Date: 12/30/2004

The Securities and Exchange Commission ("SEC") issued new rules earlier this year that require accelerated disclosure of the adoption, amendment, or termination of an executive compensation arrangement by a public company.  Specifically, a Form 8-K will generally have to be filed within four business days following the occurrence of one of these events.  The SEC staff has now issued guidance on these rules in the form of a set of frequently asked questions or FAQs.  Current Report on Form 8-K Frequently Asked Questions (Nov. 23, 2004).  We highlight below a few of the issues related to executive compensation arrangements that the FAQs address.

The new rules require a company to file Form 8-K if it adopts, materially amends, or terminates a compensation arrangement if the arrangement is of a type required to be filed as an exhibit to Form 10-Q or 10-K.  These arrangements would generally include plans and agreements providing compensation or benefits for a company's executive officers (e.g., supplemental executive retirement plans and employment agreements).  Among other things, the FAQs clarify that a Form 8-K will normally be required in the following situations:

• an equity compensation or bonus plan is adopted and the company's named executive officers ("top 5 officers") are eligible to participate, even if no awards have been made under the plan;

• an award is granted under an equity compensation plan and the material terms of the award differ from a sample agreement for plan awards previously filed with the SEC;

• performance goals for a specified period (e.g., annual bonus cycle) under an existing bonus plan are established;

• an amount is paid under a bonus plan even though the relevant performance goals were not attained.

Companies that have not already done so should establish compliance procedures to satisfy these broader, time-sensitive disclosure requirements.