SUMMARY OF PERFORMANCE GOALS AND OBJECTIVES UNDER THE CENTERPOINT ENERGY, INC.
SHORT TERM INCENTIVE PLAN
2006 PERFORMANCE 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
CENTERPOINT ENERGY, INC.
SHORT TERM INCENTIVE PLAN
(As Amended and Restated Effective January 1, 2003)
Effective as of January 1, 1999, the Board of Directors of
CenterPoint Energy, Inc., formerly Reliant Energy, Incorporated (the "Company"),
authorized the amendment, restatement and continuation of the Company's prior
annual incentive compensation plan, as in effect on December 31, 1998, in the
form of the Reliant Energy, Incorporated Annual Incentive Compensation Plan (the
"Prior Plan"). The Board of Directors of the Company has authorized the
amendment and restatement of the Prior Plan in the form of, and renamed as, the
CenterPoint Energy, Inc. Short Term Incentive Plan (the "Plan") effective
January 1, 2003 to make administrative clarifications therein and to reflect the
reorganization of the Company effective August 31, 2002.
There shall be no termination and no gap or lapse in time or
effect between the Prior Plan and this Plan. The amendment, restatement and
continuation of the Prior Plan in the form of this Plan shall not operate to
exclude, diminish, limit or restrict the payments or continuation of payments of
benefits to Participants under the terms of the Prior Plan as in effect prior to
its amendment, restatement and continuation in the form of this Plan. Except to
the extent otherwise required to reflect the fact that benefits accrued under
the Prior Plan are continued under this Plan, the provisions of this Plan shall
apply only to an employee eligible to participate under this Plan on or after
January 1, 2003.
NOW, THEREFORE, effective as of January 1, 2003, the Company
hereby amends, restates in its entirety and continues the CenterPoint Energy,
Inc. Short Term Incentive Plan as follows:
1. PURPOSE: The purpose of the Plan is to encourage a high level
of corporate performance through the establishment of predetermined corporate,
Subsidiary or business unit and/or individual goals, the attainment of which
will require a high degree of competence and diligence on the part of those
Employees (including officers) of the Company or of its participating
Subsidiaries selected to participate in the Plan, and which will be beneficial
to the owners and customers of the Company.
2. DEFINITIONS: Unless the context otherwise clearly requires,
the following definitions are applicable to the Plan:
AWARD: An incentive compensation award generally payable in
cash granted to a Participant with respect to a particular Plan Year
pursuant to any applicable terms, conditions and limitations as the
Committee may establish in order to fulfill the objectives of the Plan.
BOARD OF DIRECTORS or BOARD: The Board of Directors of the
CODE: The Internal Revenue Code of 1986, as amended from time
COMMITTEE: The Compensation Committee of the Board of
COMPANY: CenterPoint Energy, Inc. or any successor thereto.
COMPENSATION: Compensation or eligible earnings during the
year means the actual base salary paid to a salaried exempt Participant
during the Plan Year, including vacation, holiday and sick time.
Eligible earnings exclude all special payments, bonuses, allowances,
reimbursements, and payments in lieu of overtime. Compensation or
eligible earnings during the year means the actual gross wages paid to
a hourly or salaried non-exempt Participant during the Plan Year,
including vacation, holiday and sick time. Eligible earnings exclude
all special payments, bonuses, allowances, reimbursements, but include
overtime pay in a manner consistent with the requirements of applicable
labor law. Notwithstanding the foregoing, any Participant covered by
the terms of a collective bargaining agreement shall have his
Compensation calculated in the manner consistent with the collective
bargaining agreement, if applicable.
EMPLOYEE: An employee of the Company or any of its
Subsidiaries who is a regular full or part-time employee and who
regularly works at least 20 hours per week.
EMPLOYER: The Company and each Subsidiary which is designated
by the Committee as an Employer under this Plan.
PARTICIPANT: An Employee who is selected to participate in the
PERFORMANCE AWARD: An Award made to a Participant pursuant to
this Plan that is subject to the attainment of one or more Performance
PERFORMANCE GOALS: The performance objectives of the Company,
its Subsidiaries or its business units and/or individual Participants
established for the purpose of determining the level of Awards, if any,
earned during a Plan Year.
PLAN: This CenterPoint Energy, Inc. Short Term Incentive Plan,
as amended from time to time.
PLAN YEAR: The calendar year.
RETIREMENT PLAN: The CenterPoint Energy, Inc. Retirement Plan,
as amended and restated effective January 1, 1999, and as thereafter
SAVINGS PLAN: The CenterPoint Energy, Inc. Savings Plan, as
amended and restated effective April 1, 1999, and as thereafter
SUBSIDIARY: A subsidiary corporation with respect to the
Company as defined in Section 424(f) of the Code.
A pronoun or adjective in the masculine gender includes the
feminine gender, and the singular includes the plural, unless the context
clearly indicates otherwise.
3. PARTICIPATION: The Committee (or its appropriately designated
delegate) shall select the Employees who will be Participants for each Plan
Year. No Employee shall at any time have the right (a) to be selected as a
Participant in the Plan for any Plan Year, (b) if so selected, to be entitled to
an Award, or (c) if selected as a Participant in one Plan Year, to be selected
as a Participant in any subsequent Plan Year. The terms and conditions under
which a Participant may participate in the Plan shall be determined by the
Committee (or its appropriately designated delegate) in its sole discretion.
4. ELIGIBILITY: Except as provided below, only Employees who (a)
are employed at least 90 calendar days during the Plan Year, (b) are employed on
the last day of the Plan Year, and (c) are employed on the Payment Date are
eligible for the payment of an Award under the Plan. Days counted to meet the
90-day minimum need not be consecutive days as there may be a break in
employment. Employees covered by a collective bargaining agreement providing for
participation in this Plan are eligible for payments under this Plan only to the
extent of the specific terms contained in the applicable collective bargaining
agreement. Employees covered by a collective bargaining agreement that does not
specifically provide for their participation in this Plan are not eligible for
any payments under this Plan under any circumstances.
(1) Retirement, Death or Disability: If, during the
Plan Year, a Participant retires on his Retirement Date as
defined in the Retirement Plan, dies or terminates employment
under circumstances establishing eligibility for disability
benefits under the Company's long-term disability plan, then
the Participant shall nonetheless receive payment of the Award
the Participant would have received had the goals with respect
to the Participant's Award been met at the target level based
on his Compensation earned prior to the Participant's date of
retirement, death or disability. Payments under this Section 4
(1) shall be made as soon as practicable following the date of
the Participant's retirement, death or disability, but no
later than 30 days after the date of the Participant's
retirement, death or disability.
(2) Termination After Last Day of the Plan Year: If a
Participant is an Employee on the last day of the Plan Year
and was employed at least 90 days during the Plan Year, but is
not an Employee on the Payment Date, then the Participant may
receive on the Payment Date, an Award (if any) upon
management's recommendation and approval by the Committee.
5. PLAN ADMINISTRATION: The Plan shall be administered by the
Committee. All decisions of the Committee shall be binding and conclusive on the
Participants. The Committee, on behalf of the Participants, shall enforce this
Plan in accordance with its terms and shall have all powers necessary for the
accomplishment of that purpose, including, but not by way of limitation, the
(a) To select the Participants;
(b) To interpret, construe, approve and adjust all terms,
provisions, conditions and limitations of this Plan;
(c) To decide any questions arising as to the
interpretation or application of any provision of the Plan;
(d) To prescribe forms and procedures to be followed by
Employees for participation in the Plan, or for other occurrences in
the administration of the Plan;
(e) To establish the terms and conditions of any
Agreement under which an Award may be earned and paid; and
(f) In addition to all other powers granted herein, the
Committee shall make and enforce such rules and regulations for the
administration of the Plan as are not inconsistent with the terms set
No member of the Committee or officer of the Company to whom
the Committee has delegated authority in accordance with the provisions of
Section 5 of this Plan shall be liable for anything done or omitted to be done
by him, by any member of the Committee or by any officer of the Company in
connection with the performance of any duties under this Plan, except for his
own willful misconduct or as expressly provided by statute.
6. DELEGATION OF AUTHORITY: The Committee may delegate to the
Chief Executive Officer and to other senior officers of the Company its duties
under this Plan (including, but not limited to, its authority to select
Participants) pursuant to such conditions or limitations as the Committee may
7. AWARDS: The Committee shall determine the terms and conditions
of Awards to be made under this Plan and shall designate from time to time the
individuals who are to be the recipients of Awards. Awards may also be made in
combination or in tandem with, in replacement of, or as alternative to, grants
or rights under this Plan or any other employee plan of the Company or any of
its Subsidiaries, including the plan of any acquired entity. An Award may
provide for the grant or issuance of additional, replacement or alternative
Awards upon the occurrence of specified events. All or part of an Award may be
subject to conditions established by the Committee, which may include, but are
not limited to, continuous service with the Company and its Subsidiaries,
achievement of specific individual and/or business objectives, increases in
specified indices, attainment of specified growth rates and other comparable
measurements of performance. Unless
specified otherwise by the Committee, the amount payable pursuant to an Award
shall be based on a percentage of the Participant's Compensation.
An Award may be in the form of a Performance Award. A
Performance Award shall be paid, vested or otherwise deliverable solely on
account of the attainment of one or more pre-established, objective Performance
Goals established by the Committee prior to the earlier to occur of (x) 90 days
after the commencement of such period of service to which the Performance Goal
relates and (y) the lapse of 25% of such period of service (as scheduled in good
faith at the time the goal is established), and in any event while the outcome
is substantially uncertain. A Performance Goal is objective if a third party
having knowledge of the relevant facts could determine whether the goal is met.
Such a Performance Goal may be based on one or more business criteria that apply
to the individual, one or more business units of the Company, or the Company as
a whole. Performance Goals shall be based upon targets established by the
Committee with respect to one or more of the following financial or operational
factors, as applied to the Company or a business unit, as applicable: earnings
per share, earnings per share growth, total shareholder return, economic value
added, cash return on capitalization, increased revenue, revenue ratios (per
employee or per customer), net income, stock price, market share, return on
equity, return on assets, return on capital, return on capital compared to cost
of capital, shareholder value, net cash flow, operating income, earnings before
interest and taxes, cash flow, cash flow from operations, cost reductions, cost
ratios (per employee or per customer), proceeds from dispositions, project
completion time and budget goals, net cash flow before financing activities,
customer growth, total market value, customer satisfaction, and employee safety.
Unless otherwise stated, a Performance Goal need not be based upon an increase
or positive result under a particular business criterion and could include, for
example, maintaining the status quo or limiting economic losses (measured, in
each case, by reference to specific business criteria), and may also be based on
performance relative to the S&P 500 Electric Utilities Panel or other designated
Prior to the payment of any compensation based on the
achievement of Performance Goals, the Committee must certify in writing that
applicable Performance Goals and any of the material terms thereof were, in
fact, satisfied. The Committee in its sole discretion may decrease the amount
payable pursuant to a Performance Award, but in no event shall the Committee
have discretion to increase the amount payable pursuant to a Performance Award
in a manner inconsistent with the requirements for qualified performance-based
compensation under Code Section 162(m). In interpreting Plan provisions
applicable to Performance Goals and Performance Awards, it is the intent of the
Plan to conform with the standards of Code Section 162(m) applicable to
qualified performance-based compensation, and the Committee in establishing such
Performance Goals and interpreting the Plan shall be guided by such provisions.
Subject to the foregoing provisions, the terms, conditions and limitations
applicable to any Performance Awards pursuant to this Plan shall be determined
by the Committee. No Participant may be granted Performance Awards which will
result in the payment of more than $3,500,000 per Plan Year.
8. PAYMENT OF AWARDS: The Committee has sole and absolute
authority and discretion to determine the time and manner in which Awards, if
any, shall be paid under this Plan. Generally, however, the following provisions
(a) FORM OF PAYMENT: Generally, payment of Awards shall
be made in cash and may be subject to such restrictions as the
Committee shall determine.
(b) DATE OF PAYMENT: Payment of Awards shall be made as
soon as practicable (as determined by the Committee) following the
close of the Plan Year (the "Payment Date"), unless otherwise provided
in Section 4(1).
9. ASSIGNABILITY: Unless otherwise determined by the Committee
and provided in the Agreement, no Award or any other benefit under this Plan
shall be assignable or otherwise transferable, except by will or the laws of
descent and distribution. Any attempted assignment of an Award or any other
benefit under this Plan in violation of this Section 9 shall be null and void.
10. TAX WITHHOLDING: The Company shall have the right to withhold
applicable taxes from any Award payment and to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes.
11. FINALITY OF DETERMINATIONS: Any determination by the Committee
in carrying out or administering this Plan shall be final and binding for all
purposes and upon all interested persons and their heirs, successors, and
12. EMPLOYEE RIGHTS UNDER THE PLAN: No Employee or other person
shall have any claim or right to be granted an Award under this Plan. Neither
the Plan nor any action taken thereunder shall be construed as giving an
Employee any right to be retained in the employ of the Company or an Employer.
No Participant shall have any lien on any assets of the Company or an Employer
by reason of any Award made under this Plan.
13. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION: The Board
may amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law, except that (i) no amendment or alteration that would adversely affect
the rights of any Participant under any Award previously granted to such
Participant shall be made without the consent of such Participant and (ii) no
amendment or alteration shall be effective prior to its approval by the
stockholders of the Company; however clause (ii) shall only apply if, and to the
extent, such approval is required by applicable legal requirements.
14. OTHER PLANS: The Award payments under this Plan shall be
considered compensation under the Retirement Plan and the Savings Plan.
15. GOVERNING LAW: This Plan and all determinations made and
actions taken pursuant hereto, shall be governed by and construed in accordance
with the laws of the State of Texas.
IN WITNESS WHEREOF, CenterPoint Energy, Inc. has executed these
presents as evidenced by the signature of its duly authorized officer, in a
number of copies, all of which shall constitute but one and the same instrument,
which may be sufficiently evidenced by any such executed copy hereof, this 19th
day of June, 2003, but effective as of January 1, 2003.
CENTERPOINT ENERGY, INC.
By /s/ David M. McClanahan
David M. McClanahan
President and Chief Executive Officer
/s/ Richard Dauphin