Exhibit 10.9
CHANGE IN CONTROL AGREEMENT
This is an Agreement entered into between SEMCO Energy,
Inc., a Michigan corporation ("Company"), and
______________________________ ("Executive"). References to
employment by Executive with the Company include employment by
the Company or one of its subsidiaries.
BACKGROUND
A. Executive is a valued member of the Company's management
team.
B. The Board of Directors of the Company desires to recognize
the contributions of the Executive to the Company and to assure
continuous harmonious management of the Company.
C. The Board of Directors of the Company believes that public
companies in the natural gas industry face the possibility of a
Change in Control (as hereinafter defined), and that the
management uncertainty related to a Change in Control can have
potential adverse effects on the Company and its shareholders.
D. The Board of Directors of the Company believes that it is in
the best interests of the Company that the Executive remain in
the employ of the Company during an actual or threatened Change
in Control of the Company, and that the Executive be granted
certain protection in the event that the Executive's employment
is involuntarily terminated or the Executive terminates
employment for Good Reason (as hereinafter defined) prior to or
following a Change in Control.
AGREEMENT
Executive and Company agree as follows:
Section 1. Effective Date of Agreement. This Agreement shall be
effective immediately upon its execution by both parties.
Section 2. Termination of Agreement. This Agreement shall
terminate upon the earlier of:
(a) The termination of the Executive's employment with the
Company for any reason (i) prior to a Change in Control
and (ii) not In Anticipation of a Change in Control
(excluding assignment of Executive to employment by the
Company or a subsidiary of the Company);
(b) Upon the Executive's assignment to a non-Executive
position if said assignment is (i) prior to a Change in
Control and (ii) not In Anticipation of a Change in
Control;
(c) The termination of Executive's employment because of
death, disability, voluntary retirement on or after age
65, or Cause (as defined in Section 6(b)); or
(d) April 1, 2003, unless extended by the Board of
Directors of the Company.
Section 3. Requirements for Benefits. The benefits set forth in
Section 7 shall be provided in the event there has been a Change
in Control as set forth in Section 4 and within two years
thereafter there is a Termination of Employment of Executive, as
described in Section 6. The benefits set forth in Section 7
shall also be provided in the event there is a Termination of
Employment of Executive In Anticipation of a Change in Control
as set forth in Section 5. Benefits shall be provided only in
response to a valid claim made within sixty (60) days of such
event or the Change in Control, whichever is later, in
accordance with the provisions of Section 14.
Section 4. Change in Control. A "Change in Control" as used
herein shall be deemed to have occurred:
(a) if any "person," including a "group" as determined in
accordance with Section 13(d)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act"), is or
becomes the beneficial owner, directly or indirectly,
of securities of the Company representing forty (40)
percent or more of the combined voting power of the
Company's then outstanding securities;
(b) if the shareholders of the Company approve (i) the sale
of all or substantially all the Company's assets or
(ii) any transaction which would result in paragraph
(a) above being true; or
(c) upon the addition of a majority of new members to the
Board of Directors within any twelve-month period.
Section 5. In Anticipation of a Change in Control. An action is
taken "In Anticipation of a Change in Control" if taken in
preparation for a Change in Control within six (6) months prior
to an actual Change in Control. Subject to reasonable rebuttal,
any action by the Company taken within six (6) months prior to a
Change in Control shall be presumed to be an action taken In
Anticipation of a Change in Control.
2
Section 6. Termination of Employment.
(a) "Termination of Employment" means:
(1) Termination by the Company of the Executive's
employment for any reason other than death,
disability, voluntary retirement on or after age
65 or Cause (excluding assignment of Executive to
employment by the Company or a subsidiary of
Company); or
(2) Resignation by Executive for Good Reason.
(b) "Good Reason" means the occurrence of any of the
following events without Executive's express written
consent:
(1) Any reduction in the Executive's salary;
(2) Any failure by the Company to continue any bonus
plan, or other incentive plan (without instituting
a comparable plan) in which the Executive
participated;
(3) Any significant diminution of the Executive's
authority, duties and responsibilities,
(4) Any required relocation of the Executive's
residence to a location outside of the state of
Michigan.
(c) "Cause" means an act of Executive constituting willful
gross misconduct, material breach of duties, or an act
of material dishonesty or fraud that is injurious to
the Company.
Section 7. Severance Benefit. Upon the occurrence of the events
described in Section 3, Company shall provide the Executive the
following benefits:
(a) An amount equal to one year's salary, computed as
Executive's highest annual W-2 Compensation from the
Company during the last three years. "W-2
Compensation" shall exclude compensation derived from
the exercise of stock options and other income from the
Company's stock based incentive plan, signing bonuses,
relocation expense reimbursement and awards under the
Short Term Incentive Plan or its successor.
3
(b) Continued participation in the Company's (or
successor's) group life and disability coverage (to the
extent permitted by law and any applicable insurance
carrier), family medical, hospitalization and dental
coverage, until the earlier of the expiration of one
(1) year or the commencement of a comparable coverage
from another employer; provided that any continuation
of medical and dental coverage shall run concurrently
with the Executive's statutory COBRA period. The
Executive shall promptly notify the Company upon
receipt of comparable coverage from a new employer.
(c) The Company shall provide and pay for services for an
out placement executive search firm for a period of six
months following a Termination of Employment of
Executive.
(d) Benefits shall be reduced to the extent necessary to
avoid loss of any tax deduction or payment of
non-deductible items under Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code").
Section 8. Method of Payment.
(a) In the case of a "Friendly Change in Control," as
defined below, the Benefit payable under Section 7(a)
shall be paid over twelve months in equal payments
consistent with the Company's payroll practices, the
first payment being due on the first payday of the
month following Termination of Employment. Any late
payments shall include interest at the prime rate (as
published by First of Michigan Bank) plus two
percentage points. A "Friendly Change in Control"
means a transaction approved by (i) a majority of the
members of the Board of Directors who have been in
office for at least twelve (12) months or (ii) a Board
whose majority consists of members in office twelve
months, plus members who were recommended or elected by
a majority of incumbent directors.
(b) In any case other than a Friendly Change in Control,
the Benefit payable under Section 7(a) shall be paid in
a lump sum within twenty (20) days after Termination of
Employment, with interest thereon accruing thereafter
at the rate described above.
Section 9. No Mitigation or Duty to Seek Employment. Executive
shall be under no obligation to seek or accept other employment
after Termination of Employment. Further, any Benefits, except
as set forth in Section 7(b), shall not be diminished as a
result of subsequent employment.
4
Section 10. Tax Withholding. The Company may withhold or
require Executive to remit (at the time of receipt of Benefits)
all applicable Federal, State, local or other withholding taxes.
Section 11. Binding Effect.
(a) This Agreement shall be binding upon successors and
assigns of the company.
(b) This Agreement shall be binding upon Executive and
shall inure to the benefit of Executive's legal
representatives and heirs.
Section 12. Amendment or Modification of Agreement. This
Agreement may not be modified or amended except by instrument in
writing signed by the parties hereto.
Section 13. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision.
Section 14. Claims Procedure.
(a) The Administrator shall be the Company, whose address
is SEMCO Energy, Inc., 405 Water St., Port Huron,
Michigan. The Company shall have the right to
designate one or more employees as Administrator at any
time. The Company shall give Executive written notice
of any change. All notices shall be in writing, and
delivered to Executive in person or sent by certified
mail to Executive's last known address.
(b) The Administrator shall make all determinations as to
Benefits. Any denial of a claim for benefits shall be
stated in writing and delivered or mailed within ten
(10) business days after receipt of the claim, unless
special circumstances require an extension of time.
Written notice of an extension shall be furnished prior
to the termination of the initial 10-day period. Such
extension may not exceed ten (10) business days.
Failure to provide any notice within ten (10) business
days constitutes acceptance of the claim. Notice of
denial shall set forth reasons for the denial,
reference to provisions upon which the denial is based,
a description of additional material or information
necessary to perfect the claim, with an explanation of
why such material or information is necessary, and an
explanation of claim review procedures, written in a
manner that may be understood without legal counsel.
5
(c) A claimant whose claim has been wholly or partially
denied may request, within ten (10) days following such
denial in writing a review of such denial. The
claimant may submit comments in writing and may include
a request for a hearing in person before the
administrator. Prior to submitting a request, the
claimant shall be entitled to review such documents as
the Administrator agrees are pertinent to the claim.
The claimant may be represented by counsel. The
Administrator's decision with respect to any review
shall be in writing and shall be mailed not later than
ten (10) days following receipt of the request for
review unless special circumstances, such as the need
to hold a hearing, require an extension of time, in
which case the Administrator's decision shall be
delivered in person, or mailed by certified mail, not
later than twenty (20) days after receipt of such
request.
(d) A claimant who has followed the procedure in paragraphs
(b) and (c) of this section, but who has not obtained
full relief on Executive's claim may, within sixty (60)
days following receipt of the decision on review, apply
in writing to the Administrator for binding arbitration
of Executive's claim before three arbitrators in St.
Clair County, Michigan, in accordance with the
commercial arbitration rules of the American
Arbitration Association. The Company shall designate
one arbitrator, the Executive shall choose an
arbitrator and the two arbitrators jointly shall
designate a third arbitrator. The arbitrators' sole
authority shall be to interpret and apply the
provisions of this Agreement; they shall not change,
add to, or subtract from, any of its provisions. The
arbitrators shall have the power to compel attendance
of witnesses at the hearing. Once a claimant commences
arbitration proceedings, any right to commence
litigation shall be waived, and the arbitration
proceedings shall continue to conclusion. Any court
having jurisdiction may enter a judgment based upon
such arbitration. All decisions of the arbitrators
shall be final and binding without appeal to any court.
Section 15. Legal Fees and Expenses. To the extent that
Executive is successful in the above described proceedings, the
Company shall reimburse Executive for legal fees and expenses
incurred as the result of any controversy over any provision in
this Agreement. The Company shall reimburse the executive within
twenty (20) days following written demand therefor with interest
accruing thereafter in accordance with the provisions of Section
8(a).
6
Section 16. Non-Alienation of Benefits. Except as may be
protected by applicable law, no transfer, pledge, or attachment
of any Benefits shall be valid.
Section 17. Miscellaneous. A waiver of any breach shall not
constitute a waiver of any subsequent breach. The headings shall
not be a part of, or control or affect the meaning of, any
provision hereof.
Section 18. Governing Law. To the extent not preempted by
Federal law, this agreement shall be governed and construed in
accordance with the laws of the state of Michigan.
Section 19. Entire Agreement. This document represents the
entire agreement and understanding of the parties with respect to
its subject matter.
INTENDING TO BE LEGALLY BOUND, the parties hereto have
executed this Agreement as of the 20th day of March, 1998.
SEMCO Energy, Inc.
By ______________________________
William L. Johnson
Chairman, President and CEO
Executive
_________________________________
Signature
_________________________________
Printed name
COCAGR.SAM(sla)
7