<PAGE> 1
Filed pursuant to 424(b)(2)
File No. 333-01523
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 27, 1996)
$500,000,000
MCN INVESTMENT CORPORATION
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
ENTITLED TO THE BENEFITS OF A SUPPORT AGREEMENT BY
LOGO
MCN Investment Corporation ("MCN Investment" or the "Company") may from
time to time offer up to $500,000,000 aggregate initial offering price of its
unsecured notes, designated as Medium-Term Notes, Series B (the "Offered
Notes"), subject to reduction as a result of the sale of other Debt Securities
as described in the accompanying Prospectus. Each Offered Note will mature on
any day nine months or more from the date of issue. Each Offered Note may also
be subject to redemption prior to its Stated Maturity at the option of the
Company or pursuant to a sinking fund or repayment prior to its Stated Maturity
at the option of the Holder, in each case as set forth in a pricing supplement
to this Prospectus Supplement (a "Pricing Supplement"). The Offered Notes are
entitled to the benefits of a Support Agreement between MCN Investment and its
parent company, MCN Corporation ("MCN"), whereby MCN will provide funds to MCN
Investment to pay principal, premium, if any, and interest on the Offered Notes
in the event of default by MCN Investment.
------------------------ (Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT HERETO OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
=========================================================================================================
PRICE TO AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)(4)
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Offered Note................. 100% .125% - .750% 99.875% - 99.250%
- - ---------------------------------------------------------------------------------------------------------
Total............................ $500,000,000 $625,000 - $3,750,000 $499,375,000 - $496,250,000
=========================================================================================================
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, the price
to the public will be 100% of the principal amount.
(2) The Company will pay to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated; Donaldson, Lufkin & Jenrette Securities Corporation;
Salomon Brothers Inc; and Smith Barney Inc. (each, an "Agent" and
collectively, the "Agents") a commission ranging from .125% to .750% of the
principal amount of any Offered Note, depending upon its Stated Maturity,
sold through such Agent. Commissions with respect to Offered Notes with
Stated Maturities in excess of 30 years that are sold through an Agent will
be agreed upon by the Company and the respective Agent at the time of sale.
The Company may sell Offered Notes at a discount to each Agent for its own
account or for resale to one or more investors or other purchasers at
varying prices related to prevailing market prices at the time of the resale
as determined by such Agents, or if so specified in an applicable Pricing
Supplement, for resale at a fixed public offering price. In addition, the
Agents may offer the Offered Notes purchased by them as principal to other
dealers. Unless otherwise specified in an applicable Pricing Supplement, any
Offered Note purchased by an Agent as principal will be purchased at 100% of
the principal amount thereof less a percentage equal to the commission
applicable to an agency sale of an Offered Note of identical Stated
Maturity.
(3) Before deducting estimated expenses of $420,000 payable by the Company.
(4) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
------------------------
The Offered Notes will be offered on a continuous basis by the Company
through the Agents who have agreed to use reasonable efforts to solicit offers
to purchase the Offered Notes. The Company may sell Offered Notes to investors
on its own behalf. Unless otherwise specified in an applicable Pricing
Supplement, the Offered Notes will not be listed on any securities exchange and
there can be no assurance that the Offered Notes will be sold or that there will
be any secondary market for any of the Offered Notes. The Company reserves the
right to withdraw, cancel or modify the offer made hereby without notice. The
Company or an Agent may reject any offer to purchase Offered Notes, whether or
not solicited, in whole or in part. See "Plan of Distribution."
------------------------
MERRILL LYNCH & CO. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC SMITH BARNEY INC.
------------------------
The date of this Prospectus Supplement is May 6, 1996.
<PAGE> 2
(Continued from previous page)
Each Offered Note will bear interest at a fixed rate (a "Fixed Rate Note")
or at a floating rate (a "Floating Rate Note") determined by reference to the CD
Rate, Commercial Paper Rate, LIBOR, Federal Funds Rate, Prime Rate or the
Treasury Rate or any other Base Rate, as selected by the purchaser and agreed to
by the Company, or selected by the Company and agreed to by the purchaser, as
adjusted by the Spread and/or Spread Multiplier, if any, applicable to such
Offered Note. Unless otherwise indicated in the applicable Pricing Supplement,
interest on each Fixed Rate Note will be payable semiannually in arrears on each
March 1 and September 1 and on the Maturity Date. Interest on each Floating Rate
Note will accrue from its date of issue and will be payable in arrears monthly,
quarterly, semiannually or annually, as specified in the applicable Pricing
Supplement, and on the Maturity Date. Unless otherwise specified in the
applicable Pricing Supplement, the rate of interest on each Floating Rate Note
will be reset daily, weekly, monthly, quarterly, semiannually or annually, as
set forth therein and specified in the applicable Pricing Supplement. The
Offered Notes may also be issued with original issue discount, and such Offered
Notes may or may not pay any interest. See "Description of the Offered Notes."
The interest rate or interest rate formula, Issue Price, Stated Maturity,
Interest Payment Dates, redemption provisions, provisions for the repayment by
the Company of any Offered Note at the option of the Holder and certain other
terms with respect to each Offered Note will be established at the time of
issuance of such Offered Note and set forth in the applicable Pricing
Supplement.
Each Offered Note will be represented by one or more global Offered Note(s)
(the "Global Notes") registered in the name of a nominee of The Depository Trust
Company, as Depositary (such an Offered Note, so represented, being called a
"Book-Entry Note") as set forth in the applicable Pricing Supplement. Beneficial
interests in Global Notes representing Book-Entry Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary and its participants. Book-Entry Notes will not be issuable as a
certificate issued in definitive form (a "Certificated Note") except under the
circumstances described herein. See "Description of Offered Notes -- Book Entry
Notes."
S-2
<PAGE> 3
IN CONNECTION WITH THE OFFERING OF OFFERED NOTES, THE AGENTS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
OFFERED NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
MCN CORPORATION
MCN is a $2.9 billion (assets) diversified natural gas holding company with
gas markets and investments in various regions in North America. Its principal
operating subsidiaries are MichCon, a natural gas distribution and intrastate
transmission company, and MCN Investment. MCN Investment owns subsidiaries
involved in exploration and production, gas gathering and processing, gas
storage, gas marketing and cogeneration and computer operations services.
MCN's major business segments are Gas Distribution and, within MCN
Investment's Diversified Energy group, Gas Services and Computer Operations
Services. See "MCN Investment Corporation" below for a description of
Diversified Energy's businesses.
MCN's strategy is to aggressively invest in a diverse portfolio of domestic
and international natural gas-related projects. MCN's intent is:
- to continue the growth of its Gas Distribution business through
investments and acquisition of assets leading to business and market
expansion;
- to invest in a portfolio of energy-related projects including
investments in exploration and production, power generation, gas
gathering and processing systems, and gas storage; and
- to pursue new opportunities in other areas of expertise.
Accordingly, MCN's capital investments could range between $2.5 billion and
$3.3 billion from 1996 through 2000. This proposed level of investment will
increase capital requirements materially in excess of internally generated funds
and require the issuance of additional debt and equity securities. MCN's capital
requirements and general market conditions will affect the timing and amount of
future issuances. As it expands its business, MCN's capitalization objective is
to maintain its solid credit ratings through a strong balance sheet.
Gas Distribution operates the largest natural gas distribution and
intrastate transmission system in Michigan and one of the largest in the United
States. For the twelve months ended December 31, 1995, operating revenues in the
Gas Distribution segment exceeded $1.1 billion. In addition, at December 31,
1995, the segment had total assets of approximately $1.9 billion. Gas
Distribution serves approximately 1.2 million customers in more than 500
communities throughout Michigan with gas sales and transportation markets of
about 730 billion cubic feet (Bcf). Gas Distribution continues to increase its
markets by reaching customers in new communities, offering new services to
current customers and expanding its intrastate gas transportation network.
The mailing address of MCN's principal executive office is 500 Griswold
Street, Detroit, Michigan 48226, and its telephone number is (313) 256-5500.
MCN INVESTMENT CORPORATION
MCN Investment, a wholly-owned subsidiary of MCN, is a subsidiary holding
company for MCN's Diversified Energy group. Operating under the two major
business segments described below, MCN Investment had total consolidated assets
of approximately $1.0 billion at December 31, 1995 and a $261 million share in
the assets of various joint ventures. The Company's investments in joint
ventures totaled approximately $100 million at December 31, 1995.
S-3
<PAGE> 4
Gas Services is an integrated energy group with investments in exploration
and production, cogeneration, gas gathering and processing, and gas storage
fields. It also markets natural gas to large-volume users and utilities. For the
twelve months ended December 31, 1995, operating revenues for the segment were
approximately $400 million and, at December 31, 1995, assets totaled
approximately $1.1 billion, including Gas Services' interest in the assets of
joint ventures. During 1995, MCN Investment invested over $400 million in
various projects, of which $300 million were for exploration and production
projects. Expanding opportunities throughout North America should enable Gas
Services to continue to grow its 180 Bcf markets and asset-based investments.
At December 31, 1995, MCN Investment owned 858 Bcf of proved gas reserves
and proved oil reserves totaled 4.7 million barrels, or the equivalent of
another 28 Bcf of natural gas. Producing oil and gas wells totaled 1,972 at
December 31, 1995.
Computer Operations Services is a leading provider of computer outsourcing
services in the United States. The Genix Group ("Genix") provides computer
operations management, data processing and related services to approximately 100
corporate clients, including thirteen Fortune 500 companies, in more than a
dozen industries. For 1995, Computer Operations Services had revenues of $105.2
million and operating income of $8.0 million, up 19% and 21%, respectively, over
1994.
The mailing address of MCN Investment's principal executive office is 150
W. Jefferson Ave., Suite 1800, Detroit, Michigan 48226, and its telephone number
is (313) 256-5500.
RECENT DEVELOPMENTS
Consistent with its strategic focus of investing in energy-related
projects, in April 1996, MCN announced its intention to sell Genix. The
disposition of Genix is expected to occur in the second quarter of 1996 and
result in a gain. MCN is pursuing growth opportunities in the energy industry
including gas and oil exploration and production, gas marketing, gas gathering
and processing and power generation projects. Proceeds from the potential sale
of Genix would partially fund MCN's capital expenditures, including investments
in energy-related projects, which may reach $850 million in 1996.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the periods indicated which have been restated to reflect Genix being accounted
for as a discontinued operation.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
MCN Investment(1)........................................... 1.24 1.29 1.55 3.39 0.45(2)
MCN(1)...................................................... 2.55 2.70 3.15 2.82 2.17
</TABLE>
- - -------------------------
(1) The Ratios of Earnings to Fixed Charges are based on earnings from
continuing operations. "Earnings" consist of the pre-tax income of
majority-owned and 50%-owned companies adjusted to include any income
actually received from less than 50% owned companies, plus fixed charges,
less interest capitalized during the period for nonutility companies and
less, in the case of MCN, the preferred stock dividend requirements of
MichCon included in fixed charges but not deducted in the determination of
pre-tax income. "Fixed Charges" represent (a) interest (whether expensed or
capitalized), (b) amortization of debt discount, premium and expense, (c) an
estimate of interest implicit in rentals, and (d) in the case of MCN, the
preferred securities dividend requirements of subsidiaries (MichCon and MCN
Michigan Limited Partnership), increased to reflect the pre-tax earnings
requirement for MichCon.
(2) Earnings for the year ended December 31, 1991 were not adequate to cover
fixed charges. The amount of the coverage deficiency was $1,736,000.
(3) In April 1996, MCN announced its intention to sell Genix. For purposes of
calculating the Ratio of Earnings to Fixed Charges, it has been classified
as a discontinued operation for all periods presented.
S-4
<PAGE> 5
USE OF PROCEEDS
Proceeds from the sale of the Offered Notes, in respect of which this
Prospectus Supplement is being delivered, will be used for general corporate
purposes, including capital expenditures, investment in subsidiaries, working
capital and repayment of short-term borrowings.
DESCRIPTION OF THE OFFERED NOTES
The following description of the particular terms of the Offered Notes
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Offered Notes set forth under
"Description of Debt Securities" and "Support Agreement" in the accompanying
Prospectus, to which description reference is hereby made. Unless otherwise
specified in an applicable Pricing Supplement, the following description of the
Offered Notes shall apply.
GENERAL
The Offered Notes will be issued as a series of debt securities under an
Indenture, dated as of September 1, 1995 (the "Indenture"), between MCN
Investment and NBD Bank, as trustee (the "Trustee"). NBD Bank is a wholly-owned
subsidiary of First Chicago NBD Corporation. The Offered Notes will be limited
to $500,000,000 aggregate initial offering price, subject to reduction as a
result of the sale of other Debt Securities as described in the accompanying
Prospectus. The Offered Notes are entitled to the benefits of the Support
Agreement between MCN Investment and MCN, whereby MCN will provide funds to MCN
Investment to pay principal, premium, if any, and interest on the Offered Notes
in the event of default by MCN Investment. See "Description of Debt Securities"
and "Support Agreement" in the Prospectus. The Offered Notes will rank pari
passu with all other unsecured debt of the Company.
Each Offered Note will be issued as either a Book-Entry Note or a
Certificated Note in fully registered form only, without coupons. Except as set
forth below under "Book-Entry Notes", Book-Entry Notes will not be issuable in
certificated form. The authorized denominations of each Offered Note will be
$1,000 and integral multiples thereof, unless otherwise specified in the
applicable Pricing Supplement.
Interest rates offered by the Company with respect to the Offered Notes may
differ depending upon, among other things, the aggregate principal amount of the
Offered Notes purchased in any single transaction.
Each Offered Note will mature on any day nine months or more from its date
of issue, as selected by the purchaser and agreed to by the Company, or selected
by the Company and agreed to by the purchaser. Each Offered Note may also be
subject to redemption at the option of the Company, or pursuant to a sinking
fund or to repayment by the Company at the option of the Holder prior to its
Stated Maturity (as defined below). The Offered Notes may also be issued with
original issue discount ("Original Issue Discount Notes") and such Offered Notes
may or may not bear any interest.
The Pricing Supplement relating to an Offered Note will describe the
following terms: (i) whether such Offered Note is a Fixed Rate Note or a
Floating Rate Note; (ii) the price, which may be expressed as a percentage of
the aggregate principal amount thereof, at which such Offered Note will be
issued (the "Issue Price"); (iii) the date on which such Offered Note will be
issued (the "Original Issue Date"); (iv) the date on which such Offered Note
will mature (the "Stated Maturity"); (v) if such Offered Note is a Fixed Rate
Note, the rate per annum at which such Offered Note will bear interest, if any,
and the Interest Payment Dates; (vi) if such Offered Note is a Floating Rate
Note, the Base Rate, the Initial Interest Rate, the Interest Reset Period,
Interest Reset Dates, the Interest Payment Dates, the Index Maturity, the
Maximum Interest Rate, if any, the Minimum Interest Rate, if any, the Spread
and/or Spread Multiplier, if any (all as defined below), and any other terms
relating to the particular method of calculating the interest rate for such
Offered Note; (vii) whether such Offered Note may be redeemed at the option of
the Company prior to Stated Maturity as described under "Redemption" below and,
if so, the provisions relating to such redemption; (viii) any sinking fund or
other mandatory redemption provisions applicable to such Offered Note; (ix) any
provisions for the repayment by the Company of such Offered Note at the option
of the Holder; and (x) any other terms of such Offered Note not inconsistent
with the provisions of the Indenture under which such Offered Note will be
issued.
S-5
<PAGE> 6
The term "Business Day" as used herein shall mean any day other than a
Saturday or Sunday, which is (i) not a day on which banking institutions or
trust companies in The City of New York are authorized or required by law,
regulation or executive order to close and (ii) if such Offered Note is a LIBOR
Note (as defined below), such day is also a London Business Day. "London
Business Day" with respect to any Offered Note means any day on which dealings
in deposits in U.S. dollars are transacted in the London interbank market.
The Indenture does not contain any covenants or other provisions that
specifically are intended to afford Holders of the Offered Notes special
protection in the event of a highly leveraged transaction.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of interest on the Offered Notes (other than interest payable at
Stated Maturity or earlier by declaration of acceleration, call for redemption,
repayment or otherwise, the Stated Maturity or such prior date, as the case may
be, is herein referred to as the "Maturity Date") will be made, except as
provided below, by check mailed, or wire transfer, to the Holders of such
Offered Notes (which, in the case of Global Notes representing Book-Entry Notes,
will be a nominee of the Depositary, as hereinafter defined) as of the Regular
Record Date (as defined below) with respect to each Interest Payment Date;
provided, however, that if the Original Issue Date of an Offered Note is after a
Regular Record Date and before the corresponding Interest Payment Date, interest
for the period from and including the Original Issue Date for such Offered Note
to but excluding such Interest Payment Date will be paid on the next succeeding
Interest Payment Date to the Holder of such Offered Note on the related Regular
Record Date.
Unless otherwise specified in the applicable Pricing Supplement, the
principal of the Offered Notes and any premium and interest thereon payable at
the Maturity Date will be paid upon surrender thereof at the principal corporate
trust office of NBD Bank, in Detroit, Michigan. Payment of interest due on the
Maturity Date will be made to the person to whom payment of the principal and
premium, if any, shall be made.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described in the accompanying Prospectus under "Description of
Debt Securities -- Events of Default and Notice Thereof", the amount of
principal due and payable with respect to such Offered Note shall be limited to
the sum of the aggregate stated principal amount of such Offered Note multiplied
by the Issue Price (expressed as a percentage of the aggregate principal amount)
plus the original issue discount accrued from the date of issue to the date of
declaration, which accrual shall be calculated using the "interest method"
(computed in accordance with generally accepted accounting principles) in effect
on the date of declaration.
The "Regular Record Date" with respect to any Interest Payment Date for a
Floating Rate Note will be the date (whether or not a Business Day) fifteen
calendar days next preceding such Interest Payment Date and for a Fixed Rate
Note (unless otherwise specified in the applicable Pricing Supplement) will be
the February 15 next preceding a March 1 Interest Payment Date or August 15 next
preceding a September 1 Interest Payment Date, as the case may be.
FIXED RATE NOTES
Each Fixed Rate Note (other than an Original Issue Discount Note) will bear
interest from its Original Issue Date at the rate per annum stated on the face
thereof until the principal amount thereof is paid or duly made available for
payment. Unless otherwise set forth in the applicable Pricing Supplement,
interest on each Fixed Rate Note will be payable semiannually in arrears on each
March 1 and September 1 (each such date, an "Interest Payment Date") and on the
Maturity Date. Interest payments in respect of the Offered Notes will equal the
amount of interest accrued from and including the immediately preceding Interest
Payment Date in respect of which interest has been paid or duly made available
for payment (or from and including the Original Issue Date, if no interest has
been paid with respect to the applicable Offered Note) to but excluding the
related Interest Payment Date or the Maturity Date, as the case may be. Unless
otherwise specified in the applicable Pricing Supplement, interest on Fixed Rate
Notes will be computed on the basis of a 360-day year of twelve 30-day months.
S-6
<PAGE> 7
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after such Interest Payment Date, or the
Maturity Date, as the case may be, to the date of such payment on the next
succeeding Business Day.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from its Original Issue Date to
the first Interest Reset Date for such Offered Note at the Initial Interest Rate
set forth on the face thereof and in the applicable Pricing Supplement.
Thereafter, the interest rate on such Offered Note for each Interest Reset
Period will be determined by reference to an interest rate basis (the "Base
Rate"), plus or minus the Spread, if any, and/or multiplied by the Spread
Multiplier, if any. The "Spread" is the number of basis points (one basis point
equals one one-hundredth of a percentage point) that may be specified in the
applicable Pricing Supplement as being applicable to such Offered Note, and the
"Spread Multiplier" is the percentage that may be specified in the applicable
Pricing Supplement as being applicable to such Offered Note. The applicable
Pricing Supplement will designate one of the following Base Rates as applicable
to a Floating Rate Note: (i) the CD Rate (a "CD Rate Note"); (ii) the Commercial
Paper Rate (a "Commercial Paper Rate Note"); (iii) LIBOR (a "LIBOR Note"); (iv)
the Federal Funds Rate (a "Federal Funds Rate Note"); (v) the Prime Rate (a
"Prime Rate Note"); (vi) the Treasury Rate (a "Treasury Rate Note"); or (vii)
such other Base Rate or interest rate formula as is set forth in such Pricing
Supplement and in such Offered Note. As used herein, the "Index Maturity" for
any Offered Note is the period of maturity of the instrument or obligation from
which the Base Rate is calculated.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum numerical limitation,
or ceiling, on the rate at which interest may accrue during any interest period
("Maximum Interest Rate") and (ii) a minimum numerical limitation, or floor, on
the rate at which interest may accrue during any interest period ("Minimum
Interest Rate"). In addition to any Maximum Interest Rate that may be applicable
to any Floating Rate Note, the interest rate on a Floating Rate Note will in no
event be higher than the maximum rate, if any, permitted by Michigan law, as the
same may be modified by United States law of general application.
The Company will appoint, and enter into an agreement with, an agent (the
"Calculation Agent") to calculate interest rates on the Floating Rate Notes.
Unless otherwise specified in the applicable Pricing Supplement, NBD Bank will
be the Calculation Agent. All determinations of interest rates by the
Calculation Agent shall, in the absence of manifest error, be conclusive for all
purposes and binding upon the Holders of the Floating Rate Notes.
The applicable Pricing Supplement will specify whether the interest rate on
each Floating Rate Note will be reset daily, weekly, monthly, quarterly,
semiannually, annually or such other specified period (such period being an
"Interest Reset Period"), and the date or dates on which such rate of interest
will be reset (each, an "Interest Reset Date"), as specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, the Interest Reset Dates will be, in the case of Floating Rate Notes
that reset daily, each Business Day; in the case of Floating Rate Notes (other
than Treasury Rate Notes) that reset weekly, Wednesday of each week; in the case
of Treasury Rate Notes that reset weekly, Tuesday of each week (except as
provided below under "Treasury Rate Notes"); in the case of Floating Rate Notes
that reset monthly, the third Wednesday of each month; in the case of Floating
Rate Notes that reset quarterly, the third Wednesday of March, June, September
and December of each year; in the case of Floating Rate Notes that reset
semiannually, the third Wednesday of each of two months of each year specified
in the applicable Pricing Supplement; and in the case of Floating Rate Notes
that reset annually, the third Wednesday of one month of each year specified in
the applicable Pricing Supplement. If an Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Business Day, such Interest
Reset Date will be postponed to the next succeeding Business Day, except that,
in the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Reset Date shall be the immediately preceding
Business Day.
S-7
<PAGE> 8
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date on or prior to the related Calculation Date (as
defined below). The "Interest Determination Date" with respect to the CD Rate,
Commercial Paper Rate, Federal Funds Rate and Prime Rate will be the second
Business Day immediately preceding the applicable Interest Reset Date and the
"Interest Determination Date" with respect to LIBOR will be the second London
Business Day immediately preceding the applicable Interest Reset Date. With
respect to the Treasury Rate, the "Interest Determination Date" will be the day
in the week in which the applicable Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at an auction held on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the Interest Determination Date
will be such preceding Friday; and provided, further, that if an auction falls
on the applicable Interest Reset Date, then the Interest Reset Date will instead
be the first Business Day following such auction.
Unless otherwise specified in the applicable Pricing Supplement, interest
payable in respect of Floating Rate Notes will be the accrued interest from and
including the Original Issue Date or the last date to which interest has been
paid or duly made available for payment, as the case may be, to but excluding
the next succeeding Interest Payment Date or the Maturity Date, as the case may
be.
With respect to a Floating Rate Note, accrued interest will be calculated
by multiplying the principal amount of such Offered Note by an accrued interest
factor. Such accrued interest factor will be computed by adding the interest
factor calculated for each day in the period for which accrued interest is being
calculated. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor (expressed as a decimal calculated to seven decimal places
without rounding) for each such day is computed by dividing the interest rate in
effect on such day by 360, in the case of CD Rate Notes, Commercial Paper Rate
Notes, LIBOR Notes, Federal Funds Rate Notes or Prime Rate Notes, or by the
actual number of days in the year in the case of Treasury Rate Notes. For
purposes of making the foregoing calculation, the interest rate in effect on any
Interest Reset Date will be the applicable rate as reset on such date.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation on Floating Rate Notes will be
rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upwards, and all dollar amounts
used in or resulting from such calculation on Floating Rate Notes will be
rounded to the nearest cent with 1/2 cent being rounded upwards.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
that reset daily, weekly, or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the applicable Pricing Supplement; in the case of Floating Rate
Notes that reset quarterly, on the third Wednesday of March, June, September and
December of each year; in the case of Floating Rate Notes that reset
semiannually, on the third Wednesday of each of two months of each year
specified in the applicable Pricing Supplement; and in the case of Floating Rate
Notes that reset annually, on the third Wednesday of the one month of each year
specified in the applicable Pricing Supplement (each such day being an "Interest
Payment Date") and, in each case, on the Maturity Date. If any Interest Payment
Date for any Floating Rate Note (other than the Maturity Date) would otherwise
be a day that is not a Business Day, such Interest Payment Date will be
postponed to the next succeeding day that is a Business Day, except that in the
case of a LIBOR Note, if such Business Day falls in the next succeeding calendar
month, such Interest Payment Date will be the immediately preceding Business
Day. If the Maturity Date of a Floating Rate Note falls on a day that is not a
Business Day, the required payment of principal, premium, if any, and/or
interest will be made on the next succeeding Business Day as if made on the date
such payment was due, and no interest shall accrue on such payment for the
period from and after the Maturity Date to the date of such payment on the next
succeeding Business Day.
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Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent for such Offered Note will provide the interest rate then in effect and,
if determined, the interest rate that will become effective as a result of a
determination made for the next succeeding Interest Reset Date with respect to
such Floating Rate Note. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date", if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date, or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or the Maturity Date, as the case may be.
CD RATE NOTES
Each CD Rate Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the CD Rate and the Spread and/or
Spread Multiplier, if any, specified in such Offered Note and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication of the Board of Governors
of the Federal Reserve System ("H.15(519)") under the heading "CDs (Secondary
Market)" or, if not so published by 3:00 p.m., New York City time, on the
related Calculation Date, the rate on such CD Rate Interest Determination Date
for negotiable certificates of deposit of the Index Maturity designated in the
applicable Pricing Supplement as published by the Federal Reserve Bank of New
York in its daily statistical release "Composite 3:30 P.M. Quotations for U.S.
Government Securities" or any successor publication ("Composite Quotations")
under the heading "Certificates of Deposit." If such rate is not yet published
by either H.15(519) or Composite Quotations by 3:00 p.m., New York City time, on
the related Calculation Date, then the CD Rate on such CD Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 a.m., New York
City time, on such CD Rate Interest Determination Date of three leading nonbank
dealers in negotiable U.S. dollar certificates of deposit in The City of New
York (which may include any of the Agents or their affiliates) selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money market banks for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity designated in the applicable Pricing
Supplement in an amount that is representative for a single transaction in that
market at that time; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting offered rates as mentioned in
this sentence, the CD Rate determined as of such CD Rate Interest Determination
Date will be the CD Rate in effect on such CD Rate Interest Determination Date.
COMMERCIAL PAPER RATE NOTES
Each Commercial Paper Rate Note will bear interest for each Interest Reset
Period at an interest rate calculated with reference to the Commercial Paper
Rate and the Spread and/or Spread Multiplier, if any, specified in such Offered
Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note or any Floating Rate Note for which the
interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield (as
defined below) on such date of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement, as such rate shall be
published in H.15(519) under the heading "Commercial Paper." In the event that
such rate is not published by 3:00 p.m., New York City time, on the related
Calculation Date, then the "Commercial Paper Rate" will be the Money Market
Yield on such Commercial Paper Rate Interest Determination Date of the rate for
commercial paper of the Index Maturity specified in the applicable Pricing
Supplement as published in Composite Quotations under the heading "Commercial
Paper" (with an Index Maturity of one
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month or three months being deemed to be equivalent to an Index Maturity of 30
days or 90 days, respectively). If by 3:00 p.m., New York City time, on the
related Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Commercial Paper Rate" on such Commercial Paper
Rate Interest Determination Date will be calculated by the Calculation Agent and
will be the Money Market Yield of the arithmetic mean of the offered rates, at
approximately 11:00 a.m., New York City time, on such Commercial Paper Rate
Interest Determination Date of three leading dealers of commercial paper in The
City of New York (which may include any of the Agents or their affiliates)
selected by the Calculation Agent for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement placed for an industrial issuer
whose bonds are rated "AA", or the equivalent, from a nationally recognized
statistical rating organization; provided, however, that if the dealers selected
as aforesaid are not quoting offered rates described in this sentence, the
"Commercial Paper Rate" will be the Commercial Paper Rate in effect on such
Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
Money Market Yield = D X 360 X 100
----------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
LIBOR NOTES
Each LIBOR Note will bear interest for each Interest Reset Period at an
interest rate calculated with reference to LIBOR and the Spread and/or Spread
Multiplier, if any, specified in such Offered Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page by its terms provides for only a single rate, in
which case such single rate shall be used) for deposits in U.S. dollars
having the Index Maturity specified in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, which appear on the Reuters Screen LIBO
Page as of 11:00 a.m., London time, on the LIBOR Interest Determination
Date, if at least two such offered rates appear (unless, as aforesaid, only
a single rate is required) on the Reuters Screen LIBO Page ("LIBOR
Reuters"), or (b) if "LIBOR Telerate" is specified in the applicable
Pricing Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified as the method for calculating LIBOR, the rate for deposits in
U.S. dollars having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Business Day immediately
following such LIBOR Interest Determination Date, that appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR Interest
Determination Date ("LIBOR Telerate"). Unless otherwise indicated in the
applicable Pricing Supplement, "Reuters Screen LIBO Page" means the display
designated as Page "LIBO" on the Reuters Monitor Money Rate Service (or
such other page as may replace the LIBO page on that service for the
purpose of displaying London interbank offered rates of major banks).
"Telerate Page 3750" means the display designated as page "3750" on the
Telerate Service (or such other page as may replace the 3750 page on that
service or such other service or service as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits). In the case where (a) above applies, if
fewer than two offered rates appear on the Reuters Screen LIBO Page, or, in
the case where (b) above
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applies if no rate appears on the Telerate Page 3750, as applicable, LIBOR
in respect of the related LIBOR Interest Determination Date will be
determined as if the parties had specified the rate described in (ii)
below.
(ii) With respect to a LIBOR Interest Determination Date to which this
provision applies, LIBOR will be determined on the basis of the rates at
which deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement are offered at approximately 11:00 a.m.,
London time, on such LIBOR Interest Determination Date by four major banks
("Reference Banks") in the London interbank market selected by the
Calculation Agent to prime banks in the London interbank market commencing
on the second London Business Day immediately following such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBOR for such LIBOR Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR for such LIBOR Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m., New York
City time, on such LIBOR Interest Determination Date by three major banks
(which may include the Agents) in The City of New York selected by the
Calculation Agent for loans in U.S. dollars to leading European banks
having the specified Index Maturity designated in the applicable Pricing
Supplement and in a principal amount that is representative for a single
transaction in such market at such time; provided, however, that if the
banks selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR determined as of such LIBOR Interest
Determination Date will be LIBOR in effect on such LIBOR Interest
Determination Date.
FEDERAL FUNDS RATE NOTES
Each Federal Funds Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Federal Funds Rate
and the Spread and/or Spread Multiplier, if any, specified in such Offered Note
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date") the rate on such date for federal funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
so published by 3:00 p.m., New York City time, on the related Calculation Date,
the rate on such Federal Funds Rate Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 p.m., New York City time, on the related Calculation Date such rate is not
published in either H.15(519) of Composite Quotations, then the Federal Funds
Rate on such Federal Funds Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the rates for the
last transaction in overnight United States dollar federal funds arranged by
three leading brokers of federal funds transactions in The City of New York
(which may include any of the Agents or their affiliates) selected by the
Calculation Agent prior to 9:00 a.m., New York City time, on such Federal Funds
Rate Interest Determination Date; provided, however, that if the brokers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Federal Funds Rate determined as of such Federal Funds Rate
Interest Determination Date will be the Federal Funds Rate in effect on such
Federal Funds Rate Interest Determination Date.
PRIME RATE NOTES
Each Prime Rate Note will bear interest for each Interest Reset Period at
an interest rate calculated with reference to the Prime Rate and the Spread
and/or Spread Multiplier, if any, specified in such Offered Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note or any Floating Rate Note for which the
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interest rate is determined with reference to the Prime Rate (a "Prime Rate
Interest Determinate Date"), the rate on such date as such rate is published in
H.15(519) under the heading "Bank Prime Loan." If such rate is not published
prior to 3:00 p.m., New York time, on the related Calculation Date, then the
Prime Rate shall be the arithmetic mean of the rates of interest publicly
announced by each bank that appears on the Reuters Screen USPRIME1 Page (as
defined below) as such bank's prime rate or base lending rate as in effect for
such Prime Rate Interest Determination Date. If fewer than four such rates but
more than one such rate appear on the Reuters Screen USPRIME1 Page for such
Prime Rate Interest Determination Date, the Prime Rate shall be the arithmetic
mean of the prime rates quoted on the basis of the actual number of days in the
year divided by a 360-day year as of the close of business on such Prime Rate
Interest Determination Date by four major money center banks in The City of New
York selected by the Calculation Agent. If fewer than two such rates appear on
the Reuters Screen USPRIME1 Page, the Prime Rate will be determined by the
Calculation Agent on the basis of the rates furnished in The City of New York by
three substitute banks or trust companies organized and doing business under the
laws of the United States, or any State thereof, having total equity capital of
at least $500 million and being subject to supervision or examination by Federal
or State authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks or trust companies selected as
aforesaid are not quoting as mentioned in this sentence, the Prime Rate
determined as of such Prime Rate Interest Determination Date will be the Prime
Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service (or such other page as may
replace the USPRIME1 page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
TREASURY RATE NOTES
Each Treasury Rate Note will bear interest for each Interest Reset Period
at an interest rate calculated with reference to the Treasury Rate and the
Spread and/or Spread Multiplier, if any, specified in such Offered Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
specified in the applicable Pricing Supplement, as such rate shall be published
in H.15(519) under the heading "Treasury Bills -- auction average (investment)"
or, in the event that such rate is not published by 3:00 p.m., New York City
time, on the related Calculation Date, the auction average rate (expressed as a
bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury Bills
having the Index Maturity designated in the applicable Pricing Supplement are
not published or reported as provided above by 3:00 p.m., New York City time, on
such Calculation Date, or if no such auction is held in a particular week, then
the "Treasury Rate" for such Interest Reset Period will be calculated by the
Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 p.m., New York City time, on such Treasury Rate Interest
Determination Date, of three leading primary United States government securities
dealers (which may include any of the Agents or their affiliates) selected by
such Calculation Agent for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting bid rates as described in this sentence, then the
"Treasury Rate" determined as of such Treasury Rate Interest Determination Date
will be the Treasury Rate in effect on such Treasury Rate Interest Determination
Date.
REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement, the
Offered Notes will not be subject to any sinking fund. The Offered Notes will be
redeemable at the option of the Company prior to Stated
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Maturity only if an Initial Redemption Date is specified in the applicable
Pricing Supplement. If so specified, the Offered Notes will be subject to
redemption at the option of the Company on any date on and after the applicable
Initial Redemption Date in whole or from time to time in part in increments of
$1,000 or the minimum denomination specified in such Pricing Supplement
(provided that any remaining principal amount thereof shall be at least $1,000
or such minimum denomination), at the applicable Redemption Price (as defined
below) on notice given not more than 45 nor less than 30 days prior to the date
of redemption and in accordance with the provisions of the Indenture.
"Redemption Price", with respect to an Offered Note, means an amount equal to
the sum of (i) the Initial Redemption Percentage specified in such Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction, if
applicable) multiplied by the unpaid principal amount of the portion to be
redeemed plus (ii) accrued interest to the date of redemption. The Initial
Redemption Percentage, if any, applicable to an Offered Note shall decline at
each anniversary of the Initial Redemption Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until the Redemption
Price is equal to 100% of the unpaid principal amount thereof or the portion
thereof to be redeemed.
REPAYMENT
If so specified in the applicable Pricing Supplement, the Offered Notes
will be repayable by the Company in whole or in part at the option of the
Holders thereof on their respective Optional Repayment Dates specified in such
Pricing Supplement. If no Optional Repayment Date is specified with respect to
an Offered Note, such Offered Note will not be repayable at the option of the
Holder thereof prior to Stated Maturity. Any repayment in part will be in
increments of $1,000 or the minimum denomination specified in the applicable
Pricing Supplement (provided that any remaining principal amount thereof shall
be at least $1,000 or such minimum denomination). Unless otherwise specified in
the applicable Pricing Supplement, the repayment price for any Offered Note to
be repaid means an amount equal to the sum of (i) 100% of the unpaid principal
amount thereof or the portion thereof plus (ii) accrued interest to the date of
repayment. For any Offered Note to be repaid, such Offered Note must be
received, together with the form thereon entitled "Option to Elect Repayment"
duly completed, by the Trustee at its Corporate Trust Office (or such other
address of which the Company shall from time to time notify the Holders) not
more than 60 nor less than 30 days prior to the date of repayment. Exercise of
such repayment option by the Holder will be irrevocable.
While the Book-Entry Notes are represented by the Global Notes held by or
on behalf of the Depositary, and registered in the name of the Depositary or the
Depositary's nominee, the option for repayment may be exercised by the
applicable Participant that has an account with the Depositary, on behalf of the
beneficial owners of the Global Note or Notes representing such Book-Entry
Notes, by delivering a written notice substantially similar to the above
mentioned form to the Trustee at its Corporate Trust Office (or such other
address of which the Company shall from time to time notify the Holders), not
more than 60 nor less than 30 days prior to the date of repayment. Notices of
elections from Participants on behalf of beneficial owners of the Global Note or
Notes representing such Book-Entry Notes to exercise their option to have such
Book-Entry Notes repaid must be received by the Trustee by 5:00 p.m., New York
City time, on the last day for giving such notice. In order to ensure that a
notice is received by the Trustee on a particular day, the beneficial owner of
the Global Note or Notes representing such Book-Entry Notes must so direct the
applicable Participant before such Participant's deadline for accepting
instructions for that day. Different firms may have different deadlines for
accepting instructions from their customers. Accordingly, beneficial owners of
the Global Note or Notes representing Book-Entry Notes should consult the
Participants through which they own their interest therein for the respective
deadlines for such Participants. All notices shall be executed by a duly
authorized officer of such Participant (with signature guaranteed) and shall be
irrevocable. In addition, beneficial owners of the Global Note or Notes
representing Book-Entry Notes shall effect delivery at the time such notices of
election are given to the Depositary by causing the applicable Participant to
transfer such beneficial owner's interest in the Global Note or Notes
representing such Book-Entry Notes, on the Depositary's records, to the Trustee.
See "Book-Entry Notes."
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The Company may at any time purchase Offered Notes at any price in the open
market or otherwise. Offered Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation.
BOOK-ENTRY NOTES
Except under the circumstances described below, the Offered Notes will be
issued in whole or in part in the form of one or more Global Notes that will be
deposited with, or on behalf of, the Depository Trust Company, New York, New
York ("DTC"), or such other depositary as may be subsequently designated (the
"Depositary"), and registered in the name of the Depositary.
Upon issuance, all Fixed Rate Book-Entry Notes having the same Original
Issue Date, interest rate, redemption provisions, provisions for repayment or
purchase by the Company at the option of the Holder and Stated Maturity will be
represented by one or more Global Notes, and all Floating Rate Book-Entry Notes
having the same Original Issue Date, Initial Interest Rate, Base Rate, Interest
Reset Period, Interest Reset Dates, Interest Payment Dates, Index Maturity,
Spread or Spread Multiplier, if any, redemption provisions, provisions for
repayment or purchase by the Company at the option of the Holder, Minimum
Interest Rate, if any, Maximum Interest Rate, if any, and Stated Maturity will
be represented by one or more Global Notes. Except as set forth below,
Book-Entry Notes represented by a Global Note will not be exchangeable for
Certificated Notes and will not otherwise be issuable as Certificated Notes.
So long as the Depositary, or its nominee, is the registered owner of a
Global Note, such Depositary or such nominee, as the case may be, will be
considered the sole holder of the individual Book-Entry Notes represented by
such Global Note for all purposes under the Indenture. Payments of principal of
and premium, if any, and any interest on individual Book-Entry Notes represented
by a Global Note will be made to the Depositary or its nominee, as the case may
be, as the Holder of such Global Note. Except as set forth below, owners of
beneficial interests in a Global Note will not be entitled to have any of the
individual Book-Entry Notes represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of any such
Book-Entry Notes and will not be considered the Holders thereof under the
Indenture, including, without limitation, for purposes of consenting to any
amendment thereof or supplement thereto.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Global Securities
representing the Offered Notes. The Offered Notes will be issued as
fully-registered securities registered in the name of Cede & Co. (DTC's
partnership nominee). The Offered Notes will be issued as one or more
fully-registered Global Securities certificate(s) in the aggregate
principal amount of such issue, and will be deposited with DTC.
DTC is a limited-purpose trust company under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need
for physical movement of securities certificates. Direct Participants
("Direct Participants") include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations.
DTC is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The Rules applicable to DTC and its Participants are on
file with the Securities and Exchange Commission.
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Purchases of Offered Notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Offered
Notes on DTC's records. The ownership interest of each actual purchaser of
each Offered Note ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial
Owners are expected to receive written confirmation providing details of
the transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owner entered
into the transaction. Transfers of beneficial ownership interest in the
Offered Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their beneficial ownership interest
in the Offered Notes, except in the event that use of the book-entry system
for the Offered Notes is discontinued.
To facilitate subsequent transfers, all the Offered Notes deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Offered Notes with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Offered Notes; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Offered Notes are credited, which may
or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Offered Notes within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Offered Notes. Under its usual procedures, DTC mails an "Omnibus Proxy" to
the Company as soon as possible after the record date. The "Omnibus Proxy"
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Offered Notes are credited on the record
date (identified in a listing attached to the "Omnibus Proxy").
Principal and interest payments on the Offered Notes will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on the
payable date(s) in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment
on the payable date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Participant and not of DTC, the Trustee, or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the
Company or the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry
Notes repaid by the Company, through its Participant, to the Trustee, and
shall effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Global Note or
Notes representing such Book-Entry Notes, on the Depositary's records, to
the Trustee. The requirement for physical delivery of Book-Entry Notes in
connection with a demand for repayment will be deemed satisfied when the
ownership rights in the Global Note or Notes representing such Book-Entry
Notes are transferred by Direct Participants on the Depositary's records.
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The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained,
Certificated Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that
event, Certificated Notes will be printed and delivered.
The information provided under this caption concerning DTC and DTC's
book-entry system has been obtained from sources that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
NONE OF THE COMPANY, THE INDENTURE TRUSTEE OR ANY AGENT FOR PAYMENT ON OR
REGISTRATION OF TRANSFER OR EXCHANGE OF SUCH OFFERED NOTES WILL HAVE ANY
RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO OR
PAYMENTS MADE ON ACCOUNT OF BENEFICIAL INTERESTS IN SUCH GLOBAL NOTE OR FOR
MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO SUCH BENEFICIAL
INTEREST.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States federal income tax
consequences of the ownership of Offered Notes as of the date hereof. Except
where noted, it deals only with Offered Notes held as capital assets by initial
purchasers and does not deal with special situations, such as those of dealers
in securities, financial institutions, individual retirement or other
tax-deferred accounts, tax-exempt organizations, insurance companies, persons
who hold Offered Notes as a hedge against currency risk, persons who hold
Offered Notes as part of a straddle with other investments or who have otherwise
hedged the risk of ownership of the Offered Notes, or United States Holders (as
defined below) whose "functional currency" is not the U.S. dollar. Persons
considering the purchase, ownership or disposition of Offered Notes should
consult their own tax advisors concerning the federal income tax consequences in
light of their particular situations as well as any consequences arising under
the laws of any other taxing jurisdiction. Furthermore, the discussion below is
based upon provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations, rulings and judicial decisions thereunder as of the
date hereof, and such authorities may be repealed, revoked or modified so as to
result in federal income tax consequences different from those discussed below.
UNITED STATES HOLDERS
As used herein, a "United States Holder" of an Offered Note means a holder
that is a citizen or resident of the United States, a corporation, partnership
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, an estate or trust the income of which is
subject to United States federal income taxation regardless of its source or any
other person whose income or gain in respect of an Offered Note is effectively
connected with the conduct of a United States trade or business. A "Non-United
States Holder" is a holder that is not a United States Holder.
PAYMENTS OF INTEREST. Except as set forth below, interest on an Offered
Note will generally be taxable to a United States Holder as ordinary income at
the time it is paid or accrued in accordance with the holder's method of
accounting for federal income tax purposes.
ORIGINAL ISSUE DISCOUNT. An Offered Note will be treated as having been
issued with "original issue discount" ("OID") if the excess of its "stated
redemption price at maturity" over its "issue price" (for these purposes the
first price at which a substantial amount of the Offered Notes is sold to the
public) equals or exceeds a de minimis amount (0.25 percent of the stated
redemption price at maturity multiplied by the number of complete years to
maturity). (Offered Notes issued with OID shall be referred to as "OID Notes.")
For this purpose, "stated redemption price at maturity" means the sum of all
payments under the Offered Notes other than "qualified stated interest"
payments. In general, "qualified stated interest" includes
S-16
<PAGE> 17
stated interest that is unconditionally payable at least annually at a single
fixed rate or at a single qualified floating rate or objective rate on a
"variable rate debt instrument." In general, an Offered Note will be a "variable
rate debt instrument" if (i) the issue price of an Offered Note does not exceed
its principal amount by more than the lesser of (a) 15 percent of the principal
amount or (b) .015 multiplied by the product of the principal amount and the
number of complete years to maturity and (ii) the interest rate on the
instrument is comprised of one or more qualified floating rates, a single fixed
rate and one or more qualified floating rates, a single objective rate, or a
single fixed rate and a single objective rate that is a qualified inverse
floating rate. (Qualified stated interest also includes interest calculated at
certain other variable rates on variable rate debt instruments.)
Unless the Offered Notes are issued with stated interest that is entirely
qualified stated interest, all payments or portions of payments that do not
constitute qualified stated interest would constitute a portion of the stated
redemption price at maturity of the Offered Notes. Any such Offered Notes may
therefore possess OID subject to the consequences described herein, even if the
issue price of the Offered Notes equals (or exceeds) the principal amount of
such Notes.
United States Holders are required to include OID in income in advance of
the receipt of some or all of the related cash payments. For OID Notes having a
term in excess of one year, OID will be included in income currently as interest
as it accrues over the life of the Offered Note under a formula based upon the
compounding of interest at a rate that provides for a constant yield to
maturity. Under this formula, United States Holders must include in income
increasingly greater amounts of OID in each successive accrual period.
The Company is required to report the amount of OID accrued on Offered
Notes held of record by persons other than corporations and other exempt
holders; however, the amount reported by the Company may not equal the amount of
OID required to be included in income by a holder that is not an initial
purchaser of the Offered Notes or who does not purchase the Offered Notes at
their issue price.
In the event that the Company determines to issue Offered Notes that are
OID Notes (including certain Offered Notes not denominated in U.S. dollars or
providing for contingent payments), and the federal income tax consequences of
such features would be material to United States Holders, notice thereof and
additional information will be provided in the appropriate supplement hereto.
SHORT-TERM NOTES. In the case of Offered Notes with a maturity of one year
or less ("Short-Term Notes"), all payments (including all stated interest
however calculated) will be included in the stated redemption price at maturity,
thus, United States Holders will be taxable on OID in lieu of stated interest.
Accrual method United Stated Holders and certain other United States Holders,
including banks and dealers in securities, are required to include OID on a
Short-Term Note in income as it accrues either on a straight line basis or, if
the holder so elects, under the constant yield method. In general, individuals
and other cash method United States Holder's are not required to include OID in
income as it accrues unless they elect to do so. In the case of an individual or
cash method holder who does not elect to include OID on a Short-Term Note in
income as it accrues, however, any gain realized on the disposition of a
Short-Term Note will be treated as ordinary income to the extent of the OID
accrued on a straight-line basis (or, if elected, on a constant yield basis).
Furthermore, such a non-electing holder will be required to defer deductions for
a portion of the holder's interest expenses with respect to any indebtedness
incurred or maintained to purchase or carry such Short-Term Notes, in an amount
not exceeding the deferred interest income, until the deferred interest income
is realized. In the case of a holder who includes OID on a Short-Term Note in
income as it accrues, the amount so included be added to the holder's tax basis
in the Short-Term Note.
Accrual method United States Holders (including holders that are not
initial purchasers) may elect to include all interest that accrues on an Offered
Note by using the constant yield method. For this purpose, "interest" includes
both OID (including OID on Short-Term Notes and de minimis OID) and stated
interest (as such may be adjusted by amortization of premium and acquisition
premium, see "Amortization of Premium" below). If the holder so elects with
respect to an Offered Note that has been purchased at a premium (as opposed to
merely an acquisition premium), this election is also treated as an election
under the amortizable bond premium provisions, described below, and the electing
holder will be required to amortize bond premium currently for all his other
debt instruments with amortizable bond premium. This election is to
S-17
<PAGE> 18
be made in the taxable year in which the holder acquired the Offered Note and
may not be revoked without the consent of the Internal Revenue Service ("IRS").
AMORTIZATION OF PREMIUM. An Offered Note may be considered to have been
issued at a "premium" to the extent that the United States Holder's tax basis in
the Offered Note immediately after purchase exceeds its principal amount. A
holder generally may elect to amortize the premium over the remaining term of
the Offered Note on a constant yield method. The amount amortized in any year
will be treated as a reduction of the holder's interest income from the Offered
Note. Premium on an Offered Note held by a holder that does not make such an
election will decrease the gain or increase the loss otherwise recognized on
disposition of the Offered Note.
An Offered Note purchased for an amount that exceeds its issue price but
not the principal amount of the Offered Note will be issued with "acquisition
premium." In that event, the amount of OID otherwise includable on the Offered
Note would be reduced over the term of the Offered Note through amortization of
the acquisition premium. Alternatively, a United States Holder may elect to
compute OID accruals by using his purchase price, rather than the issue price,
together with the constant yield method for accruing the discount. Such an
election may not be revoked unless approved by the IRS.
SALES, EXCHANGE AND RETIREMENT OF OFFERED NOTES. Upon the sale, exchange or
retirement of an Offered Note, a United States Holder will recognize gain or
loss equal to the difference between the amount realized upon the sale, exchange
or retirement and the adjusted tax basis of the Offered Note. A United States
Holder's tax basis in an Offered Note will, in general, equal the United States
Holder's cost for the Offered Note, increased by OID included in income and
reduced by any amortized premium and any cash payments on the Offered Note other
than qualified stated interest payments. Except with respect to certain
Short-Term Notes, as described in "Short-Term Notes" above, such gain or loss
will be capital gain or loss and will be long-term capital gain or loss if the
Offered Note had been held for more than one year at the time of disposition.
Net capital gains of individuals are, under certain circumstances, taxed at
lower rates than items of ordinary income. A United States Holder's ability to
offset capital losses against ordinary income is limited.
NON-UNITED STATES HOLDERS
Non-United States Holders will not be subject to United States federal
income taxes, including withholding taxes, on the interest income (including any
OID) on, or gain from the sale or disposition of any Offered Note provided that:
(i) the interest income or gain is not effectively connected with the conduct by
the Non-United States Holder of a trade or business within the United States;
(ii) the Non-United States Holder is not a controlled foreign corporation
related to the Company through stock ownership; (iii) with respect to any gain,
the Non-United States Holder, if an individual, is not present in the United
States for 183 days or more during the taxable year and (iv) the Non-United
States Holder provides the correct certification of his status (which may
generally be satisfied by providing an Internal Revenue Service Form W-8
certifying that the beneficial owner is not a United States Holder and providing
the name and address of the beneficial owner).
An individual holder of an Offered Note who is not a citizen or resident of
the United States at the time of the holder's death will not be subject to
United States federal estate tax as a result of the holder's death, as long as
any interest received on the Offered Note, if received by the holder at the time
of the holder's death, would not be effectively connected with the conduct of a
trade or business by such individual in the United States.
BACKUP WITHHOLDING
In general, if a non-corporate holder fails to furnish a correct taxpayer
identification number or certification of foreign or other exempt status, fails
to report dividend and interest income in full, or fails to certify that such
holder has provided a correct taxpayer identification number and is not subject
to backup withholding, a 31 percent federal backup withholding tax may be
withheld on amounts paid to the holder. An individual's taxpayer identification
number is his or her social security number. The backup withholding tax is not
an additional tax and may be credited against a holder's regular federal income
tax liability or refunded by the Internal Revenue Service where applicable.
S-18
<PAGE> 19
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE OFFERED
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Offered Notes are being offered on a continuous basis by the Company
through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated;
Donaldson, Lufkin & Jenrette Securities Corporation; Salomon Brothers Inc; and
Smith Barney Inc. (the "Agents"), each of whom has agreed to use its reasonable
efforts to solicit purchases of the Offered Notes. The Company will pay each
Agent a commission ranging from .125% to .750% of the principal amount of each
Offered Note sold through such Agent, depending upon the Stated Maturity of the
Offered Note. Commissions with respect to Offered Notes with Stated Maturities
in excess of 30 years that are sold through an Agent will be negotiated between
the Company and such Agent at the time of sale. The Company may sell the Offered
Notes to any of the Agents, as principal, at a discount for resale to investors
and other purchasers at varying prices related to prevailing market prices at
the time of resale, to be determined by such Agent, or, if so agreed, at a fixed
public offering price. In addition, the Agents may offer the Offered Notes they
have purchased as principal to other dealers. The Agents may sell Offered Notes
to any dealer at a discount and, unless otherwise specified in the applicable
Pricing Supplement, such discount allowed to any dealer will not be in excess of
the discount to be received by such Agent from the Company. Unless otherwise
indicated in the applicable Pricing Supplement, any Offered Note sold to an
Agent as principal will be purchased by such Agent at a price equal to 100% of
the principal amount thereof less a percentage of the principal amount equal to
the commission applicable to any agency sale of an Offered Note of identical
maturity, and may be resold by the Agent to investors and other purchasers, as
described above. After the initial public offering of Offered Notes, the public
offering price (in the case of Offered Notes to be resold at a fixed public
offering price), concession and discount may be changed.
The Company has reserved the right to appoint additional agents to solicit
offers to purchase the Offered Notes. The Company may also sell the Offered
Notes directly to investors on its behalf. In the case of sales made directly by
the Company no commission will be payable. The Company has agreed to reimburse
the Agents for certain expenses.
The Company will have the sole right to accept offers to purchase Offered
Notes and may, in its absolute discretion, reject any proposed purchase of
Offered Notes in whole or in part. Each Agent will have the right, in its
discretion reasonably exercised, to reject any offer to purchase Offered Notes
received by it in whole or in part.
No Offered Note will have an established trading market when issued. The
Offered Notes will not be listed on any securities exchange. The Agents may make
a market in the Offered Notes, but the Agents are not obligated to do so and may
discontinue any market-making at any time without notice. There can be no
assurance of a secondary market for any Offered Notes, or that the Offered Notes
will be sold.
Each Agent, whether acting as agent or principal, may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). The Company has agreed to indemnify the Agents against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments that the Agents may be required to make in respect
thereof.
S-19
<PAGE> 20
PROSPECTUS
$500,000,000
MCN INVESTMENT CORPORATION
DEBT SECURITIES
ENTITLED TO THE BENEFITS OF A SUPPORT AGREEMENT BY
[MCN CORPORATION LOGO]
------------------------
MCN Investment Corporation, a Michigan Corporation ("MCN Investment" or the
"Company"), may offer, from time to time, its unsecured notes, debentures, or
other unsecured evidence of indebtedness (the "Debt Securities"), in one or more
series, in an aggregate principal amount of up to $500,000,000. Debt Securities
may be issued in registered form without coupons or in the form of one or more
global securities (each a "Global Security"). The Debt Securities are entitled
to the benefits of the Support Agreement between MCN Investment and its parent
company, MCN Corporation ("MCN"), whereby MCN will provide funds to MCN
Investment to pay principal, premium, if any, and interest on the Debt
Securities in the event of default by MCN Investment. See "Description of Debt
Securities" and "Support Agreement."
When a particular series of Debt Securities is offered, a supplement to
this Prospectus will be delivered (the "Prospectus Supplement") together with
this Prospectus setting forth the terms of such Debt Securities, including where
applicable, the specific designation, aggregate principal amount, denominations,
maturity, rate (which may be fixed or variable) and time of payment of interest,
any terms for redemption, any terms for repayment at the option of the holder,
any terms for sinking fund payments, the initial public offering price, the
names of, and the principal amounts to be purchased by or sold through,
underwriters, agents or dealers and the compensation of such underwriters,
agents or dealers, any listing of the Debt Securities on a securities exchange
and other terms in connection with the offering and sale of such Debt
Securities.
MCN Investment may sell the Debt Securities to or through dealers or
underwriters, directly to other purchasers or through agents. See "Plan of
Distribution." Underwriters may include Merrill Lynch & Co. (Merrill Lynch,
Pierce, Fenner & Smith Incorporated) or such other underwriter or underwriters
as may be designated by MCN Investment, or an underwriting syndicate represented
by one or more of such firms. Such firms may also act as agents. The Prospectus
Supplement will set forth the names of such underwriters, dealers or agents, if
any, any applicable commissions or discounts and the proceeds to MCN Investment
from such sales.
The Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement applicable to the Debt Securities
being sold.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is March 27, 1996.
<PAGE> 21
AVAILABLE INFORMATION
MCN is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "1934 Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Reports, proxy statements and other information
concerning MCN can be inspected and copied at the SEC's Public Reference Room,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as the
following Regional Offices of the SEC: 7 World Trade Center, Suite 1300, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549, at prescribed rates. Such reports,
proxy statements and other information may also be inspected at the offices of
the New York Stock Exchange, Inc., on which MCN's common stock is traded, at 20
Broad Street, New York, New York 10005.
MCN Investment and MCN have filed a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") with the SEC under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Debt Securities. This Prospectus does not
contain all of the information set forth in such Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. Reference is made to such Registration Statement and to the exhibits
relating thereto for further information with respect to MCN Investment, MCN and
the Debt Securities. Material provisions of the documents filed as exhibits to
the Registration Statement or otherwise filed with the SEC or incorporated by
reference are contained herein. Reference is made to the copy of such document
so filed for a more complete description of the matter involved.
MCN Investment will not file, as a separate registrant, the periodic
reports required by Sections 13 and 15(d) of the 1934 Act because management has
determined that separate financial statements of MCN Investment are not material
to holders of the Debt Securities. MCN Investment does not intend to issue any
periodic or other reports to holders of the Debt Securities. MCN's consolidating
financial statements, concerning MCN Investment, Michigan Consolidated Gas
Company ("MichCon"), and MCN and other subsidiaries, currently are included in
the footnotes to MCN's consolidated financial statements and will continue to be
included for as long as the Debt Securities remain outstanding and are subject
to the Support Agreement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by MCN (File No. 1-10070) with the SEC
pursuant to the 1934 Act are incorporated by reference herein and made a part
hereof:
1. Annual Report on Form 10-K, for the year ended December 31, 1995.
2. Current Reports on Form 8-K, dated January 10, 1996 and February 6,
1996.
All documents filed by MCN pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the 1934 Act subsequent to the date hereof and prior to the termination of
the offering of the Debt Securities pursuant hereto shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference in this Prospectus or in any Prospectus Supplement
shall be deemed to be modified or superseded for purposes of this Prospectus, or
in any Prospectus Supplement, to the extent that a statement contained in this
Prospectus or in any Prospectus Supplement or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Prospectus or in any Prospectus Supplement modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
MCN undertakes to provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of any such
person, a copy of any or all of the foregoing documents incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to: Investor Relations, MCN Corporation, 500 Griswold Street,
Detroit, Michigan 48226; telephone 1-800-548-4655.
2
<PAGE> 22
MCN CORPORATION
MCN is a diversified natural gas holding company. Its principal operating
subsidiaries are MichCon, a natural gas distribution and intrastate transmission
company; and MCN Investment, a holding company with subsidiaries involved in
exploration and production, gas gathering and processing, gas storage, gas
marketing and cogeneration and computer operations services. MCN, a Michigan
corporation organized in 1988, is exempt from most provisions of the Public
Utility Holding Company Act of 1935.
MCN's major business segments are Gas Distribution and, within MCN
Investment's Diversified Energy group, Gas Services and Computer Operations
Services.
GAS DISTRIBUTION operates the largest natural gas distribution and
intrastate transmission system in Michigan and one of the largest in the United
States. This segment includes the following companies:
MichCon -- A Michigan corporation organized in 1898 that, with its
predecessors, has been in business for nearly 150 years. MichCon is a
public utility, engaged in the distribution and transmission of natural gas
in the State of Michigan serving over 1.2 million residential, commercial
and industrial customers.
Citizens Gas Fuel Company -- A Michigan corporation organized in 1951
that, with its predecessors, has been in business for more than 135 years.
Citizens is a gas utility that conducts all of its business in the State of
Michigan serving 13,000 residential, commercial and industrial customers.
The mailing address of MCN's principal executive office is 500 Griswold
Street, Detroit, Michigan 48226, and its telephone number is (313) 256-5500.
MCN INVESTMENT CORPORATION
MCN Investment, a wholly-owned subsidiary of MCN, is a subsidiary holding
company for MCN's Diversified Energy group. MCN Investment operates under the
two major business segments described below.
GAS SERVICES is an integrated energy group with investments in: Exploration
and Production, Gas Gathering and Processing, Gas Storage and Gas Marketing and
Cogeneration.
COMPUTER OPERATIONS SERVICES is a leading provider of computer outsourcing
services in the United States. The Genix Group provides computer management,
data processing and related services to approximately 100 corporate clients.
The mailing address of MCN Investment's principal executive office is 150
W. Jefferson Avenue, Suite 1800, Detroit, Michigan 48226, and its telephone
number is (313) 256-5500.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
MCN Investment(1)............................................. 1.50 1.52 1.74 2.45 0.95(2)
MCN(1)........................................................ 2.51 2.64 3.04 2.74 2.08
</TABLE>
- - -------------------------
(1) The Ratios of Earnings to Fixed Charges are based on earnings from
operations. "Earnings" consist of the pre-tax income of majority-owned and
50%-owned companies adjusted to include any income actually received from
less than 50% owned companies, plus fixed charges, less interest
capitalized during the period for nonutility companies and less, in the
case of MCN, the preferred stock dividend requirements of MichCon included
in fixed charges but not deducted in the determination of pre-tax income.
"Fixed Charges" represent (a) interest (whether expensed or capitalized),
(b) amortization of debt discount, premium and expense, (c) an estimate of
interest implicit in rentals, and (d) in the case of MCN, the preferred
securities dividend requirements of subsidiaries (MichCon and MCN Michigan
Limited Partnership), increased to reflect the pre-tax earnings requirement
for MichCon.
(2) Earnings for the year ended December 31, 1991 were not adequate to cover
fixed charges. The amount of the coverage deficiency was $388,000.
3
<PAGE> 23
USE OF PROCEEDS
MCN Investment intends to add the net proceeds from the sale of the Debt
Securities to its general funds, to be used for general corporate purposes,
which may include capital expenditures, investment in subsidiaries, working
capital, repayment of debt and other business opportunities.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
The Debt Securities may be issued, from time to time, in one or more
series. Debt Securities will be issued under an Indenture, dated as of September
1, 1995 (the "Indenture"), between the Company and NBD Bank ("NBD"), as trustee
(the "Trustee"). NBD is a wholly-owned subsidiary of First Chicago NBD
Corporation. A copy of the Indenture is incorporated by reference as an exhibit
to this Registration Statement.
The following summary contains material provisions of the Debt Securities
and the Indenture. For a complete description of all the provisions of the
Indenture, including the definitions therein of certain terms, reference is made
to the Indenture incorporated by reference as an exhibit to this Registration
Statement. Certain capitalized terms herein are defined in the Indenture.
GENERAL
The Debt Securities will be unsecured obligations of the Company.
The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that Debt Securities may
be issued thereunder, from time to time, in one or more series. The Indenture
does not contain any debt covenants or provisions which would afford bondholders
protection in the event of a highly leveraged transaction.
Reference is made to the Prospectus Supplement relating to the Debt
Securities being offered (the "Offered Debt Securities") for, among other
things, the following terms thereof: (1) the title of the Offered Debt
Securities; (2) any limit on the aggregate principal amount of the Offered Debt
Securities; (3) the date or dates on which the Offered Debt Securities will
mature; (4) the rate or rates (which may be fixed or variable) per annum at
which the Offered Debt Securities will bear interest or the method by which such
rate or rates shall be determined and the date from which such interest will
accrue or the method by which such date or dates shall be determined; (5) the
dates on which such interest will be payable and the Regular Record Dates for
such Interest Payment Dates; (6) the dates, if any, on which, and the price or
prices at which, the Offered Debt Securities may, pursuant to any mandatory or
optional sinking fund provisions, be redeemed by the Company and other detailed
terms and provisions of such sinking funds; (7) the date, if any, after which,
and the price or prices at which, the Offered Debt Securities may, pursuant to
any optional redemption provisions, be redeemed at the option of the Company or
of the Holder thereof and other detailed terms and provisions of such optional
redemption; and (8) any other terms of the Offered Debt Securities (which terms
shall not be inconsistent with the provisions of the Indenture). For a
description of the terms of the Offered Debt Securities, reference must be made
to both the Prospectus Supplement relating thereto and to the description of
Debt Securities set forth herein.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the principal of, and any premium or interest on, the Offered Debt Securities
will be payable, and the Offered Debt Securities will be exchangeable and
transfers thereof will be registrable, at the Place of Payment, provided that,
at the option of the Company, payment of interest may be made by check mailed,
or wire transfer, to the address of the person entitled thereto as it appears in
the Security Register.
4
<PAGE> 24
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued in United States dollars in fully
registered form, without coupons, in denominations of $1,000 or any integral
multiple thereof. No service charge will be made for any transfer or exchange of
the Offered Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
For purposes of the description of the Debt Securities, certain defined
terms have the following meanings:
"Indebtedness" of any Person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capitalized Lease Obligations of such Person; (iii) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all obligations under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) all obligations of the type referred to in clauses
(i) through (iv) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the type referred
to in clauses (i) through (v) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured.
"Capitalized Lease Obligations" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with such
principles.
"Project Finance Indebtedness" means Indebtedness of a Subsidiary (other
than a Utility and other than the Company) secured by a Lien on any property,
acquired, constructed or improved by such Subsidiary after the date of the
Indenture which Lien is created or assumed contemporaneously with, or within 120
days after, such acquisition or completion of such construction or improvement,
or within six months thereafter pursuant to a firm commitment for financing
arranged with a lender or investor within such 120-day period, to secure or
provide for the payment of all or any part of the purchase price of such
property or the cost of such construction or improvement, or on any property
existing at the time of acquisition thereof; provided that such a Lien shall not
apply to any property theretofore owned by any such Subsidiary other than, in
the case of any such construction or improvement, any theretofore unimproved
real property on which the property so constructed or the improvement is
located; and provided further that such Indebtedness, by its terms, shall limit
the recourse of any holder of such Indebtedness (or trustee on such holder's
behalf) in the event of any default in such Indebtedness to the assets subject
to such Liens and the capital stock of the Subsidiary issuing such Indebtedness.
Notwithstanding the foregoing, Project Finance Indebtedness shall include all
Indebtedness that would constitute Project Finance Indebtedness but for the fact
that such Indebtedness was issued prior to the date of this Indenture and taking
into account the fact that the property subject to the Lien may have been
acquired prior to the date of this Indenture.
The Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount below their
principal amount. Special federal income tax, accounting and other
considerations applicable to any such Original Issue Discount Securities will be
described in any Prospectus Supplement relating thereto. "Original Issue
Discount Security" means any security which provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof as a result of the occurrence of an Event
of Default and the continuation thereof.
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THE TRUSTEE
NBD is the Trustee under the Indenture. NBD is also the Trustee under MCN's
Senior and Subordinated Indentures. NBD has extended lines of credit to various
subsidiaries of MCN. MCN and various of its subsidiaries maintain bank accounts
and have other customary banking relationships with NBD in the ordinary course
of business. In addition, various MCN subsidiaries, including MCN Investment
borrow money from NBD. Mr. Thomas H. Jeffs II, President and Chief Operating
Officer of NBD, serves as a Director of MCN. Mr. Alfred R. Glancy III, Chairman,
President and Chief Executive Officer of MCN, serves as a Director of NBD.
RESTRICTIONS
The Indenture provides that neither the Company nor MCN shall consolidate
with, merge with or into any other corporation (whether or not the Company or
MCN, as the case may be, shall be the surviving corporation), or sell, assign,
transfer or lease all or substantially all of its properties and assets as an
entirety or substantially as an entirety to any Person or group of affiliated
Persons, in one transaction or a series of related transactions, unless: (1)
either the Company or MCN, as the case may be, shall be the continuing Person or
the Person (if other than the Company or MCN) formed by such consolidation or
with which or into which the Company or MCN is merged or the Person (or group of
affiliated Persons) to which all or substantially all the properties and assets
of the Company or MCN are sold, assigned, transferred or leased is a corporation
(or constitute corporations) organized under the laws of the United States or
any State thereof or the District of Columbia and expressly assumes, in the case
of the Company, by an indenture supplemental to the Indenture, all the
obligations of the Company under the Debt Securities and the Indenture, executed
and delivered to the Trustee in form satisfactory to the Trustee; and in the
case of MCN, the performance of every covenant of the Indenture on the part of
MCN, as applicable, and all the obligations under the Support Agreement to be
performed or observed; (2) immediately before and after giving effect to such
transaction or series of transactions, no Event of Default, and no Default, with
respect to the Debt Securities shall have occurred and be continuing; and (3)
the Company or MCN, as applicable, shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indentures comply with
the Indenture. Each of the Company and MCN covenants and agrees in the Indenture
that if, upon its consolidation with or merger into any other corporation, or
upon any consolidation or merger of any other corporation with or into it, or
upon any sale or conveyance of all or substantially all of its property and
assets to any other corporation, any of its property or any property of any
Subsidiary or any Indebtedness issued by any Subsidiary owned by it or by any
other Subsidiary immediately prior thereto would thereupon become subject to any
mortgage, security interest, pledge, lien or other encumbrance not permitted by
the Indenture, prior to or concurrently with such consolidation, merger, sale or
conveyance, it will effectively secure the Securities then Outstanding issued
under the Indenture (equally and ratably with (or prior to) any other
Indebtedness of or guaranteed by it or such Subsidiary then entitled thereto) by
a direct lien, on such of its property or such property of a Subsidiary or such
other Indebtedness issued by a Subsidiary, prior to all liens other than any
theretofore existing thereon.
The Indenture also provides that neither the Company nor MCN will, nor will
MCN permit any Significant Subsidiary to, create, incur, or suffer to exist any
Lien in, of or on the property of the Company, MCN or any of their Subsidiaries,
except: (i) Liens for taxes, assessments or governmental charges or levies on
its property if the same shall not at the time be delinquent or thereafter can
be paid without penalty, or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with generally
accepted principles of accounting shall have been set aside on its books; (ii)
Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and
other similar liens arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books; (iii) Liens arising out of
pledges or deposits under worker's compensation laws, unemployment insurance,
old age pensions, or other social security or retirement benefits, or similar
legislation; (iv) utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way
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<PAGE> 26
affect the marketability of the same or interfere with the use thereof in the
business of the Company, MCN or their Subsidiaries, as the case may be; (v)
Liens on the capital stock, partnership interest, or other evidence of ownership
of any Subsidiary or such Subsidiary's assets that secure Project Finance
Indebtedness for such Subsidiary; (vi) Liens arising in connection with first
mortgage bonds issued by any Significant Subsidiary pursuant to any first
mortgage indenture in effect as of the date of the Indenture, as such indenture
may be supplemented from time to time; (vii) purchase money liens upon or in
property now owned or hereafter acquired in the ordinary course of business
(consistent with the Company's or MCN's business practices, as the case may be)
to secure (A) the purchase price of such property or (B) Indebtedness incurred
solely for the purpose of financing the acquisition, construction, or
improvement of any such property to be subject to such liens, or Liens existing
on any such property at the time of acquisition, or extensions, renewals, or
replacements of any of the foregoing for the same or a lesser amount; provided
that no such lien shall extend to or cover any property other than the property
being acquired, constructed, or improved and replacements, modifications, and
proceeds of such property, and no such extension, renewal, or replacement shall
extend to or cover any property not theretofore subject to the Lien being
extended, renewed, or replaced; (viii) Liens existing on the date Debt
Securities are first issued; and (ix) Liens for no more than 90 days arising
from a transaction involving accounts receivable of the Company or MCN, as the
case may be (including the sale of such accounts receivable), where such
accounts receivable arose in the ordinary course of the Company's or MCN's
business, as the case may be.
The Indenture provides that neither the Company nor MCN will, nor will they
permit any Subsidiary to, enter into any arrangement with any lender or investor
(other than the Company, MCN or a Subsidiary), or to which such lender or
investor (other than the Company, MCN or a Subsidiary) is a party, providing for
the leasing by the Company, MCN or such Subsidiary for a period, including
renewals, in excess of three years of any real property located within the
United States which has been owned by the Company, MCN or such Subsidiary, as
the case may be, for more than six months and which has been or is to be sold or
transferred by the Company, MCN or such Subsidiary, as the case may be, to such
lender or investor or to any person to whom funds have been or are to be
advanced by such lender or investor on the security of such real property unless
either (a) the Company, MCN or such Subsidiary, as the case may be, could create
Indebtedness secured by a lien consistent with the restrictions set forth in the
foregoing paragraph on the real property to be leased in an amount equal to the
Value of such transaction without equally and ratably securing the Debt
Securities or (b) the Company or MCN, as the case may be, within six months
after the sale or transfer shall have been made, applies an amount equal to the
greater of (i) the net proceeds of the sale of the real property leased pursuant
to such arrangement or (ii) the fair market value of the real property so leased
to the retirement of Debt Securities and other obligations of the Company or
MCN, as the case may be, ranking on a parity with the Debt Securities. Debt
Securities rank pari passu with other unsecured indebtedness.
EVENTS OF DEFAULT AND NOTICE THEREOF
The following are Events of Default under the Indenture with respect to
Debt Securities of any series: (1) failure to pay interest on any Debt Security
of that series when due and payable, continued for 30 days; (2) failure to pay
the principal of (or premium, if any, on) any Debt Security of that series when
due and payable at Maturity, upon redemption or otherwise; (3) failure to
observe or perform any other covenant, warranty or agreement of the Company or
MCN contained in the Debt Securities of that series, the Indenture or the
Support Agreement (other than a covenant, agreement or warranty included in the
Indenture solely for the benefit of Debt Securities other than that series),
continued for a period of 60 days after notice has been given to the Company by
the Trustee or Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of that series; (4) failure to pay at final
maturity, or acceleration of, Indebtedness of the Company, MCN or a Subsidiary
(but excluding Project Finance Indebtedness and certain other gas and oil
reserve-based financing with limited recourse to MCN as described below) having
an aggregate principal amount of more than 1% of the consolidated total assets
of MCN (determined as of its most recent fiscal year-end), unless cured within
10 days after notice has been given to the Company by the Trustee or Holders of
at least 10% in aggregate principal amount of the Outstanding Debt Securities of
that series; (5) certain events of bankruptcy, insolvency or reorganization
relating to the Company, MCN or a Significant Subsidiary; and (6) any other
Event of Default with respect to Debt Securities of that series specified in the
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Prospectus Supplement relating thereto or Supplemental Indenture under which
such series of Debt Securities is issued. As noted in (4) above, it will not be
an Event of Default under the Indenture if a default occurs in certain gas and
oil reserve-based financing of Supply Development Group, Inc. (a Subsidiary of
the Company) or its Subsidiaries if the obligations of MCN and its Subsidiaries
with respect to such Indebtedness (other than Supply Development Group, Inc. and
its Subsidiaries) are limited to (i) payments with respect to Section 29 tax
credits, (ii) payments with respect to certain material contracts of the
borrower (generally limited to gas and oil supply contracts and gas and oil
hedging contracts) and (iii) certain environmental obligations of the borrowers.
As of December 31, 1995, $100,000,000 of such gas and oil reserve-based
Indebtedness was outstanding. From time to time, MCN or its Subsidiaries may
establish additional similar reserve-based credit facilities with respect to
which a default would not result in an Event of Default under the Indenture.
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to Debt Securities of
any series, give the Holders of Debt Securities of that series notice of all
uncured Defaults or Events of Default known to it (the term "Default" includes
any event which after notice or passage of time or both would be an Event of
Default); provided, however, that, except in the case of an Event of Default or
a Default in payment on any Debt Securities of any series, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or directors or Responsible Officers of the Trustee in
good faith determine that the withholding of such notice is in the interest of
the Holders of Debt Securities of that series.
If an Event of Default with respect to Debt Securities of any series (other
than due to events of bankruptcy, insolvency or reorganization) occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Outstanding Debt Securities of that series, by notice in writing
to the Company (and to the Trustee if given by the Holders of at least 25% in
aggregate principal amount of the Outstanding Debt Securities of that series),
may declare the unpaid principal of and accrued interest to the date of
acceleration on all the Outstanding Debt Securities of that series to be due and
payable immediately and, upon any such declaration, the Outstanding Debt
Securities of that series shall become immediately due and payable.
If an Event of Default occurs due to bankruptcy, insolvency or
reorganization, all unpaid principal of and accrued interest on the Outstanding
Debt Securities of any series will become immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder of any
Debt Security of that series.
The Indenture provides that the Company shall periodically file statements
with the Trustee regarding compliance by the Company with certain of the
respective covenants thereof and shall specify any Event of Default or Defaults
with respect to Debt Securities of any series, in performing such covenants, of
which the signers may have knowledge.
MODIFICATION OF INDENTURE; WAIVER
The Indenture may be modified by the Company and the Trustee without the
consent of any Holders with respect to certain matters, including (i) to cure
any ambiguity, defect or inconsistency or to correct or supplement any provision
which may be inconsistent with any other provision of the Indenture and (ii) to
make any change that does not materially adversely affect the interests of any
Holder of Debt Securities of any series. In addition, under the Indenture,
certain rights and obligations of the Company and the rights of Holders of the
Debt Securities may be modified by the Company and the Trustee with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Outstanding Debt Securities of each series affected thereby; but no
extension of the maturity of any Debt Securities of any series, reduction in the
interest rate or extension of the time for payment of interest, change in the
optional redemption or repurchase provisions in a manner adverse to any Holder
of Debt Securities of any series, other modification in the terms of payment of
the principal of, or interest on, any Debt Securities of any series, or
reduction of the percentage required for modification, will be effective against
any Holder of any Outstanding Debt Security of any series
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affected thereby without the Holder's consent. The Indenture does not limit the
aggregate amount of Debt Securities of the Company which may be issued
thereunder.
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned, compliance
by the Company with certain restrictive covenants of the Indenture. The Holders
of not less than a majority in aggregate principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive any past Event of Default or Default under the
Indenture with respect to that series, except an Event of Default or a Default
in the payment of the principal of, or premium, if any, or any interest on any
Debt Security of that series or in respect of a provision which under the
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Debt Security of that series affected.
DEFEASANCE
The Company may terminate its substantive obligations in respect of Debt
Securities of any series (except for its obligations to pay the principal of
(and premium, if any, on) and the interest on the Debt Securities of that
series) by (i) depositing with the Trustee, under the terms of an irrevocable
trust agreement, money or U.S. Government Obligations sufficient to pay all
remaining indebtedness on the Debt Securities of that series, (ii) delivering to
the Trustee either an Opinion of Counsel or a ruling directed to the Trustee
from the Internal Revenue Service to the effect that the Holders of the Debt
Securities of that series will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and termination of obligations,
and (iii) complying with certain other requirements set forth in the Indenture.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities (as such term is defined below) that will
be deposited with, or on behalf of, a Depositary ("Depositary") or its nominee
identified in the applicable Prospectus Supplement. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denomination
equal to the portion of the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Global Security or Global
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in registered form, a Global Security may not be registered for
transfer or exchange except as a whole by the Depositary for such Global
Security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by such Depositary or
any nominee to a successor Depositary or a nominee of such successor Depositary
and except in the circumstances described in the applicable Prospectus
Supplement. The term "Global Security", when used with respect to any series of
Debt Securities, means a Debt Security that is executed by the Company and
authenticated and delivered by the Trustee to the Depositary or pursuant to the
Depositary's instruction, which shall be registered in the name of the
Depositary or its nominee and which shall represent, and shall be denominated in
an amount equal to the aggregate principal amount of, all of the outstanding
Debt Securities of such series or any portion thereof, in either case having the
same terms, including, without limitation, the same original issue date, date or
dates on which principal is due, and interest rate or method of determining
interest.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
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<PAGE> 29
underwriters or agents of such Debt Securities or, if such Debt Securities are
offered and sold directly by the Company, by the Company. Ownership of
beneficial interests in such Global Security will be limited to participants or
Persons that may hold interests through participants. Ownership of beneficial
interests by participants in such Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee for such Global Security. Ownership
of beneficial interests in such Global Security by Persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in certificated form.
The foregoing limitations and such laws may impair the ability to transfer
beneficial interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Securities
represented by such Global Security for all purposes under the Indenture. Unless
otherwise specified in the applicable Prospectus Supplement, owners of
beneficial interests in such Global Security will not be entitled to have Debt
Securities of the series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Debt
Securities of such series in certificated form and will not be considered the
Holders thereof for any purposes under the Indenture. Accordingly, each Person
owning a beneficial interest in such Global Security must rely on the procedures
of the Depositary and, if such Person is not a participant, on the procedures of
the participant through which such Person owns its interest, to exercise any
rights of a Holder under the Indenture. The Company understands that under
existing industry practices, if the Company requests any action of Holders or an
owner of a beneficial interest in such Global Security desires to give any
notice or take any action a Holder is entitled to give or take under the
Indenture, the Depositary would authorize the participants to give such notice
or take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
SUPPORT AGREEMENT
The Support Agreement between the Company and MCN provides that, during the
term thereof, (i) MCN will own all of the voting stock of the Company, (ii) MCN
will cause the Company to have at all times a positive net worth (net assets,
less intangible assets, if any), as determined in accordance with generally
accepted accounting principles and (iii) if the Company is unable to make timely
payment of principal of, or any premium or interest on, any Debt (as defined
below) issued by the Company, MCN will, at the request of the Company or any
Lender (as defined below), provide funds to the Company to make such payments.
The Support Agreement also provides that any Lender to the Company shall have
the right to demand that the Company enforce its rights against MCN under the
Support Agreement as described in the previous sentence, and in the event that
the Company fails to require MCN to perform such obligations or the Company
defaults in the timely payment of principal of, or any premium or interest on,
any Debt owed to a Lender, such Lender may proceed directly against MCN to
enforce the Company's rights against MCN under the Support Agreement or to
obtain payment of such defaulted principal, premium or interest owed to such
Lender.
The Support Agreement provides that in no event may any Lender, on default
of the Company or MCN or upon failure by the Company or MCN to comply with the
Support Agreement, have recourse to or against the stock or assets of MichCon,
or any interest of the Company or MCN therein. Notwithstanding this limitation,
the Support Agreement provides that funds available to MCN to satisfy any
obligations under the Support Agreement will include cash dividends paid by
MichCon to MCN. In addition to the cash dividends paid to MCN by any of its
subsidiaries, the assets of MCN other than the stock and assets of MichCon are
available as recourse to holders of the Company's Debt. The carrying value of
such assets reflected in MCN's
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<PAGE> 30
balance sheet on an unconsolidated basis, at December 31, 1995 is approximately
$300 million. The term "Debt" is defined in the Support Agreement as debt
securities or other obligations, and includes the Debt Securities. The term
"Lender" is defined in the Support Agreement as any person, firm, corporation or
other entity to which the Company is indebted for money borrowed or to which the
Company otherwise owes any Debt or which is acting as trustee or authorized
representative on behalf of such person, firm, corporation or other entity. The
Indenture provides that each Holder of a Debt Security, as well as the Trustee,
shall be considered a "Lender" for purposes of the Support Agreement.
Funds to repay the Debt Securities at maturity pursuant to the Support
Agreement would come from earnings in the form of dividends paid to MCN by
MichCon and MCN's other subsidiaries, the earnings of other businesses of MCN
and its subsidiaries, or the proceeds of financing transactions.
The Support Agreement provides that MCN will not take any action (or
refrain from taking any action) to the extent that such action or inaction would
cause a default in the performance or breach of any term or provision of the
Indenture, or any Debt outstanding under the Indenture, and MCN will comply with
all covenants and provisions of the Indenture applicable to it as if it were a
party to the Indenture.
The Support Agreement may be amended or terminated at any time by agreement
of MCN and the Company, provided that (i) no amendment regarding the terms
described above may be made unless all Lenders consent in advance and in writing
to such amendment, (ii) no amendment regarding any other term of the Support
Agreement may be made in a manner that adversely affects the rights of Lenders
unless all affected Lenders consent in advance and in writing to such amendment
and (iii) no termination shall be effective until such time as all Debt
(including the Debt Securities) shall have been paid in full.
VALIDITY OF SECURITIES
The validity of the Debt Securities and obligations under the Support
Agreement of MCN will be passed upon by Daniel L. Schiffer, Esq., Senior Vice
President, General Counsel and Secretary of MCN Corporation, and for any agents
or underwriters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability
partnership including professional corporations, New York, New York. Mr.
Schiffer is a full-time employee and officer of MCN and owns 24,491 shares of
MCN Common Stock as of February 26, 1996. LeBoeuf, Lamb, Greene & MacRae, L.L.P.
from time to time renders legal services to MCN and the Company.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from MCN's Annual Report
on Form 10-K for the year ended December 31, 1995 have been audited by DELOITTE
& TOUCHE LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
MCN's Annual Report on Form 10-K for the year ended December 31, 1995,
includes various oil and gas reserve information summarized from reports
prepared by the independent petroleum consultants Ryder Scott Company; Miller
and Lents, Ltd.; Lee Keeling & Associates, Inc. and S.A. Holditch & Associates,
Inc. This reserve information and related schedules have been incorporated
herein by reference in reliance upon such reports given upon the authority of
said firms as experts in oil and gas reserve estimation.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (i) to or through underwriters or
dealers, (ii) directly to purchasers, or (iii) through agents. A Prospectus
Supplement with respect to the Offered Debt Securities will set forth the terms
of the offering of the Offered Debt Securities, including the name or names of
any underwriters, dealers or agents; the purchase price of the Offered Debt
Securities and the proceeds to MCN Investment from such sale; any underwriting
discounts and commissions and other items constituting underwriters' or agents'
compensation; any initial public offering price and any discounts or concessions
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<PAGE> 31
allowed or reallowed or paid to dealers; and any securities exchange on which
such Offered Debt Securities may be listed. Any initial public offering price,
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time. Only firms named in the Prospectus Supplement or a related
pricing supplement, if applicable, will be deemed to be underwriters, dealers or
agents in connection with the Debt Securities offered thereby, and if any of the
firms expressly referred to below is not named in such Prospectus Supplement or
a related pricing supplement, then such firm will not be a party to the
underwriting or distribution agreement in respect of such Debt Securities, will
not be purchasing any such Debt Securities from the Company and will have no
direct or indirect participation in the underwriting or other distribution of
such Debt Securities, although it may participate in the distribution of such
Debt Securities under circumstances entitling it to a dealer's commission.
If underwriters are used in the sale, the Offered Debt Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Debt Securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters or
directly by one or more firms acting as underwriters. The underwriter or
underwriters with respect to a particular underwritten offering of Offered Debt
Securities will be named in the Prospectus Supplement relating to such offering
and, if an underwriting syndicate is used, the managing underwriter or
underwriters will be set forth on the cover of such Prospectus Supplement.
Unless otherwise set forth in the Prospectus Supplement relating thereto, the
obligations of the underwriters to purchase the Offered Debt Securities will be
subject to certain conditions precedent, and the underwriters will be obligated
to purchase all the Debt Securities if any are purchased.
If dealers are utilized in the sale of Offered Debt Securities, MCN
Investment will sell such Offered Debt Securities to the dealers as principals.
The dealers may then resell such Offered Debt Securities to the public at
varying prices to be determined by such dealers at the time of resale. The names
of the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
The Debt Securities may be sold from time to time either directly by MCN
Investment or through agents designated by MCN Investment. Any agent involved in
the offer or sale of the Offered Debt Securities in respect to which this
Prospectus is delivered will be named, and any commissions payable by MCN
Investment to such agent will be set forth in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such agent
will be acting on a best efforts basis for the period of its appointment.
The Debt Securities may be sold directly by MCN Investment to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, MCN Investment will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase Offered Debt Securities from MCN Investment at the
public offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents, dealers and underwriters may be entitled under agreements with MCN
Investment and MCN to indemnification against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such agents, dealers or underwriters may be required to make
in respect thereof. Agents, dealers and underwriters may be customers of, engage
in transactions with, or perform services for MCN Investment or MCN in the
ordinary course of business.
The Debt Securities may or may not be listed on a national securities
exchange. No assurance can be given that there will be a market for the Debt
Securities.
12
<PAGE> 32
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR
THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT,
THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY MCN, THE COMPANY OR ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF MCN OR THE
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE
PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MCN Corporation....................... S-3
MCN Investment Corporation............ S-3
Recent Developments................... S-4
Ratio of Earnings to Fixed Charges.... S-4
Use of Proceeds....................... S-5
Description of the Offered Notes...... S-5
Certain United States Federal Income
Tax Considerations.................. S-16
Plan of Distribution.................. S-19
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
MCN Corporation....................... 3
MCN Investment Corporation............ 3
Ratio of Earnings to Fixed Charges.... 3
Use of Proceeds....................... 4
Description of Debt Securities........ 4
Support Agreement..................... 10
Validity of Securities................ 11
Experts............................... 11
Plan of Distribution.................. 11
</TABLE>
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===============================================================================
$500,000,000
MCN INVESTMENT
CORPORATION
MEDIUM-TERM NOTES,
SERIES B
ENTITLED TO THE BENEFITS
OF A SUPPORT AGREEMENT
BY
LOGO
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
SMITH BARNEY INC.
MAY 6, 1996
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