8-KMaterial Agreements

CENTERPOINT ENERGY INC 8-K Report, Material Agreement (Mar 30, 2006)

Filed March 30, 2006For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) filed an 8-K on March 30, 2006, to inform shareholders about a required reapproval of performance-based compensation plan terms. The Board of Directors decided to seek shareholder reapproval at the 2006 Annual Meeting for the material terms of the performance goals under the Short-Term Incentive Plan (STI Plan) and the Long-Term Incentive Plan. This reapproval is necessary to ensure continued tax deductibility of compensation paid to the Chief Executive Officer and other highly compensated officers under Section 162(m) of the Internal Revenue Code. The filing specifically notes that awards under the STI Plan for the 2006 plan year to named executive officers will be contingent on shareholder approval of these performance goals. The previously established goals, detailed in a February 28, 2006 filing, remain unchanged except for this contingent approval requirement for the 2006 STI awards.

Key Highlights

  • 1CenterPoint Energy (CNP) to seek shareholder reapproval of performance goals for its Short-Term Incentive (STI) and Long-Term Incentive Plans.
  • 2Reapproval is required under IRS regulations for performance-based compensation to remain tax-deductible for named executive officers (including CEO) under Section 162(m).
  • 3Shareholder vote will occur at the Company's 2006 Annual Meeting.
  • 4STI Plan awards for named executive officers in the 2006 plan year are contingent on shareholder approval of the performance goals.
  • 5Previously disclosed performance goals remain unchanged, as described in the February 28, 2006 8-K filing.
  • 6This action ensures ongoing compliance with tax regulations regarding executive compensation.

Frequently Asked Questions

CenterPoint Energy needs shareholder reapproval to ensure that the performance-based compensation paid to its top executives remains fully tax-deductible under Section 162(m) of the Internal Revenue Code. IRS regulations require periodic shareholder reapproval of the material terms of performance goals for such compensation to qualify for this tax benefit.

The material terms of the performance goals for both the Short-Term Incentive (STI) Plan and the Long-Term Incentive Plan require shareholder reapproval.

Shareholders will have the opportunity to review and reapprove the material terms of the performance goals at the Company's 2006 Annual Meeting.

No, the previously disclosed performance goals for the named executive officers under both plans, as established on February 22, 2006, remain the same. The key change is the requirement for shareholder reapproval to maintain tax deductibility, and specifically, that 2006 STI awards are contingent upon this approval.