Exhibit 10.8
Amended and Restated: January 1, 2006
FIRST AMENDED AND RESTATED
SEMCO ENERGY, INC.
DEFERRED COMPENSATION
AND
STOCK PURCHASE PLAN
FOR NON-EMPLOYEE DIRECTORS
ARTICLE 1
Purpose
1.1 General. This purpose of this Plan 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. This amendment and restatement of the Plan applies to
deferrals of compensation earned on or after January 1, 2006.
ARTICLE 2
Elections
2.1 Election to Defer Compensation. The Company and a Director may agree
to irrevocably defer payment of certain compensation otherwise payable in a
calendar year ("Annual Deferral"). The Director may choose to defer a percentage
from 0% to 100% (in whole number increments) of each monthly payment of his or
her annual retainer, including any retainer premium.
2.2 Timing of Deferral Elections. Any agreement pursuant to Section 2.1
("Participation Agreement") must be signed by the Director, and delivered to the
Administrator, prior to January 1 of the calendar 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.
2.3 Deferral Period. Separate deferral elections, investment elections,
and distribution 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 the Annual Deferral for that calendar year.
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ARTICLE 3
Accounts
3.1 Accounts and Sub-Accounts. One or more bookkeeping accounts (the
"Account") will evidence the Company's liability to the Director. Each
Director's Account will include such sub-accounts as are necessary to separately
account for each Annual Deferral ("Annual Sub-Account").
ARTICLE 4
Interest Fund
4.1 Election to Invest in Interest Fund. The Director may elect to
invest all or a portion of each Annual Deferral in the Interest Fund. If a
Director elects to invest a portion of any Annual Deferral in the Interest Fund,
the Director's Annual Sub-Account will be adjusted by the amount of such
deferral plus the interest amount determined under Section 4.2.
4.2 Calculation of Interest. Any increase under Section 4.1 shall equal
the Average Balance times the Average Prime Rate as defined in (a) and (b)
below.
(a) "Average Balance" equals the sum of each day's balance in the
applicable Annual Sub-Account that is invested in the Interest Fund, divided by
the number of days in the applicable Deferral Period.
(b) "Average Prime Rate" equals the sum of the rates announced by
LaSalle Bank (or such other bank with which the Company then maintains a
short-term credit facility) as its prime rate each day during the Deferral
Period, divided by the number of such days.
4.3 Interest Credits. Interest will be credited to each Annual
Sub-Account only once every calendar year, as of the later of (i) the last day
of the last month coincident with, or preceding, the total distribution of such
Annual Sub-Account or (ii) the last day of the calendar year. Thus, for all
years (except perhaps the last), interest will be credited on December 31.
ARTICLE 5
Stock Fund
5.1 Election to Invest in Common Stock. Instead of choosing to have
interest credited as described in Article 4, the Director may elect to invest
all or a portion of each Annual Deferral in the Stock Fund in accordance with
this Article 5. If a Director elects to invest a portion of any Annual Deferral
in the Stock Fund, the Director's Annual Sub-Account will be adjusted by the
number of Stock Units credited to such Annual Sub-Account in accordance with
Section 5.2 and Section 5.3 or as may be further adjusted pursuant to Section
6.2. For purposes of this Plan, a Stock Unit is a non-voting measurement unit
that is deemed for valuation and bookkeeping purposes to be equivalent to an
outstanding share of common stock of the Company, including any increase or
decrease in the value of such stock.
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5.2 Determination of Number of Stock Units. The Company will credit the
Director's Annual Sub-Account with a number of Stock Units with an aggregate
value equal to the amount of the Annual Deferral that the Director has elected
to invest in the Stock Fund. The number of Stock Units so credited will be
determined as of the date the compensation would have otherwise been paid to the
Director by using the fair market value of the common stock as of such date. For
purposes of this Plan, the fair market value of the common stock as of any given
date shall be the mean of the high and low sales prices for common stock as
reported on a consolidated basis for securities listed on the principal stock
exchange or market on which common stock is traded on the date as of which such
value is being determined or, if there is no sale on that day, then on the last
previous day on which a sale was reported. The fair market value of the common
stock shall be rounded to the nearest whole cent (with 0.5 cent being rounded to
the next higher whole cent).
5.3 Adjustments for Dividends. As of each cash dividend payment date
declared with respect to common stock of the Company, the Company shall credit
to each Annual Sub-Account a number of additional Stock Units equal to (i) the
product of (a) the cash dividend per share of common stock payable on such
dividend payment date and (b) the number of Stock Units credited to the Annual
Sub-Account on the dividend record date, divided by (ii) the fair market value
of a share of common stock on such dividend payment date. As of each stock
dividend payment date declared with respect to common stock of the Company, the
Company shall credit to each Annual Sub-Account a number of additional Stock
Units equal to the product of (c) the stock dividend per share (denominated in
whole or fractional shares of common stock) issuable on such dividend payment
date and (d) the number of Stock Units credited to the Annual Sub-Account on the
dividend record date.
5.4 Issuance of Shares. Payment of the portion of any Annual Sub-Account
that is invested in the Stock Fund shall be made in shares of common stock of
the Company except as may be required to reflect adjustments made in such
Sub-Account pursuant to Section 6.2.
ARTICLE 6
Stock Subject to the Plan
6.1 Stock Subject to the Plan. Subject to adjustment in accordance with
this Article 6, two hundred and forty thousand, one hundred and seventy one
(240,171) shares of the Company's common stock are hereby reserved exclusively
for issuance under the Plan pursuant to a Director's Participation Agreement
electing to have his or her Account invested in the Stock Fund with respect to
his or her Annual Deferral.
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6.2 Changes in Capitalization, Merger, Liquidation. The number of shares
of common stock reserved under the Plan shall be proportionately adjusted for
any increase or decrease in the number of issued shares of common stock
resulting from a subdivision or combination of shares or the payment of a stock
dividend in shares of common stock to holders of outstanding shares of common
stock or any other increase or decrease in the number of shares of common stock
outstanding effected without receipt of consideration by the Company.
In the event of a merger, consolidation, recapitalization, reorganization,
extraordinary dividend, dividend declared in subsidiary stock or property, stock
split, spin-off, sale of substantially all of the Company's assets, other change
in capital structure of the Company, tender offer for shares of common stock, or
a change in control of the Company the Board may make such adjustments and take
such other action as it deems necessary or appropriate to reflect such
transaction, including, but not limited to, adjustments to the Stock Units held
in each Annual Sub-Account and the number of shares of common stock reserved
under the Plan.
The existence of the Plan shall not affect in any way the right or power
of the Company to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the common stock or the rights thereof, the
dissolution or liquidation of the Company, any sale or transfer of all or any
part of its business or assets, or any other corporate act or proceeding.
ARTICLE 7
Accounts Subject to Creditors
7.1 Accounts are Assets of the Company. 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.
7.2 No Property Interest in Account. The Director shall have no property
interest in Plan assets. The Director has the status of a general unsecured
creditor. Company obligations constitute mere promises to make benefit payments
in the future. This Plan is intended to be, and shall be, unfunded for tax
purposes and for purposes of Title 1 of ERISA.
7.3 No Actual Investment. Notwithstanding any other provision in this
Plan to the contrary, the Interest Fund and the Stock Fund are to be used for
measurement purposes only, and a Director's election to hypothetically invest in
any such fund, the allocation of his or her Account balance thereto, and the
calculation of any adjustment to his or her Account shall not be considered or
construed in any manner as an actual investment of his or her Account in such
fund.
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ARTICLE 8
Distributions
8.1 Form of Distribution Election. The Director may elect to receive
amounts in each of his or her Annual Sub-Accounts in a Lump Sum or via a
Graduated Payout of a varying amount as described in (a) or (b) below. Each
payment will be made within a 30-day period ("Payment Period") after the date
the amount becomes payable in accordance with such election.
(a) If in a Lump Sum, payable:
(i) The date the Director separates from service as a Director of
the Company or any business entity controlling, controlled by
or under common control with the Company ("Separation from
Service Date").
OR
(ii) January 1 of any specified year.
OR
(iii) The earlier of either of (i) or (ii) above.
(b) If in a Graduated Payout, payable:
(i) In 3 annual payments as follows:
a. one-third as of Separation From Service Date;
b. one-half of remaining balance as of the one-year
anniversary of Separation From Service Date; and
c. the balance as of the two-year anniversary of Separation
From Service Date.
OR
(ii) In 5 annual payments as follows:
a. one-fifth as of Separation From Service Date;
b. one-fourth of remaining balance as of the one-year
anniversary of Separation From Service Date;
c. one-third of remaining balance as of the two-year
anniversary of Separation From Service Date;
d. one-half of remaining balance as of the three-year
anniversary of Separation From Service Date; and
e. the balance as of the four-year anniversary of
Separation From Service Date.
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If a Graduated Payout is chosen, and the Director has elected to invest in
both the Interest Fund and the Stock Fund with respect to an Annual Sub-Account,
distributions will be effected pro-rata based on the number of Stock Units and
the cash amount in the Annual Sub-Accounts as of the last valuation date prior
to the beginning of the Payment Period.
8.2 Changes to Elections. Once an election pursuant to this Article 8 is
made with respect to an Annual Deferral, it can only be changed if all the
following conditions are met:
(i) the Administrator consents in writing;
(ii) the change will not take effect until at least twelve (12) months
after the date the new election is made;
(iii) the change is made at least twelve (12) months before the date of
the first scheduled payment of that Annual Sub-Account;
(iv) the effect of the change is to delay distribution, provided that the
new election must delay distribution at least five (5) years from
the date such distribution otherwise would have been made.
8.3 Distribution of Shares. Shares of common stock 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 the Company's agent. If the distribution is in certificate
form, any fractional share shall be paid in cash.
8.4 Payment of Benefits upon Death. 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 with respect to any Annual Sub-Account, the entire balance of such Annual
Sub-Account shall be paid in a lump sum as soon as administratively practicable
to the estate of the last surviving payee.
8.5 Designation of Beneficiaries. The Director may change beneficiaries
at any time by submitting written notice to the Administrator.
ARTICLE 9
Rights Inalienable
9.1 No Transfers. Except as provided in Section 8.4, 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.
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ARTICLE 10
No "Employment" Agreement
10.1 No Right to Continue as a Director. 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 11
Administration
11.1 Designation of Administrator. 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).
11.2 Decisions Final and Binding. 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 12
Amendment and Termination of Plan
12.1 Amendment. 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.
12.2 Termination. The Board may terminate the Plan (or any aspect of the
Plan) at any time. Upon termination, Directors shall be paid the balance in
their Accounts in accordance with their most current elections under the Plan.
ARTICLE 13
Miscellaneous
13.1 Notice. Notices may be given by personal delivery or by U.S. mail.
13.2 Governing Law. 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.
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13.3 No Individual Liability. 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.
13.4 Compliance with Section 409A of the Internal Revenue Code. It is
intended that any distribution which is provided pursuant to or in connection
with the Plan which is considered to be non-qualified deferred compensation
subject to Section 409A of the Internal Revenue Code of 1986, as amended, (the
"Code") shall be provided and paid in a manner, and at such time and in such
form, as complies with the applicable requirements of Section 409A of the Code
to avoid the unfavorable tax consequences provided therein for non-compliance.
To record the adoption of the Plan (as amended and restated) by the Board
of Directors effective as of January 1, 2006, the Company has caused its
authorized officers to execute this Plan.
SEMCO ENERGY, INC.
By: /s/ Sherry L. Abbott
---------------------------------
Title: Corporate Secretary
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