8-KMaterial AgreementsExhibits & Filings

CENTERPOINT ENERGY INC 8-K Report, Material Agreement (Feb 28, 2006)

Filed February 28, 2006For Securities:CNP

Summary

This 8-K filing from CenterPoint Energy, Inc. (CNP) details significant executive compensation decisions made in February 2006. The Compensation Committee and Board of Directors approved base salaries for named executive officers effective April 1, 2006, with the CEO, David M. McClanahan, receiving a base salary of $980,000. The filing also outlines the performance metrics and award structures for the Short-Term Incentive Plan for fiscal year 2006 and the Long-Term Incentive Plan for the 2006-2008 performance cycle. Key performance indicators for the Short-Term Incentive Plan include exceeding common dividends with after-tax income (excluding certain note impacts) and achieving operating income of at least $850 million. For the Long-Term Incentive Plan, payouts are tied to total shareholder return relative to the S&P utility index and operating income improvement. Additionally, the Board approved the extension of service for two directors, John T. Cater and Thomas S. Madison, beyond the mandatory retirement age of 70, citing their valuable experience and expertise.

Key Highlights

  • 1CenterPoint Energy's Board approved base salaries for its top five executive officers, effective April 1, 2006, with the CEO's salary set at $980,000.
  • 2The Short-Term Incentive Plan for 2006 links cash bonuses to achieving after-tax income exceeding common dividends and a minimum operating income of $850 million.
  • 3Maximum payouts under the Short-Term Incentive Plan can be up to 2 times the target award, with specific multipliers for the CEO (1.5x) and another executive (2.5x).
  • 4The Long-Term Incentive Plan for 2006-2008 uses a combination of relative total shareholder return (70% weighting) and operating income improvement (30% weighting) to determine performance share payouts.
  • 5Stock awards under the Long-Term Incentive Plan vest after three years, contingent on a minimum of $1.80 per share in cash dividends being declared.
  • 6Two directors, John T. Cater and Thomas S. Madison, will have their service extended beyond age 70 until their current terms expire in 2007 and 2008, respectively.
  • 7Director John T. Cater has agreed to waive above-market interest on pre-1989 deferred compensation during his final year of service, accepting an 8.08% rate.

Frequently Asked Questions

For the Short-Term Incentive Plan in 2006, executive bonuses are contingent upon after-tax income from continuing operations (excluding certain impacts) exceeding the common dividend paid to shareholders, and operating income reaching or exceeding $850 million. For the Long-Term Incentive Plan, performance is measured against the S&P utility index for total shareholder return (70%) and operating income improvement (30%).

Effective April 1, 2006, the base salaries are: David M. McClanahan (CEO) - $980,000; Gary L. Whitlock - $445,000; Scott E. Rozzell - $425,000; Thomas R. Standish - $405,000; and Byron R. Kelley - $313,000.

For the Short-Term Incentive Plan, the maximum payout for most named executive officers is two times their target award. However, Mr. McClanahan's maximum is 1.5 times his target, and Mr. Kelley's maximum is 2.5 times his target. For the Long-Term Incentive Plan, performance share payouts can range from 0% to 150% of the awarded amount based on performance metrics.

Yes, the Board of Directors has extended the service of two directors, John T. Cater and Thomas S. Madison, beyond the mandatory retirement age of 70, citing their valuable experience. Additionally, Mr. Cater has agreed to a reduced interest rate on his pre-1989 deferred compensation during his final year of service to align with current plan rates.