##### 



PERFORMANCE INCENTIVE STOCK PLAN
     2.1
    
    Definitions:When used in the Plan, the following words and phrases shall have the following
meanings:
 a.
    
    Award Period means the period or periods of time relating to any restrictions imposed
by the Committee with respect to Common Stock awarded under Article VII. Such period of
time shall extend for a period of at least twelve months from and after the date of the
award.b.
    
    Beneficiary means the beneficiary or beneficiaries designated to receive the amount, if
any, payable under the Plan upon the death of a Participant.c.
    
    Board means the Board of Directors of the Corporation.d.
    
    Change in Control means, for individuals who have a written agreement including a
change in control provision, whatever meaning was given in such agreement. For other
individuals, the phrase shall have the meaning shown on Attachment A.e.
    
    Committee means the Compensation and Human Resources Committee of the Board, which
shall be comprised in such a manner to comply with the requirements, if any, of the New York
Stock Exchange or other applicable stock markets, Rule 16b-3 (or any successor rule) under
the Securities Exchange Act of 1934, as amended, and Section 162(m) of the Internal Revenue
Code of 1986, as amended.f.
    
    Common Stock means the Common Stock of the Corporation as authorized for issuance in
its Articles of Incorporation at the time of an award or grant under this Plan.g.
    
    Corporation means CMS Energy Corporation, its successors and assigns, and each of its
Subsidiaries, or any of them individually.h.
    
    Director means any person who is a member of the Board of Directors of the Corporation
or a Subsidiary.i.
    
    Eligible Person means a key employee, non-employee Director or advisor. A key employee
must at the end of the fiscal year be a regular full-time salaried employee of the
Corporation or a Subsidiary, or, to the extent the Committee may determine, a person whose
services to the Corporation terminated before the end of the fiscal year, who, in the
opinion of the Committee, made a significant contribution to the Corporation or a
Subsidiary.j.
    
    Incentive Option means an option to purchase Common Stock of the Corporation
which
meets the requirements set forth in the Plan and also meets the definition of an Incentive Stock Option set forth in Section 422 of the Internal Revenue Code of 1986,
as amended (the
Code).




---



##### 



k.
    
    Non-Employee Director means a member of the Board of Directors of the Corporation or a
Subsidiary who is not currently an employee of the Corporation or a Subsidiary and has not
been an employee of the Corporation or a Subsidiary within the preceding 3 years.l.
    
    Nonqualified Option means an option to purchase Common Stock of the Corporation which
meets the requirements set forth in the Plan but does not meet the definition of an
Incentive Stock Option set forth in Section 422 of the Code.m.
    
    Officers Incentive Compensation Plan means the incentive compensation plan, including
any amendments thereto, authorized and approved by the Board to provide incentive
compensation to the Officers of the Corporation or a Subsidiary.n.
    
    Optionee means any person to whom an option or right has been granted or who becomes a
holder of an option or right under Article VI of the Plan.o.
    
    Participant means a person to whom a grant or award has been made which has not been
paid, forfeited, or otherwise terminated or satisfied under the Plan, or a person included
under the Management Stock Purchase Plan.p.
    
    Performance Criteria are the factors used by the Committee to establish goals to track
business measures such as net earnings; operating earnings or income; earnings growth; net
income (absolute or competitive growth rates comparative); cash flow (including operating
cash flow, free cash flow, discounted cash flow return on investment, and cash flow in
excess of cost of capital); earnings per share; stock price (absolute or peer-group
comparative); total shareholder return; absolute and/or relative return on common
shareholders equity; return on shareholders equity (absolute or peer-group comparative);
absolute and/or relative return on capital; absolute and/or relative return on assets;
economic value added (income in excess of cost of capital); customer satisfaction; expense
reduction; sales; or ratio of operating expenses to operating revenues.q.
    
    Performance Unit means a contractual right granted to a Participant pursuant to Article
VIII to receive a designated dollar value equal to the value established by the Committee
and subject to such terms and conditions as are set forth in this Plan and the applicable
grant.r.
    
    Phantom Share means a contractual right granted to a Participant pursuant to Article
VIII to receive an amount equal to the Appreciation Value at such time, and
subject to such
terms and conditions as are set forth in this Plan and the applicable grant.s.
    
    Restricted Common Stock means Common Stock delivered subject to the restrictions described in Article VII.t.
    
    Restrictions for purposes of Article VII includes any time based and/or performance based conditions on vesting.u.
    
    Shareholders means the shareholders of the Corporation.v.
    
    Stock Appreciation Right shall mean a right, granted in conjunction with a Stock
Option, to surrender the Stock Option and receive the appreciation in value of the optioned
shares over the option price.w.
    
    Stock Option means an option to purchase shares of Common Stock, granted pursuant to
this Plan.x.
    
    Subsidiary means a corporation, domestic or foreign, 50 percent or more of the voting
stock of which is owned directly or indirectly by the Corporation.
  3.1
    
    This Plan shall be effective June 1, 2004, conditioned upon approval of the shareholders of
the Corporation, and shall continue until May 31, 2009.3.2
    
    The Committee shall have full power and authority to construe, interpret and administer the
Plan. All decisions, actions or interpretations of the Committee shall be final, conclusive
and binding upon all parties. If any Participant or Optionee objects to any such
interpretation or action formally or informally, the expenses of the Committee and its agents
and counsel shall be chargeable against any amounts otherwise payable under the Plan to or on account of the
Participant or Optionee.
 2




---



##### 



3.3
    
    No member of the Committee shall be personally liable by reason of any contract or other
instrument executed by him or on his behalf in his capacity as a member of the Committee nor
for any mistake of judgment made in good faith, and the Corporation shall indemnify and hold
harmless each member of the Committee and each other officer, employee or director of the
Corporation to whom any duty or power relating to the administration or interpretation of the
Plan may be allocated or delegated, against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of the Board)
arising out of any act or omission to act in connection with the Plan unless arising out of
such persons own fraud or bad faith.
  4.1
    
    Each year the Committee shall designate as Participants and/or Optionees in the Plan those
Eligible Persons who, in the opinion of the Committee, have significantly contributed to the
Corporation.
 4.2
    
    Each year, the Committee may award shares of Common Stock, and/or may grant Phantom Shares,
Performance Units, Stock Options which qualify as Incentive Stock Options within the meaning
of Section 422 of the Code or Stock Options which do not qualify as Incentive Stock Options
and/or Stock Appreciation Rights for use in connection with Stock Options to each Eligible
Person whom it has designated as an Optionee or Participant for such year. No Incentive Stock
Option will be granted to an Eligible Person who is not a full or part-time employee of the
Corporation or a subsidiary of the Corporation.
 4.3
    
    Awards of Common Stock and grants of Stock Options (with or without Stock Appreciation
Rights), Phantom Shares or Performance Units may be made, without amending the Plan, to
Eligible Persons who are foreign nationals or employed outside the United States or both, on
such terms and conditions different from those specified in the Plan as may, in the judgment
of the Committee, be necessary or desirable to further the purposes of the Plan or to
accommodate differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to or alternative versions of the Plan as it may consider necessary
or appropriate for such purposes without thereby affecting the terms of the Plan as in effect
for any other purpose; provided, however, no such supplement or alternative version shall: (a)
increase the number of available shares of Common Stock under Section 5.1; or (b) increase the
limitations contained in Section 5.3.
  5.1
    
    There is hereby reserved for award under this Plan 6 million whole shares of Common Stock,
less the number of shares awarded, granted or purchased under the provisions of this Plan
which have not been forfeited. To the extent permitted by law or the rules and regulations of
any stock exchange on which the Common Stock is listed, shares of Common Stock with respect to
which payment or exercise is in cash as well as any shares or options which are forfeited may
thereafter again be awarded or made subject to grant under the Plan. The number of shares made
available for option and sale under Article VI of this Plan plus the number of shares awarded
under Article VII of this Plan plus the number of shares awarded or purchased under Article
VIII of this Plan will not exceed, at any time, the number of shares of Common Stock reserved
pursuant to this Article V.
 5.2
    
    If a dividend shall be declared upon the Common Stock payable in shares of Common Stock, the
number of shares of Common Stock then subject to any such option and the number of shares
reserved for issuance pursuant to the Plan but not yet covered by an option shall be adjusted
by adding to each such option or share the number of shares which would be distributable
thereon if such share had been outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend. In the event that the outstanding shares of the
Common Stock shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of CMS Energy Corporation or of another corporation, whether through
reorganization, recapitalization, stock split-up, combination of shares, merger or
consolidation or otherwise, then there shall be substituted for each share of Common Stock
subject to any such option and for each share of Common Stock reserved for issuance pursuant
to the Plan but not yet covered by an option, the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock shall be so changed or for which
each such share shall be exchanged. In the event there shall be any change, other than as
specified above in this Section 5.2, in the number or kind of outstanding shares of Common
Stock of the Corporation or of any stock or other securities into which such Common Stock
shall have been changed or for which it shall have been exchanged, then if the Committee shall
in its sole discretion determine that such change equitably requires an adjustment in the
number or kind of shares theretofore reserved for issuance pursuant to the Plan but not yet
covered by an option and of the shares then subject to an option or options, such adjustment
shall be made by the Committee and shall be effective and binding for all purposes of the Plan
and each Stock Option agreement. In the ease of any such substitution or adjustment as
provided for in this paragraph, the option price in each Stock Option agreement for each share
covered thereby prior to such substitution or adjustment will be the option price for all shares of stock or other securities which shall have been substituted for such share or to
which such share shall have been adjusted pursuant to this section. No adjustment or
substitution provided for in this Section 5.2 shall require the Corporation
 3




---



##### 



in any Stock Option agreement to sell a fractional share, and the total substitution or
adjustment with respect to each Stock Option agreement shall be limited accordingly.5.3
    
    Individual Grant Limit:The combined maximum shares awarded or granted for any one Eligible
Person for any one year under this Plan, excluding any Performance Units awarded under Section
8.2, will not exceed 250,000 shares of Common Stock.
  6.1
    
    The Committee may from time to time provide for the option and sale of shares of Common
Stock, which may consist in whole or in part of the authorized and unissued Common Stock of
the Corporation.6.2
    
    Optionees:The Committee shall determine and designate from time to time, in its discretion,
those Eligible Persons to whom Stock Options and Stock Appreciation Rights are to be granted
and who thereby become Optionees under the Plan.6.3
    
    Allotment of Shares:The Committee shall determine and fix the number of shares of Common
Stock subject to options to be offered to each Optionee.6.4
    
    Option Price:The Committee shall establish the option price at the time any option is
granted at not less than 100% of the fair market value of the stock on the date on which such
option is granted; provided, however, that with respect to an Incentive Option granted to an
employee who at the time of the grant owns (after applying the attribution rules of Section
425(d) of the Code) more than 10% of the total combined voting stock of the Corporation or of
any parent or Subsidiary, the option price shall not be less than 110% of the fair market
value of the stock subject to the Incentive Option on the date such option is granted. In no
event shall Options previously granted under this Plan be re-priced by reducing the exercise
price thereof, nor shall Options previously granted under this Plan be cancelled and replaced
by a subsequent re-grant under this Plan of Options having an exercise price lower than the
options so cancelled.
 6.5
    
    Stock Appreciation Rights:At the discretion of the Committee, any Stock Option granted under
this Plan may, at the time of such grant, include a Stock Appreciation Right. A Stock
Appreciation Right shall pertain to, and be granted only in conjunction with, a related
underlying Stock Option, and shall be exercisable only at the time and to the extent the
related underlying Stock Option is exercisable and only if the fair market value of the Common
Stock of the Corporation exceeds the Stock Option price in the related underlying Stock
Option. An Optionee who is granted a Stock Appreciation Right may elect to surrender the
related underlying Stock Option with respect to all or part of the number of shares subject to
the related underlying Stock Option and exercise in lieu thereof the Stock Appreciation Right
with respect to the number of shares as to which the Stock Option is surrendered.
  6.6
    
    Grantingand Exercise of Stock Options and Stock Appreciation Rights:The granting of Stock
Options and Stock Appreciation Rights hereunder shall be effected in accordance with
determinations made by the Committee pursuant to the provisions of the Plan, by execution of
instruments in writing in form approved by the Committee. The Committee may grant Stock
Options that provide for the grant of a subsequent restoration Stock Option if the exercise
price has been paid for by tendering shares to the Company. Any restoration Stock Option shall
be for the number of shares tendered in exercising the predecessor option. The restoration
Stock Option exercise price shall be the then-current Fair Market Value, and the term of such
restoration option may not extend beyond the remaining term of the original option.Each Stock Option and Stock Appreciation Right granted hereunder shall be exercisable at any such
time or times or in any such installments as may be determined by the Committee at the time of
the grant, subject to the limitation that for each Incentive Option and related Stock
Appreciation Right granted, a maximum of $100,000 (based on the price at the date of grant) may
be exercised per year, plus any unused carry-over from a previous year(s).
 4




---



##### 



6.7
    
    Payment of Stock Option Price:At the time of the exercise in whole or in part of any Stock
Option granted hereunder, payment of the option price in full in cash or in Common Stock of
the Corporation shall be made by the Optionee for all shares so purchased. No Optionee shall
have any of the rights of a Shareholder of the Corporation under any such Stock Option until
the actual issuance of shares to said Optionee, and prior to such issuance no adjustment shall
be made for dividends, distributions or other rights in respect of such shares, except as
provided in Section 5.2.
 6.8
    
    Nontransferability of Stock Options and Stock Appreciation Rights:No Stock Option or Stock
Appreciation Right granted under the Plan to an Optionee shall be transferable by such
Optionee otherwise than by will, pursuant to a valid Domestic Relations Order which limits the
rights of the alternate payee to those available to the Optionee, or by the laws of descent
and distribution except that the Optionee may transfer to an immediate family member or a
family trust for estate planning purposes, and such Stock Option and Stock Appreciation Right
shall be exercisable, during the lifetime of the Optionee, only by the Optionee or by a member
of such Optionees immediate family or by the family trust.
 6.9
    
    Term ofStock Options and Stock Appreciation Rights:If not sooner terminated, each Stock
Option and Stock Appreciation Right granted hereunder shall expire not more than ten years
from the date of the granting thereof; provided, that with respect to an Incentive Option and
a related Stock Appreciation Right granted to an Optionee who, at the time of the grant, owns
(after applying the attribution rules of Section 425(d) of the Code) more than 10% of the
total combined voting stock of all classes of stock of the Corporation or of any parent or
Subsidiary, such Incentive Option and Stock Appreciation Right shall expire not more than five
years after the date of granting thereof.
 6.10
    
    Termination of Employment:If the employment of an Optionee by the Corporation shall be
terminated due to either the voluntary resignation of the employee or for cause, any
outstanding Stock Option or Stock Appreciation Right granted to such Optionee shall terminate.
If the employment of an Optionee shall be terminated due to the Optionees death, any Stock
Option or Stock Appreciation Right, transferred to a family trust or by will or by the laws of
descent and distribution, may be exercised for one year following the date of the Optionees
death. If the employment of an Optionee shall otherwise terminate such as due to dismissal, a
reorganization, retirement from active employment or service with the Corporation after age
55, or the disability of the Optionee, the Optionee may exercise any outstanding Stock Option
or Stock Appreciation Right for one year following the date of the termination of employment.
In such event, except upon the disability of the Optionee, any outstanding Incentive Option or
related Stock Appreciation Right may be exercised for only three months following an
Optionees termination of employment. Notwithstanding the foregoing, any Stock Option,
Incentive Stock Option or Stock Appreciation Right, the exercise of which has been extended
pursuant to this Section 6.10, shall immediately terminate upon the Optionees acceptance of
an offer of employment with a competitor of the Corporation as determined by the Committee in
its sole discretion. In no event, however, shall a Stock Option or Stock Appreciation Right be
exercisable subsequent to its expiration date and, furthermore, a Stock Option or Stock
Appreciation Right may only be exercised after termination of an Optionees employment to the
extent exercisable on the date of termination of employment.
 6.11
    
    Termination of Service:If a Non-Employee Director ceases to be a member of the Board for any
reason, or if an advisor no longer provides service to the Corporation, the Non-Employee
Director or advisor may exercise any Option or related Stock Appreciation Right for one year
following such termination of service. In no event, however, shall a Stock Option or Stock
Appreciation Right be exercisable subsequent to its expiration date and, furthermore, a Stock
Option or Stock Appreciation Right may only be exercised after termination of an Optionees
service to the extent exercisable on the date of termination of service.
 6.12
    
    Investment Purpose:Any shares of Common Stock subject to option under the Plan may be made
subject to such other restrictions as the Committee deems advisable, including without
limitation provisions to comply with Federal and state securities laws. In making
determinations of legal requirements the Committee shall rely on an opinion of counsel for the
Corporation.
 6.13
    
    Withholding Payments:If upon the exercise of a Nonqualified Option and/or a Stock
Appreciation Right or as a result of a disqualifying disposition (within the meaning of
Section 422 of the Code) of shares acquired upon exercise of an Incentive Option, there shall
be payable by the Corporation any amount for income tax withholding, either the Corporation
shall appropriately reduce the amount of stock or cash to be paid to the Optionee or the
Optionee shall pay such amount to the Corporation to reimburse it for such income tax
withholding.
 6.14
    
    Restrictions on Sale of Shares:If, at the time of exercise of any Stock Option or Stock
Appreciation Right granted hereunder, the Corporation is precluded by any legal, regulatory or
contractual restriction from selling and/or delivering shares pursuant to the terms of such
Stock Option or Stock Appreciation Right, the sale and delivery of the shares may be delayed
until the restrictions
 5




---



##### 



are resolved and only cash may be paid upon exercise of the Stock Appreciation Right. At any time
during such delay, the Committee, in its discretion, may permit the Optionee to revoke a Stock
Option exercise, in which event any corresponding Stock Appreciation Right shall be reinstated.6.15
    
    Compliance With Rule 16b-3:Notwithstanding any other provision of the Plan to the contrary,
the administration of the Plan and the grant, exercise and terms of Stock Appreciation Rights
hereunder shall comply with Rule 16b-3, or any successor rule, under the Securities Exchange
Act of 1934, as amended (the Exchange Act).
  7.1
    
    Awards:The Committee may from time to time award restricted shares of Common Stock to any
Eligible Person it has designated as a Participant for such year. Awards shall be made to
Eligible Persons in accordance with such rules as the Committee may prescribe. The Committee
may also award restricted shares of Common Stock conditioned on the attainment of a
performance goal that relates to Shareholder return, measured by Performance Criteria as
determined by the Committee as set forth in the award.
 7.2
    
    Restrictions:
 a.
    
    Award Period.Any shares of Common Stock awarded or issued under the Plan may be made
subject to such other restrictions as the Committee deems advisable, including without
limitation provisions to comply with Federal and state securities laws. In making
determinations of legal requirements the Committee may rely on an opinion of counsel for the
Corporation. Except for any recoupment set forth in Article X.2, after shares are awarded
under the Plan, the Committee may not, at a later date, add additional restrictions or
extend the length of the Award Period. Notwithstanding the foregoing, the restrictions
shall terminate upon the death of the Participant.b.
    
    Stock Certificates.Whenever shares of Common Stock are awarded to a Participant, such
shares shall be outstanding, and stock certificates shall be issued in the name of the
Participant, which certificates may bear a legend stating that the shares are issued subject
to the restrictions set forth in the Plan. All certificates issued for shares of Common
Stock awarded under the Plan shall be deposited for the benefit of the Participant with the
Secretary of the Corporation as custodian until such time as the shares are vested and
transferable.c.
    
    Voting Rights.A Participant who is awarded shares of Common Stock under the Plan shall
have full voting rights on such shares, whether or not the shares are vested or
transferable.d.
    
    Dividend Rights.Shares of Common Stock awarded to a Participant under the Plan, whether
or not vested or transferable, may have full dividend rights as determined by the Committee.
However, if shares or securities are issued as a result of a merger, consolidation or
similar event, such shares shall be issued in the same manner, and subject to the same
deposit requirements, vesting provisions and transferability restrictions as the shares of
Common Stock which have been awarded.e.
    
    Delivery.Deliveries of Restricted Common Stock by the Corporation may consist in whole
or in part of the authorized and unissued Common Stock of the Corporation (at such time or
times and in such manner as it may determine). The Restricted Common Stock shall be paid and
delivered as soon as practicable after the Award Period in accordance with Section 7.3.f.
    
    Transferability.The shares may not be sold, exchanged, transferred, pledged,
hypothecated, or otherwise disposed of by the Participant until their release. However,
nothing herein shall preclude a Participant from making a gift of any shares of Restricted
Common Stock to a spouse, child, stepchild, grandchild, parent or sibling, or legal
dependent of the Participant or to a trust of which the beneficiary or beneficiaries of the
corpus and the income shall be either such a person or the Participant; provided that, the
Restricted Common Stock so given shall remain subject to the restrictions, obligations and
conditions described in this Article VII.g.
    
    Vesting.If a Participant has received an award pursuant to the provisions of the Plan,
is employed by the Corporation or remains a Non-Employee Director or is an advisor at the
end of the Award Period and the performance goals have been met, then the Participant shall
be fully vested, at the end of the Award Period, in the shares of Common Stock awarded to
the Participant for that Award Period.
 6




---



##### 



h.
    
    Termination of Employment.In the event of termination of employment of an employee
Participant or termination of service of a Non-Employee Director or advisor prior to the
last day of an Award Period for any reason other than Participants death, retirement of a
Participant from active employment or service with the Corporation after age 55
(Retirement), or disability of a Participant., all rights to any shares of Restricted
Common Stock held in a deposit account with respect to such award, including any additional shares issued with respect to such shares as described in subsection 7.2d above shall be
forfeited to the Corporation. However, the Committee may, if the Committee determines that
circumstances warrant such action, vest all or a portion of such outstanding awards and
approve the immediate distribution of all vested Common Stock that would otherwise be
forfeited. Alternatively, the Committee may, if the Committee determines that circumstances
warrant such action, instruct that such shares of Restricted Common Stock shall continue to
be held by the Corporation in a deposit account until any performance restrictions have been
satisfied or the shares are forfeited for failure to satisfy such performance restrictions.i.
    
    Exchange of Shares .In the event the Common Stock shall be changed into or exchanged for
a different number or kind of shares of stock or other securities of CMS Energy Corporation
or of another corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation or otherwise, then there shall be substituted
for each share of stock awarded pursuant to this Article VII the number and kind of shares
of stock or other securities into which each outstanding share Common Stock shall be so
changed or for which each such share shall be exchanged. In the event the Common Stock
shall be exchanged for a cash payment, in whole or in part, whether through reorganization,
recapitalization, merger or consolidation or otherwise, then any shares awarded pursuant to
this Article VII shall also be exchanged for a similar cash and/or stockpayment. At the
time of any such change or exchange, whether for stock or for cash or a combination of stock
and cash, any restrictions, other than time based vesting, shall be removed and such stock
and/or cash as substituted for the shares awarded to the Participantshall continue to be
considered an award of shares of Restricted Common Stock under this Plan. Nothing in this
provision permits or requires the Corporation to sell a fractional share. Any such exchange
for cash will be structured in such a manner as to be exempt from Section 409A or
alternatively, to comply with Section 409A.
 7.3
    
    Distribution of Restricted Common Stock
 a.
    
    Distribution After Award Period:Except as otherwise provided, distribution of vested
awards of Common Stock shall be made as soon as practicable after the last day of the
applicable Award Period in the form of full shares of Common Stock, with fractional shares,
if any, being awarded in cash.b.
    
    Distribution After Death of Participant:Upon the death of the Participant, either before
or after retirement, any shares of Restricted Common Stock then held shall, subject to this
Article VII, be delivered within a reasonable time under the circumstances to Participants
Beneficiary or, in the absence of an appropriate Beneficiary designation to the
Participants estate, in such one or more installments as the Committee may then determine.c.
    
    Distribution After Retirement or Disability:Upon termination of a Participant due to
Retirement or disability, any shares awarded not less than 12 months prior to termination
shall continue to be held by the Corporation in a deposit account until any performance
restrictions have been satisfied or the shares are forfeited for failure to satisfy such
performance restrictions. The Committee may, at its discretion and in exceptional
circumstances, waive the requirement that the shares be awarded not less than 12 months
prior to such termination. If such outstanding shares awarded to the Participant are
subject only to time based vesting and not to any additional performance criteria, then such
shares shall be delivered to the Participant as soon as practicable after such termination.
Notwithstanding the above, if an employee Participant accepts an offer of employment with a
competitor of the Corporation as determined by the Committee in its sole discretion, all
shares that have not been distributed as of that date shall terminate and be forfeited by
the Participant.
 7.4
    
    Designation of Beneficiaries
  7




---



##### 



7.5
    
    Transferability:Subject to the provision of this Article VII, shares of Common Stock awarded
to a Participant will become freely transferable by the Participant only at the end of the
Award Period established with respect to such shares.7.6
    
    Distribution to Person Other Than Employee:If the Committee shall find that any person to
whom any award is payable under this Article VII of the Plan is unable to care for such
persons affairs because of illness or accident, or is a minor, or has died, then any payment
due Participant or Participants estate (unless a prior claim therefor has been made by a duly
appointed legal representative), may, if the Committee so directs the Corporation, be paid to
Participants spouse, a child, a relative, an institution maintaining or having custody of
such person, or any other person deemed by the Committee to be a proper recipient on behalf of
such person otherwise entitled to payment. Any such payment shall be a complete discharge of
the liability of the Committee and the Corporation therefor.7.7
    
    RestrictedCommon Stock for employee Participants is intended to constitute an unfunded
deferred compensation arrangement for a select group of management or highly compensated
personnel.7.8
    
    A forfeitureof shares of Common Stock pursuant to subsection 7.2h of the Plan shall effect a
complete forfeiture of voting rights, dividend rights and all other rights relating to the
award or grant as of the date of forfeiture.7.9
    
    Each distributionof Common Stock under this Article VII of the Plan shall be made subject to
such federal, state and local tax withholding requirements as apply on the distribution date.
For this purpose, the Committee may provide for the withholding of shares of Common Stock or
allow a Participant to pay to the Corporation funds sufficient to satisfy such withholding
requirements.
 Article
 8.1
    
    Phantom Shares.
 a.
    
    Grants of Phantom Shares. The Committee may from time to time grant Phantom Shares, the
value of which is determined by reference to a share of Common Stock on terms and conditions
as the Committee, in its discretion, may from time to time determine. Each grant of Phantom
Shares shall specify the number of Phantom Shares granted, the Initial Value of such Phantom
shares which shall not be less than 100% of the Fair Market Value of the Common Stock as of
the date of grant, the Valuation Dates, the number of Phantom Shares whose appreciation
value shall be determined on each such Valuation Date, any applicable vesting schedule for
such Phantom Shares, and any applicable limitation on payment for such Phantom Shares.
 b.
    
    Appreciation Value.
 (i)
    
    Valuation Dates; Measurement of Appreciation Value. The Committee shall provide for
one or more Valuation Dates on which the Appreciation Value of the Phantom Shares granted
shall be measured and fixed, and shall designate the number of such Phantom Shares whose
Appreciation Value is to be calculated on each such Valuation Date.(ii)
    
    Payment of Appreciation Value. Except as otherwise provided in this Section 8.1, the
Appreciation Value of a Phantom Share shall be paid to a Participant in cash in a lump sum
as soon as practicable following the Valuation Date applicable to such Phantom Share. The
Committee may in its discretion, establish and set forth a maximum dollar amount payable
under the Plan for each Phantom Share granted.(iii)
    
    The Committee may, in its discretion, provide that Phantom Shares shall vest
(subject to such terms and conditions as the Committee may provide in the award) over such
period of time, from the date of grant, as may be specified in a vesting schedule
contained in the grant.(iv)
    
    Termination. In the event of termination of employment of an employee Participant or
termination of service of a non-Employee Director or advisor prior to one or more
Valuation Dates, unless the Committee in its discretion determines otherwise, the
Appreciation Value for any Phantom Share to which the Participants Rights are vested,
shall be the lesser of the Appreciation Value as of the termination date or the
Appreciation Value of such Phantom Share calculated as of the originally scheduled
Valuation Date applicable thereto in accordance with Section 8.1(b)(i). Except as
otherwise provided in the grant agreement, the Appreciation Value so determined for each
such vested outstanding Phantom Share shall then be payable to the Participant or the
Participants estate following the originally scheduled Valuation Date applicable thereto
in accordance with Section 8.1(b)(ii). Upon a termination as described in this Section
8.1(b)(iv), all rights with respect to Phantom Shares that are not vested as of such date
will be relinquished.
 8




---



##### 



8.2
    
    Performance Units. The Committee may, in its discretion, grant Performance Units to Eligible
Persons. Each Performance Unit will have an initial value that is established by the Committee
at the time of grant and credited to a bookkeeping account established for the Participant,
but no Participant shall be granted Performance Units during any one fiscal year with an
initial value in excess of $2.5 million. The Committee will set performance periods and
objectives and other terms and conditions of the grant based upon Performance Criteria as
determined by the Committee that, depending upon the extent to which they are met, will
determine the value of Performance Units that will be paid out to the Participant. The
Committee may pay earned Performance Units in cash, Common Stock or a combination thereof.Unless otherwise set forth in the grant, in the event the employment of an employee Participant
is terminated during a performance period due to death, disability or retirement under the
provisions of the Pension Plan the Participant will receive a prorated payout of Performance
Units. In the event the employment is terminated for any other reason, then all Performance Units
will be forfeited. If the service of a Non-Employee Director or advisor is terminated during a
performance period, the Participant will receive a prorated payout of Performance Units.
Notwithstanding the above, no payouts will be made to the extent that objectives other than the
duration of the performance period have not been met except to the extent that the Committee in
its discretion decides to waive any such other achievement or objectives.8.3
    
    Grant Terms.The terms of any award granted under this Article VIII shall be set forth in a
separate grant agreement. Any such award either shall be structured in such a manner as to be
exempt from the requirements of Code section 409A or shall be structured to meet the
requirements of such provision.
  9.1
    
    Duration of Plan.No grants or awards may be made under this Plan after May 31, 2009. Any
grant or award effective on or prior to May 31, 2009 will continue to vest and otherwise be
effective after the expiration of this Plan in accordance with the terms and conditions of
this Plan as well as any requirements set forth in the grant or award.
 9.2
    
    Right To Amend, Suspend or Terminate Plan:Except as provided in Section 9.5 below, the Board
reserves the right at any time to amend, suspend or terminate the Plan in whole or in part and
for any reason and without the consent of any Optionee, Participant or Beneficiary; provided,
that no such amendment shall:
 a.
    
    Change the Stock Option price or adversely affect any Stock Option or Stock Appreciation
Right outstanding under the Plan on the effective date of such amendment or termination, orb.
    
    Adversely affect any award or grant then in effect or rights to receive any amount to
which Participants or Beneficiaries have become entitled prior to such amendment, orc.
    
    Unless approved by the Shareholders of the Corporation, increase the aggregate number of
shares of Common Stock reserved for award or grant under the Plan, change the group of
Eligible Persons under the Plan or materially increase benefits to Eligible Persons under
the Plan.
 9.3
    
    Periodic Review of Plan:In order to assure the continued realization of the purposes of the
Plan, the Committee shall periodically review the Plan, and the Committee may suggest
amendments to the Board as it may deem appropriate.
 9.4
    
    Amendments May Be Retroactive:Subject to Section 9.1 above, any amendment, modification,
suspension or termination of any provisions of the Plan may be made retroactively.
 9.5
    
    Change in Control Under an Agreement:Notwithstanding any other provisions in the Plan, in
the event of a Change in Control as defined under any written employment contract or agreement
between the Corporation or a subsidiary and an Officer of the Corporation or a subsidiary,
awards of Common Stock granted under this Plan, as well as grants of any Performance Units and
the Appreciation Value of Phantom Shares, shall vest to the extent, if any, provided for in
the written employment agreement or contract or in such separate contractual arrangement
relating to such an award or grant as may exist from time to time. Notwithstanding any other
provisions of the Plan, the provisions of this Section 9.5 may not be amended after the date a
Change in Control occurs.
 9




---



##### 



9.6
    
    Change in Control Without an Agreement: Except as otherwise may be provided by the Committee,
in the event of a change in control, a Participant not covered by a written employment
contract or agreement or agreement containing a change in control provision will have any
portion of an Award based on absolute total shareholder return vest (for purposes of the
performance-based restriction) at the target, and continue to be subject to time based
restrictions. The portion of any Award based on relative total shareholder return will vest
(for purposes of the performance-based restriction) on a pro rata basis to the change in
control date using the target number of shares as the basis for the pro ration and continue to
be subject to time based restrictions.
  10.1
    
    Rights to Continued Employment, Award or Option:Nothing contained in the Plan or in any
grant or award under this Plan shall give any employee the right to be retained in the
employment of the Corporation or affect the right of the Corporation to terminate the
employees employment at any time. The adoption of the Plan shall not constitute a contract
between the Corporation and any employee. No Eligible Person who is an employee shall receive
any right to be granted an option, right or award hereunder nor shall any such option, right
or award be considered as compensation under any employee benefit plan of the Corporation.
 10.2
    
    Recoupment.Any Awards or Grants under this Plan is also subject to recoupment under the CMS
Energy Recoupment Policy Relating to Financial Restatements.
 10.3
    
    Governing Law:The provisions of this Plan and all rights thereunder shall be governed by and
construed in accordance with the laws of the State of Michigan.
  ATTEST:
    
    CMS ENERGY CORPORATION/s/
    
    By: /s/Secretary
    
    Chief Executive Officer
 10




---



##### 



Change in Control
 (a)
    
    Any Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of CMS Energy Corporation (not including securities beneficially
owned by such Person any securities acquired directly from CMS Energy Corporation
or its Affiliates) representing twenty-five percent (25%) or more of the combined
voting power of CMS Energy Corporations then outstanding securities, excluding any
Person who becomes such a Beneficial Owner in connection with a transaction
described in clause (i) of paragraph (c) below; or
 (b)
    
    The following individuals cease for any reason to constitute a
majority of directors then serving: individuals who, on the Effective Date,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of CMS Energy Corporation) whose appointment or election by
the Board or nomination for election by CMS Energy Corporations stockholders was
approved or recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the Effective Date or whose
appointment, election or nomination for election was previously so approved or
recommended; or
 (c)
    
    The consummation of a merger or consolidation of CMS Energy Corporation
or any direct or indirect subsidiary of CMS Energy Corporation with any other
corporation or other entity, other than: (i) any such merger or consolidation which
involves either CMS Energy Corporation or any such subsidiary and would result in
the voting securities of CMS Energy Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent thereof),in
combination with the ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of CMS Energy Corporation or its Affiliates, at
least sixty percent (60%) of the combined voting power of the voting securities of
CMS Energy Corporation or the surviving entity or any parent thereof outstanding
immediately after such merger or consolidation and immediately following which the
individuals who comprise the Board immediately prior thereto constitute at least a
majority of the board of directors of CMS Energy Corporation, the entity surviving
such merger or consolidation or, if CMS Energy Corporation or the entity surviving
such merger is then a subsidiary, the ultimate parent thereof; or (ii) a merger or
consolidation effected to implement a recapitalization of CMS Energy Corporation
(or similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of CMS Energy Corporation (not including in
the securities beneficially owned by such Person any securities acquired directly
from CMS Energy Corporation or its Affiliates) representing twenty-five percent
(25%) or more of the combined voting power of CMS Energy Corporations then
outstanding securities; or
 (d)
    
    Either (1) the stockholders of CMS Energy Corporation approve a plan of
complete liquidation or dissolution of CMS Energy Corporation, or (2) there is
consummated an agreement for the sale, transfer or disposition by CMS Energy
Corporation of all or substantially all of CMS Energy Corporations assets (or any
transaction having a similar effect). For purposes of clause (d)(2), (i) the sale,
transfer or disposition of a majority of the shares of common stock of Consumers
Energy Company shall constitute a sale, transfer or disposition of substantially
all of the assets of CMS Energy Corporation and (ii) the sale, transfer or
disposition of subsidiaries or affiliates of CMS Energy Corporation, singly or in
combinations, or their assets, only qualifies as a Change in Control if it
satisfies the substantiality test contained in that clause and the Board of CMS
Energy Corporations determination in that regard is final. In addition, for
purposes of clause (d)(2), the sale, transfer or disposition of assets has to be in
a transaction or series of transactions closing within six months after the closing
of the first transaction in the series, other than with an
 1




---



##### 



2