CENTERPOINT ENERGY INC

Transcription

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2 CENTERPOINT ENERGY INC FORM 8-K (Unscheduled Material Events) Filed 3/1/2006 For Period Ending 2/22/

3 ~ (17 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C FOW 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of of earliest event reported): FEBRUARY 22,2006 CENTERPOINT ENERGY, INC. (Exact name of registrant as specified in its charter) TEXAS (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 1111 LOUISIANA HOUSTON. TEXAS (Address of principal executive offices) (Zip Code) Registrant s telephone number, including area code: (7 13) I Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): I [ 3 Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act CFR a-12) [ ] he-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) [ ] he-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c)) 52

4 ITEM ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. On February 22,2006, the Compensation Committee ("Compensation Committee") of the Board of Directors of Centerpoint Energy, Inc. (the "Company") determined certain matters related to the awards to Mr. McClanahan, the Chief Executive Officer, and the four other most highly compensated executive officers of the Company, Messrs. Whitlock, Rozzell, Standish and Kelley (collectively referred to as the "named executive officers"), in connection with the Centerpoint Energy, Inc. Short Term Incentive Plan for fiscal year 2006 and in connection with goals and stock awards under the Company's Long-Term Incentive Plan for the performance cycle. Further, the Compensation Committee recommended to the Board of Directors and on February 23,2006, the Board of Directors approved the base salaries of the Company's named executive officers for Centerpoint Energy, Inc. Short Term Incentive Plan Cash bonuses are payable pursuant to the Short Term Incentive Plan based on the achievement of certain performance objectives approved in accordance with the terms of the Plan at the commencement of the year. On February 22,2006, the Compensation Committee approved the target amount and performance objectives for the Chief Executive Officer under the Short Term Incentive Plan for fiscal year Additionally, on the same date, after review of his proposals with the Compensation Committee, the Chief Executive Officer of the Company approved the target amount and performance objectives for awards to the other named executive officers under that Plan for fiscal year In order for any amounts to be payable under the Plan with respect to 2006, after-tq income from continuing operations, excluding certain impacts related to the Company's Zero-Premium Exchangeable Subordinated Notes, must exceed the common dividend paid to shareholders, and operating income must equal or exceed $850 million. Target annual incentives for the named executive officers of the Company for 2006 range from 50% to 85% of base salary earned in The maximum payout for any named executive officer is two times his target award, except for Mr. McClanahan and Mr. Kelley, whose maximum payouts are 1.5 and 2.5 times their target awards, respectively. Plan funding is determined by measuring achievement of the performance criteria. Individual named executive officer payouts are subject to discretionary adjustment by the Compensation Committee above or below the funding level, taking into account the Chief Executive Officer's assessment of certain individual performance measures. The payout to the Chief Executive Officer may be decreased below the level determined by measuring achievement but not increased. The performance goals for the named executive officers of the Company under the Plan for 2006 are based on the criteria summarized on Exhibit 10.1 hereof, which is incorporated by reference herein. As used in Exhibit 10.1, "Operating Income" refers to the reported operating income of the Company, adjusted to include income reported as other income from any partnerships in which the Company holds an equity interest and to exclude the impacts on operating income of certain regulatory actions related to the Company's stranded cost recovery and any variances in severance costs budgeted by the Company. Long-Term Incentive Plan of CenterPoint Energy, Inc. On February 22,2006, the compensation Committee approved performance goals and grants under the Long-Term Incentive Plan of the Company consisting of (i) performance shares for the performance cycle and (ii) stock awards to the named executive officers. Distributions pursuant to the performance share awards are based on a total shareholder return measure of the Company compared to companies in the S&P utility index, weighted at 70%, and improvement in the Company's operating income, weighted at 30%. For purposes of the Company's goals for the performance cycle, "Operating Income" means reported operating income of the Company adjusted to (i) include income reported as other income from any partnerships in which the Company holds an equity interest and (ii) exclude (A) income related to the Company's stranded cost recovery, (B) the impacts of any acquisitions, mergers and divestitures and (C) the impacts of any changes in accounting standards. The stock awards vest three years from the date of grant if a minimum of $1.80 per share in cash dividends has been declared on the Company's common stock during the three-year period. 53

5 Target amounts for these awards range from 90% to 200% of base salary. The named executive officers will receive 70% of their awards in performance shares and 30% in stock awards. Payouts of the performance share awards can range from 0% to 150% based on achievement of the applicable performance goals. Forms of agreement for performance share awards and stock awards with performance goals under the Long-Term Incentive Plan of the Company are attached hereto as Exhibits 10.2 and 10.3, respectively, and are incorporated by reference herein. Executive Officer Base Salaries On February 23,2006, the Board of Directors of the Company approved the following base salaries for the named executive officers of the Company effective April 1,2006: David M. McClanahan, $980,000; Gary L. Whitlock, $445,000; Scott E. Rozzell, $425,000; Thomas R. Standish, $405,000; and Byron R. Kelley, $313,000. Continuing Service of Directors Under the Company's Bylaws, a member of the Board of Directors must step down from the Board at the annual meeting after he or she reaches 70 years of age, unless the Board determines that the member has special skill, experience or distinction having value to the Company that is not readily available or transferable. Both directors John T. Cater and Thomas S. Madison will have reached 70 years of age by the expected date of the Company's annual meeting in May However, on February 23,2006, the Board of Directors determined that their service should be extended until the expiration of their current terms, which would expire in 2007 for Mr. Cater and 2008 for Mr. Madison. In conjunction with this decision, Mr. Cater has agreed to waive during the last year of his current term the interest that would be earned by him on deferrals he made prior to 1989 under the Company's 1985 Deferred Compensation Plan. The 1985 Deferred Compensation Plan provides for interest accruals at rates substantially above current market rates and was designed to begin payment status at the later of when a director retires or reaches age 70. Instead of the rate prescribed under that plan, the interest rate earned by Mr. Cater on those deferrals during the last year of his current term will be reduced to Mr. Cater's applicable interest rate paid under the Company's present deferred compensation plan (8.08%), and the amount of interest accrued during the last year of his term will accrue interest at the 8.08% rate over the 15 year payout period. Mr. Cater is the only current director who has balances under the 1985 Deferred Compensation Plan. Otherwise, Messrs. Cater and Madison will receive the compensation payable to directors until the expiration of their current terms. 54

6 ~ ~ Centerpoint ITEM FINANCIAL STATEMENTS AND EXHIBITS. The exhibits listed below are filed herewith. (d) Exhibits Summary of Performance Goals and Objectives under the Centerpoint Energy, Inc. Short Term Incentive Plan Form of Performance Share Award Agreement for the 2OXX-2OXX Performance Cycle under the Long-Term Incentive Plan of Energy, Inc Form of Stock Award Agreement (With Performance Goals) under the Long-Term Incentive Plan of Centerpoint Energy, Inc. 55

7 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CENTERPOINT ENERGY, INC. Date: February 28, 2006 By: /s/ James S. Brian - James S. Brian Senior Vice President and Chief Accounting Officer 56

8 EXHIBIT INDEX 10.1 Summary of Performance Goals and Objectives under the Centerpoint Energy, Inc. Short Term Incentive Plan _ Form of Performance Share Award Agreement for the 2OXX-20XX Performance Cycle under the Long-Term Incentive Plan of CenterPoint Energy, Inc Form of Stock Award Agreement (With Performance Goals) under the Long-Term Incentive Plan of CenterPoint Energy, Inc. 57

9 EXHIBIT 10.1 SUMMARY OF PERFORMANCE GOALS AND OBJECTIVES UNDER THE CENTERPOINT ENERGY, INC. SHORT TERM INCENTIVE PLAN 2006 PERFORMANCE GOALS OFFICER GOALS _ David M. McClanahan Operating Income Gary L. whitlock Operating Income Scott E. Rozzell Operating Income Thomas R. Standish Operating Income Operating Income from the Regulated Operations Group Achievement of certain financial and operational performance goals for each of the regulated units: - Houston Electric - Southern Gas Operations - Minnesota Gas Byron R. Kelley Operating Income Achievement of certain financial and operational performance goals for each of the Pipeline and Field Services units: - Interstate Pipelines - Pipeline Services - Field Services 58

10 EXHIBIT 10.2 LONG-TERM INCENTIVE PLAN OF CENTERPOINT ENERGY, INC. PERFORMANCE SHARE AWARD AGREEMENT 20XX -- 20XX PERFORMANCE CYCLE Pursuant to this Award Agreement, CENTERPOINT ENERGY, INC. (the "Company") hereby grants to -FIRSTNAME- -LAST-NAME- (the "Participant"), an employee of the Company, -PBRS- performance shares of Common Stock (the "Target Performance Shares"), such number of shares being subject to adjustment as provided in Section 14 of the Long-Term Incentive Plan of Centerpoint Energy, Inc. (the "Plan"), conditioned upon the Company's achievement of the Performance Goals over the course of the 20XX - 20XX Performance Cycle pursuant to the Plan, and subject to the following terms and conditions: 1. RELATIONSHIP TO THE PLAN; DEFINITIONS. This grant of Performance Shares is subject to all of the terms, conditions and provisions of the Plan and administrative interpretations thereunder, if any, which have been adopted by the Committee and are in effect on the date hereof. Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the Plan. To the extent that any provision of this Award Agreement conflicts with the express terms of the Plan, it is hereby acknowledged and agreed that the terms of the Plan shall control and, if necessary, the applicable provisions of this Award Agreement shall be hereby deemed amended so as to carry out the purpose and intent of the Plan. References to the Participant herein also include the heirs or other legal representatives of the Participant. For purposes of this Award Agreement: "20XX -- 20XX PERFORMANCE CYCLE means the period from January 1,20XX to December 31,20XX. "ACHIEVEMENT PERCENTAGE" means the percentage of achievement determined by the Committee at the end of the Performance Cycle in accordance with Section 3 that reflects the extent to which the Company achieved the Performance Goals during the Performance Cycle applicable to this Award Agreement. "DISABILITY" means that the Participant is both eligible for and in receipt of benefits under the Company's long-term disability plan. "EMPLOYMENT means employment with the Company or any of its Subsidiaries. "PERFORMANCE GOALS" means the standards established by the Committee to determine in whole or in part whether the Performance Shares shall be earned, which are attached hereto and made a part hereof for all purposes. "PERFORMANCE SHARES" means the shares of Common Stock potentially deliverable to Participant pursuant to this Award Agreement. "RETIREMENT" means termination of Employment on or after attainment of age 55 and with at least five years of service with the Company

11 "TARGET PERFORMANCE SHARES" means the actual number of Performance Shares initially granted to the Participant pursuant to this Award Agreement, with such number of Performance Shares to be awarded to the Participant at the close of the 20XX - 20XX Performance Cycle if the Company attains an Achievement Percentage of 100%. "VESTED PERFORMANCE SHARES" means the shares of Common Stock awarded to Participant following Participant's satisfaction of the vesting provisions of Section 4 and, if applicable, the determination by the Committee of the extent to which the Company has achieved the Performance Goals for the 20XX - 20XX Performance Cycle pursuant to Section ESTABLISHMENT OF PERFORMANCE SHARE ACCOUNT. The grant of Target Performance Shares pursuant to this Award Agreement shall be implemented by a credit to a bookkeeping account maintained by the Company evidencing the accrual in favor of the Participant of the unfunded and unsecured right to receive shares of Common Stock of the Company, which right shall be subject to the terms, conditions and restrictions set forth in the Plan and to the further terms, conditions and restrictions set forth in this Award Agreement. 3. AWARD OPPORTUNITY. The Performance Goals established for the 20XX -- 20XX Performance Cycle are attached hereto and made a part hereof for all purposes. Except as otherwise provided in Sections 4 and 5, the number of Performance Shares awarded to Participant shall be the product of the number of Target Performance Shares and the Achievement Percentage that is based upon the Committee's determination of whether and to what extent the Company achieves the Performance Goals during the 20XX -- 20XX Performance Cycle. As soon as practicable after the close of the 20XX - 20XX Performance Cycle, the Committee shall determine the extent to which the Company has achieved each Performance Goal. If the Company has performed at or above the threshold level of achievement for a Performance Goal, the Achievement Percentage shall be between 50% and 150%, with a target level of achievement resulting in an Achievement Percentage of 100%. In no event shall the Achievement Percentage exceed 150%. The combined level of achievement is the sum of the weighted achievements of the Performance Goals as approved by the Committee. Upon completing its determination of the level at which the Performance Goals have been achieved, the Committee shall notify the Participant of the number of Vested Performance Shares that will be issued to the Participant pursuant to Section VESTING OF PERFORMANCE SHARES. (a) Unless earlier forfeited or vested in accordance with paragraph (b) or Section 5, Participant's right to receive Performance Shares shall vest upon Participant's receipt of written notice from the Committee, as required by Section 3, of the level at which the Performance Goals established for the 20XX -- 20XX Performance Cycle have been achieved. Such notice shall be given by the Committee as soon as practical after the close of the 20XX - 20XX Performance Cycle in accordance with the terms of the Plan and this Award Agreement. (b) If Participant's Employment is terminated prior to the close of the 20XX -- 20XX Performance Cycle: (i) by the Company or any of its Subsidiaries for any reason or due to voluntary resignation by the Participant, Participant's right to receive Performance -2-60

12 Shares shall be forfeited in its entirety as of such termination. (ii) due to death, Disability, or Retirement, Participant's right to receive the Target Performance Shares shall vest at the time of such termination in the proportion of the number of days elapsed in the 20XX -- 20XX Performance Cycle as of the date of such termination of Employment by the total number of days in the 20XX -- 20XX Performance Cycle and shall be delivered to Participant as soon as possible following such termination. Participant's right to receive additional Performance Shares shall be forfeited at such time. 5. DISTRIBUTION UPON A CHANGE OF CONTROL. Notwithstanding anything herein to the contrary, upon or immediately prior to the occurrence of any Change of Control of the Company, and without regard to the Performance Goals, the Participant's right to receive the Performance Shares shall be settled by the distribution to the Participant of (a) shares of Common Stock equal to 150% of the Target Performance Shares, plus (b) shares of Common Stock (rounded up to the nearest whole share) having a Fair Market Value equal to the amount of dividends that would have been declared on the number of such shares determined under clause (a) above during the period commencing at the beginning of the Performance Cycle and ending on the date immediately preceding the date on which the Change of Control occurs, with such shares of Common Stock registered in the name of the Participant and certificates representing such Common Stock to be delivered to the Participant as soon as practicable after the date the Change of Control occurs. In lieu of the foregoing distribution in shares, the Committee, in its sole discretion, may direct that such distribution be made to the Participant in cash equal to (x) the product of (i) the Fair Market Value per share of Common Stock on the date immediately preceding the date on which the Change of Control occurs and (ii) 150% of the Target Performance Shares, plus (y) the amount of dividends that would have been declared on the number of shares of Common Stock determined under clause (a) above during the period commencing at the beginning of the Performance Cycle and ending on the date immediately preceding the date on which the Change of Control occurs, with such cash payment to be made as soon as practicable after the date the Change of Control occurs. Such distribution, whether in the form of shares of Common Stock or, if directed by the Committee, in cash, shall satisfy the rights of the Participant and the obligations of the Company under this Award Agreement in full. 6. PAYMENT OF AWARD. (a) If Participant's right to receive Performance Shares has vested pursuant to Section 4, a number of shares of Common Stock equal to the number of Vested Performance Shares shall be registered in the name of the Participant and certificates representing such Common Stock shall be delivered to the Participant as soon as practical after the date upon which the Participant's right to such shares vested according to the provisions of Section 4. The Company shall have the right to withhold applicable taxes from any such payment of Vested Performance Shares or from other compensation payable to the Participant at the time of such vesting and delivery pursuant to Section 11 of the Plan. (b) Upon delivery of the Vested Performance Shares pursuant to paragraph (a), above, Participant shall also be entitled to receive a cash payment equal to the sum of all dividends, if any, declared on the Vested Performance Shares after the commencement of the 20XX -- 20XX Performance Cycle but prior to the date the Vested Performance Shares are delivered to the Participant

13 7. CONFIDENTIALITY. The Participant agrees that the terms of this Award Agreement are confidential and that any disclosure to anyone for any purpose whatsoever (save and except disclosure to financial institutions as part of a financial statement, financial, tax and legal advisors, or as required by law) by the Participant or his or her agents, representatives, heirs, children, spouse, employees or spokespersons shall be a breach of this Award Agreement and the Company may elect to revoke the grant made hereunder, seek damages, plus interest and reasonable attorneys' fees, and take any other lawful actions to enforce this Award Agreement. 8. NOTICES. For purposes of this Award Agreement, notices to the Company shall be deemed to have been duly given upon receipt of written notice by the corporate secretary of the Company at Louisiana, Houston, Texas 77002, or to such other address as the Company may furnish to the Participant. Notices to the Participant shall be deemed effectively delivered or given upon personal, electronic, or postal delivery of written notice to the Participant, the place of Employment of the Participant, the address on record for the Participant at the human resources department of the Company, or such other address as the Participant hereafter designates by written notice to the Company. 9. SHAREHOLDER RIGHTS. The Participant shall have no rights of a shareholder with respect to the Performance Shares, unless and until the Participant is registered as the holder of shares of Common Stock. 10. SUCCESSORS AND ASSIGNS. This Award Agreement shall bind and inure to the benefit of and be enforceable by the Participant, the Company and their respective permitted successors and assigns except as expressly prohibited herein and in the Plan. Notwithstanding anything herein or in the Plan to the contrary, the Performance Shares are transferable by the Participant to Immediate Family Members, Immediate Family Members trusts, and Immediate Family Member partnerships pursuant to Section 13 of the Plan NO EMPLOYMENT GUARANTEED. Nothing in this Award Agreement shall give the Participant any rights to (or impose any obligations for) continued Employment by the Company or any Subsidiary thereof or successor thereto, nor shall it give such entities any rights (or impose any obligations) with respect to continued performance of duties by the Participant. 12. COMPLIANCE WITH SECTION 409A. It is the intent of the Company and the Participant that the provisions of the Plan and this Award Agreement comply with Section 409A of the Internal Revenue Code and related regulations and Department of the Treasury pronouncements ("Section 409A"). If any provision provided herein would result in the imposition of an excise tax under the provisions of Section 409A, the parties agree that any such provision will be modified as the Company determines is appropriate to avoid imposition of such excise tax. In certain circumstances the Company may delay the payment of the Performance Shares until a date which is six months after the date of the Participant's separation from service. 13. MODIFICATION OF AWARD AGREEMENT. Any modification of this Award Agreement shall be binding only if evidenced in writing and signed by an authorized representative of the Company

14 EXHIBIT 103 LONG-TERM INCENTIVE PLAN OF CENTERPOINT ENERGY, INC. STOCK AWARD AGREEMENT (WITH PERFORMANCE GOAL) Pursuant to this Award Agreement, CENTERPOINT ENERGY, INC. (the "Company") hereby grants to -FIRSTNAME- -LAST-NAME- (the "Participant"), an employee of the Company, on [GRANT DATE] (the "Grant Date"), -RS- shares of Common Stock of the Company (the "Stock Award"), pursuant to the LONG-TERM INCENTIVE PLAN OF CENTERPOINT ENERGY, INC. (the "Plan"), conditioned upon the Company's achievement of the Performance Goals established by the Committee over the course of the Vesting Period, with such number of shares being subject to adjustment as provided in Section 14 of the Plan, and further subject to the terms, conditions and restrictions described in the Plan and as follows: 1. RELATIONSHIP TO THE PLAN; DEFINITIONS. The Stock Award is subject to all of the terms, conditions and provisions of the Plan and administrative interpretations thereunder, if any, which have been adopted by the Committee and are in effect on the date hereof. Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the Plan. To the extent that any provision of this Award Agreement conflicts with the express terms of the Plan, it is hereby acknowledged and agreed that the terms of the Plan shall control and, if necessary, the applicable provisions of this Award Agreement shall be hereby deemed amended so as to carry out the purpose and intent of the Plan. References to the Participant herein also include the heirs or other legal representatives of the Participant. For purposes of this Award Agreement: "DISABILITY" means that the Participant is both eligible for and in receipt of benefits under the Company's long-term disability plan. "EMPLOYMENT means employment with the Company or any of its Subsidiaries. "PERFORMANCE GOALS" means the standards established by the Committee to determine in whole or in part whether the shares of Common Stock under the Stock Award shall be earned, which are attached hereto and made a part hereof for all purposes. "RETIREMENT means termination of Employment on or after attainment of age 55 and with at least five years of service with the Company. "VESTING DATE" means [DATE] "VESTING PERIOD" means the period commencing on the Grant Date and ending on the Vesting Date. 1 63

15 2. ESTABLISHMENT OF STOCK AWARD ACCOUNT. The grant of shares of Common Stock of the Company pursuant to this Stock Award shall be implemented by a credit to a bookkeeping account maintained by the Company evidencing the accrual in favor of the Participant of the unfunded and unsecured right to receive such shares of Common Stock, which right shall be subject to the terms, conditions and restrictions set forth in the Plan and to the further terms, conditions and restrictions set forth in this Award Agreement. Except as otherwise provided in Section 10 of this Award Agreement, the shares of Common Stock credited to the Participant's bookkeeping account may not be sold, assigned, transferred, pledged or otherwise encumbered until the Participant has been registered as the holder of such shares of Common Stock on the records of the Company, as provided in Section 5 or 6 of this Award Agreement. 3. VESTING OF STOCK AWARD. Unless earlier forfeited or vested in accordance with Section 4 below or receipt of a distribution pursuant to Section 5 below, the Participant's right to receive 100% of the shares of Common Stock under this Stock Award shall vest on the Vesting Date if the Performance Goals established in connection with the grant of, and as a requirement to receive the, Common Stock are determined by the Committee to have been achieved during the Vesting Period. If the Committee determines that the Performance Goals have been achieved, the Participant's right to receive the Common Stock under this Award Agreement shall vest upon the Participant's receipt of written notice from the Committee of such determination. The Participant must be in continuous Employment during the Vesting Period in order for the Common Stock to vest; otherwise, all such shares shall be forfeited as of the Participant's termination date. 4. ACCELERATED VESTING AND FORFEITURE. If, prior to the end of the Vesting Date pursuant to Section 3 above and prior to the Participant's receipt of any distribution pursuant to Section 5 below, the Participant's Employment is terminated due to (a) death, (b) Disability, or (c) Retirement, then, without regard to the Performance Goals, the Participant shall vest in the right to receive a number of the shares of Common Stock determined by multiplying (i) the total number of shares of Common Stock granted under this Award Agreement by (ii) a fraction, the numerator of which is the number of days that have elapsed from the Grant Date, and the denominator of which is the total number of days in the Vesting Period. Such vested shares of Common Stock shall be delivered to the Participant as soon as practicable following the Participant's termination date. All remaining unvested shares of Common Stock as of the Participant's termination date shall be forfeited as of such date. 5. DISTRIBUTION UPON A CHANGE OF CONTROL. Notwithstanding anything herein to the contrary, upon or immediately prior to the occurrence of any Change of Control of the Company, and without regard to the Performance Goals, the Participant's right to receive the unvested shares of Common Stock under this Award Agreement shall be settled by a distribution to the Participant of (a) all shares of Common Stock not previously vested or forfeited pursuant to Section 3 or Section 4 above, plus (b) shares of Common Stock (rounded up to the nearest whole share) having a Fair Market Value equal to the amount of dividends that would have been declared on the number of shares of Common Stock determined under clause (a) above during the period commencing on the Grant Date and ending on the date immediately preceding the date on which the Change of Control occurs, with such shares of Common Stock registered in the name of the Participant and certificates representing such Common Stock to be delivered to the 2 64

16 Participant as soon as practicable after the date the Change of Control occurs. In lieu of the foregoing distribution in shares, the Committee, in its sole discretion, may direct that such distribution be made to the Participant in cash equal to (i) the product of (x) the Fair Market Value per share of Common Stock on the date immediately preceding the date on which the Change of Control occurs and (y) the number of shares of Common Stock not previously vested or forfeited pursuant to Section 3 or Section 4 above, plus (ii) the amount of dividends that would have been declared on the number of shares of Common Stock determined under clause (a) above during the period commencing on the Grant Date and ending on the date immediately preceding the date on which the Change of Control occurs, with such cash payment to be made as soon as practicable after the date the Change of Control occurs. Such distribution, whether in the form of shares of Common Stock or, if directed by the Committee, in cash, shall satisfy the rights of the Participant and the obligations of the Company under this Award Agreement in full. 6. PAYMENT OF AWARD. Upon the vesting of the Participant's right to receive the shares of Common Stock pursuant to Section 3 or Section 4 of this Award Agreement, a number of shares of Common Stock equal to the number of vested shares of Common Stock under this Award Agreement shall be registered in the name of the Participant and certificates representing such Common Stock shall be delivered to the Participant as soon as practicable after the date upon which the Participant's right to such shares vested according to the provisions of Section 3 or Section 4 above. The Company shall have the right to withhold applicable taxes from any such payment of the Common Stock (including, but not limited to, from any amounts payable as provided in the following paragraph with respect to dividends) or from other compensation payable to the Participant at the time of such vesting and delivery pursuant to Section 11 of the Plan. If the Common Stock became vested pursuant to Section 3 or Section 4 above, upon delivery of shares of Common Stock pursuant to the foregoing paragraph of this Section 6, the Participant shall also be entitled to receive a cash payment equal to the sum of all dividends, if any, declared on such shares of Common Stock after the Grant Date but prior to the date such shares of Common Stock are delivered to the Participant. 7. CONFIDENTIALITY. The Participant agrees that the terms of this Award Agreement are confidential and that any disclosure to anyone for any purpose whatsoever (save and except disclosure to financial institutions as part of a financial statement, financial, tax and legal advisoxs, or as required by law) by the Participant or his or her agents, representatives, heirs, children, spouse, employees or spokespersons shall be a breach of this Award Agreement and the Company may elect to revoke the grant made hereunder, seek damages, plus interest and reasonable attorneys' fees, and take any other lawful actions to enforce this Award Agreement. 8. NOTICES. For purposes of this Award Agreement, notices to the Company shall be deemed to have been duly given upon receipt of written notice by the Corporate Secretary of Centerpoint Energy, Inc., Louisiana, Houston, Texas 77002, or to such other address as the Company may furnish to the Participant. Notices to the Participant shall be deemed effectively delivered or given upon personal, electronic, or postal delivery of written notice to the Participant, the place of 3 65

17 Employment of the Participant, the address on record for the Participant at the human resources department of the Company, or such other address as the Participant hereafter designates by written notice to the Company. 9. SHAREHOLDER RIGHTS. The Participant shall have no rights of a shareholder with respect to the shares of Common Stock granted under this Stock Award, unless and until the Participant is registered as the holder of such shares of Common Stock. 10. SUCCESSORS AND ASSIGNS. This Award Agreement shall bind and inure to the benefit of and be enforceable by the Participant, the Company and their respective permitted successors and assigns except as expressly prohibited herein and in the Plan. Notwithstanding anything herein or in the Plan to the contrary, the shares of Common Stock are transferable by the Participant to Immediate Family Members, Immediate Family Member trusts, and Immediate Family Member partnerships pursuant to Section 13 of the Plan. 11. NO EMPLOYMENT GUARANTEED. Nothing in this Award Agreement shall give the Participant any rights to (or impose any obligations for) continued Employment by the Company or any Subsidiary, or any successor thereto, nor shall it give such entities any rights (or impose any obligations) with respect to continued performance of duties by the Participant. 12. COMPLIANCE WITH SECTION 409A. It is the intent of the Company and the Participant that the provisions of the Plan and this Agreement comply with Section 409A of the Internal Revenue Code and related regulations and Department of the Treasury pronouncements ("Section 409A). If any provision provided herein would result in the imposition of an excise tax under the provisions of Section 409A, the parties agree that any such provision will be modified as the Company determines is appropriate to avoid imposition of such excise. In certain circumstances the Company may delay the payment of the Stock Award until a date which is six months after the date of the Participant's separation from service. 13. MODIFICATION OF AWARD AGREEMENT. Any modification of this Award Agreement shall be binding only if evidenced in writing and signed by an authorized representative of the Company. 4 66

18 CENTERPOINT ENERGY INC FORM 8-K (Unscheduled Material Events) Filed 2/28/2006 For Period Ending 2/28/

19 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): FEBRUARY 28,2006 CENTERPOINT ENERGY, INC. (Exact name of registrant as specified in its charter) TEXAS (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 1111 LOUISIANA HOUSTON, TEXAS (Address of principal executive offices) (Zip Code) Registrant s telephone number, including area code: (713) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ 3 Written communications pursuant to Rule 425 under the Securities Act (1 7 CFR ) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) [ ] Re-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) [ ] Re-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c)) 68

20 ITEM RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On February 28,2006, Centerpoint Energy, Inc. ("CenterPoint Energy") reported fourth quarter and full year 2005 earnings. Certain information regarding Centerpoint Energy's fourth quarter and full year 2005 earnings is included in Item 8.01 below. For additional information regarding Centerpoint Energy's fourth quarter and full year 2005 earnings, please refer to Centerpoint Energy's press release attached to this report as Exhibit 99.1 (the "Press Release"), which Press Release is incorporated by reference herein. The information in the Press Release is being furnished, not filed, pursuant to Item Accordingly, the information in the Press Release will not be incorporated by reference into any registration statement filed by CenterPoint Energy under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. ITEM OTHER EVENTS. Fourth Quarter and Full Year 2005 Results Net income was $81 million, or $0.25 per diluted share, for the fourth quarter of 2005 compared to $100 million, or $0.29 per diluted share, for the same period of For the year 2005, net income was $252 million, or $0.75 per diluted share, compared to a net loss of $905 million, or $2.48 per diluted share, for Net income for 2004 included a $977 million extraordinary loss from the write-down of generation-related regulatory assets as a result of actions taken by the Texas Public Utility Commission (PUC), $83 million of this amount was recorded in the fourth quarter. Net income for 2004 also included a $133 million overall loss from discontinued operations, although there was a $21 million gain from discontinued operations recorded in the fourth quarter of Net income for 2005 included a $30 million positive adjustment to the 2004 write-down of generation-reiated regulatory assets and a $3 million loss from discontinued operations. Income from continuing operations before extraordinary item for the fourth quarter of 2005 was $81 million, or $0.25 per diluted share, compared to $162 million, or $0.46 per diluted share, for the fourth quarter of Income from continuing operations before extraordinruy item for the year 2005 was $225 million, or $0.67 per diluted share, compared to $205 million, or $0.61 per diluted share, for As a result of actions taken by the PUC, in the fourth quarter of 2004 Centerpoint Energy recorded pre-tax income of $226 million related to interest on CenterPoint Energy's authorized true-up balance. Of this amount, $131 million related to 2004 ($36 million related to the fourth quarter of 2004) and $95 million related to periods prior to ITEM FINANCIAL STATEMENTS AND EXHIBITS. The exhibit listed below is furnished pursuant to Item 2.02 of this Form 8-K. (d) Exhibits Press Release issued February 28,2006 regarding Centerpoint Energy, 1nc.k fourth quarter and full year 2005 earnings. 69

21 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CENTERPOINT ENERGY, INC. Date: February 28, 2006 By: /s/ JAMES S. BRIAN - - James S. Brian Senior vice President and Chief Accounting Officer 70

22 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION Press Release issued February 28, 2006 regarding Centerpoint Energy, Inc. s fourth quarter and full year 2005 earnings. 71

23 (CENTERPOINT ENERGY LOGO) For more information contact MEDIA: FOR IMMEDIATE RELEASE Page 1 of 5 LETICIA LOWE Phone INVESTORS: MARIANNE PAULSEN Phone CENTERPOINT ENERGY REPORTS FOURTH QUARTER AND FULL YEAR 2005 EARNINGS HOUSTON, TX - FEBRUARY 28, Centerpoint Energy, Inc. (NYSE CNP) today reported net income of $81 million, or $0.25 per diluted share, for the fourth quarter of 2005 compared to $100 million, or $0.29 per diluted share for the same period of For the year 2005, the company recorded net income of $252 million, or $0.75 per diluted share, compared to a net loss of $905 million, or $2.48 per diluted share, for Net income for 2004 included a $977 million extraordinary loss from the write-down of generation-related regulatory assets as a result of actions taken by the Texas Public Utility Commission (PUC), $83 million of this amount was recorded in the fourth quarter. Net home for 2004 also included a $133 million overall loss from discontinued operations, although there was a $21 million gain from discontinued operations recorded in the fourth quarter of Net income for 2005 included a $30 million positive adjustment to the 2004 write-down of generation-related regulatory assets, and a $3 million loss from discontinued operations. Income from continuing operations before extraordinary item for the fourth quarter of 2005 was $81 million, or $0.25 per diluted share, compared to $162 million, or $0.46 per diluted share, for the fourth quarter of Income from continuing operations before extraordinary item for the year 2005 was $225 million, or $0.67 per diluted share, compared to $205 million, or $0.61 per diluted share, for As a result of actions taken by the PUC, in the fourth quarter of 2004 the company recorded pre-tax income of $226 million related to interest on the company's authorized true-up balance. Of this amount, $131 million related to 2004 ($36 million related to the fourth quarter of 2004) and $95 million related to periods prior to "I am very pleased with our overall progress and accomplishments in 2005," said David M. McClanahan, president and chief executive officer of Centerpoint Energy. "2005 was a year of significant milestones for our company, marking the end to our transition. We completed the sale of our power generation business and began to recover our authorized true-up balance through the implementation of a competition transition charge and the issuance of $1.85 billion of transition bonds. We repaid our high-cost $1.31 billion term loan, reduced other debt and restructured our credit facilities to reduce interest costs, extend maturities and improve terms. Now that our transition is behind US, we look forward to further improving our operating performance while we explore opportunities to grow in a disciplined manner." -more- 72

24 (CENTERPOINT ENERGY LOGO) For more information contact MEDIA: LETICIA LOWE Phone INVESTORS : MARIANNE PAULSEN Phone FOR IMMEDIATE RELEASE Page 2 of 5 OPERATING INCOME BY SEGMENT DETAILED ELECTRIC TRANSMISSION & DISTRIBUTION The electric transmission & distribution segment generated operating income of $102 million in the fourth quarter of 2005, consisting of $90 million for the regulated electric transmission & distribution utility (TDU) and $12 million for the transition bond companies, which is an amount sufficient to pay interest on the transition bonds. Operating income for the fourth quarter of 2004 totaled $104 million, consisting of $95 million for the TDU and $9 million for the transition bond company. Revenues increased in the fourth quarter of 2005 primarily due to continued customer growth with the addition of over 60,000 metered customers since December 2004, increased customer usage and the implementation of a competition transition charge (CTC) in September Operating expenses increased primarily due to higher transmission costs, labor and benefit-related expenses, tree trimming expenses, and increased franchise fees paid to the City of Houston under a new 30-year franchise agreement. Operating income for the year 2005 was $487 million, consisting of $448 million for the TDU and $39 million for the transition bond companies. Operating income for 2004 totaled $494 million, consisting of $441 million for the TDU, $38 million for the transition bond company, and a $15 million reversal of a reserve related to the final fuel reconciliation of the former integrated utility recorded in the fourth quarter of For the year 2005, revenues increased primarily due to continued customer growth, increased customer usage driven by warmer weather, higher transmission cost recovery and implementation of the CTC. Operating expenses increased primarily due to higher transmission costs, labor and benefit-related expenses, tree trimming expenses, depreciation and amortization, and the increased franchise fees paid to the City of Houston. Operating expenses for 2004 reflected an $1 1 million credit from a land sale. NATURAL GAS DISTRIBUTION Beginning with the fourth quarter of 2005, the natural gas distribution segment excludes the company's non-rate regulated natural gas sales and services business, which is now reported as a separate segment, "competitive natural gas sales and services". All prior period segment information has been reclassified to conform to the 2005 presentation. -more- 73

25 (CENTERPOINT ENERGY LOGO) For more information contact MEDIA: LETICIA LOWE Phone INVESTORS : MARIANNE PAULSEN Phone FOR IMMEDIATE RELEASE Page 3 of 5 The natural gas distribution segment reported operating income of $59 million for the fourth quarter of 2005, compared to $69 million for the same period of Higher margins from the addition of nearly 44,000 customers since December 2004 were more than offset by increased litigation reserves and increased bad debt expense associated with higher natural gas prices. Operating income for the year 2005 was $175 million compared to $178 million for The benefits from rate increases and customer growth were more than offset by reduced customer usage, increased bad debt expense and litigation reserves, and higher depreciation. In 2004, operating expenses reflected severance and associated benefit-related expenses due to an organizational restructuring. COMPETITIVE NATURAL GAS SALES AND SERVICES The competitive natural gas sales and services business is engaged in the sale of natural gas and related services primarily to commercial and industrial customers and electric and gas utility companies. This segment reported operating income of $30 million for the fourth quarter of 2005, compared to $16 million for the same period of The increase was primarily attributable to higher sales to utilities and favorable basis differentials across the pipeline capacity that the company controls. Operating income for the year 2005 was $60 million compared to $44 million for The increase was primarily attributable to the same items noted above. Partially offsetting the margin increase were the effects of mark-to-market accounting related to non-trading Fmancial derivatives used to lock in economic margins of certain forward gas sales, as well as increased employee-related and bad debt expenses. PIPELINES AND FIELD SERVICES The pipelines and field services segment reported operating income of $67 million for the fourth quarter of 2005 compared to $57 million for the same period of Within this segment, the pipeline business achieved higher operating income ($46 million vs. $42 million) driven by increased demand for transportation resulting from basis differentials across the system and higher demand for ancillary services. The field services business achieved higher operating income ($21 million vs. $15 million) driven by increased throughput and demand, increased gas gathering and ancillary services, and higher commodity prices. -more- 74

26 (CENTERPOINT ENERGY LOGO) For more information contact MEDIA: LETICIA LOWE Phone INVESTORS : MARIANNE PAULSEN Phone FOR IMMEDIATE RELEASE Page 4 of Operating income for the year 2005 was $235 million compared to $180 million for Operating income for the pipeline business for 2005 was $165 million compared to $129 million for The field services business recorded operating income of $70 million for 2005 compared to $5 1 million for The improvements in operating income for the year resulted primarily from the same items noted for the quarter. OTHER OPERATIONS The company's other operations reported an operating loss of $6 million for the fourth quarter of 2005 compared to a loss of $15 million for the same period of The operating loss for the year 2005 was $1 8 million compared to a loss of $32 million for OTHER 2005 EVENTS Additional significant events for Centerpoint Energy during 2005 included: o completion of the sale of the company's generation assets; proceeds of $2.231 billion and $700 million were received in 2004 and 2005, respectively; o issuance of over $1.85 billion in transition bonds to recover a portion of the company's authorized true-up balance; o implementation of a CTC to begin recovering the remaining authorized true-up balance of $596 million over 14 years, plus interest; o contribution of $75 million to the pension plan in 2005 following a $476 million pension plan contribution in 2004; and o completion of an exchange offer for $572 million of the company's 3.75 percent convertible senior notes. DIVIDEND DECLARATION On January 26,2006, Centerpoint Energy's board of directors declared a regular quarterly cash dividend of $0.15 per share of common stock payable on March 10,2006, to shareholders of record as of the close of business on February 16,2006. In declaring this dividend, the board of directors indicated its intent to return to the company's traditional practice of paying consistent quarterly dividends. An annualized dividend based on a $0.15 per common share quarterly dividend represents a 50 percent increase over the $0.40 per common share in total dividends paid by the company in more- 75