EXHIBIT 10.12
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Amended and Restated: December 13, 2002
SEMCO ENERGY, INC.
DEFERRED COMPENSATION
AND
STOCK PURCHASE PLAN
FOR NON-EMPLOYEE DIRECTORS
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ARTICLE I
Purpose
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This Plan's purpose is to accomplish the deferral of federal income tax on
deferred compensation and earnings for any participating non-employee member of
the Board of Directors (a "Director") of SEMCO Energy, Inc. ("the Company").
Deferral is sought until the Director (or other recipient) actually receives
payment.
ARTICLE II
Elections
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The Company and a Director may agree to irrevocably defer payment of
certain delineated compensation otherwise payable in a calendar year ("That
Year's Deferred Compensation").
Any such agreement ("Participation Agreement") must be signed by the
Director, and delivered to the Administrator, prior to January 1 of the year for
which it is applicable. For a new Director, such signing and delivery must
occur no later than 30 days after becoming a Director and must relate only to
services performed after such election.
Separate investment elections and deferral elections must be made for each
calendar year in which a Director chooses to defer compensation. Thus, for a
new Director, the first deferral election may be effective (the "Deferral
Period") for less than 12 months. Similarly, the Deferral Period for the
Director's last calendar year may be less than 12 months. Once an investment
election is made, it will continue to apply to That Year's Deferred
Compensation.
The Director may choose any of the following compensation to be deferred:
(a) monthly retainer: all; none; an amount certain (which will be deferred
on a first-earned first-deferred basis).
(b) Board & Committee meeting fees: all; none; an amount certain (which
will be deferred on a first-earned first-deferred basis).
(c) compensation in lieu of medical plan participation: all or none.
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ARTICLE III
Accounts
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One or more bookkeeping accounts (the "Account") will evidence the
Company's liability to the Director. Before April of each year, the Company
will notify the Director in writing of the value of his Account as of the prior
December 31.
ARTICLE IV
Interest Available
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The Director may choose to have interest credited to That Year's Deferred
Compensation or choose to have such Deferred Compensation invested in Company
common stock. If chosen, interest will be credited in an amount equal to the
Average Balance times the Average Prime Rate.
"Average Balance" equals the sum of the Account balances on each day during the
period, divided by the number of days in the period.
"Average Prime Rate" equals the sum of the rates announced by Standard
Federal Bank (f.k.a. Michigan National Bank) as its prime rate each day during
the period, divided by the number of such days.
Interest will be credited only once a year, as of the last day of the last
month of the calendar year coincident with, or preceding, total distribution of
That Year's Deferred Compensation. Thus, for all years (except perhaps the
last), interest will be credited on December 31.
ARTICLE V
Common Stock
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Instead of choosing to have interest credited, the Director may choose to
have That Year's Deferred Compensation used to purchase shares of Company common
stock.
Without regard to a Director's choice, Deferred Compensation in lieu of medical
plan participation will automatically be used to purchase common stock.
Purchases of common stock with Deferred Compensation will be made from the
Company at the price that shares are purchased pursuant to the Company's Direct
Stock Purchase and Dividend Reinvestment Plan ("DRIP"). Purchases will be made
as of the DRIP investment date first occurring on or after the date such
Deferred Compensation is credited to the Account.
Shares so purchased will be held in an actual DRIP account. Dividends on
such DRIP account will be reinvested pursuant to the DRIP. (Shares purchased
pursuant to the DRIP may be purchased on the open market or directly from the
Company as described in the DRIP Prospectus.)
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Consistent with the New York Stock Exchange Listed Company Manual, no
shares of common stock will be issued for Deferred Compensation pursuant to this
Plan to the extent that issuance of such shares would result in:
(i) a single Director's Deferred Compensation purchasing more than
173,808 shares (1% of outstanding common shares on the Initiation Date);
(ii) more than 869,040 shares (5% of outstanding common shares on the
Initiation Date) being issued in total pursuant to
(a) this Plan, counting only shares issued for Deferred
Compensation; and
(b) all other un-approved Plans.
The term "Initiation Date" means the date that this Plan was amended to provide
for the possible issuance of common shares (being December 17, 1998).
For this purpose, "un-approved Plans" does not include any Plan:
(i) for which shareholder approval has been obtained (e.g. 1997 LTIP);
(ii) which is open generally to all Company common stockholders
(e.g. DRIP);
(iii) which is a broadly-based Plan; or
(iv) to the extent that options or shares are issued to a person not
previously an employee as a material inducement to entering into an employment
contract.
Any term or phrase used in the above limitation shall be interpreted consistent
with the NYSE Listed Company Manual, including Section 312 (Shareholder Approval
Policy).
ARTICLE VI
Accounts Subject to Creditors
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Other than common stock, the Company is not required to earmark assets.
All assets allocated to pay an Account will always be subject to claims of the
Company's general creditors and be available for the Company's unfettered use.
The Company shall have the power to use such assets to the same extent as its
other property. The Company may vote any common stock.
The Director shall have no property interest in Plan assets whether or not
earmarked and whether or not placed in a DRIP account. The Director has the
status of a general unsecured creditor. Company obligations constitute mere
promises to make benefit payments in the future. No trust shall be created to
hold Plan assets. This Plan is intended to be, and shall be, unfunded for tax
purposes and for purposes of Title 1 of ERISA.
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ARTICLE VII
Distributions
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Common shares shall be distributed in certificate form if such shares are
restricted pursuant to Rule 144 or if a certificate is requested. If such
shares are not restricted pursuant to Rule 144, they may be distributed in book
entry form into an existing or newly created account with Wells Fargo. If the
distribution is in certificate form, any fractional share shall be paid out at
the price that would be paid for such fractional share pursuant to a DRIP
withdrawal effected on that date.
The Company shall have the right to withhold from any payment an amount
sufficient to satisfy any federal, state or local tax withholding requirements
in connection with such payment or any other payment previously made to, or for
the benefit of, Director (whether effected pursuant to this Agreement or
otherwise).
The Director may elect to receive amounts in the Account attributable to
That Year's Deferred Compensation in a Lump Sum or via a Graduated Payout of a
varying Distribution Amount as described below. Each payment will be made
within a 30-day period ("Payment Period") after the date the amount becomes
payable. Each payment date, within the Payment Period, will be selected at the
discretion of the Company.
In a Lump Sum payable:
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(i) the date the Director ceases to be a full time Director of the
Company or any business entity controlling, controlled by or under common
control with the Company ("Termination Date").
OR
(ii) January 1 of any specified year.
OR
(iii) the earlier of either of (i) or (ii) above.
OR
(iv) the later of either of (i) or (ii) above.
OR
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In a Graduated Payout:
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(v) in 3 annual payments as follows:
a. one-third as of Termination Date;
b. one-half of remaining balance as of the one-year
anniversary of Termination Date; and
c. the balance as of the two-year anniversary of
Termination Date.
OR
(vi) in 5 annual payments as follows:
a. one-fifth as of Termination Date;
b. one-fourth of remaining balance as of the one-year
anniversary of Termination Date;
c. one-third of remaining balance as of the two-year
anniversary of Termination Date;
d. one-half of remaining balance as of the three-year
anniversary of Termination Date; and
e. the balance as of the four-year anniversary of
Termination Date.
If a Graduated Payout is chosen, and the Director has both an
interest-bearing account and a Common Stock account, distributions will be
effected pro-rata based on the accounts' values as of the beginning of the
Payment Period (or, if no value is easily determinable for such date, as of the
most recent date prior thereto for which a value is easily determinable).
Once such an election is made for That Year's Deferred Compensation, it can
only be changed if all the following conditions are met:
(i) the Administrator consents in writing;
(ii) the change is made before any portion of That Year's Deferred
Compensation otherwise becomes distributable;
(iii) the effect of the change is to delay distribution.
If the Director dies prior to any given Payment Period, payment of the
amount relating to that Payment Period shall be made to the primary beneficiary.
However, if the primary beneficiary dies prior to any given Payment Period,
payment of the amount relating to that Payment Period shall be made, to the
alternate beneficiary. If any payee is alive at the beginning of the Payment
Period and dies prior to distribution of the amount relating to that Payment
Period, such amount shall be paid to such payee's estate.
If the Director and all beneficiaries have died prior to any Payment
Period, the entire balance (except amounts relating to a prior Payment Period
remaining unpaid) will be paid out in a lump sum as soon as administratively
convenient to the estate of the last surviving payee. In the absence of
conclusive proof as to the identity of the last surviving payee, the
Administrator may choose the payee from among the possible survivors in its
unfettered discretion and without regard to the actual identity of the last
survivor. In the absence of conclusive proof as to whether the Director or a
beneficiary survived to the beginning of a Payment Period, the Administrator may
treat such Director or beneficiary as having died as of the day before the
Payment Period in its unfettered discretion and without regard to the actual
date of death.
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The Director may change beneficiaries at any time by submitting written
notice to the Administrator.
ARTICLE VIII
Rights Inalienable
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Neither the Director nor any beneficiary shall have any right to transfer
or encumber any right to receive any payment. Any attempt to do so will be
void.
ARTICLE IX
No "Employment" Agreement
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Neither this Plan nor any document created pursuant to this Plan will
constitute a contract of employment or contract for services. Nor shall this
Plan or any such document interfere with the Company's right to modify the
Director's compensation.
ARTICLE X
Administration
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This Plan shall be administered by the Secretary of the Company ("the
Administrator"). The Administrator may make, interpret and enforce rules for
administration and decide all questions and act for the Company in all manners
under this Plan (except to the extent expressly otherwise stated herein).
Administrator decisions shall be conclusive and binding on all persons,
unless a written appeal is received by the Administrator within sixty days of
the disputed decision. Any appeal timely filed will be reviewed by the
Administrator (in consultation with the President or his designee) and the
resulting decision shall be final, conclusive and binding.
ARTICLE XI
Amendment and Termination of Plan
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The Board may amend the Plan at any time. No amendment may decrease the
value of any Account at that time. Each Participation Agreement and each other
document having continuing effect after any amendment is automatically subject
to each amendment.
The Board may terminate the Plan (or any aspect of the Plan) at any time.
Upon termination, Participants shall be paid the balance in their Deferred
Benefit Accounts in a lump sum or over any period of time determined by the
Board.
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ARTICLE XII
Miscellaneous
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Notices may be given by personal delivery or by U.S. mail.
This Plan shall be governed by the laws of Michigan and federal income tax
laws. Any provision precluding the deferral of income recognition for federal
tax purposes shall be modified to the least extent necessary to avoid such
preclusion or, if not capable of any such rational modification, be null and
void.
So long as they act in good faith, the Company and its officers, directors,
agents, and employees may act pursuant to this Plan without any liability to the
Director, any beneficiary or any other person.
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