<PAGE> 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:
- --------------------------------------------------------------------------------
<PAGE> 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
<PAGE> 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
<PAGE> 4
<TABLE>
<S> <C>
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.
</TABLE>
3
<PAGE> 5
<TABLE>
<S> <C>
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.
</TABLE>
4
<PAGE> 6
<TABLE>
<S> <C>
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.
</TABLE>
5
<PAGE> 7
MANAGEMENT SECURITY OWNERSHIP
The following chart summarizes the ownership of the Corporation's Common
Stock by the directors and executive officers.
<TABLE>
<CAPTION>
Shares
Name Beneficially Owned*
---------------------------------------- -------------------
<S> <C>
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
</TABLE>
* 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
<PAGE> 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
<PAGE> 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
<PAGE> 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 $1,843 for Ms. Lund, the only selecting Director.
9
<PAGE> 11
EXECUTIVE COMPENSATION
The following charts contain information concerning annual and long-term
compensation and awards of stock options and restricted stock under the
Corporation's Performance Incentive Stock Plan. The charts include the Chairman
of the Board and the next four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation(1)
----------------------------------------
Awards Payouts
Annual ------------------------- ----------
Compensation Restricted Securities Long-Term All Other
---------------------- Stock Underlying Incentive Compen-
Name and Principal Position Year Salary Bonus Awards($) Options Payouts(2) sation(3)
- ---------------------------- ----- --------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
(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
<PAGE> 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
<TABLE>
<CAPTION>
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)
- ---------------------------------- --------- ------------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
(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
<TABLE>
<CAPTION>
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)
- ---------------------------------- ---------------- ---------- -------------------- ---------------
<S> <C> <C> <C> <C>
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
</TABLE>
(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
<PAGE> 13
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1995
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price-Based
Plans (Shares)(1)
Number of Period Until ------------------------------------
Name Shares Payout Threshold Target Maximum
- ------------------------------------ --------- ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
(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).
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------------------
Compensation 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 16
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG CMS ENERGY CORPORATION, S&P 500 INDEX & DOW JONES UTILITY INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DOW JONES
(FISCAL YEAR COVERED) CMS ENERGY S&P 500 INDEX UTILITY INDEX
<S> <C> <C> <C>
1990 100 100 100
1991 68 131 115
1992 70 140 119
1993 98 155 130
1994 93 157 110
1995 126 215 145
</TABLE>
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN
AMONG CMS ENERGY CORPORATION, S&P 500 INDEX & DOW JONES UTILITY INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DOW JONES
(FISCAL YEAR COVERED) CMS ENERGY S&P 500 INDEX UTILITY INDEX
<S> <C> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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
---------------------------
