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EXHIBIT 10a
ANNUAL OFFICER INCENTIVE
COMPENSATION PLAN FOR CMS ENERGY CORPORATION
AND ITS SUBSIDIARIES
Effective January 1, 2005
Approved by Committee on March 23, 2005
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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, 2005.
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. For purposes of the Plan, an Officer's
Base Salary must be subject to annual review and annual
approval by the Committee.
(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 Compensation and Human
Resources of the Board of Directors of CMS Energy.
(h) "Common
Stock" means the common stock of CMS Energy.
(i) "Company" means CMS Energy
Corporation.
(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.
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(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 President 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 President 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 participants, as
recommended by the President 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).
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(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 Year. The table
for
Performance Year 2005 is set forth below.
(a) EPS
COMPONENT. EPS performance shall constitute 40% of the
composite Plan Performance Factor. The 100% EPS goal for the
2005 performance year is $.90 per share, and the EPS component
shall increase or decrease by 25% for each $.05 per share
change in performance.
