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EXHIBIT 10.1
EXECUTION COPY
REPURCHASE AGREEMENT
THIS REPURCHASE
AGREEMENT (the "Agreement") is made and entered into by
and between K-1 GHM, LLLP, a Delaware
limited liability limited partnership
("K-1" or "Seller"), and SEMCO ENERGY,
INC., a Michigan corporation ("Company"
or "Purchaser"), to be effective this 8th
day of March, 2005. Seller and
Purchaser are sometimes hereinafter
referred to together as the "Parties" and
individually as a "Party."
BACKGROUND:
A. K-1 and
the Company entered into that certain Securities Purchase
Agreement dated as of March 19, 2004 (the
"Securities Purchase Agreement"),
whereby K-1 purchased from the Company (i)
50,000 shares of Company's 6% Series
B Convertible Preference Stock, par value
$1.00 per share (together with the
additional 2,542.94 shares of 6% Series B
Convertible Preference Stock paid to
K-1 as dividends through February 15, 2005,
the "Preference Stock"), the terms
of the Preference Stock being set forth in
a Certificate of Designation of the
Company (the "Certificate of Designation")
and (ii) warrants (the "Warrants") to
purchase 905,565 shares of the Company's
common stock, par value $1.00 per share
(the "Common Stock").
B. K-1
owns all of the issued and outstanding shares of Preference
Stock
and Warrants, the Company wishes to
repurchase the Preference Stock and Warrants
from K-1, and K-1 wishes to sell the
Preference Stock and Warrants to the
Company.
C. To
facilitate such repurchase, the Parties have entered into this
Agreement, which shall govern in all
respects the repurchase of the Preference
Stock and Warrants, as well as other rights
and obligations of the Parties as
set forth herein.
NOW,
THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements
contained herein, and other good and valuable
consideration, the receipt and sufficiency
of which are hereby acknowledged, the
Parties hereby agree as follows:
1.
Repurchase and Sale of Preference Stock and Warrants. Subject to
the
terms and conditions contained herein,
Seller hereby agrees to sell, convey and
deliver to Purchaser, and Purchaser hereby
agrees to purchase from Seller, all
of Seller's right, title and interest in
and to the Preference Stock and
Warrants (the "Repurchase"). Prior to
Repurchase and in order to give effect
thereto, Seller agrees that at it shall not
(i) permit any of the Preference
Stock or Warrants to become encumbered by
any lien, pledge, claim, security
interest or other encumbrance (other than
those that exist pursuant to the
Securities Purchase Agreement, Stock
Purchase Agreement, Shareholders Agreement
(as defined herein), Registration Rights
Agreement (as defined herein) or
Warrants) or (ii) sell, distribute or
otherwise transfer any shares of
Preference Stock or Warrants.
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2.
Purchase Price. The total purchase price to be paid by Purchaser
for
the Preference Stock and Warrants shall be
$60 million (the "Purchase Price").
To the extent relating to the purchase of
the Preference Stock, as between the
Parties, the Repurchase is being conducted
in lieu of the notice, deposit for
funds and other mechanics provided for with
respect to an "Optional Approval
Redemption" (as such term is defined in
Section 11 of the Certificate of
Designation) provided, however, that the
foregoing shall in no way constitute an
acknowledgement by Seller of Purchaser's
right to conduct an Optional Approval
Redemption under any circumstances. Seller
shall not be otherwise entitled to
the reimbursement by Purchaser of any other
fees and expenses incurred by Seller
in connection with the transactions
contemplated by this Agreement except as
otherwise specifically provided herein.
In the
event the Closing takes place after March 19, 2005, Purchaser
shall
pay to Seller an amount, which shall be in
addition to the Purchase Price and
deemed a part thereof, in lieu of accrued
dividends on the Preference Stock, as
set forth below:
(a) 3/20/05 - 3/31/05 - In the event the Closing occurs on or
after
March 20, 2005 up to and including March
31, 2005, an amount equal to:
52,542.94 x [1/360] x 7% x $1,000
for each day after March 19, 2005 up to and
including the date of Closing.
(b) 4/1/05-5/14/05 - In the event the Closing occurs on or
after
April 1, 2005 up to and including May 14,
2005, an amount equal to:
52,542.94 x [1/360] x 8% x $1,000
for each day after March 31, 2005 up to and
including the date of Closing, plus
all amounts calculated in accordance with
subsection (a), above. For the
purposes of the foregoing, each month shall
be deemed to have 30 days.
3. Closing
Date and Termination of Transaction. The closing (the
"Closing") of the Repurchase shall occur at
the offices of Troutman Sanders LLP,
600 Peachtree Street, Atlanta, Georgia
30308, at 10:00 a.m. (Atlanta time), or
any other time and location that is
mutually agreed by the Parties, provided
that the Closing shall in no event occur
later than April 15, 2005 (the
"Termination Date"). The Parties agree that
if the Closing does not occur by the
Termination Date due to the breach or the
non-performance of a Party, then the
non-breaching Party may terminate this
Agreement or seek specific performance of
the obligations hereunder pursuant to
Section 15(g) of this Agreement; provided,
further, that the foregoing shall in no way
be deemed to release the breaching
Party from any liability for any breach or
failure to perform by such Party of
the terms and conditions of this
Agreement.
(a) Notice of Closing - At least three (3) days prior to the
Closing, Purchaser shall provide Seller
notice of the time and place of the
Closing (if the Closing
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is to be held at a location other than that
the offices of Troutman Sanders,
Purchaser shall obtain the reasonable
consent of Seller to the proposed time and
place for the Closing (which Closing shall
occur no later than April 15, 2005).
At least one (1) business day prior to the
Closing, Seller shall provide
Purchaser with wire transfer
instructions.
(b) Closing Deliveries - At the Closing, Seller shall deliver
to
Purchaser (i) all certificates representing
the Preference Stock, which shall be
endorsed in blank or accompanied by all
necessary stock transfer powers, (ii)
the Warrants, accompanied by an instrument
of assignment, (iii) the resignations
of the K-1 Directors (as defined below),
(iv) a Release (as defined below) and
(v) a certificate of an appropriate officer
of Seller substantially in the form
attached hereto as Exhibit A. Purchaser
shall deliver to Seller (w) the Purchase
Price via wire transfer in accordance with
the instructions provided by Seller
(or such other means agreed by the
Parties), (x) a Release, (y) a certificate of
an appropriate officer of Purchaser
substantially in the form attached hereto as
Exhibit A, and (z) an opinion of legal
counsel, as contemplated by Section
15(l).
4. Fund
Raising by Purchaser and Waiver of Rights. The Parties
acknowledge
that Purchaser will undertake certain
activities to fund the Purchase Price (the
"Fund Raising"). Purchaser will use all
commercially reasonable efforts to
timely complete the Fund Raising; provided,
however, that Purchaser's failure to
complete the Fund Raising or otherwise
produce the Purchase Price on or before
the Termination Date shall constitute a
breach of this Agreement; provided,
further, that so long as Purchaser has used
commercially reasonable efforts to
complete the Fund Raising, Purchaser's
failure to complete the Fund Raising or
otherwise produce the Purchase Price on or
before the Termination Date shall
provide Purchaser the right to terminate
this Agreement. Seller agrees that
neither it nor any of its affiliates will
in any way impede, obstruct or object
to the Fund Raising. To the extent the Fund
Raising would otherwise trigger
Seller's pre-emptive rights under Section
4(e) of the Securities Purchase
Agreement, Seller hereby waives such
pre-emptive rights. To the extent the Fund
Raising would otherwise require the
approval of Seller as a holder of all the
Preference Stock or in conjunction with
approval of the shareholders of
Purchaser, in general, Seller agrees to
promptly provide such approval;
provided, however, that to the extent not
impairing the legal validity of such
approvals, such approval can either be
conditioned upon the occurrence of the
Repurchase or rendered null and void if the
Repurchase does not occur as a
result of a termination of this Agreement
not caused by the breach of this
Agreement by Seller.
5.
Resignation of Directorships. Seller agrees that at the Closing,
it
will deliver the resignations of Mr.
Jeffrey A. Safchik and Ms. Sherry A.
Stanley (the "K-1 Directors") from
Purchaser's Board of Directors; provided,
however, that such resignations will be
rendered null and void if the Repurchase
does not occur as a result of a termination
of this Agreement not caused by the
breach of this Agreement by Seller. Seller
acknowledges that such resignation of
the K-1 Directors will require Purchaser to
file a current report on Form 8-K
with the Securities and Exchange Commission
(the "SEC"), and Seller agrees to
provide any reasonable assistance to
Purchaser in
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connection with such filing. The Parties
further agree that the resignation of
the K-1 Directors is not "due to a
disagreement with the registrant" and is not
a removal "with cause" as contemplated by
Item 5.02(a) of Form 8-K.
6.
Withdrawal from RCA Proceedings. Promptly following the execution
of
this Agreement, the Parties will jointly
petition the Regulatory Commission of
Alaska ("RCA") to suspend and, upon or
following the Closing, to dismiss
proceedings relating to the original
purchase of the Preference Stock and
Warrants by Seller (Case No. U-04-106), on
the grounds that, since the
Preference Stock and Warrants have been
repurchased by Purchaser, it is
unnecessary for the RCA to further
investigate or take any action with respect
to the issuance to Seller of the Preference
Stock and Warrants. Seller further
agrees to take such other actions before
and after the Closing as may reasonably
be requested by Purchaser (solely at the
expense of Purchaser) in connection
with obtaining the favorable action of the
RCA with respect to the suspension
and dismissal of this proceeding and any
other action relating to the subject
matter of this Agreement. Purchaser
acknowledges and agrees that Seller shall be
permitted to take all actions necessary to
(i) comply with the applicable laws
of the State of Alaska and (ii) respond to
any inquiries or requests of the
State of Alaska or its regulatory agencies;
provided, however, that to the
extent such actions relate to the
Repurchase or Seller's ownership of the
Preference Stock or Warrants, such actions
shall be mutually agreed upon in
advance (unless Seller is advised by
counsel that any such action not mutually
agreed upon in advance is required to be
made by law or applicable rule and is
not binding upon Purchaser, and then only
after consulting with Purchaser and
making reasonable efforts to comply with
the provisions of this Section).
7. Other
Agreements. Except as otherwise specifically set forth herein,
the Parties agree that to the extent the
terms of this Agreement conflict with
the Certificate of Designation or any other
agreement between the Parties, that
the terms of this Agreement shall control
and supersede such conflicting terms.
The Parties agree that upon the Closing,
the following agreements of the Parties
shall be terminated: (i) the Shareholder
Agreement between the Parties, dated as
of March 19, 2004, (ii) any provisions of
the Securities Purchase Agreement that
survived following the purchase of the
Preference Stock and Warrants by Seller,
and (iii) the Registration Rights Agreement
(the "Registration Rights
Agreement") between the Parties, dated as
of March 19, 2004. Additionally, the
Parties agree that, upon the Closing,
Purchaser shall be entitled to amend its
articles of incorporation to cancel,
eliminate or redesignate the Preference
Stock.
8.
Representation and Warranties of Seller. Seller hereby represents
and
warrants to Purchaser that:
(a) it is the lawful owner of the Preference Stock and Warrants
and
that such securities are free and clear of
any and all liens, pledges,
hypothecations, claims, security interests
or other encumbrances (other than
those t
