<PAGE> 1
Pursuant to Rule 424(b)(5)
Registration No. 33-55665
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 18, 1994)
4,000,000 PREFERRED SECURITIES
MCN MICHIGAN LIMITED PARTNERSHIP
9 3/8% CUMULATIVE PREFERRED SECURITIES, SERIES A
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
[LOGO]
------------------------
The 9 3/8% Cumulative Preferred Securities, Series A (the "Series A
Preferred Securities"), offered hereby represent beneficial interests in the
limited partner interests being issued by MCN Michigan Limited Partnership, a
limited partnership formed under the laws of the State of Michigan ("MCN
Michigan"). MCN Corporation, a Michigan corporation ("MCN", the "Company" or the
"General Partner"), is the General Partner in MCN Michigan. MCN Michigan exists
for the sole purpose of issuing securities representing beneficial interests in
limited partner interests and investing the proceeds thereof in debt securities
of MCN. The owners of Series A Preferred Securities will have a preference with
respect to cash distributions and amounts payable on liquidation over the
General Partner's interest in MCN Michigan.
(continued on next page)
------------------------
SEE "INVESTMENT CONSIDERATIONS" FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DIVIDENDS ON THE SERIES A
PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX
CONSEQUENCES.
The Series A Preferred Securities have been approved for listing on the New
York Stock Exchange, subject to official notice of issuance.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=========================================================================================================
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) MCN MICHIGAN(3)(4)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Series A Preferred Security.......... $25.00 (3) $25.00
- ---------------------------------------------------------------------------------------------------------
Total.................................... $100,000,000 (3) $100,000,000
=========================================================================================================
</TABLE>
(1) Plus accrued dividends, if any, from November 2, 1994.
(2) MCN Michigan and MCN have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting".
(3) In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will ultimately be invested in Series A Subordinated Debt
Securities, under the Underwriting Agreement, MCN has agreed to pay to the
Underwriters as compensation ("Underwriters' Compensation") for their
arranging the investment therein of such proceeds, $.7875 per Series A
Preferred Security (or $3,150,000 in the aggregate); provided, that such
compensation for sales of 10,000 or more to a single purchaser will be $.50
per Series A Preferred Security. Therefore, to the extent of such sales, the
actual amount of Underwriters' Compensation will be less than the aggregate
amount specified in the preceding sentence. See "Underwriting".
(4) Expenses of the offering which are payable by MCN are estimated to be
$350,000.
------------------------
The Series A Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Series A Preferred Securities will be made only in
book-entry form through the facilities of The Depository Trust Company on or
about November 2, 1994.
------------------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
ROBERT W. BAIRD & CO.
INCORPORATED
DEAN WITTER REYNOLDS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
A.G. EDWARDS & SONS, INC.
------------------------
The date of this Prospectus Supplement is October 26, 1994.
<PAGE> 2
(continued from previous page)
Holders of the Series A Preferred Securities will be entitled to receive
cumulative cash distributions at an annual rate of 9 3/8% of the liquidation
preference of $25 per Series A Preferred Security, accruing from the date of
original issuance and payable monthly in arrears on the last day of each
calendar month of each year, commencing November 30, 1994 ("dividends"). The
payment of dividends, out of moneys held by MCN Michigan, and payments on
liquidation of MCN Michigan or the redemption of Series A Preferred Securities,
as set forth below, are guaranteed by MCN to the extent described in the
accompanying Prospectus (the "Guarantee"). See "Description of the Guarantee" in
the accompanying Prospectus. If MCN fails to make interest payments on the
Series A Subordinated Deferrable Interest Debt Securities ("Series A
Subordinated Debt Securities") purchased by MCN Michigan, MCN Michigan will not
have sufficient funds to pay dividends on the Series A Preferred Securities. The
Guarantee does not cover payment of dividends when MCN Michigan does not have
sufficient funds to pay such dividends. In such event, the remedy of a holder of
Series A Preferred Securities is to enforce the rights of MCN Michigan under the
Series A Subordinated Debt Securities purchased by MCN Michigan from MCN.
The Series A Preferred Securities are redeemable at the option of MCN
Michigan, in whole or in part, from time to time, on or after November 30, 1999,
at $25 per Series A Preferred Security plus accrued and unpaid dividends thereon
(the "Redemption Price") to the date fixed for redemption. See "Description of
the Series A Preferred Securities -- Optional Redemption". In addition, upon the
occurrence of certain events arising from a change in law or a change in legal
interpretation regarding tax matters, the Series A Preferred Securities are
redeemable in whole at the Redemption Price at the option of MCN, in its
capacity as the General Partner of MCN Michigan, or MCN may dissolve MCN
Michigan and cause to be distributed to the holders of the Series A Preferred
Securities, on a pro rata basis, Series A Subordinated Debt Securities in lieu
of any cash distribution. See "Description of the Series A Subordinated Debt
Securities". If the Series A Subordinated Debt Securities are distributed to the
holders of the Series A Preferred Securities, MCN will use its best efforts to
have the Series A Subordinated Debt Securities listed on the New York Stock
Exchange or on such other exchange as the Series A Preferred Securities are then
listed. See "Description of the Series A Preferred Securities -- Tax Event
Redemption or Distribution" and "Description of the Series A Subordinated Debt
Securities." The obligations of MCN under the Guarantee are subordinate and
junior in right of payment to all other liabilities of MCN and pari passu with
the most senior preferred stock issued by MCN. The obligations of MCN under the
Series A Subordinated Debt Securities are subordinate and junior in right of
payment to all present and future Senior Indebtedness of MCN, which aggregated
approximately $220 million at June 30, 1994, and pari passu with MCN trade
creditors.
In the event of the dissolution of MCN Michigan, the holders of the Series
A Preferred Securities will be entitled to receive for each Series A Preferred
Security, a liquidation preference of $25, plus accrued and unpaid dividends
thereon (including interest thereon) to the date of payment, unless in
connection with such dissolution, the Series A Subordinated Debt Securities are
distributed to the holders of the Series A Preferred Securities. See
"Description of the Series A Preferred Securities -- Liquidation Distribution
Upon Dissolution".
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
MCN CORPORATION
SELECTED FINANCIAL AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Operating Revenues........ $1,559,836 $ 1,469,579 $ 1,438,280 $ 1,276,279 $ 1,209,339 $ 1,296,645
Operating Income.......... 171,866 143,886 125,493 98,641 84,964 100,835
Net Income................ 89,407 72,790 57,118 35,078 32,336 49,785
Earnings Per Share........ 3.03 2.48 2.11 1.42 1.38 2.20
Average Number of Common
Shares Outstanding
(000's)................. 29,504 29,321 27,108 24,693 23,516 22,662
OPERATING DATA:
Utility Gas Markets
(Millions of Cubic Feet)
Gas Sales(1).......... 215,980 205,372 203,110 192,770 188,066 214,051
========== ========== ========== ========== ========== ==========
Gas Transported(1).... 454,967 409,759 313,700 225,342 184,703 174,946
========== ========== ========== ========== ========== ==========
Average Utility
Customers............... 1,135,582 1,129,752 1,119,740 1,112,651 1,103,616 1,078,682
========== ========== ========== ========== ========== ==========
Nonutility Gas Markets
(Millions of Cubic Feet)
Gas Sales(1).......... 128,822 122,849 112,263 91,968 74,380 55,164
========== ========== ========== ========== ========== ==========
Gas Transported....... 21,250 21,840 25,382 25,335 -- --
========== ========== ========== ========== ========== ==========
CAPITAL INVESTMENTS(2):
Utility Services........ $ 129,837 $ 142,428 $ 129,423 $ 118,245 $ 114,987 $ 74,165
Nonutility Services..... 131,791 66,248 41,445 21,637 53,757 3,595
MCN's Share of Joint
Ventures.............. 18,286 36,502 31,203 5,139 8,923 5,273
---------- ---------- ---------- ---------- ---------- ----------
Total................. $ 279,914 $ 245,178 $ 202,071 $ 145,021 $ 177,667 $ 83,033
========== ========== ========== ========== ========== ==========
TOTAL ASSETS:............... $1,888,210 $ 1,864,430 $ 1,648,989 $ 1,517,387 $ 1,500,360 $ 1,365,318
========== ========== ========== ========== ========== ==========
LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATIONS(3):..... $ 555,064 $ 494,821 $ 379,811 $ 328,052 $ 320,516 $ 307,421
========== ========== ========== ========== ========== ==========
REDEEMABLE CUMULATIVE
PREFERRED STOCK OF
SUBSIDIARY(3):............ $ 2,618 $ 5,618 $ 9,000 $ 12,000 $ 15,000 $ 18,000
========== ========== ========== ========== ========== ==========
COMMON STOCK:
Market Price per share
(end of period)......... $ 40.00 $ 34.75 $ 30.88 $ 24.38 $ 21.50 $ 23.38
Dividends Paid Per
Share................... $ 1.71 $ 1.69 $ 1.65 $ 1.64 $ 1.59 $ 1.58
</TABLE>
- -------------------------
(1) Includes intercompany volumes.
(2) Capital investments represent consolidated capital expenditures,
acquisitions, and MCN's share of capital expenditures of joint ventures,
less the minority partners' share of consolidated capital expenditures.
(3) Excluding current requirements.
S-3
<PAGE> 4
The following information concerning the Series A Preferred Securities, the
Guarantee and the Series A Subordinated Debt Securities supplements and should
be read in conjunction with the information contained in the accompanying
Prospectus. Capitalized terms used in this Prospectus Supplement have the same
meanings as in the accompanying Prospectus.
MCN CORPORATION
MCN, a Michigan corporation organized in 1988, is the holding company for
(i) Michigan Consolidated Gas Company ("MichCon"), a public utility engaged in
the distribution, transmission and storage of natural gas to more than 1.1
million customers throughout Michigan; (ii) Citizens Gas Fuel Company
("Citizens"), a natural gas utility servicing Adrian, Michigan; and (iii) MCN
Investment Corporation ("MCN Investment"), the holding company for its
nonutility businesses. MCN's principal executive office is located at 500
Griswold, Detroit, MI 48226, telephone number (313) 256-5500.
Utility Services. MichCon and Citizens provide gas sales service primarily
to residential and commercial customers and transportation service to
large-volume customers. MichCon also provides transportation service to other
gas utilities, gas marketers and producers.
Gas Services. MCN Investment, through its subsidiary companies and various
joint ventures, markets natural gas to large-volume customers, develops gas
cogeneration facilities, provides gas gathering and processing services, engages
in gas exploration and production and provides gas storage services.
Computer Operations Services. The Genix Group, a wholly-owned subsidiary of
MCN Investment, provides data processing, computer operations management, data
telecommunications design and management, large-scale electronic printing and
mailing, and business process solution services to more than 100 corporate
clients in financial services, insurance, retailing, food processing, education,
manufacturing and other industries. These services are provided through
facilities located in Michigan, Pennsylvania and North Carolina.
Gas Technology. MCN's gas technology programs are developing products to
expand demand for natural gas.
Capital investments will exceed $400 million in 1994, with over $250
million being invested in nonutility businesses, primarily to purchase gas
reserves and for exploration and development. Approximately $150 million will be
invested in MCN's utility services operations.
MCN MICHIGAN LIMITED PARTNERSHIP
MCN Michigan is a limited partnership formed under the Michigan Revised
Uniform Limited Partnership Act (the "Partnership Act") by filing a certificate
of limited partnership with the Michigan Secretary of State on September 28,
1994. The initial partners in MCN Michigan are MCN, as General Partner, and MCN
Finance Corporation, a Michigan corporation and a wholly-owned subsidiary of MCN
("MCN Finance"), as limited partner. Upon the issuance of the Series A Preferred
Securities, MCN Finance will withdraw as a limited partner and Cede & Co., as
nominee for The Depository Trust Company, will be registered as the limited
partner of MCN Michigan. Thereafter all of the beneficial interests in the
limited partner interests will be owned by holders of the Series A Preferred
Securities. In this Prospectus Supplement, the phrase, "holders of Series A
Preferred Securities," refers to the beneficial owners of the Series A Preferred
Securities. See "Description of the Series A Preferred Securities --
Book-Entry-Only Issuance -- The Depository Trust Company". The General Partner
will agree to contribute capital to MCN Michigan to the extent required to
maintain its capital at an amount equal to at least 1% of the total capital
contributions to MCN Michigan. MCN and MCN Finance entered into a limited
partnership agreement dated as of September 28, 1994. Such limited partnership
agreement will be amended and restated in its entirety (as so amended and
restated, the "Limited Partnership Agreement") substantially in the form filed
as an exhibit to the Registration Statement of which this Prospectus Supplement
and the accompanying Prospectus form a part.
S-4
<PAGE> 5
MCN Michigan will not file, as a separate registrant, the periodic reports
required by Sections 13 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") with respect to the Series A Preferred Securities
because: (1) MCN Michigan is managed by MCN, a reporting company under the 1934
Act, as the sole General Partner, (2) MCN Michigan has no independent operations
but exists for the sole purpose of issuing securities representing beneficial
interests in limited partner interests and investing the proceeds thereof in the
Subordinated Debt Securities, and (3) any holders of the Series A Preferred
Securities may proceed directly against MCN to enforce its rights under the
Guarantee (see "Description of the Guarantee" in the accompanying Prospectus).
The rights of the holders of the Series A Preferred Securities including
economic rights, rights to information and voting rights, are set forth in the
Limited Partnership Agreement and the Partnership Act. See "Description of the
Series A Preferred Securities".
RECENT DEVELOPMENTS
On October 19, 1994, MCN reported a seasonal third quarter 1994 loss of
$15.6 million, or $.52 per share, compared with 1993's third quarter loss of
$11.2 million, or $.38 per share. Given the seasonal decline in demand for
natural gas in its utility business during the summer, MCN typically experiences
a third quarter loss. However, the increased earnings of MCN's nonutility
businesses helped offset some of this loss. As expected, the third quarter 1994
loss was greater than last year's because of the timing, on a quarterly basis,
of certain operating expenses (which tend to be incurred evenly throughout the
year) and the related revenues generated from a January 1994 rate order (which
are realized on a volumetric basis, the bulk of which occur in the colder first
and fourth quarters).
For the nine months ended September 30, 1994, MCN reported net income of
$57.0 million, or $1.92 per share, compared to $44.8 million, or $1.53 per
share, for the same period last year. For the twelve months ended September 30,
1994, MCN reported net income of $85.1 million, or $2.87 per share, compared to
$58.5 million, or $2.01 per share, for the prior twelve-month period. Earnings
for the nine-and twelve-month periods were higher primarily because of the
effect of colder weather on utility sales earlier in the year and increased
nonutility earnings from gas production and gas marketing operations.
INVESTMENT CONSIDERATIONS
Prospective purchasers of Series A Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and in
the accompanying Prospectus and should particularly consider the following
matters:
SUBORDINATE OBLIGATIONS UNDER GUARANTEE AND SERIES A SUBORDINATED DEBT
SECURITIES
MCN's obligations under the Guarantee are subordinate and junior in right
of payment to all other liabilities of MCN and pari passu with the most senior
preferred stock issued by MCN. The obligations of MCN under the Series A
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Indebtedness of MCN and pari passu with MCN trade
creditors. At June 30, 1994, Senior Indebtedness of MCN aggregated approximately
$220 million. There are no terms in the Series A Preferred Securities, the
Series A Subordinated Debt Securities or the Guarantee that limit MCN's ability
to incur additional indebtedness, including indebtedness that ranks senior to
the Series A Subordinated Debt Securities and the Guarantee. See "Description of
the Guarantee -- Status of the Guarantee" and "Description of MCN Debt
Securities -- Particular Terms of the Subordinated Debt Securities --
Subordination" in the accompanying Prospectus. The Limited Partnership Agreement
provides that each holder of Preferred Securities by acceptance thereof agrees
to the subordination provisions of the Guarantee and the Subordinated Debt
Securities Indenture.
S-5
<PAGE> 6
OPTION TO EXTEND INTEREST PAYMENT PERIOD
MCN has the right under the Indenture (as such term is defined in
"Description of the Series A Subordinated Debt Securities") to extend the
interest payment period at any time, and from time to time, on the Series A
Subordinated Debt Securities, and, as a consequence, monthly dividends on the
Series A Preferred Securities would be deferred (but would continue to accrue
with interest thereon) by MCN Michigan during any such extended interest payment
period. Such right to extend the interest payment period for the Series A
Subordinated Debt Securities is limited to a period not exceeding 60 consecutive
months. In the event that MCN exercises this right to extend, MCN may not
declare or pay dividends on, or redeem, purchase or acquire, any of its capital
stock until deferred interest on the Series A Subordinated Debt Securities is
paid in full. Prior to the termination of any such extension period, MCN may
further extend the interest payment period, provided that such extension period
together with all such previous and further extensions thereof may not exceed 60
consecutive months. Upon the termination of any extension period and the payment
of all amounts then due, MCN may select a new extension period subject to the
above requirements. See "Description of the Series A Preferred Securities --
Dividends" and "Description of the Series A Subordinated Debt Securities --
Option to Extend Interest Payment Period".
Should an extended interest payment period occur, MCN Michigan will
continue to accrue income for United States federal income tax purposes which
will be allocated, but not distributed, to holders of record of Series A
Preferred Securities. As a result, such holder will include such interest in
gross income for United States federal income tax purposes in advance of the
receipt of cash and will not receive the cash from MCN Michigan related to such
income if such holder disposes of its Series A Preferred Securities prior to the
record date for payment of dividends. See "United States Federal Income Taxation
- -- Potential Extension of Interest Payment Period".
TAX EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Tax Event (as defined herein), the General Partner
may elect to dissolve MCN Michigan and cause Series A Subordinated Debt
Securities to be distributed to the holders of the Series A Preferred Securities
in connection with the liquidation of MCN Michigan. If the General Partner has
received a Redemption Tax Opinion (as defined herein) or has been notified that
a No Recognition Opinion (as defined herein) cannot be delivered to the General
Partner, the General Partner shall have the right to redeem the Series A
Preferred Securities in whole (and not in part). See "Description of the Series
A Preferred Securities -- Tax Event Redemption or Distribution".
Under current United States federal income tax law, such a distribution of
Series A Subordinated Debt Securities would not be a taxable event to holders of
the Series A Preferred Securities. Under a change in law, a change in legal
interpretation or the other circumstances giving rise to a Tax Event, however,
the dissolution in which holders of the Series A Preferred Securities receive
cash would be a taxable event to such holders. See "United States Federal Income
Taxation -- Receipt of Series A Subordinated Debt Securities or Cash Upon
Liquidation of MCN Michigan".
S-6
<PAGE> 7
CAPITALIZATION OF MCN AT JUNE 30, 1994 (UNAUDITED)
(THOUSANDS, EXCEPT PERCENTAGES)
The following table sets forth the unaudited summary capitalization of MCN
and its consolidated subsidiaries as of June 30, 1994, and as adjusted to
reflect the application of the estimated net proceeds from the sale of 4,000,000
Series A Preferred Securities. See "Use of Proceeds". The table should be read
in conjunction with MCN's consolidated financial statements and notes thereto
and other financial data incorporated by reference herein. See "Incorporation of
Certain Documents by Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
AT JUNE 30, 1994
----------------------------------------------
ACTUAL AS ADJUSTED(4)
--------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Long-Term Debt (including capital
leases)(1)(2)(3)............................... $ 555,064 51.3% $ 555,064 46.9%
Preferred Units of Subsidiary.................... -- -- 100,000 8.5
Redeemable Preferred Stock of Subsidiary(2)...... 2,618 .2 2,618 .2
Common Shareholders' Equity...................... 525,015 48.5 525,015 44.4
---------- ------- ---------- -------
Total.......................................... $1,082,697 100.0% $1,182,697 100.0%
========= ===== ========= =====
</TABLE>
(1) Senior Indebtedness of MCN, for purposes of the subordination provisions of
the Series A Subordinated Debt Securities, includes only indebtedness of MCN
on an unconsolidated basis. As of June 30, 1994, such Senior Indebtedness
aggregated $220,067,275 which includes $186,488,151 under various revolving
lines of credit for MCN and MCN Investment. These lines of credit currently
permit total borrowings of up to $320,000,000. MCN has agreed to support MCN
Investment for its obligations under these lines of credit if MCN Investment
is unable to make timely payment of its indebtedness under them.
(2) Excluding current maturities.
(3) Excluding $80,000,000 aggregate principal amount of first mortgage bonds
issued September 26, 1994 by MichCon.
(4) Adjusted for the sale of the Series A Preferred Securities.
USE OF PROCEEDS
The proceeds from the sale of the Series A Preferred Securities will be
invested in the Series A Subordinated Debt Securities issued pursuant to the
Indenture described herein, and ultimately will be used by MCN for general
corporate purposes, which may include capital expenditures, investment in
subsidiaries, working capital, repayment of loans under bank credit agreements
and repayment of other short-term borrowings.
S-7
<PAGE> 8
DESCRIPTION OF THE SERIES A PREFERRED SECURITIES
The following summary of the principal terms and provisions of the Series A
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Limited Partnership Agreement, a
copy of which is filed as an exhibit to the Registration Statement, of which
this Prospectus Supplement is a part, and the Partnership Act.
GENERAL
All of the general partner interests in MCN Michigan are owned directly or
indirectly by MCN. The Limited Partnership Agreement and the action of the
General Partner dated October 26, 1994, authorize and create the Series A
Preferred Securities, which represent beneficial interests in limited partner
interests in MCN Michigan. Preferred securities of MCN Michigan ("Preferred
Securities") may be issued from time to time in one or more series. See
"Description of the MCN Michigan Preferred Securities" in the accompanying
Prospectus. The limited partner interests represented by the Series A Preferred
Securities will have a preference with respect to dividends and amounts payable
on liquidation over the General Partner's interest in MCN Michigan. The Limited
Partnership Agreement does not permit the issuance by MCN Michigan of any
Preferred Securities ranking, as to participation in profits and dividends and
in the assets of MCN Michigan, senior or junior to the Series A Preferred
Securities or the incurrence of any indebtedness by MCN Michigan.
DIVIDENDS
Dividends on the Series A Preferred Securities will be fixed at a rate per
annum of 9 3/8% of the stated liquidation preference of $25 per Preferred
Security. Dividends in arrears for more than one month will bear interest
thereon at the rate per annum of 9 3/8% thereof. The term "dividends" as used
herein includes any such interest payable unless otherwise stated. The amount of
dividends payable for any period will be computed on the basis of a 360-day year
of twelve 30-day months.
Dividends on the Series A Preferred Securities will be cumulative, will
accrue from November 2, 1994 and will be payable monthly in arrears on the last
day of each calendar month of each year, commencing November 30, 1994, when, as
and if available and determined to be so payable by MCN as the General Partner,
except as otherwise described below.
MCN has the right under the Indenture to extend the interest payment period
from time to time on the Series A Subordinated Debt Securities and, as a
consequence, monthly dividends on the Series A Preferred Securities would be
deferred (but would continue to accrue with interest) by MCN Michigan during any
such extended interest payment period. Such right to extend the interest payment
period for the Series A Subordinated Debt Securities is limited to a period not
exceeding 60 consecutive months. In the event that MCN exercises this right, MCN
may not declare or pay dividends on, or redeem, purchase or acquire, any of its
capital stock. Prior to the termination of any such extension period, MCN may
further extend the interest payment period, provided that such extension period
together with all such previous and further extensions thereof may not exceed 60
consecutive months. Upon the termination of any extension period and the payment
of all amounts then due, MCN may select a new extension period, subject to the
above requirements. See "Description of the Series A Subordinated Debt
Securities -- Interest" and "-- Option to Extend Interest Payment Period". If
dividends are deferred, the deferred dividends and accrued interest thereon
shall be paid to holders of record of the Series A Preferred Securities as they
appear on the records of MCN Michigan on the record date next following such
deferral period.
Dividends on the Series A Preferred Securities must be paid on the dates
payable to the extent that MCN Michigan has (i) funds legally available for the
payment of such dividends and (ii) cash on hand sufficient to permit such
payments. It is anticipated that MCN Michigan's earnings available for
distribution to the holders of the Series A Preferred Securities will be limited
to payments under the Series A Subordinated Debt Securities in which MCN
Michigan will invest the proceeds from the issuance and sale of the Series A
Preferred Securities and the General Partner's capital contribution. See
"Description of the
S-8
<PAGE> 9
Series A Subordinated Debt Securities". The payment of dividends, out of moneys
held by MCN Michigan, are guaranteed by MCN as set forth under "Description of
the Guarantee" in the accompanying Prospectus.
Dividends on the Series A Preferred Securities will be payable to the
holders thereof as they appear on the books and records of MCN Michigan on the
relevant record dates, which, as long as the Series A Preferred Securities
remain in book-entry-only form, will be one Business Day (as defined below)
prior to the relevant payment dates. Subject to any applicable laws and
regulations and the provisions of the Limited Partnership Agreement, each such
payment will be made as described under "Book-Entry-Only Issuance -- The
Depository Trust Company" below. In the event the Series A Preferred Securities
shall not continue to remain in book-entry-only form, the General Partner shall
have the right to select relevant record dates which shall be more than one
Business Day prior to the relevant payment dates. In the event that any date on
which dividends are payable on the the Series A Preferred Securities is not a
Business Day, then payment of the dividend payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business Day is
in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. A "Business Day" shall mean any day other than a day on
which banking institutions in The City of New York are authorized or required by
law to close.
CERTAIN RESTRICTIONS ON MCN MICHIGAN
If dividends have not been paid in full on the Series A Preferred
Securities, MCN Michigan shall not:
(i) pay or declare and set aside for payment any dividends on any
other series of Preferred Securities, unless the amount of any dividends
paid on all other series of Preferred Securities is paid on such other
series of Preferred Securities and the Series A Preferred Securities on a
pro rata basis on the date such dividends are paid on all such other series
of Preferred Securities, so that
(x) the aggregate amount of dividends paid on the Series A
Preferred Securities bears to the aggregate amount of dividends paid on
all such Preferred Securities the same ratio as
(y) the aggregate of all accrued and unpaid dividends in respect of
the Series A Preferred Securities bears to the aggregate of all accrued
and unpaid dividends in respect of all such Preferred Securities; or
(ii) pay any distribution on any interest of any General Partner in
MCN Michigan ("General Partner Interest"); or
(iii) redeem, purchase or otherwise acquire any other series of
Preferred Securities or any General Partner Interest;
until, in each case, such time as all accrued and unpaid dividends on the Series
A Preferred Securities shall have been paid in full for all dividend periods
terminating on or prior to, in the case of clause (i), such payment and, in the
case of clause (iii), the date of such redemption, purchase or acquisition.
As of the date of this Prospectus Supplement, there are no series of
Preferred Securities outstanding.
OPTIONAL REDEMPTION
The Series A Preferred Securities are redeemable, at the option of MCN
Michigan, in whole or in part, from time to time, on or after November 30, 1999,
upon not less than 30 nor more than 60 days' notice, at the Redemption Price. In
the event that fewer than all the outstanding Series A Preferred Securities are
to be so redeemed, the Series A Preferred Securities to be redeemed will be
selected as described under "Book-Entry-Only Issuance -- The Depository Trust
Company" below. If a partial redemption would result in the delisting of the
Series A Preferred Securities, MCN Michigan may only redeem the Series A
Preferred Securities in whole. If MCN Michigan redeems the Series A Preferred
Securities in accordance with the terms thereof, the Series A Subordinated Debt
Securities will become due and payable in a principal amount equal to the
aggregate stated liquidation preference of the Series A Preferred Securities so
redeemed, together with any accrued and unpaid interest, including Additional
Interest (as defined below), if any.
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TAX EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the General Partner shall have received an opinion
of nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that, as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein or (b) any amendment to or change in an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after such date), there is more than an
insubstantial risk that (i) MCN Michigan is subject to federal income tax with
respect to interest received on the Series A Subordinated Debt Securities, (ii)
interest payable to MCN Michigan on the Series A Subordinated Debt Securities
will not be deductible by MCN for federal income tax purposes or (iii) MCN
Michigan is subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
If a Tax Event (as defined above) shall occur and be continuing, the
General Partner may elect to dissolve MCN Michigan and cause Series A
Subordinated Debt Securities with an aggregate principal amount equal to the
aggregate stated liquidation preference of, with an interest rate identical to
the dividend rate of, and accrued and unpaid interest equal to accrued and
unpaid dividends (whether or not declared) on, the Series A Preferred
Securities, to be distributed to the holders of the Series A Preferred
Securities in liquidation of such holders' interests in MCN Michigan, within 90
days following the occurrence of such Tax Event; provided, however, that as a
condition of such dissolution and distribution, the General Partner and MCN
Michigan shall have received an opinion of nationally recognized independent tax
counsel experienced in such matters (a "No Recognition Opinion") to the effect
that the holders of the Series A Preferred Securities will not recognize any
gain or loss for federal income tax purposes as a result of such dissolution and
distribution of Series A Subordinated Debt Securities; provided, further, that,
if at the time there is available to the General Partner the opportunity to
eliminate, within such 90 day period, the Tax Event by taking some ministerial
action, such as filing a form or making an election, or pursuing some other
similar reasonable measure, which has no adverse effect on MCN Michigan, MCN or
the holders of the Series A Preferred Securities, the General Partner will
pursue such measure in lieu of dissolution. Furthermore, if the General Partner
(i) has received an opinion (a "Redemption Tax Opinion") of nationally
recognized independent tax counsel experienced in such matters that, as a result
of a Tax Event, there is more than an insubstantial risk that MCN would be
precluded from deducting the interest on the Series A Subordinated Debt
Securities for federal income tax purposes even if the Series A Subordinated
Debt Securities were distributed to the holders of Series A Preferred Securities
in liquidation of such holders' interests in MCN Michigan as described above or
(ii) after its receipt of a Dissolution Tax Opinion, the General Partner shall
have been informed by such tax counsel that a No Recognition Opinion cannot be
delivered to the General Partner and MCN Michigan, the General Partner shall
have the right, upon not less than 30 nor more than 60 days notice to redeem the
Series A Preferred Securities, in whole (and not in part), for cash at the
Redemption Price within 90 days following the occurrence of such Tax Event;
provided, however, that, if at the time there is available to the General
Partner the opportunity to eliminate, within such 90 day period, the Tax Event
by taking some ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure, which has no adverse effect
on MCN Michigan, MCN or the holders of the Series A Preferred Securities, the
General Partner will pursue such measure in lieu of redemption.
If the Series A Subordinated Debt Securities are distributed to the holders
of the Series A Preferred Securities, MCN will use its best efforts to have the
Series A Subordinated Debt Securities listed on the New York Stock Exchange or
on such other exchange as the Series A Preferred Securities are then listed.
After the date fixed for any distribution of Series A Subordinated Debt
Securities, upon dissolution of MCN Michigan, (i) the Series A Preferred
Securities will no longer be deemed to be outstanding, (ii) the Depositary or
its nominee, as the record holder of the Series A Preferred Securities, will
receive a registered global certificate or certificates representing the Series
A Subordinated Debt Securities to be delivered upon such distribution and (iii)
any certificates representing Series A Preferred Securities not held by the
Depositary or its nominee will be deemed to represent Series A Subordinated Debt
Securities having an
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aggregate principal amount equal to the aggregate stated liquidation preference
of, with an interest rate identical to the dividend rate of, and accrued and
unpaid interest equal to accrued and unpaid dividends (whether or not declared)
on, such Series A Preferred Securities until such certificates are presented to
MCN or its agent for transfer or reissuance.
MANDATORY REDEMPTION
Upon the redemption or payment at maturity of the Series A Subordinated
Debt Securities, the proceeds from such redemption or payment will be applied to
redeem the Series A Preferred Securities, in whole, upon not less than 30 nor
more than 60 days' notice, at the Redemption Price.
REDEMPTION PROCEDURES
MCN Michigan may not redeem fewer than all the outstanding Series A
Preferred Securities unless all accrued and unpaid dividends have been paid on
all Series A Preferred Securities for all monthly dividend periods terminating
on or prior to the date of redemption.
If MCN Michigan gives a notice of redemption in respect of Series A
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the redemption date, MCN Michigan will irrevocably deposit
with the Depositary funds sufficient to pay the applicable Redemption Price and
will give the Depositary irrevocable instructions and authority to pay the
Redemption Price to the holders of the Series A Preferred Securities. See
"Book-Entry-Only Issuance -- The Depository Trust Company". If notice of
redemption shall have been given and funds deposited as required, then
immediately prior to the close of business on the date of such deposit, all
rights of holders of such Series A Preferred Securities so called for redemption
will cease, except the right of the holders of such Series A Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price. In the event that any date fixed for redemption of Series A
Preferred Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day. In the event that
payment of the Redemption Price in respect of Series A Preferred Securities is
improperly withheld or refused and not paid either by MCN Michigan or by MCN
pursuant to the Guarantee described under "Description of the Guarantee" in the
accompanying Prospectus, dividends on such Series A Preferred Securities will
continue to accrue at the then applicable rate, from the original redemption
date to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all of the outstanding Series A Preferred
Securities are to be redeemed, the Series A Preferred Securities to be redeemed
will be selected by lot as described under "Book-Entry-Only Issuance -- The
Depository Trust Company" below.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), MCN or its subsidiaries may at any time
and, from time to time, purchase outstanding Series A Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of MCN Michigan, the holders of the Series A Preferred
Securities at the time will be entitled to receive out of the assets of MCN
Michigan available for distribution to partners after satisfaction of
liabilities of creditors as required by the Partnership Act, before any
distribution of assets is made to the General Partner, but together with the
holders of every other series of Preferred Securities outstanding, an amount
equal to, in the case of holders of Series A Preferred Securities, the aggregate
of the stated liquidation preference of $25 per Series A Preferred Security and
accrued and unpaid dividends thereon to the date of payment (the "Liquidation
Distribution"), unless, in connection with such liquidation, dissolution,
winding-up or termination, Series A
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Subordinated Debt Securities in an aggregate principal amount equal to the
Liquidation Distribution have been distributed on a pro rata basis to the
holders of the Series A Preferred Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because MCN Michigan has insufficient assets available to pay in
full the aggregate Liquidation Distribution and the aggregate maximum
liquidation distributions on all other series of Preferred Securities, then the
amounts payable directly by MCN Michigan on the Series A Preferred Securities
and on such other series of Preferred Securities shall be paid on a pro rata
basis, so that
(i) the aggregate amount paid in respect of the Liquidation
Distribution bears to the aggregate amount paid as liquidation
distributions on all other series of Preferred Securities the same ratio as
(ii) the aggregate Liquidation Distribution bears to the aggregate
maximum liquidation distributions on the other series of Preferred
Securities.
Pursuant to the Limited Partnership Agreement, MCN Michigan shall be
dissolved and its affairs shall be wound up: (i) on December 31, 2093, the
expiration of the term of MCN Michigan, (ii) upon the bankruptcy of the General
Partner, (iii) upon the assignment by the General Partner of its entire interest
in MCN Michigan when the assignee is not admitted to MCN Michigan as a general
partner of MCN Michigan in accordance with the Limited Partnership Agreement, or
the filing of a certificate of dissolution or its equivalent with respect to the
General Partner, or the revocation of the General Partner's charter and the
expiration of 90 days after the date of notice to the General Partner of
revocation without a reinstatement of its charter, or any other event occurs
which causes the General Partner to cease to be a general partner of MCN
Michigan under the Partnership Act, unless the business of MCN Michigan is
continued in accordance with the Partnership Act, (iv) the election of the
General Partner upon the occurrence of a Tax Event or any event specified in an
action of the General Partner as an event permitting the dissolution of MCN
Michigan, (v) upon the entry of a decree of a judicial dissolution or (vi) upon
the written consent of all partners of MCN Michigan.
MERGER, CONSOLIDATION OR AMALGAMATION OF MCN MICHIGAN
MCN Michigan may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. MCN Michigan may, to the extent permitted under the Partnership
Act and other applicable law, without the consent of the holders of the Series A
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by a limited partnership, limited liability corporation or a trust
organized as such under the laws of any state of the United States of America or
the District of Columbia; provided, that (i) such successor entity either (x)
expressly assumes all of the obligations of MCN Michigan under the Series A
Preferred Securities or (y) substitutes for the Series A Preferred Securities
other securities having substantially the same terms as the Series A Preferred
Securities (the "Successor Securities") so long as the Successor Securities
rank, with respect to participation in the profits and dividends or in the
assets of the successor entity, at least as high as the Series A Preferred
Securities rank with respect to participation in the profits and dividends or in
the assets of MCN Michigan, (ii) MCN expressly acknowledges such successor
entity as the holder of the Series A Subordinated Debt Securities, (iii) the
Series A Preferred Securities or any Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Series A
Preferred Securities are then listed, (iv) such merger, consolidation,
amalgamation or replacement does not cause the Series A Preferred Securities
(including any Successor Securities) to be downgraded by any nationally
recognized statistical rating organization, (v) such merger, consolidation,
amalgamation or replacement does not adversely affect the powers, preferences
and other special rights of the holders of the Series A Preferred Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), (vi) such
successor entity has a purpose substantially identical to that of MCN Michigan,
(vii) such merger, consolidation, amalgamation or replacement will not effect
the limited liability of any Preferred Partner (as such term is defined in the
Limited Partnership Agreement) and (viii) prior to such merger, consolidation,
amalgamation or replacement, MCN has received an opinion of nationally
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recognized independent counsel to MCN Michigan experienced in such matters to
the effect that (x) such successor entity will be treated as a partnership for
federal income tax purposes, (y) following such merger, consolidation,
amalgamation or replacement, MCN and such successor entity will be in compliance
with the Investment Company Act of 1940, as amended (the "1940 Act"), without
registering thereunder as an investment company and (z) such merger,
consolidation, amalgamation or replacement will not adversely affect the limited
liability of the holders of the Series A Preferred Securities.
VOTING RIGHTS
Except as provided below, under the Partnership Act and under "Description
of the Guarantee -- Amendments and Assignment" in the accompanying Prospectus
and as otherwise required by law and the Limited Partnership Agreement, the
holders of the Series A Preferred Securities will have no voting rights.
If (i) MCN Michigan fails to pay dividends in full on the Series A
Preferred Securities for 18 consecutive monthly dividend periods; (ii) an Event
of Default (as defined in the Indenture) occurs and is continuing on the Series
A Subordinated Debt Securities; or (iii) MCN is in default on any of its payment
or other obligations under the Guarantee (as described under "Description of the
Guarantee -- Certain Covenants of MCN" in the accompanying Prospectus), then the
holders of the Series A Preferred Securities, together with the holders of any
other series of Preferred Securities having the right to vote for the
appointment of a special representative of MCN Michigan and the limited partners
(a "Special Representative") in such event, acting as a single class, will be
entitled by the majority vote of such holders to appoint a Special
Representative and, if an Event of Default occurs under the Subordinated Debt
Securities Indenture, the Special Representative shall be authorized to enforce
MCN Michigan's creditor rights under the Series A Subordinated Debt Securities,
to enforce the rights of the holders of the Series A Preferred Securities under
the Guarantee and to enforce the rights of the holders of the Series A Preferred
Securities to receive dividends on the Series A Preferred Securities. The
Special Representative shall not be admitted as a partner in MCN Michigan or
otherwise be deemed to be a partner in MCN Michigan and shall have no liability
for the debts, obligations or liabilities of MCN Michigan. For purposes of
determining whether MCN Michigan has failed to pay dividends in full for 18
consecutive monthly dividend periods, dividends shall be deemed to remain in
arrears, notwithstanding any payments in respect thereof, until full cumulative
dividends have been or contemporaneously are paid with respect to all monthly
dividend periods terminating on or prior to the date of payment of such full
cumulative dividends. Not later than 30 days after such right to appoint a
Special Representative arises, the General Partner will convene a meeting for
the purpose of appointing a Special Representative. If the General Partner fails
to convene such meeting within such 30-day period, the holders of not less than
10% of the aggregate liquidation preference of the outstanding Preferred
Securities will be entitled to convene such meeting. The provisions of the
Limited Partnership Agreement relating to the convening and conduct of the
meetings of the partners will apply with respect to any such meeting. Any
Special Representative so appointed shall cease to be a Special Representative
of MCN Michigan and the limited partners if MCN Michigan (or MCN pursuant to the
Guarantee) shall have paid in full all accrued and unpaid dividends on the
Preferred Securities or such default or breach, as the case may be, shall have
been cured and MCN, in its capacity as the General Partner, shall continue the
business of MCN Michigan without dissolution. Notwithstanding the appointment of
any such Special Representative, MCN shall continue as General Partner and shall
retain all rights under the Indenture, including the right to extend the
interest payment period as provided under "Description of the Series A
Subordinated Debt Securities -- Option to Extend Interest Payment Period". If
such an extension occurs, there will be no Event of Default under the
Subordinated Debt Securities Indenture for failure to make any scheduled
interest payment during the Extension Period on the date originally scheduled.
If any proposed amendment to the Limited Partnership Agreement provides
for, or the General Partner otherwise proposes to effect, (i) any action which
would adversely affect the powers, preferences or special rights of the Series A
Preferred Securities, whether by way of amendment to the Limited Partnership
Agreement or otherwise (including, without limitation, the authorization or
issuance of any limited partner interests in MCN Michigan ranking, as to
participation in the profits and dividends or in the assets of MCN Michigan,
senior to the Series A Preferred Securities), or (ii) the dissolution,
winding-up or termination of
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MCN Michigan, other than (x) in connection with the distribution of Series A
Subordinated Debt Securities upon the occurrence of a Tax Event or (y) as
described under "Merger, Consolidation or Amalgamation of MCN Michigan" above,
then the holders of outstanding Series A Preferred Securities will be entitled
to vote on such amendment or proposal of the General Partner (but not on any
other amendment or proposal) as a class with all other holders of series of
Preferred Securities similarly affected, and such amendment or proposal shall
not be effective except with the approval of the holders of 66 2/3% or more of
the aggregate liquidation preference of the outstanding Preferred Securities
having a right to vote on the matter; provided, however, that no such approval
shall be required if the dissolution, winding-up or termination of MCN Michigan
is proposed or initiated upon the initiation of proceedings, or after
proceedings have been initiated, for the dissolution, winding-up, liquidation or
termination of MCN.
The rights attached to the Series A Preferred Securities will be deemed not
to be adversely affected by the creation or issue of, and no vote will be
required for the creation or issue of any further limited partner interests of
MCN Michigan ranking pari passu with the Series A Preferred Securities with
regard to participation in the profits and dividends or in the assets of MCN
Michigan.
So long as any Series A Subordinated Debt Securities are held by MCN
Michigan, the General Partner shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or executing
any trust or power conferred on the Trustee with respect to such series, (ii)
waive any past default which is waivable under Section 513 of the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Series A Subordinated Debt Securities shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture, where
such consent shall be required, without, in each case, obtaining the prior
approval of the holders of at least 66 2/3% in liquidation preference of all
series of Preferred Securities affected thereby, acting as a single class;
provided, however, that where a consent under the Indenture would require the
consent of each holder affected thereby, no such consent shall be given by the
General Partner without the prior consent of each holder of all series of
Preferred Securities affected thereby. The General Partner shall not revoke any
action previously authorized or approved by a vote of any series of Preferred
Securities. The General Partner shall notify all holders of the Series A
Preferred Securities of any notice of default received from the Trustee with
respect to the Series A Subordinated Debt Securities.
Any required approval of holders of Series A Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for such
purpose, at a meeting of all of the partners in MCN Michigan or pursuant to
written consent. MCN Michigan will cause a notice of any meeting at which
holders of Series A Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Series A Preferred Securities. Each such
notice will include a statement setting forth (i) the date of such meeting or
the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the holders of Series A Preferred Securities will be
required for MCN Michigan to redeem and cancel Series A Preferred Securities in
accordance with the Limited Partnership Agreement.
Notwithstanding that holders of Series A Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Series A Preferred Securities and any other series of Preferred Securities that
are entitled to vote or consent with such Series A Preferred Securities as a
single class at such time that are owned by MCN or any entity owned more than
20% by MCN, either directly or indirectly, shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if they
were not outstanding.
The procedures by which holders of Series A Preferred Securities may
exercise their voting rights are described below. See "-- Book-Entry-Only
Issuance -- The Depository Trust Company."
Holders of the Series A Preferred Securities will have no rights to remove
or replace the General Partner.
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BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Series A Preferred Securities. The Series A Preferred Securities will be
issued only as fully-registered securities registered in the name of Cede & Co.
(DTC's nominee). One or more fully-registered global Series A Preferred Security
certificates will be issued, representing in the aggregate the total number of
Series A Preferred Securities, and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global Preferred
Security.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the 1934 Act. DTC holds
securities that its participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
Inc. (the "New York Stock Exchange"), the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Series A Preferred Securities within the DTC system must be
made by or through Direct Participants, which will receive a credit for the
Series A Preferred Securities on DTC's records. The ownership interest of each
actual purchaser of each Series A Preferred Security ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Series A Preferred Securities. Transfers of ownership interests in the
Series A Preferred Securities are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in Series A
Preferred Securities, except in the event that use of the book-entry system for
the Series A Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Series A Preferred Securities
deposited by Participants with DTC are registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of Series A Preferred Securities
with DTC and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Series A Preferred Securities. DTC's records reflect only the identity of
the Direct Participants to whose accounts such Series A Preferred Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Series A Preferred Securities are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each Direct Participant in such series to
be redeemed.
Although voting with respect to the Series A Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will itself consent or vote with respect to Series A Preferred Securities.
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Under its usual procedures, DTC would mail an Omnibus Proxy to MCN Michigan as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Series A Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy). MCN and MCN Michigan believe that the
arrangements among DTC, Direct and Indirect Participants, and Beneficial Owners
will enable the Beneficial Owners to exercise rights equivalent in substance to
the rights that can be exercised by a limited partner of MCN Michigan.
Dividend payments on the Series A Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as in the case with securities
held for the account of customers in bearer form or registered in "street name,"
and will be the responsibility of such Participant and not of DTC, MCN Michigan
or MCN, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of dividends to DTC is the responsibility of MCN
Michigan, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Series A Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the Series A Preferred Securities at any time by giving reasonable
notice to MCN Michigan. Under such circumstances, in the event that a successor
securities depository is not obtained, Series A Preferred Security certificates
are required to be printed and delivered. Additionally, MCN Michigan (with the
consent of MCN) may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor depositary). In that event, certificates
for the Series A Preferred Securities will be printed and delivered. In each of
the above circumstances, the General Partner will appoint a paying agent with
respect to the Series A Preferred Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that MCN Michigan believes to be reliable, but
MCN Michigan takes no responsibility for the accuracy thereof.
REGISTRAR AND TRANSFER AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions would apply:
First Chicago Trust Company of New York will act as registrar, transfer
agent and paying agent for the Series A Preferred Securities, but the Company
may designate an additional or substitute registrar, transfer agent and paying
agent at any time.
Registration of transfers of Series A Preferred Securities will be effected
without charge by or on behalf of MCN Michigan, but upon payment (with the
giving of such indemnity as MCN Michigan or MCN may require) in respect of any
tax or other government charges which may be imposed in relation to it.
MCN Michigan will not be required to register or cause to be registered the
transfer of Series A Preferred Securities after such Series A Preferred
Securities have been called for redemption.
MISCELLANEOUS
The General Partner is authorized and directed to conduct its affairs and
to operate MCN Michigan in such a way that MCN Michigan will not be deemed to be
an "investment company" required to be registered under the 1940 Act or taxed as
a corporation for federal income tax purposes and so that the Series A
Subordinated Debt Securities will be treated as indebtedness of MCN for federal
income tax purposes. In this connection, the General Partner is authorized to
take any action, not inconsistent with applicable law, the certificate of
limited partnership or the Limited Partnership Agreement, that the General
Partner determines in its discretion to be necessary or desirable for such
purposes, as long as such action does not adversely affect the interests of the
holders of the Series A Preferred Securities.
Holders of the Series A Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE SERIES A SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Series A
Subordinated Debt Securities in which MCN Michigan will invest with the proceeds
of the issuance and sale of (i) the Series A Preferred Securities and (ii) the
General Partner's capital contribution with respect to the Series A Preferred
Securities (the "General Partnership Payment"). This description supplements the
description of the general terms and provisions of the Series A Subordinated
Debt Securities set forth in the accompanying Prospectus under the caption
"Particular Terms of the Subordinated Debt Securities". The following
description does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the description in the accompanying Prospectus
and the Subordinated Debt Securities Indenture, dated as of September 1, 1994,
between MCN and NBD Bank, N.A., as Trustee, (the "Indenture"), a copy of which
is filed as an Exhibit to the Registration Statement of which this Prospectus
Supplement forms a part. Certain capitalized terms used herein are defined in
the Indenture.
Under certain circumstances involving the dissolution of MCN Michigan
following the occurrence of a Tax Event, Series A Subordinated Debt Securities
may be distributed to the holders of the Series A Preferred Securities in
liquidation of MCN Michigan. See "Description of the Series A Preferred
Securities -- Tax Event Redemption or Distribution".
If the Series A Subordinated Debt Securities are distributed to the holders
of the Series A Preferred Securities, MCN will use its best efforts to have the
Series A Subordinated Debt Securities listed on the New York Stock Exchange or
on such other exchange as the Series A Preferred Securities are then listed.
GENERAL
The Series A Subordinated Debt Securities will be issued as unsecured debt
under the Indenture. The Series A Subordinated Debt Securities will be limited
in aggregate principal amount to approximately $101 million, such amount being
the sum of the aggregate stated liquidation preference of the Series A Preferred
Securities and the General Partnership Payment.
The Series A Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Series A Subordinated Debt
Securities will become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest (as hereinafter defined), if
any, on November 30, 2024.
If Series A Subordinated Debt Securities are distributed to holders of
Series A Preferred Securities in liquidation of such holders' interests in MCN
Michigan, such Series A Subordinated Debt Securities will initially be issued as
a Global Security (as defined below). As described herein, under certain limited
circumstances, Series A Subordinated Debt Securities may be issued in
certificated form in exchange for a Global Security (as defined below). See "--
Book-Entry and Settlement". In the event that Series A Subordinated Debt
Securities are issued in certificated form, such Series A Subordinated Debt
Securities will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below. Payments on
Series A Subordinated Debt Securities issued as a Global Security will be made
to the depositary for the Series A Subordinated Debt Securities. In the event
Series A Subordinated Debt Securities are issued in certificated form, principal
and interest will be payable, the transfer of the Series A Subordinated Debt
Securities will be registrable and Series A Subordinated Debt Securities will be
exchangeable for Series A Subordinated Debt Securities of other denominations of
a like aggregate principal amount at the corporate trust office of the Trustee
in Detroit, Michigan; provided, that payment of interest may be made at the
option of MCN by check mailed to the address of the persons entitled thereto.
MANDATORY PREPAYMENT
If MCN Michigan redeems Series A Preferred Securities in accordance with
the terms thereof, the Series A Subordinated Debt Securities will become due and
payable in a principal amount equal to the aggregate stated liquidation
preference of the Series A Preferred Securities so redeemed, together with any
accrued and unpaid interest, including Additional Interest, if any, to the date
fixed for redemption. Any
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payment pursuant to this provision shall be made prior to 12:00 noon, New York
time, on the date of such redemption or at such other time on such earlier date
as the parties thereto shall agree.
OPTIONAL REDEMPTION
If there shall be no Series A Preferred Securities outstanding, MCN shall
have the right to redeem the Series A Subordinated Debt Securities, in whole or
in part, from time to time, on or after November 30, 1999, upon not less than 30
nor more than 60 days' notice, at a redemption price equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest, including
Additional Interest, if any, to the redemption date.
INTEREST
Each Series A Subordinated Debt Security shall bear interest at the rate of
9 3/8% per annum from the original date of issuance, payable monthly in arrears
on the last day of each calendar month of each year (each, an "Interest Payment
Date"), commencing November 30, 1994, to the person in whose name such Series A
Subordinated Debt Security is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
In the event the Series A Subordinated Debt Securities shall not continue to
remain in book-entry-only form, MCN shall have the right to select record dates
which shall be more than one Business Day prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Series A Subordinated Debt Securities is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
MCN shall have the right at any time, and from time to time, during the
term of the Series A Subordinated Debt Securities to extend the interest payment
period for a period not exceeding 60 consecutive months (the "Extension
Period"), at the end of which Extension Period, MCN shall pay all interest then
accrued and unpaid (including any Additional Interest) (together with interest
thereon at the rate specified for the Series A Subordinated Debt Securities to
the extent permitted by applicable law); provided, that, during any such
Extension Period, MCN shall not declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to any of its
capital stock until deferred interest on the Series A Subordinated Debt
Securities is paid in full. Prior to the termination of any such Extension
Period, MCN may further extend the interest payment period, provided that such
Extension Period together with all such previous and further extensions thereof
may not exceed 60 consecutive months. Upon the termination of any Extension
Period and the payment of all amounts then due, MCN may select a new Extension
Period, subject to the above requirements. No interest during an Extension
Period, except at the end thereof, shall be due and payable. If MCN Michigan
shall be the sole holder of the Series A Subordinated Debt Securities, MCN shall
give MCN Michigan notice of its selection of such Extension Period one Business
Day prior to the earlier of (i) the date the dividends on the Series A Preferred
Securities are payable or (ii) the date MCN Michigan is required to give notice
to the New York Stock Exchange or other applicable self-regulatory organization
or to holders of the Series A Preferred Securities of the record date or the
date such dividend is payable, but in any event not less than one Business Day
prior to such record date. MCN shall cause MCN Michigan to give notice of MCN's
selection of such Extension Period to the holders of the Series A Preferred
Securities. If MCN Michigan shall not be the sole holder of the Series A
Subordinated Debt Securities, MCN shall give the holders of the Series A
Subordinated Debt Securities notice of its selection of such Extension Period
ten Business Days prior to the earlier of (i) the Interest Payment Date or (ii)
the date MCN is required to give notice to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Series A
Subordinated Debt Securities, of the record or payment date of such related
interest payment but in any event not less than two Business Days prior to such
record date.
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ADDITIONAL INTEREST
If at any time MCN Michigan shall be required to pay any interest on
dividends in arrears in respect of the Series A Preferred Securities pursuant to
the terms thereof, then MCN will pay as interest to MCN Michigan as the holder
of the Series A Subordinated Debt Securities ("Additional Interest") an amount
equal to such interest on dividends in arrears. In addition, if MCN Michigan
would be required to pay any taxes, duties, assessments or governmental charges
of whatever nature (other than withholding taxes) imposed by the United States,
or any other taxing authority, then, in any such case, MCN also will pay as
Additional Interest such amounts as shall be required so that the net amounts
received and retained by MCN Michigan after paying any such taxes, duties,
assessments or other governmental charges will be not less than the amounts MCN
Michigan would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
SET-OFF
Notwithstanding anything to the contrary in the Indenture, MCN shall have
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent MCN has theretofore made, or is concurrently on the date
of such payment making, a payment under the Guarantee.
EVENTS OF DEFAULT
In the case any Event of Default (as defined in the Indenture) shall occur
and be continuing, MCN Michigan will have the right to declare the principal of
and the interest on the Series A Subordinated Debt Securities (including any
Additional Interest) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Series A Subordinated Debt Securities. See "Enforcement of
Certain Rights by Special Representative" below for a discussion of certain
rights available to holders of the Series A Preferred Securities upon the
occurrence of an Event of Default.
ENFORCEMENT OF CERTAIN RIGHTS BY SPECIAL REPRESENTATIVE
If (i) MCN Michigan fails to pay dividends in full on the Series A
Preferred Securities for 18 consecutive monthly dividend periods; (ii) an Event
of Default (as defined in the Indenture) occurs and is continuing on the Series
A Subordinated Debt Securities; or (iii) MCN is in default on any of its payment
of other obligations under the Guarantee, under the terms of the Series A
Preferred Securities, the holders of outstanding Series A Preferred Securities
will have the rights referred to under "Description of the Series A Preferred
Securities -- Voting Rights", including the right to appoint a Special
Representative, which Special Representative shall, if an Event of Default
occurs under the Subordinated Debt Securities Indenture, be authorized to
exercise MCN Michigan's right to accelerate the principal amount of the Series A
Subordinated Debt Securities and to enforce MCN Michigan's other creditor rights
under the Series A Subordinated Debt Securities. The procedures by which such
rights would be effected are described in "Description of the Series A Preferred
Securities -- Book-Entry-Only Issuance -- The Depository Trust Company."
Notwithstanding the appointment of any such Special Representative, MCN shall
continue as General Partner and shall retain all rights under the Indenture,
including the right to extend the interest payment period. See "-- Option to
Extend Interest Payment Period". If such an extension occurs, there will be no
Event of Default under the Subordinated Debt Securities Indenture for failure to
make any scheduled interest payment during the Extension Period on the date
originally scheduled.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Series A Preferred Securities in connection
with the dissolution of MCN Michigan as a result of the occurrence of a Tax
Event, the Series A Subordinated Debt Securities will be issued in the form of
one or more global certificates (each, a "Global Security") registered in the
name of the depositary or its nominee. Except under the limited circumstances
described below, Series A Subordinated Debt Securities represented by the Global
Security will not be exchangeable for, and will not otherwise be
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issuable as, Series A Subordinated Debt Securities in definitive form. The
Global Securities described above may not be transferred except by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or to a successor depositary
or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Series A
Subordinated Debt Securities in definitive form and will not be considered the
Holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Series A Subordinated Debt
Securities shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the depositary or its
nominee or to a successor depositary or its nominee. Accordingly, each
beneficial owner must rely on the procedures of the depositary and, if such
person is not a Participant, on the procedures of the Participant through which
such person owns its interest, to exercise any rights of a Holder under the
Indenture.
THE DEPOSITARY
If Series A Subordinated Debt Securities are distributed to holders of
Series A Preferred Securities in liquidation of such holders' interests in MCN
Michigan, DTC will act as securities depositary for the Series A Subordinated
Debt Securities. For a description of DTC and the specific terms of the
depository arrangements, see "Description of the Series A Preferred Securities
- -- Book-Entry-Only Issuance -- The Depository Trust Company". As of the date of
this Prospectus Supplement, the description therein of DTC's book-entry system
and DTC's practices as they relate to purchases, transfers, notices and payments
with respect to the Series A Preferred Securities apply in all material respects
to any debt obligations represented by one or more Global Securities held by
DTC. MCN may appoint a successor to DTC or any successor depositary in the event
DTC or such successor depositary is unable or unwilling to continue as
depositary.
None of MCN, MCN Michigan, the Trustee, any paying agent and any other
agent of MCN or the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security for such Series A Subordinated Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Series A Subordinated Debt
Securities registered in the names of persons other than the depositary or its
nominee only if (i) the depositary notifies MCN that it is unwilling or unable
to continue as a depositary for such Global Security and no successor depositary
shall have been appointed, or if any time the depositary ceases to be a clearing
agency registered under the 1934 Act at a time when the depositary is required
to be so registered to act as such depositary and no successor depositary shall
have been appointed, (ii) MCN in its sole discretion determines that such Global
Security shall be so exchangeable or (iii) there shall have occurred an Event of
Default with respect to such Series A Subordinated Debt Securities. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for Series A Subordinated Debt Securities registered in such names
as the depositary shall direct. It is expected that such instructions will be
based upon directions received by the depositary from its Participants with
respect to ownership of beneficial interests in such Global Security.
MISCELLANEOUS
For restrictions on certain actions of the General Partner with respect to
Series A Subordinated Debt Securities held by MCN Michigan, see "Description of
the Series A Preferred Securities -- Voting Rights".
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EFFECT OF OBLIGATIONS UNDER THE
SERIES A SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
As set forth in the Limited Partnership Agreement, the sole purpose of MCN
Michigan is to issue securities representing beneficial interests in limited
partner interests, including, without limitation, the Series A Preferred
Securities, and to invest the proceeds thereof in the Series A Subordinated Debt
Securities or other similar debt instruments of MCN.
As long as payments of interest and other payments are made when due on the
Series A Subordinated Debt Securities, such payments will be sufficient to cover
dividends and payments due on the Series A Preferred Securities primarily
because (i) the aggregate principal amount of Series A Subordinated Debt
Securities will be equal to the sum of the aggregate stated liquidation
preference of the Series A Preferred Securities and the General Partnership
Payment; (ii) the interest rate and interest and other payment dates on the
Series A Subordinated Debt Securities will match the dividend rate and dividend
and other payment dates for the Series A Preferred Securities; (iii) the Limited
Partnership Agreement provides that MCN, as General Partner, shall pay for all,
and MCN Michigan shall not be obligated to pay, directly or indirectly, for any,
costs and expenses of MCN Michigan; and (iv) the Limited Partnership Agreement
further provides that the General Partner shall not cause or permit MCN Michigan
to, among other things, engage in any activity that is not consistent with the
purposes of MCN Michigan.
If MCN fails to make interest or other payments on the Series A
Subordinated Debt Securities when due (taking account of any Extension Period),
the Limited Partnership Agreement provides a mechanism whereby the holders of
the Series A Preferred Securities, using the procedures described in
"Description of the Series A Preferred Securities -- Book-Entry-Only Issuance --
The Depository Trust Company", may enforce the rights of MCN Michigan under the
Series A Subordinated Debt Securities through the appointment of a Special
Representative. Payments of dividends and other payments due on the Series A
Preferred Securities out of moneys held by MCN Michigan are guaranteed by MCN to
the extent set forth under "Description of the Guarantee" in the accompanying
Prospectus. The Limited Partnership Agreement also provides, and MCN, under the
Guarantee, acknowledges, that a Special Representative may be appointed to
enforce the Guarantee if MCN is in default on any of its payment obligations
under the Guarantee. In addition, if the General Partner or the Special
Representative fails to enforce the Guarantee, a holder of a Series A Preferred
Security, using the procedures described in "Description of the Series A
Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust
Company", may institute a legal proceeding directly against MCN to enforce its
rights under the Guarantee without first instituting a legal proceeding against
MCN Michigan or any other person or entity.
MCN and MCN Michigan believe that the Guarantee and the rights described in
the immediately preceding paragraph together effect a full and unconditional
guarantee of the Guarantee Payments. See "Description of the Guarantee --
General".
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
This section is a summary of certain United States federal income tax
considerations that may be relevant to prospective purchasers of Series A
Preferred Securities and represents the opinion of Sidley & Austin, special tax
counsel to MCN and MCN Michigan, insofar as it relates to matters of law and
legal conclusions. This section is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change. Subsequent changes may cause tax consequences to vary
substantially from the consequences described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Series A
Preferred Securities. Moreover, the discussion focuses on initial purchasers of
Series A Preferred Securities that are individual citizens or residents of the
United States that
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hold the Series A Preferred Securities as a capital asset and has only limited
application to corporations, estates, trusts or non-resident aliens.
Accordingly, each prospective purchaser of Series A Preferred Securities should
consult, and should depend on, its own tax advisor in analyzing the federal,
state, local and foreign tax consequences of the purchase, ownership or
disposition of Series A Preferred Securities.
INCOME FROM SERIES A PREFERRED SECURITIES
MCN Michigan will be treated as a partnership and the Series A Subordinated
Debt Securities will be treated as indebtedness for federal income tax purposes.
Accordingly, each beneficial owner of Series A Preferred Securities (a
"Preferred Securityholder") will be required to include in gross income the
Preferred Securityholder's distributive share of the net income of MCN Michigan.
Such income will not exceed the dividends received on such Series A Preferred
Securities, except in limited circumstances as described below under "Potential
Extension of Interest Payment Period". Any amount so included in a Preferred
Securityholders' gross income will increase its tax basis in the Series A
Preferred Securities, and the amount of cash dividends to the Preferred
Securityholder will reduce its tax basis in the Series A Preferred Securities.
No portion of such income will be eligible for the dividends received deduction.
DISPOSITION OF SERIES A PREFERRED SECURITIES
A Preferred Securityholder will recognize gain or loss on a sale of Series
A Preferred Securities, including a redemption for cash of all of a Preferred
Securityholder's Series A Preferred Securities, equal to the difference between
the amount realized and the Preferred Securityholder's tax basis for the Series
A Preferred Securities sold or redeemed. In the case of a cash distribution in
partial redemption of a Preferred Securityholder's Series A Preferred
Securities, no loss will be recognized, such holder's tax basis in the Series A
Preferred Securities will be reduced by the amount of the distribution, and such
holder will recognize gain to the extent, if any, that the amount of the
distribution exceeds such holder's tax basis in the Series A Preferred
Securities. Gain or loss recognized by a Preferred Securityholder on the sale or
exchange of a Series A Preferred Security held for more than one year will
generally be taxable as long-term capital gain or loss.
RECEIPT OF SERIES A SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF MCN
MICHIGAN
Under certain circumstances, as described under the caption "Description of
the Series A Preferred Securities -- Tax Event Redemption or Distribution",
Series A Subordinated Debt Securities may be distributed to Preferred
Securityholders in exchange for the Series A Preferred Securities and in
liquidation of MCN Michigan. Under current United States federal income tax law,
such a distribution would be treated as a non-taxable exchange to each Preferred
Securityholder and each Preferred Securityholder would receive an aggregate tax
basis in the Series A Subordinated Debt Securities equal to such holder's
aggregate tax basis in its Series A Preferred Securities. A holder's holding
period in the Series A Subordinated Debt Securities so received in liquidation
of MCN Michigan would include the period for which the Series A Preferred
Securities were held by such holder. Under a change in law, a change in legal
interpretation or the other circumstances giving rise to a Tax Event, however,
the dissolution in which Preferred Securityholders receive cash in exchange for
Series A Preferred Securities generally will be taxable to a Preferred
Securityholder and such holder will recognize gain or loss measured by the
difference between the amount of the cash received and such holder's tax basis
in its Series A Preferred Securities.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
MCN has the right to extend, from time to time, the interest payment period
on the Series A Subordinated Debt Securities to a period not exceeding 60
consecutive months. In the event that the interest payment period is extended,
MCN Michigan will continue to accrue income, equal to the amount of the interest
payment due at the end of the Extension Period, over the length of the Extension
Period.
Accrued income for any month will be allocated, but not distributed, to
Preferred Securityholders of record on the Business Day preceding the last day
of each calendar month. As a result, Preferred
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Securityholders of record during an Extension Period will include interest in
gross income in advance of the receipt of cash, and any such holders who dispose
of Series A Preferred Securities prior to the record date for the payment of
dividends following such Extension Period will include interest in gross income
but will not receive any cash related thereto from MCN Michigan. The tax basis
of a Series A Preferred Security will be increased by the amount of any interest
that is included in income without a receipt of cash, and will be decreased
again when and if such cash is subsequently received from MCN Michigan.
USE OF CONVENTION
MCN Michigan will adopt a convention under which all of the net income
accrued by MCN Michigan in any calendar month will be allocated to the Preferred
Securityholder of record on the record date for dividends in respect of such
month. It is unclear whether this convention will be respected for federal
income tax purposes. If it is not respected, the distributive share of MCN
Michigan's net income allocable to Series A Preferred Securities in respect of a
month in which such Series A Preferred Securities are sold may be allocated
between the seller and the purchaser on some other basis. Any amount so
allocated to the Preferred Securityholder, whether as seller or purchaser, would
be includible in the holder's income and would increase such holder's tax basis
in the Series A Preferred Securities.
MCN MICHIGAN INFORMATION RETURNS AND AUDIT PROCEDURES
MCN, as the General Partner in MCN Michigan, will furnish each Preferred
Securityholder with a Schedule K-1 each year setting forth such Preferred
Securityholder's allocable share of income for the prior calendar year. MCN is
required to furnish such Schedule K-1 as soon as practicable following the end
of the year, but in any event within 90 days after the end of MCN Michigan's
fiscal year.
Any person who holds Series A Preferred Securities as a nominee for another
person is required to furnish to MCN Michigan (a) the name, address and taxpayer
identification number of the Beneficial Owner and the nominee; (b) information
as to whether the Beneficial Owner is (i) a person that is not a United States
person, (ii) a foreign government, an international organization or any
wholly-owned agency or instrumentality of either of the foregoing, or (iii) a
tax-exempt entity; (c) the amount and description of Series A Preferred
Securities held, acquired or transferred for the Beneficial Owner; and (d)
certain information including the dates of acquisitions and transfers, means of
acquisitions and transfers, and acquisition cost for purchases, as well as the
amount of net proceeds from sales. Brokers and financial institutions are
required to furnish additional information, including whether they are United
States persons and certain information on Series A Preferred Securities they
acquire, hold or transfer for their own accounts. A penalty of $50 per failure
(up to a maximum of $100,000 per calendar year) is imposed by the Code for
failure to report such information to MCN Michigan. The nominee is required to
supply the Beneficial Owners of the Series A Preferred Securities with the
information furnished to MCN Michigan.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
Preferred Securityholder who or which is (i) a nonresident alien individual or
(ii) a foreign corporation, partnership or estate or trust, in either case not
subject to United States federal income tax on a net income basis in respect of
a Series A Preferred Security.
Under current United States federal income tax law, subject to the
discussion below with respect to backup withholding:
(i) Payments by MCN Michigan or any of its paying agents to any holder
of a Series A Preferred Security who or which is a United States Alien
Holder will not be subject to United States federal withholding tax
provided that (a) the Beneficial Owner of the Series A Preferred Security
does not actually or constructively own 10% or more of the total combined
voting power of all classes of capital stock of MCN entitled to vote, (b)
the Beneficial Owner of the Series A Preferred Security is not a controlled
foreign corporation that is related to MCN through stock ownership and (c)
either (x) the Beneficial Owner of the Series A Preferred Security
certifies to MCN Michigan or its agent, under
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penalties of perjury, that it is a United States Alien Holder and provides
its name and address or (y) the holder of the Series A Preferred Security
is a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution"), and such holder certifies to MCN
Michigan or its agent under penalties of perjury that such statement has
been received from the Beneficial Owner by it or by a financial institution
between it and the Beneficial Owner and furnishes MCN Michigan or its agent
with a copy thereof; and
(ii) a United States Alien Holder of a Series A Preferred Security
will generally not be subject to United States federal withholding tax on
any gain realized on the sale or exchange of a Series A Preferred Security
unless such holder is present in the United States for 183 days or more in
the taxable year of sale and either has a "tax home" in the United States
or certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments to
noncorporate United States holders of the proceeds of the sale of Series A
Preferred Securities within the United States and "backup withholding" at a rate
of 31% will apply to such payments if the United States holder fails to provide
an accurate taxpayer identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Series A Preferred Securities made to or through a foreign office of a broker
generally will not be subject to information reporting or backup withholding,
except that, if the broker is a United States person, a controlled foreign
corporation for United States tax purposes, or a foreign person 50% or more of
whose gross income is effectively connected with a United States trade or
business for a specified three-year period, information reporting may apply to
such payments. Payments of the proceeds from the sale of Series A Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SERIES A
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX
LAWS.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), MCN Michigan has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated; Smith Barney Inc.; Robert W. Baird & Co.
Incorporated; Dean Witter Reynolds Inc.; Donaldson, Lufkin & Jenrette Securities
Corporation and A.G. Edwards & Sons, Inc., are acting as representatives (the
"Representatives"), has severally agreed to purchase the number of Series A
Preferred Securities set forth opposite its name below. In the Underwriting
Agreement, the several Underwriters have agreed, subject to the terms and
conditions set forth therein, to purchase all the Series A Preferred Securities
offered hereby if any of the Series A Preferred Securities are purchased. In the
event of default by an Underwriter, the Underwriting Agreement provides that, in
certain
S-24
<PAGE> 25
circumstances, the purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
------------ ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................... 525,000
Smith Barney Inc. ................................................. 525,000
Robert W. Baird & Co. Incorporated................................. 525,000
Dean Witter Reynolds Inc. ......................................... 525,000
Donaldson, Lufkin & Jenrette Securities Corporation ............... 525,000
A.G. Edwards & Sons, Inc. ......................................... 525,000
Bear, Stearns & Co. Inc. .......................................... 50,000
Cowen & Company.................................................... 50,000
CS First Boston Corporation........................................ 50,000
Dillon, Read & Co. Inc. ........................................... 50,000
First of Michigan Corporation...................................... 50,000
Kidder, Peabody & Co. Incorporated ................................ 50,000
Ladenburg, Thalmann & Co. Inc. .................................... 50,000
Legg Mason Wood Walker, Incorporated............................... 50,000
Lehman Brothers Inc. .............................................. 50,000
Oppenheimer & Co., Inc. ........................................... 50,000
PaineWebber Incorporated........................................... 50,000
Piper Jaffray Inc. ................................................ 50,000
Prudential Securities Incorporated................................. 50,000
Raymond James & Associates, Inc. .................................. 50,000
Roney & Co. ....................................................... 50,000
Salomon Brothers Inc .............................................. 50,000
Wertheim Schroder & Co. Incorporated............................... 50,000
----------
Total................................................. 4,000,000
========
</TABLE>
The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $.50 per Series A Preferred Security.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $.25 per Series A Preferred Security to certain brokers and dealers.
After the Series A Preferred Securities are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Representatives.
In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will ultimately be used to purchase the Series A Subordinated Debt
Securities, the Underwriting Agreement provides that MCN has agreed to pay as
compensation ("Underwriters' Compensation") for the Underwriters' arranging the
investment therein of such proceeds, an amount in New York Clearing House (next
day) funds of $.7875 per Series A Preferred Security (or $3,150,000 in the
aggregate) for the accounts of the several Underwriters provided that such
compensation for sales of 10,000 or more Series A Preferred Securities to any
single purchaser will be $.50 per Series A Preferred Security. Therefore, to the
extent of such sales, the actual amount of Underwriters Compensation will be
less than the aggregate amount specified in the preceding sentence.
MCN and MCN Michigan have agreed, during the period beginning from the date
of the Underwriting Agreement and continuing to and including the earlier of (i)
the date after the closing date on which the distribution of the Series A
Preferred Securities and the Guarantee ceases, as determined by the
Underwriters, or (ii) 90 days after the closing date, not to offer, sell,
contract to sell, or otherwise dispose of any Series A Preferred Securities, any
limited partnership interests of MCN Michigan, or any preferred stock or any
other securities of MCN Michigan or MCN which are substantially similar to the
Series A Preferred Securities
S-25
<PAGE> 26
including the Guarantee, or any securities convertible into or exchangeable for
Series A Preferred Securities, limited partnership interests, preferred stock or
such substantially similar securities of either MCN Michigan or MCN, without the
prior written consent of the Underwriters.
Prior to this offering, there has been no public market for the Series A
Preferred Securities. In order to meet one of the requirements for listing the
Series A Preferred Securities on the New York Stock Exchange, the Underwriters
will undertake to sell lots of 100 or more Series A Preferred Securities to a
minimum of 400 beneficial holders.
MCN Michigan and MCN have agreed to indemnify the Underwriters against, or
contribute to payments that the Underwriters may be required to make in respect
of, certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, MCN and its subsidiaries in the ordinary
course of business.
LEGAL MATTERS
Certain matters of Michigan law relating to the formation of MCN Michigan,
the status of the Preferred Securities, and certain effects of the Limited
Partnership Agreement with respect to Preferred Partners (as such term is
defined in the Limited Partnership Agreement) are being passed upon by
Dickinson, Wright, Moon, Van Dusen & Freeman, special Michigan counsel to MCN
Michigan. The validity of the Indenture, the Guarantee and the Series A
Subordinated Debt Securities will be passed upon on behalf of MCN Michigan and
MCN by Daniel L. Schiffer, Vice President, General Counsel and Secretary of MCN
and on behalf of the Underwriters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a
limited liability partnership including professional corporations, New York, New
York. Statements as to United States taxation in the Prospectus Supplement in
the second paragraph under the caption "Investment Considerations -- Tax Event
Redemption or Distribution", and under the caption "United States Federal Income
Taxation", have been passed upon for MCN and MCN Michigan by Sidley & Austin,
special tax counsel to MCN Michigan and MCN, and are stated herein on their
authority.
S-26
<PAGE> 27
PROSPECTUS
$300,000,000
[MCN LOGO]
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
COMMON STOCK
AND
MCN MICHIGAN LIMITED PARTNERSHIP PREFERRED SECURITIES
------------------------
MCN Corporation, a Michigan Corporation, ("MCN" or the "Company") may
offer, from time to time, (i) unsecured senior debt securities (the "Senior Debt
Securities") consisting of debentures, notes or other unsecured evidences of
indebtedness, (ii) unsecured subordinated debt securities (the "Subordinated
Debt Securities") consisting of debentures, notes and other unsecured evidence
of indebtedness (item (i) or (ii) above being referred to herein as the "Debt
Securities"), (iii) MCN Common Stock $.01 par value ("MCN Common Stock"), and
(iv) its guarantee of MCN Michigan Limited Partnership preferred securities
("Preferred Securities"), or any combination of the foregoing, in each case in
one or more series and in amounts, at prices and on terms to be determined at or
prior to the time of sale.
MCN Michigan Limited Partnership ("MCN Michigan"), a Michigan special
purpose limited partnership in which MCN is the general partner, may offer, from
time to time, its Preferred Securities, representing beneficial interests in
limited partner interests in one or more series. The payment of periodic cash
distributions ("dividends") with respect to Preferred Securities of any series,
out of moneys held by MCN Michigan, and payments on liquidation or redemption
with respect to the Preferred Securities are guaranteed by MCN to the extent
described herein (the "Guarantee"). MCN's obligations under the Guarantee are
subordinate and junior in right of payment to all other liabilities of MCN and
pari passu with the most senior preferred stock issued by MCN. Subordinated Debt
Securities also may be issued and sold from time to time in one or more series
by MCN to MCN Michigan in connection with the investment of the proceeds from
the offering of Preferred Securities. MCN's obligations under the Subordinated
Debt Securities are subordinate to the Senior Indebtedness (as defined herein)
and pari passu with MCN trade creditors. The Subordinated Debt Securities
subsequently may be distributed pro rata to holders of Preferred Securities in
connection with the dissolution of MCN Michigan upon the occurrence of certain
events as may be described in an accompanying Prospectus Supplement (a
"Prospectus Supplement").
Specific terms of the particular Debt Securities, MCN Common Stock and
Preferred Securities in respect of which this Prospectus is being delivered (the
"Offered Securities") will be set forth in an accompanying Prospectus Supplement
or Supplements, together with the terms of the offering of the Offered
Securities, the initial price thereof and the net proceeds from the sale
thereof. The Prospectus Supplement will set forth with regard to the particular
Offered Securities, without limitation, the following: (i) in the case of Debt
Securities, the designation, aggregate principal amount, denomination, maturity,
any exchange, conversion, redemption or sinking fund provisions, interest rate
(which may be fixed or variable), the time and method of calculating interest
payments, the right of the Company, if any, to defer payment of interest on the
Subordinated Debt Securities and the maximum length of such deferral period, any
listing on a securities exchange and other specific terms of the offering, (ii)
in the case of MCN Common Stock, the designation, number of shares, public
offering price and other specific terms of the offering and (iii) in the case of
Preferred Securities, the designation, number of shares, liquidation preference
per security, initial public offering price, any listing on a securities
exchange, dividend rate (or method of calculation thereof), dates on which
dividends shall be payable and dates from which dividends shall accrue, any
voting rights, any redemption, exchange or sinking fund provisions, any other
rights, preferences, privileges, limitations or restrictions relating to the
Preferred Securities of a specific series and the terms upon which the proceeds
of the sale of the Preferred Securities will be loaned to MCN. The offering
price to the public of the Offered Securities will be limited to $300,000,000 in
the aggregate.
The Company's Common Stock is traded on the New York Stock Exchange
("NYSE") under the symbol MCN. See "Description of MCN Capital Stock -- Price
Range of MCN Common Stock and Common Stock Dividends".
MCN and/or MCN Michigan may sell the Offered Securities directly, through
agents designated from time to time or through underwriters or dealers. See
"Plan of Distribution." If any agents of MCN and/or MCN Michigan or any
underwriters or dealers are involved in the sale of the Offered Securities, the
names of such agents, underwriters or dealers and any applicable commissions and
discounts will be set forth in the related Prospectus Supplement.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECU-RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 18, 1994.
<PAGE> 28
AVAILABLE INFORMATION
MCN is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "1934 Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Reports, proxy statements and other information
concerning MCN can be inspected and copied at the SEC's Public Reference Room,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as the
following Regional Offices of the SEC: 7 World Trade Center, Suite 1300, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549, at prescribed rates. Such reports,
proxy statements and other information may also be inspected at the offices of
the NYSE, on which MCN Common Stock is traded, at 20 Broad Street, New York, New
York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed with the SEC under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Offered Securities. This Prospectus does
not contain all of the information set forth in such Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. Reference is made to such Registration Statement and to the exhibits
relating thereto for further information with respect to MCN and the Offered
Securities. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the SEC or incorporated by reference herein are not necessarily complete,
and in each instance reference is made to the copy of such document so filed for
a more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
No separate financial statements of MCN Michigan have been included herein.
MCN and MCN Michigan do not consider that such financial statements would be
material to holders of Preferred Securities because MCN Michigan is a newly
organized special purpose entity, has no operating history and no independent
operations and is not engaged in, and does not propose to engage in, any
activity other than the issuance of its Preferred Securities and the lending of
the proceeds thereof to MCN. MCN Michigan is a limited partnership organized
under the laws of the State of Michigan. MCN is the sole general partner in MCN
Michigan and, as of the date hereof, directly or indirectly beneficially owns
all of MCN Michigan's partnership interests. See "MCN Michigan Limited
Partnership".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by MCN (File No. 1-10070) with the SEC
pursuant to the 1934 Act are incorporated by reference herein and made a part
hereof:
1. Annual Report on Form 10-K for the year ended December 31, 1993.
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and
June 30, 1994.
3. The description of MCN's Common Stock as contained in its Form 8-B dated
September 29, 1988.
4. The description of MCN's Preferred Share Purchase Rights contained in its
Form 8-A dated December 28, 1989.
All documents filed by MCN pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the 1934 Act subsequent to the date hereof and prior to the termination of the
offering of the Offered Securities pursuant hereto shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this Prospectus modifies
or supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
MCN undertakes to provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of any such
person, a copy of any or all of the foregoing documents incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to: Investor Relations, MCN Corporation, 500 Griswold Street,
Detroit, Michigan 48226; telephone 1-800-548-4655.
2
<PAGE> 29
MCN CORPORATION
MCN, a Michigan corporation organized in 1988, is the holding company for
(i) Michigan Consolidated Gas Company ("MichCon"), a public utility engaged in
the distribution, transmission and storage of natural gas to more than 1.1
million customers throughout Michigan; (ii) Citizens Gas Fuel Company
("Citizens"), a natural gas utility servicing Adrian, Michigan; and (iii) MCN
Investment Corporation ("MCN Investment"), the holding company for its
nonutility businesses. MCN's principal executive office is located at 500
Griswold Street, Detroit, Michigan 48226, telephone number (313) 256-5500.
Utility Services. MichCon and Citizens provide gas sales service primarily
to residential and commercial customers and transportation service to
large-volume customers. MichCon also provides transportation service to other
gas utilities, gas marketers and producers.
Gas Services. MCN Investment, through its subsidiary companies and various
joint ventures, markets natural gas to large-volume customers, develops gas
cogeneration facilities, provides gas gathering and processing services, engages
in gas exploration and production and provides gas storage services.
Computer Operations Services. The Genix Group, a wholly-owned subsidiary of
MCN Investment, provides data processing, computer operations management, data
telecommunications design and management, large-scale electronic printing and
mailing, and business process solution services to more than 100 corporate
clients in financial services, insurance, retailing, food processing, education,
manufacturing and other industries. These services are provided through
facilities located in Michigan, Pennsylvania and North Carolina.
Gas Technology. MCN's gas technology programs are developing products to
expand demand for natural gas.
Capital investments will exceed $400 million in 1994, with over $250
million being invested in nonutility businesses, primarily to purchase gas
reserves and for exploration and development. Approximately $150 million will be
invested in MCN's utility services operations.
MCN MICHIGAN LIMITED PARTNERSHIP
MCN Michigan is a limited partnership formed under the laws of the State of
Michigan. MCN Michigan exists for the sole purpose of issuing securities
representing beneficial interests in limited partner interests and investing the
net proceeds thereof in Subordinated Debt Securities. All of its partnership
interests, as of the date hereof, are beneficially owned, directly or
indirectly, by MCN. MCN is the sole general partner in MCN Michigan (the
"General Partner"). MCN Finance Corporation, a Michigan corporation and
wholly-owned subsidiary of MCN ("MCN Finance"), is, as of the date hereof, the
sole limited partner in MCN Michigan. Upon the issuance of Preferred Securities,
which securities represent beneficial interests in limited partner interests in
MCN Michigan, MCN Finance will withdraw as a limited partner. MCN Michigan has a
term of approximately 99 years, unless earlier dissolved. MCN Michigan's
registered office in the State of Michigan is 500 Griswold Street, Detroit,
Michigan 48226, telephone number: (313) 256-5500. All of MCN Michigan's business
and affairs will be conducted by MCN, as the sole general partner. The principal
place of business of MCN Michigan is c/o MCN Corporation, 500 Griswold Street,
Detroit, Michigan 48226, telephone number: (313) 256-5500.
USE OF PROCEEDS
MCN intends to add the net proceeds from the sale of Offered Securities to
its general funds, to be used for general corporate purposes, including capital
expenditures, investment in subsidiaries, working capital, repayment of loans
under bank credit agreements and repayment of other short-term borrowings. MCN
Michigan will loan to MCN all proceeds received by MCN Michigan from the sale of
its Preferred Securities.
3
<PAGE> 30
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
the ratio of earnings to fixed charges and preferred stock dividends for the
periods indicated.
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------
1994 1993 1992 1991 1990 1989
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(1)......... 3.38 3.04 2.74 2.08 2.06 3.45
</TABLE>
- -------------------------
(1) MCN has authority to issue up to 25,000,000 shares of preferred stock, no
par value, however, there are currently no shares outstanding and MCN
currently does not have a preferred stock dividend obligation. Therefore,
the Ratio of Earnings to Fixed Charges and Preferred Stock Dividends is
equal to the Ratio of Earnings to Fixed Charges and is not disclosed
separately.
The Ratio of Earnings to Fixed Charges, and the Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends are based on continuing operations.
"Earnings" consist of the consolidated pre-tax income of MCN adjusted to exclude
any income not actually received from less than 50% owned companies, plus fixed
charges, less interest capitalized for nonutility operations. "Fixed Charges"
represent (a) interest (whether expensed or capitalized), (b) amortization of
debt discount or premium and expense, (c) an estimate of interest implicit in
rentals and (d) preferred stock dividend requirements of MichCon, increased to
reflect the pre-tax earnings requirement.
DESCRIPTION OF MCN DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
The Debt Securities may be issued, from time to time, in one or more series
and will constitute either Senior Debt Securities or Subordinated Debt
Securities. Senior Debt Securities will be issued under an Indenture (the
"Senior Debt Securities Indenture"), between the Company and NBD Bank, N.A.
("NBD"), as trustee (the "Senior Debt Securities Trustee"). The Subordinated
Debt Securities will be issued under an Indenture (the "Subordinated Debt
Securities Indenture") between the Company and NBD as trustee (the "Subordinated
Debt Securities Trustee").
The Senior Debt Securities Indenture and the Subordinated Debt Securities
Indenture are referred to herein individually as an "Indenture" and,
collectively, as the "Indentures," and the Senior Debt Securities Trustee and
the Subordinated Debt Securities Trustee are referred to herein as the
"Trustee." A copy of each Indenture is filed as an exhibit to the Registration
Statement.
The following summaries of certain provisions of the Debt Securities and
the Indentures do not purport to be complete and are subject to, and are
qualified in their entirety by express reference to, all the provisions of the
Indentures, including the definitions therein of certain terms. Certain
capitalized terms herein are defined in the Indentures.
GENERAL
The Debt Securities will be unsecured obligations of the Company.
The Indentures do not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provide that Debt Securities may
be issued thereunder, from time to time, in one or more series.
Reference is made to the Prospectus Supplement relating to the Debt
Securities being offered (the "Offered Debt Securities") for, among other
things, the following terms thereof: (1) the title of the Offered
4
<PAGE> 31
Debt Securities; (2) any limit on the aggregate principal amount of the Offered
Debt Securities; (3) the date or dates on which the Offered Debt Securities will
mature; (4) the rate or rates (which may be fixed or variable) per annum at
which the Offered Debt Securities will bear interest or the method by which such
rate or rates shall be determined and the date from which such interest will
accrue or the method by which such date or dates shall be determined; (5) the
dates on which such interest will be payable and the Regular Record Dates for
such Interest Payment Dates; (6) the dates, if any, on which, and the price or
prices at which, the Offered Debt Securities may, pursuant to any mandatory or
optional sinking fund provisions, be redeemed by the Company and other detailed
terms and provisions of such sinking funds; (7) the date, if any, after which,
and the price or prices at which, the Offered Debt Securities may, pursuant to
any optional redemption provisions, be redeemed at the option of the Company or
of the Holder thereof and other detailed terms and provisions of such optional
redemption; (8) the right of the Company, if any, to defer payment of interest
on the Subordinated Debt Securities and the maximum length of any such deferral
period; and (9) any other terms of the Offered Debt Securities (which terms
shall not be inconsistent with the appropriate Indenture). For a description of
the terms of the Offered Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and to the description of Debt Securities
set forth herein.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the principal of, and any premium or interest on, the Offered Debt Securities
will be payable, and the Offered Debt Securities will be exchangeable and
transfers thereof will be registrable, at the Place of Payment, provided that,
at the option of the Company, payment of interest may be made by check mailed to
the address of the person entitled thereto as it appears in the Security
Register.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued in United States dollars in fully
registered form, without coupons, in denominations of $1,000 or any integral
multiple thereof. No service charge will be made for any transfer or exchange of
the Offered Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
For purposes of the descriptions of both the Senior Debt Securities and the
Subordinated Debt Securities, certain defined terms have the following meanings:
"Indebtedness" of any Person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capitalized Lease Obligations of such Person; (iii) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all obligations under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) all obligations of the type referred to in clauses
(i) through (iv) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the type referred
to in clauses (i) through (v) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured.
"Significant Subsidiary" means a Subsidiary or Subsidiaries of the Company
possessing assets (including the assets of its own Subsidiaries but without
regard to the Company or any other Subsidiary) having a book value, in the
aggregate, equal to not less than 10% of the book value of the aggregate assets
of the Company and its Subsidiaries calculated on a consolidated basis.
5
<PAGE> 32
"Capitalized Lease Obligations" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with such
principles.
The Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be offered and sold at a substantial discount below their
principal amount. Special federal income tax, accounting and other
considerations applicable to any such Original Issue Discount Securities will be
described in any Prospectus Supplement relating thereto. "Original Issue
Discount Security" means any security which provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof as a result of the occurrence of an Event
of Default and the continuation thereof.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities (as such term is defined below) that will
be deposited with, or on behalf of, a Depositary ("Depositary") or its nominee
identified in the applicable Prospectus Supplement. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denomination
equal to the portion of the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Global Security or Global
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in registered form, a Global Security may not be registered for
transfer or exchange except as a whole by the Depositary for such Global
Security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by such Depositary or
any nominee to a successor Depositary or a nominee of such successor Depositary
and except in the circumstances described in the applicable Prospectus
Supplement. The term "Global Security", when used with respect to any series of
Debt Securities, means a Debt Security that is executed by the Company and
authenticated and delivered by the Trustee to the Depositary or pursuant to the
Depositary's instruction, which shall be registered in the name of the
Depositary or its nominee and which shall represent, and shall be denominated in
an amount equal to the aggregate principal amount of, all of the Outstanding
Debt Securities of such series or any portion thereof, in either case having the
same terms, including, without limitation, the same original issue date, date or
dates on which principal is due, and interest rate or method of determining
interest.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or, if such Debt Securities are
offered and sold directly by the Company, by the Company. Ownership of
beneficial interests in such Global Security will be limited to participants or
Persons that may hold interests through participants. Ownership of beneficial
interests by participants in such Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee for such Global Security. Ownership
of beneficial interests in such Global Security by Persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in certificated form.
The foregoing limitations and such laws may impair the ability to transfer
beneficial interests in such Global Securities.
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So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Securities
represented by such Global Security for all purposes under the Indenture. Unless
otherwise specified in the applicable Prospectus Supplement, owners of
beneficial interests in such Global Security will not be entitled to have Debt
Securities of the series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Debt
Securities of such series in certificated form and will not be considered the
Holders thereof for any purposes under the Indenture. Accordingly, each Person
owning a beneficial interest in such Global Security must rely on the procedures
of the Depositary and, if such Person is not a participant, on the procedures of
the participant through which such Person owns its interest, to exercise any
rights of a Holder under the Indenture. The Company understands that under
existing industry practices, if the Company requests any action of Holders or an
owner of a beneficial interest in such Global Security desires to give any
notice or take any action a Holder is entitled to give or take under the
Indenture, the Depositary would authorize the participants to give such notice
or take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
THE TRUSTEE
NBD is the Trustee under the Senior Debt Securities Indenture and the
Subordinated Debt Securities Indenture. NBD has extended lines of credit to
various subsidiaries of MCN. MCN and various of its subsidiaries maintain bank
accounts and have other customary banking relationships with NBD in the ordinary
course of business. In addition, various MCN subsidiaries borrow money from NBD.
Mr. Thomas H. Jeffs II, President and Chief Operating Officer of NBD, serves as
a Director of MCN. Mr. Alfred R. Glancy III, Chairman, President and Chief
Executive Officer of MCN, serves as a Director of NBD.
PARTICULAR TERMS OF THE SENIOR DEBT SECURITIES
The following description of the Senior Debt Securities sets forth certain
general terms and provisions of the Senior Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Senior Debt
Securities offered by any Prospectus Supplement and the extent, if any, to which
such general provisions may apply to the Senior Debt Securities so offered will
be described in the Prospectus Supplement relating to such Senior Debt
Securities.
RESTRICTIONS
The Senior Debt Securities Indenture provides that the Company shall not
consolidate with, merge with or into any other corporation (whether or not the
Company shall be the surviving corporation), or sell, assign, transfer or lease
all or substantially all of its properties and assets as an entirety or
substantially as an entirety to any Person or group of affiliated Persons, in
one transaction or a series of related transactions, unless: (1) either the
Company shall be the continuing Person or the Person (if other than the Company)
formed by such consolidation or with which or into which the Company is merged
or the Person (or group of affiliated Persons) to which all or substantially all
the properties and assets of the Company are sold, assigned, transferred or
leased is a corporation (or constitute corporations) organized under the laws of
the United States or any State thereof or the District of Columbia and expressly
assumes, by an indenture supplemental to the Senior Debt Securities Indenture,
all the obligations of the Company under the Senior Debt Securities and the
Senior Debt Securities Indenture, executed and delivered to the Trustee in form
satisfactory to the Trustee; (2) immediately before and after giving effect to
such transaction or series of transactions, no Event of Default, and no Default,
with respect to the Senior Debt Securities shall have occurred and be
continuing; and (3) the Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indentures comply with the Senior Debt
Securities Indenture.
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The Senior Debt Securities Indenture also provides that the Company will
not, nor will it permit any Significant Subsidiary to, create, incur, or suffer
to exist any Lien in, of or on the property of the Company or any of its
Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges
or levies on its property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith and
by appropriate proceedings and for which adequate reserves in accordance with
generally accepted principles of accounting shall have been set aside on its
books; (ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books; (iii) Liens arising
out of pledges or deposits under worker's compensation laws, unemployment
insurance, old age pensions, or other social security or retirement benefits, or
similar legislation; (iv) utility easements, building restrictions and such
other encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of the Company or its Subsidiaries; (v) Liens on the
capital stock, partnership interest, or other evidence of ownership of any
Subsidiary or such Subsidiary's assets that secure project financing for such
Subsidiary; (vi) Liens arising in connection with first mortgage bonds issued by
any Significant Subsidiary pursuant to any first mortgage indenture in effect as
of the date of the Senior Debt Securities Indenture, as such indenture may be
supplemented from time to time; (vii) purchase money liens upon or in property
now owned or hereafter acquired in the ordinary course of business (consistent
with the Company's business practices) to secure (A) the purchase price of such
property or (B) Indebtedness incurred solely for the purpose of financing the
acquisition, construction, or improvement of any such property to be subject to
such liens, or Liens existing on any such property at the time of acquisition,
or extensions, renewals, or replacements of any of the foregoing for the same or
a lesser amount; provided that no such lien shall extend to or cover any
property other than the property being acquired, constructed, or improved and
replacements, modifications, and proceeds of such property, and no such
extension, renewal, or replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed, or replaced; (viii)
Liens existing on the date Senior Debt Securities are first issued; and (ix)
Liens for no more than 90 days arising from a transaction involving accounts
receivable of the Company (including the sale of such accounts receivable),
where such accounts receivable arose in the ordinary course of the Company's
business.
The Senior Debt Securities Indenture provides that the Company will not,
nor will it permit any Subsidiary to, enter into any arrangement with any lender
or investor (other than the Company or a Subsidiary), or to which such lender or
investor (other than the Company or a Subsidiary) is a party, providing for the
leasing by the Company or such Subsidiary for a period, including renewals, in
excess of three years of any real property located within the United States
which has been owned by the Company or such Subsidiary for more than six months
and which has been or is to be sold or transferred by the Company or such
Subsidiary to such lender or investor or to any person to whom funds have been
or are to be advanced by such lender or investor on the security of such real
property unless either (a) the Company or such Subsidiary could create
Indebtedness secured by a lien consistent with the restrictions set forth in the
foregoing paragraph on the real property to be leased in an amount equal to the
Value of such transaction without equally and ratably securing the Senior Debt
Securities or (b) the Company, within six months after the sale or transfer
shall have been made, applies an amount equal to the greater of (i) the net
proceeds of the sale of the real property leased pursuant to such arrangement or
(ii) the fair market value of the real property so leased to the retirement of
Senior Debt Securities and other obligations of the Company ranking on a parity
with the Senior Debt Securities.
RANKING OF SENIOR DEBT SECURITIES
The Senior Debt Securities will rank pari passu in right of payment with
all other unsecured indebtedness of the Company, except that the Senior Debt
Securities will be senior in right of payment to any subordinated indebtedness
which, by its terms, is subordinate to the Senior Debt Securities.
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EVENTS OF DEFAULT AND NOTICE THEREOF
The following are Events of Default under the Senior Debt Securities
Indenture with respect to Senior Debt Securities of any series: (1) failure to
pay interest on any Senior Debt Security of that series when due, continued for
30 days; (2) failure to pay the principal of (or premium, if any, on) any Senior
Debt Security of that series when due and payable at Maturity, upon redemption
or otherwise; (3) failure to observe or perform any other covenant, warranty or
agreement contained in the Senior Debt Securities of that series or in the
Senior Debt Securities Indenture (other than a covenant, agreement or warranty
included in the Senior Debt Securities Indenture solely for the benefit of
Senior Debt Securities other than that series), continued for a period of 60
days after notice has been given to the Company by the Trustee or Holders of at
least 25% in aggregate principal amount of the Outstanding Senior Debt
Securities of that series; (4) failure to pay at final maturity, or acceleration
of, Indebtedness of the Company having an aggregate principal amount of more
than 1% of the Company's consolidated total assets (determined as of its most
recent fiscal year-end), unless cured within 10 days after notice has been given
to the Company by the Trustee or Holders of at least 10% in aggregate principal
amount of the Outstanding Senior Debt Securities of that series; (5) certain
events of bankruptcy, insolvency or reorganization relating to the Company; and
(6) any other Event of Default with respect to Senior Debt Securities of that
series specified in the Prospectus Supplement relating thereto or Supplemental
Indenture under which such series of Senior Debt Securities is issued.
The Senior Debt Securities Indenture provides that the Trustee shall,
within 30 days after the occurrence of any Default or Event of Default with
respect to Senior Debt Securities of any series, give the Holders of Senior Debt
Securities of that series notice of all uncured Defaults or Events of Default
known to it (the term "Default" includes any event which after notice or passage
of time or both would be an Event of Default); provided, however, that, except
in the case of an Event of Default or a Default in payment on any Senior Debt
Securities of any series, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or
directors or responsible officers of the Trustee in good faith determine that
the withholding of such notice is in the interest of the Holders of Senior Debt
Securities of that series.
If an Event of Default with respect to Senior Debt Securities of any series
(other than due to events of bankruptcy, insolvency or reorganization) occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the Outstanding Senior Debt Securities of that series, by
notice in writing to the Company (and to the Trustee if given by the Holders of
at least 25% in aggregate principal amount of the Senior Debt Securities of that
series), may declare the unpaid principal of and accrued interest to the date of
acceleration on all the Outstanding Senior Debt Securities of that series to be
due and payable immediately and, upon any such declaration, the Senior Debt
Securities of that series shall become immediately due and payable.
If an Event of Default occurs due to bankruptcy, insolvency or
reorganization, all unpaid principal of and accrued interest on the Outstanding
Senior Debt Securities of any series will become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder of
any Senior Debt Security of that series.
Any such declaration with respect to Senior Debt Securities of any series
may be annulled and past Events of Default and Defaults (except, unless
theretofore cured, an Event of Default or a Default in payment of principal of
or interest on the Senior Debt Securities of that series) may be waived by the
Holders of a majority of the principal amount of the Outstanding Senior Debt
Securities, upon the conditions provided in the Senior Debt Securities
Indenture.
The Senior Debt Securities Indenture provides that the Company shall
periodically file statements with the Trustee regarding compliance by the
Company with certain of the respective covenants thereof and shall specify any
Event of Default or Defaults with respect to Senior Debt Securities of any
series, in performing such covenants, of which the signers may have knowledge.
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MODIFICATION OF SENIOR DEBT SECURITIES INDENTURE; WAIVER
The Senior Debt Securities Indenture may be modified by the Company and the
Trustee without the consent of any Holders with respect to certain matters,
including (i) to cure any ambiguity, defect or inconsistency or to correct or
supplement any provision which may be inconsistent with any other provision of
the Senior Debt Securities Indenture and (ii) to make any change that does not
materially adversely affect the interests of any Holder of Senior Debt
Securities of any series. In addition, under the Senior Debt Securities
Indenture, certain rights and obligations of the Company and the rights of
Holders of the Senior Debt Securities may be modified by the Company and the
Trustee with the written consent of the Holders of at least a majority in
aggregate principal amount of the Outstanding Senior Debt Securities of each
series affected thereby; but no extension of the maturity of any Senior Debt
Securities of any series, reduction in the interest rate or extension of the
time for payment of interest, change in the optional redemption or repurchase
provisions in a manner adverse to any Holder of Senior Debt Securities of any
series, other modification in the terms of payment of the principal of, or
interest on, any Senior Debt Securities of any series, or reduction of the
percentage required for modification, will be effective against any Holder of
any Outstanding Senior Debt Security of any series affected thereby without the
Holder's consent. The Senior Debt Securities Indenture does not limit the
aggregate amount of Senior Debt Securities of the Company which may be issued
thereunder.
The Holders of a majority in aggregate principal amount of the Outstanding
Senior Debt Securities of any series may on behalf of the Holders of all Senior
Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Company with certain restrictive covenants of the Senior Debt
Securities Indenture. The Holders of not less than a majority in aggregate
principal amount of the Outstanding Senior Debt Securities of any series may on
behalf of the Holders of all Senior Debt Securities of that series waive any
past Event of Default or Default under the Senior Debt Securities Indenture with
respect to that series, except an Event of Default or a Default in the payment
of the principal of, or premium, if any, or any interest on any Senior Debt
Security of that series or in respect of a provision which under the Senior Debt
Securities Indenture cannot be modified or amended without the consent of the
Holder of each Outstanding Senior Debt Security of that series affected.
DEFEASANCE
The Company may terminate its substantive obligations in respect of Senior
Debt Securities of any series (except for its obligations to pay the principal
of (and premium, if any, on) and the interest on the Senior Debt Securities of
that series) by (i) depositing with the Trustee, under the terms of an
irrevocable trust agreement, money or U.S. Government Obligations sufficient to
pay all remaining indebtedness on the Senior Debt Securities of that series,
(ii) delivering to the Trustee either an Opinion of Counsel or a ruling directed
to the Trustee from the Internal Revenue Service to the effect that the Holders
of the Senior Debt Securities of that series will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit and termination
of obligations, and (iii) complying with certain other requirements set forth in
the Senior Debt Securities Indenture.
PARTICULAR TERMS OF THE SUBORDINATED DEBT SECURITIES
The following description of the Subordinated Debt Securities sets forth
the general terms and provisions of the Subordinated Debt Securities to which
any Prospectus Supplement may relate. The particular terms of the Subordinated
Debt Securities offered by any Prospectus Supplement and the extent, if any, to
which such general provisions may apply will be described in the Prospectus
Supplement relating to such Subordinated Debt Securities.
For purposes of the description of the Subordinated Debt Securities,
certain defined terms have the following meanings:
"Senior Indebtedness" means the principal of and premium, if any, and
interest on the following, whether outstanding on the date of execution of
the Subordinated Debt Securities Indenture or thereafter incurred or
created: (i) indebtedness of the Company for money borrowed by the Company
(including
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purchase money obligations with an original maturity in excess of one year)
or evidenced by debentures (other than the Subordinated Debt Securities),
notes, bankers' acceptances or other corporate debt securities or similar
instruments issued by the Company; (ii) obligations with respect to letters
of credit; (iii) indebtedness of the Company constituting a guarantee of
indebtedness of others of the type referred to in the preceding clauses (i)
and (ii); or (iv) renewals, extensions or refundings of any of the
indebtedness referred to in the preceding clauses (i), (ii) and (iii)
unless, in the case of any particular indebtedness, renewal, extension or
refunding, under the express provisions of the instrument creating or
evidencing the same, or pursuant to which the same is outstanding, such
indebtedness or such renewal, extension or refunding thereof is not
superior in right of payment to the Subordinated Debt Securities.
RESTRICTIONS
The Subordinated Debt Securities Indenture provides that the Company shall
not consolidate with, merge with or into any other corporation (whether or not
the Company shall be the surviving corporation), or sell, assign, transfer or
lease all or substantially all of its properties and assets as an entirety or
substantially as an entirety to any Person or group of affiliated Persons, in
one transaction or a series of related transactions, unless: (1) either the
Company shall be the continuing Person or the Person (if other than the Company)
formed by such consolidation or with which or into which the Company is merged
or the Person (or group of affiliated Persons) to which all or substantially all
the properties and assets of the Company are sold, assigned, transferred or
leased is a corporation (or constitute corporations) organized under the laws of
the United States or any State thereof or the District of Columbia and expressly
assumes, by indentures supplemental to the Subordinated Debt Securities
Indenture executed and delivered to the Trustee in form satisfactory to the
Trustee, all the obligations of the Company under the Subordinated Debt
Securities and the Subordinated Debt Securities Indenture; (2) immediately
before and after giving effect to such transaction or series of related
transactions or series of transactions, no Event of Default, and no Default,
with respect to the Subordinated Debt Securities shall have occurred and be
continuing; and (3) the Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or sale, assignment, transfer or lease and such supplemental indentures
comply with the Subordinated Debt Securities Indenture.
The Subordinated Debt Securities Indenture also provides that the Company
will not, nor will it permit any Significant Subsidiary to, create, incur, or
suffer to exist any Lien in, of or on the property of the Company or any of its
Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges
or levies on its property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith and
by appropriate proceedings and for which adequate reserves in accordance with
generally accepted principles of accounting shall have been set aside on its
books; (ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar Liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books; (iii) Liens arising
out of pledges or deposits under worker's compensation laws, unemployment
insurance, old age pensions, or other social security or retirement benefits, or
similar legislation; (iv) utility easements, building restrictions and such
other encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of the Company or its Subsidiaries; (v) Liens on the
capital stock, partnership interest, or other evidence of ownership of any
Subsidiary or such Subsidiary's assets that secure project financing for such
Subsidiary; (vi) Liens arising in connection with first mortgage bonds issued by
any Significant Subsidiary pursuant to any first mortgage indenture in effect as
of the date of the Subordinated Debt Securities Indenture, as such indenture may
be supplemented from time to time; (vii) purchase money liens upon or in
property now owned or hereafter acquired in the ordinary course of business
(consistent with the Company's business practices) to secure (A) the purchase
price of such property or (B) Indebtedness incurred solely for the purpose of
financing the acquisition, construction, or improvement of any such property to
be subject to such liens, or Liens existing on any such property at the time of
acquisition, or extensions, renewals, or replacements of any of the foregoing
for the same or a lesser amount; provided that no such lien shall extend to or
cover any property other than the
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property being acquired, constructed, or improved and replacements,
modifications, and proceeds of such property, and no such extension, renewal, or
replacement shall extend to or cover any property not theretofore subject to the
Lien being extended, renewed, or replaced; (viii) Liens existing on the date
Subordinated Debt Securities are first issued; and (ix) Liens for no more than
90 days arising from a transaction involving accounts receivable of the Company
(including the sale of such accounts receivable), where such accounts receivable
arose in the ordinary course of the Company's business.
The Subordinated Debt Securities Indenture provides that the Company will
not, nor will it permit any Subsidiary to, enter into any arrangement with any
lender or investor (other than the Company or a Subsidiary), or to which such
lender or investor (other than the Company or a Subsidiary) is a party,
providing for the leasing by the Company or such Subsidiary for a period,
including renewals, in excess of three years of any real property located within
the United States which has been owned by the Company or such Subsidiary for
more than six months and which has been or is to be sold or transferred by the
Company or such Subsidiary to such lender or investor or to any person to whom
funds have been or are to be advanced by such lender or investor on the security
of such real property unless either (a) the Company or such Subsidiary could
create Indebtedness secured by a lien consistent with the restrictions set forth
in the foregoing paragraph on the real property to be leased in an amount equal
to the Value of such transaction without equally and ratably securing the
Subordinated Debt Securities or (b) the Company, within six months after the
sale or transfer shall have been made, applies an amount equal to the greater of
(i) the net proceeds of the sale of the real property leased pursuant to such
arrangement or (ii) the fair market value of the real property so leased to the
retirement of Subordinated Debt Securities and other obligations of the Company
ranking senior to or on a parity with the Subordinated Debt Securities.
EVENTS OF DEFAULT AND NOTICE THEREOF
The following are Events of Default under the Subordinated Debt Securities
Indenture with respect to the Subordinated Debt Securities of any series: (1)
failure to pay interest on any Subordinated Debt Securities of that series when
due, continued for 30 days; however, if the Company is permitted by the terms of
the Subordinated Debt Securities of the applicable series to defer the payment
in question, the date on which such payment is due and payable shall be the date
on which the Company is required to make payment following such deferral, if
such deferral has been elected pursuant to the terms of the Subordinated Debt
Securities; (2) failure to pay the principal of (or premium, if any, on) any
Subordinated Debt Securities of that series when due and payable at Maturity,
upon redemption or otherwise; however, if the Company is permitted by the terms
of the Subordinated Debt Securities, of the applicable series to defer the
payment in question, the date on which such payment is due and payable shall be
the date on which the Company is required to make payment following such
deferral, if such deferral has been elected pursuant to the terms of the
Subordinated Debt Securities; (3) failure to observe or perform any other
covenant, warranty or agreement contained in the Subordinated Debt Securities of
that series or in the Subordinated Debt Securities Indenture (other than a
covenant, agreement or warranty included in the Subordinated Debt Securities
Indenture solely for the benefit of Subordinated Debt Securities of a series
other than that series), continued for a period of 60 days after notice has been
given to the Company by the applicable Trustee or Holders of at least 25% in
aggregate principal amount of the Outstanding Subordinated Debt Securities of
that series; (4) failure to pay at final maturity, or acceleration of,
Indebtedness of the Company having an aggregate principal amount of more than 1%
of the Company's consolidated total assets (determined as of its most recent
fiscal year-end), unless cured within 10 days after notice has been given to the
Company by the Trustee or Holders of at least 10% in aggregate principal amount
of the Outstanding Subordinated Debt Securities of that series; (5) certain
events of bankruptcy, insolvency or reorganization relating to the Company; and
(6) any other Event of Default with respect to Subordinated Debt Securities of
that series specified in the Prospectus Supplement relating thereto.
The Subordinated Debt Securities Indenture provides that the Trustee shall,
within 30 days after the occurrence of any Default or Event of Default with
respect Subordinated Debt Securities of any series, give the Holders of
Subordinated Debt Securities of that series notice of all uncured Defaults or
Events of Default known to it (the term "Default" includes any event which after
notice or passage of time or both would be an
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<PAGE> 39
Event of Default); provided, however, that, except in the case of an Event of
Default or a Default in payment on any Subordinated Debt Securities of any
series, the Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or directors or responsible
officers of the Trustee in good faith determine that the withholding of such
notice is in the interest of the Holders of Subordinated Debt Securities of that
series.
If an Event of Default with respect to Subordinated Debt Securities of any
series (other than due to events of bankruptcy, insolvency or reorganization)
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Outstanding Subordinated Debt Securities of
that series, by notice in writing to the Company (and to the Trustee if given by
the Holders of at least 25% in aggregate principal amount of the Subordinated
Debt Securities of that series), may declare the unpaid principal of and accrued
interest to the date of acceleration on all the Outstanding Subordinated Debt
Securities of that series to be due and payable immediately and, upon any such
declaration, the Subordinated Debt Securities of that series shall become
immediately due and payable.
If an Event of Default occurs due to bankruptcy, insolvency or
reorganization, all unpaid principal of and accrued interest on the Outstanding
Subordinated Debt Securities of any series will become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder of any Subordinated Debt Security of that series.
Any such declaration with respect to Subordinated Debt Securities of any
series may be annulled and past Events of Default and Defaults (except, unless
theretofore cured, an Event of Default or a Default in payment of principal of
or interest on the Subordinated Debt Securities of that series) may be waived by
the Holders of a majority of the principal amount of the Outstanding
Subordinated Debt Securities of that series, upon the conditions provided in the
Subordinated Debt Securities Indenture.
The Subordinated Debt Securities Indenture provides that the Company shall
periodically file statements with the Trustees regarding compliance by the
Company with certain of the respective covenants thereof and shall specify any
Event of Default or Defaults with respect to Subordinated Debt Securities of any
series, in performing such covenants, of which the signers may have knowledge.
MODIFICATION OF SUBORDINATED DEBT SECURITIES INDENTURE; WAIVER
The Subordinated Debt Securities Indenture may be modified by the Company
and the Trustee without the consent of any Holders with respect to certain
matters, including (i) to cure any ambiguity, defect or inconsistency or to
correct or supplement any provision which may be inconsistent with any other
provision of the Subordinated Debt Securities Indenture and (ii) to make any
change that does not materially adversely affect the interests of any Holder of
Subordinated Debt Securities of any series. In addition, under the Subordinated
Debt Securities Indenture, certain rights and obligations of the Company and the
rights of Holders of the Subordinated Debt Securities may be modified by the
Company and the Trustee with the written consent of the Holders of at least a
majority in aggregate principal amount of the Outstanding Subordinated Debt
Securities of each series affected thereby; but no extension of the maturity of
any Subordinated Debt Securities of any series, reduction in the interest rate
or extension of the time for payment of interest, change in the optional
redemption or repurchase provisions in a manner adverse to any Holder of
Subordinated Debt Securities of any series, other modification in the terms of
payment of the principal of, or interest on, any Subordinated Debt Securities of
any series, or reduction of the percentage required for modification, will be
effective against any Holder of any Outstanding Subordinated Debt Security of
any series affected thereby without the Holder's consent. The Subordinated Debt
Securities Indenture does not limit the aggregate amount of Subordinated Debt
Securities of the Company which may be issued thereunder.
The Holders of a majority in aggregate principal amount of the Outstanding
Subordinated Debt Securities of any series may on behalf of the Holders of all
Subordinated Debt Securities of that series waive, insofar as that series is
concerned, compliance by the Company with certain restrictive covenants of the
Subordinated Debt Securities Indenture. The Holders of not less than a majority
in aggregate principal amount of the Outstanding Subordinated Debt Securities of
any series may on behalf of the Holders of all Subordinated Debt Securities of
that series waive any past Event of Default or Default under the Subordinated
Debt Securities Indenture with respect to that series, except an Event of
Default or a Default in
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<PAGE> 40
the payment of the principal of, or premium, if any, or any interest on any
Subordinated Debt Security of that series or in respect of a provision which
under the Subordinated Debt Securities Indenture cannot be modified or amended
without the consent of the Holder of each Outstanding Subordinated Debt Security
of that series affected.
DEFEASANCE
The Company may terminate its substantive obligations in respect of
Subordinated Debt Securities of any series (except for its obligations to pay
the principal of (and premium, if any, on) and the interest on the Subordinated
Debt Securities of that series) by (i) depositing with the Trustee, under the
terms of an irrevocable trust agreement, money or U.S. Government Obligations
sufficient to pay all remaining indebtedness on the Subordinated Debt Securities
of that series, (ii) delivering to the Trustee either an Opinion of Counsel or a
ruling directed to the Trustee from the Internal Revenue Service to the effect
that the Holders of the Subordinated Debt Securities of that series will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and termination of obligations, and (iii) complying with certain
other requirements set forth in the Subordinated Debt Securities Indenture.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
Subordinated Debt Securities will be subordinated in right of payment to the
prior payment in full of all Senior Indebtedness of the Company and pari passu
with MCN trade creditors. No payment on account of principal of, premium, if
any, or interest on the Subordinated Debt Securities and no acquisition of, or
payment on account of any sinking fund for, the Subordinated Debt Securities may
be made unless full payment of amounts then due for principal, premium, if any,
and interest then due on all Senior Indebtedness by reason of the maturity
thereof (by lapse of time, acceleration or otherwise) has been made or duly
provided for in cash or in a manner satisfactory to the Holders of such Senior
Indebtedness. In addition, the Subordinated Debt Securities Indenture provides
that if a default has occurred giving the holders of such Senior Indebtedness
the right to accelerate the maturity thereof, or an event has occurred which,
with the giving of notice, or lapse of time, or both, would constitute such an
event of default, then unless and until such event shall have been cured or
waived or shall have ceased to exist, no payment on account of principal,
premium, if any, or interest on the Subordinated Debt Securities and no
acquisition of, or payment on account of a sinking fund for, the Subordinated
Debt Securities may be made. The Company shall give prompt written notice to the
Trustee of any default under any Senior Indebtedness or under any agreement
pursuant to which Senior Indebtedness may have been issued. The Subordinated
Debt Securities Indenture provisions described in this paragraph, however, do
not prevent the Company from making a sinking fund payment with Subordinated
Debt Securities acquired prior to the maturity of Senior Indebtedness or, in the
case of default, prior to such default and notice thereof. Upon any distribution
of its assets in connection with any dissolution, liquidation or reorganization
of the Company, all Senior Indebtedness must be paid in full before the Holders
of the Subordinated Debt Securities are entitled to any payments whatsoever. As
a result of these subordinated provisions, in the event of the Company's
insolvency, holders of the Subordinated Debt Securities may recover ratably less
than senior creditors of the Company.
DESCRIPTION OF MCN CAPITAL STOCK
The following is a brief description of certain provisions relating to MCN
capital stock:
MCN has authority to issue up to 125,000,000 shares of capital stock, which
are divided into two classes as follows: 25,000,000 shares of MCN Preferred
Stock, no par value ("MCN Preferred Stock") and 100,000,000 shares of MCN Common
Stock, par value $.01 per share. On August 31, 1994, there were no shares of MCN
Preferred Stock outstanding and 29,754,426 shares of MCN Common Stock
outstanding.
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<PAGE> 41
MCN COMMON STOCK
Voting Rights: The holders of MCN Common Stock are entitled to one vote for
each share on all matters voted upon by MCN's shareholders and, subject to any
voting rights of outstanding MCN Preferred Stock, the holders of such shares
possess all voting power.
Any action required or permitted to be taken by any shareholder of MCN must
be effected at a duly called annual or special meeting of such shareholders and
may not be effected by any consent in writing by such shareholders. Except as
otherwise permitted by law, special shareholder meetings of MCN may be called
only pursuant to a resolution approved by the Board.
The holders of MCN Common Stock have noncumulative voting rights, which
means that the holders of more than 50% of the shares of MCN Common Stock voting
for the election of directors can elect 100% of the directors standing for
election at any meeting if they choose to do so and, in such event, the holders
of the remaining shares voting for the election of directors would not be able
to elect any person or persons to the Board at that meeting.
Dividend Rights: The holders of MCN Common Stock are entitled to such
dividends as may be declared from time to time by the Board from funds legally
available therefor subject to: (1) preferential dividend rights, if any, of any
series of MCN Preferred Stock then outstanding; and (2) applicable requirements,
if any, with respect to the setting aside of sums for purchase, retirement or
sinking funds for MCN Preferred Stock.
Liquidation Rights: In the event of liquidation, the holders of MCN Common
Stock will be entitled to receive pro rata any assets distributable to
shareholders in respect of shares held by them, subject to the rights of any
holders of MCN Preferred Stock.
No Preemptive Rights: No holder of MCN Common Stock has any right to
subscribe to any additional securities which may be issued by MCN.
Redemption and Conversion Provisions: MCN Common Stock does not have any
redemption provisions or conversion rights.
Preferred Share Purchase Rights: MCN Common Stock currently trades with
Preferred Share Purchase Rights. The Rights, which cannot be traded separately
from MCN Common Stock, are intended to protect shareholders in the event of an
unsolicited attempt to acquire MCN and become exercisable upon the occurrence of
certain triggering events. Triggering events include acquisition by a person or
group of beneficial ownership of 20% or more of MCN's Common Stock. The Rights
could also have the effect of delaying, deferring or preventing a takeover or
change in control of MCN that has not been approved by the Board of Directors.
Transfer Agent: The transfer agent and registrar for MCN Common Stock is
First Chicago Trust Company of New York, 525 Washington Boulevard, Jersey City,
New Jersey 07310.
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<PAGE> 42
PRICE RANGE OF MCN COMMON STOCK AND COMMON STOCK DIVIDENDS
MCN Common Stock began trading on the NYSE on January 4, 1989, following
the effective date of the restructuring of MichCon and subsequent formation of
MCN as its holding company. The high and low sales prices of the Common Stock of
MCN, reported as composite transactions, have been as follows:
<TABLE>
<CAPTION>
CASH
DIVIDENDS
PAID PER
HIGH LOW SHARE
----- ----- ---------
<S> <C> <C> <C>
1992
First Quarter....................................... $24 1/2 $21 3/4 $ .41
Second Quarter...................................... 24 7/8 21 5/8 .41
Third Quarter....................................... 28 1/8 24 5/8 .41
Fourth Quarter...................................... 31 25 1/4 .42
1993
First Quarter....................................... 33 5/8 29 .42
Second Quarter...................................... 34 7/8 30 7/8 .42
Third Quarter....................................... 36 1/2 33 .42
Fourth Quarter...................................... 36 5/8 33 7/8 .43
1994
First Quarter....................................... 40 33 3/4 .43
Second Quarter...................................... 40 1/4 35 1/4 .43
Third Quarter (through August 31, 1994)............. 40 1/2 37 7/8 .43
</TABLE>
The closing price of MCN Common Stock on September 28, 1994 was $36.125 per
share. The book value of the Company's Common Stock on June 30, 1994 was $17.68
per share.
The timing and amount of future cash dividends will depend on the financial
condition of MCN, the income from its subsidiaries, primarily MichCon, internal
cash requirements and other factors deemed relevant by MCN's Board of Directors.
MCN sponsors a dividend reinvestment and stock purchase plan under which
holders of record of MCN Common Stock and MichCon's $2.05 Series Preferred Stock
may purchase a limited amount of MCN Common Stock without paying brokerage fees
and other expenses. Under this plan, the MCN Common Stock may be purchased in
the open market at prevailing prices or purchased from MCN at the average of the
high and low sales prices on the NYSE during the five trading days immediately
preceding the purchase.
MCN PREFERRED STOCK
The Board of Directors of MCN is authorized, without further action by the
shareholders of MCN, to issue up to 25,000,000 shares of MCN Preferred Stock,
without par value, in one or more series, from time to time, with such voting
powers, full or limited, or without voting powers, and with such designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as may be provided in a
resolution or resolutions adopted by the Board of Directors. The authority of
the Board of Directors includes, but is not limited to, the determination or
fixing of the following with respect to shares of such class or any series
thereof: (i) the number of shares and designation; (ii) the dividend rate and
whether the dividends are to be cumulative; (iii) whether shares are to be
redeemable and, if so, the terms and provisions applying; (iv) whether the
shares are subject to a purchase, retirement or sinking fund and, if so, the
terms and provisions applying; (v) whether shares shall be convertible and, if
so, the terms and provisions applying; (vi) what voting rights are to apply, if
any, not to exceed one vote per share; (vii) the rights to which the holders of
shares are entitled upon voluntary or involuntary liquidation or dissolution;
and (viii) what restrictions are to apply, if any, on the issue or reissue of
any additional MCN Preferred Stock. If MCN Preferred Stock of a class were to be
issued, it would be preferred to the MCN Common Stock with respect to dividends
and other matters and might have the effect of making more difficult any change
in control of MCN.
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<PAGE> 43
Management cannot currently foresee whether or when MCN might issue any
shares of MCN Preferred Stock.
OTHER PROVISIONS
The Articles of Incorporation of MCN provide for a classified Board of
Directors; the removal of directors by a two-thirds vote of shareholders (but
only for cause) or by vote of two-thirds of the other directors (with or without
cause); procedures for nomination by shareholders of candidates for election as
a director; director consideration of other constituencies when evaluating a
business combination; the prohibition of shareholder action by written consent;
supermajority (two-thirds) shareholder vote to amend or repeal the foregoing
provisions; and limitations on the personal liability of directors. These
provisions are generally intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and ensure the careful
consideration of proposed business combinations and any appropriate alternatives
for MCN's stockholders. Such provisions may have the effect of making more
difficult or discouraging a proxy contest, or delaying, deferring or preventing
a future takeover or change in control of MCN.
DESCRIPTION OF THE MCN MICHIGAN PREFERRED SECURITIES
MCN Michigan may issue, from time to time, Preferred Securities, in one or
more series, having terms described in the Prospectus Supplement relating
thereto. The limited partnership agreement of MCN Michigan will be amended and
restated (as so amended and restated, the "Limited Partnership Agreement") to
authorize the establishment of one or more series of Preferred Securities,
having such terms, including dividends, redemption, voting, liquidation rights
and such other preferred, deferred or other special rights or such restrictions
as shall be set forth therein or otherwise established by the General Partner
pursuant thereto. Reference is made to the Prospectus Supplement relating to the
Preferred Securities of a particular series for specific terms, including (i)
the distinctive designation of such series which shall distinguish it from other
series; (ii) the number of Preferred Securities included in such series, which
number may be increased or decreased from time to time unless otherwise provided
by the General Partner in creating the series; (iii) the annual dividend rate
(or method of determining such rate) for Preferred Securities of such series and
the date or dates upon which such dividends shall be payable, provided, however,
dividends on any series of Preferred Securities shall be payable on a monthly
basis to holders of such series of Preferred Securities as of a record date in
each month during which such series of Preferred Securities are outstanding;
(iv) whether dividends on Preferred Securities of such series shall be
cumulative, and, in the case of Preferred Securities of any series having
cumulative dividend rights, the date or dates or method of determining the date
or dates from which dividends on Preferred Securities of such series shall be
cumulative; (v) the amount or amounts which shall be paid out of the assets of
MCN Michigan to the holders of Preferred Securities of such series upon
voluntary or involuntary dissolution, winding-up or termination of MCN Michigan;
(vi) the price or prices at which, the period or periods within which and the
terms and conditions upon which Preferred Securities of such series may be
redeemed or purchased, in whole or in part, at the option of MCN Michigan or the
General Partner; (vii) the obligation, if any, of MCN Michigan to purchase or
redeem Preferred Securities of such series pursuant to a sinking fund or
otherwise and the price or prices at which, the period or periods within which
and the terms and conditions upon which Preferred Securities of such series
shall be purchased or redeemed, in whole or in part, pursuant to such
obligation; (viii) the period or periods within which and the terms and
conditions, if any, including the price or prices or the rate or rates of
conversion or exchange and the terms and conditions of any adjustments thereof,
upon which the Preferred Securities of such series shall be convertible or
exchangeable at the option of the holder of the Preferred Security, or MCN
Michigan, into any other Interests (as such term is defined in the Limited
Partnership Agreement) or securities or other property or cash or into any other
series of Preferred Securities; (ix) the voting rights, if any, of Preferred
Securities of such series in addition to those required by law or set forth in
the Limited Partnership Agreement, and any requirement for the approval by the
holders of Preferred Securities, or of Preferred Securities of one or more
series, or of both, as a condition to specified action or amendments to the
Limited Partnership Agreement; (x) the additional amounts, if any, which MCN
Michigan will pay as a distribution as necessary in order that the net amounts
received by holders of Preferred Securities of such series after withholding or
deduction of
17
<PAGE> 44
certain taxes, duties, assessments or governmental charges will equal the amount
which would have been receivable in respect of such Preferred Securities in the
absence of such withholding or deduction; and (xi) any other relative rights,
powers, preferences, privileges, limitations or restrictions of Preferred
Securities of the series consistent with the Limited Partnership Agreement or
with applicable law. All Preferred Securities offered hereby will be guaranteed
by MCN to the limited extent set forth below under "Description of the
Guarantee." Any applicable federal income tax considerations applicable to any
offering of Preferred Securities will be described in the Prospectus Supplement
relating thereto. The aggregate number of Preferred Securities which MCN
Michigan shall have authority to issue is unlimited.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
will be executed and delivered by MCN for the benefit of the holders, from time
to time, of Preferred Securities. The summary does not purport to be complete
and is subject in all respects to the provisions of, and is qualified in its
entirety by reference to, the Guarantee, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
GENERAL
MCN will irrevocably and unconditionally agree, to the extent set forth
herein, to pay in full, to the holders of the Preferred Securities of each
series, the Guarantee Payments (as defined below) (except to the extent paid by
MCN Michigan), as and when due, regardless of any defense, right of set-off or
counterclaim which MCN may have or assert against MCN Michigan. The following
payments with respect to any series of Preferred Securities to the extent not
paid by MCN Michigan (the "Guarantee Payments") will be subject to the Guarantee
(without duplication): (i) any accrued and unpaid dividends which are required
to be paid on the Preferred Securities of such series, to the extent MCN
Michigan shall have funds legally available therefor, (ii) the redemption price,
including all accrued and unpaid dividends (the "Redemption Price"), payable out
of funds legally available therefor with respect to any Preferred Securities
called for redemption by MCN Michigan and (iii) upon a liquidation of MCN
Michigan, the lesser of (a) the aggregate of the liquidation preference and all
accrued and unpaid dividends on the Preferred Securities of such series to the
date of payment and (b) the amount of assets of MCN Michigan remaining available
for distribution to holders of Preferred Securities of such series in
liquidation of MCN Michigan. MCN's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by MCN to the holders of
Preferred Securities or by causing MCN Michigan to pay such amounts to such
holders.
CERTAIN COVENANTS OF MCN
In the Guarantee, MCN will covenant that, so long as any Preferred
Securities remain outstanding, MCN will not declare or pay any dividend on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock if at such time MCN shall be in default with respect to its
payment or other obligations under the Guarantee or there shall have occurred
any event that, with the giving of notice or lapse of time or both, would
constitute an Event of Default under the Subordinated Debt Securities Indenture.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
Guarantee may be changed only with the prior approval of the holders of not less
than 66 2/3% in liquidation preference of the outstanding Preferred Securities.
All guarantees and agreements contained in the Guarantee shall bind the
successors, assignees, receivers, trustees and representatives of MCN and shall
inure to the benefit of the holders of the Preferred Securities then
outstanding.
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<PAGE> 45
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect as to
the Preferred Securities of any series upon full payment of the Redemption Price
of all Preferred Securities of such series and will terminate completely upon
full payment of the amounts payable upon liquidation of MCN Michigan. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Preferred Securities of any series must restore
payment of any sums paid under such series of Preferred Securities or the
Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of MCN and will rank
(i) subordinate and junior in right of payment to all other liabilities of MCN,
(ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by MCN and with any guarantee now or hereafter entered into by
MCN in respect of any preferred or preference stock of any affiliate of MCN and
(iii) senior to MCN's common stock. The Limited Partnership Agreement provides
that each holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection.
The Guarantee will be deposited with the General Partner to be held for the
benefit of the holders of each series of Preferred Securities. In the event of
the appointment of a Special Representative to, among other things, enforce the
Guarantee, the Special Representative may take possession of the Guarantee for
such purpose. If no Special Representative has been appointed to enforce the
Guarantee, the General Partner has the right to enforce the Guarantee on behalf
of the holders of each series of Preferred Securities. The holders of not less
than 10% in aggregate liquidation preference of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding for
any remedy available in respect of the Guarantee, including the giving of
directions to the General Partner or the Special Representative, as the case may
be. If the General Partner or the Special Representative fails to enforce the
Guarantee as provided above, any holder of Preferred Securities may institute a
legal proceeding directly against the Guarantor to enforce its rights under the
Guarantee, without first instituting a legal proceeding against MCN Michigan or
any other person or entity. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by MCN Michigan
and by complete performance of all obligations under the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
PLAN OF DISTRIBUTION
MCN and/or MCN Michigan may sell the Offered Securities (i) to or through
underwriters or dealers; (ii) directly to purchasers; or (iii) through agents.
The Prospectus Supplement with respect to the Offered Securities will set forth
the terms of the offering of the Offered Securities, including the name or names
of any underwriters, dealers or agents; the purchase price of the Offered
Securities and the proceeds to MCN and/or MCN Michigan from such sale; any
underwriting discounts and commissions and other items constituting
underwriters' compensation; any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers and any securities
exchange on which such Offered Securities may be listed. Any initial public
offering price, discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Offered Securities will be
named in the
19
<PAGE> 46
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters to
purchase the Offered Securities will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all the Offered Securities if
any are purchased.
If dealers are utilized in the sale of Offered Securities, MCN and/or MCN
Michigan will sell such Offered Securities to the dealers as principals. The
dealers may then resell such Offered Securities to the public at varying prices
to be determined by such dealers at the time of resale. The names of the dealers
and the terms of the transaction will be set forth in the Prospectus Supplement
relating thereto.
The Offered Securities may be sold directly by MCN and/or MCN Michigan or
through agents designated by MCN and/or MCN Michigan from time to time. Any
agent involved in the offer or sale of the Offered Securities in respect to
which this Prospectus is delivered will be named, and any commissions payable by
MCN and/or MCN Michigan to such agent will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
The Offered Securities may be sold directly by MCN and/or MCN Michigan to
institutional investors or others, who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales will be described in the Prospectus Supplement relating
thereto.
If so indicated in the Prospectus Supplement, MCN and/or MCN Michigan will
authorize agents, underwriters or dealers to solicit offers from certain types
of institutions to purchase Offered Securities from MCN and/or MCN Michigan at
the public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject only to those conditions set
forth in the Prospectus Supplement, and the Prospectus Supplement will set forth
the commission payable for solicitation of such contracts.
Agents, dealers and underwriters may be entitled under agreements with MCN
and/or MCN Michigan to indemnification by MCN and/or MCN Michigan against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which such agents, dealers or underwriters
may be required to make in respect thereof. Agents, dealers and underwriters may
be customers of, engage in transactions with, or perform services for MCN and/or
MCN Michigan in the ordinary course of business.
The Offered Securities may or may not be listed on a national securities
exchange. No assurance can be given that there will be a market for the Offered
Securities.
VALIDITY OF SECURITIES
The validity of the Offered Securities of MCN will be passed upon for MCN
and/or MCN Michigan by Daniel L. Schiffer, Esq., Vice President, General Counsel
and Secretary of MCN Corporation, and for the underwriters by LeBoeuf, Lamb,
Greene & MacRae, a partnership including professional corporations, New York,
New York. Mr. Schiffer is a full-time employee and officer of MCN and owns 9,984
shares of MCN Common Stock as of August 31, 1994.
EXPERTS
The consolidated financial statements and related financial statement
schedules incorporated in this prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1993 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference (which reports express an unqualified
opinion and include an explanatory paragraph relating to MCN's adoption of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting For
Postretirement Benefit Plans Other Than Pensions"), and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
20
<PAGE> 47
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- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR UNDERWRITER.
THIS PROSPECTUS SPEAKS AS OF ITS DATE AND NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-----------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Selected Financial and Operating
Information.............................. S-3
MCN Corporation............................ S-4
MCN Michigan Limited Partnership .......... S-4
Recent Developments........................ S-5
Investment Considerations.................. S-5
Capitalization of MCN at June 30, 1994..... S-7
Use of Proceeds............................ S-7
Description of the Series A Preferred
Securities............................... S-8
Description of the Series A Subordinated
Debt Securities.......................... S-17
Effect of Obligations Under the Series A
Subordinated Debt Securities and the
Guarantee................................ S-21
United States Federal Income Taxation...... S-21
Underwriting............................... S-24
Legal Matters.............................. S-26
PROSPECTUS
Available Information...................... 2
Incorporation of Certain Documents by
Reference................................ 2
MCN Corporation............................ 3
MCN Michigan Limited Partnership .......... 3
Use of Proceeds............................ 3
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends................ 4
Description of MCN Debt Securities......... 4
General.................................. 4
Particular Terms of the Senior Debt
Securities............................. 7
Particular Terms of the Subordinated Debt
Securities............................. 10
Description of MCN Capital Stock........... 14
MCN Common Stock......................... 15
Price Range of MCN Common Stock and
Common Stock Dividends................. 16
MCN Preferred Stock...................... 16
Other Provisions......................... 17
Description of the MCN Michigan Preferred
Securities............................... 17
Description of the Guarantee............... 18
Plan of Distribution....................... 19
Validity of Securities..................... 20
Experts.................................... 20
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- ------------------------------------------------------
- ------------------------------------------------------
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4,000,000 PREFERRED SECURITIES
MCN MICHIGAN
LIMITED PARTNERSHIP
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
[MCN LOGO]
9 3/8% CUMULATIVE
PREFERRED SECURITIES,
SERIES A
-------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
ROBERT W. BAIRD & CO.
INCORPORATED
DEAN WITTER REYNOLDS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
A.G. EDWARDS & SONS, INC.
OCTOBER 26, 1994
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