SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
SOUTHEASTERN MICHIGAN GAS ENTERPRISES, INC.
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(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:
________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
5) Total fee paid:
________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] 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:
________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
3) Filing Party:
________________________________________________________________________
4) Date Filed:
________________________________________________________________________
[LOGO]
SOUTHEASTERN
MICHIGAN GAS ENTERPRISES
March 7, 1997
NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS
TO BE HELD ON APRIL 15, 1997
To the Common Shareholders of
SOUTHEASTERN MICHIGAN GAS ENTERPRISES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Southeastern Michigan Gas Enterprises, Inc. (the Company) will be held at
the McMorran Auditorium, 701 McMorran Boulevard, Port Huron, Michigan (see
map on back), on Tuesday, April 15, 1997 at 2:00 p.m., for the following
purposes:
I. To approve the 1997 Long-Term Incentive Plan.
II. To approve the creation of Preference Stock.
III. To approve a change in the Company's name to SEMCO Energy,
Inc.
IV. To elect four members to the Board of Directors.
V. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Common Shareholders of record, at the close of business on February
18, 1997, will be entitled to vote at the meeting or at any adjournment
thereof.
Whether or not you expect to attend the meeting, please sign, date and
return the accompanying proxy in the enclosed envelope, which requires no
postage if mailed in the United States. If you should attend, you may vote
in person, if you wish, whether or not you have sent in your proxy.
By order of the Board of Directors
Sherry L. Abbott, Secretary
405 Water Street P.O. Box 5026
Port Huron, Michigan 48061-5026 (810) 987-2200
[LOGO]
SOUTHEASTERN
MICHIGAN GAS ENTERPRISES, INC.
405 Water Street, Port Huron, MI 48060
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Southeastern Michigan Gas Enterprises, Inc. (the Company) for use at the
Annual Meeting of Shareholders on Tuesday, April 15, 1997, at 2:00 p.m.,
and any adjournments thereof, to be held at McMorran Auditorium, 701
McMorran Boulevard, Port Huron, Michigan. These proxy materials are being
mailed to shareholders on or about March 7, 1997.
A Shareholder giving the enclosed proxy (or his authorized
representative) may revoke it any time before it is exercised by executing
a subsequent proxy, or by oral or written notice to the Company or by
voting in person at the meeting.
The Company will bear the cost of soliciting proxies, including
charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of stock. In addition
to mailings, proxies may be solicited by personal interview,
telephone or telegraph by certain of the Company's employees
without compensation. The Company may also retain and compensate
one or more outside organizations to assist in soliciting proxies.
A copy of the Company's 1996 Annual Report is enclosed.
STOCK OUTSTANDING, VOTING RIGHTS AND VOTES REQUIRED
Only Common Shareholders of record at the close of business on
February 18, 1997 (the record date) will be entitled to vote at the
meeting.
The Company had approximately 12,400,000 shares of Common Stock,
$1 Par Value (Common Shares), outstanding on the record date. A majority of
the Common Shares entitled to vote constitutes a quorum.
To the Company's knowledge, no person owns beneficially more than 5%
of the common stock as of the record date.
The votes required for approval of each matter to be submitted at the
meeting for shareholder vote are described in the applicable sections of
this Proxy Statement.
Management's security ownership as February 28, 1997 is:
Amount and
Nature of Percent
Name of Beneficial of
Title of Class Beneficial Owner<F1> Ownership<F2> Class
Common Stock, $1 Par Value Directors, Nominees and
Executive Officers --
Frank G. Andreoni 24,294 *
Daniel A. Burkhardt 2,154 *
Robert F. Caldwell 16,205 <F3> *
Edward J. Curtis 1,001 <F4><F5> *
John T. Ferris 37,545 *
Michael O. Frazer 6,432 *
William L. Johnson 5,007 <F3><F4> *
Harvey I. Klein 1,939 <F4><F5> *
Frederick S. Moore 1,297 <F4><F5> *
George C. Noble 7,294 <F3> *
Edith A. Stotler 2,080 *
Donald W. Thomason 2,794 *
All directors, nominees and
executive officers as a group 108,540 *
Cumulative Preferred Stock
of Subsidiary -- Directors, Nominees and
Southeastern Michigan Gas Executive Officers --
Company Robert F. Caldwell 73 *
All directors, nominees and
executive officers as a group 73 *
___________________
*Less than one percent.
<FN>
<F1>
This table does not include information concerning the stock ownership of Ward N. Kirby who
resigned his employment as President, CEO and Director of the Company effective
January 18, 1996. Information concerning Mr. Kirby's stock ownership and compensation
during 1996 was disclosed in the previous proxy statement.
<F2>
Each of the identified beneficial owners has sole voting and investment power as to all of the
shares shown with the exception of those held by certain officers and directors jointly with
their spouses or directly by their spouses, minor children, or certain other relatives, and with
the exceptions described in (3) below.
<F3>
Inclusive of the individual's beneficial interest in shares held by the Company's Employee Stock Ownership
Plan (ESOT) as follows:
Common Shares
Name Held by ESOT
Robert F. Caldwell..................................... 10,092
William L. Johnson..................................... 7
George C. Noble........................................ 3,731
All directors, nominees and executive
officers as a group.................................. 13,830
Such persons may vote their shares held by ESOT. Such persons have no investment power as to the shares
held by the ESOT except for certain limited rights of diversification required to be granted under the
Internal Revenue Code.
<F4>
Pursuant to Board resolutions, Board members are required to own a minimum of 2,000 Common Shares by
December 1999. For new members, the deadline is 60 months from election to the Board. For this
purpose, Phantom Stock purchased under the Deferred Compensation and Phantom Stock Purchase Agreements
is counted. Phantom Stock has no voting rights or other shareholder rights (see the "Director
Compensation" section below for further information concerning the Deferred Compensation and
Phantom Stock Purchase Agreements).
<F5>
As of February 28, 1997, directors' Phantom Stock ownership was as follows:
Name Phantom Shares
Frank G. Andreoni...................................... 295
Edward J. Curtis....................................... 1,885
Harvey I. Klein........................................ 5,750
Frederick S. Moore..................................... 2,548
Donald W. Thomason..................................... 195
[/FN]
APPROVAL OF 1997 LONG-TERM INCENTIVE PLAN
The Board of Directors believes that the continued success of the
Company depends on its ability to attract, retain and motivate key
employees. Accordingly, the Compensation Committee of the Board of
Directors ("Compensation Committee") has reviewed the Company's
compensation program for key employees and recommends that shareholders
approve the 1997 Long-Term Incentive Plan ("Plan"). Currently, the Company
does not have a long-term incentive plan. The Plan also covers
non-employee members of the Board of Directors. The Plan allows for awards
to be granted during each of the next ten (10) years.
The approval of a majority of Common Shares
voted is required for adoption of the Plan.
The principal features of the Plan are described below. The full text
of the Plan is annexed hereto as Exhibit A.
Generally. The Plan provides for various types of long-term incentive
awards. These awards include options to purchase Common Shares ("stock
options"), restricted stock grants, stock appreciation rights, performance
units and other stock-based awards.
At this time, the Compensation Committee's intent is to award only
stock options if the Plan is approved by shareholders. The first stock
option awards will be awarded on May 1, 1997.
Administration. The Plan vests broad powers in the Compensation
Committee to administer and interpret the Plan , subject to approval by the
Board of Directors . The Compensation Committee consists of three (3) or
more members of the Company's Board of Directors who are considered outside
and disinterested for the purposes of the Internal Revenue Code and the
Securities Exchange Act of 1934.
The Compensation Committee's powers include authority, within certain
limitations, to select the persons to be granted awards; to determine the
type, size, and term of awards; to determine the time when awards will be
granted and any conditions for receiving awards; to establish objectives
and conditions for earning awards; to determine whether such conditions
have been met and when payment of an award will be made; to determine
whether payments of an award should be reduced or eliminated; and to
determine whether such awards should be designed to be deductible for
federal income tax purposes. The Plan does not allow the repricing and
replacement of underwater stock options.
Eligibility to Receive Awards. Key employees of the Company and its
subsidiaries and non-employee members of the Board of Directors are
eligible to be granted awards. All members of the Board of Directors are
non-employees except for Mr. Johnson. A group now consisting of
approximately 25 persons, including Mr. Johnson and other executive
officers, may be granted awards under the Plan, as well as the non-employee
Board members. The Compensation Committee may also make awards to
non-executive employees who are in a position to contribute to the success
of the Company. Because the selection of participants is discretionary, it
is impossible to determine the exact number of persons who will be eligible
for awards under the Plan during its term.
Awards. The terms of these various awards are discussed below.
Stock Options. The Plan provides for regular grants of stock
options and permits supplemental prorata grants of stock options to certain
participants who are promoted or newly hired during the vesting period for
a regular grant.
Under the Plan, the purchase price per share of Common Stock
covered by each stock option must be at least equal to the fair market
value on the date of grant. Fair market value is defined as the mean of
the high and low sales prices for Common Stock as reported on the NASDAQ
Stock Market on the date of the award. The Plan provides that the term for
exercise of a stock option may not exceed ten (10) years from the date of
grant.
In the event of a Change of Control of the Company (as defined in
the Plan), each outstanding stock option or other award becomes immediately
exercisable for a period of six (6) months. Rights under other stock-based
programs may also be accelerated as is appropriate in the judgment of the
Compensation Committee.
Performance Units. Performance units are rights to receive up to
100% of the value of shares of Common Stock, without any payment to the
Company, provided specified performance goals are met. Each performance
unit would have a value equal to the fair market value of one share of
Common Stock on the grant date. The Plan also provides for supplemental
prorata grants of performance units for certain participants who are
promoted or newly hired during the award period.
Payment of a performance unit award would be made upon a
determination by the Compensation Committee that the Company has achieved
the established performance goals for the award period. As described
below, notwithstanding attainment of a performance goal established under
the Plan, the Compensation Committee has the discretion to reduce some or
all of an award. Payment of performance units may be made in cash, shares
of Common Stock, or both, and the amount of such payment would be the fair
market value of shares of Common Stock at the date the performance units
were granted.
Other Awards. As indicated above, the Compensation Committee may
also make other types of awards, including incentive stock options, stock
appreciation rights and restricted stock grants, although it is not the
Compensation Committee's present intention to do so. The value of
incentive stock options and stock appreciation rights would be based on the
fair market value of Common Stock on the date of grant. The full and/or
partial vesting of any restricted stock award will occur only upon the
attainment by the Company of performance goals established by the
Compensation Committee based on one or more of the following performance
goals: corporate earnings, return on investment, total shareholder return,
market value added, or economic value added.
Negative Discretion. Notwithstanding attainment of a performance goal
established for an award under the Plan, the Compensation Committee has the
discretion, by participant, to reduce the amount of an award that would
otherwise be paid or to determine that no portion of the award should be
paid.
Shares of Stock Subject to the Plan. No more than 500,000 shares of
Common Stock may be issued under the Plan. However, in the event of a
stock split, stock dividend, merger or similar event increasing the number
of shares outstanding, such limitation may be adjusted.
Individual Maximum . Based on current guidelines approved by
the Board of Directors, Mr. Johnson may be awarded stock options or shares
up to a maximum of 30,000 shares in any calendar year, and other participants
(other than non-employee directors) may be awarded stock options or shares
up to a maximum of 10,500 shares each in any calendar year.
Awards to Non-Employee Directors . Options for 1,000 shares will
be awarded to each non-employee director each year.
Assignment. Unless the Compensation Committee shall specifically
determine otherwise, no award under the Plan would be assignable or
transferable.
Retirement, Disability Retirement, or Death. The Compensation
Committee would determine terms and conditions for vesting and
exerciseability of options and eligibility for and payment of other awards
in the event of retirement, death or disability. Initially, the terms and
conditions would be as provided in Exhibit A hereto.
Amendment and Termination. The Compensation Committee may amend or
terminate the Plan so long as it does not adversely affect any awards
previously made under the Plan. Unless the shareholders first approve, no
amendment of the Plan may increase the maximum number of shares which can
be delivered or awarded to any one individual or extend the maximum period
during which awards may be granted.
No awards of stock options, performance units, incentive stock
options, restricted stock, stock appreciation rights, or other stock-based
awards may be made more than ten (10) years after the date that the Plan is
approved by the shareholders.
Federal Tax Consequences. Under the Internal Revenue Code as presently
in effect, an award of stock options would have no federal income tax
consequence. Upon exercise of a stock option, the excess of the fair
market value of the stock at the date of exercise over the option price is
taxable to a participant as ordinary income. All amounts taxable to
participants in respect of stock options are deductible by the Company.
Upon a sale of Common Stock acquired under the Plan, even if a participant
realizes taxable gain, the Company receives no further deduction. Other
stock-based awards have various federal tax consequences to the Company and
the recipient.
The Board of Directors recommends that shareholders
vote FOR approval of the 1997 Long-Term Incentive Plan .
PROPOSAL TO CREATE PREFERENCE STOCK
The Company proposes to create a new class of stock called Preference
Stock. The Company requests that the shareholders approve an amendment to
the Articles of Incorporation to authorize 3,000,000 shares of Preference
Stock ("the Amendment").
Initially, 2,000,000 shares of the Preference Stock will be designated
Series A Preference Stock and reserved for issuance pursuant to the
Shareholder Rights Plan. A summary description of the Shareholder Rights
Plan is given below. There are no current plans for issuance of the
remainder of the 3,000,000 shares of Preference Stock authorized by the
Amendment. The Board will be able to create other series of Preference
Stock in the future with dividend, voting and other rights as the Board
deems appropriate. However, the total number of shares of Preference Stock
is limited to 3,000,000 by the Amendment. Also, as discussed below,
Preference Stock is subordinated to (that is, stands in line behind)
Preferred Stock with respect to receiving dividends and assets. Because
the 2,000,000 shares of Preference Stock reserved for issuance pursuant to
the Shareholder Rights Plan may be increased, a maximum of 1,000,000 shares
of Preference Stock may be assigned to other series by the Board.
Except for Preference Stock reserved for the Shareholder Rights Plan,
the remainder of Preference Stock will be available for such Company
purposes as the Board believes to be appropriate including, for example,
acquisitions and capital expenditures. The Board believes that having a
significant number of authorized but unissued shares of Preference Stock
not reserved for specific purposes will allow the Company to take prompt
action with respect to future opportunities that develop without the delay
and expense of calling a special shareholders' meeting.
The affirmative vote of a majority of all outstanding shares of Common
Stock is required for approval of the Amendment.
Summary of Rights to Purchase Preference Stock
On January 16, 1997, the Board of Directors declared a dividend
distribution of one Right for each outstanding share of Common Stock to
stockholders of record at the close of business April 15, 1997. Each Right
entitles the owner to purchase from the Company one one-hundredth of a
share of Preference Stock under certain circumstances that indicate a
takeover attempt. However, the Rights held by anyone attempting the
takeover would generally not be exercisable. Therefore, the existence of
these Rights tends to discourage a hostile takeover attempt. The Company
can redeem the Rights for a limited time, thus allowing the Company to
remove this obstacle if a takeover offer is deemed fair by the Board of
Directors. A full description of the Rights is set forth in a Rights
Agreement (the "Rights Agreement") between the Company and Continental
Stock Transfer & Trust Company ("Continental"). Continental also acts as
the transfer agent for all the Company's stock and as administrator for the
Company's Direct Stock Purchase and Dividend Reinvestment Plan.
The Company is seeking shareholder approval to create a new class of
stock -- the Preference Stock. If shareholders do not approve of this new
class of stock, the Rights will not be exercisable. Although the Rights
Agreement allows the Company to issue Common Stock in lieu of Preference
Stock, shareholders would have to approve a significant increase in
authorized Common Stock for the Company to do so. Shareholder approval of
an increase in authorized Common Stock is not being sought at this time.
Initially, no separate Rights Certificates will be distributed. A
separate Rights Certificate will be distributed if a person or group of
affiliated persons (an "Acquiring Person") acquires, or obtains the right
to acquire, ownership of fifteen percent (15%) or more of the outstanding
Common Stock, or if anyone makes a tender offer or exchange offer to obtain
fifteen percent (15%) or more of the Common Stock (each a "Triggering
Event"). The Rights will be transferred automatically with Common Stock
certificates until separate Rights Certificates are distributed.
Following a Triggering Event (except pursuant to an offer for all
Common Stock that the Board determines to be fair), each Right allows the
holder to purchase for a certain price ("the Purchase Price") Preference
Stock having a value equal to two times the Purchase Price. All Rights
that are owned by any Acquiring Person will be null and void. However,
Rights are not exercisable until the Rights are no longer redeemable by the
Company.
Preference Stock will be issued in units of 1/100 of a share
("Preference Units"). Each Preference Unit is expected to have a value
approximately equal to one share of Common Stock because of the dividend
rights and voting rights of Preference Stock, discussed below.
For example, at the current Purchase Price of $74.88 per Right, each
Right not owned by an Acquiring Person would entitle its holder to purchase
$149.76 worth of Preference Stock for $74.88. Assuming that a Preference
Unit had a value of $18.72, the holder of each valid Right would be
entitled to purchase 8 Preference Units for a total of $74.88.
In the event that (i) the Company is acquired in a business
combination, or (ii) fifty percent (50%) or more of the Company's assets or
cash flow is transferred to another company, each Right could be exercised
for common stock of the acquiring company having a value equal to two times
the Purchase Price. The events set forth in this paragraph also are
"Triggering Events."
For a limited time following a Triggering Event, the Company can
redeem the Rights at a price of $.01 per Right. If the Board orders
redemption of the Rights, the Rights terminate and the holders of Rights
will receive only the $.01 redemption price.
No dividends will be paid on the Rights and the Rights have no voting
power. While the distribution of the Rights will not be taxable to
stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income at a later date in the event that
the Rights become exercisable.
The Rights Agreement may be amended by the Board. However, after
Rights Certificates are distributed, the Rights Agreement may be amended by
the Board only to cure an ambiguity, to make changes which do not adversely
affect the interests of holders of Rights, or to shorten or lengthen any
time period. No amendment may be made once the Rights are not redeemable
by the Company.
A copy of the Rights Agreement has been or will be filed by the
Company with the Securities and Exchange Commission as an exhibit to Form
10-K for 1996. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights is not complete
and is qualified by reference to the Rights Agreement, which is
incorporated herein by reference.
Summary of Preference Stock
Each share of the Preference Stock issued pursuant to the Shareholder
Rights Plan is intended to have a value approximately equal to 100 shares
of Common Stock. To accomplish this goal, 2,000,000 shares of Preference
Stock will be reserved for issuance under the Plan. Each such share will
have the following characteristics:
1) Voting Power: 100 votes on each matter (that is, the voting
power of 100 shares of Common Stock);
2) Dividends: quarterly dividends of $10.00 or 100 times the
dividend paid per share of Common Stock, whichever is greater;
3) Liquidation: If the Company were ever liquidated, the Preference
Stock would receive $100 per share plus 100 times whatever was distributed
upon liquidation for each share of Common Stock;
4) Ratio of Relative Powers: If the Company changes the number of
shares of Common Stock outstanding by a stock dividend, stock split or
other similar transaction, the rights of the Preference Stock will be
adjusted proportionately. For example, if the Company ever declared a
two-for-one stock split, then the ratio of 100 used above for voting,
dividends and liquidation rights would be changed to 200;
5) No Redemption, Sinking Fund, Conversion: No sinking fund will be
established to retire the Preference Stock and the Company will not have
the right to redeem it. The Preference Stock will not be convertible into
any other security;
6) No Preemption: Like all other stockholders, Preference
Shareholders would not have any right to demand that any security, which
the Company intended to sell or issue, be sold or issued to such
stockholders.
The capital stock currently authorized by the Articles of
Incorporation consists of 20,000,000 shares of Common Stock of which
approximately 12,400,000 are outstanding and 500,000 shares of Cumulative
Preferred Stock ("Preferred Stock") of which approximately 6,000 are
outstanding . The quarterly Preferred Stock dividend must be paid before
the quarterly dividend can be paid on Preference Stock. Similarly, if the
Company were ever liquidated, Preferred Shareholders would receive a
distribution before Preference Shareholders.
Except for the above-discussed priority of Preferred Stock, the
Preference Stock not reserved for issuance under the Shareholder Rights
Plan may be issued under such terms and for such purposes, that the Board
of Directors deems appropriate. There are no present plans to issue any
such Preference Stock.
Anti-Takeover Effect
The purpose of the Shareholder Rights Plan is to discourage a hostile
takeover of the Company -- that is, an attempted takeover deemed by the
Board to be coercive or unfair. Therefore, the Shareholder Rights Plan can
be considered to be an anti-takeover measure. Also, the shares of
Preference Stock not reserved for the Shareholder Rights Plan could be used
by the Board to discourage a takeover of the Company.
There are other provisions in the Company's Articles of Incorporation,
the Company's Bylaws and in Michigan statutes which also tend to discourage
takeovers and therefore are considered to be anti-takeover measures.
The other anti-takeover provisions in the Company's Articles were
previously approved by the shareholders and include:
(1) A staggered Board of Directors. Only about one-third of the
Board is elected each year. Directors may be removed only by shareholders
and only for "Cause" -- which requires a court determination of
wrong-doing. Directors can fill vacancies on the Board.
(2) Fairness opinion required. Certain business combinations
cannot take place unless a written opinion is obtained from an independent
investment banker that the consideration to be paid shareholders is fair
and reasonable.
The Company's Bylaws provide that only the President, the Secretary or
a majority of the Board may call a special shareholders' meeting.
Michigan statutes provide that:
(1) Certain business combinations require a super-majority vote.
That is, any proposed business combination with someone who owns 10% or
more of the common stock must be approved by at least two-thirds of the
common stock held by others.
(2) The owner of "Control Shares" does not have a right to vote
such shares unless the right to vote them is granted by a majority of the
common stock held by other shareholders. Control Shares are those shares
which, when added to the shares owned before he obtained these Control
Shares, caused the owner to have more than 20% but less than one-third of
the outstanding common stock or more than one-third but less than a
majority or more than a majority.
If the proposed Amendment is adopted by the shareholders, it will
become effective upon filing a Certificate of Amendment with the Michigan
Department of Commerce.
The financial statements of the Company as well as management's
discussion and analysis of financial condition and results of operations,
included in the 1996 Annual Report to Shareholders, are incorporated herein
by reference.
The Board of Directors recommends that shareholders
vote FOR the creation of Preference Stock.
PROPOSAL TO CHANGE COMPANY NAME
The Board of Directors approved changing the Company's name to SEMCO
Energy, Inc. Because the Company's name is in its Articles of
Incorporation, shareholders must approve of an amendment to the Articles in
order to change the name.
The Company intends to change the name of all subsidiaries to the
extent necessary to indicate that all companies belong to one corporate
family.
The affirmative vote of a majority of all outstanding shares of Common
Stock is necessary to approve the name change.
The Board of Directors recommends that
shareholders vote FOR the name change.
RESPECTING THE ELECTION OF DIRECTORS
Common Shareholders are entitled to cumulative voting for directors.
Each Common Shareholder may cast a number of votes equal to the number of
shares held on the record date multiplied by the number of directors to be
elected. The shareholder may cast all votes for a single director or
distribute them among the directors to be voted for, as the shareholder
sees fit.
The Company's Articles of Incorporation provide for three classes of
directors. The term of office of each class is three years and the term of
one class expires each year. The Company's Bylaws provide for a Board of
Directors with eleven members. The classes will be comprised of as nearly
equal a number of directors as possible. Therefore, approximately
one-third of the Board of Directors will be elected at each Annual Meeting
of Shareholders. In case of a vacancy in the Board of Directors, the
remaining Directors, by a majority vote, could elect a successor to serve
until the next election of the class for which the director was chosen. A
vacancy can also be filled by a vote of the shareholders. There is
presently one vacancy on the Board of Directors in the class whose term
expires in 1998 that resulted from Mr. Caldwell's resignation from the
Board of Directors in June 1996. The Nominating Committee of the Board of
Directors has engaged the services of a search firm to aid in the
identification of appropriate nominees to fill this vacancy.
Four directors are to be elected at this Annual Meeting, each to hold
office for a term of three years or until his or her successor shall have
been fully elected and qualified. It is the intention of the persons named
in the enclosed Form of Proxy, unless otherwise instructed by the
shareholder, to vote for the election of the persons listed below, each of
whom is presently a member of the Board of Directors.
John T. Ferris
Michael O. Frazer
Frederick S. Moore
Edith A. Stotler
The Board does not contemplate that any nominee will become
unavailable for any reason. Should that occur before the meeting, however,
proxies will be voted for another person selected by the Board.
The persons named in the enclosed proxy form also reserve the right to
vote the proxies cumulatively and for less than all of the nominees, but do
not intend to do so unless other nominees are nominated at the meeting. In
any case, the proxies will not vote for any nominees other than those named
for the class of directors whose term expires in 2000, unless a nominee
becomes unavailable as described above.
INFORMATION ABOUT DIRECTORS
Name, Position with the Company<F1> and Director
Business Experience During Past Five Years Age Since
NOMINEES (terms expiring 2000)
John T. Ferris.................................................................................. 46 1994
Senior Partner in law firm of Ferris & Schwedler, P.C. in Bad Axe, Michigan, former
prosecutor for Huron County, Michigan.
Michael O. Frazer............................................................................... 58 1986
Attorney practicing in Battle Creek, Michigan.
Frederick S. Moore.............................................................................. 58 1995
President and Chairman DSLT Inc., a holding company with subsidiaries serving the food
service industry and engaging in the real estate development business.
Edith A. Stotler................................................................................ 50 1987
Partner, Stotler Grain Company; President, Homer Grain Company.
OTHER DIRECTORS (terms expiring 1998)
William L. Johnson.............................................................................. 54 1996
President and Chief Executive Officer of the Company since May 1996; Chief Executive
Officer, Northern Pipeline Construction Company, Kansas City, Missouri, from 1994 to
May 1996; President, Gas Service Division, Western Resources, Inc., Topeka, Kansas,
from 1990 to 1994.
Donald W. Thomason.............................................................................. 53 1995
Executive Vice President - Corporate Services and Technology of the Kellogg Company.
OTHER DIRECTORS (for terms expiring 1999)
Frank G. Andreoni............................................................................... 67 1978
Chairman of the Board of Directors of the Company since April 1995; President of Community
Foundation of St. Clair County since June 1994; Port Huron City Chairman of Michigan
National Bank from July 1994 until retirement in March 1995 and Port Huron City President
prior to July 1994.
Daniel A. Burkhardt............................................................................. 49 1993
Associated with Edward D. Jones & Co., a securities brokerage firm, since 1978; Principal
in Investment Banking Department of Jones; Member of Jones' Investment Policy Committee;
Director of: Essex County Gas Co., Mid-America Realty Investments, Inc. and St. Joseph
Light & Power Co.
Edward J. Curtis................................................................................ 54 1995
President of E.J. Curtis Associates, Inc., a professional management consulting firm;
Director of Essex County Gas Co.
Harvey I. Klein................................................................................. 57 1993
President of Global Strategies Group L.C., a private consulting firm, since 1995. Retired
from Ford Motor Company in January 1995. Held positions of increasing responsibility with
the last position being Manager of Advanced Vehicle/Safety and Fuel Economy Planning.
_________________
<FN>
<F1>
Other than Mr. Johnson, each director's and nominee's principal employment is and has been with a
company which is not affiliated with the Company.
</FN>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Audit Committee members are Michael O. Frazer, Chairman,
Daniel A. Burkhardt, Edward J. Curtis and Frederick S. Moore. The
committee has elected Mr. Curtis as chairman to begin when Mr. Frazer's
term as chairman expires April 15, 1997. The committee held 4 formal
meetings in 1996. The Audit Committee's functions are primarily to review
the independent public accountants' reports and audit findings, the scope
and plans for future audit programs, annual financial statements,
accounting and financial controls and compliance with appropriate codes of
conduct. The committee also recommends the choice of independent public
accountants to the Board.
The Company's Compensation Committee members are Harvey I. Klein,
Chairman, John T. Ferris, Edith A. Stotler and Donald W. Thomason. The
committee has elected Mr. Thomason as chairman to begin April 15, 1997 when
Mr. Klein will step down in order to become chairman of the Nominating
Committee. The committee held 7 formal meetings in 1996. The Compensation
Committee, after review and analysis of available data, recommends
compensation of executive officers and directors to the Board of Directors.
The Company's Nominating Committee members are Daniel A. Burkhardt,
Chairman, Harvey I. Klein, Frederick S. Moore and Edith A. Stotler. The
committee has elected Mr. Klein as chairman to begin when Mr. Burkhardt's
term as chairman expires April 15, 1997. The committee held 4 meetings in
1996. The functions of the Nominating Committee are to recommend to the
Board directors to serve as members of the Board committees, candidates to
serve as trustees of employee benefit plan trusts, candidates to fill Board
vacancies, the slate of director candidates for shareholder approval,
personal qualifications criteria for Board membership and general criteria
regarding Board committee composition. The committee's functions for 1997
have been expanded to include corporate governance. Accordingly, effective
February 26, 1997, the committee has been renamed "Nominating and Corporate
Governance." Recommendations by shareholders of candidates for Board
membership will be considered by the Nominating and Corporate Governance
Committee. Such recommendations should be sent to the Nominating and
Corporate Governance Committee of the Board of Directors at 405 Water
Street, Port Huron, Michigan 48060.
The Company formed an ad hoc Search Committee in 1996. The members of
this Search Committee were Harvey I. Klein, Chairman, Frank G. Andreoni,
Daniel A. Burkhardt and Michael O. Frazer. The committee held 4
face-to-face meetings and 3 conference-call meetings in 1996. This
committee located a replacement CEO and negotiated an employment agreement.
The Board of Directors held 9 meetings during 1996. In 1996 each
director attended 75% or more of the aggregate of (1) the total number of
meetings of the board of directors (held during the period for which he or
she has been a director) and (2) the total number of meetings held by all
committees of the board on which he or she served (during the periods that
he or she served).
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following executive officers had salary and bonus exceeding
$100,000 in 1996.
Name and Principal Other Annual All Other
Position Year Salary<F1> Bonus<F2> Compensation<F3> Compensation<F4>
William L. Johnson, President and CEO.............. 1996 $130,846 $ 8,500 $3,643 $69,939
Robert F. Caldwell, Executive Vice President
and CFO........................................... 1996 $183,400 $27,047 $ 877 $ 0
1995 $183,115 $40,869 $1,024 $ 2,311
1994 $175,739 $55,481 $1,008 $ 4,262
George C. Noble, Vice President of
Information Systems............................... 1996 $102,885 $ 2,557 $1,096 $ 0
____________________
<FN>
<F1>
Actual salary earned during the year. Mr. Johnson began employment on May 1, 1996. Mr. Noble
was promoted to his current position effective August 15, 1996.
<F2>
Cash incentive earned during the year pursuant to the Company's short-term incentive plan then in effect
and bonus paid to reimburse the premium cost of a whole life or a universal life insurance
policy. Mr. Caldwell was paid a $25,000 bonus in 1996 for serving as interim president from January 18,
1996 to May 1, 1996.
<F3>
Amount paid to reimburse the executive for taxes relating to the bonus for life insurance
discussed in the preceding note.
<F4>
Moving expenses for Mr. Johnson incurred in 1996.
[/FN]
Option/SAR Grants in Last Fiscal Year
% of Potential
Total Realizable Value at
Number of Options/ Assumed 5% or 10%
Securities SARs Annual Stock Price
Underlying Granted to Exercise Appreciation Value of
Options/ Employees or Base to April 30, 2006 Options at
SARs in Fiscal Price Expiration ------------------------ December 31,
Name Granted Year ($/Sh)<F2> Date<F3> 5% 10% 1996<F1>
- ------------------ ---------- ---------- ---------- --------------- ----------- ----------- ---------------
William L. Johnson 15,000 100 $16.50 April 30, 2006 $155,651 $394,451 $30,000
<F4> <F4> <F4> <F4> <F4>
<FN>
<F1>
Based on the last trade price of the Common Stock on December 31, 1996 on the NASDAQ/NMS market ($18.50).
<F2>
The exercise price equals the market value of the Common Stock at the time the options were granted.
<F3>
These options cannot be exercised until May 1, 1999.
<F4>
Subject to adjustment for stock dividends, etc.
[/FN]
Employment and Related Agreements
Mr. Johnson is a party to an employment agreement with the Company.
The employment agreement provides for a lump sum payment to Mr. Johnson if
the Company terminates his employment other than for "cause" or
"disability" or if Mr. Johnson resigns due to a required relocation of
personal residence or a diminution in position, authority, etc. The lump
sum payment will equal Mr. Johnson's present annual salary plus any accrued
obligations. The Company also agrees to continue insurance, medical,
dental and similar benefit plans for twelve months after Mr. Johnson's date
of termination. Certain other limitations apply.
In addition, Mr. Johnson is a party to a change of control employment
agreement with the Company. The change of control employment agreement
provides for a lump sum payment to Mr. Johnson if the Company terminates
his employment other than for "cause" or "disability" or if Mr. Johnson
resigns due to a required relocation of personal residence or a diminution
in position, authority, etc. The lump sum payment will equal 2.99 time s
Mr. Johnson's present annual salary plus any accrued obligations. The
Company also agrees to continue insurance, medical, dental and similar
benefit plans for twelve months after Mr. Johnson's date of termination.
Certain other limitations apply.
As part of Mr. Johnson's employment arrangements, the Company has
granted Mr. Johnson options to purchase 15,000 shares of the Company's
stock at a price of $16.50 per share (subject to adjustments for stock
dividends, etc.) fully exercisable beginning May 1, 1999, and options to
purchase 30,000 shares at a price of $18.875 per share fully exercisable
beginning January 3, 2000.
Pension Plan
Pension Plan Table
Annual Years of Credited Service
Remuneration 5 10 15 20 25 30 35 40
90,000 7,875 15,750 23,625 31,500 39,375 47,250 55,125 63,000
110,000 9,625 19,250 28,875 38,500 48,125 57,750 67,375 77,000
130,000 11,375 22,750 34,125 45,500 56,875 68,250 79,625 91,000
150,000 13,125 26,250 39,375 52,500 65,625 78,750 91,875 105,000
170,000 14,875 29,750 44,625 59,500 74,375 89,250 104,125 119,000
190,000 16,625 33,250 49,875 66,500 83,125 99,750 116,375 133,000
210,000 18,375 36,750 55,125 73,500 91,875 110,250 128,625 147,000
230,000 20,125 40,250 60,375 80,500 100,625 120,750 140,875 161,000
250,000 21,875 43,750 65,625 87,500 109,375 131,250 153,125 175,000
270,000 23,625 47,250 70,875 94,500 118,125 141,750 165,375 189,000
290,000 25,375 50,750 76,125 101,500 126,875 152,250 177,625 203,000
310,000 27,125 54,250 81,375 108,500 135,625 162,750 189,875 217,000
The above table sets forth the estimated annual benefits payable at
normal retirement age (65) under the Retirement Plan and the Supplemental
Retirement Plan for Certain Officers based on a straight-life annuity form
of retirement income.
The Retirement Plan is a non-contributory plan. Substantially all
employees are eligible to participate. All above-named executive officers
participate. Compensation for purposes of the Retirement Plan is equal to
base salary (including commissions for sales persons), excluding overtime
and bonuses.
At normal retirement age (65), a participant will receive an annual
retirement benefit equal to 1.75% of the highest average of his annual
compensation for any consecutive three calendar years preceding the earlier
of the retirement date or the date of termination of employment multiplied
by years of credited service after October 31, 1970. The benefits listed
in the Pension Plan Table are not subject to any deduction for Social
Security or other offset amounts.
As of January 1, 1997, Messrs. Caldwell and Noble had 17 and 11 years ,
respectively, and Mr. Johnson had less than one year of
credited service .
Federal law limits the annual benefits that can be paid from any
funded retirement plan that qualifies for federal tax exemption, and the
amount for calendar year 1997 is $125,000. In addition, federal law limits
the amount of covered compensation for purposes of calculating pension
benefits. As of January 1, 1997, that maximum is $160,000. Under the
Supplemental Retirement Plan for Certain Officers adopted by the Company on
December 7, 1995, benefits are provided for any executives whose retirement
benefits are restricted due to IRS limitations for qualified pension plans
so as to provide them with the retirement benefits to which they would be
entitled but for such limitation.
Director Compensation
Employees who are directors receive no additional compensation for
service as directors. Non-employee directors received the following during
1996: the chairman of the board was paid $2,000 per month and $875 for
each directors' meeting attended; the chairman of each committee was paid
$1,200 per month, $600 for each directors' meeting attended and $875 for
each committee meeting attended for which they serve as chairman; the
remaining directors were paid $1,000 per month and $600 for each directors'
meeting attended and for each committee meeting attended for which they are
a member.
Compensation was also paid to non-employee directors at a rate of $875
for the board chairman and $600 for the remaining board members for each of
two strategic planning sessions held during 1996.
Members of the Search Committee were paid $600 for each face-to-face
Search Committee meeting and $300 for each conference-call Search Committee
meeting. As Chairman of the Search Committee, Mr. Klein received
additional compensation totaling $38,975.50 during 1996 for services
performed outside of Search Committee meetings.
Non-employee directors who were members of the board prior to
January 1, 1996 have the option to participate in the Company's medical,
dental and prescription drug program or receive $3,500 worth of
restricted stock or receive $3,500 worth of deferred
compensation in the form of phantom stock under a Deferred
Compensation and Phantom Stock Agreement as described below. Any directors
who opt out of the medical program cannot later opt back in; any
non-employee directors who join the board after January 1, 1996 do not
have the option to receive medical coverage. Directors who do
not participate in the medical program have the choice each
year to receive restricted stock or phantom stock .
The Company has also established Deferred Compensation and Phantom
Stock Purchase Agreements for non-employee directors. Non-employee
directors may defer compensation for each upcoming
year. If deferred, the compensation accrues interest at the prime rate or,
at the prior election of the director, is treated as if it were invested in
Common Stock (Phantom Stock) through the dividend reinvestment plan.
Five directors are deferring compensation for 1997; all such
compensation is being used to purchase Phantom Stock.
Non-employee directors also accrue $3,000 per year in the form of
retirement compensation payable after leaving the Board.
In addition, if the Company's Long-Term Incentive Plan is approved by
the shareholders, non-employee directors will be granted stock options for
1,000 shares per year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Membership on the Compensation Committee for 1996 was as follows:
John T. Ferris, Harvey I. Klein, Edith A. Stotler and Donald W. Thomason.
None of these Committee members are Company officers or served on other
Boards with Company officers, etc.
Notwithstanding anything to the contrary set forth in any of the
Company's filings under the Securities Act of 1933, or the Securities
Exchange Act of 1934, the following report and the Performance Graph shall
not be deemed to be incorporated by reference into any such filings except
to the extent that they are specifically incorporated.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (CC) is responsible for recommending to the
full Board the compensation of Executive Officers. The CC is composed of
four non-employee directors. The CC has adopted a strategy to adjust all
salary, benefits and perquisites for an executive to reflect an average of
that paid to executives with similar experience, responsibilities and
authority in a peer group including 18 other utility companies and our
Company (Peer Group). The elements of compensation include base salary,
benefits, perquisites and incentive. An independent consultant has been
employed by the CC to assist in developing and implementing this strategy.
Incentive plan s provide an executive with an
opportunity for above-average total compensation.
All base salaries of officers, including those shown in the
"Salary" column of the above Compensation Table, were approved by
the CC .
Under the Company's Short-Term Incentive Plan Mr. Johnson is eligible
to earn an incentive award of up to 40% of his base salary if the Company
meets the target earnings for the year. If the Company achieves 108% or
more of the target earnings for the year, Mr. Johnson is eligible to earn
an incentive award of up to a maximum of 72% of his base salary.
In addition, if the Company's Long-Term Incentive Plan is approved by
the Company's shareholders, Mr. Johnson may be granted stock options
for up to 30,000 shares in any one calendar year.
Additional stock options called for by Mr. Johnson's employment
arrangements are described under "Employment and Related Agreements." In
addition, the Company provided Mr. Johnson with a bonus to reimburse him
for the cost of a term life insurance policy in the face amount of
$1,000,000. The bonus includes an amount for income taxes so that the
after-tax amount of the bonus equals the insurance premium. The portion of
the bonus relating to the premium cost of this policy is reflected in the
"Bonus" column of the above Compensation Table and the projected tax burden
portion is reflected in the "Other Annual Compensation" column. Mr.
Johnson's life insurance policy was purchased in 1996.
The Company also provided Mr. Johnson certain other perquisites of the
office of President including limited personal use of a Company car. These
other perquisites are not significant.
All decisions of the CC regarding executive compensation are reviewed
by the full Board of Directors.
COMPENSATION COMMITTEE
Harvey I. Klein, Chairman
John T. Ferris
Edith A. Stotler
Donald W. Thomason
PERFORMANCE GRAPH
The following graph compares cumulative total returns (assuming
reinvestment of dividends). The stock price performance shown on the graph
is not necessarily indicative of future price performance. The graph
assumes the investment of $100 in the Company's stock, the stocks
representing the EDJ index and the stocks representing the S&P 500 index on
December 31, 1991.
Comparison of Five Year Cumulative Total Return
Among stock of Southeastern Michigan Gas Enterprises, Inc.,
S&P 500 Index and
Edward D. Jones & Co. Natural Gas Diversified Company Index
Measurement Period Southeastern Michigan Edward D. S&P 500
(Fiscal Year Covered) Gas Enterprises, Inc. Jones Index Index
Measurement Pt-12/31/91 $100 $100 $100
FYE 12/31/92 $137 $110 $108
FYE 12/31/93 $179 $123 $119
FYE 12/31/94 $159 $108 $121
FYE 12/31/95 $169 $141 $166
FYE 12/31/96 $191 $178 $204
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP have been the auditors for the Company and
Southeastern Michigan Gas Company for over thirty (30) years and have been
appointed by the Board of Directors to continue in that capacity during
1997. A member of Arthur Andersen LLP will be available at the
Shareholders Meeting to make a statement if he so desires and to answer
appropriate questions.
SHAREHOLDER PROPOSALS
A proposal to be included in the proxy statement or form of proxy for
the Company's next annual meeting of shareholders must be received at the
Company's principal executive office not later than November 7, 1997.
OTHER BUSINESS
The management of the Company knows of no matters other than those
above stated which are to be brought before the meeting. However, if any
other such matters should be presented for action, it is the intention of
the persons named in the enclosed form of proxy to vote in accordance with
their judgment on such matters.
It is important that proxies be returned promptly to avoid unnecessary
expenses. Therefore, all Common Shareholders (even those planning to
attend the meeting) are urged, regardless of the number of shares of stock
owned, to sign, date and return the enclosed proxy in the business-reply
envelope, also enclosed. Shareholders attending in person may withdraw
their proxies and vote in person.
By order of the Board of Directors
Sherry L. Abbott, Secretary
EXHIBIT A
1997 Long-Term Incentive Plan
of Southeastern Michigan Gas Enterprises, Inc.
and Subsidiaries
1. Purpose
The purposes of this 1997 Long-Term Incentive Plan ("Plan") are to
provide long-term incentives to those persons with significant
responsibility for the success and growth of Southeastern Michigan Gas
Enterprises, Inc. ("Company") and its subsidiaries; to assist the Company
in attracting and retaining key employees and non-employee directors; and
to associate the interests of such employees and directors with those of
the Company's shareholders.
2. Administration of the Plan
This Plan shall be administered by the Compensation Committee of the
Board of Directors of the Company ("Committee"). The Committee shall be
appointed by the Board of Directors and shall consist of three or more
non-employee members of the Board.
The Committee shall have all the powers vested in it by the terms of
this Plan, such powers to include authority (within the limitations
described herein) to select the persons to be granted awards under this
Plan; to determine the type, size, and terms of awards to be made to each
person selected; to determine the time when awards will be granted and any
conditions which must be satisfied by such persons before an award is made;
to establish performance goals and conditions for earning awards; to
determine whether such performance goals and conditions have been met and
whether awards will be paid at the end of the award period or when the
award is exercised, or deferred; to determine whether payment of an award
should be reduced or eliminated; to determine the terms and conditions for
vesting and exerciseability of stock options and eligibility for and
payment of other awards in the event of retirement, death or disability;
and to determine whether such awards should qualify, regardless of their
amount, as deductible in their entirety for federal income tax purposes;
with the exception that stock options shall not be repriced at a lower
option price than the original grant price except as provided in Section 7.
Subject to approval by the Board of Directors, the Committee shall
have full power and authority to administer and interpret this Plan and to
adopt such rules, regulations, agreements, guidelines and instruments for
the administration of this Plan and for the conduct of its business as the
Committee deems necessary or advisable. Unless otherwise determined by the
Board of Directors, the Committee's interpretations of this Plan, and all
actions taken and determinations made by the Committee pursuant to the
powers vested in it hereunder, shall be conclusive and binding on all
parties concerned, including the Company, its shareholders, and any person
receiving an award under this Plan.
3. Eligibility
Key management employees of the Company and its subsidiaries are
eligible (including employees who are officers or directors of the Company
or its subsidiaries) to be granted awards under this Plan. Such key
management employees of the Company and its subsidiaries may be granted
awards of stock options and may, in the Committee's discretion, be granted
other awards available under this Plan. The Committee, in its discretion,
may also grant awards under this Plan to other employees of the Company and
its subsidiaries who are in a position to contribute to the success of the
Company. Awards shall be based upon the attainment by the Company of
performance goals established by the Committee at the time the award is
made. These performance goals may include one or more of the following:
corporate earnings, return on investment, total shareholder return, market
value added, or economic value added.
Non-employee members of the Board of Directors who are active Board
members on the date of the award, also participate in this Plan. All of
the terms and conditions of such option awards shall be the same as those
awarded to key management employees of the Company.
Employees and non-employee members of the Board of Directors who are
granted awards under this Plan are sometimes referred to herein as
"Participants."
4. Awards
(a) Types. Awards under this Plan may include stock options,
incentive stock options, restricted stock, performance units, stock
appreciation rights, and other stock incentives that may be deemed
appropriate by the Committee.
(1) Stock Options. Stock options are rights to purchase shares
of the Common Stock of the Company ("Common Stock") at a fixed price for a
specified period of time. The purchase price per share of Common Stock
covered by a stock option awarded pursuant to this Plan, including any
incentive stock options, shall be equal to or greater than the fair market
value of a share of the Common Stock on the date the stock option is
granted. The Committee shall have the power to determine when options
granted hereunder become exercisable.
Fair market value is the mean of the high and low sales prices
for Common Stock as reported on the NASDAQ Stock Market on the date of the
award; or if there are no sales on such date, on the next preceding day on
which there were sales. Such price shall be subject to adjustment as
provided in Section 7. Repricing and replacement of underwater stock
options shall not be permitted. Options granted under this Plan shall
expire no later than ten (10) years from the date of grant.
(2) Restricted Stock. Restricted stock is stock which is granted
subject to restrictions and risk of forfeiture until vesting provisions are
met. The full and/or partial vesting of any restricted stock award made
under this Plan will occur only upon the attainment by the Company of
performance goals established by the Committee at the time the award is
made.
(3) Stock Appreciation Rights. Stock appreciation rights are
rights to receive the difference between the fair market value of a share
of Common Stock on the grant date and the fair market value of a share of
Common Stock on the date the stock appreciation right is exercised.
(4) Performance Units. Performance units are rights to receive
up to 100% of the value (as determined by the Committee) of shares of
Common Stock as of the date of grant, which value may be paid in cash or
Common Stock, without payment of any amounts to the Company. The full
and/or partial payment of performance unit awards that may be granted under
this Plan shall be made only upon certification by the Committee of the
attainment by the Company of performance goals which have been established
by the Committee. No payment will be made if the performance goals are not
met.
(5) Other Stock Incentives. Other Common Stock Incentives may be
awarded by the Committee if, in its judgment, it deems such incentives
appropriate to attract key employees or provide performance incentives.
(b) Supplemental Awards. Participants who are newly hired or
promoted during the vesting period for stock options or during the award
period for other types of awards may be granted supplemental prorata
awards.
(c) Negative Discretion. Notwithstanding the attainment by the
Company of any performance goal, the Committee has the discretion, by
Participant, to reduce some or all of an award that would otherwise be
made.
(d) Guidelines. The Committee shall adopt from time to time written
policies for its implementation of this Plan. Such policies shall be
consistent with this Plan and may include, but need not be limited to, the
type, size, and term of awards to be made, and the conditions for such
awards. Conditions for grant or exercise may include, without limitation,
eligibility, employment with the Company, manner of exercise, option
period, and limitations on exercise.
(e) Maximum Awards. An employee may be granted multiple awards under
this Plan, but no one employee may be granted awards which would result in
his or her receiving options or other awards for more than 30,000 shares
under this Plan in any one calendar year. Each non-employee director shall
each year be awarded an option to purchase 1,000 shares.
5. Shares of Stock Subject to the Plan
The shares that may be delivered or purchased under this Plan shall
not exceed an aggregate of 500,000 shares of Common Stock (as adjusted, if
appropriate, pursuant to Section 7 hereof). Such shares may be treasury,
repurchased, or authorized, but unissued shares of Common Stock.
6. Deferred Payments
The Committee may determine that all or a portion of a payment to a
Participant under this Plan, whether it is to be made in cash, shares of
Common Stock, or a combination thereof, shall be deferred. Deferrals shall
be for such periods and upon such terms as the Committee may determine in
its sole discretion.
7. Dilution and Other Adjustments
In the event of any change in the outstanding shares of Common Stock
by reason of any split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, such equitable adjustments shall be made in this Plan and the
awards thereunder as the Committee determines are necessary and
appropriate, including, if necessary, an adjustment in the maximum number,
the price, or kind of shares subject to this Plan or which may be or have
been awarded to any Participant. Such adjustment shall be conclusive and
binding for all purposes of this Plan.
8. Miscellaneous Provisions
(a) Misconduct. If the Committee determines that a present or former
employee has (1) used for profit or disclosed to unauthorized persons,
confidential information or trade secrets of the Company, or (2) breached
any contract with or violated any fiduciary obligation to the Company, or
(3) performed any other actions detrimental to the Company, that employee
shall forfeit any outstanding or future rights under this Plan.
(b) Rights of Shareholder. A Participant in this Plan shall have no
rights as a holder of Common Stock with respect to awards hereunder, unless
and until ownership of Common Stock is actually effected.
(c) Assignment or Transfer. Unless the Committee shall specifically
determine otherwise, no award under this Plan or any rights or interests
therein shall be assignable or transferable by a Participant except by will
or the laws of descent and distribution.
(d) Agreements. All awards granted under this Plan shall be
evidenced by agreements in such form and containing such terms and
conditions (not inconsistent with this Plan) as the Committee shall
approve.
(e) Requirements for Transfer. No share of Common Stock shall be
issued or transferred under this Plan until all legal requirements
applicable to the issuance or transfer of such shares have been complied
with to the satisfaction of the Committee. The Committee shall have the
right to condition any issuance of shares of Common Stock made to any
Participant upon such Participant's written undertaking to comply with such
restrictions on his or her subsequent disposition of such shares as the
Committee or the Company shall deem necessary or advisable as a result of
any applicable law, regulation, or official interpretation thereof, and
certificates representing such shares may be legended to reflect any such
restrictions.
(f) Withholding Taxes. The Company shall have the right to deduct
from all awards hereunder paid in cash any federal, state, local or foreign
taxes required by law to be withheld with respect to such awards and, with
respect to awards paid in stock or upon exercise of stock options, to
require the payment (through withholding from the Participant's salary or
otherwise) of any such taxes. The obligations of the Company to make
delivery of awards in cash or Common Stock shall be subject to currency or
other restrictions imposed by any government.
(g) No Rights to Awards. No employee or other person shall have any
claim or right to be granted an award under this Plan. Neither this Plan
nor any action taken hereunder shall be construed as giving any employee
any right to be retained in the employ of the Company or any of its
subsidiaries.
(h) Costs and Expenses. The costs and expenses of administering this
Plan shall be borne by the Company and not charged to any award nor to any
employee receiving an award.
(i) Funding of Plan. This Plan shall be unfunded. The Company shall
not be required to establish any special or separate fund or to make any
other segregation of assets to assure the payment of any award under this
Plan.
9. Effective Date, Amendments, Termination, Compliance with
Section 162(m), and Change of Control
(a) Effective Date. This Plan shall become effective on the date it
is approved by the Company's shareholders.
(b) Amendments. The Committee may at any time terminate or from time
to time amend this Plan in whole or in part, but no such action shall
adversely affect any rights or obligations with respect to any awards
theretofore made under this Plan.
Unless the shareholders of the Company shall have first approved
thereof, no amendment of this Plan shall be effective which would increase
the maximum number of shares of the Company's Common Stock which may be
delivered under this Plan or to any one individual, except to the extent
such amendment is made pursuant to Section 7 hereof, or extend the maximum
period during which awards may be granted under this Plan.
With the consent of the employee affected, the Committee may
amend outstanding agreements evidencing awards under this Plan in a manner
not inconsistent with the terms of this Plan.
(c) Termination. No awards of stock options, restricted stock,
performance units, incentive stock options, stock appreciation rights, or
other stock-based awards, shall be made under this Plan more than ten (10)
years after the date this Plan is adopted.
(d) Compliance with Section 162(m). With respect to employees
subject to Section 162(m) of the Internal Revenue Code, transactions under
this Plan are intended to avoid loss of the deduction referred to in
paragraph (1) of Section 162(m). Anything in this Plan or elsewhere to the
contrary notwithstanding , to the extent any provision of this Plan or
action by the Committee fails to so comply or avoid the loss of such
deduction, it shall be deemed null and void to the extent permitted by law
and deemed advisable by the Committee.
Retirement, Disability Retirement, or Death. In the event of the
retirement or disability retirement of a holder of stock options, such
options shall vest immediately and shall be exercisable during the
remaining term of the options or up to three (3) years, whichever is less.
In the event of death, vesting shall be 100% immediately and the
individual's beneficiary shall have one (1) year from the date of death to
exercise the option. In the event of the death, retirement, or disability
retirement of a holder of performance units or other awards, such awards
shall be payable at the end of the award period in proportion to the
service of the Participant during such period. Generally, if any option
plan Participant shall cease to be an employee for any reason other than
death, retirement, or disability retirement, the Participant's rights to
any award shall terminate three (3) months from the date employment ends or
the end of the option period, whichever occurs first.
(e) Change of Control. Each outstanding Stock Option or other
stock-based award shall become immediately and fully exercisable for a
period of six (6) months following the date of the following occurrences,
each constituting a "Change of Control":
(1) If any person (including a group as defined in Section
13(d)(3) of the Securities Exchange Act of 1934 ) becomes directly or
indirectly the beneficial owner of 20% or more of the shares of the Company
entitled to vote for the election of directors;
(2) As a result of or in connection with any cash tender offer,
exchange offer, merger or other business combination, sale of assets or
contested election, or combination of the foregoing, the persons who were
directors of the Company just prior to such event cease to constitute a
majority of the Company's Board of Directors; or
(3) The stockholders of the Company approve an agreement
providing for a transaction in which the Company will cease to be an
independent publicly-owned corporation or a sale or other disposition of
all or substantially all of the assets of the Company occurs.
[MAP]
APPENDIX
Map on back cover shows general area, specific street and specific building
where shareholders meeting will take place.
SOUTHEASTERN This Proxy is Solicited by
MICHIGAN GAS ENTERPRISES, INC. the Board of Directors
405 Water Street, Port Huron, MI 48060
The undersigned hereby appoints George C. Noble and Steven W. Warsinske, or
either one of them, with power of substitution in each, proxies to vote, as
designated on the reverse side, all of the undersigned's shares of Common
Stock of SOUTHEASTERN MICHIGAN GAS ENTERPRISES, INC. at the Annual Meeting
of Shareholders to be held on April 15, 1997, and any and all adjournments
thereof.
Please date, sign exactly as name appears hereon, and mail promptly in the
enclosed envelope which requires no postage if mailed in the United States.
When signing as attorney, executor, administrator, trustee, guardian, etc.,
give full title as such. If shares are held jointly, both owners must
sign.
Dated____________________________, 1997
_______________________________________
Signature
_______________________________________
Signature
(Continued on the other side)
Properly executed proxies will be voted as marked and,
if not marked, will be voted FOR all of the nominees
and for proposals 2, 3 and 4.
1. Election of Directors -- (Check Only One Box)
A. For all nominees. [ ] B. For no nominees. [ ]
C. For all nominees except names crossed out. [ ]
John T. Ferris Michael O. Frazer Frederick S. Moore Edith A. Stotler
2. To approve a change in the Company's name to SEMCO Energy, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To authorize the class of Preference Stock composed of 3,000,000
shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENTS THEREOF.
(To be Dated and Signed on Other Side)