Document:

Exhibit 10.1 - Promissory Note

    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.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    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
	 	 	
              

            
	 	 	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

              

      

    

     

     

     

     

     

     

     

     

     

    -
      6
      -Exhibit 10.2 - Letter Agreement

    Exhibit
      10.2

    [JPMorganChase
      Logo]

    

    

    

    

    December
      6, 2006

    

    

    

    

    SEMCO
      Energy, Inc.

    1411
      Third Street, Suite A

    Port
      Huron, MI 48060

    Attention:
      Chief Financial Officer 

    

    

    Ladies
      and Gentlemen:

    

    JPMorgan
      Chase Bank, N.A (the "Bank") is pleased to advise that it is prepared to offer
      a
      line of credit to SEMCO Energy, a Michigan corporation (the "Company") up to
      the
      maximum amount of $15,000,000, for general corporate purposes. The offering
      of
      this line of credit constitutes an agreement by the Bank to perform an ongoing
      credit review of the Company to enable the Bank to respond quickly to any
      request for credit that the Company may make. The line of credit is not a
      commitment and does not in any way obligate the Bank to make loans or grant
      any
      credit. Each decision to make an advance hereunder is discretionary: if the
      Bank
      decides to make one advance under this line, the Bank may still use its sole
      discretion to make or deny any subsequent advance under this line.

    

    Any
      credit which the Bank may extend will be on such terms and conditions and will
      bear interest at such rate as the Bank may require at the time the Company
      requests an advance and must be evidenced by documents in form and substance
      satisfactory to the Bank.

    

    The
      Bank
      will consider requests for advances under the line until May 1, 2007, unless
      this discretionary line is earlier terminated by the Company or the Bank. This
      line of credit is issued subject to such factors as the Bank may find relevant
      at the time of the request, including, without limitation, money market
      conditions remaining the same as at present; Company obtaining proper
      governmental approvals for any advances; the Bank in its sole discretion
      continuing to be satisfied with the Company's financial condition and economic
      prospects; and the Company's maintenance of a satisfactory relationship with
      the
      Bank.

    

    

     

    

    

    

    

    JPMorgan
      Chase Bank, N.A. - Commercial Banking - IL1-0530, 227 W. Monroe Street,
      28th Fl., Chicago, IL 60606-5055

     

    Facsimile:
      312 541 3376

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2

    

    

    This
      letter is for the Company’s information only and is not to be shown to or relied
      upon by third parties, except that the Company may disclose this letter if
      required by law. This letter constitutes the entire understanding between the
      Bank and the Company and supercedes all prior discussions.

     

    
      	 	 	 
	 	
              Very
                truly yours,

               

            
	 	JPMORGAN
              CHASE BANK, N.A.
	 
 	 
 	 
 
	 	By:  	/s/ Nancy
              R. Barwig
	 	
              

            
	 	Name: 
              Nancy R. Barwig 
	 	Title: 
              Vice President

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