<PAGE>
EXHIBIT 10(f)
ANNUAL OFFICER INCENTIVE
COMPENSATION PLAN FOR CMS ENERGY CORPORATION
AND ITS SUBSIDIARIES
Effective January 1, 2004
Approved by Committee on February 27,
2004
1
<PAGE>
ANNUAL OFFICER INCENTIVE
COMPENSATION PLAN FOR OFFICERS OF CMS ENERGY CORPORATION
AND ITS SUBSIDIARIES
I.
GENERAL PROVISIONS
1.1 PURPOSE.
The purpose of the Annual Officer Incentive
Compensation Plan ("Plan") is to:
(a) Provide an
equitable and competitive level of
compensation that will permit CMS Energy Corporation
("Company") and its subsidiaries to attract, retain
and motivate highly competent Officers.
(b) No
payments to Officers in the form of incentive
compensation shall be made unless pursuant to a plan
approved by the Committee and after express approval
of the Committee.
1.2 EFFECTIVE
DATE. The initial effective date of the Plan is
January 1, 2004. The Plan as described herein, is amended and
restated effective January 1, 2004.
1.3
DEFINITIONS. As used in this Plan, the following terms have
the meaning described below:
(a) "Annual
Award" means an annual incentive award
granted under the Plan.
(b) "Base
Salary" means the base salary on January 1 of a
Performance Year, except as impacted by a Change in
Status as defined in Article V. Deferred merit
increases from the Salaried Employees Merit Program
for the year 2004 shall be added to Base Salary being
paid in cash for the 2004 and 2004 Performance Years.
For purposes of the Plan, an Officer's Base Salary
must be subject to annual review and annual approval
by the Committee. For any Code Section 162(m)
Employee, the Base Salary upon which the Annual Award
is based will be the amount in effect on January 1 of
the Performance Year.
(c) "CMS
Energy" means CMS Energy Corporation.
(d) "Code"
means the Internal Revenue Code of 1986, as
amended.
(e) "Code
Section 162(m)" means the "Million Dollar Cap"
that may limit an employer's annual tax compensation
deduction for certain compensation of covered
employees, unless the compensation is based on
specific performance goals that are adopted and
administered in accordance with requirements set
forth in Code Section 162(m) and regulations
thereunder.
(f) "Code
Section 162(m) Employee" means an employee
whose compensation is subject to the "Million Dollar
Cap" under Code Section 162(m). Generally, this is
the CEO and the four highest paid executive officers
of the Company.
(g)
"Committee" means the Committee on Organization and
Compensation of the Board of Directors of CMS Energy.
(h) "Common
Stock" means the common stock of CMS Energy.
(i) "Company"
means CMS Energy Corporation.
2
<PAGE>
(j) "Corporate
Free Cash Flow" (CFCF) means CMS
Consolidated Cash Flow from operating activities,
excluding pension contributions and adjusted for GCR
Recovery, plus Cash Flow from Investing Activities.
(k)
"Disability" means that a participant has terminated
employment with the Company or a Subsidiary and is
entitled to disability payments under the Pension
Plan.
(l) "Earnings
Per Share" (EPS) means the amount of
ongoing net income per outstanding CMS Energy Share.
(m) "GCR
Recovery" means actual/forecast incremental GCR
recovery during January and February calculated as
actual/forecast GCR cycle billed sales times above
budget GCR factor.
(n) "Leave of
Absence" for purposes of this Plan means a
leave of absence that has been approved by the Plan
Administrator.
(o) "Officer"
means an employee of the Company or a
Subsidiary in Salary Grade "E-3" or higher.
(p) "Outside
Directors" means directors of CMS Energy who
are not employed by CMS Energy or a Subsidiary and
satisfy the requirements of an "Outside Director"
under Code Section 162(m).
(q) "Pension
Plan" means the Pension Plan for Employees
of Consumers Energy and Other CMS Energy Companies.
(r)
"Performance Year" means the calendar year prior to
the year in which an Annual Award is made by the
Committee.
(s) "Plan"
means the Annual Officer Incentive
Compensation Plan for Officers of CMS Energy
Corporation and Its Subsidiaries, as effective
January 1,
2004 and any amendments thereto.
(t) "Plan
Administrator" means the Chairman and Chief
Executive Officer of CMS Energy, under the general
direction of the Outside Directors on the Committee.
(u)
"Retirement" means that a Plan participant is no
longer an active employee and qualifies for a
retirement benefit other than a deferred vested
retirement benefit under the Pension Plan.
(v)
"Subsidiary" means any direct or indirect subsidiary
of the Company.
1.4
ELIGIBILITY. Officers (salary grade E-3 and above) are
eligible for participation in the Plan.
1.5
ADMINISTRATION OF THE PLAN.
(a) The Plan
is administered by the Chairman and Chief
Executive Officer of CMS Energy under the general
direction of the Outside Directors who are members of
the Committee.
(b) The
Committee, no later than March 30th of the
Performance Year, will approve performance goals for
the Performance Year.
(c) The
Committee, no later than March 30th of the
calendar year following the Performance Year, will
review for approval proposed Annual Awards for all
Officer
3
<PAGE>
participants, as recommended by the Chairman and CEO
of the Company. All proposed Annual Awards are
subject to approval of the Committee. Before the
payment of any Annual Awards, the Committee will
certify in writing that the performance goals were in
fact satisfied in accordance with Code Section
162(m).
(d) The
Committee reserves the right to modify the
performance goals with respect to unforeseeable
circumstances or otherwise exercise discretion with
respect to proposed Annual Awards as it deems
necessary to maintain the spirit and intent of the
Plan, provided that such discretion will be to
decrease or eliminate, not increase, Annual Awards in
the case of any Code Section 162(m) Employees. The
Committee also reserves the right in its discretion
to not pay Annual Awards for a Performance Year. All
discretionary decisions of the Committee are final.
(e) Only
Committee members who are Outside Directors
shall participate in the Committee actions with
respect to Code Section 162(m) Employees
II. CORPORATE
PERFORMANCE GOALS
2.1 IN
GENERAL. The composite Plan Performance Factor will depend
on corporate performance in two areas: (1) the ongoing net
income per outstanding CMS Energy share (EPS); and (2) the
Corporate Free Cash Flow of CMS Energy (CFCF). There will be
no payout under the Plan unless a composite Plan Performance
Factor of at least 75% is achieved. Each Component as well as
the composite Plan Performance Factor to be used for payouts
will be capped at a maximum of 200%. A table containing the
composite Plan Performance Factors shall be created by the
Committee for each Performance
