EXHIBIT 10 (f)
PERFORMANCE INCENTIVE STOCK PLAN
The CMS Energy Corporation Performance Incentive Stock Plan, first effective
February 3, 1988, is hereby set forth as amended and restated effective June 1,
2004, and as further amended effective April 1, 2006 to ensure compliance with
the requirements of Internal Revenue Code Section 409A.
Article I. Purpose
The CMS Energy Corporation Performance Incentive Stock Plan (hereinafter called
the "Plan") is a Plan to provide incentive compensation to Eligible Persons,
based upon such Eligible Persons' individual contributions to the long- term
growth and profitability of the Corporation, and in order to encourage such
Eligible Persons to identify with shareholder concerns and their current and
continuing interest in the development and financial success of the Corporation.
Because it is expected that the efforts of the key employees, Directors or
advisors selected for participation in the Plan will have a significant impact
on the results of the Corporation's operations in future years, the Plan is
intended to assist the Corporation in attracting and retaining as key employees,
Directors or advisors individuals of superior ability and in motivating their
activities on behalf of the Corporation.
Article II. Definitions
2.1 Definitions: When used in the Plan, the following words and phrases shall
have the following meanings:
a. "Beneficiary" means the beneficiary or beneficiaries designated to
receive the amount, if any, payable under the Plan upon the death of
a Participant.
b. "Board" means the Board of Directors of the Corporation.
c. "Committee" means the Compensation and Human Resources Committee of
the Board, which shall be comprised in such a manner to comply with
the requirements, if any, of the New York Stock Exchange or other
applicable stock markets, Rule 16b-3 (or any successor rule) under
the Securities Exchange Act of 1934, as amended, and Section 162(m)
of the Internal Revenue Code of 1986, as amended.
d. "Common Stock" means the Common Stock of the Corporation as
authorized for issuance in its Articles of Incorporation at the time
of an award or grant under this Plan.
e. "Corporation" means CMS Energy Corporation, its successors and
assigns, and each of its Subsidiaries, or any of them individually.
f. "Director" means any person who is a member of the Board of
Directors of the Corporation or a Subsidiary.
g. "Eligible Person" means a key employee, non-employee Director or
advisor. A key employee must at the end of the fiscal year be a
regular full-time salaried employee of the Corporation or a
Subsidiary, or, to the extent the Committee may determine, a person
whose services to the Corporation terminated before the end of the
fiscal year, who, in the opinion of the Committee, made a
significant contribution to the Corporation or a Subsidiary.
h. "Incentive Option" means an option to purchase Common Stock of the
Corporation which meets the requirements set forth in the Plan and
also meets the definition of an Incentive Stock Option set forth in
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
i. "Non-Employee Director" means a member of the Board of Directors of
the Corporation or a Subsidiary who is not currently an employee of
the Corporation or a Subsidiary and has not been an employee of the
Corporation or a Subsidiary within the preceding 3 years.
j. "Nonqualified Option" means an option to purchase Common Stock of
the Corporation which meets the requirements set forth
in the Plan but does not meet the definition of an Incentive Stock
Option set forth in Section 422 of the Code.
k. "Officers Incentive Compensation Plan" means the incentive
compensation plan, including any amendments thereto, authorized and
approved by the Board to provide incentive compensation to the
Officers of the Corporation or a Subsidiary.
l. "Optionee" means any person to whom an option or right has been
granted or who becomes a holder of an option or right under Article
VI of the Plan.
m. "Participant" means a person to whom a grant or award has been made
which has not been paid, forfeited, or otherwise terminated or
satisfied under the Plan, or a person included under the Management
Stock Purchase Plan.
n. "Performance Criteria" are the factors used by the Committee to
establish goals to track business measures such as net earnings;
operating earnings or income; earnings growth; net income (absolute
or competitive growth rates comparative); cash flow (including
operating cash flow, free cash flow, discounted cash flow return on
investment, and cash flow in excess of cost of capital); earnings
per share; stock price (absolute or peer-group comparative); total
shareholder return; absolute and/or relative return on common
shareholders equity; return on shareholders equity (absolute or
peer-group comparative); absolute and/or relative return on capital;
absolute and/or relative return on assets; economic value added
(income in excess of cost of capital); customer satisfaction;
expense reduction; sales; or ratio of operating expenses to
operating revenues.
o. "Performance Unit" means a contractual right granted to a
Participant pursuant to Article VIII to receive a designated dollar
value equal to the value established by the Committee and subject to
such terms and conditions as are set forth in this Plan and the
applicable grant.
p. "Phantom Share" means a contractual right granted to a Participant
pursuant to Article VIII to receive an amount equal to the
Appreciation Value at such time, and subject to such terms and
conditions as are set forth in this Plan and the applicable grant.
q. "Restricted Common Stock" means Common Stock delivered subject to
the restrictions described in Article VII.
r. "Restricted Stock Unit" means a bookkeeping account established
pursuant to a matching grant to a Participant, as described in
Article VIII, that is (a) credited with amounts equal to Shares or
some other unit of measurement specified in the award, (b) subject
to restrictions and (c) payable in cash or shares.
s. "Shareholders" means the shareholders of the Corporation.
t. "Stock Appreciation Right" shall mean a right, granted in
conjunction with a Stock Option, to surrender the Stock Option and
receive the appreciation in value of the optioned shares over the
option price.
u. "Stock Option" means an option to purchase shares of Common Stock,
granted pursuant to this Plan.
v. "Subsidiary" means a corporation, domestic or foreign, 50 percent or
more of the voting stock of which is owned directly or indirectly by
the Corporation.
Article III. Effective Date. Duration, Scope and Administration of the Plan
3.1 This Plan shall be effective June 1, 2004, conditioned upon approval of
the shareholders of the Corporation, and shall continue until May 31,
2009.
3.2 The Committee shall have full power and authority to construe, interpret
and administer the Plan. All decisions, actions or interpretations of the
Committee shall be final, conclusive and binding upon all parties. If any
person objects to any such interpretation or action formally or
informally, the expenses of the Committee and its agents and counsel shall
be chargeable against any amounts otherwise payable under the Plan to or
on account of the Participant or Optionee.
3.3 No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by him or on his behalf in his
capacity as a member of the Committee nor for any mistake of judgment made
in good faith, and the Corporation shall indemnify and hold harmless each
member of the Committee and each other officer, employee or director of
the Corporation to whom any duty or power relating to the administration
or interpretation of the Plan may be allocated or delegated, against any
cost or expense (including counsel fees) or liability (including any sum
paid in settlement of a claim with the approval of the
2
Board) arising out of any act or omission to act in connection with the
Plan unless arising out of such person's own fraud or bad faith.
Article IV. Participation, Awards and Grants
4.1 Each year the Committee shall designate as Participants and/or Optionees
in the Plan those Eligible Persons who, in the opinion of the Committee,
have significantly contributed to the Corporation.
4.2 Each year, the Committee may award shares of Common Stock, Restricted
Stock Units, and/or may grant Phantom Shares, Performance Units, Stock
Options which qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Code or Stock Options which do not qualify as Incentive
Stock Options and/or Stock Appreciation Rights for use in connection with
Stock Options to each Eligible Person whom it has designated as an
Optionee or Participant for such year. No Incentive Stock Option will be
granted to an Eligible Person who is not a full or part-time employee of
the Corporation or a subsidiary of the Corporation.
4.3 Awards of Common Stock or Restricted Stock Units and grants of Stock
Options (with or without Stock Appreciation Rights), Phantom Shares or
Performance Units may be made, without amending the Plan, to Eligible
Persons who are foreign nationals or employed outside the United States or
both, on such terms and conditions different from those specified in the
Plan as may, in the judgment of the Committee, be necessary or desirable
to further the purposes of the Plan or to accommodate differences in local
law, tax policy or custom. Moreover, the Committee may approve such
supplements to or alternative versions of the Plan as it may consider
necessary or appropriate for such purposes without thereby affecting the
terms of the Plan as in effect for any other purpose; provided, however,
no such supplement or alternative version shall: (a) increase the number
of available shares of Common Stock under Section 5.1; or (b) increase the
limitations contained in Section 5.3.
Article V. Shares Reserved Under the Plan
5.1 There is hereby reserved for award under this Plan 6 million whole shares
of Common Stock, less the number of shares awarded, granted or purchased
under the provisions of this Plan which have not been forfeited. To the
extent permitted by law or the rules and regulations of any stock exchange
on which the Common Stock is listed, shares of Common Stock with respect
to which payment or exercise is in cash as well as any shares or options
which are forfeited may thereafter again be awarded or made subject to
grant under the Plan. The number of shares made available for option and
sale under Article VI of this Plan plus the number of shares awarded under
Article VII of this Plan plus the number of shares awarded or purchased
under Article VIII of this Plan will not exceed, at any time, the number
of shares of Common Stock reserved pursuant to this Article V.
5.2 If a dividend shall be declared upon the Common Stock payable in shares of
Common Stock, the number of shares of Common Stock then subject to any
such option and the number of shares reserved for issuance pursuant to the
Plan but not yet covered by an option shall be adjusted by adding to each
such option or share the number of shares which would be distributable
thereon if such share had been outstanding on the date fixed for
determining the shareholders entitled to receive such stock dividend. In
the event that the outstanding shares of the Common Stock shall be changed
into or exchanged for a different number or kind of shares of stock or
other securities of CMS Energy Corporation or of another corporation,
whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation or otherwise, then there
shall be substituted for each share of Common Stock subject to any such
option and for each share of Common Stock reserved for issuance pursuant
to the Plan but not yet covered by an option, the number and kind of
shares of stock or other securities into which each outstanding share of
Common Stock shall be so changed or for which each such share shall be
exchanged. In the event there shall be any change, other than as specified
above in this Section 5.2, in the number or kind of outstanding shares of
Common Stock of the Corporation or of any stock or other securities into
which such Common Stock shall have been changed or for which it shall have
been exchanged, then if the Committee shall in its sole discretion
determine that such change equitably requires an adjustment in the number
or kind of shares theretofore reserved for issuance pursuant to the Plan
but not yet covered by an option and of the shares then subject to an
option or options, such adjustment shall be made by the Committee and
shall be effective and binding for all purposes of the Plan and each Stock
Option agreement. In the ease of any such substitution or adjustment as
provided for in this paragraph, the option price in each Stock Option
agreement for each share covered thereby prior to such substitution or
adjustment will be the option price for all shares of stock or other
securities which shall have been substituted for such share or to which
such share shall have been adjusted pursuant to this section. No
adjustment or substitution provided for in this Section 5.2 shall require
the Corporation in any Stock Option agreement to sell a fractional share,
and the total substitution or adjustment with respect to each Stock Option
agreement shall be limited accordingly.
3
5.3 Individual Grant Limit: The combined maximum shares awarded or granted for
any one Eligible Person for any one year under this Plan, excluding (a)
any shares or Restricted Share Units purchased or awarded under the
Management Stock Purchase Plan in Section 8.3 and (b) any Performance
Units awarded under Section 8.2, will not exceed 250,000 shares of Common
Stock.
Article VI. Stock Options and Stock Appreciation Rights
6.1 The Committee may from time to time provide for the option and sale of
shares of Common Stock, which may consist in whole or in part of the
authorized and unissued Common Stock of the Corporation.
6.2 Optionees: The Committee shall determine and designate from time to time,
in its discretion, those Eligible Persons to whom Stock Options and Stock
Appreciation Rights are to be granted and who thereby become Optionees
under the Plan.
6.3 Allotment of Shares: The Committee shall determine and fix the number of
shares of Common Stock subject to options to be offered to each Optionee.
6.4 Option Price: The Committee shall establish the option price at the time
any option is granted at not less than 100% of the fair market value of
the stock on the date on which such option is granted; provided, however,
that with respect to an Incentive Option granted to an employee who at the
time of the grant owns (after applying the attribution rules of Section
425(d) of the Code) more than 10% of the total combined voting stock of
the Corporation or of any parent or Subsidiary, the option price shall not
be less than 110% of the fair market value of the stock subject to the
Incentive Option on the date such option is granted. In no event shall
Options previously granted under this Plan be re-priced by reducing the
exercise price thereof, nor shall Options previously granted under this
Plan be cancelled and replaced by a subsequent re-grant under this Plan of
Options having an exercise price lower than the options so cancelled.
6.5 Stock Appreciation Rights: At the discretion of the Committee, any Stock
Option granted under this Plan may, at the time of such grant, include a
Stock Appreciation Right. A Stock Appreciation Right shall pertain to, and
be granted only in conjunction with, a related underlying Stock Option,
and shall be exercisable only at the time and to the extent the related
underlying Stock Option is exercisable and only if the fair market value
of the Common Stock of the Corporation exceeds the Stock Option price in
the related underlying Stock Option. An Optionee who is granted a Stock
Appreciation Right may elect to surrender the related underlying Stock
Option with respect to all or part of the number of shares subject to the
related underlying Stock Option and exercise in lieu thereof the Stock
Appreciation Right with respect to the number of shares as to which the
Stock Option is surrendered.
The exercise of the underlying Stock Option shall terminate the related
Stock Appreciation Right to the extent of the number of shares purchased
upon exercise of the underlying Stock Option. The exercise of a Stock
Appreciation Right shall terminate the related underlying Stock Option to
the extent of the number of shares with respect to which the Stock
Appreciation Right is exercised. Upon exercise of a Stock Appreciation
Right, an Optionee shall be entitled to receive, without payment to the
Company (except for applicable withholding taxes), an amount equal to the
excess of (i) the then aggregate fair market value of the number of shares
with respect to which the Optionee exercises the Stock Appreciation Right,
over (ii) the aggregate Stock Option price per share for such number of
shares. Such amount may be paid by the Corporation, at the election of the
Optionee, in cash, Common Stock of the Corporation or any combination
thereof; provided, however, that the Committee shall have sole discretion
to approve or disapprove an election of an Optionee to receive cash upon
exercise of a Stock Appreciation Right.
6.6 Granting and Exercise of Stock Options and Stock Appreciation Rights: The
granting of Stock Options and Stock Appreciation Rights hereunder shall be
effected in accordance with determinations made by the Committee pursuant
to the provisions of the Plan, by execution of instruments in writing in
form approved by the Committee. The Committee may grant Stock Options that
provide for the grant of a subsequent restoration Stock Option if the
exercise price has been paid for by tendering shares to the Company. Any
restoration Stock Option shall be for the number of shares tendered in
exercising the predecessor option. The restoration Stock Option exercise
price shall be the then-current Fair Market Value, and the term of such
restoration option may not extend beyond the remaining term of the
original option.
Each Stock Option and Stock Appreciation Right granted hereunder shall be
exercisable at any such time or times or in any such installments as may
be determined by the Committee at the time of the grant, subject to the
limitation that for each Incentive Option and related Stock Appreciation
Right granted, a maximum of $100,000 (based on the price at the date of
grant) may be exercised per year, plus any unused carry-over from a
previous year(s). Except as provided in Section 6.10 and 6.11, Stock
Options and Stock Appreciation Rights may be exercised only while the
Optionee is an employee, Non-Employee Director or advisor of the
Corporation.
4
Successive Stock Options and Stock Appreciation Rights may be granted to
the same Optionee, whether or not the Stock Option(s) and Stock
Appreciation Right(s) previously granted to such Optionee remain
unexercised. An Optionee may exercise a Nonqualified Option or related
Stock Appreciation Right, if then exercisable, notwithstanding that Stock
Options and Stock Appreciation Rights previously granted to such Optionee
remain unexercised.
6.7 Payment of Stock Option Price: At the time of the exercise in whole or in
part of any Stock Option granted hereunder, payment of the option price in
full in cash or in Common Stock of the Corporation shall be made by the
Optionee for all shares so purchased. No Optionee shall have any of the
rights of a Shareholder of the Corporation under any such Stock Option
until the actual issuance of shares to said Optionee, and prior to such
issuance no adjustment shall be made for dividends, distributions or other
rights in respect of such shares, except as provided in Section 5.2.
6.8 Nontransferability of Stock Options and Stock Appreciation Rights: No
Stock Option or Stock Appreciation Right granted under the Plan to an
Optionee shall be transferable by such Optionee otherwise than by will,
pursuant to a valid Domestic Relations Order which limits the rights of
the alternate payee to those available to the Optionee, or by the laws of
descent and distribution except that the Optionee may transfer to an
immediate family member or a family trust for estate planning purposes,
and such Stock Option and Stock Appreciation Right shall be exercisable,
during the lifetime of the Optionee, only by the Optionee or by a member
of such Optionee's immediate family or by the family trust.
6.9 Term of Stock Options and Stock Appreciation Rights: If not sooner
terminated, each Stock Option and Stock Appreciation Right granted
hereunder shall expire not more than ten years from the date of the
granting thereof; provided, that with respect to an Incentive Option and a
related Stock Appreciation Right granted to an Optionee who, at the time
of the grant, owns (after applying the attribution rules of Section 425(d)
of the Code) more than 10% of the total combined voting stock of all
classes of stock of the Corporation or of any parent or Subsidiary, such
Incentive Option and Stock Appreciation Right shall expire not more than
five years after the date of granting thereof.
6.10 Termination of Employment: If the employment of an Optionee by the
Corporation shall be terminated due to either the voluntary resignation of
the employee or for cause, any outstanding Stock Option or Stock
Appreciation Right granted to such Optionee shall terminate. If the
employment of an Optionee shall be terminated due to the Optionee's death,
any Stock Option or Stock Appreciation Right, transferred to a family
trust or by will or by the laws of descent and distribution, may be
exercised for one year following the date of the Optionee's death. If the
employment of an Optionee shall otherwise terminate such as due to
dismissal, a reorganization, retirement from active employment or service
with the Corporation after age 55, or the disability of the Optionee, the
Optionee may exercise any outstanding Stock Option or Stock Appreciation
Right for one year following the date of the termination of employment. In
such event, except upon the disability of the Optionee, any outstanding
Incentive Option or related Stock Appreciation Right may be exercised for
only three months following an Optionee's termination of employment.
Notwithstanding the foregoing, any Stock Option, Incentive Stock Option or
Stock Appreciation Right, the exercise of which has been extended pursuant
to this Section 6.10, shall immediately terminate upon the Optionee's
acceptance of an offer of employment with a competitor of the Corporation
as determined by the Committee in its sole discretion. In no event,
however, shall a Stock Option or Stock Appreciation Right be exercisable
subsequent to its expiration date and, furthermore, a Stock Option or
Stock Appreciation Right may only be exercised after termination of an
Optionee's employment to the extent exercisable on the date of termination
of employment.
6.11 Termination of Service: If a Non-Employee Director ceases to be a member
of the Board for any reason, or if an advisor no longer provides service
to the Corporation, the Non-Employee Director or advisor may exercise any
Option or related Stock Appreciation Right for one year following such
termination of service. In no event, however, shall a Stock Option or
Stock Appreciation Right be exercisable subsequent to its expiration date
and, furthermore, a Stock Option or Stock Appreciation Right may only be
exercised after termination of an Optionee's service to the extent
exercisable on the date of termination of service. Further, no Stock
Option or related Stock Appreciation Right may be exercised after such
termination of service, except within a time period provided in this
Section 6.11.
6.12 Investment Purpose: Any shares of Common Stock subject to option under the
Plan may be made subject to such other restrictions as the Committee deems
advisable, including without limitation provisions to comply with Federal
and state securities laws. In making determinations of legal requirements
the Committee shall rely on an opinion of counsel for the Corporation.
6.13 Withholding Payments: If upon the exercise of a Nonqualified Option and/or
a Stock Appreciation Right or as a result of a disqualifying disposition
(within the meaning of Section 422 of the Code) of shares acquired upon
exercise of an Incentive Option,
5
there shall be payable by the Corporation any amount for income tax
withholding, either the Corporation shall appropriately reduce the amount
of stock or cash to be paid to the Optionee or the Optionee shall pay such
amount to the Corporation to reimburse it for such income tax withholding.
6.14 Restrictions on Sale of Shares: If, at the time of exercise of any Stock
Option or Stock Appreciation Right granted hereunder, the Corporation is
precluded by any legal, regulatory or contractual restriction from selling
and/or delivering shares pursuant to the terms of such Stock Option or
Stock Appreciation Right, the sale and delivery of the shares may be
delayed until the restrictions are resolved and only cash may be paid upon
exercise of the Stock Appreciation Right. At any time during such delay,
the Committee, in its discretion, may permit the Optionee to revoke a
Stock Option exercise, in which event any corresponding Stock Appreciation
Right shall be reinstated.
6.15 Compliance With Rule 16b-3: Notwithstanding any other provision of the
Plan to the contrary, the administration of the Plan and the grant,
exercise and terms of Stock Appreciation Rights hereunder shall comply
with Rule 16b-3, or any successor rule, under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
Article VII. Restricted Common Stock
7.1 Awards: The Committee may from time to time award restricted shares of
Common Stock to any Eligible Person it has designated as a Participant for
such year. Awards shall be made to Eligible Persons in accordance with
such rules as the Committee may prescribe. The Committee may also award
restricted shares of Common Stock conditioned on the attainment of a
performance goal that relates to Shareholder return, measured by
Performance Criteria as determined by the Committee as set forth in the
award.
7.2 Restrictions:
a. Any shares of Common Stock awarded or issued under the Plan may be
made subject to such other restrictions as the Committee deems
advisable, including without limitation provisions to comply with
Federal and state securities laws. In making determinations of legal
requirements the Committee shall rely on an opinion of counsel for
the Corporation. The restrictions with respect to the Common Stock
awarded will extend for such period, or periods, of at least twelve
months from and after the date of the award, as may be determined
for each award by the Committee (the Award Period). After shares are
awarded under the Plan, the Committee may not, at a later date, add
additional restrictions or extend the length of the award period.
Notwithstanding the foregoing, the restrictions shall terminate upon
the death of the Participant.
b. Whenever shares of Common Stock are awarded to a Participant, such
shares shall be outstanding, and stock certificates shall be issued
in the name of the Participant, which certificates may bear a legend
stating that the shares are issued subject to the restrictions set
forth in the Plan. All certificates issued for shares of Common
Stock awarded under the Plan shall be deposited for the benefit of
the Participant with the Secretary of the Corporation as custodian
until such time as the shares are vested and transferable.
c. A Participant who is awarded shares of Common Stock under the Plan
shall have full voting rights on such shares, whether or not the
shares are vested or transferable.
d. Shares of Common Stock awarded to a Participant under the Plan,
whether or not vested or transferable, may have full dividend rights
as determined by the Committee. However, if shares or securities are
issued as a result of a merger, consolidation or similar event, such
shares shall be issued in the same manner, and subject to the same
deposit requirements, vesting provisions and transferability
restrictions as the shares of Common Stock which have been awarded.
e. Deliveries of Restricted Common Stock by the Corporation may consist
in whole or in part of the authorized and unissued Common Stock of
the Corporation (at such time or times and in such manner as it may
determine). The Restricted Common Stock shall be paid and delivered
as soon as practicable after the award period in accordance with
Section 7.3.
f. The shares may not be sold, exchanged, transferred, pledged,
hypothecated, or otherwise disposed of by the Participant until
their release. However, nothing herein shall preclude a Participant
from making a gift of any shares of Restricted Common Stock to a
spouse, child, stepchild, grandchild, parent or sibling, or legal
dependent of the Participant or to a trust of which the beneficiary
or beneficiaries of the corpus and the income shall be either such a
person or the Participant; provided that, the Restricted Common
Stock so given shall remain subject to the restrictions, obligations
and conditions described in this Article VII.
6
g. If a Participant has received an award pursuant to the provisions of
the Plan, is employed by the Corporation or remains a Non-Employee
Director or is an advisor at the end of the award period and the
performance goals have been met, then the Participant shall be fully
vested, at the end of the award period, in the shares of Common
Stock awarded to the Participant for that award period.
h. In the event of termination of employment of an employee Participant
or termination of service of a Non-Employee Director or advisor
prior to the last day of an award period for any reason other than
Participant's death, retirement of a Participant from active
employment or service with the Corporation after age 55
("Retirement"), or disability of a Participant., all rights to any
shares of Restricted Common Stock held in a deposit account with
respect to such award, including any additional shares issued with
respect to such shares as described in subsection 7.2d above shall
be forfeited to the Corporation. However, the Committee may, if the
Committee determines that circumstances warrant such action, vest
all or a portion of such outstanding awards and approve the
immediate distribution of all vested Common Stock that would
otherwise be forfeited. Alternatively, the Committee may, if the
Committee determines that circumstances warrant such action,
instruct that such shares of Restricted Common Stock shall continue
to be held by the Corporation in a deposit account until any
performance restrictions have been satisfied or the shares are
forfeited for failure to satisfy such performance restrictions.
7.3 Distribution of Restricted Common Stock
a. Distribution After Award Period: Except as otherwise provided,
distribution of vested awards of Common Stock shall be made as soon
as practicable after the last day of the applicable award period in
the form of full shares of Common Stock, with fractional shares, if
any, being awarded in cash.
b. Distribution After Death of Participant: Upon the death of the
Participant, either before or after retirement, any shares of
Restricted Common Stock then held shall, subject to this Article
VII, be delivered within a reasonable time under the circumstances
to Participant's Beneficiary or, in the absence of an appropriate
Beneficiary designation to the Participant's estate, in such one or
more installments as the Committee may then determine.
c. Distribution After Retirement or Disability: Upon termination of a
Participant due to Retirement or disability, any shares awarded not
less than 12 months prior to termination shall continue to be held
by the Corporation in a deposit account until any performance
restrictions have been satisfied or the shares are forfeited for
failure to satisfy such performance restrictions. The Committee may,
at its discretion and in exceptional circumstances, waive the
requirement that the shares be awarded not less than 12 months prior
to such termination. If such outstanding shares awarded to the
Participant are subject only to time based vesting and not to any
additional performance criteria, then such shares shall be delivered
to the Participant as soon as practicable after such termination.
Notwithstanding the above, if an employee Participant accepts an
offer of employment with a competitor of the Corporation as
determined by the Committee in its sole discretion, all shares that
have not been distributed as of that date shall terminate and be
forfeited by the Participant.
7.4 Designation of Beneficiaries
If a Participant dies prior to the receipt in full of any award under the
Plan to which the Participant is entitled, the award shall be distributed
to the Participant's Beneficiary or, in the absence of a Beneficiary
designation, to the Participant's estate. The designation of a Beneficiary
shall be made in writing on a form prescribed by and filed with the
Committee prior to the Participant's death. If the Committee is in doubt
as to the right of any person to receive such amount, the Committee may
retain such amount, without liability for any interest thereon, until the
rights thereto are determined, or the Committee may pay such amount into
any court of appropriate jurisdiction and such payment shall be a complete
discharge of the liability of the Plan and the Corporation therefor.
7.5 Transferability: Subject to the provision of this Article VII, shares of
Common Stock awarded to a Participant will become freely transferable by
the Participant only at the end of the award period established with
respect to such shares.
7.6 Distribution to Person Other Than Employee: If the Committee shall find
that any person to whom any award is payable under this Article VII of the
Plan is unable to care for such person's affairs because of illness or
accident, or is a minor, or has died, then any payment due Participant or
Participant's estate (unless a prior claim therefor has been made by a
duly appointed legal representative), may, if the Committee so directs the
Corporation, be paid to Participant's spouse, a child, a relative, an
institution maintaining or having custody of such person, or any other
person deemed by the Committee to be a proper recipient on behalf of
7
such person otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Committee and the Corporation
therefor.
7.7 Restricted Common Stock for employee Participants is intended to
constitute an unfunded deferred compensation arrangement for a select
group of management or highly compensated personnel.
7.8 A forfeiture of shares of Common Stock pursuant to subsection 7.2h of the
Plan shall effect a complete forfeiture of voting rights, dividend rights
and all other rights relating to the award or grant as of the date of
forfeiture.
7.9 Each distribution of Common Stock under this Article VII of the Plan shall
be made subject to such federal, state and local tax withholding
requirements as apply on the distribution date. For this purpose, the
Committee may provide for the withholding of shares of Common Stock or
allow a Participant to pay to the Corporation funds sufficient to satisfy
such withholding requirements.
Article VIII. Phantom Shares, Performance Units, Restricted Stock Units and
Management Stock Purchase Plan
8.1 Phantom Shares.
a. Grants of Phantom Shares. The Committee may from time to time grant
Phantom Shares, the value of which is determined by reference to a
share of Common Stock on terms and conditions as the Committee, in
its discretion, may from time to time determine. Each grant of
Phantom Shares shall specify the number of Phantom Shares granted,
the Initial Value of such Phantom shares which shall not be less
than 100% of the Fair Market Value of the Common Stock as of the
date of grant, the Valuation Dates, the number of Phantom Shares
whose appreciation value shall be determined on each such Valuation
Date, any applicable vesting schedule for such Phantom Shares, and
any applicable limitation on payment for such Phantom Shares.
b. Appreciation Value.
(i) Valuation Dates; Measurement of Appreciation Value. The
Committee shall provide for one or more Valuation Dates on
which the Appreciation Value of the Phantom Shares granted
shall be measured and fixed, and shall designate the number of
such Phantom Shares whose Appreciation Value is to be
calculated on each such Valuation Date.
(ii) Payment of Appreciation Value. Except as otherwise provided in
this Section 8.1, the Appreciation Value of a Phantom Share
shall be paid to a Participant in cash in a lump sum as soon
as practicable following the Valuation Date applicable to such
Phantom Share. The Committee may in its discretion, establish
and set forth a maximum dollar amount payable under the Plan
for each Phantom Share granted.
(iii) The Committee may, in its discretion, provide that Phantom
Shares shall vest (subject to such terms and conditions as the
Committee may provide in the award) over such period of time,
from the date of grant, as may be specified in a vesting
schedule contained in the grant.
(iv) Termination. In the event of termination of employment of an
employee Participant or termination of service of a
non-Employee Director or advisor prior to one or more
Valuation Dates, unless the Committee in its discretion
determines otherwise, the Appreciation Value for any Phantom
Share to which the Participant's Rights are vested, shall be
the lesser of the Appreciation Value as of the termination
date or the Appreciation Value of such Phantom Share
calculated as of the originally scheduled Valuation Date
applicable thereto in accordance with Section 8.1(b)(i).
Unless the Committee, in its discretion determines otherwise,
the Appreciation Value so determined for each such vested
outstanding Phantom Share shall then be payable to the
Participant or the Participant's estate following the
originally scheduled Valuation Date applicable thereto in
accordance with Section 8.1(b)(ii). Upon a termination as
described in this Section 8.1(b)(iv), all rights with respect
to Phantom Shares that are not vested as of such date will be
relinquished.
8.2 Performance Units. The Committee may, in its discretion, grant Performance
Units to Eligible Persons. Each Performance Unit will have an initial
value that is established by the Committee at the time of grant and
credited to a bookkeeping account established for the Participant, but no
Participant shall be granted Performance Units during any one fiscal year
with an initial value in excess of $2.5 million. The Committee will set
performance periods and objectives and other terms and conditions of the
grant based upon Performance Criteria as determined by the Committee that,
depending upon the extent to which they are met, will determine the value
of Performance Units that will be paid out to the Participant. The
Committee may pay earned Performance Units in cash, Common Stock or a
combination thereof.
8
Unless otherwise set forth in the grant, in the event the employment of an
employee Participant is terminated during a performance period due to
death, disability or retirement under the provisions of the Pension Plan
the Participant will receive a prorated payout of Performance Units. In
the event the employment is terminated for any other reason, then all
Performance Units will be forfeited. If the service of a Non-Employee
Director or advisor is terminated during a performance period, the
Participant will receive a prorated payout of Performance Units.
Notwithstanding the above, no payouts will be made to the extent that
objectives other than the duration of the performance period have not been
met except to the extent that the Committee in its discretion decides to
waive any such other achievement or objectives.
8.3 Management Stock Purchase Plan. The Committee may permit select employee
Participants to elect to receive all or a portion of their incentive
payment under the Officer's Incentive Compensation Plan in the form of
cash, shares of Restricted Common Stock, shares of Restricted Stock Units
or a combination of these and any such election of Restricted Common Stock
and/or Restricted Stock Units shall be referred to for purposes of this
Plan as a purchase. The Committee may also award additional shares of
Restricted Common Stock or Restricted Stock Units to such select
Participants who elect to receive their incentive payment in the form of
Common Stock or Restricted Stock Units, provided that the value of all
such additional Common Stock and Restricted Stock Units awarded to any one
Participant will not exceed $2.5 million for any fiscal year. Shares of
Common Stock and Restricted Stock Units will be granted under and governed
by the terms and conditions of this Plan (other than the limitations with
respect to maximum shares under Section 5.3) as well as any terms of the
grant. Each grant will set forth the extent to which the Participant has
the right to retain unvested Restricted Common Stock or Restricted Stock
Units after his or her termination of employment with the Corporation or a
Subsidiary. These terms will be determined by the Committee in its sole
discretion, need not be uniform among all grants, and may reflect, among
other things, distinctions based on the reasons for termination of
employment.
Article IX. Amendment, Duration and Termination of the Plan
9.1 Duration of Plan. No grants or awards may be made under this Plan after
May 31, 2009. Any grant or award effective on or prior to May 31, 2009
will be continue to vest and otherwise be effective after the expiration
of this Plan in accordance with the terms and conditions of this Plan as
well as any requirements set forth in the grant or award.
9.2 Right To Amend, Suspend or Terminate Plan: Except as provided in Section
9.5 below, the Board reserves the right at any time to amend, suspend or
terminate the Plan in whole or in part and for any reason and without the
consent of any Optionee, Participant or Beneficiary; provided, that no
such amendment shall:
a. Change the Stock Option price or adversely affect any Stock Option
or Stock Appreciation Right outstanding under the Plan on the
effective date of such amendment or termination, or
b. Adversely affect any award or grant then in effect or rights to
receive any amount to which Participants or Beneficiaries have
become entitled prior to such amendment, or
c. Unless approved by the Shareholders of the Corporation, increase the
aggregate number of shares of Common Stock reserved for award or
grant under the Plan, change the group of Eligible Persons under the
Plan or materially increase benefits to Eligible Persons under the
Plan.
9.3 Periodic Review of Plan: In order to assure the continued realization of
the purposes of the Plan, the Committee shall periodically review the
Plan, and the Committee may suggest amendments to the Board as it may deem
appropriate.
9.4 Amendments May Be Retroactive: Subject to Section 9.1 above, any
amendment, modification, suspension or termination of any provisions of
the Plan may be made retroactively.
9.5 Change in Control: Notwithstanding any other provisions in the Plan, in
the event of a Change in Control as defined under any written employment
contract or agreement between the Corporation or a subsidiary and an
Officer of the Corporation or a subsidiary, awards of Common Stock granted
under this Plan, as well as grants of any Performance Units, Restricted
Stock Units and the Appreciation Value of Phantom Shares, shall vest to
the extent, if any, provided for in the written employment agreement or
contract or in such separate contractual arrangement relating to such an
award or grant as may exist from time to time. Notwithstanding any other
provisions of the Plan, the provisions of this Section 9.5 may not be
amended after the date a Change in Control occurs.
9
9.6 Code Section 409A: Prior to December 31, 2006, this Plan will be further
amended, effective January 1, 2005, if necessary to ensure compliance with
the requirements of Section 409A of the Code. Prior to that amendment, if
any, the Plan will be operated in good faith compliance with the
provisions of Section 409A and related regulations. While operating in
good faith compliance, any provisions of the Plan that violate provisions
of Section 409A will be changed in operation to conform to Section 409A.
Article X. General Provisions
10.1 Rights to Continued Employment, Award or Option: Nothing contained in the
Plan or in any grant or award under this Plan shall give any employee the
right to be retained in the employment of the Corporation or affect the
right of the Corporation to terminate the employee's employment at any
time. The adoption of the Plan shall not constitute a contract between the
Corporation and any employee. No Eligible Person who is an employee shall
receive any right to be granted an option, right or award hereunder nor
shall any such option, right or award be considered as compensation under
any employee benefit plan of the Corporation.
10.2 Governing Law: The provisions of this Plan and all rights thereunder shall
be governed by and construed in accordance with the laws of the State of
Michigan.
IN WITNESS WHEREOF, execution is hereby effected.
ATTEST: CMS ENERGY CORPORATION
/s/ Catherine M. Reynolds By: /s/ David W. Joos
- ----------------------------------- -----------------------------------
Secretary Chief Executive Officer
10