-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BySAi2oGtvfEsKgYaPNxBQ7SrKsAmrTQ1gNQU6Kg4Ibc/u0ETy0I4kBarL8rdMB4 Lf7Ffq6WRa+ucGmx7vLhlg== 0000950124-96-001701.txt : 19960423 0000950124-96-001701.hdr.sgml : 19960423 ACCESSION NUMBER: 0000950124-96-001701 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960524 FILED AS OF DATE: 19960422 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CMS ENERGY CORP CENTRAL INDEX KEY: 0000811156 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 382726431 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09513 FILM NUMBER: 96549159 BUSINESS ADDRESS: STREET 1: FAIRLANE PLZ SOUTH STE 1100 STREET 2: 330 TOWN CENTER DR CITY: DEARBORN STATE: MI ZIP: 48126 BUSINESS PHONE: 313-436-9200 MAIL ADDRESS: STREET 1: FAIRLANE PLAZA SOUTH, SUITE 1100 STREET 2: 330 TOWN CENTER DRIVE CITY: DEARBORN STATE: MI ZIP: 48126 DEF 14A 1 DEF 14A 1 SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the registrant [X] Filed by a party other than the registrant [ ] Check the appropriate box: [ ] 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 Rule 14a-11(c) or Rule 14a-12 CMS ENERGY CORPORATION - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) CMS ENERGY CORPORATION - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of filing fee (Check the appropriate box): [X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] 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 (Set forth the amount on which the filing fee is calculated and state how it was determined): - -------------------------------------------------------------------------------- (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: - -------------------------------------------------------------------------------- 2 [CMS ENERGY LOGO] CMS ENERGY CORPORATION CALL AND NOTICE OF ANNUAL MEETING OF SHAREHOLDERS MAY 24, 1996 To the Shareholders of CMS Energy Corporation: The annual meeting of shareholders of CMS ENERGY CORPORATION will be held on Friday, the 24th day of May 1996, at 10:30 A.M., Eastern Daylight Saving Time, at the Dearborn Inn, 20301 Oakwood Boulevard, Dearborn, Michigan, 48124-4099 for the purpose of: (1) Electing a Board of Directors of 11 members; (2) Ratifying the appointment of Arthur Andersen LLP, independent public accountants, to audit the financial statements of the Corporation for the year ending December 31, 1996; and (3) Transacting such other business as may properly come before the meeting. The annual report to the shareholders for the year 1995, including financial statements, has been furnished to you. The Board of Directors has fixed March 26, 1996 as the record date for the determination of shareholders entitled to notice of and to vote at the meeting. Common Shareholders will be entitled to vote on all matters that come before the meeting. All shareholders are cordially invited to attend the annual meeting. The Board of Directors requests that you sign and date the enclosed proxy and return it in the enclosed envelope, which requires no postage if mailed in the United States. By order of the Board of Directors, Thomas A. McNish, Secretary CMS Energy Corporation Fairlane Plaza South Suite 1100 330 Town Center Drive Dearborn, Michigan 48126 April 18, 1996 3 PROXY STATEMENT ------------------------ INTRODUCTION The Board of Directors solicits your proxy for use at this year's annual meeting. The shares represented by your proxy will be voted if the proxy is signed and returned prior to the meeting. You may revoke your proxy at any time before it is exercised, provided that you so notify the Secretary of CMS Energy Corporation (the "Corporation") in writing before the proxy is exercised. As of December 31, 1995, the Corporation's outstanding Common Stock consisted of a total of 99,212,103 shares. This total consisted of 91,593,501 shares of the Corporation's Common Stock, $.01 par value, and 7,618,602 shares of the Corporation's Class G Common Stock, no par value. Each outstanding share is entitled to one vote on all matters which may come before the annual meeting. All shares represented by signed proxies will be voted at the annual meeting. The Corporation has received a copy of Schedule 13G filed with the Securities and Exchange Commission ("SEC") by Brinson Partners, Inc., 209 South LaSalle, Chicago, Illinois, 60604-1295, which indicates holdings of 5,667,800 shares representing 5.7% of the outstanding Common Stock of the Corporation. This form indicates that the shares were purchased in a fiduciary capacity in the ordinary course of business for investment purposes. To the knowledge of management, no other person owns beneficially more than 5% of any class of the Corporation's outstanding voting securities. The determination of approval of corporate action by the shareholders is based on votes "for" and "against". Abstentions and broker non-votes are not counted as "against" votes but are counted in the determination of a quorum. NOMINEES FOR ELECTION AS MEMBERS OF THE BOARD OF DIRECTORS The nominees for directors of the Corporation and Consumers Power Company ("Consumers") will hold office until the next annual meeting or until their successors are elected and qualified. Unless a shareholder withholds authority to vote for the election of directors as provided in the proxy, the returned proxy will be voted for the listed nominees. The Board of Directors has no reason to believe that the persons named will not be available but in the event any nominee is unable to serve, the proxy will be voted for a substitute nominee designated by the Board of Directors. All of the nominees are presently serving as directors. S. Kinnie Smith, Jr., who has retired, and Frank H. Merlotti, who has announced his retirement, are not standing for reelection. The eleven nominees receiving the greatest number of votes will be elected. 2 4 WILLIAM T. MCCORMICK, JR., 51, has served as Chairman of the Board and Chief WILLIAM T. McCORMICK Executive Officer of the Corporation since it was incorporated in February 1987 and [Photo] as Chairman of the Board of Consumers since November 1985. Until January 1992 he was also CEO of Consumers, and until December 1987, he was also President of the Corporation and of Consumers. He is a director of First Chicago NBD Corporation, Rockwell International Corporation, and Schlumberger Ltd. He is also a director of the American Gas Association, the Edison Electric Institute, and the National Petroleum Council. He has been a director of the Corporation since 1987 and of Consumers since 1985. JAMES J. DUDERSTADT, 53, has served since 1988 as the President of the University of JAMES J. DUDERSTADT Michigan, Ann Arbor, Michigan. He is a director of the Unisys Corporation and the [Photo] University of Michigan Hospitals. He has been a Director of the Corporation and of Consumers since 1993. KATHLEEN R. FLAHERTY, 44, has served since 1995 as National Marketing Director for KATHLEEN R. FLAHERTY British Telecom, a provider of global telecommunications services. Previously, she [Photo] served from 1993 to 1995 as Corporate Senior Vice President of MCI Communications Corporation, and as Senior Vice President, Worldwide Sales and Marketing, of Concert Management Services, Inc., a joint venture with British Telecom. Prior to that, she had served from 1985 to 1993 as Vice President of MCI Communications Corporation. She has been a director of the Corporation and of Consumers since January, 1995. VICTOR J. FRYLING, 48, was elected Chief Operating Officer of the Corporation VICTOR J. FRYLING effective January 1996 and has served as President of the Corporation and Vice [Photo] Chairman of Consumers since 1992. Previously, he had been Executive Vice President and Chief Financial Officer of the Corporation and of Consumers from 1988 to 1991. He has been a director of the Corporation and of Consumers since 1990.
3 5 EARL D. HOLTON, 62, has served since 1980 as President and Chief Operating Officer EARL D. HOLTON [Photo] of Meijer, Inc., a Grand Rapids, Michigan based operator of food and general merchandise centers. He is a director of Meijer, Inc. and Old Kent Financial Corporation. He has been a director of the Corporation and of Consumers since 1989. LOIS A. LUND, 68, is Professor, College of Human Ecology, Michigan State University, LOIS A. LUND [Photo] East Lansing, Michigan. Previously, she served as Dean, College of Human Ecology, Michigan State University, from 1973 to 1985. She has been a director of the Corporation since 1987 and of Consumers since 1983. MICHAEL G. MORRIS, 49, was elected Executive Vice President of the Corporation MICHAEL G. MORRIS effective January 1996 and has served as President and Chief Executive Officer of [Photo] Consumers since 1994. Previously, he had been Chief Operating Officer of Consumers from 1992 to 1993 and Executive Vice President of Consumers from 1988 to 1991. He was elected a director of the Corporation and of Consumers in February, 1996.
4 6 WILLIAM U. PARFET, 49, has served since November 1995 as Co-Chairman of MPI WILLIAM U. PARFET Research, Mattawan, Michigan, a research lab conducting risk assessment toxicology [Photo] studies. Previously, he served from 1993 to January 1996 as President and Chief Executive Officer of Richard-Allan Medical Industries, Richland, Michigan. Prior to that, he served as Vice Chairman from 1992 to 1993; as President from 1991 to 1992; and as Executive Vice President from 1989 to 1990 of The Upjohn Company. He is a director of Pharmacia & Upjohn, Inc., Old Kent Financial Corporation, Stryker Corporation, and Universal Foods Corporation. He has been a director of the Corporation and of Consumers since 1991. PERCY A. PIERRE, 57, has served since 1990 as Professor of Electrical Engineering, PERCY A. PIERRE [Photo] Michigan State University, East Lansing, Michigan. He also served as Vice President for Research and Graduate Studies at Michigan State University from 1990 to 1995. Previously, he had held the following positions at Prairie View A&M University: Honeywell Professor of Electrical Engineering from 1989 to 1990; President from 1983 to 1989. Dr. Pierre is a former Assistant Secretary of the Army for Research, Development and Acquisition (1977 to 1981). He is a director of Old Kent Financial Corporation. He has been a director of the Corporation and of Consumers since 1990. KENNETH WHIPPLE, 61, has served since 1988 as Executive Vice President of Ford Motor KENNETH WHIPPLE [Photo] Company, Dearborn, Michigan, a world-wide automotive manufacturer, and President of the Ford Financial Services Group. He previously served as Chairman and Chief Executive Officer of Ford of Europe, Inc. from 1986 to 1988. He has been a director of the Corporation and of Consumers since 1993. JOHN B. YASINSKY, 56, has served as Chairman and Chief Executive Officer since 1995, JOHN B. YASINSKY [Photo] President and Chief Executive Officer from 1994 to 1995, and President and Chief Operating Officer from 1993 to 1994 of GenCorp, Fairlawn, Ohio, a manufacturer of aerospace, automotive and polymer products. Previously, he served as Group President of Westinghouse Electric Corporation in 1993 and as President of Westinghouse Power Systems from 1990 to 1993. He is a director of GenCorp. He has been a director of the Corporation and of Consumers since 1994.
5 7 MANAGEMENT SECURITY OWNERSHIP The following chart summarizes the ownership of the Corporation's Common Stock by the directors and executive officers.
Shares Name Beneficially Owned* ---------------------------------------- ------------------- William T. McCormick, Jr. .............. 155,344 James J. Duderstadt..................... 1,568 Kathleen R. Flaherty.................... 1,716 Victor J. Fryling....................... 78,390 Earl D. Holton.......................... 6,471 Lois A. Lund............................ 2,424 Frank H. Merlotti....................... 4,923 Michael G. Morris....................... 56,659 William U. Parfet....................... 11,000 Percy A. Pierre......................... 3,090 S. Kinnie Smith, Jr. (retired 3/1/96)... 65,835 Kenneth Whipple......................... 3,000 John B. Yasinsky........................ 2,559 Alan M. Wright.......................... 22,473 All Directors and Executive Officers.... 541,391
* Shares shown as beneficially owned include the number of shares and share equivalents represented by interests in the Employees' Savings and Incentive Plan, the Deferred Salary Savings Plan, the Performance Incentive Stock Plan, and the Directors' Deferred Compensation Plan as of December 31, 1995. Both CMS Energy Corporation Common Stock and CMS Energy Corporation Class G Common Stock are included in the calculation of Shares Beneficially Owned. The directors each own 10 shares of Preferred Stock of Consumers as qualifying shares. Two executive officers own a total of 2,200 shares of non-voting Preferred Stock of Consumers. No other executive officer owns shares of Consumers Preferred Stock. The directors and executive officers together own less than 1% of the outstanding shares of the Corporation. DIRECTOR AND OFFICER SECURITIES REPORT The Federal Securities Laws require the Corporation's directors and executive officers, and persons who own more than 10% of the Corporation's Common Stock, to file with the SEC reports of ownership and changes in ownership of any securities or derivative securities of the Corporation. To the Corporation's knowledge during the year ended December 31, 1995 all the Corporation's officers and directors made all required filings except Michael G. Morris, Executive Vice President of the Corporation, who filed late Forms 4 in June 1995 regarding the October 1992 sale of 4,165 shares and the April 1995 sale of 847 shares. 6 8 BOARD OF DIRECTORS AND COMMITTEES OF THE CORPORATION AND CONSUMERS The Board of Directors of the Corporation met 11 times and Consumers' Board of Directors met 10 times during 1995. All incumbent directors attended more than 75% of the board and assigned committee meetings during 1995. AUDIT COMMITTEES Members: Frank H. Merlotti (Chair), Lois A. Lund, William U. Parfet, Percy A. Pierre, and John B. Yasinsky. Meetings during 1995: Corporation 3 -- Consumers 3 These committees meet with representatives of the independent public accountants from time to time during the year and after the completion of the annual audit of the Corporation's and Consumers' financial statements to review and discuss such audit, internal controls and other appropriate matters; review the activities of the Internal Audit Department; review the relationship of the Corporation's and Consumers' independent public accountants with the Corporation and Consumers insofar as they perform nonaudit services; and review and recommend to the Boards of Directors the appointment of independent public accountants. NOMINATING COMMITTEES Members: Percy A. Pierre (Chair), James J. Duderstadt, Frank F. Merlotti, Kenneth Whipple, and John B. Yasinsky. Meetings during 1995: Corporation 2 -- Consumers 2 These committees conduct a continuing study of the size, structure, composition and compensation of the boards; seek out possible candidates to fill board positions; aid in attracting qualified candidates to the boards; recommend annually, prior to the solicitation of proxies, a slate of qualified candidates for election to the boards at the annual meeting and, in case of any vacancies on the boards, candidates to fill those vacancies; review periodically and recommend to the Boards of Directors modifications, as appropriate, to the director tenure policy; and determine from time to time criteria for selection and retention of board members. The committees consider shareholders' recommendations of nominees for election to the Boards of Directors. The recommendations must be accompanied by the consent of each of the recommended nominees to act as a director. Shareholders should send their written recommendations of nominees to: Mr. Thomas A. McNish, Corporate Secretary, CMS Energy Corporation, Fairlane Plaza South, Suite 1100, 330 Town Center Drive, Dearborn, Michigan 48126. ORGANIZATION AND COMPENSATION COMMITTEES Members: Earl D. Holton (Chair), Frank H. Merlotti, William U. Parfet, Kenneth Whipple, and John B. Yasinsky. Meetings during 1995: Corporation 5 -- Consumers 5 These committees review the executive organization of the Corporation and of Consumers from time to time; review from time to time the salaries and other compensation of all the officers of the Corporation and of Consumers; monitor the development of personnel for availability to fill key management positions as vacancies occur; establish goals annually for the Executive Incentive Compensation Plan; review and approve the incentive compensation payment schedule; review and approve grants under the Executive Stock Option and Stock Appreciation Rights Plan; administer the Corporation's Performance Incentive Stock Plan; and report to the Boards of Directors with respect to the committees' recommendations. 7 9 ENVIRONMENTAL AND CORPORATE RESPONSIBILITY COMMITTEES Members: Lois A. Lund (Chair), James J. Duderstadt, Kathleen R. Flaherty, Earl D. Holton, and Percy A. Pierre. Meetings during 1995: Corporation 2 -- Consumers 2 These committees make recommendations to the Boards of Directors regarding significant environmental matters affecting the Corporation's and Consumers' operations; advise the Boards on the adoption and evaluation of policies designed to maintain the Corporation's and Consumers' position of corporate responsibility; review and monitor the Corporation's and Consumers' policies and objectives related to equal employment opportunities; review the Corporation's and Consumers' policies to comply with federal and state laws and regulations affecting personnel matters, such as the Occupational Safety and Health Act, Americans with Disabilities Act and the Age Discrimination in Employment Act; and review the Corporation's and Consumers' policies related to contributions and support of charitable, educational and community organizations. EXECUTIVE COMMITTEES Members: William T. McCormick, Jr. (Chair), Earl D. Holton, Lois A. Lund, Frank H. Merlotti, Percy A. Pierre, S. Kinnie Smith, Jr. and Kenneth Whipple. Meetings during 1995: Corporation 0 -- Consumers 1 These committees exercise the power and authority of the Boards of Directors as may be necessary during the intervals between meetings of the Boards of Directors, subject to such limitations as are provided by law or by resolution of the boards. FINANCE AND PENSION COMMITTEES Members: Kenneth Whipple (Chair), Kathleen R. Flaherty, Earl D. Holton, Lois A. Lund, and William U. Parfet. Meetings during 1995: Corporation 1 -- Consumers 2 These committees give advice and counsel to the officers of the Corporation and Consumers with respect to the means for providing the funds required to carry out the Corporation's and Consumers' programs; review the financial policies including capitalization objectives, use of short-term financing and issuance of long-term securities; and recommend to the Boards of Directors financial policies for the Corporation and Consumers. In addition, the committee of Consumers reviews the investment policies for all employee benefit funds with respect to assets being managed, including adequacy of funding; reviews quarterly the investment performance of each of the investment managers for all employee benefit funds of Consumers; reports to the Board of Directors on findings regarding selection and retention of managers; and reviews the administration of the employee benefit plans. 8 10 COMPENSATION OF DIRECTORS Directors who are not officers of the Corporation or Consumers received in 1995 an annual retainer fee of $30,000, and $1,000 for attendance at each board meeting and $750 for attendance at each committee meeting. Committee chairs receive $1,000 for attendance at each committee meeting. Retainer and attendance fees are set by the Boards of Directors. In addition, in 1995 such Directors were vested in 200 restricted shares of common stock of the Corporation with a fair market value at the time of vesting of $4,725. 600 shares of restricted stock will vest 33% per year in 1996 through 1998 for those Directors who continue to serve through such years. Directors are reimbursed for expenses incurred in attending board or committee meetings. Directors who are officers of the Corporation or Consumers do not receive retainers or meeting fees for service on the board or as a member of any board committee. Pursuant to the Directors' Deferred Compensation Plan, a director of the Corporation or Consumers who is not an employee may at any time prior to a calendar year in which a retainer and fees are to be earned, or at any time during the year prior to the month in which a retainer and fees are earned may elect to irrevocably defer payment for that year, or a portion thereof, through written notice to the Corporation or Consumers, of all or half of any of the retainer and fees which would otherwise be paid to the director, to a time following the director's retirement from the Board of Directors. Any amount deferred will either (a) accrue interest at either the prime rate or the rate for 10-year Treasury Notes (whichever is greater), (b) be treated as if it were invested as an optional cash payment in the Corporation's Stock Purchase Plan, or (c) be treated as if it were invested in a Standard & Poor's 500 stock index fund. Accrued amounts will be distributed in a lump sum or in five annual installments in cash. Outside directors who retire with five years of service on the board will receive monthly retirement payments equal to the monthly retainer. These payments will continue for a period of time equal to their years of service on the board. All benefits will cease at the death of the retired director. Outside directors are offered optional life insurance coverage, business-related travel accident insurance, and optional health care insurance, and the Corporation and Consumers pay the premiums associated with participation by directors. The value for income tax purposes of the life insurance coverage in 1995 was: Messrs. Duderstadt, $605; Holton, $940; Merlotti, $1,965; Parfet, $491; Pierre, $691; Whipple, $940; Yasinsky, $691; and Ms. Lund, $948. The value for health care coverage in 1995 was $1,843 for Ms. Lund, the only selecting Director. 9 11 EXECUTIVE COMPENSATION The following charts contain information concerning annual and long-term compensation and awards of stock options and restricted stock under the Corporation's Performance Incentive Stock Plan. The charts include the Chairman of the Board and the next four most highly compensated executive officers. SUMMARY COMPENSATION TABLE
Long-Term Compensation(1) ---------------------------------------- Awards Payouts Annual ------------------------- ---------- Compensation Restricted Securities Long-Term All Other ---------------------- Stock Underlying Incentive Compen- Name and Principal Position Year Salary Bonus Awards($) Options Payouts(2) sation(3) - ---------------------------- ----- --------- --------- ---------- ---------- ---------- --------- William T. McCormick, Jr. 1995 $750,000 $560,000 40,000 $166,765 $22,500 Chairman and CEO, 1994 725,000 470,000 36,000 104,400 21,750 Corporation and Chairman, 1993 675,000 435,000 32,000 96,563 20,235 Consumers Victor J. Fryling(4) 1995 495,000 350,000 $547,500(5) 24,000 82,714 14,850 President and COO, 1994 466,000 312,015 22,000 51,613 13,980 Corporation and Vice 1993 430,000 306,310 20,000 45,063 12,932 Chairman, Consumers S. Kinnie Smith, Jr.(6) 1995 480,000 288,550 16,000 82,714 14,400 Vice Chairman, 1994 460,000 277,855 16,000 51,613 13,800 Corporation and Consumers 1993 435,000 269,560 16,000 45,063 13,035 Michael G. Morris(7) 1995 451,000 314,780 205,312(8) 20,000 72,220 13,530 Executive Vice President, 1994 423,667 289,935 18,000 45,022 12,710 Corporation, and 1993 365,000 208,800 16,000 38,625 11,154 President and CEO, Consumers Alan M. Wright 1995 255,000 170,000 12,000 45,292 1,912 Senior Vice President 1994 240,000 147,195 11,000 27,949 0 and CFO, Corporation 1993 215,000 116,880 9,000 19,312 0 and Consumers
(1) Aggregate restricted stock held as of December 31, 1995 by named officers was: William T. McCormick, Jr., 66,675 shares; Victor J. Fryling, 59,311 shares; S. Kinnie Smith, Jr., 30,311 shares; Michael G. Morris, 47,515 shares; Alan M. Wright, 19,500 shares; with respective values based on market price at December 31, 1995 of $1,991,915; $1,771,916; $905,541; $1,419,510; and $582,562. Regular dividends are paid on such restricted stock. (2) Market value of common stock paid under the Corporation's Performance Incentive Stock Plan for three-year performance periods. (3) Employer matching contribution to defined contribution plans. (4) Mr. Fryling was elected Chief Operating Officer of the Corporation effective January 1, 1996. (5) 20,000 shares were awarded and vest at a rate of 25% per year beginning in 1997. (6) Mr. Smith retired March 1, 1996. (7) Mr. Morris was elected Executive Vice President of the Corporation effective January 1, 1996. (8) 7,500 shares were awarded and vest at a rate of 25% per year beginning in 1997. 10 12 EMPLOYMENT ARRANGEMENTS Agreements with the executive officers (except S. Kinnie Smith, Jr.) named above and seven other senior executive officers provide for payments of two times annual cash compensation if there is a change of control and adverse change of responsibilities. The Corporation and Consumers also provide long-term disability insurance policies for all executive officers which would provide payments of 60% of compensation in the event of disability. OPTION GRANTS IN 1995
Number of Securities Underlying Percentage of Total Exercise Grant Date Options Options Granted to Price Per Expiration Present Name Granted Employees in 1995 Share Date Value(1) - ---------------------------------- --------- ------------------- --------- ---------- ---------- William T. McCormick, Jr. ........ 40,000 14.13 $ 24.75 8/26/05 $168,000 Victor J. Fryling................. 24,000 8.48 24.75 8/26/05 100,800 S. Kinnie Smith, Jr. ............. 16,000 5.65 24.75 8/26/05 67,200 Michael G. Morris................. 20,000 7.07 24.75 8/26/05 84,000 Alan M. Wright.................... 12,000 4.24 24.75 8/26/05 50,400
(1) The present value is based on the Black-Scholes Model, a mathematical formula used to value options traded on securities exchanges. The model utilizes a number of assumptions and adjustments, including the exercise price, the underlying stock's volatility of 15% using daily prices for a one year period prior to grant date, the dividend rate of $0.96, the term of the option, and the level of interest rates at 6.49%, equivalent to the rate of 10-year Treasury Notes. However, the Model does not take into account a significant feature of options granted to employees under the Corporation's Plan, i.e., the non-transferability of options awarded under the Corporation's Plan. AGGREGATED OPTIONS/SARS EXERCISES IN 1995 AND YEAR-END OPTIONS/SARS VALUES
Number of Value of Securities Unexercised Underlying In-the-Money Shares Acquired Value Unexercised Options/ Options/SARs At Name On Exercise Realized SARS at Year End Year End(1)(2) - ---------------------------------- ---------------- ---------- -------------------- --------------- William T. McCormick, Jr. ........ 61,666 $1,097,346 380,000 $ 3,003,750 Victor J. Fryling................. 0 0 161,500 1,021,500 S. Kinnie Smith, Jr............... 0 0 142,000 826,875 Michael G. Morris................. 0 0 107,000 585,750 Alan M. Wright.................... 0 0 42,000 284,250
(1) All options/SARs listed in this table are exercisable. The named officers have no unexercisable options/SARs. (2) Based on the December 31, 1995 closing price of the Corporation's Common Stock as shown in the report of the NYSE Composite Transactions ($29.875). 11 13 LONG-TERM INCENTIVE PLANS -- AWARDS IN 1995
Estimated Future Payouts Under Non-Stock Price-Based Plans (Shares)(1) Number of Period Until ------------------------------------ Name Shares Payout Threshold Target Maximum - ------------------------------------ --------- ------------ --------- ------ ------- William T. McCormick, Jr............ 20,000 2-5 Years 5,000 20,000 30,000 Victor J. Fryling................... 12,000 2-5 Years 3,000 12,000 18,000 S. Kinnie Smith, Jr................. 8,000 2-5 Years 2,000 8,000 12,000 Michael G. Morris................... 10,000 2-5 Years 2,500 10,000 15,000 Alan M. Wright...................... 6,000 2-5 Years 1,500 6,000 9,000
(1) Under the Corporation's Performance Incentive Stock Plan, awards of restricted stock for the above officers vest at the rate of 25% per year after two years and are subject to achievement of specified levels of total shareholder return over a three-year period. The target amount will be earned if 100% of the targeted average 15% annual total shareholder return is achieved. The threshold amount will be earned on achievement of 40% of the target, and the maximum award will be earned on achieving 140% of the target. PENSION PLAN TABLE The following table shows the aggregate annual pension benefits at Normal Retirement Date presented on a straight life annuity basis under the Corporation's qualified pension plan and non-qualified supplemental executive retirement plan (offset by a portion of Social Security benefits).
Years of Service -------------------------------------------------------------------- Compensation 15 20 25 30 35 ------------ -------- -------- -------- -------- -------- 4$00,000.... $126,000 $168,000 $198,000 $228,000 $258,000 600,000..... 189,000 252,000 297,000 342,000 387,000 800,000..... 252,000 336,000 396,000 456,000 516,000 1,000,000... 315,000 420,000 495,000 570,000 645,000 1,200,000... 378,000 504,000 594,000 684,000 774,000
Regular, straight-time salary as shown in the Summary Compensation Table during the 5 years of highest earnings is used in computing benefits under the Pension Plan; in addition, awards under the Executive Incentive Compensation Plan as shown in the Summary Compensation Table during the 5 years of highest earnings are used in computing benefits under the Supplemental Executive Retirement Plan. The estimated years of service for each named executive is: William T. McCormick, Jr., 20.44 years, Victor J. Fryling, 20.00 years, S. Kinnie Smith, Jr., 18.00 years, Michael G. Morris, 14.86 years, and Alan M. Wright, 9.52 years. 12 14 ORGANIZATION AND COMPENSATION COMMITTEE REPORT Compensation Philosophy The Corporation's executive compensation program is directed by a committee composed entirely of independent outside directors. The Committee is responsible for determining and administering executive compensation policies and plans as well as reviewing and recommending officer appointments to the Board of Directors. The Committee also has the responsibility for approving both annual compensation and awards under the long-term stock ownership programs. Such programs seek to enhance the profitability of the Corporation and, hence, shareholder value by aligning the financial interests of the Corporation's officers with those of its shareholders. In doing so, the Committee relies to a large degree on incentive compensation including stock-related awards to attract and retain outstanding officers. Compensation for Mr. McCormick and the other executive officers consists of a base salary, which is intended to be at the competitive median of the amounts paid to senior executives with equivalent positions at other energy companies of comparable size, and substantial annual and long-term incentive compensation closely tied to the Corporation's success in achieving earnings, stock appreciation and other performance goals. The incentive program is also designed to be competitive with plans of other comparable energy companies and variable "at risk" compensation is intended to be above median in years when the corporation meets or exceeds its performance goals. Annual Compensation Just prior to the beginning of each fiscal year, the Committee reviews the base salary of Mr. McCormick and the other executive officers and approves an annual salary plan for them based on industry, peer group, and national surveys and judgment as to the past and expected future contributions of each individual. In the case of Mr. McCormick, such judgment also involves the Committee's assessment of his past performance and its expectation as to his future contribution in leading the Corporation. The annual incentive compensation (bonus) payment, if any, is based on the Corporation's success in meeting challenging earnings per share goals set by the Committee at the beginning of each year. In addition individual performance goals are established for each executive officer for specific financial, operating and management achievements. Following the end of each year, the results on a corporate and individual basis are reviewed by the Committee to determine the appropriateness of awards. For 1995, because the Corporation exceeded its earnings goal the Committee granted annual incentive bonuses as shown in the Summary Compensation Table in accordance with the Corporation's Executive Incentive Compensation Plan. The Plan has a threshold payout at 80% of the earnings per share goal and a maximum payout at 120% of goal. Mr. McCormick's award was based on a standard award under the Plan of 75% of the median salary for his grade, adjusted to reflect the Committee's judgement as to his leadership performance for the year. Long-term Compensation The last element of executive compensation considered by the Committee during each year is long-term incentive awards in the form of stock options and restricted stock awards under the Corporation's Performance Incentive Stock Plan. The Committee believes such awards are desirable in encouraging common stock ownership by executives, thus linking their interests directly to that of other shareholders. Therefore, in 1995, the Committee decided to grant stock options with an exercise price equal to the market price on the date of the grant to the 13 15 executive officers as shown in the above charts. Options have been granted annually usually in respect of approximately the same number of shares. The Committee believes grants should be made annually on a generally consistent basis. In determining grants, the Committee weighed a number of factors including prior grants and corporate performance. The Committee also awarded performance-based restricted stock which will vest at the rate of 25% per year beginning after two years, rising to 100% after five years. However, the nominal restricted stock award will be paid only if the average annual shareholder return target of 15% is achieved for each three-year performance period. If the average annual shareholder return is less than the target, the award will be smaller, and if the return is more than the target, then the award will be greater. Compensation Deductibility The Committee has reviewed the Corporation's Compensation Plans and the applicability of Section 162(m) of the Internal Revenue Code and regulations thereunder dealing with federal income tax deductibility for compensation in excess of $1 million. The Committee believes that awards of stock options and vesting of Restricted Stock under the Corporation's Performance Incentive Stock Plan are not considered compensation under the regulations under Section 162(m), because both have been approved by Shareholders and are based on pre-established performance goals. However, bonus awards under the Executive Incentive Compensation Plan are considered compensation because the Committee believes that it is in the best interests of the Corporation to retain maximum flexibility in rewarding superior performance. Compensation Consultant In connection with its ongoing independent review of executive compensation, the Committee has retained Hewitt Associates, a recognized compensation and benefit consultant, to assist the Committee in evaluating the appropriateness and competitiveness of its compensation policies and programs. Submitted by the Organization and Compensation Committee: Earl D. Holton (Chair), Frank H. Merlotti, William U. Parfet, Kenneth Whipple, and John B. Yasinsky. 14 16 COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG CMS ENERGY CORPORATION, S&P 500 INDEX & DOW JONES UTILITY INDEX
MEASUREMENT PERIOD DOW JONES (FISCAL YEAR COVERED) CMS ENERGY S&P 500 INDEX UTILITY INDEX 1990 100 100 100 1991 68 131 115 1992 70 140 119 1993 98 155 130 1994 93 157 110 1995 126 215 145
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN AMONG CMS ENERGY CORPORATION, S&P 500 INDEX & DOW JONES UTILITY INDEX
MEASUREMENT PERIOD DOW JONES (FISCAL YEAR COVERED) CMS ENERGY S&P 500 INDEX UTILITY INDEX 1985 100 100 100 1986 201 119 126 1987 174 125 133 1988 311 146 153 1989 485 192 204 1990 363 186 195 1991 248 243 224 1992 254 261 232 1993 357 287 253 1994 337 291 214 1995 456 401 283
Total return assumes reinvestment of dividends. Fiscal years ending December 31. Assumes the value of the investment in the Corporation's common stock and each index was $100 on December 31, 1990 and December 31, 1985 for the ten year chart. 15 17 RATIFICATION OF THE APPOINTMENT OF AUDITORS Subject to the approval of the shareholders, the Board of Directors has appointed Arthur Andersen LLP, independent public accountants, to audit the financial statements of the Corporation for the year 1996. Arthur Andersen LLP also served as the Corporation's auditors for the year 1995. A representative of Arthur Andersen LLP will be present at the annual meeting of shareholders and will have an opportunity to make a statement and respond to appropriate questions. Approval of the proposal to ratify the appointment of auditors requires the affirmative vote of holders of a majority of the shares of common stock present at the meeting. THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE APPOINTMENT OF AUDITORS 1997 PROXY STATEMENT INFORMATION A shareholder who intends to submit a proposal for consideration at the 1997 annual meeting pursuant to the applicable rules of the Securities and Exchange Commission must send the proposal to reach the Corporation's Corporate Secretary on or before December 18, 1996. The proposals should be addressed to: Mr. Thomas A. McNish, Corporate Secretary, Fairlane Plaza South, Suite 1100, 330 Town Center Drive, Dearborn, Michigan 48126. OTHER MATTERS The Board of Directors does not know of any other matters that might be presented to the meeting except matters incident to the conduct of the meeting. However, if any other matters (including matters incident to the conduct of the meeting) do come before the meeting, it is intended that the holders of the proxies will vote thereon in their discretion. The cost of solicitation of proxies will be borne by the Corporation and Consumers. Proxies may be solicited by officers and other employees of the Corporation and Consumers or their subsidiaries, personally or by telephone, facsimile or mail. The Corporation has arranged for Morrow & Co., of 909 Third Ave., New York, New York 10022-4799, to solicit proxies in such manner, and it is anticipated that the cost of such solicitations will not exceed $25,000, plus incidental expenses. The Corporation may also reimburse brokers, dealers, banks, voting trustees or other record holders for postage and other reasonable expenses of forwarding the proxy material to the beneficial owners of shares of stock held of record by such brokers, dealers, banks, voting trustees or other record holders. - - - - - PLEASE MARK, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE NO POSTAGE STAMP NECESSARY IF MAILED IN THE UNITED STATES 16 18 - ----------- COMMON STOCK PROXY CMS ENERGY SOLICITED BY THE BOARD OF DIRECTORS - ----------- FOR ANNUAL MEETING OF SHAREHOLDERS The undersigned appoints W. T. MC CORMICK, JR. and T. A. MC NISH, and each of them, proxies with full power of substitution, to vote on behalf of the undersigned at the annual meeting of shareholders of CMS Energy Corporation to be held at the Dearborn Inn, 20301 Oakwood Boulevard, Dearborn, Michigan on May 24, 1996 and at any adjournment or adjournments thereof. Said proxies, and each of them present and acting at the meeting, may vote upon the matters set forth on the reverse side hereof and with discretionary authority on all other matters that come before the meeting; all as more fully set forth in the Proxy Statement received by the undersigned. The shares represented hereby will be voted on the proposals as specified. IF THIS PROXY IS RETURNED SIGNED BUT NOT COMPLETED, IT WILL BE VOTED IN FAVOR OF THE ELECTION OF DIRECTORS AND THE RATIFICATION OF APPOINTMENT OF AUDITORS. PLEASE VOTE, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE. Thank you for your prompt response. PLEASE VOTE, SIGN AND DATE BELOW / / TO VOTE AS RECOMMENDED by the Board of Directors on all items, MARK THIS BOX, SIGN, DATE AND RETURN THIS PROXY. (No additional boxes need be marked. If additional boxes are marked, this box will take precedence.) THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2. (1) ELECTION OF / / FOR all nominees listed below (except as indicated below) DIRECTORS / / WITHHOLD AUTHORITY to vote for all nominees listed below William T. McCormick, Jr., James J. Duderstadt, Kathleen R. Flaherty, Victor J. Fryling, Earl D. Holton, Lois A. Lund, Michael G. Morris, William U. Parfet, Percy A. Pierre, Kenneth Whipple and John B. Yasinsky. (INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided below.) - ------------------------------------------------------------------------------- (2) Ratification of appointment of auditors / / FOR / / AGAINST / / ABSTAIN PLEASE SIGN, DATE AND RETURN THIS Signed PROXY IN THE ENCLOSED ENVELOPE. -------------------------------- No postage is needed if mailed in the United States. Dated , 1996 --------------------------- -----END PRIVACY-ENHANCED MESSAGE-----