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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MCN CORPORATION d/b/a MCN Energy Group Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
MCN ENERGY GROUP INC. LOGO
<PAGE> 3
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Letter from the Chairman.................................... 3
Notice of 1997 Annual Meeting of Shareholders............... 4
Proxy Statement............................................. 5
- - Proposal 1 -- Election of Directors....................... 5
Committees of the MCN Board............................... 10
Beneficial Security Ownership of Directors, Nominees and
Executive Officers........................................ 11
- Executive Stock Ownership Guidelines.................... 12
Security Ownership of Certain Beneficial Owners........... 12
Compensation of Directors and Executive Officers.......... 12
- Directors' Compensation................................. 12
- Executives' Compensation................................ 14
- Other Compensation Matters.............................. 15
Report of the Compensation Committee of The Board of
Directors on Executive Compensation..................... 19
Performance Graph......................................... 24
- - Proposal 2 -- Amendment to the MCN Articles of
Incorporation to change the Company Name to MCN Energy
Group Inc. ............................................... 25
- - Proposal 3 -- Amendment of the MCN Corporation Stock
Incentive Plan to Increase the number of shares of MCN
Common Stock authorized to be issued under the Plan....... 25
- - Proposal 4 -- Selection of Auditors....................... 26
Other Proxy Matters......................................... 26
</TABLE>
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- - Denotes items to be voted on at the meeting.
<PAGE> 4
MCN ENERGY GROUP INC. LOGO
ALFRED R. GLANCY III 500 Griswold Street
Chairman, President and Detroit, Michigan 48226
Chief Executive Officer
February 27, 1997
To our Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of MCN Corporation, d/b/a MCN Energy Group Inc. This year's meeting will be held
at the Company's headquarters in Detroit, Michigan on Tuesday, April 22, 1997 at
1:00 p.m. Eastern Daylight-Saving Time. The business items to be acted on during
the Annual Meeting are listed in the Notice of Annual Meeting and are described
more fully in the Proxy Statement.
I especially call your attention to the proposed amendment to the MCN
Articles of Incorporation to change the name of the Corporation to "MCN Energy
Group Inc." MCN has been doing business under the new name since January 14,
1997. The name change is intended to reflect MCN's evolution from a natural gas
distribution company into a new, far-reaching diversified energy company. Your
Board of Directors and management support and recommend the proposed amendment.
If you plan to attend the Annual Meeting, please mark the appropriate box
on the proxy card to request an attendance card. WHETHER OR NOT YOU PLAN TO
ATTEND, YOU CAN BE SURE YOUR SHARES ARE REPRESENTED AT THE MEETING BY PROMPTLY
COMPLETING, SIGNING, DATING AND RETURNING YOUR PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
Along with the other members of the Board of Directors, I look forward to
the opportunity of greeting personally those shareholders who are able to attend
the Annual Meeting.
Sincerely,
/s/ALFRED R. GLANCY III
3
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NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS OF MCN CORPORATION
d/b/a MCN ENERGY GROUP INC.
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1:00 p.m., April 22, 1997
Guardian Building, 32nd Floor Auditorium
500 Griswold St.
Detroit, Michigan 48226
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February 27, 1997
To our Shareholders:
The 1997 Annual Meeting of Shareholders of MCN Energy Group Inc. will be
held at the Company's headquarters in the Guardian Building, 32nd Floor
Auditorium, 500 Griswold Street, Detroit, Michigan on Tuesday, April 22, 1997 at
1:00 p.m., Eastern Daylight-Saving Time. Shareholders will act on the following
matters:
(1) ELECTION OF THREE DIRECTORS TO SERVE FOR TERMS OF THREE YEARS;
(2) APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY TO MCN ENERGY GROUP INC.;
(3) APPROVAL OF AN AMENDMENT TO THE MCN CORPORATION STOCK INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES OF MCN COMMON STOCK AUTHORIZED TO BE
ISSUED UNDER THE PLAN;
(4) RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1997; AND
(5) TRANSACTION OF SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING, OR ANY ADJOURNMENTS.
Shareholders of record at the close of business on February 26, 1997 are
entitled to receive notice of and to vote at the Annual Meeting.
You are invited to attend the Annual Meeting in person. REGARDLESS OF
WHETHER YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOUR BOARD OF
DIRECTORS URGES YOU TO VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Directors,
/s/ Daniel L. Schiffer
Senior Vice President,
General Counsel and Secretary
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MCN CORPORATION LOGO
PROXY STATEMENT
The Board of Directors of MCN Energy Group Inc. (the "MCN Board") solicits
your proxy for use at the Annual Meeting of Shareholders of MCN Energy Group
Inc. ("MCN" or the "Company") to be held on Tuesday, April 22, 1997 at 1:00
p.m., and at any adjournments. This Proxy Statement and a proxy card are
scheduled to be mailed to shareholders beginning on March 4, 1997.
In the following pages, you will find information on your Board of
Directors, both the candidates proposed for election and continuing Directors,
and additional proposals to change the Company name to MCN Energy Group Inc., to
increase the number of shares of MCN Common Stock authorized to be issued under
the MCN Corporation Stock Incentive Plan, and for ratification of the
appointment of auditors, all to be voted upon at the Annual Meeting of
Stockholders or any adjournment of that meeting. The information in this Proxy
Statement has been supplied to you to help you decide how to vote.
As of February 26, 1997, the record date for determination of shareholders
entitled to notice of and to vote at the Annual Meeting, there were 6x,xxx,xxx
outstanding shares of MCN Common Stock, $.01 par value ("MCN Common Stock").
Each outstanding share is entitled to one vote on all matters which may come
before the Annual Meeting.
You can ensure that your shares are voted at the Annual Meeting by
completing, signing, dating and returning the accompanying proxy card in the
enclosed postage-paid envelope. Sending in a signed proxy will not affect your
right to attend the Annual Meeting and vote. A shareholder who gives a proxy may
revoke it at any time before it is exercised by notifying the Secretary of MCN
in writing before the proxy is exercised, or by delivering to the Secretary of
MCN a proxy bearing a later date, or by attending the Annual Meeting and voting
in person.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The MCN Board consists of ten members divided into three classes, with the
term of each director expiring at the Annual Meeting of MCN in the year
indicated on the following pages. Generally, one-third of the MCN Board is
elected each year.
Unless otherwise instructed on the proxy card, the proxy holders intend to
vote for the election of Alfred R. Glancy III, Frank M. Hennessey and Howard F.
Sims to three-year terms as directors. Each of the nominees is a current member
of the MCN Board and served the previous full term. The MCN Board believes that,
if elected, each nominee will be able and willing to serve. However, if any
nominee should be unable or unwilling to serve as a director, the MCN Board may
select a substitute nominee and, in that event, the proxy will be voted for the
person so selected. The remaining seven directors will continue to serve in
accordance with their previous elections.
Information concerning the three directors nominated for a term of three
years and the seven continuing MCN Board members is set forth on pages 6 through
9.
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NOMINEES FOR ELECTION AS DIRECTORS FOR THREE-YEAR TERMS TO EXPIRE IN 2000
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[PHOTO]
ALFRED R. GLANCY III, 59, DIRECTOR SINCE 1988
Attendance: 100% of Board Meetings
Mr. Glancy has been Chairman and Chief Executive Officer of MCN
since August 1988 and President since September 1992. He has
been Chairman of MCN Investment Corporation ("MCNIC") since
1988. Mr. Glancy has been Chairman of MichCon since 1984 and
served as its Chief Executive Officer from 1984 until September
1992. He has been a Director of MichCon since 1981.
Mr. Glancy is Chairman of the Executive Committee of Detroit
Renaissance, Inc., Chairman of Detroit Symphony Orchestra Hall,
Inc., and past Chairman of The Detroit Medical Center. He is a
Trustee of the Founders Society of the Detroit Institute of Arts. He is also a
current Trustee and Director of United Way Community Services, and Director of
Detroit Economic Growth Corporation, Community Foundation for Southeastern
Michigan, NBD Bank Michigan, New Detroit, Inc., Citizens Research Council of
Michigan, Greater Downtown Partnership, Greater Detroit Chamber of Commerce,
Karmanos Cancer Institute and the Hudson-Webber Foundation. He is the
non-executive Chairman of MLX Corp. in Atlanta, Georgia and Vice Chairman of
UNICO Investment in Seattle, Washington.
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[PHOTO]
FRANK M. HENNESSEY, 58, DIRECTOR SINCE 1988
Attendance: 100% of Board and Committee Meetings
Mr. Hennessey became Executive Vice President of Masco
Corporation in September 1995, as well as CEO and Chairman of
Emco Limited, a leading Canadian manufacturer and distributor of
plumbing-related products, roofing and other building products.
He was previously Vice President for Strategic Planning at Masco
Corporation, and President, Chief Executive Officer and Director
of Emco Limited from December 1990 through August 1995. In
addition, Mr. Hennessey is the former President, Chief Executive
Officer and Director of the Handleman Company, having served as
President and Director from 1981 to December 1989 and Chief Executive Officer
from March 1988 to December 1989.
Mr. Hennessey is a Trustee of the Hudson-Webber Foundation and a Director of New
Detroit, Inc. He is a Director and Member of the Finance Committee of United Way
Community Services, and Trustee of the Citizens Research Council of Michigan as
well as a member of the Board of the Greater Detroit and Windsor Japan American
Society. He also served as a Director of Habitat for Humanity, Canada in 1995.
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[PHOTO]
HOWARD F. SIMS, 63, DIRECTOR SINCE 1988
Attendance: 88% of Board and Committee Meetings
Mr. Sims is Chairman and Chief Executive Officer of Sims-Varner
& Associates, Inc., an architecture, engineering and planning
firm, and has been a practicing architect since 1963.
Mr. Sims is a Director of Comerica Incorporated, NICO Ventures,
Citizens Research Council of Michigan, Greater Detroit Area
Health Council, Detroit Economic Growth Corporation and United
Way Community Services. He is a Trustee of the Kellogg
Foundation, Karmanos Cancer Institute, Oakland University and
WTVS. Mr. Sims is a member of the Executive Board of the Detroit Area Council,
Boy Scouts of America.
THE MCN BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF ALFRED R. GLANCY III,
FRANK M. HENNESSEY, AND HOWARD F. SIMS TO THE BOARD OF DIRECTORS.
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CONTINUING DIRECTORS WHOSE TERM EXPIRES IN 1998
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[PHOTO]
THOMAS H. JEFFS II, 58, DIRECTOR SINCE 1991
Attendance: 87% of Board and Committee Meetings
Mr. Jeffs assumed his current duties as Vice Chairman of First
Chicago NBD Corporation and First National Bank of Chicago in
December 1995. Mr. Jeffs has been President and Chief Operating
Officer of its subsidiary, NBD Bank Michigan, since January
1994. He previously served as Vice Chairman of NBD Bancorp, Inc.
and NBD Bank from 1985 through December 1993. Mr. Jeffs is a
Director of First Chicago NBD Corporation and NBD Bank Michigan.
He is Chairman of New Detroit, Inc. and a Director of The Economic Club of
Detroit, Detroit Renaissance, Inc. and Local Initiatives Support Corporation of
New York, New York. Mr. Jeffs serves as Vice Chairman and a member of the
Executive Committee of the Detroit Symphony Orchestra Hall, Inc., and Vice
Chairman of the Greater Detroit Chamber of Commerce. He is a Trustee of the
Founders Society of the Detroit Institute of Arts. Mr. Jeffs is a member of the
Visiting Committee of the University of Michigan, School of Business
Administration and The Bankers' Roundtable.
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[PHOTO]
DALE A. JOHNSON, 59, DIRECTOR SINCE 1992
Attendance: 100% of Board and Committee Meetings
Mr. Johnson retired after serving as Chairman and Chief
Executive Officer of SPX Corporation from 1991 through June
1995. He was President and Chief Executive Officer of SPX
Corporation from 1990 to 1991, and its President and Chief
Operating Officer from 1988 to 1990. SPX Corporation designs,
manufactures and markets specialty service tools and engineered
components for the global motor vehicle industry.
Mr. Johnson is a Director of Douglas & Lomason Company and past Chairman of the
Motor Equipment Manufacturing Association and the Michigan Manufacturing
Association.
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CONTINUING DIRECTORS WHOSE TERM EXPIRES IN 1998
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[PHOTO]
WILLIAM K. MCCRACKIN, 63, DIRECTOR SINCE 1988
Attendance: 100% of Board Meetings
Mr. McCrackin has been Vice Chairman and Chief Financial Officer
of MCN since August 1988 and Treasurer from August 1988 to
September 1992. Mr. McCrackin served as Vice Chairman of MichCon
from 1986 until September 1992 and as Chief Financial Officer of
MichCon from 1985 until September 1992. He has been a Director
of MCNIC since 1988 and a Director of MichCon since 1984.
Mr. McCrackin is Chairman of Junior Achievement of Southeastern Michigan. Mr.
McCrackin is also a Director of Mercy Health Services, and a member of the
Finance Committee of United Way Community Services.
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[PHOTO]
BILL M. THOMPSON, 64, DIRECTOR SINCE 1996
Attendance: 92% of Board and Committee Meetings
Mr. Thompson retired from Phillips Petroleum Company in December
1992 after 38 years of service. He was Chairman of the Board,
President and Chief Executive Officer of GPM Gas Corporation, a
wholly owned subsidiary of Phillips Petroleum Company, from
February 1992 until December 1992. He had been Vice Chairman of
Phillips Petroleum Company from his election in December 1991
until February 1992. Prior to that, he was Executive Vice
President of Phillips' downstream operations from September 1988
until December 1991. He was elected a member of the Board of Directors of
Phillips Petroleum Company in 1988.
Mr. Thompson serves on the Board of Directors of The University of Texas College
of Engineering Foundation Advisory Council, Chapelwood United Methodist Church
in Houston, Texas and Country Club of the Rockies in Edwards, Colorado. Mr.
Thompson also serves on the Board of Directors of Noble Drilling Corporation but
has elected not to stand for re-election when his current term expires on April
23, 1997. He is a past member of the Board of Directors of the American
Petroleum Institute, The National Association of Manufacturers, and The Chemical
Manufacturers Association.
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CONTINUING DIRECTORS WHOSE TERM EXPIRES IN 1999
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[PHOTO]
STEPHEN E. EWING, 53, DIRECTOR SINCE 1988
Attendance: 92% of Board Meetings
Mr. Ewing has been President of Michigan Consolidated Gas
Company ("MichCon") since 1985, Chief Executive Officer since
September 1992 and Chief Operating Officer from 1985 to
September 1992. He previously served as President and Chief
Operating Officer of MCN from August 1988 to September 1992. Mr.
Ewing has been a Director of MichCon since 1984.
Mr. Ewing is the Chairman of the Greater Detroit Area Health
Council and Oakwood Healthcare Systems, and Vice Chairman of
United Way Community Services, also serving as Chairman of their Capital Fund
Committee and member of their Community Leaders Council. He is past Chairman of
the Metropolitan Affairs Corporation and the Midwest Gas Association. He is a
board member of the Michigan First, Michigan Opera Theater and the Skillman
Foundation. Mr. Ewing is also a member of the Detroit Institute of Arts'
Corporate Relations Committee, Leadership Detroit, and Boy Scouts of America's
Detroit Area Advisory Council.
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[PHOTO]
ROGER FRIDHOLM, 56, DIRECTOR SINCE 1988
Attendance: 100% of Board and Committee Meetings
Mr. Fridholm has been President of the St. Clair Group, a
private investment company, since 1991. He has been Chairman of
Ad Hoc Legal Resources, LLC since 1995 and in 1996 became
President of IPG Services Corporation, both of which are
staffing service companies. He previously served as President
and Chief Executive Officer of Of Counsel, Enterprises, Inc.
from February through July 1994 and as Senior Vice President of
Corporate Development of Kelly Services, Inc. from March 1992
through January 1994. He was President and Chief Operating Officer of The Stroh
Brewery Company from 1979 to 1991.
Mr. Fridholm serves as a Director of The Stroh Brewery Company, Comerica
Bank-Michigan, and MascoTech, Inc.
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[PHOTO]
HELEN O. PETRAUSKAS, 53, DIRECTOR SINCE 1990
Attendance: 100% of Board and Committee Meetings
Ms. Petrauskas has been Vice President for Environmental and
Safety Engineering with Ford Motor Company since 1983.
Ms. Petrauskas is a Director of The Sherwin-Williams Company, a
Trustee of the Henry Ford Health System and a member of the
Society of Automotive Engineers. Ms. Petrauskas is also on the
Advisory Boards of the Center for Risk Analysis, Harvard School
of Public Health, and Resources for the Future in Washington,
D.C.
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COMMITTEES OF THE MCN BOARD
The MCN Board held ten regular meetings during 1996. A majority of
directors attended all meetings of the Board. The MCN Board has the following
standing committees. Committee membership as of the record date of February 26,
1997 is identified below.
AUDIT COMMITTEE
Frank M. Hennessey, Chairman
Roger Fridholm
Helen O. Petrauskas
Bill M. Thompson
- - Recommends the selection of the Company's independent auditors;
- - Reviews the scope of audit procedures, the results of the respective audits,
and audit recommendations to management;
- - Reviews auditors' fees, annual financial statements, adequacy of internal
audit procedures and results of those procedures; and
- - Reviews MCN's policies relating to business conduct.
3 meetings in 1996
COMPENSATION COMMITTEE
Dale A. Johnson, Chairman
Thomas H. Jeffs II
Helen O. Petrauskas
- - Reviews and recommends to the MCN Board salary and incentive compensation for
officers of MCN, MichCon and MCNIC; and
- - Reviews the salary policies for other officers, management and supervisory
personnel.
1 meeting in 1996
FINANCE COMMITTEE
Roger Fridholm, Chairman
Frank M. Hennessey
Dale A. Johnson
Howard F. Sims
Reviews and makes recommendations to the MCN Board regarding:
- - Financial plans;
- - Timing and amount of securities to be issued; and
- - Investment policies of the trusteed benefit plans and other corporate funds.
2 meetings in 1996
CORPORATE RESPONSIBILITY COMMITTEE
Howard F. Sims, Chairman
Thomas H. Jeffs II
Bill M. Thompson
- - Consults with management regarding corporate contributions and contributions
from the MichCon Foundation;
- - Reviews and recommends to the MCN Board an annual corporate contribution
budget; and
- - Reviews programs to assure that MCN and its subsidiaries carry out their
respective corporate responsibilities on a broad basis in an effective and
efficient manner.
2 meetings in 1996
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BENEFICIAL SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table includes MCN Common Stock and stock-based holdings, as
of February 26, 1997, of the Company's chief executive officer and its four most
highly-compensated executive officers in 1996 (collectively, the "Named
Executive Officers") and its directors and nominees.
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COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS
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<TABLE>
<CAPTION>
COMMON STOCK
OWNERSHIP
---------------------- STOCK
NAME AMOUNT(1) PERCENT EQUIVALENTS(2) TOTAL
---- --------- ------- -------------- -------
<S> <C> <C> <C> <C>
Alfred R. Glancy III............................ xxx(3) .x% xxx xxx
Rai P. K. Bhargava.............................. xxx(3) * xxx xxx
Stephen E. Ewing................................ xxx(3) .x% xxx xxx
William K. McCrackin............................ xxx(3) .x% xxx xxx
Daniel L. Schiffer.............................. xxx(3) * xxx xxx
Roger Fridholm.................................. xxx(4) * -- xxx
Frank M. Hennessey.............................. xxx * -- xxx
Thomas H. Jeffs II.............................. xxx * -- xxx
Dale A. Johnson................................. xxx * -- xxx
Helen O. Petrauskas............................. xxx * -- xxx
Howard F. Sims.................................. xxx * -- xxx
Bill M. Thompson................................ xxx * -- xxx
Directors, nominees and executive officers
as a group...................................... xxxxxx .x% xxx xxxxxx
</TABLE>
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* Less than 0.1%
(1) This column lists voting securities, including shares of restricted stock in
which the beneficial owners have voting power but do not have investment
power until the shares vest. In many instances, voting power and investment
power are shared with another as joint tenants.
(2) This column includes the non-voting common stock equivalents, such as
performance units and deferred stock units under the MCN Corporation
Mandatory Deferred Compensation Plan.
(3) Includes shares held in the MCN Energy Group Savings and Stock Ownership
Plan (the "Savings Plan"). The beneficial owners of the shares have sole
voting power on all shares. Beneficial owners have investment power on all
shares except those purchased by MCN and held as restricted under provisions
of the Savings Plan.
(4) Includes x,xxx shares held in the St. Clair Charitable Trust, of which Roger
Fridholm is a Trustee. Mr. Fridholm has shared voting and investment power
on these shares.
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EXECUTIVE STOCK OWNERSHIP GUIDELINES
In 1995, the Compensation Committee of the MCN Board approved stock
ownership guidelines for all executives and external directors to formalize its
policy of encouraging share ownership by officers and directors. The guidelines
require the Chairman & CEO to own stock with a value at least five times annual
salary. Other executive and director stock ownership guidelines range from one
to three times salary or retainer fee, depending on their level, with the
expectation that the shares required to at least minimally meet the guidelines
will be acquired over a period of five years from when an individual becomes
subject to such guidelines. At February 26, 1997, xx% of the Named Executive
Officers and directors meet or exceed the guidelines. The comparable percentage
for all MCN, MichCon and MCNIC officers and directors is xx%. The average
stockholdings at February 26, 1997 for the Named Executive Officers and
directors as a multiple of salary or retainer fee is x.x times. The comparable
relationship for all MCN, MichCon and MCNIC officers and directors is x.x times
at February 26, 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Based on a Schedule 13G for the year ended December 31, 1996, filed with
the Securities and Exchange Commission, the information is set forth below with
respect to the beneficial owners of more than five percent of MCN Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS SHARES PERCENT OF CLASS
---------------- --------- ----------------
<S> <C> <C>
The Capital Group Companies, Inc. .............. 3,807,000(1) 5.7%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- ---------------
(1) As reflected in a statement on Schedule 13G dated February 12, 1997, The
Capital Group Companies, Inc., has sole investment power in all shares and
sole voting power in 1,384,000 shares. The Capital Group Companies, Inc.
claims to have no shared voting power on these shares.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION
Currently, officers of MCN or its subsidiaries who serve on the MCN Board
do not receive any additional compensation for service as directors. However,
directors of MCN who are not employees of MCN or its subsidiaries ("Non-officer
Directors") receive an annual fee of $18,000. In addition, MCN's Non-officer
Directors receive 400 restricted shares of MCN Common Stock annually.
Non-officer Directors are also paid a fee of $750 for attendance at each MCN
Board and committee meeting. In 1996 MCN increased the number of regularly
scheduled Board meetings from eight to ten. Non-officer Directors are eligible
to participate in a plan which provides for deferral of all or part of their
annual fee, with interest accrued on amounts deferred. The deferral plan also
includes a pre-retirement survivor benefit which provides the participant's
beneficiary with a payment equal to the present value of any deferrals that
would have been made prior to normal retirement.
An increase in directors' compensation was found appropriate based upon a
review of the practices of comparable companies. In January 1997, the MCN Board
voted to merge and modify the Non-officer Directors' compensation plans.
Effective April 1, 1997 Non-officer Directors will receive an annual fee of
$30,000. The $750 fee for attendance at each MCN Board and committee meeting
will be eliminated. Additionally, each year Non-officer Directors will receive
performance shares worth approximately $30,000, calculated at the beginning of
the fiscal year and rounded to the nearest 100 shares, instead of 400 shares of
restricted stock. Non-officer Directors will also be permitted to defer all or a
portion of their cash retainer fee in performance shares. The performance
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shares will be credited to deferral accounts established for each Non-officer
Director. The value of the performance shares held in each Non-officer
Directors' account will increase/decrease as the value of the underlying MCN
Common Stock increases/decreases and the account will be credited with dividend
equivalents equal to one-half of the common stock dividend rate. Upon the
Non-officer Director's death or retirement, the value of the performance shares
will be paid out in shares of MCN Common Stock over a period of one to fifteen
years as elected by the Non-officer Director. Based on the elections of the
Non-officer Directors, beginning April 1, 1997 % of their compensation will be
in the form of performance shares. As a result these Non-officer Directors are
being effectively compensated 100% in MCN Common Stock, further aligning the
interests of each Non-officer Director and shareholders by tying compensation to
the value of MCN Common Stock.
Currently, Non-officer Directors also participate in the Supplemental Death
Benefit and Retirement Income Plan (SDBRIP). Under the plan, if a Non-officer
Director dies while in office, the director's surviving spouse is entitled to a
lump-sum payment of $100,000. This plan also provides that if a Non-officer
Director holds office until reaching age 65 and then ceases to hold office, the
director can elect to receive either (i) a supplemental retirement benefit of
$10,000 annually for ten years, or (ii) a postretirement death benefit of
$100,000 payable solely to the director's surviving spouse upon the director's
death. The SDBRIP for Non-officer Directors will be terminated on March 31,
1997. The Company's obligations under the Non-officer Director SDBRIP will be
bought out on an actuarially determined, discounted basis with MCN performance
units based on their market value on April 1, 1997.
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EXECUTIVES' COMPENSATION
The following table sets forth the aggregate compensation paid or awarded
for performance from 1994 through 1996 to the Named Executive Officers of MCN.
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SUMMARY COMPENSATION TABLE
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<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL -----------------------------
COMPENSATION(1) RESTRICTED ALL OTHER
----------------------- STOCK LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) AWARD($)(3) PAYOUT($)(1)(4) ($)(5)
--------------------------- ---- --------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
A. R. GLANCY III................. 1996 575,000 -- 34,500
Chairman, President, & Chief 1995 543,750 500,000 -- 1,504,800 32,625
Executive Officer 1994 445,000 268,000 -- -- 26,700
S. E. EWING...................... 1996 335,625 -- 20,138
President & Chief 1995 322,500 170,000 -- 940,500 17,738
Executive Officer, MichCon 1994 319,375 112,000 -- -- 15,969
W. K. MCCRACKIN.................. 1996 306,875 -- 18,413
Vice Chairman & 1995 282,500 175,000 -- 808,830 16,950
Chief Financial Officer 1994 280,625 130,000 -- -- 16,837
R. P. K. BHARGAVA................ 1996 273,750 12,188
President & Chief 1995 227,500 260,000 379,022 413,820 10,375
Executive Officer, MCNIC 1994 190,000 175,000 -- -- 8,750
D. L. SCHIFFER................... 1996 220,000 -- 10,600
Senior Vice President, 1995 195,575 90,000 -- 376,200 9,629
General Counsel & Secretary 1994 165,525 65,000 -- -- 8,712
</TABLE>
- -------------------------
(1) Includes amounts received or deferred.
(2) Amounts under the MCN Corporation Annual Performance Plan are shown for the
year upon which performance is measured. They are paid in February or March
of the subsequent year.
(3) The following table reflects the aggregate restricted stock holdings, from
previous years' awards under the MCN Corporation Stock Incentive Plan, for
the Named Executive Officers, the value of the aggregate shares as of the
date of grant and as of December 31, 1996, and the number of shares that
vested in 1996. Beginning with the 1992 performance year, the Company
revised its Stock Incentive Plan replacing restricted stock awards with
performance units. The Company's current use of restricted stock is limited
to Mr. Bhargava's Special Retention Agreement described on page 16, and
other special situations. Regular dividends are paid on the restricted
stock. The table below does not include the performance units awarded under
the MCN Corporation Long-Term Incentive Performance Unit Plan ("Performance
Unit Plan") described on page 21.
<TABLE>
<CAPTION>
NON-VESTED SHARES AT
DECEMBER 31, 1996
-------------------------------------
VALUE -- VALUE -- SHARES(#)
AGGREGATE DATE OF DECEMBER 31, VESTED
SHARES(#) GRANT($) 1996($) IN 1996
--------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
A. R. Glancy III................. 10,000 $115,000 $ 288,750 10,000
S. E. Ewing...................... 7,000 80,500 202,125 7,000
W. K. McCrackin.................. 6,600 75,900 190,575 6,600
R. P. K. Bhargava................ 17,470 403,949 504,446 2,000
D. L. Schiffer................... 2,000 23,000 57,750 2,000
Executive officers as a group.... 43,070 698,349 1,243,646 27,600
</TABLE>
(4) Amounts shown in this column represent the dollar value of payouts of the
1993 and 1994 awards pursuant to the Performance Unit Plan based upon
performance for the 6 year periods 1990 through 1995 and 1991 through 1996,
respectively. See page 21 for a detailed description of the plan.
(5) Amounts shown in this column represent the Company's contributions to
defined contribution plans.
14
<PAGE> 16
Beginning with the 1992 performance year, the Company adopted a Performance
Unit Plan pursuant to the Stock Incentive Plan approved by its shareholders.
Performance units are granted in February subsequent to the three year period
upon which performance is measured. Performance units granted February 26, 1997
for the 1994 to 1996 performance period to the Named Executive Officers are
indicated in the table below.
- --------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLAN -- AWARDS FOR THE YEAR 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER NON-STOCK PRICE-BASED PLANS
PERIOD UNTIL -------------------------------
NUMBER OF MATURATION THRESHOLD TARGET MAXIMUM
NAME UNITS(#) OR PAYOUT (#) (#) (#)
---- --------- ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
A. R. Glancy III...... xx,xxx 3 years 0 xx,xxx xx,xxx
S. E. Ewing........... xx,xxx 3 years 0 xx,xxx xx,xxx
W. K. McCrackin....... xx,xxx 3 years 0 xx,xxx xx,xxx
R. P. K. Bhargava..... xx,xxx 3 years 0 xx,xxx xx,xxx
D. L. Schiffer........ x,xxx 3 years 0 x,xxx xx,xxx
</TABLE>
Each performance unit is equivalent to a share of MCN Common Stock. The number
of performance units initially granted is based on MCN's total shareholder
return for the previous three years compared to the total shareholder return for
a group of peer companies (identified in the Compensation Committee Report on
page 22) over the same period. Once initially granted, regular dividend
equivalents are paid on performance units. The initial grants are adjusted
upward or downward after a three year period based on MCN's total shareholder
return for this subsequent period compared to the total shareholder return for a
group of peer companies over the same period. (See the discussion of peer groups
and award periods on page 22.) The final award, which will be paid 100% in MCN
Common Stock, will range from zero to 200% of the initial grant. Final awards
are included as Long-Term Incentive Payouts in the Summary Compensation Table on
page 14 in the year they are paid out.
OTHER COMPENSATION MATTERS
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
MCN has entered into Change of Control Employment Agreements with its Named
Executive Officers and certain other officers of MCN and its two principal
subsidiaries. Change of control is defined in the agreements as any of the
following: (1) the acquisition of beneficial ownership of 20% or more of the
outstanding voting securities of the Company, (2) the appointment or election of
new directors to the Company's Board which causes the existing directors to no
longer constitute at least a majority of the Company's Board, (3) a
reorganization, merger or consolidation in which the beneficial owners of the
outstanding voting securities have a beneficial interest of less than 60% of the
common stock or outstanding voting securities of the corporation resulting from
such reorganization, merger or consolidation, or (4) a complete liquidation or
dissolution of the Company. The agreements generally have a term of three years
beginning with the latter of the change of control or the consummation of a
change of control transaction, obligate the officer to continue to serve MCN in
the officer's then current capacity, require MCN to compensate the officer in an
amount at least equal to the officer's base salary plus the average annual bonus
paid to the officer during the preceding three years and provide for the vesting
of various unfunded benefits. These unfunded benefits include the Supplemental
Retirement Plan discussed on page 17, the Supplemental Death Benefit and
Retirement Income Plan discussed on page 17 and the Supplemental Savings Plan,
which permits certain key executives to defer income and be credited with
matching contributions to the extent that would otherwise be permitted under the
Savings Plan but for limitations imposed by
15
<PAGE> 17
Federal tax law on tax-qualified savings plans. The agreements also provide for
the grossed-up payment of any Federal excise taxes due from the executive as a
result of any payments received under the agreement and provide three years of
continued participation in MCN's benefit and retirement programs. MCN's
obligations to the officer, including the obligation to pay base salary and any
bonuses, can only be extinguished if the officer's employment is terminated by
MCN for "good cause" or by the officer without "good reason" both as defined in
the agreements, or by death or disability.
SPECIAL RETENTION AGREEMENT
Early in 1995, the MCN Board authorized an eight year retention agreement
with Mr. Bhargava, the President and Chief Executive Officer of MCNIC. Mr.
Bhargava is the executive officer who is expected to manage and grow the
Company's diversified business ("Diversified Energy") in order to produce a
significant portion of the growth in shareholder value inherent in the Company's
strategic direction. The retention agreement is intended to encourage the
attainment of shortterm and long-term financial goals and discourage alternative
offers of employment. Recognizing the entrepreneurial nature of the Diversified
Energy group, the agreement is also intended to provide Mr. Bhargava with the
economic equivalent of an equity stake in its affairs.
Specifically, Mr. Bhargava will receive annual restricted stock awards
equivalent to 5% of the net income of MCNIC that is in excess of the threshold
return on equity ("ROE"), but less than the target ROE, plus 3% of net income in
excess of the target ROE. If earnings are below the threshold ROE levels, then
no award is paid. The threshold and target ROE levels will be 12% and 15%,
respectively. Annual awards are limited to 1.5% of net income and total awards
payable under the agreement are limited to $4,000,000, subject to increase at
the discretion of the MCN Board. Dividends will be paid on the shares of
restricted stock awarded and the shares will vest on December 31, 2002, the end
of the contract term.
The awards of restricted stock are generally forfeitable if Mr. Bhargava
leaves the Company prior to the end of the contract term. The restricted shares
awarded immediately vest under specified circumstances, including Mr. Bhargava's
death, permanent disability, or involuntary termination without cause.
INDEBTEDNESS OF MANAGEMENT
In order to encourage executives to maintain their holdings in shares
purchased under the MCN Stock Option Plan, which was replaced by the MCN Stock
Incentive Plan in May 1989, the Company provided loans at an interest rate in
accordance with IRS guidelines based on the market yield of U.S. short-term
marketable securities. Pursuant to this provision, Mr. Glancy initiated a loan
in 1992 at an interest rate of 4.43%, which was renewed in 1995 at the then
current interest rate of 5.65%. The loan covered a maximum outstanding amount of
$957,994, including interest, during 1996. A balance of $841,330, including
interest, was outstanding as of December 31, 1996. The loan is secured by
169,628 shares of MCN Common Stock with a year-end market value of $4,898,009.
16
<PAGE> 18
RETIREMENT PLANS
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFIT FOR YEARS OF SERVICE
--------------------------------------------------------------------
FINAL AVERAGE 20 25 30 35 40 45
ANNUAL EARNINGS YEARS YEARS YEARS YEARS YEARS YEARS
- --------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000.................... $ 54,700 $ 68,400 $ 82,100 $ 95,700 $105,700 $115,600
200,000.................... 73,000 91,300 109,500 127,800 141,000 154,300
250,000.................... 91,300 114,100 137,000 159,800 176,400 193,000
300,000.................... 109,600 137,000 164,400 191,800 211,700 231,600
350,000.................... 127,900 159,900 191,900 223,800 247,100 270,300
400,000.................... 146,200 182,800 219,300 255,900 282,400 309,000
450,000.................... 164,500 205,600 246,800 287,900 317,800 347,700
500,000.................... 182,800 228,500 274,200 319,900 353,100 386,300
550,000.................... 241,800 276,100 301,600 351,900 388,500 425,000
600,000.................... 263,800 301,300 329,100 383,900 423,800 463,700
650,000.................... 285,800 326,400 356,500 415,900 459,100 502,400
700,000.................... 307,800 351,500 384,000 447,900 494,500 541,000
</TABLE>
RETIREMENT PLANS. All salaried employees of MCN and certain of its
subsidiaries (the "Participating Companies") participate in a noncontributory,
defined benefit retirement plan (the "Retirement Plan"). Under the Retirement
Plan, the monthly pension at normal retirement (age 65) is calculated using a
formula providing a single life monthly benefit equal to (1) 1.33% of final
average monthly earnings multiplied by the number of total years of credited
service with the Participating Companies; plus (2) 0.5% of final average monthly
earnings which exceed a 35 year average social security wage base multiplied by
the number of years of credited service up to 35 years. Early retirement
benefits (at a reduced benefit if such retirement is before the participant
attains age 62) are permitted under the plan, (1) on or after the date a
participant attains age 55, if the participant's age plus years of credited
service (as defined in the plan) equals or exceeds 70, or (2) when the
participant has attained 30 years of credited service. An employee's final
average monthly earnings is defined as his or her highest average monthly
earnings for a consecutive 60-month period during the participant's last 15
years of employment. Average monthly earnings are calculated based on an
individual's base salary only. An employee is not vested under the Retirement
Plan until he or she has completed five years of credited service or has
attained age 65.
The Supplemental Retirement Plan is also maintained which provides for the
payment of benefits that would otherwise be payable under the Retirement Plan
but for limitations imposed by Federal tax law on benefits paid by qualified
plans.
The table above illustrates the total estimated annual normal retirement
pension benefits including the Supplemental Retirement Plan amounts, if
applicable, that will be payable upon normal retirement at age 65 to
participants for the specified remuneration and years of credited service
classifications. Retirement benefits are not subject to any deduction for social
security or other offset amounts. The table does not reflect any reductions in
retirement benefits that would result from the selection of one of various
available survivorship options or the election to retire prior to age 62.
Benefit amounts are computed on a straight life annuity basis.
As of December 31, 1996, the credited years of service (rounded to the
nearest whole year) for the Named Executive Officers are as follows: Mr. Glancy,
34 years; Mr. Ewing, 25 years; Mr. McCrackin, 41 years; Mr. Bhargava, 22 years
and Mr. Schiffer, 20 years.
SUPPLEMENTAL DEATH BENEFIT AND RETIREMENT INCOME PLAN. The Company's Named
Executive Officers and certain other officers of the Participating Companies
currently participate in a
17
<PAGE> 19
Supplemental Death Benefit and Retirement Income Plan. Under this plan, the
pre-retirement death benefits payable to an employee's surviving spouse are 50%
of the employee's final salary until such time as the employee would have
reached age 65; thereafter, payments are 20% of salary until the employee would
have reached age 75. At retirement an employee may elect to receive (1) annual
supplemental retirement income equal to 20% of the employee's final annual
salary payable for a period of ten years after age 62; or (2) other available
post retirement benefits which are actuarially equivalent to the ten-year
payment option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Dale A. Johnson, Mr. Thomas H. Jeffs II and Ms. Helen O. Petrauskas
serve on the Compensation Committee of MCN. Mr. Jeffs is an executive officer of
NBD Bank Michigan. Mr. Alfred R. Glancy III, Chairman, President and Chief
Executive Officer of MCN, serves as a Director of NBD Bank Michigan.
MCN prohibits an officer-director of MCN from serving on the compensation
committee of an unaffiliated corporation if an officer-director of the
unaffiliated corporation serves on the MCN Compensation Committee. Also, no
director of MCN can serve on the MCN Compensation Committee if he or she is an
officer-director of an unaffiliated corporation on whose Compensation Committee
one or more officer-directors of MCN serve. Mr. Jeffs' service on the MCN
Compensation Committee and Mr. Glancy's service as a Director of NBD Bank
Michigan, are consistent with the MCN policy.
18
<PAGE> 20
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee (the "Committee") establishes MCN's strategic
compensation objectives. The Committee then monitors and evaluates the design
and effectiveness of MCN's executive pay programs against those objectives.
Under Committee review, MCN's executive compensation programs are administered
to link executive pay with MCN's strategic direction and business objectives.
OBJECTIVE:
The primary and overriding objective is to provide a total compensation
package that allows MCN to attract, retain and motivate executive employees. In
doing so,
- MCN establishes total compensation opportunity (base salary, annual
incentive, and long-term incentive) at competitive levels.
- Base salary levels are generally set between the 40th and 65th
percentile for each individual position.
- Total cash compensation (base salary and annual incentive) is
targeted for the 65th percentile with the opportunity to exceed
that level when warranted by company and individual performance.
Company performance is measured against established financial
targets.
- Long-term incentives are also targeted for the 65th percentile with
the opportunity to exceed that level when MCN performance warrants.
Performance is defined in terms of total shareholder return
relative to a peer group of companies for establishing the level of
long-term incentives granted.
METHODOLOGY:
The methodology used to determine market competitiveness is an annual
survey of comparable companies as well as analysis of national and industry
executive compensation data. Three separate sets of comparable companies have
been identified to best match the three distinct business environments of MCN,
MichCon, and MCNIC.
- Performance, both Company and individual, drive total compensation
levels.
- The relationship of an executive's current salary in relation to
the specific marketplace data, along with an assessment of the
individual's performance against a set of objectives, determines
base pay increases.
- Annual incentives relate to attaining financial, operating, and
individual objectives.
- Long-term incentives relate to creating shareholder value.
- Variable ("incentive") compensation opportunities are set at levels to
put a significant percentage of executive compensation at risk relative
to Company performance, thus linking executive and shareholder interests.
At target payout projections, the short-term and long-term incentive
programs put approximately 60% of the Chairman & CEO's total direct
compensation at-risk.
- Program design encourages and increases stock ownership by executives to
better align their interests with those of shareholders. Currently, any
final awards under the long-term incentive plan are paid out 100% in MCN
Common Stock.
- All components of executive compensation programs are communicated to
participating executives annually to insure they understand the
opportunity (and the risks) available based on performance, thus
increasing the motivational impact of the plans.
19
<PAGE> 21
ROLE OF THE COMMITTEE:
The Committee makes recommendations to the Board of Directors on the
compensation levels of all officers of MCN, MCNIC, and MichCon and reviews the
aggregate recommendations for base pay, annual incentive awards, and long-term
incentive awards for the other senior executives of the Company. In addition,
the Committee has oversight responsibility for all the Company's compensation
programs to ensure that they are aligned with the strategic direction and
objectives of the Company.
In fulfilling these responsibilities, the Committee utilizes the Company's
internal compensation function and outside consultants to research and summarize
pay and incentive practices of comparable companies, industry averages, and
other benchmarks. This year, the Committee through MCN's executive compensation
staff, again utilized Hewitt Associates to assist in this process.
SPECIFIC DISCUSSION ON THE COMPONENTS OF EXECUTIVE COMPENSATION:
The components of an MCN executive's direct compensation consist of base
salary, short-term incentives, and long-term incentives. These are discussed
below:
BASE SALARY -- The base salary of an executive is established when entering
the position based on the individual's experience in relation to external market
comparisons for that position. Annually, each executive's salary is reviewed
relative to the specific marketplace data and adjustments are made with
consideration of the individual's level of performance.
The Committee, in developing its recommendations, reviewed not only the
market data for these increases, but also considered the scope and role of the
executive within the organization. In addition, the Committee factored in the
executives' contribution and results. Finally, the Committee reviewed the base
salary and incentive compensation to total compensation levels in the
marketplace.
For 1997 the Committee found, using the market data developed by Hewitt
Associates, that Mr. Glancy's base salary was slightly below the 40th percentile
of the diversified energy company market. Therefore, the Committee determined to
increase Mr. Glancy's base salary to $xxx,xxx (x% increase). Mr. Glancy's base
salary was last increased on April 1, 1995. Using the same methodology, the
committee determined that 17 other officers of MCN, MichCon, and MCNIC should
receive base salary increases averaging 10.2%. Eight other officers did not
receive any increase in base salary. Overall, base salaries were increased by a
total of 7.0% for the 25 officers other than Mr. Glancy.
SHORT-TERM INCENTIVES ("THE ANNUAL PERFORMANCE PLAN") -- Payout under the
Company's annual performance plan is funded based on the performance of the
Company as measured against goals established by the Committee prior to the
start of the fiscal year. Individual payouts are determined based on each
executive's performance.
The measures of Company performance used in determining annual incentive
award funding are as follows:
- For MichCon, the achievement of the following combined financial and
operating goals in 1996:
Return on Equity -- weighted 70%
Customer Satisfaction -- weighted 20%
Employee Satisfaction -- weighted 10%
In 1997, Annual Incentive Plan funding will be based solely on
achievement of targeted return on equity.
- for MCNIC, the achievement of targeted return on equity.
20
<PAGE> 22
- for MCN, the weighted combination of MichCon and MCNIC results. Weighting
is determined annually by the Committee prior to the start of the fiscal
year. For 1996 the weighting was 60% MichCon and 40% MCNIC for most MCN
employees and 75% MCNIC and 25% MichCon for those MCN employees who
devote a large majority of their time directly supporting MCNIC. For 1997
the weighting has been established at 50% MichCon and 50% MCNIC based on
the expected financial contribution by each company in the coming years.
The weighting for MCNIC support employees was not changed.
In 1996 the target award opportunity for the Chairman & CEO was 60% of base
salary. Target awards for all other executives ranged from 15% to 55%. The
adjusted award could be more or less than the target award depending on the
achievement of the Company's performance measures discussed above. Actual payout
of the award is based on individual performance and may vary from 0% to 125% of
the adjusted award amount. Individual performance is measured using a
combination of sources including:
- the performance assessment to measure specific accomplishments and
results, and
- leadership abilities and the executive's fiscal responsibility.
MichCon's performance in 1996, using the above measures, resulted in an
adjusted incentive award fund equal to 100% of the target payout. MCNIC's
performance in 1996, using the above measure, resulted in an adjusted incentive
award fund equal to 201% of the target payout. The weighted performance of these
two MCN subsidiaries resulted in an MCN adjusted incentive award fund equal to
140% (60/40 weighting) of the target award. Mr. Glancy's actual award, based on
his and the Company's performance, was $ or % of his 1996 base salary.
In 1994, the Annual Performance Plan for executives was expanded to include
all MCN Corporate staff and MCNIC employees. In 1997 all MichCon non-executive
employees, excluding those covered by Collective Bargaining Agreements, will
also be included in this plan. Employees are eligible to receive awards using
the same funding criteria as executives. MichCon union employees will continue
to participate in the MichCon Employee Incentive Program introduced in 1993.
As a result of the overall compensation review of the market, the
Committee, for 1997, increased the target award opportunity for three levels of
MCN, MichCon, and MCNIC executives by five percentage points; however, the
overall range remains from 15% to 55% of base salary. The target awards for the
Chairman & CEO of MCN is unchanged at 60% of base salary and is also unchanged
for the President & CEO of MCNIC at 55% of base salary.
LONG-TERM INCENTIVES ("PERFORMANCE UNIT PLAN") -- In late 1992, the Company
redesigned its Long-Term Incentive Program to encourage a more strategic focus
on long-term performance from a shareholder perspective, to place a larger
portion of long-term incentives at-risk and increase the retention of stock
issued under the plan.
This program annually awards performance units to executives based on total
shareholder return covering a six-year period, as compared to a peer group of
companies. This period is divided into two parts. The first three years
determines the initial grant of performance units. Participants receive dividend
equivalents on the performance units during the subsequent three-year period.
The initial grant is adjusted upward or downward based upon performance over the
subsequent three-year period. The final award, if any, is paid 100% in MCN
Common Stock (of which the recipient may sell half primarily to satisfy tax
withholding obligations) that must be retained until the recipient meets or
exceeds the applicable stock ownership guidelines discussed on page 12, retires,
or
21
<PAGE> 23
terminates employment with the Company. Both the initial grant and the final
award are based on MCN's performance ranking within its peer group using the
following parameters:
<TABLE>
<CAPTION>
PERFORMANCE
RANKING PERCENT OF
(QUARTILE) AWARD
----------- ----------
<S> <C> <C>
First....................................... 125% - 200%
Second...................................... 75% - 150%
Third....................................... 25% - 100%
Fourth...................................... 0% - 50%
</TABLE>
Individual standard awards are based on the impact of the executive's
position to corporate success and to the size of the standard grant (at current
market value) compared to base salary to achieve an appropriate market-based
relationship between base pay and incentive opportunity. The target award
levels, which are expressed as a percentage of the 50th percentile base salary,
are reviewed annually as part of the overall compensation survey analysis. The
standard award for the Chairman & CEO was increased from 75% to 85% of base pay.
Standard awards for certain other executives were also increased. In 1997 this
equated to 18,100 performance units (based on an average stock price of $29.02
for the period December 16, 1996 through January 15, 1997) for Mr. Glancy.
In 1996 the Committee approved the use of a new peer group to recognize
MCN's continuing transition to a diversified energy company; however, the old
peer group will continue to be used as the basis for issuing final awards for
performance units initially granted in 1994 and 1995. The new peer group will be
used as the basis for final awards for performance units granted in 1996 and
subsequent years. Because of pending mergers and acquisitions it was necessary
to replace one company in the old peer group and three companies in the new peer
group. The replacement companies are prospective only. The companies currently
included in the respective peer groups are identified below:
<TABLE>
<CAPTION>
OLD PEER GROUP NEW PEER GROUP
-------------- --------------
<S> <C>
Atlanta Gas Light Brooklyn Union Gas Company
Brooklyn Union Gas Company CMS Energy Corp.
CMS Energy Corp. Coastal Corp(2)
Columbia Gas System Columbia Gas System
Consolidated Natural Gas Consolidated Natural Gas
DTE Energy Company (Detroit Edison) Enron Corporation
Equitable Resources Equitable Resources
Laclede Gas Company K N Energy
National Fuel Gas National Fuel Gas
NICOR Inc. ONEOK Inc.(2)
ONEOK Inc.(1) Questar Corporation
Peoples Energy Company Sonat Inc.(2)
Southwest Gas Corp. Southwestern Energy Co.
Washington Gas Light The Williams Companies
WICOR Inc. WICOR Inc.
</TABLE>
----------------------------------------
(1) Replaces NorAm Energy Corp.
(2) Replaces Enserch Corporation, NorAm Energy Corp., and
PanEnergy Corp.
For the three-year period 1994-1996, MCN's total return to shareholders was
90% which placed the Company fifth in the new peer group. Using the program
guidelines above, and considering MCN's ranking, the Committee granted 1997
performance units at xxx% of the standard award level. For Mr. Glancy the
Committee granted xx,xxx performance units. These units may as much as
22
<PAGE> 24
double or be forfeited completely based on how MCN's total shareholder return
compares to peer companies using the above scale for the 1997-1999 period.
The Performance Units initially granted in February 1994 vested in February
1997. The Company finished third in the old peer group for the 1994-1996 period;
however, for the entire 1991-1996 performance cycle MCN finished first in the
peer group with a total shareholder return of 270%. This was over 115 percentage
points higher than the next closest company. During this same six year period,
MCN's total market capitalization increased by more than $1.4 billion (278%) and
shareholder value, based on the number of shares outstanding on December 31,
1990, increased by $868 million (169%). Based on that performance, the Committee
adjusted the initial units granted by 200% to determine the final awards.
TREATMENT OF INDIVIDUAL EXECUTIVE WITH COMPENSATION EXCEEDING $1 MILLION
ANNUALLY
In 1994, the Company adopted a plan requiring covered executives whose
total compensation in any calendar year exceeded the $1 million limitation on
deductibility set forth on Section 162(m) of the Internal Revenue Code of 1986
to defer the excess until he or she leaves the Company. This excess amount is
placed in an account in which the value is adjusted in terms of MCN Common Stock
at prevailing market prices. Executives receive dividend equivalents on 50% of
the common stock units deferred.
CONCLUSION
We believe that MCN's Executive Compensation programs closely align each
executive's total compensation potential with individual and Company performance
as well as shareholder returns, while providing a balanced compensation mix
between base pay and incentives that is based on market and performance factors.
We believe these compensation programs will allow MCN to attract, retain, and
motivate executive employees. It is the Compensation Committee's intent to
ensure that this alignment continues into the future and to review and refine
the Company's pay and incentive programs to reflect this objective.
THE COMPENSATION COMMITTEE
Dale A. Johnson, Chairman
Thomas H. Jeffs II
Helen O. Petrauskas
23
<PAGE> 25
PERFORMANCE GRAPH
COMPARISON OF $100 INVESTED IN MCN STOCK
SINCE DECEMBER 1991
WITH DIVIDENDS REINVESTED
[GRAPH]
OLD NEW
DATE MCN S&P 500 PEER GROUP PEER GROUP
- ----- ------- ------- ---------- ----------
12/91 $100.00 $100.00 $100.00 $100.00
12/92 $135.39 $107.62 $112.92 $120.71
12/93 $160.33 $118.47 $127.84 $153.58
12/94 $173.76 $120.03 $113.37 $147.18
12/95 $235.10 $165.14 $160.12 $208.16
12/96 $302.70 $203.02 $197.65 $275.36
- -------------------------
(1) The above graph compares the performance of MCN with that of a broad equity
market index, the S&P 500 Composite. Also included is the performance of the
old peer group of companies currently used in connection with the Company's
Performance Unit Plan. In 1996, the Company changed to the new peer group of
companies to be used in connection with its Performance Unit Plan to better
reflect its current business mix. (See the discussion of peer groups and
award periods on page 22.)
Due to the Company's business mix, it no longer compares itself to the S&P
Utilities Composite.
(2) The returns for each company included in the peer group are weighted
according to the company's stock market capitalization at the beginning of
each month.
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<PAGE> 26
PROPOSAL 2 -- COMPANY NAME CHANGE
The MCN Board proposes an amendment to the MCN Corporation Articles of
Incorporation to change the name of the Company to "MCN Energy Group Inc." The
name change is intended to reflect MCN's evolution from a natural gas
distribution company into a new, far-reaching diversified energy company. MCN is
now involved in multiple facets of the energy industry, from natural gas and oil
exploration and production to natural gas gathering, processing, transmission,
distribution and storage, as well as electric power generation. During the
five-year period ending 1996, MCN's diversified energy businesses experienced
rapid growth. The Company's strategic direction envisions significant growth
opportunities through investments in a portfolio of energy-related projects. At
year-end 1996 the Diversified Energy group assets represented approximately 43%
of MCN's total of $3.6 billion, up from approximately 5% in 1991. Approximately
28% of MCN's earnings from continuing operations were from the Diversified
Energy group in 1996. In addition to better describing MCN's focus on the energy
business and strategic growth path, the name change retains the equity built up
in the "MCN" name since forming the holding company in late 1988.
THE MCN BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND APPROVAL OF THE
AMENDMENT TO CHANGE THE NAME OF THE CORPORATION TO MCN ENERGY GROUP INC.
PROPOSAL 3 -- APPROVAL TO AMEND THE MCN CORPORATION STOCK INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES OF MCN COMMON STOCK AUTHORIZED TO BE
ISSUED UNDER THE PLAN
At the 1989 Annual Meeting of Shareholders, shareholders approved the MCN
Corporation Common Stock Incentive Plan (the "Plan"). The objectives of the Plan
are to encourage key employees to remain employed with the Company and provide
them with a significant level of compensation in a form which links their
interests with those of shareholders for the long-term success and progress of
the Company. The Plan provides for an annual grant of performance units if
certain threshold levels of total return to shareholders are achieved relative
to a group of peer companies. The performance units vest over a period of three
years. Initial performance unit grants are typically forfeited upon resignation.
Final awards under the Plan are in the form of MCN Common Stock which must be
retained until the participant's direct shareholdings meet or exceed the
applicable stock ownership guidelines, or the participant retires or terminates
employment with the Company. As of February 26, 1997, xxx employees participate
in the Plan and xxx shares remain available for issuance. In order to meet
future potential Performance Unit Plan awards, the MCN Board proposes to amend
the Plan to increase the number of authorized shares available for distribution
under the Plan by 5% of the number of MCN common shares issued and outstanding
as of February 26, 1997.
If this proposal is approved by the Company's shareholders, the additional
number of shares of MCN Common Stock with respect to which Options, Stock
Appreciation Rights, Awards and Performance Units may be issued under the Plan
will be 3,xxx,xxx shares, which may be adjusted for stock splits or other
changes in the capital structure affecting MCN Common Stock. In any calendar
year, the number of shares issued under the Plan shall not exceed one percent of
the shares of MCN Common Stock outstanding on the first day during the calendar
year on which the shares are issued. No option or share award shall be made
under the Plan after March 1, 2005.
THE MCN BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND APPROVAL OF THE
AMENDMENT OF THE MCN CORPORATION STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES OF MCN COMMON STOCK AUTHORIZED TO BE ISSUED UNDER THE PLAN.
25
<PAGE> 27
PROPOSAL 4 -- SELECTION OF AUDITORS
The MCN Board has selected Deloitte & Touche LLP as independent auditors to
audit the financial statements of MCN and its subsidiaries for the year ending
December 31, 1997 and is submitting its choice for ratification by shareholders.
Deloitte & Touche LLP, or its predecessors, has served as MCN's auditors since
1988 and MichCon's auditors since 1986. A representative of Deloitte & Touche
LLP will be present at the Annual Meeting of Shareholders and will have an
opportunity to make a statement and respond to appropriate questions. If the
appointment is not ratified, the MCN Board will appoint another firm as the
independent auditors for the year ending December 31, 1997.
THE MCN BOARD OF DIRECTORS RECOMMENDS THE RATIFICATION OF DELOITTE & TOUCHE
LLP AS INDEPENDENT AUDITORS, TO AUDIT THE FINANCIAL STATEMENTS OF THE
CORPORATION AND ITS SUBSIDIARIES FOR THE YEAR ENDING DECEMBER 31, 1997.
OTHER PROXY MATTERS
VOTING
Michigan law and the Company's bylaws require the presence of a quorum for
the annual meeting, defined here as a majority of the votes entitled to be cast
at the meeting. Votes withheld from director nominees and abstentions will be
counted in determining whether a quorum has been reached.
Assuming a quorum has been reached, a determination must be made as to the
results of the vote on each matter submitted for shareholders approval. The
director nominees must receive a plurality of the votes cast at the meeting;
therefore, abstentions will not affect the election of directors. The approval
of the amendment of the Company's Articles of Incorporation to change the name
of the Company to MCN Energy Group Inc. must be approved by a majority of the
votes outstanding and not merely the votes cast. The ratification of the
amendment to the MCN Corporation Stock Incentive Plan must be approved by a
majority of votes present, or represented and entitled to vote at the meeting.
Therefore abstentions will have the same legal effect as votes against these
matters. The selection of the Company's auditors must be approved by a majority
of the votes cast at the meeting; therefore, abstentions will not affect the
selection of the Company's auditors.
Under the rules of the New York Stock Exchange ("NYSE"), brokers who hold
shares on behalf of their customers (shares held in street name), have the
authority to vote on certain items when they have not received instructions from
beneficial owners. However, brokers are not authorized to vote on "non-routine"
matters if they do not receive instructions from beneficial owners ("Broker
Non-votes"). Under NYSE rules, all the matters presently before the meeting are
"routine" matters, therefore brokers holding shares in street name for their
customers may vote, in their discretion, on behalf of any customer who does not
furnish voting instructions. If a "non-routine" matter comes before the meeting,
Broker Non-votes will not be treated as votes cast in determining the outcome of
the vote.
COST OF SOLICITATION OF PROXIES
The cost of soliciting Proxies will be borne by MCN and the solicitation
will be made by use of the mails, personally or by telephone or telegraph by
officers, directors and regular employees of MCN and its subsidiaries who will
not be additionally compensated therefore. The firm of Corporate Investor
Communications, Inc. has been retained to assist with the solicitation of broker
and nominee Proxies at a cost of approximately $6,500. MCN will also reimburse
banks, brokers,
26
<PAGE> 28
nominees and other fiduciaries for reasonable expenses incurred by them in
forwarding the Proxy material to the beneficial owners of MCN Common Stock.
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for inclusion in MCN's 1998 proxy
statement for presentation at the 1998 Annual Meeting of Shareholders must be
received by the Secretary of MCN at 500 Griswold Street, Detroit, Michigan
48226, no later than November 4, 1997. Other shareholder proposals concerning
business to be conducted at MCN's annual meeting must be received by the
Secretary of MCN at 500 Griswold Street, Detroit, Michigan 48226 not earlier
than January 22, 1998 nor later than February 21, 1998.
27
<PAGE> 29
500 Griswold Street
Detroit, Michigan 48226
<PAGE> 30
/X/ PLEASE MARK YOUR 4769
VOTES AS IN THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" ALL OF
THE BOARD OF DIRECTORS' NOMINEES AND "FOR" PROPOSALS 2, 3 AND 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
<TABLE>
<S> FOR ALL <C> <C>
1. Election of FOR WITHHELD EXCEPT 2. Approval to amend the FOR AGAINST ABSTAIN
Directors / / / / / / MCN Articles of / / / / / /
Incorporation to
change the name of the Company
to MCN Energy Group Inc.
NOMINEES:
ALFRED R. GLANCY III, FRANK M. HENNESSEY 3. Approval to FOR AGAINST ABSTAIN
AND HOWARD F. SIMS amend the MCN / / / / / /
Corporation Stock Incentive
IF YOU DO NOT WISH YOUR SHARES Plan to increase the number of
VOTED "FOR" A PARTICULAR NOMINEE, shares of MCN Common Stock
MARK THE "FOR ALL EXCEPT" BOX authorized to be issued under the plan.
AND STRIKE A LINE THROUGH THE
NOMINEE(S) NAME. YOUR SHARES
WILL BE VOTED FOR THE REMAINING 4. Ratification of FOR AGAINST ABSTAIN
NOMINEE(S). appointment of / / / / / /
Deloitte & Touche
LLP as independent
auditors for the
year ending
December 31, 1997.
5. In their
discretion the
Proxies are
authorized to vote
upon such other
business as may
properly come
before the meeting
or adjournments.
Mark box at right / /
to request that an
Attendance Card to
the Annual Meeting
be sent to you.
Mark box at right / /
if comments have
been noted on the
reverse side of
this card.
Please sign
exactly as name
appears hereon.
Joint owners
should each sign.
When signing as
attorney,
executor,
administrator,
trustee or
guardian, please
give full title
as such.
</TABLE>
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[MCN ENERGY GROUP INC. LOGO]
500 GRISWOLD
DETROIT, MICHIGAN 48226
Dear Shareholder:
Your vote is very important to the successful conduct of the company's
business. I strongly encourage you to exercise your right to vote your shares.
We must receive your vote prior to the Annual Meeting of Shareholders on
April 22, 1997.
Please mark the boxes on the proxy card to indicate how you wish to vote your
shares. Then sign, date and detach the card and return it in the enclosed
postage-paid envelope. If you expect to attend the Annual Meeting, please
mark the appropriate box above and an Attendance Card will be mailed to you
prior to the meeting.
We look forward to meeting you if you are able to attend the Annual Meeting and
thank you for promptly returning your proxy card.
Sincerely,
/S/ ALFRED R. GLANCY III
- --------------------------
Alfred R. Glancy III
Chairman, President
& Chief Executive Officer
