payable no later
than May 1, 2007 (the “Maturity Date”), (iv) the interest rate agreed between
the Borrower and the Bank as the interest rate to be paid to the Bank on each
Loan (each such rate, the “Applicable Interest Rate”), which rate, at the
Borrower's option in accordance herewith, shall be at (a) the Prime Rate (the
“Prime Rate Loan(s)”), or (b) a fixed rate of interest determined by and
available at the Bank in its sole discretion (the “Fixed Rate”) for the
applicable Interest Period (the “Fixed Rate Loan(s)”), (v) the amount of each
payment made hereunder, and (vi) the outstanding principal balance of the Loans
hereunder from time to time. The date, amount, rate of interest and maturity
date of each Loan and payment(s) (if any) of principal, the Loan(s) to which
such payment(s) will be applied (which shall be at the discretion of the Bank)
and the outstanding principal balance of Loans shall be recorded by the Bank on
its books and records (which may be electronic in nature) and at any time and
from time to time may be, and shall be prior to any transfer and delivery of
this Note, entered by the Bank on the schedule attached or any continuation of
the schedule attached hereto by the Bank (at the discretion of the Bank, any
such entries may aggregate Loans (and payments thereon) with the same interest
rate and tenor and, if made on a given date, may show only the Loans outstanding
on such date). Any such entries shall be conclusive in the absence of manifest
error. The failure by the Bank to make any or all such entries shall not relieve
the Borrower from its obligation to pay any and all amounts due hereunder.
 
 
 
 

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Prepayment

The Borrower shall not have the right to prepay any Fixed Rate Loan prior to the
Maturity Date of such Loan unless in connection therewith the Borrower
reimburses the Bank on demand for any loss incurred or to be incurred by it in
the reemployment of the funds released by any prepayment in accordance with the
indemnity provisions set forth hereinbelow.

Discretionary Loans by the Bank

The Bank, pursuant to a letter dated of even date herewith, has approved an
uncommitted line of credit to the Borrower in a principal amount not to exceed
the face amount of this Note. The execution and delivery of this Note and the
acceptance by the Bank of this Note shall not be deemed or construed to create
any contractual commitment to lend by the Bank to the Borrower. The line of
credit is in the form of advances made from time to time by the Bank in its sole
and absolute discretion to the Borrower. This note evidences the Borrower’s
obligations to repay those advances. The aggregate outstanding principal amount
of debt evidenced by this Note is the amount so reflected from time to time in
the records of the Bank. Fixed Rate Loans shall be in a minimum principal amount
of $100,000. Each such request for a Loan shall be made by any officer of the
Borrower or any person designated in writing by any such officer, all of which
are hereby designated and authorized by the Borrower to request Loans and agree
to the terms thereof (including without limitation the Applicable Interest Rate
and Maturity Date with respect thereto). The Borrower shall give the Bank notice
no later than 11:00AM (Central time) on the Business Day of any such borrowing,
specifying whether the Loan shall bear interest at the Prime Rate or the Fixed
Rate and the Interest Period applicable thereto. In the event the Borrower shall
fail to provide such notice, the Loan shall be deemed to bear interest at the
applicable Prime Rate. The principal amount of each Loan shall be prepaid on the
earlier to occur of the Maturity Date applicable thereto, or the date upon which
the entire unpaid balance hereof shall otherwise become due and payable.

Indemnity

The Borrower shall indemnify the Bank against (i) any loss or expense which the
Bank may sustain or incur as a consequence of the occurrence of any Event of
Default and (ii) any loss or expense sustained or incurred including, without
limitation, in connection with obtaining, liquidating or employing deposits from
third parties as a consequence of the conversion of any Fixed Rate Loan from one
interest rate to another or the payment of any principal of any Fixed Rate Loan
by the Borrower (in either case, pursuant to a default, change in legality or
otherwise) on any day other than the last day of an Interest Period, or the
failure by the Borrower to borrow or prepay, convert or continue any Fixed Rate
Loan or part thereof once notice has been given; provided, however, that any
such indemnity shall be calculated using the Bank’s cost of funds rather than
the rate of interest charged to the Borrower and such indemnity shall not
include any lost profits to the Bank. The Bank shall provide to the Borrower a
statement, supported where applicable by documentary evidence, explaining the
amount of any such loss or expense, which statement shall be conclusive absent
manifest error.

Events of Default

If: (i) Borrower fails to pay the principal amount of this Note, or any part
thereof, when due, by maturity, acceleration or otherwise, or fails to pay any
interest, fees or other amounts (other than principal) owing under this Note
when due or upon demand, as applicable, and such failure continues for more than
three (3) Business Days; or (ii) Borrower fails to comply with any of the terms
or provisions of any agreement between Borrower and Bank (taking into account
applicable periods of notice and cure, if any); or (iii) Borrower or any
Subsidiary thereof becomes insolvent or the subject of a voluntary or
involuntary proceeding in bankruptcy, or a reorganization, arrangement or
creditor composition
 
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proceeding and, in the event of an involuntary proceeding only, such proceeding
is not dismissed within sixty (60) days, ceases doing business as a going
concern, or is the subject of a dissolution; or (iv) any warranty or
representation made by Borrower in connection with this Note shall be discovered
to be materially untrue or incomplete when made or when deemed made; or (v)
there is a default or event of default under (A) that certain Second Amendment
and Restated Credit Agreement, dated September 15, 2005, among Borrower, various
financial institutions parties thereto as lenders, LaSalle Bank Midwest National
Association, a national banking association, as administrative agent and
arranger, National City Bank (fka National City Bank of the Midwest), a national
banking association, as syndication agent, and U.S. Bank, N.A., as documentation
agent, as the same may be amended, restated, supplemented or replaced from time
to time (or, if such agreement expires without renewal or is terminated, in the
form in effect immediately prior to such expiry or termination), or (B) that
certain Indenture dated as of May 21, 2003, among Borrower and Fifth Third Bank,
as trustee, relating to Borrower’s 7-1/8 % Senior Notes due 2008; or (vi) there
is any failure by Borrower or any Subsidiary thereof to pay when due any of its
other indebtedness in excess of Ten Million Dollars ($10,000,000.00) in the
aggregate or in the observance or performance of any term, covenant or condition
in any document evidencing, securing or relating to such indebtedness, which
failure results in or permits the acceleration of the maturity of such
indebtedness; or (vii) there is filed or issued a levy or writ of attachment or
garnishment or other like judicial process upon Borrower or any Subsidiary,
including, without limitation, any accounts of Borrower with Bank, for an amount
or amounts aggregating in excess of One Million Dollars ($1,000,000.00); then
and in any such event, in addition to all rights and remedies of the Bank under
applicable law and otherwise, all such rights and remedies cumulative, not
exclusive and enforceable alternatively, successively and concurrently, the Bank
may, at its option, declare any and all of the amounts owing under this Note to
be due and payable, whereupon the maturity of the then unpaid balance hereof
shall be accelerated and the same, together with all interest accrued hereon,
shall forthwith become due and payable provided, however, that if a bankruptcy
event specified in subsection (iii) above shall have occurred, all amounts owing
under this Note shall be immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are expressly waived
by the Borrower. Further, acceptance of any payments shall not waive or affect
any prior demand or acceleration of amounts due hereunder, and each such payment
made shall be applied first to the payment of accrued interest, then to the
aggregate unpaid principal or otherwise as determined by the Bank in its sole
discretion. “Subsidiary” means (i) any corporation if more than 50% of the
outstanding securities having ordinary voting power are owned or controlled,
directly or indirectly, by the Borrower or any one or more of its Subsidiaries;
or (ii) any partnership, association, joint venture or similar business or
organization if more than 50% of the ownership interests having ordinary voting
power are so owned or controlled.

Definitions

A. Business Day

   
A “Business Day” shall mean any day other than a Saturday, Sunday or other day
on which the Bank is authorized or required by law or regulation to close, and
which is a day on which transactions are being carried out Chicago, Illinois for
Fixed Rate Loans and Prime Loans.

B. Interest Period
 

   
For Fixed Rate Loans, “Interest Period” shall mean the period requested by the
Borrower and agreed to by the Bank, as available.

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If any Interest Period would end on a day which shall not be a Business Day,
such Interest Period shall be extended to the next succeeding Business Day.
Furthermore, no Interest Period may extend beyond the Maturity Date.

Set-Off

The Borrower hereby gives to the Bank a right of set-off against all moneys,
securities and other property of the Borrower and the proceeds thereof, now or
hereafter delivered to, remaining with or in transit in any manner to the Bank,
its correspondents, affiliates (including J.P Morgan Securities Inc.) or its
agents from or for the Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise or coming into possession, control or
custody of the Bank in any way, and also, any balance of any deposit accounts
and credits of the Borrower with, and any and all claims of the Borrower against
the Bank at any time existing, hereby authorizing the Bank at any time or times,
without prior notice, to apply such balances, credits or claims, or any part
thereof, to the obligations of the Borrower under this Note in such amounts as
it may select, whether contingent, unmatured or otherwise.

Miscellaneous

The Borrower hereby waives diligence, demand, presentment, protest and notice of
any kind, and assents to extensions of the time of payment, release, surrender
or substitution of security, or forbearance or other indulgence, without notice.

This Note may not be changed, modified or terminated orally, but only by an
agreement in writing signed by the party to be charged and consented to in
writing by the party hereof.

The Bank reserves the right to assign or sell participations in the Loans or the
Note to any entity (including to any Federal Reserve Bank in accordance with
applicable law) and to provide any assignee or participant or prospective
assignee or participant with information of the Borrower previously received by
the Bank, subject to confidentiality requirements. The Borrower’s consent to
such assignment or participation is hereby deemed granted.

The Borrower hereby authorizes the Bank and any other holder of an interest in
this Note (a "Holder") to disclose confidential information relating to the
financial condition or operations of the Borrower (i) to any director, officer,
employee or affiliate of the Bank or any Holder, (ii) to any purchaser or
prospective purchaser of an interest in any Loan, (iii) to legal counsel,
accountants, and other professional advisors to the Bank or any Holder, (iv) to
regulatory officials, (v) as requested or required by law, regulation, or legal
process or (vi) in connection with any legal proceeding to which the Bank or any
other Holder is a party; provided that, in the case of (i), (ii) and (iii)
above, the recipient is notified of the confidential nature of the confidential
information and agrees to keep it confidential in the manner provided for
herein.

In the event the Bank or any holder hereof shall refer this Note to an attorney
for collection, the Borrower agrees to pay, in addition to unpaid principal and
interest, all the costs and expenses incurred in attempting or effecting
collection hereunder, including reasonable attorney's fees of internal or
outside counsel, whether or not suit is instituted.

In the event of any litigation with respect to this Note, THE BORROWER WAIVES
THE RIGHT TO A TRIAL BY JURY and all rights of setoff and rights to interpose
non-compulsory counter-claims and cross-claims. The Borrower hereby irrevocably
consents to the jurisdiction of the courts of the State of Illinois and of any
Federal court located in such State in connection with any action
 
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or proceeding arising out of or relating to this Note. The execution and
delivery of this Note has been authorized by the Board of Directors and by any
necessary vote or consent of the stockholders of the Borrower. This Note shall
be governed by and construed in accordance with the laws of the State of
Illinois applicable to contract made and to be performed in such State, and
shall be binding upon the successors and assigns of the Borrower and inure to
the benefit of the Bank, its successors, endorsees and assigns.

If any term or provision of this Note shall be held invalid, illegal or
unenforceable the validity of all other terms and provisions hereof shall in no
way be affected thereby.

        SEMCO Energy, Inc.  
   
   
    By:   /s/ Michael V. Palmeri    

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    Michael V. Palmeri    Title:   SVP and Chief Financial Officer 

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GRID SCHEDULE

 
DATE
APPLICABLE
INTEREST
RATE
APPLICABLE
INTEREST
PERIOD
AMOUNT OF
PRINCIPAL
REPAID
MATURITY
DATE

 
 
 
 
 
 
 
 
 
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