Exhibit 10.1 - Loan Agreement


    Exhibit
      10.1

     

    


    LOAN
      AGREEMENT

     

    


    This
      Loan
      Agreement (“Agreement”)
      is
      entered into on January 5, 2007, by and between SEMCO ENERGY, INC., a Michigan
      corporation (“Borrower”),
      whose
      address is 1411
      Third Street, Suite A, Port Huron, Michigan 48060
      and
      Charter One Bank, N.A., a national banking association
      (“Bank”)
      whose
      address is
      27777
      Franklin Road, Suite 1900, Southfield, Michigan 48034.

    


    In
      consideration of the mutual agreements contained herein, Bank may, in its sole
      and absolute discretion, make available to Borrower loan funds not to exceed
      an
      aggregate principal amount outstanding of Fifteen Million and 00/100
      ($15,000,000) Dollars (“Loan”)
      upon
      the following terms and conditions:

    


    1.     Method
      of Borrowing.
      Each
      advance under this Agreement (the “Advance”
and
      collectively, the “Advances”)
      shall
      be offered to Borrower through its representative(s) by a duly authorized
      representative of the Bank, at the interest rate provided below to be repaid
      by
      Borrower as provided herein. Requests for, offers of, and acceptance of Advances
      between Bank and Borrower may be made in writing (including facsimile
      transmission or e-mail transmission provided that any signatures required
      thereon are actual signatures and not computer-generated signatures) or orally
      (including telephonic communication) (each, an “Advance
      Notice”).
      Each
      Advance Notice shall specify the dollar amount of such Advance and the duration
      of the borrowing period therefor, which borrowing period shall be a period
      (the
“Borrowing
      Period”)
      agreed
      to by Bank ending no later than the Maturity Date (as hereinafter defined).
      All
      Advances, accrued and unpaid interest thereon and all other amounts owing from
      Borrower to Bank shall be due and payable in full on October 31, 2007 (the
      “Maturity Date”) and otherwise in accordance with Section 4 hereof. All Advances
      shall be in immediately available funds. The terms of an offered Advance shall
      be open for acceptance by Borrower until 3:00 p.m. (Eastern time) on the day
      of
      notification to Borrower by Bank of such offering; and the offering shall be
      deemed withdrawn if not accepted within that time period. All terms offered
      with
      respect to the Advances shall be determined by Bank in its sole discretion
      provided such terms are not inconsistent with any provision contained in this
      Agreement.

    


    Any
      Advance shall be conclusively presumed to have been made to, for the benefit
      of,
      and at the request of Borrower when: (a) (i) the Advance is deposited or
      credited to an account of Borrower with Bank, notwithstanding that such Advance
      was requested, orally or in writing and (ii) any part of such Advance is
      withdrawn from the account; or (b) the Advance is made in accordance with oral
      or written instructions of an authorized representative of Borrower. The
      Borrower will provide a written listing of authorized representatives to the
      Bank. Borrower agrees that Bank may rely on any such telephonic or telecopy
      notice given by any person Lender in good faith reasonably believes is an
      authorized representative without the necessity of independent investigation,
      and in the event any such notice by telephone conflicts with any written
      confirmation the written notice shall govern if Bank acted in reliance
      thereon.

    


    NOTWITHSTANDING
      ANY PROVISION OR INFERENCE TO THE CONTRARY, THE BANK SHALL HAVE NO OBLIGATION
      TO
      EXTEND ANY CREDIT TO OR FOR THE ACCOUNT OF BORROWER BY REASON OF THIS
      AGREEMENT.

    


    2.     Interest
      Rate.
      Each
      Advance shall bear interest at an “Offering
      Rate”
which
      shall mean such interest rates and terms offered by Bank and accepted by
      Borrower. Principal and interest on Advances at an Offering Rate shall be
      payable as required herein. Interest shall be computed on the basis of a 360
      per
      day year for the actual number of days in the interest period. (“Actual/360
      Computation”).
      Bank’s Actual/360 Computation determines the annual effective interest yield by
      taking the stated (nominal) interest rate for a year’s period and then dividing
      said rate by 360 to determine the daily periodic rate to be applied for each
      day
      in the interest period.

     

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    3.     Recordation
      of Advances.
      All
      Advances shall be charged to an account in Borrower’s name on Bank’s books (the
“Loan
      Account”),
      and
      Bank shall debit to such Loan Account the amount of each Advance when made
      and
      credit to such account the amount of each repayment. Bank shall render to
      Borrower from time to time a statement of account setting forth the Borrower’s
      loan balance in said Loan Account which shall be deemed to be correct and
      accepted by and binding upon Borrower, unless Bank receives a written statement
      of exceptions within twenty (20) calendar days after such statement has been
      rendered to Borrower. Such statement of account shall be prima facie evidence
      of
      the principal sum and accrued interest in the absence of such statement of
      exceptions.

     

    4.     Payment
      of Advances.
      Borrower
      shall pay all amounts owing hereunder for principal and interest on each Advance
      (time being of the essence), in the account of the Bank designated for such
      payment via wire transfer, as follows:  

     

    (i)
      principal payments shall be made on the last day of the applicable Borrowing
      Period; and

     

    (ii)
      interest payments shall be made monthly on the last day of each
      month.

     

    5.     Posting
      of Payments.
      All
      payments received during normal banking hours after 3:00 P.M. Eastern time
      shall
      be deemed received at the opening of the next banking day.

    


    6.     Prepayment.
      (a)
      Borrower may prepay in whole or in part subject to Section 6(b) below, any
      amounts due and owing hereunder. No partial prepayment shall affect the
      obligation of Borrower to make any payment of the remaining principal or
      interest due with respect to such Advance until such Advance has been paid
      in
      full.

    


    (b)     If
      Borrower makes any payment of principal with respect to any Advance on any
      day
      other than the last day of the applicable Borrowing Period therefor (whether
      voluntarily, by acceleration, or otherwise), or if Borrower fails to borrow
      an
      Advance after notice has been given by Borrower to Bank in accordance with
      the
      terms of this Agreement requesting such Advance and Bank has agreed to make
      such
      Advance, or if Borrower fails to make any payment of principal in respect of
      any
      Advance when due, Borrower shall reimburse Bank, on demand, for any resulting
      loss, cost or expense incurred by Bank as a result thereof, including, without
      limitation, any such loss, cost or expense incurred in obtaining, liquidating,
      employing or redeploying deposits from third parties, but excluding any portion
      of such loss attributable to the Bank’s margin, as determined by the Bank which
      determination shall be conclusive absent manifest error. Calculation of any
      amounts payable to Bank under this paragraph shall be made as though Bank shall
      have actually funded or committed to fund the relevant Advance through the
      purchase of an underlying deposit in an amount equal to the amount of such
      Advance and having a term comparable to the Borrowing Period of such Advance;
      provided,
      however,
      Bank
      may fund any Advance in any manner it deems fit and the foregoing assumption
      shall be utilized only for the purpose of the calculation of amounts payable
      under this paragraph.

    


    7.     Conditions
      Precedent.
      Each and
      every Advance which has been offered and accepted pursuant to this Agreement
      is
      subject to the following conditions precedent: (a) Borrower shall be in
      compliance with all of the terms and conditions set forth herein and an Event
      of
      Default as specified herein, or an event which upon notice or lapse of time
      or
      both would constitute such an Event of Default, shall not have occurred or
      be
      continuing at the time of such Advance; (b) Bank shall have received a certified
      resolution authorizing borrowings by Borrower under this Agreement; (c) Bank
      shall have received a copy of the Borrower’s audited financial statements for
      the fiscal year ending December 31, 2005; and (d) Borrower shall deliver to
      Bank
      such information and documents as Bank may reasonably request from time to
      time.
      Upon acceptance of any Advance, the Borrower shall be deemed to have made an
      affirmative representation that there does not exist any Event of Default
      hereunder.

     

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    8.     Representations,
      Warranties.
      Borrower represents and warrants to the Bank, all of which representations
      and
      warranties shall be true on the date hereof and on the date any Advance is
      made
      hereunder:

     

    (a)     Existence
      and Authority.
      Borrower
      is duly organized, validly existing and in good standing under the laws of
      its
      state of incorporation. Borrower has the legal power and authority and is duly
      authorized to: (a) execute and perform its obligations under the Loan Agreement
      and any other documents executed in connection herewith (collectively, the
      “Loan
      Documents”)
      to
      which it is a party and such documents constitute the Borrower’s valid and
      binding legal obligation enforceable in accordance with their terms, (b) borrow
      money in accordance with the terms of this Loan Agreement, and (c) do any and
      all other things required of it hereunder. Borrower has the legal power and
      authority to carry out its business as now being conducted and is qualified
      to
      do business in the State of Michigan and in every jurisdiction where the nature
      of its business or the property owned or operated by it makes such qualification
      necessary and where the failure to be so qualified would reasonably be expected
      to have a material adverse effect on the business, assets or financial condition
      of the Borrower.

     

    (b)     Financial
      Information.
      All
      financial data and information which has been or shall hereafter be furnished
      to
      the Bank has been and/or shall be prepared in substantially the same form as
      the
      management prepared financial statements provided by Borrower to current lenders
      under the Corporate Credit Facility and fully and fairly presents the financial
      condition of the Borrower (any accounting terms used in this Loan Agreement
      which are not specifically defined herein shall have the meanings customarily
      given them in accordance with GAAP). There has been no material adverse change
      in the properties, business, assets or financial condition of Borrower taken
      as
      a whole since the date of Borrower’s latest financial statements filed with the
      Securities and Exchange Commission.

    


    (c)     Compliance.
      The
      execution of the Loan Documents shall not violate any other agreements of which
      Borrower is a party.

    


    (d)     Subsidiaries.
      As
      of the
      date hereof, except as disclosed in Borrower’s most recent annual report on Form
      10-K most recently filed with the Securities and Exchange Commission, the
      Borrower has no subsidiaries.

    


    9.     Reporting;
      Covenants. 

     

    (a)     The
      Borrower shall furnish to the Bank or make available to Bank on Borrower’s
      website:

     

    (i)
      as
      soon as available, and in any event within 105 days after the close of the
      Borrower’s fiscal year, a copy of the Borrower’s consolidated financial
      statements (form 10-K) for such year, audited and certified without
      qualification by an independent public accountant of recognized
      standing,;

     

    (ii)
      as
      soon as possible, and in any event within 60 days after the close of the
      Borrower’s fiscal quarter, a copy of the Borrower’s quarterly report (10-Q)
      filed with the U.S. Securities and Exchange Commission; 

     

    
      (iii)
        contemporaneously with the furnishing of
        the
        Borrower’s 10-Q or 10-K U.S. securities filings, a confidential copy of the
        quarterly compliance certificate delivered by the Borrower to the Administrative
        Agent under that certain Credit Agreement dated as of September 15, 2005
        (such
        agreement, as may be amended, restated, supplemented or replaced from time
        to
        time, shall be referred to herein as the “Corporate
        Credit Facility”),
        between and among the Borrower, LaSalle Bank Midwest National Association,
        as
        Administrative Agent, and the Lenders party thereto; and

       

    

     

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    (iv)
      notice of any amendment or modification of the Corporate Credit Facility as
      soon
      as possible upon execution or effectiveness thereof.

     

    (b)     Each
      Subsidiary (as defined in the Corporate Credit Facility) that has delivered,
      or
      may at any time be required to deliver, in accordance with the terms of the
      Corporate Credit Facility, a guaranty to the Administrative Agent under the
      Corporate Credit Facility, shall execute and deliver, and Borrower shall cause
      each such Subsidiary to execute and deliver, to Bank a guaranty agreement
      whereby such Subsidiary becomes a guarantor of the obligations of the Borrower
      under this Agreement, together with such certificates, resolutions, formation
      documents and opinions of counsel as the Bank may reasonably
      request.

     

    (c)     Until
      the
      Advances, interest thereon and all other amounts owing from Borrower to Bank
      hereunder have been paid in full, the Borrower covenants and agrees that it
      will
      not create, incur, assume or suffer to exist any mortgage, pledge, encumbrance,
      security interest, lien or charge of any kind upon the of its assets other
      than
      Permitted Liens. “Permitted Liens” shall mean:

     

    (i)     Liens,
      mortgages, security interests and other encumbrances to or in favor of
      Bank;

     

    (ii)     Liens
      for
      taxes, assessments or other governmental charges incurred in the ordinary course
      of business and for which no interest, late charge or penalty is attaching
      or
      which is being contested in good faith by appropriate proceedings and, if
      requested by the Bank, bonded in an amount and manner satisfactory to the
      Bank;

     

    (iii)     Liens,
      not delinquent, created by statute in connection with worker’s compensation,
      unemployment insurance, social security and similar statutory
      obligations;

     

    (iv)     Liens
      of
      mechanics, materialmen, carriers, warehousemen or other like statutory or common
      law liens securing obligations incurred in good faith in the ordinary course
      of
      business that are not yet due and payable;

     

    (v)     Minor
      encumbrances or imperfections of title consisting of existing or future zoning
      restrictions, existing recorded rights-of-way, existing recorded easements,
      existing recorded private restrictions or future public restrictions on the
      use
      of real property, none of which (individually or in the aggregate) materially
      impairs, or would materially impair, the present or future use of such property
      in the operation of the business for which it is used, or would be violated
      in
      any material respect by any existing or proposed structure or land use or would
      have a material adverse effect on the sale or lease of such property, or render
      title thereto unmarketable;

     

    (vi)     The
      “Permitted Liens” as defined in the Corporate Credit Facility; and

     

    (vii)     The
      “Permitted Liens” as defined in 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.

     

    10.     Events
      of Default.
      Upon the
      occurrence of any one or more of the following “Events
      of Default,”
the
      entire unpaid principal balance of the Loan shall at the option of the Bank
      become immediately due and payable without demand, notice or protest (which
      are
      hereby waived):

    


    (a)
      Nonpayment;
      Nonperformance.
      Borrower
      fails to pay any principal amounts hereunder when due, fails to pay any other
      amount due hereunder within three business days of when due or fails to observe
      or perform any obligation or covenant, as required under this Agreement, or
      any
      other document furnished in connection herewith, or contained in any other
      agreement between Bank and Borrower and such failure continues for more than
      thirty (30) days after notice to Borrower.

     

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    (b)
      False
      Warranty.
      Any
      representation or warranty made by Borrower in connection with this Agreement
      is
      determined by Bank to have been false or misleading in any material respect
      when
      made.

    


    (c)
      Default
      on Other Obligations.
      (i)
      Borrower defaults in the payment of interest, principal, or fees on any
      indebtedness in respect of any borrowed money in excess of $10,000,000, and
      such
      failure continues after the expiration of any applicable grace period and such
      defaults causes or permits the holders of such indebtedness to accelerate the
      maturity thereof or (ii) the occurrence of an “Event of Default” under and as
      defined in the Corporate Credit Facility.

    


    (d)
      Judgment
      Entered.
      Final
      judgment for the payment of money is entered against Borrower in excess of
      $5,000,000 and remains undischarged for a period of 30 days, unless execution
      on
      such judgment shall be effectively stayed. 

    


    (e)
      Bankruptcy.
      Borrower (i)
      files
      a petition as Debtor under the Bankruptcy Code or makes an assignment for the
      benefit of creditors, or (ii) becomes the object of insolvency proceedings
      or is
      named debtor in an involuntary petition under the Bankruptcy Code and such
      proceedings or such petition is not dismissed against Borrower within 60
      days.

    


    (f)
      Change
      of Control. There
      shall occur a change of control or comparable event under Section 13.1.11 of
      the
      Corporate Credit Facility.

    


    11.     Acceleration
      Upon Default.
      Upon any
      Event of Default, Bank may, at Bank’s sole discretion, accelerate the maturity
      of the Loan and all other obligations of Borrower to Bank, and the total
      outstanding balance of principal and unpaid interest and such Advances and
      other
      obligations shall be immediately due and payable.

    


    12.     Default
      Rate.
      In
      addition to all other rights contained in this Agreement, upon the occurrence
      and during the continuance of an Event of Default, all outstanding Advances
      shall bear interest at the Effective Interest Rates plus 2% (“Default
      Rate”).
      The
      Default Rate shall apply from the occurrence of an Event of Default until the
      Advances or any judgment thereon is paid in full.

    


    13.     Payment
      Application.
      All
      payments made by or on behalf of and all credits due to Borrower shall be
      applied and reapplied in whole or in part, so long as there does not exist
      any
      Event of Default hereunder, to such obligations as Borrower may specify or,
      if
      Borrower does not specify or there then exists an Event of Default, to such
      of
      Borrower’s obligations as are then due and payable and otherwise to any of
      Borrower’s obligations hereunder to the extent and in the manner that Bank may
      see fit.

    


    14.     Attorneys’
      Fees.
      Borrower
      shall pay all of Bank’s actual, reasonable and necessary expenses incurred to
      successfully enforce or collect the indebtedness under the Loan, including,
      without limitation, reasonable attorneys’ fees and expenses, whether incurred
      without the commencement of a suit, in any trial, arbitration, or administrative
      proceeding, or in any appellate or bankruptcy proceeding.

    


    15.     Usury.
      Anything
      contained herein to the contrary notwithstanding, if for any reason the
      effective rate of interest on any Advance should exceed the maximum lawful
      rate,
      the effective rate shall be deemed reduced to and shall be such maximum lawful
      rate, and (i) the amount which would be excessive interest shall be deemed
      applied to the reduction of the principal balance of the Advance and not to
      the
      payment of interest, and (ii) if the Advance has been or is thereby paid in
      full, the excess shall be returned to the party paying same, such application
      to
      the principal balance of the Advance or the refunding of the excess to be a
      complete settlement and acquittance thereof.

     

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    16.     Waivers.
      Borrower
      hereby waives presentment, protest, notice of dishonor, demand for payment,
      notice of intention to accelerate maturity, notice of acceleration of maturity,
      notice of sale and all other notices of any kind whatsoever except as otherwise
      required hereunder. Any failure by Bank to exercise any right hereunder shall
      not be construed as a waiver of the right to exercise the same or any other
      right at any time.

    


    17.     Amendment
      and Severability. No
      amendment to or modification of this Agreement shall be binding upon either
      party unless in writing and signed by it. If any provision of this Agreement
      shall be prohibited or invalid under applicable law, such provision shall be
      ineffective but only to the extent of such prohibition or invalidity, without
      invalidating the remainder of such provision or the remaining provisions of
      this
      Agreement.

    

      18.     Miscellaneous.
        This
        Agreement is fully assignable by Bank and all rights of Bank thereunder shall
        inure to the benefit of its successors and assigns. This Agreement may not
        be
        assigned by Borrower without the prior written consent of Bank and shall
        be
        binding upon Borrower and its successors and its permitted assigns. The captions
        contained in this Agreement are inserted for convenience only and shall not
        affect the meaning or interpretation of the Agreement. This Agreement shall
        be
        governed by and interpreted in accordance with the laws of the State of
        Michigan, without regard to that state’s conflict of laws
        principles.

       

    

    19.     WAIVER
      OF JURY TRIAL. THE
      BORROWER AND THE LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
      CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
      (OR
      HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
      AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY
      JURY
      IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR
      IN
      ANY WAY RELATED TO, THIS AGREEMENT OR THE LOAN.

    


    


    


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            In
      Witness
      Whereof,
      the
      parties hereto have duly executed this Agreement as of the date stated
      above.

    


    
      	 	 	 
	 	BORROWER:
	 	 
	 	SEMCO
              ENERGY, INC. 
	 	Taxpayer
              Identification Number:  38-2144267 
	 
 	 
 	 
 
	 	By:  	/s/ Michael
              V. Palmeri
	 	 	
              

            
	 	Name:	 Michael
              V. Palmeri 
	 	Title: 	Senior
              Vice President and Chief Financial Officer and
              Treasurer 
	 	
            
	 	
            


    

     

    
      


      
        	 	 	 
	 	BANK:
	 	 
	 	CHARTER
                ONE BANK, N.A.
	 
 	 
 	 
 
	 	By:  	/s/ Andre
                A. Nazareth
	 	 	
                

              
	 	Name:	 Andre
                A. Nazareth
	 	Title: 	Vice
                President
	 	
              
	 	
              


      

       

    

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