Document:

Exhibit 10.6 - Dubay Severance Agreement

    Exhibit
      10.6 - Dubay Severance Agreement

    

    SEVERANCE
      AGREEMENT

     

    This
      Severance Agreement (the “Agreement”) is made and entered into as of this
      29th
      day of
      June, 2005 (the “Effective Date”), by and between SEMCO Energy Inc., a Michigan
      corporation (the “Company”), and Eugene N. Dubay (“Executive”).

     

    WHEREAS,
      Executive desires to be employed, or to continue to be employed, by the
      Company;

     

    WHEREAS,
      among other things, the Company believes that, in the event a transaction is
      proposed that would, if consummated, constitute a Change in Control (as defined
      below), it is important to the Company that Executive be induced to remain
      in
      his position and focused on pursuing the best interests of the Company and
      its
      shareholders and not be distracted by personal uncertainties and risks created
      by the prospect of such a Change in Control;

     

    WHEREAS,
      the Company desires to employ, or continue to employ, Executive, on the terms
      and conditions set forth in this Agreement, which, except as provided herein,
      is
      intended to supersede all prior such agreements and understandings between
      Executive and the Company;

     

    NOW,
      THEREFORE, in consideration of the compensation and other benefits of
      Executive’s employment and, if applicable, Executive’s continued employment, by
      the Company and the mutual covenants and agreements hereinafter set forth,
      Executive and the Company agree as follows:

     

    
      	
              1.

            	
              Employment.

            

    

     

    1.1. Executive
      is employed by the Company as of the Effective Date, and Executive hereby
      accepts and, if applicable, continues such employment, upon the terms and
      conditions hereinafter set forth. Executive shall be employed by the Company
      in
      the position set forth on Exhibit A and have such functions, authority, duties
      and responsibilities as are customarily given to persons in such positions
      at a
      company with publicly-traded securities, including (without limitation) the
      reporting relationships, functions, authority, duties, and responsibilities
      set
      forth on Exhibit A.

     

    1.2. Executive
      agrees that, throughout Executive’s employment with the Company, Executive will
      (i) faithfully render such services as may be reasonably delegated to, or
      required of, Executive by the Company, (ii) and devote Executive’s entire
      business time, best efforts, ability, skill and attention, in good faith, to
      the
      Company’s business, and (iii) follow and act in accordance with the rules,
      policies, and procedures of the Company. Executive shall serve on a full-time
      basis; provided, however, that it shall not be a breach of this Agreement for
      Executive to serve on corporate, industry trade group, civic or charitable
      boards or committees or to engage in other activities, with the consent of
      the
      President and Chief Executive Officer and so long as such activities do not
      materially interfere with the performance of Executive’s duties and
      responsibilities to the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2. Employment
      “At Will”.
      Executive and the Company agree that Executive’s employment with the Company is
“at will” and is not for any specified term. Accordingly, either Executive or
      the Company may terminate the employment relationship, with or without reason
      therefor, with the notice required by and otherwise in accordance with the
      terms
      of this Agreement.

     

    
      	
              3.

            	
              Compensation.

            

    

     

    3.1. Base
      Salary.
      The
      Company shall pay Executive as compensation for Executive’s services an annual
      base salary (as initially established and as it may change from time to time,
      the “Base Salary”) set forth on Exhibit B, payable beginning on the Effective
      Date in accordance with the Company’s usual payroll practices. The amount of
      Executive’s Base Salary shall be reviewed annually by the Board of Directors,
      which may increase, but not decrease, Executive’s Base Salary.

     

    3.2. Bonus.
      The
      Company shall pay Executive an annual lump sum bonus in accordance with the
      Company’s then-existing Short-Term Incentive Plan (the “STIP”), which shall
      afford Executive a reasonable opportunity to earn annual lump sum payments
      (i)
      based on the percentage set forth in Exhibit C multiplied by his Base Salary
      (as
      initially established and as it may increase from time to time,
      the
“Target Annual Bonus”), and (ii), depending on his performance and the financial
      performance of the Company, such lesser or greater annual lump sum payments
      as
      may be awarded under the STIP.

     

    3.3. Options;
      Long-Term Incentive Plan Participation.

     

    3.3.1. Executive
      has been granted options to acquire the number of shares of the Company’s Common
      Stock set forth on Exhibit D (the “Options”). The Options were granted
      under the Company's Long-Term Incentive Plan (as it exists from time to time,
      the “LTIP”) and vest as set forth on Exhibit D; provided, however, that,
      notwithstanding that vesting schedule, Executive shall vest in the Options,
      to
      the extent not already vested, upon (a)
      the
      consummation of a transaction constituting a Change in Control, (b) the
      Company’s termination of Executive’s employment without Cause, or (c) the
      Executive’s termination of his employment with Good Reason.

     

    3.3.2. In
      addition, Executive shall participate in the LTIP and be considered for
      additional awards thereunder at such times as such awards are made to other
      senior executives of the Company. Any such LTIP awards shall be made on
      substantially the same terms as awards made to such other senior executives.
      Exhibit D sets forth Executive’s annual long-term incentive award target, which
      is the
      percentage set forth in Exhibit D multiplied by his Base Salary (as
      initially established and as it may increase from time to time,
      the
“Long-Term Incentive Award Target”). Annual long-term incentive
      awards
      to
      satisfy the Long-Term Incentive Target may be made up of awards of options
      to
      purchase the Company’s Common Stock, restricted stock units, or other kinds of
      long-term incentives authorized by the LTIP.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.4. Restricted
      Stock Units.
      Executive has been granted the number of restricted stock units, representing
      shares of the Company’s Common Stock, set forth on Exhibit E (the “Restricted
      Stock Units”). Such Restricted Stock Units were granted under the LTIP, and the
      restrictions with respect to the Restricted Stock Units shall lapse and
      Executive shall be entitled to the shares of Common Stock represented by such
      Restricted Stock Units as set forth on Schedule E; provided,
      however, that, notwithstanding the schedule set forth on Exhibit E, all such
      restrictions shall lapse and Executive shall be entitled to the shares of Common
      Stock represented by such Restricted Stock Units, to the extent such
      restrictions have not already lapsed and the shares vested, upon (a)
      the
      consummation of a transaction constituting a Change in Control, (b) the
      Company’s termination of Executive’s employment without Cause, or (c) the
      Executive’s termination of his employment with Good Reason. In no case shall
      shares of the Company’s Common Stock represented by the Restricted Stock Units
      be delivered to the Executive prior to the latest date set forth on Exhibit
      E.

     

    3.5. Retirement
      Benefits.
      Executive shall be eligible to participate in the Company’s Non-Union Retirement
      Plan. In addition, Executive shall be eligible to receive additional retirement
      benefits pursuant to the Company’s Supplemental Executive Retirement Plan, as
      amended from time to time (the “SERP”), including the additional service and
      retirement considerations set forth in Exhibit F.

     

    3.6. Welfare
      Benefits.
      The
      Company shall provide to Executive all benefits for which Executive may be
      eligible under any welfare benefit plans, practices, policies, and programs
      as
      may be provided by the Company from time to time (including, without limitation,
      medical, prescription, dental, disability, employee life, group life, accidental
      death and travel accident insurance plans and programs) to the extent these
      rights and benefits are generally made available to other employees of the
      Company.

     

    3.7. Expense
      Reimbursement.
      The
      Company shall promptly reimburse Executive for reasonable expenses (including
      entertainment expenses) incurred by Executive while attending to the business
      of
      the Company, in accordance with the Company’s then-existing business expense
      reimbursement policies.

     

    3.8. Other
      Perquisites.
      Executive shall be provided with the perquisites set forth on Exhibit
      G.

     

    3.9. Relocation
      Expenses.
      In
      connection with Executive’s relocation to Michigan (if applicable), Executive
      shall be reimbursed, on an after-tax equivalent basis, for relocation expenses
      in accordance with the Company’s then-effective Relocation Policy. (For purposes
      of the preceding sentence, “an after-tax equivalent basis” shall mean that
      Executive will be reimbursed in amount which will provide him a reimbursement
      amount which after the payment of all federal, state, and local income and
      employment taxes would equal the amount he would have received if the
      reimbursement were not subject to such taxation when made.)

     

    3.10. Vacation.
      Executive shall be entitled to 4 weeks of paid vacation in each calendar year.
      Unused vacation shall carry over from year-to-year in accordance with the
      Company’s then-effective vacation carryover policy.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.11. Directors
      and Officers Insurance and Indemnification.
      Executive shall be covered under the Company’s then-existing directors and
      officers insurance policy. Executive also shall be indemnified as provided
      in
      the Company’s then-existing bylaws and Articles of Incorporation.

     

    3.12. Executive
      hereby consents to the imposition of reasonable Company Common Stock ownership
      guidelines established by the Board of Directors.

     

    
      	
              4.

            	
              Termination
                of Employment.

            

    

     

    4.1. Executive’s
      employment may be terminated by the Company as follows:

     

    4.1.1. Termination
      Due to Death.
      Executive’s employment shall be terminated immediately upon the death of the
      Executive.

     

    4.1.2. Termination
      Due to Disability.
      If the
      Company determines, in good faith, that the Disability (as defined below) of
      Executive has occurred, it may give Executive written notice of its intention
      to
      terminate Executive’s employment. In such event, Executive’s employment shall
      terminate effective on the 30th
      day
      after receipt of such notice by Executive (the “Disability Effective Date”), if
      , within 30 days after such receipt, Executive shall not have returned to the
      performance of his essential functions, with or without reasonable
      accommodation. For purposes of this Agreement, “Disability” shall mean the
      inability of Executive to perform a material portion of his duties for 180
      consecutive days as a result of incapacity due to a mental or physical
      condition, which is determined to be total and permanent by a physician selected
      by the Company.

     

    4.1.3. Termination
      for Cause.
      The
      Company may terminate Executive’s employment at any time for Cause. For the
      purposes of this Agreement, “Cause” shall mean:

     

    4.1.3.1.  Executive’s
      continued failure or inability to perform any material duties reasonably
      assigned to Executive (other than any such failure resulting from Executive’s
      death or Disability) or Executive’s substantial performance deficiencies, after
      (i) Executive is given a written demand by the Board of Directors identifying
      the manner in which the Company believes (a) Executive has not performed such
      duties or, as applicable, (b) the reasons for finding Executive’s performance to
      be deficient, and (ii) Executive’s subsequent failure to (a) cure or (b)
      otherwise address, to the reasonable satisfaction of the Board of Directors,
      the
      matters set forth in such written demand within 30 days (which, if a transaction
      contituting a Change in Control has been consummated at the time such demand
      is
      made, shall be extended to 60 days); or

     

    4.1.3.2.  a
      material breach of this Agreement by Executive; or

     

    4.1.3.3.  Executive’s
      commission of fraud against the Company or his engaging in willful misconduct
      which is materially injurious to the Company, monetarily or otherwise;
      or

     

    4.1.3.4.  Executive’s
      willful misconduct involving a third party or conviction of a felony or
      submission of a guilty or nolo contendere plea by Executive with respect
      thereto.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.1.4. For
      purposes of this definition, no act or omission on Executive’s part shall be
      considered “willful” unless done or omitted to be done by Executive in bad
      faith, recklessly, or in the absence of a reasonable belief that Executive’s act
      or omission was in the best interests of the Company.

     

    4.1.5. Termination
      without Cause.
      The
      Company may terminate Executive’s employment for any reason not amounting to
      Cause, upon not less than 60 days’ prior written notice to
      Executive.

     

    4.2. Executive’s
      employment may be terminated by Executive as follows:

     

    4.2.1. Termination
      by Executive with Good Reason.
      Executive’s employment may be terminated by Executive at any time with Good
      Reason. For the purposes of this Agreement, “Good Reason” shall mean any of the
      following actions taken without Executive’s consent, in writing:

     

    4.2.1.1.  the
      assignment to Executive of any duties that are materially inconsistent with
      Executive’s position (including status, office, titles and reporting
      relationships), functions, authority, duties or responsibilities as contemplated
      by this Agreement, or any other action by the Company which results in a
      material diminution in Executive’s position, functions, authority, duties, or
      responsibilities, excluding an isolated, insubstantial and inadvertent action
      not taken in bad faith and which is remedied by the Company within 30 days
      after
      receipt of written notice thereof given by Executive; or

     

    4.2.1.2.  a
      material breach of this Agreement by the Company; or

     

    4.2.1.3.  a
      reduction in Executive’s Base Salary, Target Annual Bonus, or Long-Term
      Incentive Award Target; or

     

    4.2.1.4.  after
      a
      transaction constituting a Change in Control has been consummated, the
      relocation of the Company’s headquarters by more than 50 miles or the assignment
      of Executive to a work location that is more than 50 miles from his work
      location (as determined by his work location immediately preceding the
      announcement of the transaction which, when consummated, constituted the Change
      in Control referred to in this sentence); provided, however, that to the extent
      reasonably required and substantially consistent with such travel immediately
      prior to consummation of the transaction constituting a Change in Control,
      travel by the Executive on Company business shall not be deemed a change in
      his
      work location; or

     

    4.2.1.5.  the
      failure of any successor to the Company to adopt and agree to be bound by this
      Agreement, in writing, and thereafter honor the Company’s obligations
      hereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.2.2. Anything
      in this Agreement to the contrary notwithstanding, if (i) a transaction
      constituting a Change in Control is consummated, (ii) Executive’s employment
      with the Company is terminated within one year prior to the date on which such
      consummation occurred, and (iii) it is reasonably demonstrated by the Executive
      that such termination of employment (a) was at the request of a third party
      which had taken, or subsequently took, steps reasonably calculated to effect
      a
      Change in Control, or (b) otherwise arose in connection with or anticipation
      of
      a transaction which, if consummated, would constitute a Change in Control,
      then,
      for purposes of this Agreement and notwithstanding any other action taken by
      the
      Company or Executive (including execution of a general release of claims),
      Executive’s termination shall be deemed to have occurred with Good Reason after
      consummation of a transaction constituting a Change in Control.

     

    4.2.3. Termination
      by Executive without Good Reason.
      Executive’s employment may be terminated by Executive, for any reason not
      amounting to Good Reason, upon not less than 60 days’ prior written notice to
      the Company.

     

    4.3. Notice
      of Termination.
      Any
      termination of Executive’s employment (other than by death) shall be
      communicated to the other party by Notice of Termination given in accordance
      with this section. For purposes of this Agreement, a “Notice of Termination”
      means a written notice which (i) states the specific termination provision
      in
      this Agreement relied upon, (ii), to the extent applicable, sets forth in
      reasonable detail the facts and circumstances claimed to provide a basis for
      termination of Executive’s employment under the provision so indicated, and
      (iii) if the Date of Termination (as defined below) is other than the date
      of
      receipt of such notice, specifies the termination date.

     

    4.4. Date
      of Termination.
“Date
      of Termination” means: (i) if Executive’s employment is terminated by reason of
      death or Disability, the Date of Termination shall be the date of death of
      Executive or the Disability Effective Date, as the case may be; (ii) if
      Executive’s employment is terminated by the Company for Cause or by Executive
      with Good Reason, the date of receipt of the Notice of Termination or any later
      date specified therein, as the case may be; (iii) if Executive’s employment is
      terminated by the Company without Cause or is terminated by Executive without
      Good Reason, the Date of Termination shall be the date specified in the notice,
      which must be at least 60 days after the notice is given.

     

    4.5. Obligations
      upon Termination.
      Upon
      Executive’s termination, this Agreement shall terminate and all rights and
      obligations of the parties hereunder shall cease, except (i) as otherwise
      expressly provided herein, and (ii) for the following:

     

    4.5.1. In
      any
      event, Executive shall be entitled to receive his Base Salary through the Date
      of Termination to the extent not theretofore paid, any accrued vacation pay,
      and
      to the extent not theretofore paid or provided, any other amounts or benefits
      (including, without limitation, vested benefits) required to be paid or provided
      under any plan, program, policy or agreement (including, without limitation,
      to
      the extent it has been earned for the preceding year but not paid, Executive’s
      annual lump sum bonus).

     

    4.5.2. If
      Executive’s employment is terminated by death or Disability, by the Company with
      Cause, or by the Executive without Good Reason, no further payments shall be
      due
      and owing to Executive hereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.5.3. If
      Executive’s employment is terminated by the Company without Cause or by the
      Executive with Good Reason, then Executive shall thereafter receive (i) an
      amount equal to 2 times
      the sum
      of (a) his Base Salary plus
      (b) his
      Target Annual Bonus, payable in accordance with the Company's usual payroll
      practices, or (ii) in the event that a transaction constituting a Change in
      Control has been consummated within the 24 months preceding such termination,
      an
      amount equal to 2.99 times
      the
      sum
      of (a) his Base Salary plus
      (b)
      his
      Target Annual Bonus, payable in a lump sum within 60 days following the Date
      of
      Termination, together with (y) the pro rata portion of the annual lump sum
      bonus
      earned by Executive for the year in which his employment is terminated,
      calculated based on his Target Annual Bonus and without any other adjustment
      for
      Executive’s performance or otherwise, and (z) any Gross-Up Payment for Excise
      Taxes described in Exhibit H.

     

    4.5.4. If
      Executive’s employment is terminated by the Company without Cause or by
      Executive with Good Reason, then the Company shall thereafter continue medical
      and other welfare benefits coverages for Executive and Executive’s family, which
      shall be substantially the same as those which would have been provided to
      them
      under the plans, programs, practices and policies described in Section 3.6
      as if
      Executive’s employment had not been terminated, (i) for 2 years, or (ii) in the
      event that a transaction constituting a Change in Control has been consummated
      within the 24 months preceding such termination, for 3 years; provided, however,
      that if Executive becomes re-employed with another employer and is eligible
      to
      receive substantially similar medical and other welfare benefits coverages
      under
      another employer’s plans, at substantially similar cost to Executive, then the
      Company-provided medical and other welfare benefit coverages described herein
      shall be deemed secondary to such other medical and other welfare benefit
      coverages.

     

    4.5.5. Executive
      shall be entitled to continue, at his expense, medical or other welfare benefits
      for Executive and Executive’s family, as provided under state or federal law,
      after the medical and other welfare benefits coverages provided under Section
      4.5.4 end.

     

    4.5.6. If
      Executive’s employment is terminated by the Company without Cause or by
      Executive with Good Reason, the Company shall pay the actual cost of
      outplacement services for Executive up to a total of $10,000.

     

    4.5.7. As
      a
      condition of receiving any payments or benefits pursuant to Sections 4.5.3,
      4.5.4, or 4.5.6, Executive shall execute a general release of claims (including,
      without limitation, any claims arising under federal, state, or local law,
      rules, regulations, or orders related to the termination of Executive’s
      employment and this Agreement) substantially in the form attached hereto at
      Exhibit I.

     

    4.5.8. Executive
      shall not be required to mitigate the amount of any payment or benefit provided
      hereunder by seeking other employment or otherwise. Except as provided herein,
      the amount of any such payment or benefits hereunder shall not be reduced by
      any
      compensation earned, payment made, or benefits received by Executive as a result
      of obtaining such employment or engaging in any other other
      activity.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.5.9. The
      termination of Executive’s employment pursuant to this Section 4 or otherwise
      shall not terminate or otherwise affect the rights and obligations of the
      parties pursuant to Sections 5 through 15.

     

    4.6. For
      purposes of this Section 4, the following definitions shall apply:

     

    4.6.1. “Change
      in Control” shall mean:

     

    4.6.1.1.  the
      direct or indirect sale, lease, exchange or other transfer of all or
      substantially all of the assets of the Company to any Person or entity or group
      of Persons or entities acting in concert as a partnership or other group (a
      “Group of Persons”) (other than a Person described in clause (i) of the
      definition of Affiliate);

     

    4.6.1.2.  the
      consummation of any consolidation or merger of the Company with or into another
      corporation with the effect that the stockholders of the Company immediately
      prior to the date of the consolidation or merger hold less than 51% of the
      combined voting power of the outstanding voting securities of the surviving
      entity of such merger or the corporation resulting from such consolidation
      ordinarily having the right to vote in the election of directors (apart from
      rights accruing under special circumstances) immediately after such merger
      or
      consolidation;

     

    4.6.1.3.  the
      stockholders of the Company shall approve any plan or proposal for the
      liquidation or dissolution of the Company;

     

    4.6.1.4.  a
      Person
      or Group of Persons acting in concert as a partnership, limited partnership,
      syndicate or other group shall, as a result of a tender or exchange offer,
      open
      market purchases, privately negotiated purchases or otherwise, have become
      the
      direct or indirect beneficial owner (within the meaning of Rule 13d-3 under
      the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (“Beneficial
      Owner”) of securities of the Company representing 30% or more of the combined
      voting power of the then outstanding securities of the Company ordinarily (and
      apart from rights accruing under special circumstances) having the right to
      vote
      in the election of directors; or

     

    4.6.1.5.  a
      Person
      or Group of Persons, together with any Affiliates thereof, shall succeed in
      having a sufficient number of its nominees elected to the Board of Directors
      such that such nominees, when added to any existing director remaining on the
      Board of Directors after such election who is an Affiliate of such Person or
      Group of Persons, will constitute a majority of the Board of
      Directors.

     

    4.6.2. “Affiliate”
      of any specified Person shall mean (i) any other Person which, directly or
      indirectly, is in control of, is controlled by or is under common control with
      such specified Person or (ii) any other Person who is a director or officer
      (A)
      of such specified Person, (B) of any subsidiary of such specified Person or
      (C)
      of any Person described in clause (i) above or (iii) any Person in which such
      Person has, directly or indirectly, a five (5) percent or greater voting or
      economic interest or the power to control. For the purposes of this definition,
      “control” of a Person means the power, direct or indirect, to direct or cause
      the direction of the management or policies of such Person whether through
      the
      ownership of voting securities, or by contract or otherwise; and the terms
      “controlling” and “controlled” have meanings correlative to the
      foregoing.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.6.3. “Person”
      shall mean any individual, corporation, partnership, joint venture, association,
      joint-stock company, trust, unincorporated organization, government or any
      agency or political subdivision thereof or any other entity within the meaning
      of Section 13(d)(3) or 14(d)(2) of the Exchange Act.

     

    4.6.4. “Voting
      Power” shall mean the voting power of all securities of a Person then
      outstanding generally entitled to vote for the election of directors of the
      Person (or, where appropriate, for the election of persons performing similar
      functions).

     

    4.6.5. Nothwithstanding
      the foregoing, the Board of Directors may determine, after a review of the
      facts
      and circumstances surrounding a particular transaction, in its sole discretion,
      that consummation of the transaction shall constitute a Change in Control for
      purposes of this Agreement.

     

    
      	
              5.

            	
              Confidential
                Information.

            

    

     

    5.1. Both
      during his employment and for a period of 2 years following termination of
      his
      employment, Executive shall exercise due care to protect from disclosure all
      secret or confidential information, knowledge or data relating to the Company,
      its businesses and strategic plans, possessed or known by or disclosed or made
      available to Executive during his employment and which shall not be or have
      become public knowledge (other than as a result of a breach of this
      Agreement).

     

    5.2. For
      a
      period of 2 years following termination of his employment, Executive shall
      not,
      without the prior written consent of the Company, communicate or divulge any
      such secret or confidential information, knowledge or data to any other person,
      except as required by law; provided that, in any such case, Executive shall
      give
      the Company prompt prior written notice of such legal requirement so that the
      Company may seek, at its sole expense, a protective order or other appropriate
      remedy to protect such information from disclosure or to limit such
      disclosure.

     

    6. Post-Termination
      Restrictions.
      Executive acknowledges that the Company (i) has spent substantial money, time
      and effort to develop secret or confidential information, knowledge or data
      relating to the Company, its businesses and strategic plans, possessed or known
      by or disclosed or made available to Executive during his employment, and (ii)
      is employing Executive with the understanding that, following the termination
      of
      his employment, Executive will not put himself in a position in which the
      Company’s ability to execute its strategic plan might be compromised.
      Accordingly, Executive agrees that during his employment at the Company and
      for
      2 years following the termination of his employment, irrespective of the reasons
      for or circumstances surrounding that termination, Executive shall not, directly
      or indirectly (whether as owner, partner, consultant, employee or otherwise),
      unless the Company consents thereto in writing:

     

    6.1. engage
      in, assist or have an interest in, or enter the employment of or act as an
      agent, advisor or consultant for, any person or entity which is engaged in
      business in the States of Michigan and Alaska that is competitive with any
      business in which the Company is engaged at the time of the Executive’s
      termination, or which is, on that date, is engaged in a business that is
      competitive with any business described in the Company’s strategic plan approved
      by the Board of Directors (a “Competing Activity”); or

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6.2. cause
      or
      attempt to cause any person or entity to divert, terminate, limit, modify or
      fail to enter into any existing or potential business relationship with the
      Company; or

     

    6.3. induce
      or
      attempt to induce any employee, consultant or advisor of the Company to leave
      his or her position with the Company, change his relationship with the Company,
      or accept employment or an affiliation involving a Competing
      Activity.

     

    7. Acknowledgment
      Regarding Restrictions.
      Executive acknowledges that the restraints set forth in Sections 5 and 6 (both
      separately and in total) are reasonable and enforceable in view of the Company’s
      legitimate interests in protecting its secret or confidential information,
      knowledge or data relating to the Company, its businesses and strategic plans,
      those strategic plans themselves, and the Company’s goodwill
      generally.

     

    8. No
      Waiver of Rights.
      The
      Company’s failure to enforce at any time any of the provisions of this Agreement
      or to require at any time performance by Executive of any of the provisions
      hereof shall in no way be construed to be a waiver of such provisions or to
      affect either the validity of this Agreement, or any part hereof, or the right
      of the Company thereafter to enforce each and every provision in accordance
      with
      its terms.

     

    9. Executive’s
      Duty to Provide Information on Request; Company’s Right to Injunctive Relief;
      Tolling.

     

    9.1. As
      reasonably requested by the Company, for a period of 2 years after the
      termination of his employment, Executive shall report in reasonable detail
      to
      the Company, orally or in writing, with respect to any matter reasonably related
      to his compliance with his obligations under Sections 5 and 6 hereof, including
      (without limitation) his (i) knowledge or actions with respect to the protection
      from disclosure of secret or confidential information, knowledge or data
      relating to the Company, its businesses and strategic plans, possessed or known
      by or disclosed or made available to Executive during his employment, (ii)
      interests, direct or indirect (whether as owner, partner, consultant, employee
      or otherwise), in any Competing Activity, (iii) knowledge or actions with
      respect to any person or entity involved in any existing or potential business
      relationship with the Company, and (iv) knowledge or actions concerning any
      employee, consultant or advisor of the Company and their relationship with
      the
      Company or any person engaged in any Competing Activity.

     

    9.2. In
      the
      event of a breach or threatened breach of any of Executive’s obligations under
      the terms of Sections 5 or 6 hereof, the Company shall be entitled, in addition
      to any other legal or equitable remedies it may have in connection therewith
      (including any right to damages that it may suffer), to temporary, preliminary
      and permanent injunctive relief restraining such breach or threatened breach.
      Executive acknowledges that the harm which might result to the Company as a
      result of any noncompliance by Executive with any of the provisions of Sections
      5 or 6 would be irreparable. Executive agrees that if there is a question as
      to
      the enforceability of any of the provisions of Sections 5 or 6 hereof, Executive
      will not engage in any conduct inconsistent with or contrary to the obligations
      set forth therein until after any such question has been resolved by a final
      judgment of a court of competent jurisdiction, which, insofar as practicable
      under the circumstances, shall be secured on an expedited basis. Executive
      and
      the Company agree that the running of the periods set forth in Section 6 hereof
      shall be tolled during any period of time in which Executive violates the
      obligations set forth therein.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    10.  Judicial
      Enforcement.
      If any
      provision of this Agreement is adjudicated to be invalid or unenforceable under
      the applicable law in any jurisdiction, the validity or enforceability of the
      remaining provisions thereof shall be unaffected. To the extent that any
      provision of this Agreement is adjudicated to be invalid or unenforceable
      because it is overbroad, that provision shall not be void but rather shall
      be
      limited only to the extent required by applicable law and enforced as so
      limited. Executive and the Company acknowledge that this provision is reasonable
      in view of their respective interests.

     

    11.  Executive
      Representations.
      Executive represents that the execution and delivery of the Agreement and
      Executive’s employment by the Company do not breach any previous employment
      agreement or other contractual obligations of Executive with a third-party.
      Executive further agrees to disclose, during the 2 years following the
      termination of Executive’s employment with the Company, the substance of the
      terms of Sections 5, 6, 7, and 9 of this Agreement to any potential future
      employer, joint venturer, contractor, partner, or any other person who may
      be
      directly affected by such provisions.

     

    12.  Executive
      Covenant.
      Following his employment with the Company, to the extent the Company reasonably
      so requests, Executive agrees to cooperate with the Company and its counsel
      in
      the contest or defense of, and to provide any testimony and access to his books
      and records in connection with, any action, arbitration, audit, hearing,
      investigation, litigation or suit involving or relating to any action, activity,
      circumstance, condition, conduct, event, fact, failure to act, incident,
      occurrence, plan, practice, situation, status or transaction involving the
      Company while he was employed by the Company. The Company shall reimburse
      Executive for all reasonable expenses incurred by Executive in connection with
      providing such cooperation. For its part, the Company shall (i) make every
      reasonable effort to arrange for such cooperation to be provided by Executive
      at
      mutually-convenient times and places and otherwise in a manner that does not
      interfere unreasonably with Executive’s employment, search for employment, or
      retirement, and (ii) compensate Executive reasonably for any professional
      services rendered (except in a situation where Executive is providing testimony
      in a court of law or administrative proceeding on behalf of the Company, in
      which case Executive shall only receive legally mandated witness fees and
      reimbursement of his reasonable expenses).

     

    13.  Amendments,
      Entire Agreement.
      No
      modification, amendment, or waiver of any of the provisions of this Agreement
      shall be effective unless such modification, amendment, or waiver is in writing
      specifically referring hereto, and signed by the parties hereto. This Agreement
      supersedes all prior agreements and understandings between Executive and the
      Company, except previously-executed LTIP-related agreements between Executive
      and the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    14.  Assignments.
      This
      Agreement shall be freely assignable by the Company to, and shall inure to
      the
      benefit of and be binding upon, the Company, its successors, assigns and any
      other entity which shall succeed to the business presently being conducted
      by
      the Company. As a contract for personal services, neither this Agreement nor
      any
      rights hereunder shall be assigned by Executive.

     

    15.  Choice
      of Forum and Governing Law; Attorneys’ Fees.

     

    15.1. Any
      litigation involving this Agreement shall be filed and conducted in the state
      or
      federal courts in Michigan; and (ii) the Agreement shall be interpreted in
      accordance with and governed by the laws of the State of Michigan, without
      regard to any conflict of law principles thereof.

     

    15.2. The
      Company shall promptly pay all legal fees and expenses incurred by Executive
      in
      seeking to obtain any benefits or payments under, or otherwise enforce, this
      Agreement, in connection with a Change in Control. Such payments shall be made
      to Executive within 15 days after Executive’s submission of a written request
      therefor; provided, however, that Executive shall provide supporting
      documentation for the fees and expenses for which reimbursement is sought as
      the
      Company may reasonably require. In the event that a court of competent
      jurisdiction shall determine that Executive has pursued such claims for benefits
      or payments under, or enforcement of, this Agreement in bad faith, or advanced
      frivolous claims in connection therewith, Executive shall promptly repay all
      or
      part of such attorneys’ fees and expenses, as such court shall determine are
      directly attributable to such bad faith or frivolous claims.

     

    16.  Headings.
      Section
      headings are provided in this Agreement for convenience only and shall not
      be
      deemed to alter the content of such sections.

     

    17.  Execution
      of Agreement.
      This
      Agreement may be executed in one or more counterparts, each of which will be
      deemed to be an original copy of this Agreement and all of which, when taken
      together, will be deemed to constitute one and the same agreement. The exchange
      of copies of this Agreement and of signature pages by facsimile transmission
      shall constitute effective execution and delivery of this Agreement as to the
      parties and may be used in lieu of the original Agreement for all purposes.
      Signatures of the parties transmitted by facsimile shall be deemed to be their
      original signatures for all purposes.

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      as
      of the day and year first above written.

     

     

    SEMCO
      ENERGY INC.

     

    By:
      /s/George
      A. Schreiber, Jr.  

     

    Name:
      George A. Schreiber, Jr.

     

    Title:
      President and Chief Executive Officer

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXECUTIVE

     

    /s/Eugene
      N. Dubay  

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      A

     

    Executive’s
      title shall be: Senior Vice President and Chief Operating Officer.

     

    Executive
      shall report to the Company’s President and Chief Executive
      Officer.

     

    Executive’s
      functions, authority, duties, and responsibilities shall include (without
      limitation): Overall responsibility for, and supervision of, all operational
      matters involving or otherwise affecting the Company’s local distribution
      business, including (without limitation) advising the Board of Directors with
      respect to all such matters, determining and implementing the Company’s
      operational strategies and activities, and controlling all expenditures related
      thereto. Executive shall at all times be a member of the Company’s senior
      executive group, for the purpose of providing the benefit of his business
      experience to the Company.

     

    EXHIBIT
      B

     

    Executive’s
      annual Base Salary shall be $260,000.

     

    EXHIBIT
      C

     

    Executive’s
      Target Annual Bonus shall be 40% multiplied by his Base Salary.

     

    EXHIBIT
      D

     

    Executive
      has previously been granted the following Options, at $4.610/share: 30,000.
      Except as otherwise provided herein, such Options shall vest as
      follows:

     

    33%    September
      2, 2005

     

    33%    September
      2, 2006

     

    34%    September
      2, 2007

     

    Executive’s
      Long-Term Incentive Award Target is 50% multiplied by his Base Salary. Except
      as
      otherwise provided herein, Executive shall vest in the Options only if he is
      still employed on the dates set forth above.

     

    EXHIBIT
      E

     

    Executive
      has previously been granted the following Restricted Stock Units. Except as
      otherwise provided herein, the restrictions on such Restricted Stock Units
      shall
      lapse and the Executive shall be entitled the shares of Common Stock represented
      by the Restricted Stock Units as set forth below:

     

    5,000 Number
      of
      Restricted Stock Units on which the restrictions shall lapse on September 2,
      2005.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2,500 Number
      of
      Restricted Stock Units on which the restrictions shall lapse upon March 31,
      2006, if Executive has met the performance targets applicable
      thereto.

     

    2,500 Number
      of
      Restricted Stock Units on which the restrictions shall lapse upon March 31,
      2007, if Executive has met performance targets applicble thereto.

     

    With
      respect to Restricted Stock Units as to which all restrictions lapse on March
      31, 2006, and March 31 2007, Executive shall be entitled to the shares of Common
      Stock represented by the Restricted Stock Units only if he is still employed
      on
      such dates.

     

    EXHIBIT
      F

     

    Executive
      shall be granted the following additional service and retirement
      considerations:

     

    (a) On
      the
      fifth anniversary of Executive’s first being employed by the Company, he shall
      receive an additional 5 Years of Service with the Company, as defined in the
      SERP.

     

    (b) If,
      prior
      to the fifth anniversary of Executive’s first being employed by the Company, a
      transaction constituting a Change in Control is consummated, in lieu of the
      additional credited service provided under Exhibit F (a), as of the day
      immediately preceding the day on which such Change in Control transaction is
      consummated, he shall receive an additional 5 Years of Service with the Company
      and shall be deemed as eligible to Retire, as defined in the SERP.

     

    EXHIBIT
      G

     

    The
      following perquisites shall be provided to Executive, at Company
      expense:

     

    (1) Cellular
      telephone.

     

    (2) Reimbursement
      of the cost of an annual physical examination.

     

    (3) Payment
      of membership dues to professional organizations.

     

    (4) Reimbursement
      for annual tax preparation expenses in an amount not to exceed $2,500 per
      year.

     

    (5) A
      per
      month cash car allowance as provided in the Company’s then-existing car
      allowance policy (currently $600).

     

    EXHIBIT
      H

     

    Executive
      shall be entitled to a Gross-Up Payment for Excise Taxes, as
      follows:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (a) In
      the
      event it shall be determined that any payment or distribution by the Company
      to
      or for the benefit of the Executive (whether paid or payable or distributed
      or
      distributable pursuant to the terms of this Agreement or otherwise, but not
      including any additional payments required by this Exhibit H)(a “Payment”) would
      be subject to the excise tax imposed by Section 4999 of the Internal Revenue
      Code, as amended, or any interest or penalties are incurred by the Executive
      with respect to such excise tax (such excise tax, together with any such
      interest and penalties, are hereinafter collectively referred to as the “Excise
      Tax”), then the Executive shall be entitled to receive from the Company an
      additional payment (a "Gross-Up Payment") in an amount that allows Executive
      to
      retain that part of the Gross-Up Payment equal to the Excise Tax imposed upon
      the Payments after deducting from the Gross-up Payment all taxes (including,
      without limitation, the Excise Tax on the payments, the Excise Tax on the
      Gross-Up Payment, any income taxes and all interest and penalties imposed with
      respect to any of such taxes). Notwithstanding the foregoing provisions of
      this
      Exhibit H, if it shall be determined that the Executive is entitled to a
      Gross-Up Payment, but that the Payments do not exceed 110% of the greatest
      amount (the "Reduced Amount") that could be paid to the Executive such that
      the
      receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
      Payment shall be made to the Executive and the Payments, in the aggregate,
      shall
      be reduced to the Reduced Amount.

     

    (b) Subject
      to the provisions of Exhibit H(c), all determinations required to be made under
      this Exhibit H, including whether and when a Gross-Up Payment is required and
      the amount of such Gross-Up Payment and the assumptions to be utilized in
      arriving at such determination, shall be made by a nationally recognized
      accounting firm selected by the Company for this purpose prior to the
      consummation of a transaction constituting a Change in Control (the "Accounting
      Firm"), which shall provide detailed supporting calculations both to the Company
      and the Executive within 15 business days of the receipt of notice from the
      Executive that there has been a Payment, or such earlier time as is requested
      by
      the Company. In the event that the Accounting Firm is serving as accountant
      or
      auditor for the individual, entity or group effecting the Change in Control,
      the
      Executive shall appoint another nationally recognized accounting firm to make
      the determinations required hereunder (which accounting firm shall then be
      referred to as the Accounting Firm hereunder). All fees and expenses of the
      Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
      as
      determined pursuant to this Exhibt H, shall be timely paid by the Company on
      behalf of the Executive directly to the appropriate taxing authorities. Any
      determination by the Accounting Firm shall be binding upon the Company and
      the
      Executive. As a result of the uncertainty in the application of Section 4999
      of
      the Code at the time of the initial determination by the Accounting Firm
      hereunder, it is possible that Gross-Up Payments which should have been made
      ("Underpayment"), consistent with the calculations required to be made hereunder
      will not have been made by the Company. In the event that the Company exhausts
      its remedies pursuant to Exhibit H(c), and the Executive thereafter is required
      to make a payment of any Excise Tax, the Accounting Firm shall determine the
      amount of the Underpayment that has occurred and any such Underpayment shall
      be
      promptly paid by the Company to the appropriate taxing authorities for the
      benefit of the Executive. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c) Executive
      shall notify the Company in writing of any claim by the Internal Revenue Service
      that, if successful, would require the payment by the Company of the Gross-Up
      Payment. Such notification shall be given as soon as practicable but no later
      than 20 days after the Executive is informed in writing of such claim and shall
      apprise the Company of the nature of such claim and the date on which such
      claim
      is requested to be paid. Executive shall not pay such claim prior to the
      expiration of the 30-day period following the date on which it gives such notice
      to the Company (or such shorter period ending on the date that any payment
      of
      taxes with respect to such claim is due). If the Company notifies the Executive
      in writing prior to the expiration of such period that it desires to contest
      such claim, the Executive shall:

    

     

    (i)
      give
      the Company any information reasonably requested by the Company relating to
      such
      claim;

     

    (ii)
      take
      such action in connection with contesting such claim as the Company shall
      reasonably request in writing from time to time, including, without limitation,
      accepting legal representation with respect to such claim by an attorney
      reasonably selected by the Company;

     

    (iii)
      cooperate with the Company in good faith in order effectively to contest such
      claim; and

     

    (iv)
      permit the Company to participate in any proceedings relating to such
      claim;

     

    provided,
      however, that the Company shall bear and pay directly all costs and expenses
      (including additional interest and penalties) incurred in connection with such
      contest and shall indemnify and hold the Executive harmless, on an after-tax
      basis, for any Excise Tax or income tax (including interest and penalties with
      respect thereto) imposed as a result of such representation and payment of
      costs
      and expenses. Without limiting the foregoing provisions of this Exhibit H(c),
      the Company shall control all proceedings taken in connection with such contest
      and, in its sole discretion, may pursue or forgo any and all administrative
      appeals, proceedings, hearings and conferences with the taxing authority in
      respect of such claim and may, in its sole discretion, either direct the
      Executive to pay the tax claimed and sue for a refund or contest the claim
      in
      any permissible manner, and the Executive agrees to prosecute such contest
      to a
      determination before any administrative tribunal, in a court of initial
      jurisdiction and in one or more appellate courts, as the Company shall
      determine; provided, however, that if the Company directs the Executive to
      pay
      such claim and sue for a refund, the Company shall advance the amount of such
      payment to the Executive, on an interest-free basis and shall indemnify and
      hold
      the Executive harmless, on an after-tax basis, from any Excise Tax or income
      tax
      (including interest or penalties with respect thereto) imposed with respect
      to
      such advance or with respect to any imputed income with respect to such advance;
      and further provided that any extension of the statute of limitations relating
      to payment of taxes for the taxable year of the Executive with respect to which
      such contested amount is claimed to be due is limited solely to such contested
      amount. Furthermore, the Company's control of the contest shall be limited
      to
      issues with respect to which a Gross-Up Payment would be payable hereunder
      and
      the Executive shall be entitled to settle or contest, as the case may be, any
      other issue raised by the Internal Revenue Service or any other taxing
      authority. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (d) If,
      after
      the receipt by the Executive of an amount advanced by the Company pursuant
      to
      Exhibit H(c), the Executive becomes entitled to receive any refund with respect
      to such claim, the Executive shall (subject to the Company's complying with
      the
      requirements of Exhibit H(c)) promptly pay to the Company the amount of such
      refund (together with any interest paid or credited thereon after taxes
      applicable thereto). If, after the receipt by the Executive of an amount
      advanced by the Company pursuant to Exhibit H(c), a determination is made that
      the Executive shall not be entitled to any refund with respect to such claim
      and
      the Company does not notify the Executive in writing of its intent to contest
      such denial of refund prior to the expiration of 30 days after such
      determination, then such advance shall be forgiven and shall not be required
      to
      be repaid and the amount of such advance shall offset, to the extent thereof,
      the amount of Gross-Up Payment required to be paid.

     

    

     

    EXHIBIT
      I

     

    FORM
      OF GENERAL RELEASE OF CLAIMS

     

    For
      good
      and valuable consideration set forth in the agreement (the “Agreement”) between
      [INSERT NAME OF EMPLOYEE] (“Employee”) and SEMCO Energy, Inc. (together with its
      subsidiaries, affiliates, and successors and the directors, officers, employees,
      agents thereof, the “Company”), the sufficiency of which is hereby acknowledged,
      Employee and the Company agree as follows:

     

    1. General
      Release of Claims.
      Except
      as expressly provided in the Agreement, Employee, for himself and him
      dependents, heirs, executors, administrators, representatives, and assigns,
      irrevocably releases and forever discharges the Company of and from, and agrees
      to indemnify and hold the Company harmless from, any and all manner of claims,
      suits, actions, causes of action, demands, charges, complaints, or obligations
      of any sort whatsoever (including claims for costs and attorneys’ fees), direct
      or indirect, fixed or contingent, known and unknown, in law or in equity, which
      he ever had, now has, or may have against the Company arising in any way
      whatsoever from or in connection with his employment at, or the termination
      of
      his employment with, the Company. Without limiting the generality of the
      foregoing, it is understood and agreed that this General Release of Claims
      specifically includes any and all claims for: breach of express or implied
      contract or covenant; violation of any federal, state or local statute, rule,
      regulation, or order (including the Equal Pay Act of 1963, Title VII of the
      Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967,
      the
      Americans with Disabilities Act of 1990, the Elliott-Larsen Civil Rights Act,
      and the Michigan Persons with Disabilities Act); tort; and breach of any
      statutory or common law duties or doctrines.

     

    2. Certain
      Matters Not Covered by General Release of Claims. This
      General Release of Claims does not, and is not intended to, release, discharge
      or in any way remove or otherwise limit or affect any claims, suits, actions,
      causes of action, demands, charges, complaints, or obligations of any sort
      whatsoever (including claims for costs and attorneys’ fees) arising in
      connection with or under or relating in any way to either party’s performance of
      their obligations under the Agreement.

     

    3. No
      Admission of Liability.
      Neither
      the terms nor the existence of the Agreement or the General Release of Claims,
      or the Company’s seeking Employee’s execution of the General Release of Claims,
      shall be construed as an admission of liability by the Company, including that
      it violated any federal, state or local statute, regulation, rule, or order;
      breached any contract or covenant; committed any tort; breached any statutory
      or
      common law duty or doctrine; or otherwise took, or failed to take, any action
      or
      committed any offense that is actionable in any way by Employee.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4. Use
      of Counterparts Authorized.
      The
      General Release of Claims may be executed in counterparts; provided, however,
      that each party to the General Release of Claims shall provide a duly-executed
      copy of it to the other party to the General Release of Claims.

     

    5. Definition.
      In the
      General Release of Claims, the words “include,”“includes,” and “including”
      shall mean include, includes, or including without limitation.

     

    6. Parties
      Are Acting Freely, on an Informed Basis, with the Opportunity to Seek the Advice
      of Counsel.
      Employee
      and the Company each acknowledge that they: are acting of their own free will;
      fully understand both the Agreement and the General Release of Claims; and
      have
      had the opportunity to seek the advice of an attorney about these important
      legal documents affecting their rights.

     

    7. Governing
      Law and Venue.
      The
      Agreement and the General Release of Claims shall be governed and construed
      in
      accordance with the laws of the State of Michigan, without regard to the
      conflict of laws provisions thereof. Any action related in any way whatsoever
      to
      the Agreement or General Release of Claims shall be brought in a court of
      competent jurisdiction in the State of Michigan.

     

    8. Time
      to Consider General Release of Claims; Right to Revoke; Effect of
      Revocation.
      Employee
      acknowledges that: (i) he may consider whether to execute the General Release
      of
      Claims for up to 21 days; and (ii), after executing the General Release of
      Claims, he may revoke it within 7 days, by giving notice, in writing, to the
      Company’s General Counsel, c/o SEMCO Energy, Inc., 2301 West Big Beaver Road -
      Suite 921, Troy, Michigan 48084. If Employee revokes the General Release of
      Claims as provided herein, Employee shall promptly repay to the Company any
      severance and related benefits paid to him under the Agreement.

     

    9. Entire
      Agreement.
      The
      Agreement and the General Release of Claims constitute the entire agreement
      between Employee and the Company with respect to the subject-matter hereof.
      They
      acknowledge that they are not relying on any representations or statements
      (written or oral) not contained therein.Exhibit 10.7 - Clark Severance Agreement

    Exhibit
      10.7 - Clark Severance Agreement

    

    SEVERANCE
      AGREEMENT

     

    This
      Severance Agreement (the “Agreement”) is made and entered into as of this
      29th
      day of
      June, 2005 (the “Effective Date”), by and between SEMCO Energy Inc., a Michigan
      corporation (the “Company”), and Peter F. Clark (“Executive”).

     

    WHEREAS,
      Executive desires to be employed, or to continue to be employed, by the
      Company;

     

    WHEREAS,
      among other things, the Company believes that, in the event a transaction is
      proposed that would, if consummated, constitute a Change in Control (as defined
      below), it is important to the Company that Executive be induced to remain
      in
      his position and focused on pursuing the best interests of the Company and
      its
      shareholders and not be distracted by personal uncertainties and risks created
      by the prospect of such a Change in Control;

     

    WHEREAS,
      the Company desires to employ, or continue to employ, Executive, on the terms
      and conditions set forth in this Agreement, which, except as provided herein,
      is
      intended to supersede all prior such agreements and understandings between
      Executive and the Company;

     

    NOW,
      THEREFORE, in consideration of the compensation and other benefits of
      Executive’s employment and, if applicable, Executive’s continued employment, by
      the Company and the mutual covenants and agreements hereinafter set forth,
      Executive and the Company agree as follows:

     

    
      	
              1.

            	
              Employment.

            

    

     

    1.1. Executive
      is employed by the Company as of the Effective Date, and Executive hereby
      accepts and, if applicable, continues such employment, upon the terms and
      conditions hereinafter set forth. Executive shall be employed by the Company
      in
      the position set forth on Exhibit A and have such functions, authority, duties
      and responsibilities as are customarily given to persons in such positions
      at a
      company with publicly-traded securities, including (without limitation) the
      reporting relationships, functions, authority, duties, and responsibilities
      set
      forth on Exhibit A.

     

    1.2. Executive
      agrees that, throughout Executive’s employment with the Company, Executive will
      (i) faithfully render such services as may be reasonably delegated to, or
      required of, Executive by the Company, (ii) and devote Executive’s entire
      business time, best efforts, ability, skill and attention, in good faith, to
      the
      Company’s business, and (iii) follow and act in accordance with the rules,
      policies, and procedures of the Company. Executive shall serve on a full-time
      basis; provided, however, that it shall not be a breach of this Agreement for
      Executive to serve on corporate, industry trade group, civic or charitable
      boards or committees or to engage in other activities, with the consent of
      the
      President and Chief Executive Officer and so long as such activities do not
      materially interfere with the performance of Executive’s duties and
      responsibilities to the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2. Employment
      “At Will”.
      Executive and the Company agree that Executive’s employment with the Company is
“at will” and is not for any specified term. Accordingly, either Executive or
      the Company may terminate the employment relationship, with or without reason
      therefor, with the notice required by and otherwise in accordance with the
      terms
      of this Agreement.

     

    
      	
              3.

            	
              Compensation.

            

    

     

    3.1. Base
      Salary.
      The
      Company shall pay Executive as compensation for Executive’s services an annual
      base salary (as initially established and as it may change from time to time,
      the “Base Salary”) set forth on Exhibit B, payable beginning on the Effective
      Date in accordance with the Company’s usual payroll practices. The amount of
      Executive’s Base Salary shall be reviewed annually by the Board of Directors,
      which may increase, but not decrease, Executive’s Base Salary.

     

    3.2. Bonus.
      The
      Company shall pay Executive an annual lump sum bonus in accordance with the
      Company’s then-existing Short-Term Incentive Plan (the “STIP”), which shall
      afford Executive a reasonable opportunity to earn annual lump sum payments
      (i)
      based on the percentage set forth in Exhibit C multiplied by his Base Salary
      (as
      initially established and as it may increase from time to time,
      the
“Target Annual Bonus”), and (ii), depending on his performance and the financial
      performance of the Company, such lesser or greater annual lump sum payments
      as
      may be awarded under the STIP.

     

    3.3. Options;
      Long-Term Incentive Plan Participation.

     

    3.3.1. Executive
      has been granted options to acquire the number of shares of the Company’s Common
      Stock set forth on Exhibit D (the “Options”). The Options were granted
      under the Company's Long-Term Incentive Plan (as it exists from time to time,
      the “LTIP”) and vest as set forth on Exhibit D; provided, however, that,
      notwithstanding that vesting schedule, Executive shall vest in the Options,
      to
      the extent not already vested, upon (a)
      the
      consummation of a transaction constituting a Change in Control, (b) the
      Company’s termination of Executive’s employment without Cause, or (c) the
      Executive’s termination of his employment with Good Reason.

     

    3.3.2. In
      addition, Executive shall participate in the LTIP and be considered for
      additional awards thereunder at such times as such awards are made to other
      senior executives of the Company. Any such LTIP awards shall be made on
      substantially the same terms as awards made to such other senior executives.
      Exhibit D sets forth Executive’s annual long-term incentive award target, which
      is the
      percentage set forth in Exhibit D multiplied by his Base Salary (as
      initially established and as it may increase from time to time,
      the
“Long-Term Incentive Award Target”). Annual long-term incentive
      awards
      to
      satisfy the Long-Term Incentive Target may be made up of awards of options
      to
      purchase the Company’s Common Stock, restricted stock units, or other kinds of
      long-term incentives authorized by the LTIP.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.4. Restricted
      Stock Units.
      Executive has been granted the number of restricted stock units, representing
      shares of the Company’s Common Stock, set forth on Exhibit E (the “Restricted
      Stock Units”). Such Restricted Stock Units were granted under the LTIP, and the
      restrictions with respect to the Restricted Stock Units shall lapse and
      Executive shall be entitled to the shares of Common Stock represented by such
      Restricted Stock Units as set forth on Schedule E; provided,
      however, that, notwithstanding the schedule set forth on Exhibit E, all such
      restrictions shall lapse and Executive shall be entitled to the shares of Common
      Stock represented by such Restricted Stock Units, to the extent such
      restrictions have not already lapsed and the shares vested, upon (a)
      the
      consummation of a transaction constituting a Change in Control, (b) the
      Company’s termination of Executive’s employment without Cause, or (c) the
      Executive’s termination of his employment with Good Reason. In no case shall
      shares of the Company’s Common Stock represented by the Restricted Stock Units
      be delivered to the Executive prior to the latest date set forth on Exhibit
      E.

     

    3.5. Retirement
      Benefits.
      Executive shall be eligible to participate in the Company’s Non-Union Retirement
      Plan. In addition, Executive shall be eligible to receive additional retirement
      benefits pursuant to the Company’s Supplemental Executive Retirement Plan, as
      amended from time to time (the “SERP”), including the additional service and
      retirement considerations set forth in Exhibit F.

     

    3.6. Welfare
      Benefits.
      The
      Company shall provide to Executive all benefits for which Executive may be
      eligible under any welfare benefit plans, practices, policies, and programs
      as
      may be provided by the Company from time to time (including, without limitation,
      medical, prescription, dental, disability, employee life, group life, accidental
      death and travel accident insurance plans and programs) to the extent these
      rights and benefits are generally made available to other employees of the
      Company.

     

    3.7. Expense
      Reimbursement.
      The
      Company shall promptly reimburse Executive for reasonable expenses (including
      entertainment expenses) incurred by Executive while attending to the business
      of
      the Company, in accordance with the Company’s then-existing business expense
      reimbursement policies.

     

    3.8. Other
      Perquisites.
      Executive shall be provided with the perquisites set forth on Exhibit
      G.

     

    3.9. Relocation
      Expenses.
      In
      connection with Executive’s relocation to Michigan (if applicable), Executive
      shall be reimbursed, on an after-tax equivalent basis, for relocation expenses
      in accordance with the Company’s then-effective Relocation Policy. (For purposes
      of the preceding sentence, “an after-tax equivalent basis” shall mean that
      Executive will be reimbursed in amount which will provide him a reimbursement
      amount which after the payment of all federal, state, and local income and
      employment taxes would equal the amount he would have received if the
      reimbursement were not subject to such taxation when made.)

     

    3.10. Vacation.
      Executive shall be entitled to 4 weeks of paid vacation in each calendar year.
      Unused vacation shall carry over from year-to-year in accordance with the
      Company’s then-effective vacation carryover policy.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.11. Directors
      and Officers Insurance and Indemnification.
      Executive shall be covered under the Company’s then-existing directors and
      officers insurance policy. Executive also shall be indemnified as provided
      in
      the Company’s then-existing bylaws and Articles of Incorporation.

     

    3.12. Executive
      hereby consents to the imposition of reasonable Company Common Stock ownership
      guidelines established by the Board of Directors.

     

    
      	
              4.

            	
              Termination
                of Employment.

            

    

     

    4.1. Executive’s
      employment may be terminated by the Company as follows:

     

    4.1.1. Termination
      Due to Death.
      Executive’s employment shall be terminated immediately upon the death of the
      Executive.

     

    4.1.2. Termination
      Due to Disability.
      If the
      Company determines, in good faith, that the Disability (as defined below) of
      Executive has occurred, it may give Executive written notice of its intention
      to
      terminate Executive’s employment. In such event, Executive’s employment shall
      terminate effective on the 30th
      day
      after receipt of such notice by Executive (the “Disability Effective Date”), if
      , within 30 days after such receipt, Executive shall not have returned to the
      performance of his essential functions, with or without reasonable
      accommodation. For purposes of this Agreement, “Disability” shall mean the
      inability of Executive to perform a material portion of his duties for 180
      consecutive days as a result of incapacity due to a mental or physical
      condition, which is determined to be total and permanent by a physician selected
      by the Company.

     

    4.1.3. Termination
      for Cause.
      The
      Company may terminate Executive’s employment at any time for Cause. For the
      purposes of this Agreement, “Cause” shall mean:

     

    4.1.3.1.  Executive’s
      continued failure or inability to perform any material duties reasonably
      assigned to Executive (other than any such failure resulting from Executive’s
      death or Disability) or Executive’s substantial performance deficiencies, after
      (i) Executive is given a written demand by the Board of Directors identifying
      the manner in which the Company believes (a) Executive has not performed such
      duties or, as applicable, (b) the reasons for finding Executive’s performance to
      be deficient, and (ii) Executive’s subsequent failure to (a) cure or (b)
      otherwise address, to the reasonable satisfaction of the Board of Directors,
      the
      matters set forth in such written demand within 30 days (which, if a transaction
      contituting a Change in Control has been consummated at the time such demand
      is
      made, shall be extended to 60 days); or

     

    4.1.3.2.  a
      material breach of this Agreement by Executive; or

     

    4.1.3.3.  Executive’s
      commission of fraud against the Company or his engaging in willful misconduct
      which is materially injurious to the Company, monetarily or otherwise;
      or

     

    4.1.3.4.  Executive’s
      willful misconduct involving a third party or conviction of a felony or
      submission of a guilty or nolo contendere plea by Executive with respect
      thereto.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.1.4. For
      purposes of this definition, no act or omission on Executive’s part shall be
      considered “willful” unless done or omitted to be done by Executive in bad
      faith, recklessly, or in the absence of a reasonable belief that Executive’s act
      or omission was in the best interests of the Company.

     

    4.1.5. Termination
      without Cause.
      The
      Company may terminate Executive’s employment for any reason not amounting to
      Cause, upon not less than 60 days’ prior written notice to
      Executive.

     

    4.2. Executive’s
      employment may be terminated by Executive as follows:

     

    4.2.1. Termination
      by Executive with Good Reason.
      Executive’s employment may be terminated by Executive at any time with Good
      Reason. For the purposes of this Agreement, “Good Reason” shall mean any of the
      following actions taken without Executive’s consent, in writing:

     

    4.2.1.1.  the
      assignment to Executive of any duties that are materially inconsistent with
      Executive’s position (including status, office, titles and reporting
      relationships), functions, authority, duties or responsibilities as contemplated
      by this Agreement, or any other action by the Company which results in a
      material diminution in Executive’s position, functions, authority, duties, or
      responsibilities, excluding an isolated, insubstantial and inadvertent action
      not taken in bad faith and which is remedied by the Company within 30 days
      after
      receipt of written notice thereof given by Executive; or

     

    4.2.1.2.  a
      material breach of this Agreement by the Company; or

     

    4.2.1.3.  a
      reduction in Executive’s Base Salary, Target Annual Bonus, or Long-Term
      Incentive Award Target; or

     

    4.2.1.4.  after
      a
      transaction constituting a Change in Control has been consummated, the
      relocation of the Company’s headquarters by more than 50 miles or the assignment
      of Executive to a work location that is more than 50 miles from his work
      location (as determined by his work location immediately preceding the
      announcement of the transaction which, when consummated, constituted the Change
      in Control referred to in this sentence); provided, however, that to the extent
      reasonably required and substantially consistent with such travel immediately
      prior to consummation of the transaction constituting a Change in Control,
      travel by the Executive on Company business shall not be deemed a change in
      his
      work location; or

     

    4.2.1.5.  the
      failure of any successor to the Company to adopt and agree to be bound by this
      Agreement, in writing, and thereafter honor the Company’s obligations
      hereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.2.2. Anything
      in this Agreement to the contrary notwithstanding, if (i) a transaction
      constituting a Change in Control is consummated, (ii) Executive’s employment
      with the Company is terminated within one year prior to the date on which such
      consummation occurred, and (iii) it is reasonably demonstrated by the Executive
      that such termination of employment (a) was at the request of a third party
      which had taken, or subsequently took, steps reasonably calculated to effect
      a
      Change in Control, or (b) otherwise arose in connection with or anticipation
      of
      a transaction which, if consummated, would constitute a Change in Control,
      then,
      for purposes of this Agreement and notwithstanding any other action taken by
      the
      Company or Executive (including the execution of a general release of claims),
      Executive’s termination shall be deemed to have occurred with Good Reason after
      consummation of a transaction constituting a Change in Control.

     

    4.2.3. Termination
      by Executive without Good Reason.
      Executive’s employment may be terminated by Executive, for any reason not
      amounting to Good Reason, upon not less than 60 days’ prior written notice to
      the Company.

     

    4.3. Notice
      of Termination.
      Any
      termination of Executive’s employment (other than by death) shall be
      communicated to the other party by Notice of Termination given in accordance
      with this section. For purposes of this Agreement, a “Notice of Termination”
      means a written notice which (i) states the specific termination provision
      in
      this Agreement relied upon, (ii), to the extent applicable, sets forth in
      reasonable detail the facts and circumstances claimed to provide a basis for
      termination of Executive’s employment under the provision so indicated, and
      (iii) if the Date of Termination (as defined below) is other than the date
      of
      receipt of such notice, specifies the termination date.

     

    4.4. Date
      of Termination.
“Date
      of Termination” means: (i) if Executive’s employment is terminated by reason of
      death or Disability, the Date of Termination shall be the date of death of
      Executive or the Disability Effective Date, as the case may be; (ii) if
      Executive’s employment is terminated by the Company for Cause or by Executive
      with Good Reason, the date of receipt of the Notice of Termination or any later
      date specified therein, as the case may be; (iii) if Executive’s employment is
      terminated by the Company without Cause or is terminated by Executive without
      Good Reason, the Date of Termination shall be the date specified in the notice,
      which must be at least 60 days after the notice is given.

     

    4.5. Obligations
      upon Termination.
      Upon
      Executive’s termination, this Agreement shall terminate and all rights and
      obligations of the parties hereunder shall cease, except (i) as otherwise
      expressly provided herein, and (ii) for the following:

     

    4.5.1. In
      any
      event, Executive shall be entitled to receive his Base Salary through the Date
      of Termination to the extent not theretofore paid, any accrued vacation pay,
      and
      to the extent not theretofore paid or provided, any other amounts or benefits
      (including, without limitation, vested benefits) required to be paid or provided
      under any plan, program, policy or agreement (including, without limitation,
      to
      the extent it has been earned for the preceding year but not paid, Executive’s
      annual lump sum bonus).

     

    4.5.2. If
      Executive’s employment is terminated by death or Disability, by the Company with
      Cause, or by the Executive without Good Reason, no further payments shall be
      due
      and owing to Executive hereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.5.3. If
      Executive’s employment is terminated by the Company without Cause or by the
      Executive with Good Reason, then Executive shall thereafter receive (i) an
      amount equal to 2 times
      the sum
      of (a) his Base Salary plus
      (b) his
      Target Annual Bonus, payable in accordance with the Company's usual payroll
      practices, or (ii) in the event that a transaction constituting a Change in
      Control has been consummated within the 24 months preceding such termination,
      an
      amount equal to 2.99 times
      the
      sum
      of (a) his Base Salary plus
      (b)
      his
      Target Annual Bonus, payable in a lump sum within 60 days following the Date
      of
      Termination, together with (y) the pro rata portion of the annual lump sum
      bonus
      earned by Executive for the year in which his employment is terminated,
      calculated based on his Target Annual Bonus and without any other adjustment
      for
      Executive’s performance or otherwise, and (z) any Gross-Up Payment for Excise
      Taxes described in Exhibit H.

     

    4.5.4. If
      Executive’s employment is terminated by the Company without Cause or by
      Executive with Good Reason, then the Company shall thereafter continue medical
      and other welfare benefits coverages for Executive and Executive’s family, which
      shall be substantially the same as those which would have been provided to
      them
      under the plans, programs, practices and policies described in Section 3.6
      as if
      Executive’s employment had not been terminated, (i) for 2 years, or (ii) in the
      event that a transaction constituting a Change in Control has been consummated
      within the 24 months preceding such termination, for 3 years; provided, however,
      that if Executive becomes re-employed with another employer and is eligible
      to
      receive substantially similar medical and other welfare benefits coverages
      under
      another employer’s plans, at substantially similar cost to Executive, then the
      Company-provided medical and other welfare benefit coverages described herein
      shall be deemed secondary to such other medical and other welfare benefit
      coverages.

     

    4.5.5. Executive
      shall be entitled to continue, at his expense, medical or other welfare benefits
      for Executive and Executive’s family, as provided under state or federal law,
      after the medical and other welfare benefits coverages provided under Section
      4.5.4 end.

     

    4.5.6. If
      Executive’s employment is terminated by the Company without Cause or by
      Executive with Good Reason, the Company shall pay the actual cost of
      outplacement services for Executive up to a total of $10,000.

     

    4.5.7. As
      a
      condition of receiving any payments or benefits pursuant to Sections 4.5.3,
      4.5.4, or 4.5.6, Executive shall execute a general release of claims (including,
      without limitation, any claims arising under federal, state, or local law,
      rules, regulations, or orders related to the termination of Executive’s
      employment and this Agreement) substantially in the form attached hereto at
      Exhibit I.

     

    4.5.8. Executive
      shall not be required to mitigate the amount of any payment or benefit provided
      hereunder by seeking other employment or otherwise. Except as provided herein,
      the amount of any such payment or benefits hereunder shall not be reduced by
      any
      compensation earned, payment made, or benefits received by Executive as a result
      of obtaining such employment or engaging in any other other
      activity.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.5.9. The
      termination of Executive’s employment pursuant to this Section 4 or otherwise
      shall not terminate or otherwise affect the rights and obligations of the
      parties pursuant to Sections 5 through 15.

     

    4.6. For
      purposes of this Section 4, the following definitions shall apply:

     

    4.6.1. “Change
      in Control” shall mean:

     

    4.6.1.1.  the
      direct or indirect sale, lease, exchange or other transfer of all or
      substantially all of the assets of the Company to any Person or entity or group
      of Persons or entities acting in concert as a partnership or other group (a
      “Group of Persons”) (other than a Person described in clause (i) of the
      definition of Affiliate);

     

    4.6.1.2.  the
      consummation of any consolidation or merger of the Company with or into another
      corporation with the effect that the stockholders of the Company immediately
      prior to the date of the consolidation or merger hold less than 51% of the
      combined voting power of the outstanding voting securities of the surviving
      entity of such merger or the corporation resulting from such consolidation
      ordinarily having the right to vote in the election of directors (apart from
      rights accruing under special circumstances) immediately after such merger
      or
      consolidation;

     

    4.6.1.3.  the
      stockholders of the Company shall approve any plan or proposal for the
      liquidation or dissolution of the Company;

     

    4.6.1.4.  a
      Person
      or Group of Persons acting in concert as a partnership, limited partnership,
      syndicate or other group shall, as a result of a tender or exchange offer,
      open
      market purchases, privately negotiated purchases or otherwise, have become
      the
      direct or indirect beneficial owner (within the meaning of Rule 13d-3 under
      the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (“Beneficial
      Owner”) of securities of the Company representing 30% or more of the combined
      voting power of the then outstanding securities of the Company ordinarily (and
      apart from rights accruing under special circumstances) having the right to
      vote
      in the election of directors; or

     

    4.6.1.5.  a
      Person
      or Group of Persons, together with any Affiliates thereof, shall succeed in
      having a sufficient number of its nominees elected to the Board of Directors
      such that such nominees, when added to any existing director remaining on the
      Board of Directors after such election who is an Affiliate of such Person or
      Group of Persons, will constitute a majority of the Board of
      Directors.

     

    4.6.2. “Affiliate”
      of any specified Person shall mean (i) any other Person which, directly or
      indirectly, is in control of, is controlled by or is under common control with
      such specified Person or (ii) any other Person who is a director or officer
      (A)
      of such specified Person, (B) of any subsidiary of such specified Person or
      (C)
      of any Person described in clause (i) above or (iii) any Person in which such
      Person has, directly or indirectly, a five (5) percent or greater voting or
      economic interest or the power to control. For the purposes of this definition,
      “control” of a Person means the power, direct or indirect, to direct or cause
      the direction of the management or policies of such Person whether through
      the
      ownership of voting securities, or by contract or otherwise; and the terms
      “controlling” and “controlled” have meanings correlative to the
      foregoing.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.6.3. “Person”
      shall mean any individual, corporation, partnership, joint venture, association,
      joint-stock company, trust, unincorporated organization, government or any
      agency or political subdivision thereof or any other entity within the meaning
      of Section 13(d)(3) or 14(d)(2) of the Exchange Act.

     

    4.6.4. “Voting
      Power” shall mean the voting power of all securities of a Person then
      outstanding generally entitled to vote for the election of directors of the
      Person (or, where appropriate, for the election of persons performing similar
      functions).

     

    4.6.5. Nothwithstanding
      the foregoing, the Board of Directors may determine, after a review of the
      facts
      and circumstances surrounding a particular transaction, in its sole discretion,
      that consummation of the transaction shall constitute a Change in Control for
      purposes of this Agreement.

     

    
      	
              5.

            	
              Confidential
                Information.

            

    

     

    5.1. Both
      during his employment and for a period of 2 years following termination of
      his
      employment, Executive shall exercise due care to protect from disclosure all
      secret or confidential information, knowledge or data relating to the Company,
      its businesses and strategic plans, possessed or known by or disclosed or made
      available to Executive during his employment and which shall not be or have
      become public knowledge (other than as a result of a breach of this
      Agreement).

     

    5.2. For
      a
      period of 2 years following termination of his employment, Executive shall
      not,
      without the prior written consent of the Company, communicate or divulge any
      such secret or confidential information, knowledge or data to any other person,
      except as required by law; provided that, in any such case, Executive shall
      give
      the Company prompt prior written notice of such legal requirement so that the
      Company may seek, at its sole expense, a protective order or other appropriate
      remedy to protect such information from disclosure or to limit such
      disclosure.

     

    5.3. Nothing
      in Sections 5.1 or 5.2 hereof shall be deemed to modify in any way Executive’s
      professional obligations with respect to maintaining the confidentiality of
      information learned in connection with his representing and advising the Company
      as its counsel.

     

    6. Post-Termination
      Restrictions.
      Executive acknowledges that the Company (i) has spent substantial money, time
      and effort to develop secret or confidential information, knowledge or data
      relating to the Company, its businesses and strategic plans, possessed or known
      by or disclosed or made available to Executive during his employment, and (ii)
      is employing Executive with the understanding that, following the termination
      of
      his employment, Executive will not put himself in a position in which the
      Company’s ability to execute its strategic plan might be compromised.
      Accordingly, Executive agrees that during his employment at the Company and
      for
      2 years following the termination of his employment, irrespective of the reasons
      for or circumstances surrounding that termination, Executive shall not, directly
      or indirectly (whether as owner, partner, consultant, employee or otherwise),
      unless the Company consents thereto in writing:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6.1. cause
      or
      attempt to cause any person or entity to divert, terminate, limit, modify or
      fail to enter into any existing or potential business relationship with the
      Company; or

     

    6.2. induce
      or
      attempt to induce any employee, consultant or advisor of the Company to leave
      his or her position with the Company, change his relationship with the Company,
      or accept employment or an affiliation involving a Competing Activity. For
      purposes of this Agreement, a “Competing Activity” is any person or entity which
      is engaged in business in the States of Michigan and Alaska that is competitive
      with any business in which the Company is engaged at the time of the Executive’s
      termination, or which is, on that date, is engaged in a business that is
      competitive with any business described in the Company’s strategic plan approved
      by the Board of Directors.

     

    6.3. Nothing
      in Sections 6.1 and 6.2 hereof shall be deemed to modify in any way Executive’s
      professional obligations with respect to his ability to represent and advise
      clients whose interests are, or may be, adverse to those of the
      Company.

     

    7. Acknowledgment
      Regarding Restrictions.
      Executive acknowledges that the restraints set forth in Sections 5 and 6 (both
      separately and in total) are reasonable and enforceable in view of the Company’s
      legitimate interests in protecting its secret or confidential information,
      knowledge or data relating to the Company, its businesses and strategic plans,
      those strategic plans themselves, and the Company’s goodwill
      generally.

     

    8. No
      Waiver of Rights.
      The
      Company’s failure to enforce at any time any of the provisions of this Agreement
      or to require at any time performance by Executive of any of the provisions
      hereof shall in no way be construed to be a waiver of such provisions or to
      affect either the validity of this Agreement, or any part hereof, or the right
      of the Company thereafter to enforce each and every provision in accordance
      with
      its terms.

     

    9. Executive’s
      Duty to Provide Information on Request; Company’s Right to Injunctive Relief;
      Tolling.

     

    9.1. As
      reasonably requested by the Company, for a period of 2 years after the
      termination of his employment, Executive shall report in reasonable detail
      to
      the Company, orally or in writing, with respect to any matter reasonably related
      to his compliance with his obligations under Sections 5 and 6 hereof, including
      (without limitation) his (i) knowledge or actions with respect to the protection
      from disclosure of secret or confidential information, knowledge or data
      relating to the Company, its businesses and strategic plans, possessed or known
      by or disclosed or made available to Executive during his employment, (ii)
      knowledge or actions with respect to any person or entity involved in any
      existing or potential business relationship with the Company, (iii) knowledge
      or
      actions concerning any employee, consultant or advisor of the Company and their
      relationship with the Company or any person engaged in any Competing Activity;
      and (iv) knowledge or actions with respect to his compliance with his
      professional obligations.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    9.2. In
      the
      event of a breach or threatened breach of any of Executive’s obligations under
      the terms of Sections 5 or 6 hereof, the Company shall be entitled, in addition
      to any other legal or equitable remedies it may have in connection therewith
      (including any right to damages that it may suffer), to temporary, preliminary
      and permanent injunctive relief restraining such breach or threatened breach.
      Executive acknowledges that the harm which might result to the Company as a
      result of any noncompliance by Executive with any of the provisions of Sections
      5 or 6 would be irreparable. Executive agrees that if there is a question as
      to
      the enforceability of any of the provisions of Sections 5 or 6 hereof, Executive
      will not engage in any conduct inconsistent with or contrary to the obligations
      set forth therein until after any such question has been resolved by a final
      judgment of a court of competent jurisdiction, which, insofar as practicable
      under the circumstances, shall be secured on an expedited basis. Executive
      and
      the Company agree that the running of the periods set forth in Section 6 hereof
      shall be tolled during any period of time in which Executive violates the
      obligations set forth therein.

     

    10.  Judicial
      Enforcement.
      If any
      provision of this Agreement is adjudicated to be invalid or unenforceable under
      the applicable law in any jurisdiction, the validity or enforceability of the
      remaining provisions thereof shall be unaffected. To the extent that any
      provision of this Agreement is adjudicated to be invalid or unenforceable
      because it is overbroad, that provision shall not be void but rather shall
      be
      limited only to the extent required by applicable law and enforced as so
      limited. Executive and the Company acknowledge that this provision is reasonable
      in view of their respective interests.

     

    11.  Executive
      Representations.
      Executive represents that the execution and delivery of the Agreement and
      Executive’s employment by the Company do not breach any previous employment
      agreement or other contractual obligations of Executive with a third-party.
      Executive further agrees to disclose, during the 2 years following the
      termination of Executive’s employment with the Company, the substance of the
      terms of Sections 5, 6, 7, and 9 of this Agreement to any potential future
      employer, joint venturer, contractor, partner, or any other person who may
      be
      directly affected by such provisions.

     

    12.  Executive
      Covenant.
      Following his employment with the Company, to the extent the Company reasonably
      so requests, Executive agrees to cooperate with the Company and its counsel
      in
      the contest or defense of, and to provide any testimony and access to his books
      and records in connection with, any action, arbitration, audit, hearing,
      investigation, litigation or suit involving or relating to any action, activity,
      circumstance, condition, conduct, event, fact, failure to act, incident,
      occurrence, plan, practice, situation, status or transaction involving the
      Company while he was employed by the Company. The Company shall reimburse
      Executive for all reasonable expenses incurred by Executive in connection with
      providing such cooperation. For its part, the Company shall (i) make every
      reasonable effort to arrange for such cooperation to be provided by Executive
      at
      mutually-convenient times and places and otherwise in a manner that does not
      interfere unreasonably with Executive’s employment, search for employment, or
      retirement, and (ii) compensate Executive reasonably for any professional
      services rendered (except in a situation where Executive is providing testimony
      in a court of law or administrative proceeding on behalf of the Company, in
      which case Executive shall only receive legally mandated witness fees and
      reimbursement of his reasonable expenses).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    13.  Amendments,
      Entire Agreement.
      No
      modification, amendment, or waiver of any of the provisions of this Agreement
      shall be effective unless such modification, amendment, or waiver is in writing
      specifically referring hereto, and signed by the parties hereto. This Agreement
      supersedes all prior agreements and understandings between Executive and the
      Company, except previously-executed LTIP-related agreements between Executive
      and the Company.

     

    14.  Assignments.
      This
      Agreement shall be freely assignable by the Company to, and shall inure to
      the
      benefit of and be binding upon, the Company, its successors, assigns and any
      other entity which shall succeed to the business presently being conducted
      by
      the Company. As a contract for personal services, neither this Agreement nor
      any
      rights hereunder shall be assigned by Executive.

     

    15.  Choice
      of Forum and Governing Law; Attorneys’ Fees.

     

    15.1. Any
      litigation involving this Agreement shall be filed and conducted in the state
      or
      federal courts in Michigan; and (ii) the Agreement shall be interpreted in
      accordance with and governed by the laws of the State of Michigan, without
      regard to any conflict of law principles thereof.

     

    15.2. The
      Company shall promptly pay all legal fees and expenses incurred by Executive
      in
      seeking to obtain any benefits or payments under, or otherwise enforce, this
      Agreement, in connection with a Change in Control. Such payments shall be made
      to Executive within 15 days after Executive’s submission of a written request
      therefor; provided, however, that Executive shall provide supporting
      documentation for the fees and expenses for which reimbursement is sought as
      the
      Company may reasonably require. In the event that a court of competent
      jurisdiction shall determine that Executive has pursued such claims for benefits
      or payments under, or enforcement of, this Agreement in bad faith, or advanced
      frivolous claims in connection therewith, Executive shall promptly repay all
      or
      part of such attorneys’ fees and expenses, as such court shall determine are
      directly attributable to such bad faith or frivolous claims.

     

    16.  Headings.
      Section
      headings are provided in this Agreement for convenience only and shall not
      be
      deemed to alter the content of such sections.

     

    17.  Execution
      of Agreement.
      This
      Agreement may be executed in one or more counterparts, each of which will be
      deemed to be an original copy of this Agreement and all of which, when taken
      together, will be deemed to constitute one and the same agreement. The exchange
      of copies of this Agreement and of signature pages by facsimile transmission
      shall constitute effective execution and delivery of this Agreement as to the
      parties and may be used in lieu of the original Agreement for all purposes.
      Signatures of the parties transmitted by facsimile shall be deemed to be their
      original signatures for all purposes.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      as
      of the day and year first above written.

     

     

    SEMCO
      ENERGY INC.

     

    By:
      /s/George
      A. Schreiber, Jr.  

     

    Name:
      George A. Schreiber, Jr.

     

    Title:
      President and Chief Executive Officer

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXECUTIVE

     

    /s/Peter
      F. Clark  

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      A

     

    Executive’s
      title shall be: Senior Vice President and General Counsel.

     

    Executive
      shall report to the Company’s President and Chief Executive
      Officer.

     

    Executive’s
      functions, authority, duties, and responsibilities shall include (without
      limitation): Overall responsibility for, and supervision of, all legal and
      corporate governance matters involving or otherwise affecting the Company,
      including (without limitation) advising the Board of Directors and representing
      the Company with respect to all such matters as chief legal officer, determining
      and implementing the Company’s legal strategies, choosing and managing the
      Company’s outside counsel, and controlling all expenditures related thereto. The
      Company’s Secretary and all counsel employed by the Company shall report to
      Executive. Executive shall at all times be a member of the Company’s senior
      executive group, for the purpose of providing legal advice and representation
      and the benefit of his business experience to the Company.

     

    EXHIBIT
      B

     

    Executive’s
      annual Base Salary shall be $235,000.

     

    EXHIBIT
      C

     

    Executive’s
      Target Annual Bonus shall be 35% multiplied by his Base Salary.

     

    EXHIBIT
      D

     

    Executive
      has previously been granted the following Options, at $5.270/share: 30,000.
      Except as otherwise provided herein, such Options shall vest as
      follows:

     

    33%    September
      20, 2005

     

    33%    September
      20, 2006

     

    34%    September
      20, 2007

     

    Executive’s
      Long-Term Incentive Award Target is 40% multiplied by his Base Salary. Except
      as
      otherwise provided herein, Executive shall vest in the Options only if he is
      still employed on the dates set forth above.

     

    EXHIBIT
      E

     

    Executive
      has previously been granted the following Restricted Stock Units. Except as
      otherwise provided herein, the restrictions on such Restricted Stock Units
      shall
      lapse and the Executive shall be entitled the shares of Common Stock represented
      by the Restricted Stock Units as set forth below:

     

    5,000 Number
      of
      Restricted Stock Units on which the restrictions lapse on September 20,
      2005.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2,500 Number
      of
      Restricted Stock Units on which the restrictions shall lapse upon March 31,
      2006, if Executive has met the performance targets applicable
      thereto.

     

    2,500 Number
      of
      Restricted Stock Units on which the restrictions shall lapse upon March 31,
      2007, if Executive has met performance targets applicble thereto.

     

    With
      respect to Restricted Stock Units as to which all restrictions lapse on March
      31, 2006, and March 31 2007, Executive shall be entitled to the shares of Common
      Stock represented by the Restricted Stock Units only if he is still employed
      on
      such dates.

     

    EXHIBIT
      F

     

    Executive
      shall be granted the following additional service and retirement
      considerations:

     

    (a) On
      the
      fifth anniversary of Executive’s first being employed by the Company, he shall
      receive an additional 5 Years of Service with the Company, as defined in the
      SERP.

     

    (b) If,
      prior
      to the fifth anniversary of Executive’s first being employed by the Company, a
      transaction constituting a Change in Control is consummated, in lieu of the
      additional credited service provided under Exhibit F (a), as of the day
      immediately preceding the day on which such Change in Control transaction is
      consummated, he shall receive an additional 5 Years of Service with the Company
      and shall be deemed as eligible to Retire, as defined in the SERP.

     

    EXHIBIT
      G

     

    The
      following perquisites shall be provided to Executive, at Company
      expense:

     

    (1) Cellular
      telephone.

     

    (2) Reimbursement
      of the cost of an annual physical examination.

     

    (3) Payment
      of membership dues to professional organizations.

     

    (4) Reimbursement
      for annual tax preparation expenses in an amount not to exceed $2,500 per
      year.

     

    (6) A
      per
      month cash car allowance as provided in the Company’s then-existing car
      allowance policy (currently $600).

     

    EXHIBIT
      H

     

    Executive
      shall be entitled to a Gross-Up Payment for Excise Taxes, as
      follows:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (a) In
      the
      event it shall be determined that any payment or distribution by the Company
      to
      or for the benefit of the Executive (whether paid or payable or distributed
      or
      distributable pursuant to the terms of this Agreement or otherwise, but not
      including any additional payments required by this Exhibit H)(a “Payment”) would
      be subject to the excise tax imposed by Section 4999 of the Internal Revenue
      Code, as amended, or any interest or penalties are incurred by the Executive
      with respect to such excise tax (such excise tax, together with any such
      interest and penalties, are hereinafter collectively referred to as the “Excise
      Tax”), then the Executive shall be entitled to receive from the Company an
      additional payment (a "Gross-Up Payment") in an amount that allows Executive
      to
      retain that part of the Gross-Up Payment equal to the Excise Tax imposed upon
      the Payments after deducting from the Gross-up Payment all taxes (including,
      without limitation, the Excise Tax on the payments, the Excise Tax on the
      Gross-Up Payment, any income taxes and all interest and penalties imposed with
      respect to any of such taxes). Notwithstanding the foregoing provisions of
      this
      Exhibit H, if it shall be determined that the Executive is entitled to a
      Gross-Up Payment, but that the Payments do not exceed 110% of the greatest
      amount (the "Reduced Amount") that could be paid to the Executive such that
      the
      receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
      Payment shall be made to the Executive and the Payments, in the aggregate,
      shall
      be reduced to the Reduced Amount.

     

    (b) Subject
      to the provisions of Exhibit H(c), all determinations required to be made under
      this Exhibit H, including whether and when a Gross-Up Payment is required and
      the amount of such Gross-Up Payment and the assumptions to be utilized in
      arriving at such determination, shall be made by a nationally recognized
      accounting firm selected by the Company for this purpose prior to the
      consummation of a transaction constituting a Change in Control (the "Accounting
      Firm"), which shall provide detailed supporting calculations both to the Company
      and the Executive within 15 business days of the receipt of notice from the
      Executive that there has been a Payment, or such earlier time as is requested
      by
      the Company. In the event that the Accounting Firm is serving as accountant
      or
      auditor for the individual, entity or group effecting the Change in Control,
      the
      Executive shall appoint another nationally recognized accounting firm to make
      the determinations required hereunder (which accounting firm shall then be
      referred to as the Accounting Firm hereunder). All fees and expenses of the
      Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
      as
      determined pursuant to this Exhibt H, shall be timely paid by the Company on
      behalf of the Executive directly to the appropriate taxing authorities. Any
      determination by the Accounting Firm shall be binding upon the Company and
      the
      Executive. As a result of the uncertainty in the application of Section 4999
      of
      the Code at the time of the initial determination by the Accounting Firm
      hereunder, it is possible that Gross-Up Payments which should have been made
      ("Underpayment"), consistent with the calculations required to be made hereunder
      will not have been made by the Company. In the event that the Company exhausts
      its remedies pursuant to Exhibit H(c), and the Executive thereafter is required
      to make a payment of any Excise Tax, the Accounting Firm shall determine the
      amount of the Underpayment that has occurred and any such Underpayment shall
      be
      promptly paid by the Company to the appropriate taxing authorities for the
      benefit of the Executive. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c) Executive
      shall notify the Company in writing of any claim by the Internal Revenue Service
      that, if successful, would require the payment by the Company of the Gross-Up
      Payment. Such notification shall be given as soon as practicable but no later
      than 20 days after the Executive is informed in writing of such claim and shall
      apprise the Company of the nature of such claim and the date on which such
      claim
      is requested to be paid. Executive shall not pay such claim prior to the
      expiration of the 30-day period following the date on which it gives such notice
      to the Company (or such shorter period ending on the date that any payment
      of
      taxes with respect to such claim is due). If the Company notifies the Executive
      in writing prior to the expiration of such period that it desires to contest
      such claim, the Executive shall:

     

    

     

    (i)
      give
      the Company any information reasonably requested by the Company relating to
      such
      claim;

     

    (ii)
      take
      such action in connection with contesting such claim as the Company shall
      reasonably request in writing from time to time, including, without limitation,
      accepting legal representation with respect to such claim by an attorney
      reasonably selected by the Company;

     

    (iii)
      cooperate with the Company in good faith in order effectively to contest such
      claim; and

     

    (iv)
      permit the Company to participate in any proceedings relating to such
      claim;

     

    provided,
      however, that the Company shall bear and pay directly all costs and expenses
      (including additional interest and penalties) incurred in connection with such
      contest and shall indemnify and hold the Executive harmless, on an after-tax
      basis, for any Excise Tax or income tax (including interest and penalties with
      respect thereto) imposed as a result of such representation and payment of
      costs
      and expenses. Without limiting the foregoing provisions of this Exhibit H(c),
      the Company shall control all proceedings taken in connection with such contest
      and, in its sole discretion, may pursue or forgo any and all administrative
      appeals, proceedings, hearings and conferences with the taxing authority in
      respect of such claim and may, in its sole discretion, either direct the
      Executive to pay the tax claimed and sue for a refund or contest the claim
      in
      any permissible manner, and the Executive agrees to prosecute such contest
      to a
      determination before any administrative tribunal, in a court of initial
      jurisdiction and in one or more appellate courts, as the Company shall
      determine; provided, however, that if the Company directs the Executive to
      pay
      such claim and sue for a refund, the Company shall advance the amount of such
      payment to the Executive, on an interest-free basis and shall indemnify and
      hold
      the Executive harmless, on an after-tax basis, from any Excise Tax or income
      tax
      (including interest or penalties with respect thereto) imposed with respect
      to
      such advance or with respect to any imputed income with respect to such advance;
      and further provided that any extension of the statute of limitations relating
      to payment of taxes for the taxable year of the Executive with respect to which
      such contested amount is claimed to be due is limited solely to such contested
      amount. Furthermore, the Company's control of the contest shall be limited
      to
      issues with respect to which a Gross-Up Payment would be payable hereunder
      and
      the Executive shall be entitled to settle or contest, as the case may be, any
      other issue raised by the Internal Revenue Service or any other taxing
      authority. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (d) If,
      after
      the receipt by the Executive of an amount advanced by the Company pursuant
      to
      Exhibit H(c), the Executive becomes entitled to receive any refund with respect
      to such claim, the Executive shall (subject to the Company's complying with
      the
      requirements of Exhibit H(c)) promptly pay to the Company the amount of such
      refund (together with any interest paid or credited thereon after taxes
      applicable thereto). If, after the receipt by the Executive of an amount
      advanced by the Company pursuant to Exhibit H(c), a determination is made that
      the Executive shall not be entitled to any refund with respect to such claim
      and
      the Company does not notify the Executive in writing of its intent to contest
      such denial of refund prior to the expiration of 30 days after such
      determination, then such advance shall be forgiven and shall not be required
      to
      be repaid and the amount of such advance shall offset, to the extent thereof,
      the amount of Gross-Up Payment required to be paid.

     

    

     

    EXHIBIT
      I

     

    FORM
      OF GENERAL RELEASE OF CLAIMS

     

    For
      good
      and valuable consideration set forth in the agreement (the “Agreement”) between
      [INSERT NAME OF EMPLOYEE] (“Employee”) and SEMCO Energy, Inc. (together with its
      subsidiaries, affiliates, and successors and the directors, officers, employees,
      agents thereof, the “Company”), the sufficiency of which is hereby acknowledged,
      Employee and the Company agree as follows:

     

    1. General
      Release of Claims.
      Except
      as expressly provided in the Agreement, Employee, for himself and him
      dependents, heirs, executors, administrators, representatives, and assigns,
      irrevocably releases and forever discharges the Company of and from, and agrees
      to indemnify and hold the Company harmless from, any and all manner of claims,
      suits, actions, causes of action, demands, charges, complaints, or obligations
      of any sort whatsoever (including claims for costs and attorneys’ fees), direct
      or indirect, fixed or contingent, known and unknown, in law or in equity, which
      he ever had, now has, or may have against the Company arising in any way
      whatsoever from or in connection with his employment at, or the termination
      of
      his employment with, the Company. Without limiting the generality of the
      foregoing, it is understood and agreed that this General Release of Claims
      specifically includes any and all claims for: breach of express or implied
      contract or covenant; violation of any federal, state or local statute, rule,
      regulation, or order (including the Equal Pay Act of 1963, Title VII of the
      Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967,
      the
      Americans with Disabilities Act of 1990, the Elliott-Larsen Civil Rights Act,
      and the Michigan Persons with Disabilities Act); tort; and breach of any
      statutory or common law duties or doctrines.

     

    2. Certain
      Matters Not Covered by General Release of Claims. This
      General Release of Claims does not, and is not intended to, release, discharge
      or in any way remove or otherwise limit or affect any claims, suits, actions,
      causes of action, demands, charges, complaints, or obligations of any sort
      whatsoever (including claims for costs and attorneys’ fees) arising in
      connection with or under or relating in any way to either party’s performance of
      their obligations under the Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3. No
      Admission of Liability.
      Neither
      the terms nor the existence of the Agreement or the General Release of Claims,
      or the Company’s seeking Employee’s execution of the General Release of Claims,
      shall be construed as an admission of liability by the Company, including that
      it violated any federal, state or local statute, regulation, rule, or order;
      breached any contract or covenant; committed any tort; breached any statutory
      or
      common law duty or doctrine; or otherwise took, or failed to take, any action
      or
      committed any offense that is actionable in any way by Employee.

     

    4. Use
      of Counterparts Authorized.
      The
      General Release of Claims may be executed in counterparts; provided, however,
      that each party to the General Release of Claims shall provide a duly-executed
      copy of it to the other party to the General Release of Claims.

     

    5. Definition.
      In the
      General Release of Claims, the words “include,”“includes,” and “including”
      shall mean include, includes, or including without limitation.

     

    6. Parties
      Are Acting Freely, on an Informed Basis, with the Opportunity to Seek the Advice
      of Counsel.
      Employee
      and the Company each acknowledge that they: are acting of their own free will;
      fully understand both the Agreement and the General Release of Claims; and
      have
      had the opportunity to seek the advice of an attorney about these important
      legal documents affecting their rights.

     

    7. Governing
      Law and Venue.
      The
      Agreement and the General Release of Claims shall be governed and construed
      in
      accordance with the laws of the State of Michigan, without regard to the
      conflict of laws provisions thereof. Any action related in any way whatsoever
      to
      the Agreement or General Release of Claims shall be brought in a court of
      competent jurisdiction in the State of Michigan.

     

    8. Time
      to Consider General Release of Claims; Right to Revoke; Effect of
      Revocation.
      Employee
      acknowledges that: (i) he may consider whether to execute the General Release
      of
      Claims for up to 21 days; and (ii), after executing the General Release of
      Claims, he may revoke it within 7 days, by giving notice, in writing, to the
      Company’s General Counsel, c/o SEMCO Energy, Inc., 2301 West Big Beaver Road -
      Suite 921, Troy, Michigan 48084. If Employee revokes the General Release of
      Claims as provided herein, Employee shall promptly repay to the Company any
      severance and related benefits paid to him under the Agreement.

     

    9. Entire
      Agreement.
      The
      Agreement and the General Release of Claims constitute the entire agreement
      between Employee and the Company with respect to the subject-matter hereof.
      They
      acknowledge that they are not relying on any representations or statements
      (written or oral) not contained therein.

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