<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1994, OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-10070
MCN CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2820658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 GRISWOLD STREET, DETROIT, MICHIGAN 48226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-256-5500
NO CHANGES
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of the registrant's classes of common
stock, as of April 30, 1994:
Common Stock, par value $.01 per share: 29,622,410
- --------------------------------------------------------------------------------
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<PAGE> 2
INDEX TO FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
COVER............................................................................... i
INDEX............................................................................... ii
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements...................................................... 1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 5
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders....................... 14
Item 6. Exhibits and Reports on Form 8-K.......................................... 14
SIGNATURE........................................................................... 15
</TABLE>
ii
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MCN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------ ------------
1994 1993 1993
---------- ---------- ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and temporary cash investments, at cost (which approximates market
value).................................................................. $ 23,916 $ 8,633 $ 12,474
Accounts receivable, less allowance for doubtful accounts of $29,630,
$35,050 and $19,576, respectively....................................... 326,134 284,694 236,934
Accrued unbilled revenues................................................. 83,932 69,975 101,327
Gas in inventory (Note 1)................................................. 15,911 6,171 45,895
Property taxes assessed applicable to future periods...................... 40,089 48,873 50,709
Other..................................................................... 40,508 48,111 35,332
---------- ---------- ------------
530,490 466,457 482,671
---------- ---------- ------------
DEFERRED CHARGES AND OTHER ASSETS
Investment in and advances to joint ventures.............................. 60,541 48,312 60,528
Deferred postretirement benefit cost...................................... 25,406 7,069 25,612
Other..................................................................... 73,035 53,935 59,031
---------- ---------- ------------
158,982 109,316 145,171
---------- ---------- ------------
PROPERTY, PLANT AND EQUIPMENT, at cost...................................... 2,320,518 2,135,725 2,284,529
Less -- Accumulated depreciation and depletion............................ 1,070,418 1,000,799 1,047,941
---------- ---------- ------------
1,250,100 1,134,926 1,236,588
---------- ---------- ------------
$1,939,572 $1,710,699 $1,864,430
---------- ---------- ------------
---------- ---------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................................... $ 145,696 $ 122,097 $ 124,585
Notes payable............................................................. 105,043 108,970 280,304
Current portion of long-term debt, capital lease obligations and
redeemable cumulative preferred stock................................... 3,009 10,020 5,980
Gas inventory equalization (Note 1)....................................... 109,155 102,462 --
Federal income, property and other taxes payable.......................... 96,394 101,315 63,790
Refunds payable to customers.............................................. 11,120 13,234 10,794
Customer deposits......................................................... 10,940 12,223 13,271
Other..................................................................... 73,490 67,963 78,146
---------- ---------- ------------
554,847 538,284 576,870
---------- ---------- ------------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes......................................... 169,896 135,575 171,630
Unamortized investment tax credit......................................... 40,101 42,013 40,571
Tax benefits amortizable to customers..................................... 31,089 43,613 31,666
Minority interest......................................................... 18,185 18,198 18,357
Other..................................................................... 74,547 61,529 54,729
---------- ---------- ------------
333,818 300,928 316,953
---------- ---------- ------------
LONG-TERM DEBT, including capital lease obligations......................... 514,661 387,190 494,821
---------- ---------- ------------
REDEEMABLE CUMULATIVE PREFERRED STOCK OF SUBSIDIARY, $2.05 SERIES........... 5,618 5,618 5,618
---------- ---------- ------------
CONTINGENCIES (Note 2)
COMMON SHAREHOLDERS' EQUITY
Common stock.............................................................. 296 292 295
Additional paid-in capital................................................ 320,907 308,791 317,117
Retained earnings......................................................... 210,309 172,420 153,884
Unearned compensation and ESOP benefit.................................... (884) (2,824) (1,128)
---------- ---------- ------------
530,628 478,679 470,168
---------- ---------- ------------
$1,939,572 $1,710,699 $1,864,430
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
The notes to the consolidated financial statements are an integral part of this
statement.
1
<PAGE> 4
MCN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------- -------------------------
1994 1993 1994 1993
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES...................................... $656,757 $559,348 $1,577,063 $1,469,452
-------- -------- ---------- ----------
OPERATING EXPENSES
Cost of gas........................................... 392,017 338,612 900,138 864,301
Operation and maintenance............................. 106,899 92,501 359,110 346,117
Depreciation, depletion and amortization.............. 24,052 20,263 85,435 77,734
Property and other taxes.............................. 20,235 17,332 65,580 63,237
-------- -------- ---------- ----------
Total operating expenses............................ 543,203 468,708 1,410,263 1,351,389
-------- -------- ---------- ----------
OPERATING INCOME........................................ 113,554 90,640 166,800 118,063
-------- -------- ---------- ----------
EQUITY IN EARNINGS (LOSS) OF JOINT VENTURES............. 1,598 767 8,541 (37)
-------- -------- ---------- ----------
OTHER INCOME AND (DEDUCTIONS)
Interest income....................................... 1,877 985 6,079 6,336
Interest on long-term debt............................ (8,139) (7,023) (29,905) (30,672)
Other interest expense................................ (2,420) (2,099) (10,260) (7,114)
Minority interest..................................... (761) (747) (3,298) (3,643)
Other................................................. (826) (435) (6,431) (2,469)
-------- -------- ---------- ----------
Total other income and (deductions)................. (10,269) (9,319) (43,815) (37,562)
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES.............................. 104,883 82,088 131,526 80,464
INCOME TAX PROVISION.................................... 35,761 28,044 43,658 26,336
-------- -------- ---------- ----------
NET INCOME.............................................. $ 69,122 $ 54,044 $ 87,868 $ 54,128
-------- -------- ---------- ----------
-------- -------- ---------- ----------
EARNINGS PER SHARE...................................... $ 2.34 $ 1.85 $ 2.99 $ 1.95
-------- -------- ---------- ----------
-------- -------- ---------- ----------
AVERAGE COMMON SHARES OUTSTANDING....................... 29,544 29,174 29,412 27,780
-------- -------- ---------- ----------
-------- -------- ---------- ----------
DIVIDENDS DECLARED PER SHARE............................ $ .43 $ .42 $ 1.70 $ 1.66
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------- ----------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BALANCE -- Beginning of period.......................... $153,884 $130,621 $172,420 $164,628
ADD -- Net income....................................... 69,122 54,044 87,868 54,128
-------- -------- -------- --------
223,006 184,665 260,288 218,756
DEDUCT -- Cash dividends declared on common stock....... 12,697 12,245 49,979 46,336
-------- -------- -------- --------
BALANCE -- End of period................................ $210,309 $172,420 $210,309 $172,420
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The notes to the consolidated financial statements are an integral part of these
statements.
2
<PAGE> 5
MCN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1994 1993
--------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income....................................................................... $ 69,122 $ 54,044
Adjustments to reconcile net income to net cash provided from operating
activities
Depreciation, depletion and amortization
Per statement of income...................................................... 24,052 20,263
Charged to other accounts.................................................... 1,586 1,549
Deferred income taxes -- current............................................... (7,470) (4,676)
Deferred income taxes and investment tax credit -- net......................... (2,781) 2,745
Equity in earnings of joint ventures, net of distributions..................... (1,386) 115
Other.......................................................................... 777 (262)
--------- ---------
83,900 73,778
Changes in assets and liabilities, exclusive of changes shown separately....... 133,788 101,463
--------- ---------
Net cash provided from operating activities.................................. 217,688 175,241
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Notes payable -- net............................................................. (175,261) (130,603)
Common stock dividends paid...................................................... (12,697) (12,245)
Issuance of common stock......................................................... 3,885 2,456
Revolving credit facility -- net................................................. 21,100 13,250
Retirement of long-term debt and preferred stock................................. (4,252) (4,658)
Other............................................................................ (787) (192)
--------- ---------
Net cash used for financing activities....................................... (168,012) (131,992)
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures............................................................. (38,651) (41,248)
Investment in joint ventures..................................................... (2,014) (3,535)
Return of investment from joint ventures......................................... 3,223 79
Other............................................................................ (792) 222
--------- ---------
Net cash used for investing activities....................................... (38,234) (44,482)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS..................... 11,442 (1,233)
CASH AND TEMPORARY CASH INVESTMENTS, JANUARY 1..................................... 12,474 9,866
--------- ---------
CASH AND TEMPORARY CASH INVESTMENTS, MARCH 31...................................... $ 23,916 $ 8,633
--------- ---------
--------- ---------
CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
Accounts receivable -- net....................................................... $ (89,200) $ (74,831)
Accrued unbilled revenues........................................................ 17,395 21,441
Gas in inventory................................................................. 29,984 27,026
Accounts payable................................................................. 21,111 (5,525)
Gas inventory equalization....................................................... 109,155 102,462
Federal income, property and other taxes payable................................. 32,614 25,169
Refunds payable to customers..................................................... 326 9,919
Other current assets and liabilities............................................. 6,547 4,741
Deferred assets and liabilities.................................................. 5,856 (8,939)
--------- ---------
$ 133,788 $ 101,463
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest, net of amounts capitalized........................................... $ 6,860 $ 7,802
--------- ---------
--------- ---------
Federal income taxes........................................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>
The notes to the consolidated financial statements are an integral part of this
statement.
3
<PAGE> 6
MCN CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GAS IN INVENTORY
Inventory gas is priced on a last-in, first-out (LIFO) basis. In
anticipation that interim inventory reductions will be replaced prior to year
end, the cost of gas for net withdrawals from inventory is recorded at the
estimated average purchase rate for the calendar year. The excess of these
charges over the LIFO cost is credited to the gas inventory equalization
account. During interim periods when there are net injections to inventory, the
equalization account is reversed.
2. CONTINGENCIES
A. INTERSTATE PIPELINE RESTRUCTURING
As described in MCN's 1993 Annual Report on Form 10-K, the Federal
Energy Regulatory Commission (FERC) issued Order No. 636 in 1992 which
required interstate pipelines to separate their pipeline sales services
into various service components. The order also allows interstate pipelines
to recover their prudently incurred transition costs resulting from the
restructuring.
ANR Pipeline Company (ANR), MichCon's primary interstate natural gas
transporter, implemented its Order No. 636 restructuring in November 1993.
In February 1994, ANR filed its first transition cost recovery request.
MichCon recorded its portion of these costs of $1,200,000 in the first
quarter. These transition costs are recoverable through the Gas Cost
Recovery (GCR) mechanism, and therefore, a regulatory asset has been
recorded for the future recovery of these costs.
On April 29, 1994, ANR filed its next transition cost recovery
request. As these periodic filings are made, MichCon will accrue its
allocated portion. It is management's belief that there will be no effect
on earnings.
B. OTHER
MCN is involved in certain legal and administrative proceedings before
various courts and governmental agencies concerning claims arising in the
ordinary course of business. Management cannot predict the final
disposition of such proceedings, but believes that adequate provision has
been made for probable losses. It is management's belief, after discussion
with legal counsel, that the ultimate resolution of those proceedings still
pending will not have a material adverse effect on the accompanying
financial statements.
3. GENERAL
There have been no changes in MCN's principal accounting policies from
those set forth in MCN's 1993 Annual Report on Form 10-K. Certain
reclassifications have been made to the prior year's financial statements to
conform with the 1994 presentation.
The unaudited information furnished herein, in the opinion of management,
reflects all adjustments (consisting of only recurring adjustments or accruals)
necessary for a fair presentation of the results of operations during the
periods.
Because of seasonal and other factors, revenues, expenses, net income and
earnings per share for the interim periods should not be construed as
representative of revenues, expenses, net income and earnings per share for all
or any part of the balance of the current year or succeeding periods.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
MCN'S EARNINGS FOR THE QUARTER INCREASED 28% -- Both MCN's utility and
nonutility businesses contributed significantly to higher earnings for the 1994
first quarter, which increased $15.1 million ($.49 per share) from the 1993
quarter. Earnings for the 1994 twelve-month period increased $33.8 million
($1.04 per share) from the corresponding 1993 period. A summary of financial
performance follows:
<TABLE>
<CAPTION>
QUARTER 12 MONTHS
--------------- ---------------
1994 1993 1994 1993
----- ----- ----- -----
(MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
NET INCOME
Utility Services......................................... $66.0 $53.2 $75.4 $51.7
Nonutility Services...................................... 3.1 .8 12.5 2.4
----- ----- ----- -----
$69.1 $54.0 $87.9 $54.1
----- ----- ----- -----
----- ----- ----- -----
EARNINGS PER SHARE
Utility Services......................................... $2.23 $1.82 $2.56 $1.86
Nonutility Services...................................... .11 .03 .43 .09
----- ----- ----- -----
$2.34 $1.85 $2.99 $1.95
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
- --------------------------------------------------------------------------------
STRATEGIC DIRECTION -- As discussed in MCN's 1993 Annual Report on Form
10-K, MCN has set its strategic direction, first, to grow the gas utility
business through market expansion; second, to invest in a portfolio of
gas-related projects including gas storage, gas cogeneration, gas production and
gas gathering systems; and third, to pursue opportunities in gas technology and
other areas of expertise. MCN is continuing to pursue opportunities to invest in
these areas through both the utility and nonutility businesses, as subsequently
discussed.
UTILITY SERVICES
UTILITY SERVICES' EARNINGS INCREASED 24% -- Utility services' earnings
increased $12.8 million ($.41 per share) for the 1994 quarter as compared to the
1993 period. The increase reflects higher gas deliveries resulting from
significantly colder weather, market expansion and a January 1994 rate increase.
The increase for the 1994 twelve-month period of $23.7 million ($.70 per share)
was due to lower operating expenses, as well as higher gas deliveries resulting
from colder weather.
<TABLE>
<CAPTION>
QUARTER 12 MONTHS
-------------- --------------
1994 1993 1994 1993
---- ----- ---- -----
<S> <C> <C> <C> <C>
EFFECT OF WEATHER ON GAS MARKETS AND EARNINGS
Percentage Colder (Warmer) than Normal....................... 7.9% (3.5)% 3.5% (.4)%
Increase (Decrease) from Normal in:
Gas Markets (Bcf).......................................... 7.8 (3.3) 6.7 (4.1)
Net Income (Millions)...................................... $7.0 $(2.8) $6.1 $(3.6)
Earnings Per Share......................................... $.24 $(.10) $.21 $(.13)
</TABLE>
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--(CONTINUED)
OPERATING REVENUES
OPERATING REVENUES INCREASED 18% -- The increases in utility services'
revenues for the 1994 quarter and twelve-month period reflect higher gas markets
and rates, as subsequently discussed.
<TABLE>
<CAPTION>
QUARTER 12 MONTHS
----------------- ---------------------
1994 1993 1994 1993
------ ------ -------- --------
<S> <C> <C> <C> <C>
UTILITY OPERATIONS (in Millions)
Operating Revenues*.................................. $540.8 $459.3 $1,210.8 $1,159.1
------ ------ -------- --------
Operating Expenses*
Cost of Gas........................................ 303.5 256.8 634.7 623.6
Operation & Maintenance............................ 87.5 78.6 289.2 294.7
Depreciation, Depletion & Amortization............. 21.3 18.6 77.1 71.4
Property & Other Taxes............................. 18.9 16.3 61.5 59.9
------ ------ -------- --------
431.2 370.3 1,062.5 1,049.6
------ ------ -------- --------
Operating Income..................................... 109.6 89.0 148.3 109.5
------ ------ -------- --------
Equity in Earnings (Loss) of Joint Ventures.......... .8 -- 2.6 (.6)
------ ------ -------- --------
Other Income & (Deductions)*
Interest Income.................................... 1.4 .8 4.7 6.4
Interest on Long-Term Debt......................... (6.6) (6.4) (25.9) (27.8)
Other Interest Expense............................. (2.2) (2.1) (8.1) (7.3)
Other.............................................. (.8) (.4) (6.4) (2.7)
------ ------ -------- --------
(8.2) (8.1) (35.7) (31.4)
------ ------ -------- --------
Income Tax Provision................................. 36.2 27.7 39.8 25.8
------ ------ -------- --------
Net Income........................................... $ 66.0 $ 53.2 $ 75.4 $ 51.7
------ ------ -------- --------
------ ------ -------- --------
</TABLE>
*Includes intercompany transactions
Gas Markets
MAJOR GAS MARKETS INCREASED 16.8 BCF -- Gas sales and end user
transportation deliveries for the 1994 quarter and twelve-month period increased
16.8 billion cubic feet (Bcf) and 11.3 Bcf, respectively. The increases were
primarily due to significantly colder weather and market expansion.
<TABLE>
<CAPTION>
QUARTER 12 MONTHS
--------------- ---------------
1994 1993 1994 1993
----- ----- ----- -----
<S> <C> <C> <C> <C>
UTILITY GAS MARKETS (in Bcf)
Gas Sales*................................................ 106.0 93.0 218.4 208.1
End User Transportation................................... 44.9 41.1 132.4 131.4
Intermediate Transportation*.............................. 107.7 75.7 313.1 230.7
----- ----- ----- -----
258.6 209.8 663.9 570.2
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
*Includes intercompany volumes
INTERMEDIATE TRANSPORTATION INCREASED 42% -- Intermediate transportation
increased 32 Bcf and 82.4 Bcf for the three-and twelve-month periods,
respectively, due to additional volumes transported for ANR, Michigan gas
producers and other shippers. The April 1993 start-up of the Blue Lake gas
storage project enables MichCon to transport gas for ANR under a firm, long-term
contract. Profit margins on intermediate transportation services are
considerably less than margins on gas sales or for end user transportation
markets.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--(CONTINUED)
There has been a significant increase in Michigan Antrim gas production
over the past few years, resulting in a growing demand by gas producers and
brokers for intermediate transportation services. Given the expected continued
rise in demand, MichCon has responded with a proposal to construct a $170
million expansion of its pipeline system, which has the potential to increase
transportation deliveries by 85 Bcf per year. MichCon has filed for
authorization of its proposed construction with the Michigan Public Service
Commission (MPSC) and has encountered competing proposals which may reduce a
portion of the pipeline that MichCon has proposed constructing.
Rate Matters
As described in MCN's 1993 Annual Report on Form 10-K, MichCon received
approval from the MPSC in its general rate case to increase rates $15.7 million,
beginning in January 1994. The rate increase resulted in a significant
contribution to revenues and earnings for the 1994 quarter since the majority of
the revenues from the rate increase were earned during the colder months of the
year. However, the impact on earnings will be tempered over the remainder of the
year as increased operating costs, which the rate increase is intended to
recover, are incurred.
OPERATING EXPENSES
Cost of gas sold increased in the 1994 quarter and twelve-month period due
primarily to increased gas sales volumes. The 1994 quarter also reflects higher
prices for natural gas in the spot market. These increases were partially offset
by lower fixed costs under a gas transportation contract with ANR. The cost of
gas sold per thousand cubic feet increased by $.20 or 7.2% for the 1994 quarter
and decreased $.01 for the twelve-month period, respectively.
As described in MCN's 1993 Annual Report on Form 10-K, the FERC issued
Order No. 636 in 1992 which required interstate pipelines to separate their
pipeline sales services into various service components. The order also allows
interstate pipelines to recover their prudently incurred transition costs
resulting from the restructuring.
ANR, MichCon's primary interstate natural gas transporter, implemented its
Order No. 636 restructuring in November 1993. In February 1994, ANR filed its
first transition cost recovery request. MichCon recorded its portion of these
costs of $1.2 million in the first quarter. These transition costs are
recoverable through the GCR mechanism, and therefore, a regulatory asset has
been recorded for the future recovery of these costs.
On April 29, 1994, ANR filed its next transition cost recovery request. As
these periodic filings are made, MichCon will accrue its allocated portion. It
is management's belief that there will be no effect on earnings.
Operation and maintenance expenses were higher in the 1994 quarter due to
higher postretirement benefit costs of $7.7 million, which were recognized as a
result of the new accounting requirements under Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions". These costs are being recovered in rates that became
effective January 1994. Management's continuing efforts to reduce operating
costs resulted in the decrease in operation and maintenance expenses for the
1994 twelve-month period. Additionally, these ongoing efforts partially offset
the increase for the 1994 quarter.
The increase in depreciation and depletion for both 1994 periods was due
mainly to higher plant balances, reflecting capital expenditures of $390.1
million over the past three calendar years, as well as higher depreciation rates
that were implemented in January 1994.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--(CONTINUED)
Property and other taxes for the 1994 quarter and twelve-month period
reflect an increase in Michigan single business taxes due to higher earnings. In
addition, property and other taxes in 1994 have been impacted by the reduction
in property taxes approved by the Michigan Legislature in 1993. Based on past
practice with the MPSC as it relates to tax reductions, management does not
expect the reduction in property taxes to significantly impact earnings as such
benefits are not expected to be retained.
EQUITY IN EARNINGS OF JOINT VENTURES
Utility earnings from joint ventures increased for the 1994 quarter and
twelve-month period due to earnings from the Blue Lake gas storage project which
began operations in April 1993. MCN's 50% interest in the Blue Lake project is
owned equally by utility and nonutility services.
OTHER INCOME & DEDUCTIONS
Interest income decreased for the 1994 twelve-month period due to interest
recorded in the 1993 twelve-month period from a refund of windfall profit taxes
and an interest adjustment on MichCon's energy assistance programs.
Interest on long-term debt decreased for the 1994 twelve-month period due
to lower financing costs resulting from the refinancing of $160.1 million of
first mortgage bonds since September 1992.
Other income and deductions for the 1994 twelve-month period reflect higher
charitable contributions and the write-off of certain assets.
INCOME TAX PROVISION
Income taxes increased for the 1994 quarter and twelve-month period due to
improved earnings. Income taxes for these periods also reflect the August 1993
enactment of The Omnibus Budget Reconciliation Act which increased the corporate
tax rate to 35%, effective January 1993. The retroactive effect of the tax
increase was recorded in the third quarter of 1993.
NONUTILITY SERVICES
NONUTILITY EARNINGS INCREASED $2.3 MILLION -- The nonutility businesses
continued to make a significant contribution to MCN's earnings. Earnings
increased $2.3 million ($.08 per share) for the current quarter and $10.1
million ($.34 per share) for the twelve months ended, reflecting higher earnings
from gas exploration & production activities, which began operations during the
first quarter of 1993. Also contributing to the increases were higher earnings
from the gas marketing & cogeneration business and computer operation services.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
QUARTER 12 MONTHS
----------------- -----------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
NONUTILITY OPERATIONS (in Millions)
Operating Revenues*
Gas Services.......................................... $103.5 $ 91.4 $313.6 $268.9
Computer Operations Services.......................... 20.1 16.2 78.3 67.2
------ ------ ------ ------
123.6 107.6 391.9 336.1
------ ------ ------ ------
Operating Expenses*
Gas Services.......................................... 98.7 88.8 294.5 260.7
Computer Operations Services.......................... 18.7 16.0 71.9 63.4
Corporate & Gas Technology............................ 2.2 1.2 6.9 3.5
------ ------ ------ ------
119.6 106.0 373.3 327.6
------ ------ ------ ------
Operating Income (Loss)
Gas Services
Gas Marketing & Cogeneration....................... 2.2 .6 7.5 (1.5)
Gas Gathering & Processing......................... 2.2 2.0 9.1 9.7
Exploration & Production........................... .4 -- 2.5 --
------ ------ ------ ------
4.8 2.6 19.1 8.2
Computer Operations Services.......................... 1.4 .2 6.4 3.8
Corporate & Gas Technology............................ (2.2) (1.2) (6.9) (3.5)
------ ------ ------ ------
4.0 1.6 18.6 8.5
------ ------ ------ ------
Equity in Earnings of Joint Ventures.................... .8 .8 5.9 .6
------ ------ ------ ------
Other Income & (Deductions)*
Interest Income....................................... .5 .3 1.6 1.4
Interest Expense...................................... (1.8) (.8) (6.3) (4.2)
Minority Interest..................................... (.8) (.8) (3.3) (3.7)
Other................................................. -- -- (.1) .2
------ ------ ------ ------
(2.1) (1.3) (8.1) (6.3)
------ ------ ------ ------
Income Tax Provision (Benefit).......................... (.4) .3 3.9 .4
------ ------ ------ ------
Net Income.............................................. $ 3.1 $ .8 $ 12.5 $ 2.4
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
*Includes intercompany transactions
GAS SERVICES
OPERATING INCOME INCREASED 85% -- Gas services' increase in operating
income of $2.2 million for the 1994 quarter and $10.9 million for the twelve
months ended reflects higher gas margins on gas sales from the gas marketing &
cogeneration business and earnings from the new gas exploration & production
activities which began production in early 1993.
Gas marketing & cogeneration's operating income for the 1994 quarter
increased from the 1993 period due to more favorable margins on a slightly lower
level of gas sales. The increase for the 1994 twelve-month period also reflects
favorable margins, as well as higher gas sales volumes.
MCN's exploration & production operations contributed $.4 million of
operating income to the 1994 quarter and $2.5 million to the twelve-month
period. MCN's share of these projects has produced approximately 1.5 Bcf and 3.8
Bcf of gas for the 1994 three-and twelve-month periods, respectively, generating
$1.4 million and $3.7 million of federal gas production tax credits for the same
respective periods.
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
QUARTER 12 MONTHS
------------- ---------------
1994 1993 1994 1993
---- ---- ----- -----
<S> <C> <C> <C> <C>
NONUTILITY GAS MARKETS (in Bcf)
Gas Sales................................................... 38.5 39.1 122.3 119.8
Transportation.............................................. 5.7 5.7 21.8 24.9
---- ---- ----- -----
44.2 44.8 144.1 144.7
---- ---- ----- -----
---- ---- ----- -----
</TABLE>
MCN TO ACQUIRE NATURAL GAS RESERVES -- In 1994, MCN announced signing two
agreements to acquire natural gas properties in Oklahoma, Kansas and Texas at a
total cost of approximately $100 million. Combined, these properties include an
interest in about 700 producing wells of which MCN's share amounts to
approximately 70 Bcf of proven reserves and 35 Bcf of potential reserves,
including 9 Bcf of equivalent oil reserves. The acquisitions are consistent with
MCN's strategy of developing and acquiring gas reserves to provide reliable,
long-term gas supplies at predetermined prices for the nonregulated gas
marketing operations and gas cogeneration facilities.
COMPUTER OPERATIONS SERVICES
OPERATING INCOME INCREASED -- Computer operations services' operating
income increased $1.2 million for the current quarter and $2.6 million for the
twelve-month period reflecting higher operating revenues from new business added
throughout 1993, in addition to increased usage by existing customers. The 1993
quarter also reflects higher costs which were incurred to obtain and support the
new customer contracts.
CORPORATE & GAS TECHNOLOGY
Both the 1994 three-and twelve-month periods reflect increased corporate
expenses associated with the development of new nonutility projects.
Additionally, the 1994 twelve-month period included costs incurred to launch a
pilot program aimed at having natural gas as a viable alternative for off-road
vehicles, as well as for fleet and personal transportation vehicles.
EQUITY IN EARNINGS OF JOINT VENTURES
Joint venture earnings for both the current three-and twelve-month periods
were favorably affected by earnings from the Blue Lake gas storage project,
which began operations in April 1993. Gas gathering & processing's 1993 quarter
earnings were favorably affected by a retroactive increase in MCN's ownership
percentage in a gas processing plant. The increase in gas gathering &
processing's twelve-month period earnings reflects a full period of earnings at
the higher ownership percentage. The increased loss for the current twelve-month
period in other joint ventures was due to a reserve for the expected write-off
of assets related to the natural gas torch business.
<TABLE>
<CAPTION>
QUARTER 12 MONTHS
--------------- -----------------
1994 1993 1994 1993
---- ---- ----- -----
<S> <C> <C> <C> <C>
NONUTILITY EQUITY IN EARNINGS OF JOINT VENTURES (in
Millions)
Gas Storage........................................... $1.0 $ .6 $ 6.6 $ 1.1
Gas Marketing & Cogeneration.......................... (.5) (.5) (1.4) (1.6)
Gas Gathering & Processing............................ .5 .7 1.9 1.2
Other................................................. (.2) -- (1.2) (.1)
---- ---- ----- -----
$ .8 $ .8 $ 5.9 $ .6
---- ---- ----- -----
---- ---- ----- -----
</TABLE>
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--(CONTINUED)
OTHER INCOME & DEDUCTIONS
The 1994 three-and twelve-month periods reflect higher interest costs on
long-term debt due to increased borrowings required to finance nonutility
capital investments.
INCOME TAXES
Income taxes for the 1994 three-and twelve-month periods were favorably
impacted by $1.4 million and $3.7 million, respectively, of federal gas
production tax credits related to gas production projects. The favorable impact
of the tax credits was partially offset by the August 1993 enactment of The
Omnibus Budget Reconciliation Act which increased the corporate tax rate to 35%,
effective January 1993. The retroactive effect of the tax increase was recorded
in the third quarter of 1993.
CAPITAL RESOURCES AND LIQUIDITY
OPERATING ACTIVITIES
CASH FLOW INCREASED 24% -- MCN's cash flow from operating activities during
the first quarter of 1994 increased $42.5 million over the comparable 1993
quarter. The increase was due to higher net income and lower working capital
requirements.
<TABLE>
<CAPTION>
QUARTER
------------------
1994 1993
------ ------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES (in Millions)
Utility Services....................................................... $ 79.2 $ 72.0
Nonutility Services.................................................... 4.7 1.8
------ ------
83.9 73.8
Changes in Assets and Liabilities...................................... 133.8 101.4
------ ------
Cash Flow from Operating Activities.................................... $217.7 $175.2
------ ------
------ ------
</TABLE>
FINANCING ACTIVITIES
In anticipation of future permanent capital requirements, MCN plans to file
a universal shelf registration with the Securities and Exchange Commission (SEC)
for the issuance of up to a total of $250 million of preferred and common equity
and debt securities. During 1994, MCN may issue between $50 and $100 million of
securities under this registration.
MCN issues new shares of common stock pursuant to its Dividend Reinvestment
and Stock Purchase Plan and various employee benefit plans. During 1994, MCN
anticipates the issuance of new shares of common stock pursuant to these plans,
generating approximately $15 million. During the 1994 first quarter, MCN issued
approximately 107,000 shares, generating $3.9 million.
Utility Services
Short-term debt is normally reduced in the first part of each year as gas
inventories are depleted and funds are received from winter heating sales.
During the first quarter of 1994, MichCon repaid $155.3 million of short-term
debt, including commercial paper. During the latter part of the year, cash and
temporary cash investments decrease as funds are used to finance increases in
gas inventories and customer accounts receivable. To meet its seasonal
short-term borrowing needs, MichCon normally issues commercial paper which is
backed by credit lines with several banks. MichCon has established credit lines
of up to $300 million through March 1994. Thereafter, the lines decrease to $125
million through August 1994. Commercial paper of $105 million was outstanding at
March 31, 1994.
11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--(CONTINUED)
MichCon has shelf registrations on file with the SEC that allow for the
issuance of up to $110 million of first mortgage bonds. During 1994, MichCon may
issue between $50 and $100 million of first mortgage bonds. MichCon's capital
requirements and general financial market conditions will affect the timing and
amount of future debt issuances. MichCon's capitalization objective is to
maintain a ratio of approximately 50 percent debt and 50 percent equity. Future
long-term debt offerings are expected to carry MichCon's current debt rating of
"A".
Nonutility Services
MCN and MCN Investment maintain a joint unsecured revolving credit facility
that allows for borrowings of up to $150 million through August 1996. At March
31, 1994, borrowings outstanding under the facility totaled $93 million. In
order to finance the increased investments in nonutility projects, MCN
anticipates expanding this facility during the second quarter of 1994.
In 1993, MCN Investment established a short-term credit line through
September 1994 which allows for borrowings of up to $65 million to finance the
working capital requirements of its gas marketing operations. Short-term debt is
normally reduced in the first part of each year as gas inventories are depleted
and funds are received from winter heating sales. During the first quarter of
1994, MCN Investment repaid the full $20 million of short-term debt that was
outstanding under the credit line.
INVESTING ACTIVITIES
CAPITAL INVESTMENTS IN 1994 TO REACH $400 MILLION -- Capital investments
totaled $39.7 million in the first quarter of 1994 and included approximately
$13.5 million of capital expenditures for nonutility gas exploration &
production projects. The first quarter of 1993 included expenditures for the
Blue Lake gas storage project which began operations in April 1993.
<TABLE>
<CAPTION>
QUARTER
---------------
1994 1993
----- -----
<S> <C> <C>
CAPITAL INVESTMENTS (in Millions)
Consolidated Capital Expenditures:
Utility Services........................................................... $20.4 $25.1
Nonutility Services........................................................ 18.3 16.1
----- -----
38.7 41.2
----- -----
MCN's Share of Joint Venture Capital Expenditures:
Gas Storage................................................................ .4 12.5
Other...................................................................... .7 .3
----- -----
1.1 12.8
----- -----
Minority Partners' Share of Consolidated Capital Expenditures................ .1 --
----- -----
Total Capital Investments.................................................... $39.7 $54.0
----- -----
----- -----
</TABLE>
12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--(CONCLUDED)
Capital investments for 1994 are anticipated to be about $400 million.
These investments are to be directed toward opportunities in the utility
business and other projects that build upon management's expertise, such as
underground gas storage, natural gas cogeneration facilities, gas gathering
lines, and gas production. Approximately $250 million of the anticipated capital
investments will be made in the nonutility businesses, primarily to purchase gas
reserves and invest in additional exploration & production projects. Of the $250
million anticipated for nonutility projects, about $100 million has already been
committed through agreements to purchase oil and gas producing properties in
Oklahoma, Kansas and Texas.
The anticipated level of investments in 1994 and future years may increase
capital requirements materially in excess of internally generated funds and may
require the issuance of additional debt and equity securities. It is
management's opinion that MCN and its subsidiaries have sufficient capital
resources, both internal and external, to meet anticipated capital requirements.
13
<PAGE> 16
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
MCN held its Annual Meeting of Shareholders on April 28, 1994. As of March
1, 1994, the record date for determination of shareholders entitled to vote at
the Annual Meeting, there were 29,557,345 shares outstanding and entitled to
vote. Of these shares, 25,888,205, or 87.59%, were present by proxy, and
3,669,140 shares were not voted.
At the Annual Meeting, shareholders voted:
1. To elect the following Directors to serve for three year terms:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES WITHHOLDING
DIRECTOR CONSENTING FOR CONSENT
---------------------------------------- ---------------- ----------------
<S> <C> <C>
Alfred R. Glancy III.................... 25,663,645 224,560
Frank M. Hennessey...................... 25,686,233 201,972
Howard F. Sims.......................... 25,620,995 267,210
</TABLE>
2. To ratify the MCN Corporation Non-Officer Director Stock Award
Plan, with 23,758,991 shares voted for the ratification, 1,571,813 shares
voted against, and abstentions of 557,400 shares.
3. To approve an amendment to MCN Corporation's Articles of
Incorporation to increase the number of authorized shares of MCN Common
Stock, of the par value of $.01 per share, from 50 million to 100 million,
with 23,739,389 shares voted for the ratification, 1,813,353 shares voted
against, and abstentions of 335,463 shares.
4. To appoint Deloitte & Touche as independent auditors for the year
ending December 31, 1994, with 25,621,732 shares voted for the appointment,
85,670 shares voted against, and abstentions of 180,801 shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -------------------------------------------------------------------
<S> <C>
3-1 Articles of Incorporation of MCN Corporation, as amended.
10-1 MCN Corporation Non-Officer Director Stock Award Plan.
</TABLE>
14
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MCN CORPORATION
Date: May 6, 1994 By: /s/ PATRICK ZURLINDEN
---------------------
Patrick Zurlinden
Controller and Chief
Accounting Officer
15
<PAGE> 18
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------ -----------------------
3-1 Articles of Incorporation of MCN Corporation, as amended,
in electronic format.*
10-1 MCN Corporation Non-Officer Director Stock Award Plan.*
- --------------------------
* Indicates document filed herewith.
<PAGE> 1
EXHIBIT 3-1
STATE OF MICHIGAN
DEPARTMENT OF COMMERCE
CORPORATION AND SECURITIES BUREAU
CORPORATION DIVISION
LANSING, MICHIGAN
MCN CORPORATION
ARTICLES OF INCORPORATION
FILED
AUGUST 12, 1988
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
IDENTIFICATION NUMBER 3 8 1 - 1 5 3
<PAGE> 2
ARTICLES OF INCORPORATION
OF
MCN CORPORATION
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended, the
undersigned corporation executes the following Articles:
FIRST. The name of the corporation is MCN Corporation
SECOND. The purpose or purposes for which the Corporation is organized is
to engage in any activity with in the purposes for which corporations may be
organized under the Michigan Business Corporation Act.
THIRD. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 75,000,000 shares, which shall be
divided into two classes as follows:
(a) 25,000,000 shares of Preferred Stock, no par value (Preferred
Stock); and
(b) 50,000,000 shares of Common Stock of the par value of $.01 per share
(Common Stock).
The designations, voting powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions of the above classes of stock and other general provisions relating
thereto shall be as follows:
PART I
Preferred Stock
(a) Shares of Preferred Stock may be issued in one or more series at
such time or times and for such consideration or considerations as the Board of
Directors may determine. All shares of any one series shall be of equal rank
and identical in all respects expect that the dates from which dividends accrue
or accumulate with respect thereto may vary.
(b) The Board of Directors is expressly authorized at any time, and
from time to time, to provide for the issuance of shares of Preferred Stock in
one or more series, with such voting powers, full or limited, or without voting
powers, and such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue thereof adopted by the Board of Directors,
and as are not stated and expressed in these Articles of Incorporation, or any
amendment thereto, including (but without limiting the generality of the
foregoing) the following:
(i) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the
Board of Directors in creating such series) be increased or
2
<PAGE> 3
decreased (but not below the number of shares then outstanding) from
time to time by action of the Board of Directors.
(ii) The dividend rate or rates on the shares of such series and the
relation which such dividends shall bear to the dividends payable on
any other class of capital stock or on any other series of Preferred
Stock, the terms and conditions upon which and the periods in
respect of which dividends shall be payable, whether and upon what
conditions such dividends shall be cumulative and, if cumulative,
the date or dates from which dividends shall accumulate.
(iii) Whether the shares of such series shall be redeemable, and, if
redeemable, whether redeemable for cash, property or rights,
including securities of any other corporation, at the option of
either the holder or the Corporation or upon the happening of a
specified event, the limitations and restrictions with respect to
such redemption, the time or times when, the price or prices or rate
or rates at which, the adjustments with which and the manner in
which such shares shall be redeemable, including the manner of
selecting shares of such series for redemption if less than all
shares are to be redeemed.
(iv) The rights to which the holders of shares of such series shall be
entitled, and the preferences, if any, over any other series (or of
any other series over such series), upon the voluntary or
involuntary liquidation, dissolution, distribution or winding up of
the Corporation, which rights may vary depending on whether such
liquidation, dissolution, distribution or winding up is voluntary or
involuntary, and, if voluntary, may vary at different dates.
(v) Whether the shares of such series shall be subject to the operation
of a purchase, retirement or sinking fund and, if so, whether and
upon what conditions such purchase, retirement or sinking fund shall
be cumulative or noncumulative, the extent to which and the manner
in which such fund shall be applied to the purchase or redemption of
the shares of such series for retirement or to other corporate
purposes and the terms and provisions relative to the operation
thereof.
(vi) Whether the shares of such series shall be convertible into or
exchangeable for shares of any other class or of any other series of
any class of capital stock of the Corporation, and, if so
convertible or exchangeable, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting
the same, and any other terms and conditions of such conversion or
exchange.
(vii) The voting powers, full and/or limited, if any, of the shares of
such series, and whether and under what conditions the shares of
such series (along or together with the shares of one or more other
series having similar provisions) shall be entitled to vote
separately as a single class, for the election of one or more
3
<PAGE> 4
additional directors of the Corporation in case of dividend
arrearages, or other specified events, or upon other matters.
(viii) Whether the issuance of any additional shares of such series, or of
any shares of any other series, shall be subject to restrictions as
to issuance or as to the powers, preferences or rights of any such
other series.
(ix) Any other preferences, privileges and powers and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of
Directors may deem advisable and as shall not be inconsistent with
the provisions of these Articles of Incorporation.
(c) Unless the except to the extent otherwise required by law or
provided in the resolution or resolutions of the Board of Directors creating
any series of Preferred Stock pursuant to this Part I, the holders of the
shares of Preferred Stock shall have no voting power with respect to any matter
whatsoever. In no event shall the Preferred Stock be entitled to more than one
vote in respect to each share of Preferred Stock.
(d) Shares of Preferred Stock redeemed, converted, exchanged,
purchased, retired or surrendered to the Corporation, or which have been issued
and reacquired in any manner, may, upon compliance with any applicable
provisions of the Michigan Business Corporation Act, be given the status of
authorized and unissued shares of Preferred Stock and may be reissued by the
Board of Directors as part of the series of which they were originally a part
or may be reclassified into and reissued as part of a new series or as a part
of any other series, all subject to the protective conditions or restrictions
of any outstanding series of Preferred Stock.
PART II
Common Stock
(a) Except as otherwise required by law or by any amendment to these
Articles of Incorporation, each holder of Common Stock shall have one vote for
each share of Common Stock held by such holder on all matters voted upon by the
shareholders.
(b) Subject to the preferential dividend rights, if any, applicable
to shares of Preferred Stock and subject to applicable requirements, if any,
with respect to the setting aside of sums of purchase, retirement or sinking
funds for Preferred Stock, the holders of Common Stock shall be entitled to
receive, to the extent permitted by law, such dividends as may be declared from
time to time by the Board of Directors.
4
<PAGE> 5
PART III
General Provisions
No holder of stock of any class of the Corporation shall be entitled as a
matter of right to purchase or subscribe for any part of any unissued stock of
any class, or of any additional stock of any class of capital stock of the
Corporation, or of any bonds, certificates of indebtedness, debentures, or other
securities, whether or not convertible into stock of the Corporation, now or
hereafter authorized, but any such stock or other securities may be issued and
disposed of pursuant to resolution by the Board of Directors to such persons,
firms, corporations or associations and upon such terms and for such
consideration (not less than the par value or stated value thereof) as the Board
of Director in the exercise of its discretion may determine and as may be
permitted by law without action by the shareholders. The Board of Directors may
provide for payment therefor to be received by the Corporation in cash, personal
property, real property (or leases thereof) or services. Any and all shares of
stock so issued for which the consideration so fixed has been paid or delivered,
shall be deemed fully paid and not liable to any further call or assessment.
FOURTH.
(a) The address of the registered office of the Corporation is 500
Griswold Street, Detroit, Michigan 48226.
(b) The name of the registered agent at the registered office is Daniel
L. Schiffer.
FIFTH. The name and address of the incorporator is as follows;
Name Address
- ---- -------
Michigan Consolidated Gas Company 500 Griswold Street
Detroit, Michigan 48226
SIXTH.
(a) The business and affairs of the Corporation shall be managed by
or under the direction of a Board of Directors. The number of directors of the
Corporation shall be fixed from time to time by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors of the
Corporation, except that the minimum number of directors shall be fixed at not
fewer than seven and the maximum number of directors shall be fixed at not more
than ten. The directors shall be divided into three classes, designated as
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. At the 1989 annual meeting of shareholders and at each
succeeding annual meeting of shareholders, successors to the class of directors
whose terms of office expire at that annual meeting shall be elected to hold
office for a three-year term, so that the term of office of one class of
directors shall expire in each year.
5
<PAGE> 6
Any vacancy occurring on the Board of Directors through death,
resignation, retirement, disqualification, removal or other cause, or resulting
from an increase, the number of directors, may be filled by the affirmative
vote of a majority of the then remaining directors, through less than a quorum,
or by the sole remaining director for a term of office continuing only until
the next election of directors by the shareholders.
If the number of directors is changed, any increase or decrease shall
be apportioned among the classes of directors so as to maintain the number of
directors in each class as nearly equal as possible, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
When the number of directors is increased by the Board of Directors and any
newly created directorships are filled by the Board of Directors, there shall
be no classification of the additional directors until the next election of
directors by the shareholders.
(b) Any director may be removed from office at any time either (i) by
vote of the holders of two-thirds of the shares entitled to vote at an election
of directors, but only for cause, or (ii) by vote of two-thirds of the other
directors, with or without cause.
(c) Notwithstanding the foregoing paragraphs, whenever the holders of
any one or more class or series of Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of the Articles of Incorporation applicable thereto. The then
authorized number of directors of the Corporation shall be increased by the
number of additional directors to be elected, and such directors so elected
shall not be divided into classes pursuant to this Article SIXTH unless
expressly provided by such terms.
(d) Nominations for election to the Board of Directors of the
Corporation at a meeting of shareholders may be made by the Board of Directors,
on behalf of the Board of Directors by any nominating committee appointed by
the Board of Directors, or by any shareholder of the Corporation entitled to
vote for the election of directors at a meeting. Nominations, other than those
made by or on behalf of the Board of Directors, shall be made by notice in
writing delivered to or mailed, postage prepaid, and received by the Secretary
of the Corporation at least 90 days but no more than 120 days prior to the
anniversary date of the immediately preceding annual meeting of shareholders.
The notice shall set forth (i) the name and address of the shareholder who
intends to make the nomination; (ii) the name, age, business address and, if
known, residence address of each nominee; (iii) the principal occupation or
employment of each nominee; (iv) the number of shares of stock of the
Corporation which are beneficially owned by each nominee and by the nominating
shareholder; (v) any other information concerning the nominee that must be
disclosed of nominees in proxy solicitations pursuant to Regulation 14A of the
Securities Exchange Act of 1934 (or any subsequent provisions replacing such
Regulation); and (vi) the executed consent of each nominee to serve as a
director of the Corporation, if elected. The chairman of the meeting of
shareholders may, if the facts warrant, determine that a nomination was not
made in accordance with the foregoing procedures, and if the chairman should so
6
<PAGE> 7
determine, the chairman shall so declare to the meeting and the defective
nomination shall be disregarded.
SEVENTH. Any action required to permitted to be taken by any shareholders
of the Corporation 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 may be otherwise required by law, special meetings of
shareholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the Board of Directors.
EIGHTH. The Board of Directors shall not approve, adopt or recommend
any proposal to enter into a Business Combination (as hereinafter defined) or
any offer of any person or entity, other than the Corporation, to make a tender
or exchange offer for any capital stock of the Corporation, unless and until
the Board of Directors shall first establish a procedure for evaluating, and
shall have evaluated, the proposal or offer and determine that it would be in
compliance with all applicable laws and in the best interests of the
Corporation and its shareholders. In connection with its evaluation, the Board
of Directors may seek and obtain the advice of independent investment counsel,
may seek and rely upon an opinion of legal counsel and other independent
advisers, and may test such compliance with laws in any state or federal court
or before any state or federal administrative agency which may have appropriate
jurisdiction. In connection with its evaluation as to the best interests of
the Corporation and its shareholders, the Board of Directors shall consider all
factors which it deems relevant, including without limitation: (i) the adequacy
and fairness of the consideration to be received by the Corporation and/or its
shareholders considering the future prospects for the Corporation and its
business, historical trading prices of the Corporation capital stock, the price
that might be achieved in a negotiated sale of the Corporation as a whole, and
premiums over trading prices which have been proposed or offered with respect
to the securities of other companies in the past in connection with similar
offers; (ii) the business, financial condition and earnings prospects of the
acquiring person or entity and the competence, experience and integrity of the
acquiring person or entity and its management; and (iii) the potential social
and economic impact of the offer and its consummation upon the Corporation's
customers, the communities in which the Corporation operates or is located and
upon the Corporation's employees, other than its officers.
The term "Business Combination" shall mean any merger or consolidation of
the Corporation with any other person or entity.
NINTH. A director of the Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability for (i) any breach of the
director's duty of loyalty to the Corporation or its shareholders, (ii) acts or
omissions not in good faith or that involve international misconduct or a
knowing violation of law, (iii) a violation of Section 551(1) of the Michigan
Business Corporation Act, or (iv) any transaction from which the director
derived an improper personal benefit. If the Michigan Business Corporation Act
is amended after the date of these Articles of Incorporation to authorize
corporate action further eliminating or limiting the personal liability of
7
<PAGE> 8
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan Business
Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the shareholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
TENTH. The Corporation shall have perpetual existence.
ELEVENTH. The Corporation reserves the right to amend, alter, change
or repeal any provisions contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by the laws of Michigan, and all rights
conferred herein upon shareholders and directors are granted subject to this
reservation. Notwithstanding the foregoing as well as any other provision
contained in these Articles of Incorporation, any agreement with any national
securities exchange or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote required by any
other provision of these Articles of Incorporation, any agreement with any
national securities exchange or any provision of law, the affirmative vote of
the holders of at least two- thirds of the votes entitled to be cast by the
holders of all the then outstanding shares of the Corporation, voting together
as a single class, shall be required to amend or repeal Articles SIXTH,
SEVENTH, EIGHTH, or this Article ELEVENTH of these Articles of Incorporation or
adopt any provision inconsistent therewith.
The incorporator signs its name this 12th day of August, 1988.
MICHIGAN CONSOLIDATED GAS COMPANY
By:
--------------------------------------
Alfred R. Glancy III
Chairman and Chief Executive Officer
8
<PAGE> 9
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
FILED
DECEMBER 28, 1989
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is: MCN
Corporation
2. The corporation identification number
(CID) assigned by the Bureau is: 3 8 1 - 1 5 3
3. The location of its registered office is:
500 Griswold Detroit, Michigan 48226
4. Article Third of the Articles of Incorporation is hereby
amended to read
add thereto the Certificate of Establishment and Designation of Junior
Participating Preferred Stock, Series A of MCN Corporation in the form
attached hereto as Exhibit A.
<PAGE> 10
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS
OR TRUSTEES; OTHERWISE, COMPLETE SECTION (B)
b. [X] The foregoing amendment to the Articles of Incorporation was duly
adopted on the 20th day of December , 1989. The amendment:
(check one of the following)
[X] was duly adopted in accordance with Section 302 of the Act by the
Board of Directors.
Signed this 28th day of December , 1989
By
-------------------------------------
Stephen E. Ewing, President
<PAGE> 11
Exhibit A
---------
FORM
of
CERTIFICATE OF ESTABLISHMENT AND DESIGNATION
of
JUNIOR PARTICIPATING PREFERRED STOCK, SERIES A
of
MCN CORPORATION
(Pursuant to Section 450.1302 of the
Michigan Business Corporation Act)
MCN Corporation, a corporation organized and existing under the Business
Corporation Act of the State of Michigan (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 450.1302 of
the Michigan Business Corporation Act at a meeting duly called and held on
December 20, 1989;
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") by the provisions of the Articles of Incorporation
of the Corporation, the Board of Directors hereby establishes a series of
Preferred Stock, without par value (the "Preferred Stock"), of the Corporation
and hereby states the designation and number of shares, and prescribes the
relative rights and preferences thereof as follows:
Junior Participating Preferred Stock, Series A:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Junior Participating Preferred Stock, Series A" (the
"Series A Preferred Stock") and the number of shares constituting the Series A
Preferred Stock shall be 250,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than the number shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants, or the
conversion of any outstanding securities, issued by the Corporation
exercisable for or convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock, in preference to the
A-1
<PAGE> 12
holders of Common Stock, par value $.01 per share (the "Common Stock"),
of the Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash
on the first day of March, June, September and December in each year
(each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commending on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such even under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided, that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(C) The Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares,
or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such
A-2
<PAGE> 13
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Preferred Stock shall entitle the
holder thereof to one vote on all matters submitted to a vote of the
stockholders of the Corporation.
(B) Except as otherwise provided herein, in any other Certificate
of Establishment and Designation establishing a series of Preferred
Stock or any similar stock, or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock and any other
capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of the
stockholders of the Corporation.
(C) Except as otherwise provided herein, or by law, holders of
shares of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of shares of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a party (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
A-3
<PAGE> 14
(iii) redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock; provided, that the Corporation may at any time redeem,
purchase or otherwise acquire shares of such junior stock in
exchange for shares of stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section, purchase or otherwise acquire such shares
at such time and in such manner.
Section 5. Required Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Articles of Incorporation, or in any other Certificate of
Establishment and Designation establishing a series of Preferred Stock or any
similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment; provided, that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
A-4
<PAGE> 15
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior
to such event under the proviso to clause (1) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case
each share of Series A Preferred Stock shall at the same time be similarly
exchanged for or changed into an amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Articles of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series A Preferred
Stock, voting together as a single class.
A-5
<PAGE> 16
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
FILED
May 4, 1994
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is: MCN Corporation
2. The corporation identification number (CID) assigned by 3 8 1 - 1 5 3
the Bureau is:
3. The location of its registered office is:
500 Griswold Detroit, Michigan 48226
4. Article Third of the Articles of Incorporation is hereby amended
to read
(See attached Exhibit A)
<PAGE> 17
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF
DIRECTORS OR TRUSTEES; OTHERWISE, COMPLETE SECTION (B)
b. X The foregoing amendment to the Articles of Incorporation was
duly adopted on the 28th day of April, 1994. The amendment:
(check one of the following)
X was duly adopted in accordance with Section 611(2) of the Act
by the vote of the shareholders if a profit corporation, or by
the vote of the shareholders or members if a nonprofit
corporation, or by the vote of the directors if a nonprofit
corporation organized on a nonstock directorship basis. The
necessary votes were cast in favor of the amendment.
Signed this 2nd day of May , 1994
By /s/ Alfred R. Glancy III
----------------------------------
Alfred R. Glancy III, Chairman,
President and CEO
<PAGE> 18
EXHIBIT A
THIRD. 1. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 125,000,000 shares, which shall be
divided into two classes as follows:
(a) 25,000,000 shares of Preferred Stock, no par value (Preferred
Stock); and
(b) 100,000,000 shares of Common Stock of the par value of $.01 per
share (Common Stock).
2. The designations, voting powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions of the above classes of stock and other general
provisions relating thereto shall be as follows:
PART I
PREFERRED STOCK
(a) Shares of Preferred Stock may be issued in one or more series
at such time or times and for such consideration or considerations as the Board
of Directors may determine. All shares of any one series shall be of equal
rank and identical in all respects expect that the dates from which dividends
accrue or accumulate with respect thereto may vary.
(b) The Board of Directors is expressly authorized at any time, and
from time to time, to provide for the issuance of shares of Preferred Stock in
one or more series, with such voting powers, full or limited, or without voting
powers, and such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue thereof adopted by the Board of Directors,
and as are not stated and expressed in these Articles of Incorporation, or any
amendment thereto, including (but without limiting the generality of the
foregoing) the following:
(i) The distinctive designation and number of shares comprising
such series, which number may (except where otherwise provided
by the Board of Directors in creating such series) be increased
or decreased (but not below the number of shares then
outstanding) from time to time by action of the Board of
Directors.
(ii) The dividend rate or rates on the shares of such series and the
relation which such dividends shall bear to the dividends
payable on any other class of capital stock or on any other
series of Preferred
<PAGE> 19
Stock, the terms and conditions upon which and the periods in
respect of which dividends shall be payable, whether and upon
what conditions such dividends shall be cumulative and, if
cumulative, the date or dates from which dividends shall
accumulate.
(iii) Whether the shares of such series shall be redeemable, and, if
redeemable, whether redeemable for cash, property or rights,
including securities of any other corporation, at the option of
either the holder or the Corporation or upon the happening of a
specified event, the limitations and restrictions with respect
to such redemption, the time or times when, the price or prices
or rate or rates at which, the adjustments with which and the
manner in which such shares shall be redeemable, including the
manner of selecting shares of such series for redemption if
less than all shares are to be redeemed.
(iv) The rights to which the holders of shares of such series shall
be entitled, and the preferences, if any, over any other series
(or of any other series over such series), upon the voluntary
or involuntary liquidation, dissolution, distribution or
winding up of the Corporation, which rights may vary depending
on whether such liquidation, dissolution, distribution or
winding up is voluntary or involuntary, and, if voluntary, may
vary at different dates.
(v) Whether the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund and, if so,
whether and upon what conditions such purchase, retirement or
sinking fund shall be cumulative or noncumulative, the extent
to which and the manner in which such fund shall be applied to
the purchase or redemption of the shares of such series for
retirement or to other corporate purposes and the terms and
provisions relative to the operation thereof.
(vi) Whether the shares of such series shall be convertible into or
exchangeable for shares of any other class or of any other
series of any class of capital stock of the Corporation, and,
if so convertible or exchangeable, the price or prices or the
rate or rates of conversion or exchange and the method, if any,
of adjusting the same, and any other terms and conditions of
such conversion or exchange.
<PAGE> 20
(vii) The voting powers, full and/or limited, if any, of the shares
of such series, and whether and under what conditions the
shares of such series (along or together with the shares of one
or more other series having similar provisions) shall be
entitled to vote separately as a single class, for the election
of one or more additional directors of the Corporation in case
of dividend arrearages, or other specified events, or upon
other matters.
(viii) Whether the issuance of any additional shares of such series,
or of any shares of any other series, shall be subject to
restrictions as to issuance or as to the powers, preferences or
rights of any such other series.
(ix) Any other preferences, privileges and powers and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions of such series, as
the Board of Directors may deem advisable and as shall not be
inconsistent with the provisions of these Articles of
Incorporation.
(c) Unless the except to the extent otherwise required by law or
provided in the resolution or resolutions of the Board of Directors creating
any series of Preferred Stock pursuant to this Part I, the holders of the
shares of Preferred Stock shall have no voting power with respect to any matter
whatsoever. In no event shall the Preferred Stock be entitled to more than one
vote in respect to each share of Preferred Stock.
(d) Shares of Preferred Stock redeemed, converted, exchanged,
purchased, retired or surrendered to the Corporation, or which have been issued
and reacquired in any manner, may, upon compliance with any applicable
provisions of the Michigan Business Corporation Act, be given the status of
authorized and unissued shares of Preferred Stock and may be reissued by the
Board of Directors as part of the series of which they were originally a part
or may be reclassified into and reissued as part of a new series or as a part
of any other series, all subject to the protective conditions or restrictions
of any outstanding series of Preferred Stock.
PART II
COMMON STOCK
(a) Except as otherwise required by law or by any amendment to
these Articles of Incorporation, each holder of Common Stock shall have one
vote for each share of Common Stock held by such holder on all matters voted
upon by the shareholders.
(b) Subject to the preferential dividend rights, if any, applicable
to shares of Preferred Stock and subject to applicable
<PAGE> 21
requirements, if any, with respect to the setting aside of sums of purchase,
retirement or sinking funds for Preferred Stock, the holders of Common Stock
shall be entitled to receive, to the extent permitted by law, such dividends as
may be declared from time to time by the Board of Directors.
PART III
GENERAL PROVISIONS
No holder of stock of any class of the Corporation shall be entitled as
a matter of right to purchase or subscribe for any part of any unissued stock
of any class, or of any additional stock of any class of capital stock of the
Corporation, or of any bonds, certificates of indebtedness, debentures, or
other securities, whether or not convertible into stock of the Corporation, now
or hereafter authorized, but any such stock or other securities may be issued
and disposed of pursuant to resolution by the Board of Directors to such
persons, firms, corporations or associations and upon such terms and for such
consideration (not less than the par value or stated value thereof) as the
Board of Director in the exercise of its discretion may determine and as may be
permitted by law without action by the shareholders. The Board of Directors
may provide for payment therefor to be received by the Corporation in cash,
personal property, real property (or leases thereof) or services. Any and all
shares of stock so issued for which the consideration so fixed has been paid or
delivered, shall be deemed fully paid and not liable to any further call or
assessment.
<PAGE> 1
EXHIBIT 10-1
MCN CORPORATION
NON-OFFICER DIRECTOR
STOCK AWARD PLAN
1. ESTABLISHMENT. MCN Corporation ("MCN") hereby establishes the MCN
Corporation Non-officer Director Stock Award Plan (the "Plan"), as set forth in
this document.
2. PURPOSE. The purpose of the Plan is to enhance MCN's ability to attract
and retain the services of well-qualified directors who are not officers or
employees of MCN or any of its subsidiaries ("Non-officer Directors") by
providing them with an opportunity to participate in the growth of MCN and to
align the personal interests of Non-officer Directors with those of MCN's
stockholders.
3. DURATION OF THE PLAN. The Plan shall become effective immediately upon
approval of MCN's Board of Directors, subject to ratification by MCN's
stockholders, within one year of the Board of Director's approval, by an
affirmative vote of a majority of shares voting at the stockholders' meeting,
so long as a quorum is present. The Plan shall remain in effect until
terminated by action of the Board of Directors.
4. SHARES ISSUABLE UNDER THE PLAN. Subject to adjustment as provided in
Paragraph 5, the total number of shares of common stock of MCN ("Common Stock")
which may be granted under the Plan in each year during which the Plan is in
effect shall be the aggregate number of shares payable to the Non-officer
Directors as set forth in Paragraph 6 of the Plan, not to exceed .03 percent of
the total number of outstanding shares of MCN Common Stock as of the first day
of that year. Shares to be issued under the Plan may be authorized and
unissued shares or authorized and issued shares of Common Stock which have been
reacquired by MCN and held as treasury shares. Provided, however, that the
number of Shares that may be issued under this Plan subsequent to March 1, 1994
may not exceed 1% of the number of shares issued and outstanding on that date.
5. CAPITAL ADJUSTMENTS. The aggregate number and class of shares subject
to and authorized by the Plan shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from the payment of a stock dividend, stock split, recapitalization, merger,
consolidation, reorganization or any similar capital adjustment or other
increase or decrease in the number of outstanding shares effected without
receipt of consideration by MCN.
6. GRANTS OF COMMON STOCK. On the business day next following the date of
the Annual Meeting of the Shareholders of MCN held during each calendar year
<PAGE> 2
during which the Plan is in effect (the "Date of Grant"), each Non-officer
Director who was elected at that meeting or whose term continued thereafter as
a Director at such meeting shall be granted 100 shares of Common Stock. The
shares granted pursuant to this Plan shall be in addition to, and not in lieu
of, the Non-officer Director's annual retainer fee, meeting fees, or other
compensation payable to each Non-officer Director as a result of his or her
service on MCN's Board of Directors. The number of shares to be granted
annually to each Non-officer Director may be changed by a majority vote of
MCN's Board of Directors, provided, however, that any changes in the number of
shares granted shall be made no more often than once in any 12-month period.
7. TRANSFERABILITY. The shares of Common Stock granted to each Non-officer
Director are not transferable by the Non-officer Director until the later of
(1) the expiration of six months from the date the shares of Common Stock are
issued under the Plan or (2) the date upon which the Non-officer Director
ceases to be a Director of MCN, provided, however, that there shall be no
restriction on the transfer of any Common Stock granted under the Plan in the
event of the death of the recipient.
8. RIGHTS OF THE STOCKHOLDER. A Non-officer Director shall have no rights
as a stockholder with respect to any shares of Common Stock granted under the
terms of this Plan until the Non-officer Director shall have become the holder
of record of any such shares, and no adjustment shall be made for dividends in
cash or other property or distributions of other rights with respect to any
such shares of Common Stock for which the record date is prior to the date on
which the Non-officer Director shall have become the holder of record of any
such shares.
9. TERMINATION OF SERVICE AS A NON-OFFICER DIRECTOR. In the event a
Non-officer Director ceases to serve on the Board of Directors as a Director,
all rights to receive future grants of Common Stock hereunder shall terminate
immediately.
10. AMENDMENT OF PLAN. The Board of Directors may terminate, amend or
modify the Plan at any time and from time to time; provided, however, that such
amendments may not be made more than once every six months, other than to
comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act or the rules thereunder. Further, the Board of Directors
shall not, without the requisite affirmative approval of stockholders of MCN,
make any amendment which requires stockholder approval under any applicable
law, including Rule 16b-3 under the Securities Exchange Act of 1934, unless
such compliance, if discretionary, is no longer desired.
11. COMPLIANCE WITH RULE 16B-3. It is intended that the Plan be applied and
administered in compliance with Rule 16b-3 under the Securities and Exchange
Act of 1934. If any provision of the Plan would be in violation of Rule 16b-3
if applied as
<PAGE> 3
3
written, such provision shall not have effect as written and shall be given
effect so as to comply with Rule 16b-3, as determined by the Board of
Directors.
12. SECURITIES LAW RESTRICTIONS. MCN may impose such other restrictions on
any shares of Common Stock granted pursuant to this Plan as it may deem
advisable including, but not limited to, restrictions intended to achieve
compliance with the Securities Act of 1933, as amended, with the Securities and
Exchange Act of 1934, as amended, with the requirements of any stock exchange
upon which the Common Stock is then listed, and with any Blue Sky or state
securities laws applicable to such Common Stock.
13. GOVERNING LAW. All determinations made and actions taken pursuant to
the Plan shall be governed by the laws of the State of Michigan and construed
in accordance therewith, to the extent not preempted by the laws of the United
States.
IN WITNESS WHEREOF, MCN Corporation has caused this Plan to be executed as of
this 6th day of May 1993.
MCN Corporation
By: /s/ Daniel L. Schiffer
-------------------------
Daniel L. Schiffer,
Vice President, General
Counsel, and Secretary
