SEMCO ENERGY, INC. STOCK OPTION AGREEMENT
Exhibit
10.11 - Form of Stock Option Agreement pursuant to executive
agreements
SEMCO
ENERGY, INC.
2004
Stock Award and Incentive Plan
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Optionee:
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[Insert
Name]
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Total
Shares Under Option:
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[Insert
# Shares]
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Option
Price:
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[Insert
price per share]
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Grant
Date:
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[Insert
Date]
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THIS
STOCK OPTION AGREEMENT is effective as of the Grant Date stated above, by and
between SEMCO Energy, Inc. and the Optionee.
WHEREAS,
the options described in this Agreement have been granted pursuant to, and
are
governed by, the Plan;
NOW,
THEREFORE, SEMCO Energy, Inc. and the Optionee hereby agree as
follows:
1. Option
Grant.
Subject
to the terms and conditions of this Agreement, the Company hereby grants an
option to the Optionee to purchase from the Company, at the Option Price, the
number of shares of Stock equal to the Total Shares Under Option.
2. Vesting.
(a) Regular
Vesting.
Except
as stated in Sections 2(b) and 2(c) of this Agreement, the Optionee shall become
vested in a percentage of the Total Shares Under Option in accordance with
the
following schedule:
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Vesting
Date
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Percentage
of Total Shares Under Option
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[Insert
1st
Anniversary date]
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33%
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[Insert
2nd
Anniversary date]
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33%
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[Insert
3rd
Anniversary date]
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34%
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The
number of shares granted to the Optionee under this Agreement which become
vested on a Vesting Date in accordance with the above schedule will be
determined by multiplying the Total Shares Under Option by the percentage
specified in the above schedule, and then rounding the resulting number up
to
the nearest whole number, provided that the aggregate number of the Optionee’s
vested shares under this Agreement shall not exceed the Total Shares Under
Option. Notwithstanding anything in this Agreement to the contrary, no Vesting
Date will occur following Optionee’s termination of employment with the
Company.
(b) Accelerated
Vesting.
Notwithstanding the vesting schedule specified in Section 2(a) of this
Agreement, the Total Shares Under Option shall become 100% vested upon the
earliest to occur of the following Vesting Dates:
(i) the
Optionee’s Retirement Date;
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(ii)
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the
Optionee’s Disability Retirement
Date;
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(iii)
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the
date of the Optionee’s death prior to his termination of employment from
the Company;
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(iv)
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the
date the Company terminates the Optionee’s employment without
Cause;
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(v)
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the
date the Optionee terminates his employment with Good Reason;
or
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(vi)
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the
date of a Change in Control.
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If
more
than one of the accelerated vesting rules specified in this Section 2(b) can
apply to the Optionee, the Optionee will be deemed to have elected the available
accelerated vesting rule which provides the longest exercise
period.
(c) Termination
for Cause.
Notwithstanding anything in this Agreement to the contrary, if the Company
terminates the Optionee’s employment for Cause prior to a Change in Control,
this Agreement shall be terminated and all options granted to the Optionee
under
this Agreement shall be forfeited, regardless of whether a Vesting Date has
occurred on or before such termination date, unless and to the extent that
the
Committee determines that such forfeiture would violate applicable
law.
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3. Exercise
of Options.
(a) General.
Except
as otherwise specified by the Committee in accordance with Sections 3(c) and
3(d), the Optionee (or his Representative, as the case may be) may exercise
the
options granted under the Agreement, in whole or in part, at any time on or
after the Vesting Date for such options and prior to their Expiration Date,
by
complying with the procedures described in this Section 3. The Optionee shall
forfeit all rights to any option under this Agreement, whether or not then
vested, which is not exercised prior to its Expiration Date.
(b) Exercise
Procedure.
The
Optionee or his Representative (if applicable) may exercise all or a portion
of
his vested options under this Agreement by delivering notice to the Company.
The
notice shall specify the number of shares of Stock that the Optionee desires
to
purchase by exercise of his vested options, and shall include payment for the
Exercise Amount of such shares in one of the following ways:
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(i)
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The
Optionee may tender payment of the Exercise Amount on the date of
exercise
in the form of cash, certified check, bank draft, or postal or express
money order made payable to the order of the Company and denominated
in
U.S. dollars; or
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(ii)
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The
Optionee may tender payment of the Exercise Amount on the date of
exercise
in the form of shares of Stock having a Fair Market Value on the
date of
exercise equal to the Exercise Amount (if such shares were acquired
upon
exercise of an option, they must have been held by the Optionee for
at
least six months at the time of tender);
or
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(iii)
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The
Optionee may tender payment of the Exercise Amount on the date of
exercise
in a combination of (A) shares of Stock (subject to the holding period
described in paragraph (ii) above); and (B) cash, certified check,
bank
draft, or postal or express money order made payable to the order
of the
Company and denominated in U.S. dollars, equal to the difference
between
the Exercise Amount and the Fair Market Value of the tendered shares
of
Stock on the date of exercise; or
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| (iv) | The Optionee may initiate a cashless exercise in accordance with procedures promulgated by the Committee, if any. |
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Within
30
days after the date of such exercise, the Company shall make available to the
Optionee a certificate registered in the Optionee’s name or a book entry in a
depository institution for the Optionee’s account, representing the aggregate
number of shares of Stock purchased by the Optionee as a result of such
exercise.
(c) Exercise
of Options During Leave
of Absence. Notwithstanding
any provision of this Agreement to the contrary, if the Optionee is on a leave
of absence or is absent on military or government service at any time on or
after the Grant Date and prior to the Expiration Date, the Optionee may not
exercise any part of the Total Shares Under Option prior to the date the
Optionee returns to active employment with the Company, and vesting of any
options under this Agreement which would normally vest on a date during the
absence shall be postponed until the Optionee returns to active work at the
end
of the absence (in which case, the date of return to active employment shall
be
a Vesting Date). The provisions of this subsection (c) shall not affect any
of
Optionee’s rights in the event one of the Vesting Dates specified in Section
2(b) occurs during such an absence.
(d) Deferral
of Exercise or Delivery of Shares.
Notwithstanding any provision in this Agreement to the contrary, if any law
or
regulation of any governmental authority having jurisdiction in the matter
requires the Company, Committee, Optionee, or Representative to take any action
or refrain from action in connection with the exercise of any option under
this
Agreement or the delivery of shares of Stock to the Optionee, or to delay such
exercise or delivery, then the exercise or delivery of such shares shall be
deferred until such action has been taken or such restriction on action has
been
removed.
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4. Rules
Governing the Expiration Date.
The
Expiration Date for options granted to the Optionee under this Agreement shall
be subject to the following rules:
(a) Termination
of Employment.
If the
Optionee voluntarily or involuntarily terminates employment with the Company
(for reasons other than termination without Cause, Good Reason, death, Change
in
Control, Retirement, or Disability), the Expiration Date for exercising any
options under this Agreement which were vested as of his date of termination
shall be the three month anniversary of the date of such
termination.
(b) Termination
of Employment without Cause.
If the
Company terminates the Optionee’s employment without Cause, the Expiration Date
for exercising his vested options under this Agreement shall be the third
anniversary of such termination.
(c) Termination
of Employment for Good Reason. If
the
Optionee terminates his employment for Good Reason, the Expiration Date for
exercising his vested options under this Agreement shall be the third
anniversary of such termination.
(d) Retirement.
If the
Optionee terminates employment with the Company on his Retirement Date, the
Expiration Date for exercising his vested options under this Agreement shall
be
the third anniversary of his Retirement Date.
(e) Disability.
If the
Optionee terminates employment with the Company on his Disability Retirement
Date, the Expiration Date for exercising his vested options under this Agreement
shall be the third anniversary of his Disability Retirement Date.
(f) Optionee’s
Death.
If the
Optionee dies while actively employed by the Company, the Expiration Date for
exercising his vested options under this Agreement shall be the first
anniversary of the Optionee’s death.
(g) Change
in Control.
The
Expiration Date for all of the Optionee’s vested options shall be the tenth
anniversary of the Grant Date if a Change in Control takes place while the
Optionee is actively employed by the Company. Notwithstanding the foregoing,
if
the Optionee’s employment is terminated for Cause following a Change in Control,
the Expiration Date for all of the Optionee’s vested options shall be the date
of such termination.
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(h) Maximum
Expiration Date.
Notwithstanding any provision in this Section 4 of the Agreement to the
contrary, no
option
shall be exercisable on or after the tenth anniversary of the Grant
Date.
5. General
Provisions.
The
Optionee acknowledges that he has read, understands and agrees with all of
the
provisions in this Agreement and the Plan, including (but not limited to) the
following:
(a) Authority
of Committee.
The
Committee shall have all the authority set forth in the Plan including, but
not
limited to, the authority to administer the Agreement and the Plan; to make
all
determinations with respect to the construction and application of the
Agreement, the Plan, and the resolutions of the Board of Directors establishing
the Plan; to adopt and revise rules relating to the Agreement and the Plan;
and
to make other determinations which it believes are necessary or advisable for
the administration of the Agreement and the Plan. Any dispute or disagreement
which arises under this Agreement or the Plan shall be resolved by the Committee
in its absolute discretion. Any such determination, interpretation, resolution,
or other action by the Committee shall be final, binding and conclusive with
respect to the Optionee and all other persons affected thereby.
(b) Notices.
Any
notice which is required or permitted under this Agreement shall be in writing
(unless otherwise specified in the Agreement or in a writing from the Company
to
the Optionee), and delivered personally or by mail, postage prepaid, addressed
as follows: (i) if to the Company at 0000 Xxxxx Xxxxxx, Xxx. X, Xxxx Xxxxx,
Xxxxxxxx 00000, Attention: Corporate Secretary, or at such other address as
the
Company by notice to the Optionee may have designated from time to time; (ii)
if
to the Optionee, at the address indicated in the Optionee's then-current
personnel records, or at such other address as the Optionee by notice to the
Company may have designated from time to time. Such notice shall be deemed
given
upon receipt.
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(c) Taxation.
The
Optionee shall be responsible for all applicable withholding taxes and the
employee share of FICA taxes with respect to compensation income generated
upon
the exercise or surrender of his vested options under this
Agreement.
(d) Nontransferability.
This
Agreement and the options granted to the Optionee hereto shall be
nontransferable and shall not be sold, hypothecated or otherwise assigned or
conveyed by the Optionee to any other person, except as specifically permitted
in this Agreement. No assignment or transfer of this Agreement or the rights
represented thereby, whether voluntary or involuntary, or by operation of law
or
otherwise, shall vest in the assignee or transferee any interest or right
whatsoever, except as specifically permitted in this Agreement. The Agreement
shall terminate, and be of no force or effect, immediately upon any attempt
to
assign or transfer the Agreement or any of the options to which the Agreement
applies.
(e) Designation
of Beneficiary.
The
Optionee may designate a person or persons to receive, in the event of his
death, any rights to which he would be entitled under this Agreement. Such
a
designation shall be filed with the Company in accordance with uniform
procedures specified by the Committee. The Optionee may change or revoke a
beneficiary designation at any time by filing a written statement of such change
or revocation with the Company in accordance with uniform procedures specified
by the Committee. No beneficiary designation or change of beneficiary
designation will be effective until notice thereof is received. If an Optionee
fails to designate a beneficiary or if the beneficiary predeceases the Optionee,
the beneficiary shall be the legal representative of the Optionee’s estate. The
Optionee is not required to obtain spousal consent to designate someone other
than the spouse as beneficiary.
(f) No
Shareholder Rights.
The
Optionee shall have no rights as a shareholder of the Company, and shall not
be
deemed to be a shareholder of the Company for any purpose, as a result of the
options granted to the Optionee under this Agreement, until the date that shares
of Stock have been issued or transferred to the Optionee following the exercise
of an option in accordance with this Agreement. The Optionee shall not be
entitled to any dividends or other rights for which the record date is prior
to
the date of such issuance, transfer, or receipt.
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(g) Not
an Employment Contract.
This
Agreement shall not be deemed to limit or restrict the right of the Company
to
terminate the Optionee's employment at any time, for any reason, with or without
Cause, or to limit or restrict the right of the Optionee to terminate his
employment with the Company at any time.
(h) Forfeiture
Provisions. This
Award is subject to all of the forfeiture conditions set forth in Section 10
of
the Plan.
(i) Amendment
or Termination.
This
Agreement may be amended or terminated at any time by the mutual agreement
and
written consent of the Optionee and the Committee, but only to the extent
permitted under the Plan.
(j) Not
Considered Incentive Stock Options.
The
options granted under this Agreement do not constitute and shall not be
construed to constitute "incentive stock options" with the meaning of section
422 of the Internal Revenue Code of 1986, as amended.
(k) Governing
Instrument.
This
Agreement is subject to all terms and conditions of the Plan and shall at all
times be interpreted in a manner that is consistent with the intent, purposes,
and specific language of the Plan.
(l) Severability.
If any
provision of this Agreement should be held illegal or invalid for any reason
by
the Committee or court of applicable jurisdiction, such determination shall
not
affect the other provisions of this Agreement, and it shall be construed as
if
such provision had never been included herein.
(m) Headings/Gender.
Headings in this Agreement are for convenience only and shall not be construed
to be part of this Agreement. Any reference to the masculine, feminine or neuter
gender shall be a reference to other genders as appropriate.
(n) Governing
Law.
This
Agreement shall be construed, and its provisions enforced and administered,
in
accordance with the laws of the State of Michigan and, where applicable, federal
law.
6. Definitions.
All
capitalized terms shall have the meaning set forth in the Plan or, if not
defined in the Plan, shall be defined as set forth below.
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(a) Cause
has the
meaning specified in Section 4.1.3 of the Severance Agreement.
(b) Change
in Control has
the
meaning specified in Section 4.6 of the Severance Agreement.
(c) Company
means
SEMCO Energy, Inc., its successors and assigns, and any other company or other
entity, whether foreign or domestic, in which the Company has or obtains,
directly or indirectly, a proprietary interest of more than eighty percent
(80%)
by reason of stock ownership or otherwise.
(d) Disability
Retirement Date
means
the date of the Optionee’s termination of employment from the Company due to
Disability. For purposes of this Agreement, Disability is defined as,
the
Employee (a) is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months or (b) is, by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can
be
expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than 3 months under an
accident and health plan covering employees of the Company.
(e) Severance
Agreement
means
the severance agreement entered into as of [Insert Date], by and between SEMCO
Energy, Inc. and Optionee.
(f) Exercise
Amount
means
the sum of (a) the Option Price multiplied by the number of vested options
being
exercised plus (b) an amount sufficient to pay all applicable FICA and
withholding taxes on the difference between the Fair Market Value of Company
Stock for which the vested options are being exercised (determined as of the
exercise date) and their Option Price, as calculated by the
Committee.
(g) Expiration
Date
means
the tenth anniversary of the Grant Date, unless an earlier Expiration Date
is
established by operation of Section 4 of this Agreement.
(h) Fair
Market Value
has the
meaning specified in Section 2(n) of the Plan.
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(i) Good
Reason
has the
meaning specified in Section 4.2.1 of the Severance Agreement.
(j) Grant
Date
means
the date set forth on the first page of this Agreement, upon which the options
described in this Agreement were granted to the Optionee.
(k) Option
Price
means
the price per share set forth on the first page of this Agreement.
(l) Optionee
means
the Eligible Person named on the first page of this Agreement.
(m) Plan
means
the SEMCO Energy, Inc. 2004 Stock Award and Incentive Plan), as adopted by
the
Board of Directors on March 12, 2004, and approved by the Company’s shareholders
on May 24, 2004, and as amended from time to time.
(n) Representative
means,
in the event of the Optionee’s Disability, his duly authorized legal guardian or
representative; or, in the event of the Optionee’s death, his estate, legal
representative, or beneficiary as designated pursuant to Section
5(e).
(o) Retirement
Date
means
the date of Optionee’s termination of employment from the Company on which
Optionee is eligible to receive an immediate annuity under the terms of the
SEMCO Energy, Inc. Retirement Plan (or any successor tax-qualified retirement
plan maintained for salaried employees of the Company).
(p) Total
Shares Under Option
means
the number of options granted to the Optionee as set forth on the first page
of
this Agreement.
(q) Vesting
Date
means
any one of the dates upon which options granted to the Optionee under this
Agreement become exercisable in accordance with this Agreement.
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IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officers under its corporate seal, and the Optionee has executed
this Agreement, as of the day and year first above written.
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SEMCO
ENERGY, INC.
By:__________________________
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ATTEST:
____________________________
Corporate
Secretary
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OPTIONEE
_____________________________
[Insert
Name]
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