Exhibit 10.9.9

 

 
 
 
 
 
 
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Long Term
Incentive Plan

 
Effective 1/1/2007
 

 

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ARTICLE 1
Philosophy, Strategy and Purpose

1.1      Incentive Compensation Philosophy. The goal of the compensation
policies and incentive plans of SEMCO Energy, Inc. (the “Company”) is to inspire
and reward achievement of the Company’s strategic objectives, by encouraging
balanced and sound business decision-making for the long-term benefit of the
Company. The Company believes that this approach aligns the interests of
eligible participants with those of the Company’s shareholders.

1.2    Strategy. The incentive strategy of the Company is to benchmark peer
group, industry, and appropriate labor market criteria as a component of total
remuneration. The target compensation position is the 50th percentile of market
consensus.

1.3    Purpose. The purpose of the Long-Term Incentive Plan (the “LTIP”) is to
provide a focused approach to long-term incentive compensation for Participants
using awards authorized under the Company’s shareholder-approved 2004 Stock
Award and Incentive Plan (the “2004 Plan”). The LTIP aids the Company in
attracting, retaining, motivating and rewarding employees of the Company, or its
subsidiaries or affiliates, who are eligible to participate in the 2004 Plan and
this LTIP, by providing for equitable and competitive compensation
opportunities, to recognize individual contributions and reward achievement of
the Company’s long-term goals, and to promote the creation of long-term value
for shareholders by closely aligning the interests of Participants with those of
shareholders.

ARTICLE 2
Eligibility

2.1    Eligibility. In order to participate in the LTIP, individuals must be
active, full time employees on the date of an award, and be in one of the
following employee groups (the “Participants”):
 

  Executive Level Chief Executive Officer     Executive Level Senior Vice
President(s)     Executive Level Vice President(s)     Executive Level Regional
Vice President(s)     Management Level Employee Director(s)     Other Officer
Corporate Secretary  

 
 
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ARTICLE 3
Opportunity Level

3.1    Incentive Opportunity Level. The following table delineates the annual
LTIP incentive opportunity level as a percentage of base salary. The CEO shall
submit to the Compensation Committee recommendations for opportunity level, and
the Compensation Committee may increase or decrease a Participant’s LTIP
incentive opportunity level based on objective performance identified through
the Performance Management Program. Award opportunity percentages will be
submitted by the Compensation Committee to the Board of Directors for approval,
generally at its February meetings each year.

Executive
Target
President & CEO
100%
SVP & COO
  70%
SVP & CFO
  65%
SVP & General Counsel
  55%
VP of Human Resources and Administration
  55%
VP & Deputy General Counsel
  40%
VP & Controller
  35%
Regional Vice President(s)
  25%
Employee Director(s)
  18%
Corporate Secretary
  18%

ARTICLE 4
Awards and Award Descriptions

4.1    Awards. Awards under the 2004 Plan may be in various forms, including
stock options, stock appreciation rights, restricted stock, deferred stock,
bonus stock and awards in lieu of obligations, dividend equivalents, other
share-based awards, or performance awards. Awards under the 2004 Plan have
generally been in the form of (i) stock options, (ii) performance share units,
and (iii) restricted stock units. Annually, the Compensation Committee shall
approve the form of award(s), as permitted under the 2004 Plan, and, if more
than one form of award is used in any one year, the Compensation Committee will
determine how much of each kind of award to make to each Participant. LTIP
awards are generally made in early to mid-March.

4.2    Award Descriptions.

   
(a)
Stock Options. An option to purchase from the Company the number of shares of
Company Common Stock equal to the total shares under option at a fixed price.
The exercise price is the average of the high and low prices of a share of
Company Common Stock traded on the NYSE on the day the options are granted.
Stock Options expire ten (10) years from the date of the award. The expiration
date is the last day the optionee may exercise the option and purchase stock at
the exercise price under an award. Any unused options are forfeited after 4:00
p.m. ET on that date. LTIP Stock Options are non-qualified, which means they do
not qualify for special tax treatment under the US Internal Revenue Code. Upon
Stock Option exercise, the optionee receives ordinary income (to the extent the
market value of the stock exceeds the exercise price). The Company receives a
corresponding tax deduction as long as it reports the optionee’s income to the
IRS. For additional information, refer to the Form of Employee Stock Option
Agreement.

 
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(b)
Performance Share Units. A Performance Share Unit (“PSU”) is a grant
representing a target number of shares of Company Common Stock with vesting and
payment contingent upon achievement of specified performance goals over a
multi-year period. Grantees whose performance meets or exceeds threshold level
of performance with respect to at least one of the performance goals established
by the Compensation Committee and approved by the Board of Directors for such
Performance Period have the opportunity to receive from 25% to 150% of the
target. The value of PSUs is tied to the market value of the Company’s Common
Stock at the time of payment, which follows the end of the performance cycle.
For additional information, refer to the Form of Employee Performance Share Unit
Award Agreement.

     
(i)
Performance Share Metrics. The LTIP PSU metrics are three-year cumulative
objectives defined annually at the time of award, and maintained for the
duration of each three-year cycle. The PSU target(s) will be set by the
Compensation Committee with input from Management, and will be reviewed and
approved by the Board of Directors.

     
(ii)
Payment. Following the completion of each three-year performance period, the CEO
shall submit to the Compensation Committee recommendations as to the level of
performance achieved under the performance goals for the performance period.
Upon certification by the Compensation Committee of the achieved performance,
which generally takes place at the Committee’s February meeting, payment in
shares of Company Common Stock shall be made no later than March 15.

 
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Unless otherwise provided in the Performance Share Unit Award Agreement,
Participants must be actively employed on the last day of the performance period
to receive payment except where employment is terminated due to retirement,
disability retirement, death, or as a result of a Change of Control. Unless
otherwise provided in the Performance Share Unit Award Agreement, if the
Participant’s employment is terminated for one of the specified reasons, the
number of PSUs earned may be pro-rated.

ARTICLE 5
Administration

5.1    Administration. The Compensation Committee shall administer the LTIP and
will have the authority set forth in the 2004 Plan The Compensation Committee
will meet from time to time to establish LTIP goals, review progress, and
approve LTIP payouts. The Compensation Committee will report periodically to the
Board of Directors about the work of the Compensation Committee and, if
appropriate, recommend to the Board of Directors that it approve LTIP goals,
participant eligibility and incentive opportunity level changes.

5.2    CEO’s Participation. Although not a member of the Compensation Committee,
the CEO attends Compensation Committee meetings in an advisory capacity. The
CEO’s participation allows the Compensation Committee to remain fully
independent of management while at the same time receive input from the CEO on
the LTIP.

IN WITNESS WHEREOF, the Company has caused this Long-Term Incentive Plan, which
is effective as of January 1, 2007, to be executed as of the 22nd day of
February, 2007.
 

        SEMCO ENERGY, INC.  
   
   
    By:   /s/ Lance S. Smotherman    

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  Title:  Sr.V.P. of H.R. & Admin.  

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Schedule A

Performance Share Unit Award Level:

The trigger for the Long-Term Incentive Plan is the achievement of 25% of the
cumulative three-year objectives with the maximum at 150%.

Determination of Award

 
Achievement Level of Performance
Award as Percentage of Performance Target
Threshold
25.0%
25.0%
 
30.0%
30.0%
 
35.0%
35.0%
 
40.0%
40.0%
 
45.0%
45.0%
 
50.0%
50.0%
 
55.0%
55.0%
 
60.0%
60.0%
 
65.0%
65.0%
 
70.0%
70.0%
 
75.0%
75.0%
 
80.0%
80.0%
 
85.0%
85.0%
 
90.0%
90.0%
 
95.0%
95.0%
Target
100%
100%
 
105.0%
105.0%
 
110.0%
110.0%
 
115.0%
115.0%
 
120.0%
120.0%
 
125.0%
125.0%
 
130.0%
130.0%
 
135.0%
135.0%
 
140.0%
140.0%
 
145.0%
145.0%
Maximum
150.0%
150.0%

 

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