Document:

Exhibit 10.1

    Exhibit
      10.1

    

    

    REVOLVING
      NOTE

     

     

    
      	$7,500,000.00	
              Milwaukee,
                Wisconsin

            
	 	
              November
                16, 2006

            

    

     

    On
      or
      before November 16, 2007 (herein called the “Maturity
      Date”),
      FOR
      VALUE RECEIVED, the undersigned, SEMCO ENERGY, INC., a Michigan corporation
      (herein called the “Borrower”),
      promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (herein called
      “Bank”),
      at
      the office of Bank at 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202,
      or
      at such other office as Bank notifies Borrower in writing from time to time,
      in
      lawful currency of the United States of America, the principal sum of SEVEN
      MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000.00), or so much of said sum
      as
      has been advanced and is then outstanding hereunder, together with interest
      thereon as hereinafter set forth.

     

    This
      Note
      is a note under which Advances (as hereafter defined), repayments and new
      Advances may be made from time to time, provided that Bank shall not be
      obligated to make any Advance hereunder (notwithstanding anything expressed
      or
      implied herein or elsewhere to the contrary), and Bank, at any time and from
      time to time, without notice, and in its sole and absolute discretion, may
      refuse to make Advances to Borrower hereunder without incurring any liability
      whatsoever and without in any way affecting Borrower’s liability hereunder for
      all amounts advanced. Advances hereunder may be requested in Borrower’s
      discretion by telephonic notice to Bank or by submission to Bank of a written
      request for an advance, in form acceptable to Bank, which request shall specify
      (i) the date and aggregate amount of the proposed Advance (which shall be at
      least Five Hundred Thousand Dollars ($500,000)), (ii) the maturity date (each
      a
“Repayment
      Date”)
      for
      repayment of such Advance (which Repayment Date may be overnight or shall be
      agreed to by Bank and the Borrower, but in no event later than the Maturity
      Date), and (iii) any other terms to be applicable to such Advance. Any Advance
      requested by telephonic notice shall be confirmed by Borrower that same day
      by
      submission to Bank, either by first class mail or telefax, of a written request
      for such Advance. Borrower acknowledges that if Bank makes an Advance based
      on a
      telephonic request, it shall be for Borrower’s convenience and all risks
      involved in the use of such procedure shall be borne by Borrower, and Borrower
      expressly agrees to indemnify and hold Bank harmless therefor. Bank shall have
      no duty to confirm the authority of anyone requesting an Advance by telephone
      who Bank reasonably believes to be authorized to request advances.

     

    Interest
      on each Advance hereunder shall accrue at an annual rate equal to the Bid Margin
      (as hereafter defined) plus
      the
      Quoted Rate in effect as of the day such Advance is made. The term “Quoted
      Rate”
means
      the one-month LIBOR rate quoted by Bank from Telerate Page 3750 or any successor
      thereto, which is that one-month LIBOR rate in effect and reset each New York
      Banking Day, adjusted for any reserve requirement and any subsequent costs
      arising from a change in governmental regulations. The term “New
      York Banking Day”
means
      any day (other than a Saturday or Sunday) on which commercial banks are open
      for
      business in New York, New York. Bank’s internal records of applicable interest
      rates shall be determinative in the absence of manifest error.
      Interest
      will be computed for the actual number of days principal is unpaid, using a
      daily factor obtained by dividing the stated interest rate by three hundred
      sixty (360). Principal and interest not paid when due shall bear interest from
      and after maturity until paid computed at a rate equal to two percent (2.0%)
      per
      annum plus
      the
      prime rate announced by Bank as in effect from time to time (“Default
      Interest”).
      Default Interest shall be payable as provided herein or otherwise upon demand.
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Unless
      sooner accelerated in accordance with the terms of this Note, interest is
      payable beginning December 1, 2006, and on the first day of each consecutive
      month thereafter, plus a final interest payment on the Maturity
      Date.

    

    Each
      Advance hereunder shall be payable upon the respective Repayment Date therefor
      (unless sooner accelerated in accordance with the terms of this Note). In the
      event that any Repayment Date occurs on any day which is not a Business Day,
      such Repayment Date shall be extended to the next succeeding Business Day,
      except that if the next succeeding Business Day falls in another calendar month,
      the Repayment Date applicable thereto shall occur on the next preceding Business
      Day, and, to the extent applicable, interest shall continue to accrue and be
      payable during any such extensions of any Repayment Date.

     

    The
      amount, applicable interest rate, and Repayment Date of each Advance shall
      be
      noted on Bank’s books and records, which books and records will be conclusive
      evidence thereof; provided,
      however,
      any
      failure on the part of Bank to make any such notation shall not relieve Borrower
      of its obligations to repay Bank all amounts owing under this Note when due
      in
      accordance with the terms hereof.

     

    If:
      (a)
      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 continuance thereof for more than three (3)
      Business Days; or (b) 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 (c) Borrower becomes
      insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy,
      or a reorganization, arrangement or creditor composition 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 (d) 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 (e) there is a default or event
      of
      default under (i) 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 (ii) 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 (f) there
      is any failure by Borrower 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; or (g) there is filed
      or
      issued a levy or writ of attachment or garnishment or other like judicial
      process upon Borrower, including, without limit, any accounts of Borrower with
      Bank, for an amount in excess of One Million Dollars ($1,000,000.00); then
      Bank,
      upon the occurrence or existence of any of these conditions or events (each
      a
“Default”),
      may
      at its option and without prior notice to Borrower, declare any or all of the
      indebtedness outstanding under this Note (the “Indebtedness”)
      to be
      immediately due and payable (notwithstanding any provisions contained in the
      evidence of it to the contrary), exercise any one or more of the rights and
      remedies granted to Bank by any agreement with Borrower or given to it under
      applicable law, or otherwise.

     

    2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    All
      payments under this Note shall be in immediately available United States funds,
      without setoff or counterclaim.

     

    Borrower
      waives presentment, demand, protest, notice of dishonor, notice of demand or
      intent to demand, notice of acceleration or intent to accelerate, and all other
      notices, and agrees that no extension or indulgence to Borrower, or release,
      substitution or nonenforcement of any security, or release or substitution
      of
      any of Borrower, or any other party, whether with or without notice, shall
      affect the obligations of Borrower. Borrower agrees that Bank has the right
      to
      sell, assign, or grant participations, or any interest, in any or all of the
      Indebtedness, and that, in connection with such right, but without limiting
      its
      ability to make other disclosures to the full extent allowable, Bank may
      disclose all documents and information which Bank now or later has relating
      to
      Borrower and the Indebtedness, provided that Bank shall not disclose any
      confidential information of Borrower unless the recipient of such disclosure
      has
      agreed to keep the information confidential.

     

    Borrower
      agrees to reimburse Bank, or any other holder or owner of this Note, for any
      and
      all reasonable costs and expenses (including, without limit, court costs, legal
      expenses and reasonable attorneys’ fees, whether inside or outside counsel is
      used (but excluding fees of in-house counsel for matters for which Bank has
      engaged outside counsel), whether or not suit is instituted, and, if suit is
      instituted, whether at the trial court level, appellate level, in a bankruptcy,
      probate or administrative proceeding or otherwise) incurred in collecting or
      attempting to collect this Note or the Indebtedness or incurred in any other
      matter or proceeding relating to this Note or the Indebtedness.

     

    Borrower
      acknowledges and agrees that there are no contrary agreements, oral or written,
      establishing a term of this Note and agree that the terms and conditions of
      this
      Note may not be amended, waived or modified except in a writing signed by a
      duly
      authorized officer of Bank expressly stating that the writing constitutes an
      amendment, waiver or modification of the terms of this Note. If any provision
      of
      this Note is unenforceable in whole or part for any reason, the remaining
      provisions shall continue to be effective. THIS NOTE SHALL BE GOVERNED BY AND
      CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WISCONSIN.

     

    This
      Note
      shall bind Borrower and Borrower’s successors and assigns.

    

    For
      purposes of this Note, the following terms will have the following
      meanings:

     

    “Advance”
means
      a
      borrowing requested by Borrower and made by Bank under this Note in accordance
      with the terms hereof, including, without limitation, the continuation of an
      outstanding Advance.

     

    3

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Bid
      Margin”
means
      the per annum percentage rate quoted by Bank and accepted by Borrower with
      regard to an Advance requested hereunder.

     

    “Business
      Day”
means
      any day, other than a Saturday, Sunday or holiday, on which Bank is open for
      all
      or substantially all of its commercial banking business in Milwaukee,
      Wisconsin.

     

    Borrower
      agrees that Bank may, at any time after demand for payment or maturity of this
      Note, without notice or demand, set off against any credit balance or other
      money now or hereafter owed to Borrower by Bank any unpaid
      Indebtedness.

    

    BORROWER
      AND BANK 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 NOTE OR THE INDEBTEDNESS.

     

    Nothing
      herein shall limit any right granted Bank by other instrument or by
      law.

     

    
      	 	 	 
	 	SEMCO
              ENERGY, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Michael
              V. Palmeri
	 	 	
              

            
	 	 	 
	 	Its: 	 
              SVP and CFO 
	 	
              

            

    

    
      	 	 	 
	
            	 	 
	 	By:  	
            
	 	 	
              

            
	 	 	 
	 	Its: 	 
              
	 	
              

            
	 

    

     

    4Exhibit 10.2

    Exhibit
      10.2

    

    November
      16,
      2006            

    

    

    Semco
      Energy, Inc.

    1411
      Third Street, Suite A

    Port
      Huron, MI 48060

    

    Gentlemen:

    

    This
      Negative Pledge Agreement (the “Agreement”)
      is
      made by SEMCO ENERGY, INC., a Michigan corporation (herein “Borrower”),
      located at 1411 Third Street, Suite A, Port Huron, MI 48060, in favor of U.S.
      BANK NATIONAL ASSOCIATION (herein “Bank”),
      located at 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, pertaining
      to
      certain loans and other credit which Bank has made or may from time to time
      hereafter make available to Borrower, which are evidenced by that certain
      Revolving Note dated as of November 16, 2006, made in the principal amount
      of
      Seven Million Five Hundred Thousand Dollars ($7,500,000.00) by Borrower, payable
      to Bank, as may be amended, restated supplemented or replaced from time to
      time
      (the “Note”).

    

    In
      consideration of all present and future loans and credit from time to time
      made
      available by Bank to or in favor of Borrower under the Note and all obligations
      and liabilities of Borrower under this Agreement (herein collectively called
      the
“Liabilities”),
      Borrower covenants and agrees as follows:

    

    1.    So
      long
      as Bank shall have any obligation (if at all) to make any advance under the
      Note
      and thereafter, until the Liabilities 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 any of its assets other than Permitted Liens. “Permitted
      Liens”
shall
      mean:

     

    
      	a.  	
              Liens,
                mortgages, security interests and other encumbrances to or in favor
                of
                Bank;

            

       

    

    	b.  	
            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;

          

     

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

          

     

    1

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    	d.  	
            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;

          

     

    	e.  	
            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;

          

     

    	f.  	
            The
              “Permitted Liens” as defined in that certain Second Amendment and Restated
              Credit Agreement, dated September 15, 2005, among the (i) Borrower,
              (ii)
              Various Financial Institutions Party as Lenders, (iii) LaSalle Bank
              Midwest National Association, a national banking association, as
              administrative agent and arranger, (iv) National City Bank (fka National
              City Bank of the Midwest), a national banking association, as syndication
              agent, and (v) U.S. Bank, N.A., as documentation agent, as the same
              may be
              amended, restated, supplemented or replaced from time to time; and
              

          

     

    	g.  	
            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.

          

    

    2. Any
      failure by Borrower to fully observe, perform or otherwise comply with any
      of
      the covenants or agreements of Borrower set forth in this Agreement and
      continuance thereof more than thirty (30) days shall constitute an event of
      default under the Liabilities, and Bank shall be entitled to exercise any and
      all rights and remedies available to or otherwise conferred upon Bank as a
      result thereof, whether by agreement, by law or otherwise.

    

    3. No
      forbearance on the part of the Bank in enforcing any of its rights or remedies
      under this Agreement or the Note, nor any renewal, extension or rearrangement
      of
      any payment or covenant to be made or performed by Borrower hereunder or under
      the Note, shall constitute a waiver of any of the terms of this Agreement or
      the
      Note or of any such right or remedy.

    

    4. This
      Agreement shall be governed by and construed and enforced in accordance with
      the
      laws of the State of Wisconsin.

    

    5.    Borrower
      agrees to reimburse Bank, upon demand, for all reasonable costs and expenses
      (including, without limitation, reasonable attorneys’ fees, whether in-house or
      outside counsel (but excluding fees of in-house counsel for matters for which
      the Bank has engaged outside counsel)) incurred by Bank in connection with
      any
      default or events of default under or in respect of any of the Liabilities
      or in
      collecting or in attempting to collect any of the Liabilities, in perfecting,
      maintaining or defending any of the Bank’s liens or security interests (or the
      priority thereof), if any, in any collateral securing any part of any of the
      Liabilities, or otherwise in enforcing any of Bank's rights or remedies under
      this Agreement, the Note or otherwise in respect of any of the
      Liabilities.

     

    2

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6.    This
      Agreement shall inure to the benefit of and shall be binding upon the parties
      hereto and their respective successors and assigns; provided,
      however,
      that
      Borrower shall not assign or transfer any of its rights or obligations hereunder
      or otherwise in respect of any of the Liabilities without the prior written
      consent of Bank.

    

    7.    BORROWER
      AND BANK 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, WAIVE 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, THE NOTE OR THE LIABILITIES.

    

    If
      the
      foregoing is acceptable to Borrower, please indicate such with the signature
      of
      Borrower as provided below.

     

    
      	 	 	 
	 	Very
              truly yours, 
	 	 
	 	U.S.
              BANK NATIONAL ASSOCIATION
	 
 	 
 	 
 
	 	By:  	/s/ Matthew
              J. Schulz
	 	 	
              

            
	 	 	 
	 	Its: 	Vice
              President
	 	
              

            

    

     

    

     

    
      
        	ACCEPTED,
                ACKNOWLEDGED AND AGREED:	 
	 	 	 
	SEMCO
                ENERGY, INC. 	 
	 	 	 
	By: 	/s/
                Michael V. Palmeri 	 
	 	
                

              	 
	 	 	 
	Its: 	SVP
                and CFO 	 
	 	
                

              	 
	 	 	 
	Dated: 	Nov.
                16, 2006 	 
	 	
                

              	 

      

    

    
3

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