8-KMaterial Agreements

WILLIAMS COMPANIES, INC. 8-K Report, Material Agreement (Feb 3, 2005)

Filed February 3, 2005For Securities:WMB

Summary

Williams Companies, Inc. (WMB) filed an 8-K on February 3, 2005, detailing changes to its executive compensation structure for 2005. The Compensation Committee approved an annual incentive program for executive officers, directly tying funding and payouts to the company's improvement in Economic Value Added (EVA) for the 2005 fiscal year. This program aims to align executive rewards with the company's financial performance as measured by EVA. Furthermore, the filing clarifies the status of performance-based deferred shares granted in February 2004. While the Compensation Committee had previously set targets for the first one-third of these shares, it has now approved a specific performance target for the second one-third, also linked to 2005 EVA attainment. Investors should note that the final determination of whether these 2004 deferred shares were earned is pending the company's year-end earnings release, expected around February 23rd. The earned shares will not be issued until at least the end of the five-year term.

Key Highlights

  • 1Williams Companies approved a 2005 annual incentive program for executive officers based on Economic Value Added (EVA) improvement.
  • 2Executive incentive award payouts will be directly linked to the level of EVA attainment in 2005.
  • 3The Compensation Committee approved a specific performance target for the second one-third of 2004 performance-based deferred shares.
  • 4This target for the 2004 deferred shares is also based on 2005 EVA attainment.
  • 5The determination of attainment for the 2004 deferred shares is pending the company's year-end earnings release, expected February 23rd.
  • 6Earned deferred shares from 2004 will be issued no earlier than the end of their respective five-year terms.

Frequently Asked Questions

The primary focus of the 2005 annual incentive program is to reward executive officers based on the company's improvement in Economic Value Added (EVA) for the fiscal year 2005. Both the funding and the payout of incentive awards are directly tied to the level of EVA attainment.

The Compensation Committee has linked the earning of the second one-third of the performance-based deferred shares granted in February 2004 to the company's 2005 EVA attainment. This means that the company's performance in terms of EVA in 2005 will determine if these specific shares are earned.

The determination of whether the performance targets for the 2004 deferred shares have been met will be made by the Compensation Committee following the company's year-end earnings release, which was expected around February 23, 2005. The actual issuance of any earned shares will occur no earlier than the end of the five-year term of the grant.

Economic Value Added (EVA) is a registered trademark of Stern, Stewart and Company. It is a financial metric used to measure a company's economic profit, representing the value created above the required return on capital.