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**EXHIBIT 10(b)**

 

**ANNUAL INCENTIVECOMPENSATION PLANCLECO CORPORATION(As Amended and Restated January 23, 2003)**

**1.**  **Purpose of the Plan**

     The purpose of the Annual Incentive Compensation Plan (hereinafter the"Plan") for Cleco Corporation (hereinafterthe "Company") is to:

        A.     Provide incentive compensationto those officers and key employees who contribute significantly to the growthand success of the Company; 

        B.     Attract and retain individualsof outstanding ability;

        C.     Align the interests of thosewho hold positions of major responsibility in the Company with the interests ofCompany shareholders.

**2.  Definitions**

  As employed in the Plan and all related Attachments and Exhibits, the followingwords and phrases should have the following meanings:

  "Base Salary" means the year-end base salary in effect for the PlanYear as shown in the personnel records of the Company.

  "Board" means the Board of Directors of ClecoCorporation headquartered in Pineville, Louisiana.

  "Committee" means the Compensation Committee of the Board ofDirectors of Cleco Corporation, or any other committeeof the Board designated by resolution of the Board to administer the Plan.

  "Corporate Threshold" refers to the pre-established corporateperformance level that must be reached in order for any award(s) to be paidpursuant to those portions of the Plan that incorporate, fully or partially,some measure of Subsidiary or individual Participant performance to determinean individual's award.

  "Earnings per Share" or "EPS" means the Company's netincome attributable to common stock divided by the average number of commonshares outstanding.

  "Funding Formula" means the formula established by the Committee eachyear that determines the maximum amount of payments that may be made from thePlan.  This formula may be expressed as a percentage of net income or anyother relationship determined by the Committee to protect the interests ofshareholders.  Funds generated by the formula establish a pool of moneythat may be used for payments to Participants under the Plan.

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  "Management by Objective" or "MBO" means that metric usedat the Subsidiary level to measure an individual Participant's performance asit relates to the Annual Incentive Plan.  It may be expected that the MBOdefinition may vary from one subsidiary to the next, and be weighted in varyingpercentages from Participant to Participant.

  "Participant" means any officer, executive or key employee of theCompany selected by the Committee to receive an award under the Plan. Members of the Board who are not employed on a full-time basis by the Companyare not eligible to receive awards under the Plan.

  "Payout" means a payment made to a Participant under the terms andconditions of the Plan.

  "Payout Matrix" means a chart that illustrates the relationshipbetween the performance criteria and the payouts that are generated by theactual performance each year.  The matrix contains the various levels ofperformance and the payouts, expressed as a percentage of targeted awards, that will be paid for each level ofperformance.  Payouts determined by the payout matrix are subject toavailability of funds as computed by the Funding Formula.

  "Payout Schedule" means the incentive amount expressed as apercentage of base salary that will be paid at various levels of actualperformance when compared to target performance.

  "Peer Companies" means a list of electric utility or other companiesselected or approved by the Committee, against which the performance of theCompany is compared each year (12 month performance cycle) as one element ofdetermining payouts under the Plan.

  "Performance Criteria or Performance Measure(s) "means those financial, operational or individual measures that are selectedeach Plan Year by the Committee and used to determine awards under thePlan.  Performance criteria may be established for corporate, subsidiary,division, individual or other business unit results.

  "Plan" means the Annual Incentive Compensation Plan for the Company.

  "Subsidiary" shall mean any subsidiary, strategic business unit, orlimited liability corporation as defined for the purposes of this Plan.

  "Subsidiary Measures" means those factors/performance metrics thatare used to determine that portion of a Participant's incentive award that isbased on Subsidiary performance, or some aspect of Subsidiaryperformance.   Subsidiary measures may or may not be used in anygiven plan year.

  "Relative ROE" means the Company's Return on Equity in relation tothe Peer Group.  This relationship will normally be expressed as apercentile rank within the group.

  "Return on Assets" or "ROA" means the ratio of net earningsto total assets of the company, subsidiary or operating unit.

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  "Return on Equity" or "ROE" means the ratio of net earningsto shareholders' equity for the Company.

  "Return on Revenue" or "ROR" means the ratio of incomebefore taxes, interest expense or corporate allocationto revenue for a subsidiary or operating unit.

  "Target" means the level of performance that is judged sufficient bythe Committee, based on predetermined objectives, to obtain the target award.

**3.  Administration of the Plan**

  The Plan shall be administered by the Compensation Committee of the Board ofDirectors of the Company.  Subject to the provisions of the Plan, theCommittee shall have exclusive authority to amend, modify, suspendor terminate the Plan at any time.

  At the beginning of each Plan Year, the President and Chief Executive Officerof the Company will make recommendations to the Committee regardingParticipants, size of potential awards, corporate and individual performancecriteria, performance targets and corporate performance thresholds.  TheCommittee will consider and approve or modify the recommendations asappropriate.  At the conclusion of each Plan Year, the President and ChiefExecutive Officer of the Company will present to the Committee a scheduleindicating actual performance and the recommended award earned by eachParticipant.  The Committee will review the recommendations and approve ormodify the recommendations as presented and approve the award to be paid toeach Participant.

**4.  Performance Criteria**

  At the full discretion of the Compensation Committee of the Board of Directors,performance criteria, by which all Annual Incentive awards shall be determined,will be selected at the beginning of each Plan year.   Performancecriteria may vary from year to year and may be based on corporate, businessunit-specific, or individual criteria or some combination ofthe three.

**5.   Weighting of Performance Criteria**

  Each plan year, the Committee will consider and approve performance criteriaand relative weights which will be provided to each plan participant throughthe plan agreement document.

**6.**  **Peer Companies or Peer Group**

  The President and Chief Executive Officer of the Company shall select, and theCommittee shall approve, a group of Peer Companies against which Company ROEshall be compared to determine Company performance for purposes of thePlan.  Such selection shall take place at the time of the adoption of thePlan Year and for each Plan Year.

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  It is anticipated that the selected and approved group of Peer Companies maychange or otherwise be altered during the course of the Plan Year due tofactors including, but not limited to, corporate mergers, acquisitions,discontinuation of normal business operations, etc.  In any situation thatimpacts or materially alters the composition of the Peer Group, the Presidentand Chief Executive Officer shall recommend changes to the Peer Group andpresent those changes for the Committee's approval before the end of the PlanYear.  Ultimate approval of, or any modifications to, the Peer Group shallbe at the sole discretion of the Committee.

**7.  The Award Process**

     As soon as practicable after the end of each Plan Year, the Committee, uponrecommendation of the President and Chief Executive Officer of the Company,will determine the actual level of performance for each Plan IncentiveMeasure.  This level of performance will be matched to the appropriaterange of performance on the payout matrix and/or any other award/performanceschedules.  Based on an analysis of the relationship between the actualand Plan performance levels, the award for each Participant, expressed as apercentage of the target award for the Participant, will be determined.

     The Committee, based on the President and Chief Executive Officer'srecommendation, may adjust (up) the calculated award.  The purpose of suchadjustment is to recognize outstanding individual performance.  In theevent that performance is clearly below standards the President and ChiefExecutive Officer may recommend reduction of the calculated award.  Themagnitude of such adjustments is limited to plus or minus 25% of the affectedParticipant's calculated award. 

**8.  Funding Formula**

     The Funding Formula for the Plan will be communicated to all Participantsthrough the Plan agreement.  Any unused portions in the fund so created bythe formula cannot be used in future years and must be returned to the generalassets of the Company.  If the funding formula produces a payout pool thatis not adequate for the payment of awards from the payout matrix, all awardswill be reduced on a proportional basis so that the total dollar amount of thepool is not exceeded.

  Beginning with Plan Year 1999 the Funding Formula shall be 4.5% of Net Income,subject to modification by the Compensation Committee of the Board ofDirectors.

**9.  Corporate Threshold**

  The Committee may establish a Corporate Performance Threshold for each PlanYear.  If a threshold is established and actual corporate performance isbelow the established threshold, no payments will be made on business unit orindividual measures, regardless of actual 

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individual or business unit results.  This threshold isincluded in the Plan agreement signed by each individual Participant.

**10.****RevisedAward Levels and Performance Criteria**

  For Participants who are assigned to different position levels or transferredbetween Company organizations during the Plan Year, the Committee may, at anytime, and upon recommendation of the President and Chief Executive Officer of Cleco Corporation, establish revised award levels andperformance criteria for that Participant.

**11. Formof Payment**

     All awards under the Plan will be paid in cash, in one lump sum, subject tosuch payroll taxes and other deductions, if any, as may be in effect at thetime of payment.

**12. Timingof Payment**

  All awards will be paid as soon as practicable following approval by theCommittee of actual awards.

**13. Adjustments**

  Neither may the Committee change any performance criteria, targets, payoutschedules or participation levels retroactively for a Plan Year, nor may theCommittee exclude any previously designated Plan Participant(s), except as andto the extent determined by the Committee in the event of changes in accountingpractices or extraordinary or unanticipated circumstances which could have amaterial adverse effect on the achievement of Performance Criteria.

**14. Termination,Death or Disability**

     Awards will be paid only to Participants who are actually employed by theCompany and on the Company payroll on the last day of each Plan Year, except asindicated below.  A Participant whose employment terminates prior to theend of the Plan Year shall forfeit any and all awards and payouts from thePlan, as well as any rights thereto, whether terminated by the Company orterminating employment voluntarily.  Those who terminate employment due todeath, disabilityor retirement under the Company'squalified retirement plan will be paid a pro-rata portion of any award based ontheir date of termination.  Such prorated payments will be made at thetime and in the form that all payments are normally made to all otherParticipants.  The pro rata award shall be calculated by multiplying thefull year's award by the percentage which is the result of dividing the numberof full months as an active employee and a Participant by 12.

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**15. NewParticipants**

     Participation for new employees will be determined as required by theCommittee.

**16. Miscellaneous**

  No Participant shall have the right to anticipate, alienate, sell, transfer,assign, pledge or encumber his or her right to receive any award made under thePlan until such award becomes payable to him or her.

  No Participant shall have any lien on any asset of the Company by reason of anyaward, actual or inferred, under the Plan.

  The adoption of the Plan or any modification or amendment thereof does notimply any commitment to continue or adopt the same Plan, or any modificationthereof, or any other Plan for incentive compensation for any succeeding year,provided that no such modification or amendment shall adversely affect rightsto receive any amount to which Participants have become entitled prior to suchmodifications and amendments.  Neither the Plan nor any award made underthe Plan shall create any employment contract or relationship between theCompany and any Participant.  This Plan supersedes all officer incentivecompensation plans of Cleco Corporation, itsdivisions and subsidiaries.

  Each Participant shall be provided with a Plan description and a Plan Agreementfor each Plan Year.  The Plan Agreement shall contain or have attached toit the Plan specifics for each year, including the following:

           The corporate threshold           The funding formula            The payoutmatrix            The payoutschedule            The list ofpeer companies

**17. PlanSuccession**

  This Plan shall be binding on the successors of the Company (including anySuccessor Company).

**18. Adjustmentsin Performance**

  For the purposes of calculating the incentive award, the Committee, based onthe President and Chief Executive Officer's recommendations, may make suchadjustments in order to more accurately reflect the true operating performanceof the Company and/or Subsidiary.  Adjustments may include, but are notlimited to, excluding or including extraordinary items of income or expense.

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**19. PlanTermination and Amendment**

  The Committee shall have the right to change, modifyor terminate the Plan at any time.  However, such modification,termination or change (except under Paragraphs 17 and 18)shall not affect the Participants' awards once the Plan has been reviewed andadopted for a Plan year. 

**20. Genderand Number**

  Except when otherwise indicated by the context, any masculine terminology usedin this Plan shall also include the feminine.  Plural/singular terminologyused shall also include singular or plural as indicated by the context.

**21. Liability/Powersof the Committee**

  21.1 *Powers of the Committee*

  The Committee (under the authority delegated to it by the Board) shall have thefull authority to interpret, construe, modify and administer this Plan, toadopt appropriate procedures and make all decisions necessary or proper tocarry out the terms of the Plan, including naming of those employees who shallparticipate in the Plan.

  21.2*Liability*

  In the absence of bad faith neither the Company, nor any of its affiliates,officers, employees, members of the Committee or agentsshall have any liability to any person, firm, or corporation based on, orarising out of the Plan.

**22.****GoverningLaw**

  The Plan shall be construed in accordance with and governed by the laws of thestate of Louisiana.

**23. Severability**

  The invalidity or unenforceability of any provision hereof shall in no wayaffect the validity or enforceability of any other Plan provision(s).

**24. Titlesand Headings**

  The titles and headings of the paragraphs of this Plan are for convenience ofreference and in case of any conflicts, the text of the Plan, rather than suchtitles or headings shall control.

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