UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
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Commission file number 1-7657
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
New York State 13-4922250
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
American Express Tower, World Financial Center, New York, NY 10285
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 640-2000
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None
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1994
- --------------------------------------- -------------------------------
Common Shares (par value $.60 per share) 506,864,526 shares
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AMERICAN EXPRESS COMPANY
FORM 10-Q
INDEX
Part I. Financial Information:
Consolidated Statement of Income--Three and 1-2
nine months ended September 30, 1994 and
1993
Consolidated Balance Sheet--September 30, 3
1994 and December 31, 1993
Consolidated Statement of Cash Flows--Nine 4
months ended September 30, 1994 and 1993
Notes to Consolidated Financial Statements 5-6
Management's Discussion and Analysis of 7-16
Financial Condition and Results of
Operations
Review Report of Independent Auditors 17
Part II. Other Information 18
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PART I--FINANCIAL INFORMATION
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(millions, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
--------------------
1994 1993
Net Revenues: ------- -------
Commissions and fees $ 2,157 $ 1,981
Interest and dividends, net 1,046 1,038
Life insurance premiums 209 179
Other 192 171
------- -------
Total 3,604 3,369
------- -------
Expenses:
Human resources 958 847
Provisions for losses and benefits:
Annuities and investment certificates 295 309
Banking, credit and other 249 291
Life insurance 201 166
Marketing and promotion 280 279
Interest 251 232
Occupancy and equipment 243 240
Professional services 173 141
Communications 92 91
Other 364 357
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Total 3,106 2,953
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Pretax income from continuing operations 498 416
Income tax provision 129 103
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Income from continuing operations 369 313
Discontinued operations, net of
income taxes - 107
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Net income $ 369 $ 420
======= =======
Income per common share
from continuing operations $ 0.71 $ 0.61
Income per common share
from discontinued operations - 0.22
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Net income per common share $ 0.71 $ 0.83
======= =======
Weighted average number of common
shares outstanding (000's) 512,579 503,623
======= =======
Cash dividends declared per
common share $ 0.225 $ 0.25
======= =======
See notes to Consolidated Financial Statements.
1
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AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(millions, except per share amounts)
(Unaudited)
Nine Months Ended
September 30,
--------------------
1994 1993
Net Revenues: ------- -------
Commissions and fees $ 6,253 $ 5,764
Interest and dividends, net 3,078 2,993
Life insurance premiums 585 522
Other 564 496
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Total 10,480 9,775
------- -------
Expenses:
Human resources 2,751 2,461
Provisions for losses and benefits:
Annuities and investment certificates 867 958
Banking, credit and other 777 930
Life insurance 563 445
Marketing and promotion 794 800
Interest 741 653
Occupancy and equipment 728 703
Professional services 485 413
Communications 272 264
Other 1,086 993
Gain on sale of FDC - (779)
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Total 9,064 7,841
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Pretax income from continuing operations 1,416 1,934
Income tax provision 371 620
------- -------
Income from continuing operations 1,045 1,314
Discontinued operations, net of
income taxes 33 (235)
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Net income $ 1,078 $ 1,079
======= =======
Income per common share
from continuing operations $ 2.02 $ 2.62
Income (loss) per common share
from discontinued operations 0.07 (0.48)
------- -------
Net income per common share $ 2.09 $ 2.14
======= =======
Weighted average number of common
shares outstanding (000's) 510,672 498,862
======= =======
Cash dividends declared per
common share $ 0.70 $ 0.75
======= =======
See notes to Consolidated Financial Statements.
2
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AMERICAN EXPRESS COMPANY
CONSOLIDATED BALANCE SHEET
(millions)
(Unaudited)
September 30, December 31,
Assets 1994 1993
- ------ ------------- ------------
Cash and cash equivalents $ 6,959 $ 3,312
Accounts receivable and accrued interest, less
reserves: 1994, $788; 1993, $796 15,743 16,142
Investments 39,495 39,308
Loans and discounts, less reserves:
1994, $515; 1993, $655 14,665 14,796
Land, buildings and equipment--at cost, less
accumulated depreciation: 1994, $1,570;
1993, $1,441 1,905 1,976
Assets held in segregated asset accounts 10,700 8,992
Deferred acquisition costs 2,201 2,025
Other assets 6,527 7,581
------ ------
Total assets $ 98,195 $ 94,132
====== ======
Liabilities and Shareholders' Equity
Customers' deposits and credit balances $ 11,226 $ 11,131
Travelers Cheques outstanding 5,753 4,800
Accounts payable 4,378 3,737
Insurance and annuity reserves:
Fixed annuities 19,556 19,149
Life and disability policies 4,591 4,257
Investment certificate reserves 2,726 2,752
Short-term debt 14,338 12,489
Long-term debt 7,986 8,561
Liabilities related to segregated asset accounts 10,700 8,992
Other liabilities 10,080 9,530
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Total liabilities 91,334 85,398
Shareholders' equity:
Preferred shares, $1.66 2/3 par value,
authorized 20,000,000 shares
Convertible Exchangeable Preferred shares,
issued and outstanding 4,000,000 shares,
stated at liquidation value 200 200
$216.75 CAP Preferred shares, issued and
outstanding 122,448.98 shares in 1993,
stated at par value (liquidation value
of $300) - 1
Common shares, $.60 par value, authorized
1,200,000,000 shares; issued and outstanding
507,663,152 shares in 1994 and 489,827,852
shares in 1993 305 294
Capital surplus 3,948 3,784
Net unrealized securities gains (losses) (219) 7
Foreign currency translation adjustment (67) (73)
Deferred compensation (112) (128)
Retained earnings 2,806 4,649
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Total shareholders' equity 6,861 8,734
------ ------
Total liabilities and shareholders' equity $ 98,195 $ 94,132
====== ======
See notes to Consolidated Financial Statements.
3
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AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(millions)
(Unaudited)
Nine Months Ended
September 30,
-----------------
1994 1993
---- ----
Cash Flows from Operating Activities
Income from continuing operations $1,045 $ 1,314
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Provisions for losses and benefits 1,061 1,245
Depreciation, amortization, deferred taxes and other 188 434
Changes in operating assets and liabilities, net of effects of
acquisitions/dispositions:
Accounts receivable and accrued interest (529) (341)
Other assets 855 (820)
Accounts payable and other liabilities 552 245
Increase in Travelers Cheques outstanding 953 546
Increase in insurance reserves 352 301
Gain on sale of FDC - (779)
Net cash flows (used) provided by operating activities of
discontinued operations (3,656) 1,669
----- -----
Net cash provided by operating activities 821 3,814
----- -----
Cash Flows from Investing Activities
Proceeds from FDC public offerings, net of
cash sold in 1993 - 871
Sale of investments 3,678 2,186
Maturity and redemption of investments 5,802 5,754
Purchase of investments (10,480) (10,194)
Net increase in Cardmember receivables (887) (563)
Cardmember accounts receivable sold to Trust 900 600
Proceeds from repayment of loans 15,731 13,317
Issuance of loans (15,309) (13,490)
Purchase of land, buildings and equipment (193) (235)
Sale of land, buildings and equipment 87 55
Acquisitions/dispositions, net of cash acquired/sold (375) 132
Net cash flows (used) provided by investing activities of
discontinued operations (36) 49
----- -----
Net cash used by investing activities (1,082) (1,518)
----- -----
Cash Flows from Financing Activities
Net (decrease) increase in customers' deposits and credit
balances (95) 914
Sale of investment and annuity certificates 4,281 4,044
Redemption of investment and annuity certificates (3,993) (2,760)
Net increase (decrease) in debt with maturities of
3 months or less 5,948 (492)
Issuance of debt 3,220 9,614
Principal payments on debt (8,018) (7,845)
Issuance of American Express common shares 173 215
Repurchase of American Express common shares (137) -
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Cash infusion to Lehman Brothers (904) -
Dividends paid (386) (393)
Net cash flows provided (used) by financing activities of
discontinued operations 3,737 (966)
----- -----
Net cash provided by financing activities 3,826 2,331
Net change in cash and cash equivalents of
discontinued operations 45 752
Effect of exchange rate changes on cash 127 (49)
----- -----
Net increase in cash and cash equivalents 3,647 3,826
Cash and cash equivalents at beginning of period 3,312 3,408
----- -----
Cash and cash equivalents at end of period $6,959 $ 7,234
===== =====
See notes to Consolidated Financial Statements.
4
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AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. The consolidated financial statements should be read in conjunction
with the financial statements presented in the Annual Report on Form
10-K of American Express Company (the Company or American Express) for
the year ended December 31, 1993. Certain prior year's amounts have
been reclassified to conform to the current year's presentation.
Significant accounting policies disclosed therein have not changed,
except as disclosed in Note 4.
The consolidated financial statements are unaudited; however, in the
opinion of management, they include all normal recurring adjustments
necessary for a fair presentation of the consolidated financial
position of the Company at September 30, 1994 and December 31, 1993,
the consolidated results of its operations for the three and nine
months ended September 30, 1994 and 1993 and cash flows for the nine
months ended September 30, 1994 and 1993. Results of operations
reported for interim periods are not necessarily indicative of results
for the entire year.
2. Interest and dividends, net, reflects gross interest and dividends, net
of $240 million and $207 million of interest expense for the quarters
ended September 30, 1994 and September 30, 1993, respectively, and
$668 million and $643 million for the nine months ended September 30,
1994 and September 30, 1993, respectively, related to the Company's
international banking operations and Travel Related Services' consumer
lending activities.
3. On May 31, 1994, the Company completed the spin-off of Lehman Brothers
Holdings Inc. (Lehman Brothers) through a dividend to its common
shareholders of all of the Lehman Brothers common stock held by
American Express on that date. See Consolidated Financial Condition,
which is incorporated herein by reference. As a result of this
transaction, Lehman Brothers' results are reported as a discontinued
operation in the Consolidated Financial Statements through May 31,
1994. For the period ended December 31, 1993, the assets and
liabilities of Lehman Brothers have been reported in the Consolidated
Balance Sheet as net assets of discontinued operations and are included
in Other Assets.
4. As of January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Under SFAS No. 115, debt
securities for which the Company has both the positive intent and the
ability to hold to maturity are carried at amortized cost. Other debt
securities and all marketable equity securities are classified as
either Available for Sale or Trading and are carried at fair value.
Unrealized holding gains and losses on securities classified as
Available for Sale are reported as a separate component of
Shareholders' Equity. Unrealized holding gains and losses on
securities classified as Trading are recognized in earnings.
5
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The following is a summary of investments at September 30, 1994
(in millions):
Held to Maturity, at amortized cost $22,197
(fair value $21,997)
Available for Sale, at fair value 14,424
(cost $14,775)
Trading 349
Mortgage loans 2,525
------
$39,495
======
The change in unrealized securities losses to $219 million (after-tax)
at September 30, 1994 from $147 million (after-tax) at June 30, 1994,
is the result of changes in the fair values of investments classified
as Available for Sale. The majority of the decline was in mortgage-
backed securities, primarily due to rising interest rates.
5. Net income taxes paid during the nine months ended September 30, 1994
and 1993 were approximately $131 million and $519 million,
respectively. Interest paid during the nine months ended September 30,
1994 and 1993 was approximately $1.1 billion and $1.3 billion,
respectively.
6. In the first quarter of 1993, the Company reduced its 54 percent
ownership of First Data Corporation (FDC) to 22 percent through a
public offering of FDC shares. The Company recognized a gain from the
sale of $433 million ($779 million pretax), which is included in the
Consolidated Statement of Income for the nine months ended September
30, 1993. The Company's ownership of FDC was reduced to 21 percent in
the second quarter of 1994 due to the Company's contribution of FDC
shares to the American Express Foundation.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Consolidated Financial Condition
On April 29, 1994, the Company's Board of Directors declared a dividend to
its common shareholders of all of the Lehman Brothers Holdings Inc. (Lehman
Brothers) common stock held by American Express on the dividend
distribution date. The dividend was distributed on May 31, 1994 to
shareholders of record on May 20, 1994 and represented approximately
98.2 million shares of Lehman Brothers common stock. Shareholders of
American Express received one share of Lehman Brothers common stock for
each five common shares of American Express that they held on the record
date. Prior to the distribution, the Company added approximately
$1.1 billion of additional equity capital to Lehman Brothers representing:
The Company's purchase of approximately $903.8 million of Lehman
Brothers common stock, which was included in the dividend to
American Express common shareholders. The Company sold
approximately $11.1 million of Lehman Brothers common stock from
its holdings to certain Lehman Brothers executive officers; and
The Company's purchase of $200 million of Lehman Brothers
cumulative voting preferred stock which is being held for
investment purposes.
In addition, approximately $57 million of Lehman Brothers common stock was
acquired by Lehman Brothers employees through an existing employee
ownership plan, and approximately $89.2 million of the common stock was
acquired by Nippon Life Insurance Company (Nippon Life). The Company also
purchased 928 shares and Nippon Life purchased 72 shares of Lehman Brothers
redeemable voting preferred stock for a nominal dollar amount. The
redeemable voting preferred stock entitles its holders to receive an
aggregate annual dividend of 50 percent of Lehman Brothers net income over
$400 million for each of the next eight years, with a maximum of
$50 million in any one year. In addition, the Company and Nippon Life will
be entitled to receive 92.8 percent and 7.2 percent, respectively, of
certain contingent revenue and earnings related payouts from Travelers
Corporation (Travelers), which were assigned by Lehman Brothers to American
Express and Nippon Life in connection with the spin-off transaction. The
Travelers participations will yield a maximum of $50 million pretax
annually for three years, depending on the revenues of Smith Barney (of
which the first installment was received in the first quarter), plus 10
percent of after-tax profits of Smith Barney in excess of $250 million per
year over a five-year period.
As a result of this transaction, Lehman Brothers' results are reported as a
discontinued operation in the Consolidated Financial Statements through the
spin-off date. The assets and liabilities of Lehman Brothers have been
reported in the Consolidated Balance Sheet as net assets of discontinued
operations; accordingly $1.5 billion is included in Other Assets at December
31, 1993.
7
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In the second quarter of 1994, the Company reduced its quarterly dividend
to $0.225 per common share, representing an adjustment to its previous
$0.25 per share quarterly dividend rate, to reflect the Lehman Brothers
spin-off.
During the second quarter of 1994, the Company purchased four million of
its common shares in the open market in order to offset any dilution
resulting from the 1994 conversions of American Express Company 9%
Convertible Notes Series A-G, convertible prior to April 1, 1994 at
$17.755. Of the $160 million in Notes originally issued, $58 million was
outstanding at December 31, 1993 and was converted into approximately
3.3 million shares during the first quarter.
In August 1994, the Company mandatorily redeemed 122,448.98 CAP Preferred
shares issued to subsidiaries of Berkshire Hathaway Inc. in 1991, through
the issuance to such subsidiaries of 13,997,141 common shares in accordance
with the terms of the preferred shares. The number of common shares issued
was adjusted to reflect the spin-off of Lehman Brothers.
During the third quarter of 1994, the Company's Board of Directors approved
a plan to purchase up to 20 million of the Company's common shares subject
to market conditions. The plan aims to reduce the number of outstanding
common shares and common share equivalents to slightly less than
500 million shares by year end, and to target the number of shares at that
level. This repurchase program will also permit the Company to offset any
issuance of new shares as part of employee compensation plans. The Company
will also fund Company contributions to other employee plans through share
purchases in the open market or with cash instead of through the issuance
of new shares. As of November 10, 1994, approximately 5.1 million shares
were repurchased under this plan. In November 1994, in connection with the
share buyback program, the Company sold 4 million put options with
maturities ranging from approximately one to twelve months.
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", as of January 1, 1994. See Note 4 which is incorporated
herein by reference. At September 30, 1994, approximately 37 percent, or
$14.4 billion, of the Company's securities were classified as Available for
Sale. This does not mean that the Company expects to sell these
securities, but that under SFAS No. 115 positive intent criteria, these
securities are available to meet possible liquidity needs should there be
significant changes in market interest rates, customer demand, funding
sources and terms, or foreign currency risk.
The following sections discuss changes during the nine months ended
September 30, 1994 in the financial condition of each of the Company's
business segments. Except where indicated otherwise, comparisons of
September 30, 1994 balance sheet amounts are made with comparable amounts
at December 31, 1993.
Travel Related Services (TRS)
TRS' total assets were $42.8 billion at September 30, 1994 and
$38.8 billion at December 31, 1993. The increase in total assets reflects
seasonal growth in the Travelers Cheque portfolio, higher lending
8
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receivables and increased liquidity. Accounts receivable and accrued
interest totaled $15.4 billion at September 30, 1994 and $15.7 billion
at December 31, 1993. In the third quarter of 1994, TRS sold certain
Cardmember receivables to a subsidiary, which transferred such receivables
to a trust. The trust issued $900 million of trust certificates in a public
offering, in three series of $300 million due September 15, 1998, September 17,
2001, and September 15, 2004, respectively. The net impact of the transaction
on TRS' results is immaterial. Loans and discounts were $8.8 billion at
September 30, 1994 and $8.2 billion at December 31, 1993. TRS' prior year's
assets have been restated to reflect the transfer of certain international
consumer financial services businesses to American Express Bank.
IDS Financial Services (IDS)
IDS' total owned assets increased to $39.2 billion at September 30, 1994
from $37.4 billion at December 31, 1993. This growth primarily reflects an
increase in assets held in segregated asset accounts, reflecting strong net
sales, partially offset by market depreciation. Assets held in segregated
accounts totaled $10.7 billion and $9.0 billion at September 30, 1994 and
December 31, 1993, respectively. These assets, primarily investments
carried at market value, are held for the exclusive benefit of variable
annuity and variable life insurance contract holders. IDS earns investment
management and administration fees from the related funds.
Assets under management increased to $65.2 billion at September 30, 1994
from $62.3 billion at December 31, 1993, reflecting strong net sales,
partially offset by market depreciation.
During the first quarter of 1994, IDS Financial Corporation issued and sold
$70 million of 6.5% Medium-Term Notes due 2004 and $50 million of 6.625%
Medium-Term Notes due 2006. The Notes were sold in private placements to
institutional investors. The proceeds from these issuances were used for
general corporate purposes.
American Express Bank (the Bank)
The Bank's assets totaled $14.2 billion and $14.1 billion at September 30,
1994 and December 31, 1993, respectively. The Bank's prior year's assets
have been restated to reflect the transfer of certain international
consumer financial services businesses from TRS.
Total loans were $5.4 billion at September 30, 1994 and $5.6 billion at
year-end 1993. The reserve for credit losses was $118 million at September
30, 1994, compared with $126 million at December 31, 1993. The Bank's
credit loss reserve coverage was 2.2 percent of total loans at both
September 30, 1994 and December 31, 1993. Total loan write-offs, net of
recoveries, were $17 million during the first nine months of 1994, compared
with $40 million during the first nine months of 1993. Nonperforming loans
totaled $33 million at September 30, 1994 and $43 million at December 31,
1993, while other nonperforming assets totaled $57 million at September 30,
1994, compared with $89 million at year-end 1993. The decline in
nonperforming loans and other nonperforming assets primarily reflects
write-offs and the sale of a foreclosed property, respectively.
9
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American Express Bank Ltd.'s (AEBL) risk-based capital ratios were
6.7 percent for Tier 1 Capital and 13.0 percent for Total Capital at
September 30, 1994, compared with 6.3 percent and 10.2 percent,
respectively, at year-end 1993. AEBL's leverage ratio was 4.2 percent at
September 30, 1994 and 4.4 percent at December 31, 1993. The increase in
the Total Capital ratio at September 30, 1994 was primarily due to the
issuance and sale outside the United States of $250 million of Floating
Rate Subordinated Notes due 2004. The proceeds of this issuance were
used for general corporate purposes.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1994 and 1993
The Company reported consolidated net income of $369 million in the third
quarter of 1994, compared with income from continuing operations of
$313 million last year. Including discontinued operations, third quarter
1993 results were $420 million. Consolidated net revenues totaled
$3.6 billion in the third quarter of 1994, compared with $3.4 billion a
year ago.
The Company's effective tax rate was 26 percent in the third quarter of
1994, compared with 25 percent a year ago. Both years' rates were reduced
by tax-advantaged investment income.
In October 1994, the Company announced a series of decisions that represent
a continuation of a reengineering program launched in 1992 to provide
better customer value at significantly lower costs. The decision will
result in significant staff reductions throughout the Company over the next
several years. Costs related to these initiatives are not expected to have
a material impact on current or future earnings. Future savings generated
by these actions will be reinvested in the business and help facilitate the
achievement of the Company's business objectives.
Nine Months Ended September 30, 1994 and 1993
The Company reported consolidated income from continuing operations of
$1.0 billion for the first nine months of 1994, compared with $1.3 billion
last year, including the 1993 gain of $433 million ($779 million pretax) on
the sale of First Data Corporation (FDC) stock. Including Lehman Brothers,
which is reflected as a discontinued operation through May 31, 1994, the
spin-off date, net income totaled $1.1 billion for the first nine months of
1994 and 1993. Consolidated net revenues for the first nine months of 1994
were $10.5 billion, compared with $9.8 billion last year.
The Company's effective tax rate was 26 percent in the first nine months of
1994, compared with 32 percent a year ago. This year's rate was reduced by
tax-advantaged investment income, while the prior year's rate reflects tax-
advantaged investment income, partially offset by the tax effects of the
FDC gain.
10
<PAGE>
Travel Related Services
Three Months Ended September 30, 1994 and 1993
TRS reported net income of $264 million in the third quarter of 1994,
compared with $234 million last year. Pretax income totaled $364 million,
compared with $311 million a year ago. TRS' prior year's results have been
restated to reflect the transfer of certain international consumer
financial services businesses to the Bank.
Worldwide Card billed business increased 15 percent to $35.5 billion in the
third quarter of 1994 from $30.8 billion last year, reflecting higher
spending per Cardmember and an increase in the number of Cards outstanding.
U.S. Card billed business was $25.2 billion, compared with $22.5 billion a
year ago. Non-U.S. Card billed business totaled $10.3 billion, compared
with $8.3 billion last year.
Worldwide Cards in force totaled 35.6 million, compared with 34.2 million a
year ago. U.S. Cards in force totaled 24.7 million, compared with
23.6 million last year. Non-U.S. Cards in force were 10.9 million at
September 30, 1994, compared with 10.6 million a year ago. Basic Cards in
force totaled 26.1 million, compared with 24.9 million last year. The
increase in worldwide Cards in force reflects the addition of approximately
1.1 million Cards issued to U.S. Government employees beginning late in
1993. The number of service establishments increased 8.8 percent to
3.8 million from 3.5 million last year.
Travelers Cheque sales totaled $8.4 billion in the third quarter of 1994,
compared with $8.0 billion last year. Average Travelers Cheques
outstanding totaled $5.9 billion, compared with $5.5 billion a year ago.
Net revenues (total revenues net of lending interest expense) increased
9.0 percent to $2.6 billion, reflecting the increase in worldwide Card
billed business and growth in Business Travel sales. Discount revenue
increased to $996 million from $897 million last year. Net Card fees
totaled $435 million, compared with $433 million a year ago, reflecting a
change in the mix of Card products. Lending finance charge revenue
increased to $317 million from $295 million a year ago. Lending net
finance charge revenue increased 1.3 percent to $237 million. Interest and
dividend revenue increased to $206 million from $196 million last year.
Other revenues increased 15.9 percent to $727 million primarily due to
increased travel sales.
Total expenses, excluding lending interest expense, increased 7.8 percent
to $2.2 billion for the third quarter of 1994, compared with $2.1 billion
in the third quarter of 1993, reflecting business travel acquisitions and
growth, as well as investments in certain business initiatives. The
provision for losses and claims declined 2.3 percent to $365 million from
$374 million a year ago. The worldwide charge Card provision declined to
$153 million in the third quarter of 1994 from $156 million last year,
reflecting continued improvement in Card credit experience, partially
offset by an increase in billed business. The worldwide lending provision
was $81 million, compared to $98 million a year ago, reflecting a continued
decline in write-offs. Interest expense, excluding lending interest
expense which is included in net revenues above, totaled $208 million in
the third quarter of 1994, down from $210 million last year. Worldwide
charge Card interest expense totaled $164 million, compared with
$173 million last year. Human resources expense increased to $651 million
in the third quarter of 1994 from $556 million a year ago, primarily
reflecting growth in the Business Travel and Corporate Card businesses.
Marketing and promotion expense was $274 million in the third quarter of
1994, compared with $275 million last year.
11
<PAGE>
TRS' asset securitization program resulted in net discount expense of
$93 million in the third quarter of 1994 and $55 million in 1993 and
servicing fee revenue of $26 million in 1994 and $12 million in 1993,
reduced the provision for credit losses by $30 million in 1994 and
$21 million in 1993, and reduced interest expense, with no material impact
on net income in the third quarter of 1994 or 1993.
Nine Months Ended September 30, 1994 and 1993
TRS' net income increased 13 percent to $762 million in the first nine
months of 1994, compared with $676 million last year. Pretax income
totaled $1.1 billion, compared with $890 million a year ago.
Worldwide Card billed business increased 13 percent to $101.9 billion in
the first nine months of 1994 from $90.0 billion last year, reflecting
higher spending per Cardmember, growth in Corporate Card billed business
and an increase in the number of Cards outstanding. U.S. Card billed
business was $73.5 billion, compared with $65.3 billion a year ago.
Non-U.S. Card billed business totaled $28.4 billion, compared with
$24.7 billion last year.
Travelers Cheque sales increased to $19.8 billion in the first nine months
of 1994 from $18.8 billion last year. Average Travelers Cheques
outstanding totaled $5.3 billion, compared with $5.1 billion a year ago.
Net revenues increased 7.3 percent to $7.5 billion, reflecting the increase
in worldwide Card billed business and growth in Business Travel sales.
This increase was partially offset by discount rate reductions from SE
repricing implemented throughout 1993. Discount revenue increased
9.3 percent to $2.9 billion from $2.6 billion last year. Net Card fees
totaled $1.3 billion, unchanged from a year ago. Lending finance charge
revenue increased to $912 million from $890 million last year. Lending net
finance charge revenue increased slightly to $700 million from $696 million
last year. Interest and dividend revenue increased to $567 million from
$547 million last year. Other revenues increased 14 percent to
$2.0 billion primarily due to increased travel sales.
Total expenses, excluding lending interest expense, increased 5.6 percent
to $6.4 billion for the first nine months of 1994, compared with
$6.1 billion last year. The provision for losses and claims declined
5.6 percent to $1.1 billion from $1.2 billion a year ago. The worldwide
charge Card provision declined to $478 million in the first nine months of
1994 from $528 million last year, reflecting continued improvement in Card
credit experience, partially offset by an increase in billed business. The
worldwide lending provision was $258 million, compared with $311 million a
year ago, reflecting a continued decline in write-offs. Interest expense,
excluding lending interest expense which is included in net revenues above,
totaled $600 million for the first nine months of 1994, down from
$609 million last year, reflecting lower borrowing rates, partially offset
by increased funding requirements. Worldwide charge Card interest expense
totaled $490 million, compared with $520 million last year. Excluding
interest and the provision for losses, total expenses increased 8.2
percent, in part, reflecting business travel acquisitions and growth and
investments in certain business initiatives. Human resources expense
increased 15 percent to $1.9 billion in the first nine months of 1994 from
$1.6 billion a year ago, primarily reflecting growth in the Business Travel
and Corporate Card businesses. Marketing and promotion expense decreased
slightly to $776 million in the first nine months of 1994 from $785 million
last year. Marketing and promotion expenses for the full year are expected
to be approximately the same as a year ago.
12
<PAGE>
In the first nine months of 1994 and 1993, TRS' asset securitization
program resulted in net discount expense of $228 million and $154 million,
respectively, and servicing fee revenue of $57 million and $35 million,
respectively, reduced the provision for credit losses by $86 million and
$65 million, respectively, and reduced interest expense, with no material
impact on net income in the first nine months of 1994 or 1993.
IDS Financial Services
Three Months Ended September 30, 1994 and 1993
IDS' net income increased 19 percent to $114 million in the third quarter of
1994 from $96 million last year. Revenues increased to $822 million in the
third quarter of 1994 from $816 million a year ago. Revenue and earnings
growth benefited primarily from an increase in fees related to higher levels
of assets under management, as well as an increase in life insurance in force.
These benefits were partially offset by lower investment margins. Pretax
income totaled $168 million, compared with $140 million last year.
IDS' financial planning field force totaled 7,847 at September 30, 1994,
compared with 7,655 and 7,554 at December 31, 1993 and September 30, 1993,
respectively. Product sales generated from financial plans were approximately
64 percent of total sales, compared with approximately 58 percent a year ago.
Fees from financial plans were $9.6 million in the third quarter of 1994 and
1993. Mutual fund sales totaled $2.0 billion in the third quarter of 1994,
down 3.6 percent from $2.1 billion last year. Sales of equity mutual funds
and money market mutual funds increased over a year ago, while sales of income
mutual funds decreased. Annuity sales were $1.1 billion in the third quarter
of 1994, up slightly from a year ago. Sales of investment certificates
increased significantly to $324 million in the third quarter of 1994 from
$155 million last year. This increase reflects sales of longer-term
certificates. Life and other insurance sales totaled $78 million in the third
quarter of 1994, down from $81 million a year ago. Life insurance in force
increased 14 percent to $50.9 billion at September 30, 1994 from $46.1 billion
at December 31, 1993 and $44.8 billion at September 30, 1993.
Investment income decreased to $498 million in the third quarter of 1994
from $527 million last year, reflecting lower yields, partially offset by
higher invested assets. Commissions and fees totaled $200 million in the
third quarter of 1994, up from $188 million a year ago, reflecting
management fees earned on a higher asset base.
Total expenses were $654 million in the third quarter of 1994, compared
with $676 million last year. The provision for annuity benefits, the
largest component of expenses, decreased to $256 million from $270 million
a year ago, reflecting lower accrual rates, partially offset by higher
annuities in force. The provision for insurance benefits increased to
$95 million from $80 million a year ago. The provision for investment
certificates totaled $30 million, up from $29 million last year. Human
resources expense increased to $213 million from $200 million a year ago,
reflecting an increase in the number of employees and financial planners.
Other operating expenses decreased to $60 million in the third quarter of
1994 from $95 million last year, reflecting primarily a lower provision for
insurance industry guarantee association assessments, as well as lower
amortization of deferred acquisition costs.
13
<PAGE>
Nine Months Ended September 30, 1994 and 1993
IDS' net income increased 21 percent to $314 million in the first nine months
of 1994 from $260 million last year. Revenues increased 4.3 percent to
$2.5 billion in the first nine months of 1994 from $2.3 billion a year ago.
Revenue and earnings growth benefited primarily from an increase in fees
related to higher levels of assets under management, increased life insurance
in force and wider investment margins compared to year-ago levels. Pretax
income totaled $465 million, compared with $379 million last year.
Total product sales increased during the first nine months of 1994 compared
to last year. Product sales generated from financial plans were
approximately 62 percent of total sales, compared with approximately
57 percent a year ago. Fees from financial plans were $29.4 million in the
first nine months of 1994, compared with $27.4 million last year. Mutual
fund sales totaled $6.9 billion in the first nine months of 1994, up
10 percent from $6.2 billion last year. This increase reflects higher
sales of equity funds. Annuity sales increased 6.7 percent in the first
nine months of 1994 to $3.3 billion from $3.1 billion a year ago,
reflecting increased sales of annuities with variable investment options.
Sales of investment certificates totaled $695 million in the first nine
months of 1994, up from $453 million last year. Life and other insurance
sales totaled $231 million in the first nine months of 1994, up 4.9 percent
from $220 million a year ago, reflecting increased sales of universal life
insurance.
Investment income totaled $1.5 billion in the first nine months of 1994 and
1993, reflecting lower yields offset by higher invested assets.
Commissions and fees totaled $604 million in the first nine months of 1994,
up 14 percent from $530 million a year ago, reflecting management fees
earned on a higher asset base.
Total expenses were $2.0 billion in the first nine months of 1994 and 1993.
The provision for annuity benefits, the largest component of expenses,
decreased to $762 million from $801 million a year ago, reflecting lower
accrual rates, partially offset by higher annuities in force. The
provision for insurance benefits increased to $268 million from
$237 million a year ago, reflecting growth in insurance in force. The
provision for investment certificates totaled $77 million, down from
$97 million last year, reflecting lower investment certificates in force
and lower accrual rates. Human resources expense increased to $620 million
from $560 million a year ago, reflecting an increase in the number of
employees and financial planners, and increased commissionable sales.
Other operating expenses decreased to $258 million in the first nine months
of 1994 from $271 million last year, reflecting a lower provision for
insurance industry guarantee association assessments, partially offset by
increased amortization of deferred acquisition costs and surrenders as a
result of an annuity exchange plan announced during the first quarter of
1994.
American Express Bank
Three Months Ended September 30, 1994 and 1993
The Bank reported net income of $20 million in the third quarter of 1994,
compared with $29 million a year ago. Last year's results included a
$5 million benefit from the change in the U.S. federal income tax rate.
The Bank's results for the third quarter of 1994 reflect lower revenues and
higher operating expenses, primarily reflecting spending related to systems
technology. This decline in results was partially offset by a reduction in
the provision for credit losses. Pretax income totaled $31 million,
14
<PAGE>
compared with $37 million last year. The Bank's prior year's results have
been restated to reflect the transfer of certain international consumer
financial services businesses from TRS to the Bank.
Net interest income totaled $89 million in the third quarter of 1994,
compared with $93 million a year ago. Noninterest income, consisting
primarily of commissions, fees and other revenues, decreased to $74 million
in the third quarter of 1994 from $78 million last year. Noninterest
expenses, excluding the provision for credit losses, totaled $132 million
in the third quarter of 1994, compared with $125 million a year ago. No
provision for credit losses was recorded in the third quarter of 1994,
compared with $9.4 million a year ago.
Nine Months Ended September 30, 1994 and 1993
The Bank's net income totaled $64 million in the first nine months of 1994,
compared with $68 million a year ago. The Bank's results for the first
nine months of 1994 reflect a decline in net interest income, primarily due
to higher short-term funding costs and lower investment income, as well as
higher operating expenses. Partially offsetting this decline was a lower
provision for credit losses. Pretax income totaled $94 million, compared
with $99 million last year.
Net interest income totaled $264 million in the first nine months of 1994,
compared with $274 million a year ago, reflecting higher short-term funding
costs and lower investment income. Noninterest income increased to
$229 million in the first nine months of 1994 from $224 million last year,
primarily reflecting growth in fee income. Noninterest expenses, excluding
the provision for credit losses, totaled $390 million in the first nine
months of 1994, compared with $364 million a year ago. Increased expense
levels primarily reflected spending related to systems technology and
higher human resources expense. The provision for credit losses was
$8.3 million in the first nine months of 1994, compared with $35 million a
year ago, reflecting a lower level of nonperforming loans.
Corporate and Other
Three Months Ended September 30, 1994 and 1993
Corporate and Other reported 1994 third quarter net expenses of
$29 million, compared with $46 million last year. Corporate expenses for
1993 included a $5 million expense from the change in the U.S. federal
income tax rate.
Nine Months Ended September 30, 1994 and 1993
Corporate and Other reported net expenses of $95 million in the first nine
months of 1994, compared with $123 million in 1993, before a $433 million
($779 million pretax) gain from the sale of FDC stock last year.
Results for the first nine months of 1994 include income from the Company's
share of the Travelers revenue participation, in accordance with an
agreement related to the 1993 sale of SLB, as well as a capital gain on the
sale of Travelers preferred stock and warrants which were acquired as part
of the 1993 sale. These gains were offset by the Company's costs
associated with the Lehman Brothers spin-off and certain business building
initiatives.
15
<PAGE>
Results for the first nine months of 1993 included the first quarter gain
on the sale of FDC stock mentioned above, which reduced the Company's
ownership in FDC from 54 percent to approximately 22 percent.
16
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Shareholders and Board of Directors
American Express Company
We have reviewed the accompanying consolidated balance sheet of American
Express Company (the "Company") as of September 30, 1994, the related
consolidated statements of income for the three-month and nine-month periods
ended September 30, 1994 and 1993, and the consolidated statement of cash
flows for the nine-month periods ended September 30, 1994 and 1993. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1993, and the related consolidated statements of income, shareholders' equity,
and cash flows for the year then ended (not presented herein), and in our
report dated February 3, 1994, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of December 31, 1993, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
ERNST & YOUNG LLP
/s/Ernst & Young LLP
New York, New York
November 14, 1994
17
<PAGE>
PART II. OTHER INFORMATION
AMERICAN EXPRESS COMPANY
Item 1. Legal Proceedings
On June 2, 1994, two former employees of American Express
Bank International ("AEBI"), a wholly-owned subsidiary of American Express
Bank Ltd. ("AEB"), were convicted in a federal district court in Texas of
money laundering, bank fraud and misapplication of funds in connection with
the account of a Mexican client. AEBI was not a party in this case. However,
the United States Attorney's Office and a federal grand jury in the Southern
District of Texas are continuing the investigation, and a subpoena for the
production of documents has been issued to AEBI. AEBI is cooperating in the
investigation. If AEBI were charged with a violation of law, substantial
fines, civil penalties, forfeitures and possibly criminal sanctions could
result. A criminal charge and conviction could also have adverse collateral
consequences for AEB and AEBI, as well as certain of the registrant's other
businesses.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on page E-1 hereof.
(b) Reports on Form 8-K:
Form 8-K, dated July 25, 1994, Item 5, reporting the registrant's
earnings for the quarter ended June 30, 1994.
Form 8-K, dated October 5, 1994, Item 5, reporting a continuation
of the registrant's reengineering program.
Form 8-K, dated October 24, 1994, Item 5, reporting the
registrant's earnings for the quarter ended September 30, 1994.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the
undersigned, thereunto duly authorized.
AMERICAN EXPRESS COMPANY
(Registrant)
Date: November 14, 1994 By /s/ Michael P. Monaco
--------------------------
Michael P. Monaco
Executive Vice President,
Chief Financial Officer and
Treasurer
Date: November 14, 1994 /s/ Daniel T. Henry
-------------------------
Daniel T. Henry
Senior Vice President and
Comptroller
(Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly Report:
Exhibit Description
10.1 Amendment of American Express Senior Executive Severance Plan.
10.2 Amendment of American Express Company Executives' Incentive
Compensation Plan.
10.3 Amendment of American Express Company Key Executive Life
Insurance Plan.
10.4 Amendment of American Express Salary/Bonus Deferral Plan.
10.5 Amendment of American Express Supplementary Pension Plan.
10.6 Amendment of Long-Term Incentive Awards under the American
Express Company 1979 and 1989 Long-Term Incentive Plan.
12.1 Computation in Support of Ratio of Earnings to Fixed Charges.
12.2 Computation in Support of Ratio of Earnings to Fixed Charges and
Preferred Share Dividends.
15 Letter re Unaudited Interim Financial Information.
27 Financial Data Schedule.
E-1
<PAGE>
Exhibit 10.1
AMENDMENT OF
AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN
RESOLVED, that pursuant to Section 7.1 thereof, effective as of the
date hereof the American Express Senior Executive Severance Plan (the "Plan")
is amended as follows:
1. Article One of the Plan is amended by (i) the deletion of Section
1.10 and the new definition for Committee set forth below shall be
used throughout the Plan wherever the term "CBN Committee" had
been used previously, and (ii) the addition of the following new
sections thereto to appear in the appropriate alphabetical order
with all current numbering of sections within this Article One and
in cross references in the Plan to be renumbered accordingly, as
follows:
"1.6 "Change in Control" means the happening of any of the
following:
(a) Any individual, entity or group (a "Person") (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 25% or more of either (i) the then
outstanding common shares of the Company (the "Outstanding Company
Common Shares") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that such beneficial
ownership shall not constitute a Change in Control if it occurs as
a result of any of the following acquisitions of securities: (i)
any acquisition directly from the Company, (ii) any acquisition by
the Company or any corporation, partnership, trust or other entity
controlled by the Company (a "Subsidiary"), (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary or (iv) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization, merger
or consolidation, the conditions described in clauses (i), (ii)
and (iii) of subsection (c) of this Section 1.6 are satisfied.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person")
became the beneficial owner of 25% or more of the Outstanding
Company Common Shares or Outstanding Company Voting Securities as
a result of the acquisition of Outstanding Company Common Shares
or Outstanding Company Voting Securities by the Company which, by
reducing the number of Outstanding Company Common Shares or
Outstanding Company Voting Securities, increases the proportional
number of shares beneficially owned by the Subject Person;
provided, that if a Change in Control would be deemed to have
occurred (but for the operation of this sentence) as a result of
the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes
the beneficial owner of any additional Outstanding Company Common
Shares or Outstanding Company Voting Securities which increases
the percentage of the Outstanding Company Common Shares or
Outstanding Company Voting Securities beneficially owned by the
Subject Person, then a Change in Control shall then be deemed to
have occurred; or
<PAGE>
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board, including by reason of agreement intended to
avoid or settle any such actual or threatened contest or
solicitation; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 60% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation, (ii) no Person (excluding
the Company, any employee benefit plan (or related trust) of the
Company, a Subsidiary or such corporation resulting from such
reorganization, merger or consolidation or any subsidiary thereof,
and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly,
25% or more of the Outstanding Company Common Shares or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors and (iii) at least a majority of the
members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the
sale, lease, exchange or other disposition of all or substantially
all of the assets of the Company, other than to a corporation,
with respect to which following such sale, lease, exchange or
other disposition (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting Securities
immediately prior to such sale, lease, exchange or other
disposition, (B) no Person (excluding the Company and any
employee benefit plan (or related trust) of the Company or a
<PAGE>
Subsidiary or such corporation or a subsidiary thereof and any
Person beneficially owning, immediately prior to such sale, lease,
exchange or other disposition, directly or indirectly, 25% or more
of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly
or indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale, lease, exchange or
other disposition of assets of the Company.
1.8 "Committee" means the Compensation and Benefits Committee of
the Board of Directors or any successor committee appointed by the
Board of Directors.
1.12 "Constructive Termination" means resignation or other
employment termination by an Employee from an Employing Company as
a result of one or more of the following without the Employee's
written consent:
a. a reduction in Base Salary, except for across-the-board
reductions in the Base Salary that similarly affect all
Employees included in the Plan,
b. the Employing Company's requirement that the Employee be
based more than 50 miles from the location at which the
Employee was based immediately prior to the Change in
Control and which location is more than 35 miles from the
Employee's residence,
c. the assignment to the Employee of any duties that are
materially inconsistent with the Employee's duties prior to
the Change in Control, or
d. a significant reduction in the Employee's position,
duties, or responsibilities from those in effect prior to
the Change in Control.
1.13 "Defined Termination" means a termination of employment by
an Employee within two years after a Change in Control that occurs
as a result of either:
a. an Involuntary Termination, or
b. a Constructive Termination.
1.18 "Good Cause" means a discontinuance of an Employee's
employment by an Employing Company upon one of the following:
a. an Employee's Willful and continued failure to adequately
perform substantially all of the Employee's duties with an
Employing Company,
b. an Employee's Willful engagement in conduct which is
demonstrably and materially injurious to an Employing
Company or an affiliate thereof, monetarily or otherwise, or
c. conviction of a felony by the Employee.
<PAGE>
1.19 "Involuntary Termination" means any involuntary
discontinuance of an Employee's employment by an Employing Company
for reasons other than Good Cause.
1.27 "Willful" means that an act or failure to act on an
Employee's part is done, or omitted to be done, by the Employee in
a manner that is not in good faith, and that is without reasonable
belief that such action or omission was in the best interests of
an Employing Company."
2. Article Two of the Plan is amended by deleting subsections 2.1.7
and 2.1.8 and adding the following in place thereof:
"2.1.7 Transfer to unsuitable position;
2.1.8 Relocation, provided Employee continues at work through the
transition period; or
2.1.9 If the Employee has a Defined Termination."
3. Article Three of the Plan is amended by deleting the period at the
end of Section 3.5 and adding the following to the end thereof:
"; provided, however, that in the event the Employee has a Defined
Termination, such restrictive covenants shall: (a) be reasonable
under the applicable facts and circumstances; (b) include the
following: (i) non-solicitation of customers and employees; (ii)
confidentiality of business data; (iii) full release of claims;
and (iv) non-denigration of the Company and its affiliates, and
their officers, directors and agents; and (c) not include any non-
competition limitations."
4. Article Three of the Plan is amended by adding the following new
Section 3.6 to the end thereof:
"3.6 Notwithstanding any other provision of this Plan to the
contrary, if all or any portion of the payments or benefits to
which the Employee will be entitled under this Plan, either alone
or together with other payments or benefits which the Employee
receives or is entitled to receive directly or indirectly from the
Company or any of its subsidiaries or any other person or entity
that would be treated as a payor of parachute payments as
hereinafter defined, under any other plan, agreement or
arrangement, would constitute a "parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") or any successor provision thereto and the
regulations thereunder (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto), such payment or benefits provided to
the Employee under this Plan, and any other payments or benefits
which the Employee receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or any
other person or entity that would be treated as a payor of
parachute payments as hereinafter defined, under any other plan,
agreement or arrangement which would constitute a parachute
payment, shall be reduced (but not below zero) as described below
to the extent necessary so that no portion thereof would
constitute such a parachute payment as previously defined (except
that "2.95" shall be used instead of "3" under Section
280G(b)(2)(A)(ii) of the Code or any successor provision thereto).
<PAGE>
Whether payments or benefits to the Employee are to be reduced
pursuant to the first sentence of this paragraph, and the extent
to which they are to be so reduced, will be determined by the firm
serving, immediately prior to the Change in Control, as the
Company's independent auditors, or if that firm refuses to serve,
by another qualified firm, whether or not serving as independent
auditors, designated by the Administration Committee under the
American Express Senior Executive Severance Plan (the "Firm").
The Firm will be paid reasonable compensation by the Company for
such services. If the Firm concludes that its determination is
inconsistent with a final determination of a court or the Internal
Revenue Service, the Firm shall, based on such final
determination, redetermine whether the amount payable to the
Employee should have been reduced and, if applicable, the amount
of any such reduction. If the Firm determines that a lesser
payment should have been made to the Employee, then an amount
equal to the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for all
purposes to be a loan to the Employee made on the date of the
Employee's receipt of such Excess Amount, which the Employee will
have an obligation to repay to the Company on the fifth business
day after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the
Employee's receipt of such Excess Amount until the date of such
repayment (or such lesser rate (including zero) as may be
designated by the Firm such that the Excess Amount and such
interest will not be treated as a parachute payment as previously
defined). If the Firm determines that a greater payment should
have been made to the Employee, within five business days of such
determination, the Company will pay to the Employee the amount of
the deficiency, together with interest thereon from the date such
amount should have been paid to the date of such payment, at the
Section 1274 Rate (or such lesser rate (including zero) as may be
designated by the Firm such that the amount of such deficiency and
such interest will not be treated as a parachute payment as
previously defined).
If a reduction is to be made pursuant to this paragraph, the Firm
will have the right to determine which payments and benefits will
be reduced as described below based on the following hierarchy
from the first to be reduced to the last (or on such other
hierarchy chosen by the Firm in its sole discretion), either those
under this Plan alone or such other payments or benefits which the
Employee receives or is entitled to receive directly or indirectly
from the Company or any of its subsidiaries or any other person or
entity that would be treated as a payor of parachute payments as
previously defined, under any other plan, agreement or
arrangement:
(I) nonqualified stock option awards;
(II) restricted stock awards, awards in lieu of restricted
stock awards, and restricted stock units;
(III) amounts payable under deferred compensation
(including, but not limited to, base salary, cash
bonus or annual incentive awards, and long-term
incentive awards) programs;
(IV) any other awards or amounts not described in (I), (II)
or (III) above that would be payable or provided upon
a Change in Control;
<PAGE>
(V) amounts payable under severance benefit plans;
(VI) amounts payable under annual incentive (e.g., cash
bonus) plans;
(VII) portfolio grant awards and performance grant awards;
(VIII) amounts payable under employee welfare benefit plans,
such as life insurance plans (including, but not
limited to, the American Express Key Executive Life
Insurance Plan);
(IX) amounts payable under nonqualified employee pension
benefit plans; and
(X) any other awards or amounts not described in (V),
(VI), (VII), (VIII) or (IX) above that would be
payable or provided upon Defined Termination.
The payments and benefits subject to reduction pursuant to this
paragraph include one or more attributes thereof, including, but
not limited to, acceleration of the time for the vesting or
payment thereof and the crediting of additional interest
equivalents thereunder. Such reduction may be effected by the
reduction or elimination, in whole or in part, of any such payment
or benefit (including any or all attributes thereof). If a
payment or benefit (including any or all attributes thereof) is
reduced in part, the remaining portion of the payment or benefit
(including any or all attributes thereof) will continue in full
force and effect under the provisions of such payment or benefit
(including any or all attributes thereof) as if the Change in
Control did not occur and without regard to such reduction or
elimination. Nothing in the preceding three sentences of this
paragraph is intended or should be interpreted to change the
calculated reduction amounts and procedure of this paragraph."
5. Article Four of the Plan is amended by deleting the period at the
end of Section 4.1 and adding the following to the end thereof:
"; provided, however, that in the event the Employee has a
Defined Termination, the severance benefit under the Plan will be
paid within five days after the date of such Change in Control."
6. Sections 7.1 and 7.2 of Article Seven of the Plan are each amended
by adding the following to the end thereof:
"The foregoing sentence to the contrary notwithstanding, neither
the Board of Directors nor the Committee may terminate this Plan
or amend this Plan in a manner that is detrimental to the rights
of any participant of the Plan without his written consent (i)
with respect to the provisions of the Plan which become applicable
upon a Change in Control, and (ii) with respect to all provisions
of the Plan for a period of two years and one day after the date
of a Change in Control."
<PAGE>
Exhibit 10.2
AMENDMENT OF
AMERICAN EXPRESS COMPANY
EXECUTIVES' INCENTIVE COMPENSATION PLAN
RESOLVED, that pursuant to Paragraph (b) of Article IX thereof, the American
Express Company Executives' Incentive Compensation Plan (the "Plan") is
amended effective as of the date hereof, as follows:
1. Paragraph (a) of Article V of the Plan is amended by
deleting the period at the end thereof and adding the following:
"; provided, however, that if, within two years following the occurrence
of a Change in Control (as defined below in Article VI), a participant
under the Plan experiences a termination of employment that would
otherwise entitle him to receive the payment of severance benefits under
the provisions of the severance plan that are in effect and that he
participates in as of the date of such Change in Control, and is at Job
Band 50 or higher on the date of such termination of employment, then
such participant in the Plan shall be paid, within five days after the
date of such termination of employment, a prorata award under the Plan
equal to (i) (A) the average award paid or payable to such participant
under the Plan (or any other annual incentive award program of the
Company or one of its subsidiaries at the time of such prior payment)
for the two years prior to the Change in Control, or (B) if such
participant has not received two such awards, the most recent award paid
or payable (or target amount so payable, if such participant has not
previously received any such award) to such participant under the Plan
(or any other annual incentive award program of the Company or one of
its subsidiaries at the time of such prior payment), multiplied by (ii)
the number of full or partial months that have elapsed during the
performance year under the Plan at the time of such termination of
employment divided by 12, provided, further, that in the event such
termination of employment occurs after the end of the performance year
under the Plan but before the payment date under the Plan, then such
participant shall also be paid, within five days after such termination
of employment, an award under the Plan equal to (X) the average award
paid or payable to such participant under the Plan (or any other annual
incentive award program of the Company or one of its subsidiaries at the
time of such prior payment) for the two years prior to the Change in
Control, or (Y) if such participant has not received two such awards,
the most recent award paid or payable (or target amount so payable, if
such participant has not previously received any such award) to such
participant under the Plan (or any other annual incentive award program
of the Company or one of its subsidiaries at the time of such prior
payment)."
2. Article VI of the Plan is amended by the addition of new
paragraphs (f), (g) and (h) thereto, to read as follows:
"(f) Notwithstanding anything to the contrary contained in this Plan
(except for Paragraph VI(h)), upon the occurrence of a Change in Control
(as defined below), the value of any incentive award, the payment of
which has been deferred as of the date of such Change in Control
(including any earnings equivalents accrued thereon, plus additional
interest equivalents for a period of 24 months from the date of the
Change in Control, based on the deferral rate in effect for the plan
year prior to the date of the Change in Control), shall be paid to the
participant within five days following the date of such Change in
Control. For purposes of the preceding sentence, any participant whose
incentive award is deferred in whole or in part shall be deemed to have
<PAGE>
had such portion of his account credited with interest equivalents from
the date of deferral to the date of the Change in Control at the higher
of the deferral rates (applicable to the alternative chosen by the
participant) in effect during such deferral period (but not less than
zero)."
(g) For purposes of this Plan, "Change in Control" means the happening
of any of the following:
(i) Any individual, entity or group (a "Person") (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
25% or more of either (A) the then outstanding common shares of the
Company (the "Outstanding Company Common Shares") or (B) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that such
beneficial ownership shall not constitute a Change in Control if it
occurs as a result of any of the following acquisitions of securities:
(W) any acquisition directly from the Company, (X) any acquisition by
the Company or any corporation, partnership, trust or other entity
controlled by the Company (a "Subsidiary"), (Y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary or (Z) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the conditions described
in clauses (A), (B) and (C) of subsection (iii) of this Section (g) are
satisfied. Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person")
became the beneficial owner of 25% or more of the Outstanding Company
Common Shares or Outstanding Company Voting Securities as a result of
the acquisition of Outstanding Company Common Shares or Outstanding
Company Voting Securities by the Company which, by reducing the number
of Outstanding Company Common Shares or Outstanding Company Voting
Securities, increases the proportional number of shares beneficially
owned by the Subject Person; provided, that if a Change in Control would
be deemed to have occurred (but for the operation of this sentence) as a
result of the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the
beneficial owner of any additional Outstanding Company Common Shares or
Outstanding Company Voting Securities which increases the percentage of
the Outstanding Company Common Shares or Outstanding Company Voting
Securities beneficially owned by the Subject Person, then a Change in
Control shall then be deemed to have occurred; or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an
actual or threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board, including by reason of agreement intended to avoid or
settle any such actual or threatened contest or solicitation; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following
such reorganization, merger or consolidation, (A) more than 60% of,
<PAGE>
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Shares and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, (B) no Person (excluding
the Company, any employee benefit plan (or related trust) of the
Company, a Subsidiary or such corporation resulting from such
reorganization, merger or consolidation or any subsidiary thereof, and
any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% or
more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale,
lease, exchange or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect to
which following such sale, lease, exchange or other disposition (X) more
than 60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange or other
disposition, (Y) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or a Subsidiary or such
corporation or a subsidiary thereof and any Person beneficially owning,
immediately prior to such sale, lease, exchange or other disposition,
directly or indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(Z) at least a majority of the members of the board of directors of such
corporation were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for
such sale, lease, exchange or other disposition of assets of the
Company.
(h) Notwithstanding any other provision of this Plan to the contrary,
if all or any portion of the payments or benefits to which the
participant will be entitled under this Plan, either alone or together
with other payments or benefits which the participant receives or is
entitled to receive directly or indirectly from the Company or any of
its subsidiaries or any other person or entity that would be treated as
a payor of parachute payments as hereinafter defined, under any other
plan, agreement or arrangement, would constitute a "parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986,
<PAGE>
as amended (the "Code") or any successor provision thereto and the
regulations thereunder (except that "2.95" shall be used instead of "3"
under Section 280G(b)(2)(A)(ii) of the Code or any successor provision
thereto), such payment or benefits provided to the participant under
this Plan, and any other payments or benefits which the participant
receives or is entitled to receive directly or indirectly from the
Company or any of its subsidiaries or any other person or entity that
would be treated as a payor of parachute payments as hereinafter
defined, under any other plan, agreement or arrangement which would
constitute a parachute payment, shall be reduced (but not below zero) as
described below to the extent necessary so that no portion thereof would
constitute such a parachute payment as previously defined (except that
"2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of
the Code or any successor provision thereto). Whether payments or
benefits to the participant are to be reduced pursuant to the first
sentence of this paragraph, and the extent to which they are to be so
reduced, will be determined by the firm serving, immediately prior to
the Change in Control, as the Company's independent auditors, or if that
firm refuses to serve, by another qualified firm, whether or not serving
as independent auditors, designated by the Administration Committee
under the American Express Senior Executive Severance Plan (the "Firm").
The Firm will be paid reasonable compensation by the Company for such
services. If the Firm concludes that its determination is inconsistent
with a final determination of a court or the Internal Revenue Service,
the Firm shall, based on such final determination, redetermine whether
the amount payable to the participant should have been reduced and, if
applicable, the amount of any such reduction. If the Firm determines
that a lesser payment should have been made to the participant, then an
amount equal to the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for all
purposes to be a loan to the participant made on the date of the
participant's receipt of such Excess Amount, which the participant will
have an obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of the Code or
any successor provision thereto), compounded semi-annually (the "Section
1274 Rate") from the date of the participant's receipt of such Excess
Amount until the date of such repayment (or such lesser rate (including
zero) as may be designated by the Firm such that the Excess Amount and
such interest will not be treated as a parachute payment as previously
defined). If the Firm determines that a greater payment should have
been made to the participant, within five business days of such
determination, the Company will pay to the participant the amount of the
deficiency, together with interest thereon from the date such amount
should have been paid to the date of such payment, at the Section 1274
Rate (or such lesser rate (including zero) as may be designated by the
Firm such that the amount of such deficiency and such interest will not
be treated as a parachute payment as previously defined). If a
reduction is to be made pursuant to this paragraph, the Firm will have
the right to determine which payments and benefits will be reduced as
described below based on the following hierarchy from the first to be
reduced to the last (or on such other hierarchy chosen by the Firm in
its sole discretion), either those under this Plan alone or such other
payments or benefits which the participant receives or is entitled to
receive directly or indirectly from the Company or any of its
subsidiaries or any other person or entity that would be treated as a
payor of parachute payments as previously defined, under any other plan,
agreement or arrangement:
(I) nonqualified stock option awards;
(II) restricted stock awards, awards in lieu of restricted
stock awards, and restricted stock units;
<PAGE>
(III) amounts payable under deferred compensation
(including, but not limited to, base salary, cash
bonus or annual incentive awards, and long-term
incentive awards) programs;
(IV) any other awards or amounts not described in (I), (II)
or (III) above that would be payable or provided upon
a Change in Control;
(V) amounts payable under severance benefit plans;
(VI) amounts payable under annual incentive (e.g., cash
bonus) plans;
(VII) portfolio grant awards and performance grant awards;
(VIII) amounts payable under employee welfare benefit plans,
such as life insurance plans (including, but not
limited to, the American Express Key Executive Life
Insurance Plan);
(IX) amounts payable under nonqualified employee pension
benefit plans; and
(X) any other awards or amounts not described in (V),
(VI), (VII), (VIII) or (IX) above that would be
payable or provided upon a termination of employment
that occurs within two years after a Change in Control
as described in Paragraph V(a) above.
The payments and benefits subject to reduction pursuant to this
paragraph include one or more attributes thereof, including, but
not limited to, acceleration of the time for the vesting or
payment thereof and the crediting of additional interest
equivalents thereunder. Such reduction may be effected by the
reduction or elimination, in whole or in part, of any such payment
or benefit (including any or all attributes thereof). If a
payment or benefit (including any or all attributes thereof) is
reduced in part, the remaining portion of the payment or benefit
(including any or all attributes thereof) will continue in full
force and effect under the provisions of such payment or benefit
(including any or all attributes thereof) as if the Change in
Control did not occur and without regard to such reduction or
elimination. Nothing in the preceding three sentences of this
paragraph is intended or should be interpreted to change the
calculated reduction amounts and procedure of this paragraph."
3. Paragraph (b) of Article IX of the Plan is amended in its
entirety, to read as follows:
"The Board of Directors of the Company may amend this Plan in whole or
in part from time to time, and may terminate it at any time. The
foregoing sentence to the contrary notwithstanding, the Board of
Directors of the Company may not amend or terminate this Plan in a
manner that is detrimental to the rights of any participant with respect
to the provisions which are applicable upon a Change in Control, without
his written consent. The Board of Directors of the Company shall cause
all companies that are or have been Participating Companies to be
notified promptly of any amendment or termination. No amendment or
termination shall deprive any participant, former participant,
beneficiary or legal representatives of a former participant of any
right under this Plan as such right exists at the time of such amendment
or termination, nor increase the obligations of any company that is or
has been a Participating Company without its consent."
<PAGE>
Exhibit 10.3
AMENDMENT OF
AMERICAN EXPRESS COMPANY
KEY EXECUTIVE LIFE INSURANCE PLAN
RESOLVED, that pursuant to Section 10.01 thereof, the American Express Company
Key Executive Life Insurance Plan (the "Plan") is amended effective as of the
date hereof, as follows:
1. Article II of the Plan is amended by the addition of new Section 2.19 as
follows:
"2.19 For purposes of this Plan, "Change in Control" means the
happening of any of the following:
(a) Any individual, entity or group (a "Person") (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
25% or more of either (i) the then outstanding common shares of the
Company (the "Outstanding Company Common Shares") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that such
beneficial ownership shall not constitute a Change in Control if it
occurs as a result of any of the following acquisitions of securities:
(i) any acquisition directly from the Company, (ii) any acquisition by
the Company or any corporation, partnership, trust or other entity
controlled by the Company (a "Subsidiary"), (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary or (iv) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the conditions described
in clauses (i), (ii) and (iii) of subsection (c) of this Section 2.19
are satisfied. Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because any Person (the "Subject Person")
became the beneficial owner of 25% or more of the Outstanding Company
Common Shares or Outstanding Company Voting Securities as a result of
the acquisition of Outstanding Company Common Shares or Outstanding
Company Voting Securities by the Company which, by reducing the number
of Outstanding Company Common Shares or Outstanding Company Voting
Securities, increases the proportional number of shares beneficially
owned by the Subject Person; provided, that if a Change in Control would
be deemed to have occurred (but for the operation of this sentence) as a
result of the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the
beneficial owner of any additional Outstanding Company Common Shares or
Outstanding Company Voting Securities which increases the percentage of
the Outstanding Company Common Shares or Outstanding Company Voting
Securities beneficially owned by the Subject Person, then a Change in
Control shall then be deemed to have occurred; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
<PAGE>
whose initial assumption of office occurs as a result of either an
actual or threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board, including by reason of agreement intended to avoid or
settle any such actual or threatened contest or solicitation; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following
such reorganization, merger or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Shares and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, (ii) no Person (excluding
the Company, any employee benefit plan (or related trust) of the
Company, a Subsidiary or such corporation resulting from such
reorganization, merger or consolidation or any subsidiary thereof, and
any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% or
more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale, lease,
exchange or other disposition of all or substantially all of the assets
of the Company, other than to a corporation, with respect to which
following such sale, lease, exchange or other disposition (A) more than
60% of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting Securities immediately
prior to such sale, lease, exchange or other disposition, (B) no Person
(excluding the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary or such corporation or a subsidiary
thereof and any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or indirectly, 25%
or more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of
the members of the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company."
<PAGE>
2. Section 7.02 of the Plan is amended by adding the following to the
end thereof:
"d. (i) Notwithstanding any other provision of this Plan to the
contrary (except for Section 7.02(d)(ii)), following the occurrence of a
Change in Control (as defined below), in the event a Participant under
the Plan whose job is classified at grade level 50 or above experiences
a Defined Termination as such term is defined in the Company's Senior
Executive Severance Plan (regardless of whether or not the Participant
is eligible under such plan), then the Policy Owner shall transfer
ownership of the Policy to the Participant (or Assignee), who shall
become sole owner of the Policy free of all provisions and restrictions
of this Plan, within five days after the date of such Defined
Termination.
(ii) Notwithstanding any other provision of this Plan to the contrary,
if all or any portion of the payments or benefits to which the
Participant will be entitled under this Plan, either alone or together
with other payments or benefits which the Participant receives or is
entitled to receive directly or indirectly from the Company or any of
its subsidiaries or any other person or entity that would be treated as
a payor of parachute payments as hereinafter defined, under any other
plan, agreement or arrangement, would constitute a "parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code") or any successor provision thereto and the
regulations thereunder (except that "2.95" shall be used instead of "3"
under Section 280G(b)(2)(A)(ii) of the Code or any successor provision
thereto), such payment or benefits provided to the Participant under
this Plan, and any other payments or benefits which the Participant
receives or is entitled to receive directly or indirectly from the
Company or any of its subsidiaries or any other person or entity that
would be treated as a payor of parachute payments as hereinafter
defined, under any other plan, agreement or arrangement which would
constitute a parachute payment, shall be reduced (but not below zero) as
described below to the extent necessary so that no portion thereof would
constitute such a parachute payment as previously defined (except that
"2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of
the Code or any successor provision thereto). Whether payments or
benefits to the Participant are to be reduced pursuant to the first
sentence of this paragraph, and the extent to which they are to be so
reduced, will be determined by the firm serving, immediately prior to
the Change in Control, as the Company's independent auditors, or if that
firm refuses to serve, by another qualified firm, whether or not serving
as independent auditors, designated by the Administration Committee
under the American Express Senior Executive Severance Plan (the "Firm").
The Firm will be paid reasonable compensation by the Company for such
services. If the Firm concludes that its determination is inconsistent
with a final determination of a court or the Internal Revenue Service,
the Firm shall, based on such final determination, redetermine whether
the amount payable to the Participant should have been reduced and, if
applicable, the amount of any such reduction. If the Firm determines
that a lesser payment should have been made to the Participant, then an
amount equal to the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for all
purposes to be a loan to the Participant made on the date of the
Participant's receipt of such Excess Amount, which the Participant will
have an obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of the Code or
any successor provision thereto), compounded semi-annually (the "Section
1274 Rate") from the date of the Participant's receipt of such Excess
Amount until the date of such repayment (or such lesser rate (including
zero) as may be designated by the Firm such that the Excess Amount and
such interest will not be treated as a parachute payment as previously
<PAGE>
defined). If the Firm determines that a greater payment should have
been made to the Participant, within five business days of such
determination, the Company will pay to the Participant the amount of the
deficiency, together with interest thereon from the date such amount
should have been paid to the date of such payment, at the Section 1274
Rate (or such lesser rate (including zero) as may be designated by the
Firm such that the amount of such deficiency and such interest will not
be treated as a parachute payment as previously defined). If a
reduction is to be made pursuant to this paragraph, the Firm will have
the right to determine which payments and benefits will be reduced as
described below based on the following hierarchy from the first to be
reduced to the last (or on such other hierarchy chosen by the Firm in
its sole discretion), either those under this Plan alone or such other
payments or benefits which the Participant receives or is entitled to
receive directly or indirectly from the Company or any of its
subsidiaries or any other person or entity that would be treated as a
payor of parachute payments as previously defined, under any other plan,
agreement or arrangement:
(I) nonqualified stock option awards;
(II) restricted stock awards, awards in lieu of restricted
stock awards, and restricted stock units;
(III) amounts payable under deferred compensation
(including, but not limited to, base salary, cash
bonus or annual incentive awards, and long-term
incentive awards) programs;
(IV) any other awards or amounts not described in (I), (II)
or (III) above that would be payable or provided upon
a Change in Control;
(V) amounts payable under severance benefit plans;
(VI) amounts payable under annual incentive (e.g., cash
bonus) plans;
(VII) portfolio grant awards and performance grant awards;
(VIII) amounts payable under employee welfare benefit plans,
such as life insurance plans (including, but not
limited to, the American Express Key Executive Life
Insurance Plan);
(IX) amounts payable under nonqualified employee pension
benefit plans; and
(X) any other awards or amounts not described in (V),
(VI), (VII), (VIII) or (IX) above that would be
payable or provided upon a Defined Termination as
described in Section 7.02(d).
The payments and benefits subject to reduction pursuant to this
paragraph include one or more attributes thereof, including, but
not limited to, acceleration of the time for the vesting or
payment thereof and the crediting of additional interest
equivalents thereunder. Such reduction may be effected by the
reduction or elimination, in whole or in part, of any such payment
or benefit (including any or all attributes thereof). If a
payment or benefit (including any or all attributes thereof) is
reduced in part, the remaining portion of the payment or benefit
(including any or all attributes thereof) will continue in full
force and effect under the provisions of such payment or benefit
<PAGE>
(including any or all attributes thereof) as if the Change in
Control did not occur and without regard to such reduction or
elimination. Nothing in the preceding three sentences of this
paragraph is intended or should be interpreted to change the
calculated reduction amounts and procedure of this paragraph."
3. Sections 10.01 and 11.01 of the Plan is each amended by adding the
following to the end thereof:
"The foregoing sentence to the contrary notwithstanding, the Company may
not amend or terminate this Plan in a manner that is detrimental to the
rights of any Participant with respect to the provisions which are
applicable upon a Change in Control, without his written consent."
<PAGE>
Exhibit 10.4
AMENDMENT OF
AMERICAN EXPRESS
SALARY/BONUS DEFERRAL PLAN
RESOLVED, that pursuant to Section 7.1 thereof, the American Express
Salary/Bonus Deferral Plan (the "Plan") is amended effective as of the date
hereof, as follows:
1. Article I of the Plan is amended by adding new Section 1.22
thereto, to read as follows:
"1.22 'Change in Control' means the happening of any of the following:
(a) Any individual, entity or group (a "Person") (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
25% or more of either (i) the then outstanding common shares of the
Company (the "Outstanding Company Common Shares") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that such
beneficial ownership shall not constitute a Change in Control if it
occurs as a result of any of the following acquisitions of securities:
(i) any acquisition directly from the Company, (ii) any acquisition by
the Company or any corporation, partnership, trust or other entity
controlled by the Company (a "Subsidiary"), (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary or (iv) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the conditions described
in clauses (i), (ii) and (iii) of subsection (c) of this Section 1.22
are satisfied. Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because any Person (the "Subject Person")
became the beneficial owner of 25% or more of the Outstanding Company
Common Shares or Outstanding Company Voting Securities as a result of
the acquisition of Outstanding Company Common Shares or Outstanding
Company Voting Securities by the Company which, by reducing the number
of Outstanding Company Common Shares or Outstanding Company Voting
Securities, increases the proportional number of shares beneficially
owned by the Subject Person; provided, that if a Change in Control would
be deemed to have occurred (but for the operation of this sentence) as a
result of the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the
beneficial owner of any additional Outstanding Company Common Shares or
Outstanding Company Voting Securities which increases the percentage of
the Outstanding Company Common Shares or Outstanding Company Voting
Securities beneficially owned by the Subject Person, then a Change in
Control shall then be deemed to have occurred; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
<PAGE>
whose initial assumption of office occurs as a result of either an
actual or threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board, including by reason of agreement intended to avoid or
settle any such actual or threatened contest or solicitation; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following
such reorganization, merger or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Shares and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, (ii) no Person (excluding
the Company, any employee benefit plan (or related trust) of the
Company, a Subsidiary or such corporation resulting from such
reorganization, merger or consolidation or any subsidiary thereof, and
any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% or
more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale, lease,
exchange or other disposition of all or substantially all of the assets
of the Company, other than to a corporation, with respect to which
following such sale, lease, exchange or other disposition (A) more than
60% of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting Securities immediately
prior to such sale, lease, exchange or other disposition, (B) no Person
(excluding the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary or such corporation or a subsidiary
thereof and any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or indirectly, 25%
or more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of
the members of the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company."
<PAGE>
2. Section 6.5 of the Plan is renumbered Section 6.7 and new Sec-
tions 6.5 and 6.6 are added, to read as follows:
"6.5 Notwithstanding anything to the contrary contained in the Plan
(except for Section 6.6), upon the occurrence of a Change in
Control, the amounts credited to a Participant's Deferred
Compensation Account as of the date of such Change in Control
(including any earnings equivalents accrued thereon, plus
additional interest equivalents for a period of 24 months from the
date of the Change in Control, based on the deferral rate in
effect for the plan year prior to the date of the Change in
Control) shall be paid to the Participant within five days follow-
ing the date of such Change in Control. For purposes of the
preceding sentence, any Deferred Compensation Account shall be
deemed to have been credited with interest equivalents from the
date of deferral to the date of the Change in Control at the
higher of the deferral rates (applicable to the alternative chosen
by the Participant) in effect during such deferral period (but
not less than zero)."
"6.6 Notwithstanding any other provision of this Plan to the contrary,
if all or any portion of the payments or benefits to which the
Participant will be entitled under this Plan, either alone or
together with other payments or benefits which the Participant
receives or is entitled to receive directly or indirectly from the
Company or any of its subsidiaries or any other person or entity
that would be treated as a payor of parachute payments as
hereinafter defined, under any other plan, agreement or
arrangement, would constitute a "parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") or any successor provision thereto and the
regulations thereunder (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto), such payment or benefits provided to
the Participant under this Plan, and any other payments or
benefits which the Participant receives or is entitled to receive
directly or indirectly from the Company or any of its subsidiaries
or any other person or entity that would be treated as a payor of
parachute payments as hereinafter defined, under any other plan,
agreement or arrangement which would constitute a parachute
payment, shall be reduced (but not below zero) as described below
to the extent necessary so that no portion thereof would
constitute such a parachute payment as previously defined (except
that "2.95" shall be used instead of "3" under Section
280G(b)(2)(A)(ii) of the Code or any successor provision thereto).
Whether payments or benefits to the Participant are to be reduced
pursuant to the first sentence of this paragraph, and the extent
to which they are to be so reduced, will be determined by the firm
serving, immediately prior to the Change in Control, as the
Company's independent auditors, or if that firm refuses to serve,
by another qualified firm, whether or not serving as independent
auditors, designated by the Administration Committee under the
American Express Senior Executive Severance Plan (the "Firm").
The Firm will be paid reasonable compensation by the Company for
such services. If the Firm concludes that its determination is
inconsistent with a final determination of a court or the Internal
Revenue Service, the Firm shall, based on such final
determination, redetermine whether the amount payable to the
Participant should have been reduced and, if applicable, the
amount of any such reduction. If the Firm determines that a
lesser payment should have been made to the Participant, then an
amount equal to the amount of the excess of the earlier payment
over the redetermined amount (the "Excess Amount") will be deemed
for all purposes to be a loan to the Participant made on the date
<PAGE>
of the Participant's receipt of such Excess Amount, which the
Participant will have an obligation to repay to the Company on the
fifth business day after demand, together with interest on such
amount at the lowest applicable Federal rate (as defined in
Section 1274(d) of the Code or any successor provision thereto),
compounded semi-annually (the "Section 1274 Rate") from the date
of the Participant's receipt of such Excess Amount until the date
of such repayment (or such lesser rate (including zero) as may be
designated by the Firm such that the Excess Amount and such
interest will not be treated as a parachute payment as previously
defined). If the Firm determines that a greater payment should
have been made to the Participant, within five business days of
such determination, the Company will pay to the Participant the
amount of the deficiency, together with interest thereon from the
date such amount should have been paid to the date of such
payment, at the Section 1274 Rate (or such lesser rate (including
zero) as may be designated by the Firm such that the amount of
such deficiency and such interest will not be treated as a
parachute payment as previously defined). If a reduction is to be
made pursuant to this paragraph, the Firm will have the right to
determine which payments and benefits will be reduced as described
below based on the following hierarchy from the first to be
reduced to the last (or on such other hierarchy chosen by the Firm
in its sole discretion), either those under this Plan alone or
such other payments or benefits which the Participant receives or
is entitled to receive directly or indirectly from the Company or
any of its subsidiaries or any other person or entity that would
be treated as a payor of parachute payments as previously defined,
under any other plan, agreement or arrangement:
(I) nonqualified stock option awards;
(II) restricted stock awards, awards in lieu of restricted
stock awards, and restricted stock units;
(III) amounts payable under deferred compensation
(including, but not limited to, base salary, cash
bonus or annual incentive awards, and long-term
incentive awards) programs;
(IV) any other awards or amounts not described in (I), (II)
or (III) above that would be payable or provided upon
a Change in Control;
(V) amounts payable under severance benefit plans;
(VI) amounts payable under annual incentive (e.g., cash
bonus) plans;
(VII) portfolio grant awards and performance grant awards;
(VIII) amounts payable under employee welfare benefit plans,
such as life insurance plans (including, but not
limited to, the American Express Key Executive Life
Insurance Plan);
(IX) amounts payable under nonqualified employee pension
benefit plans; and
(X) any other awards or amounts not described in (V),
(VI), (VII), (VIII) or (IX) above that would be
payable or provided (i) upon a Defined Termination, or
(ii) upon a termination of employment within two years
after a Change in Control if the Participant is in a
<PAGE>
job classified as Job Band 50, and if such termination
of employment would otherwise entitle him to receive
the payment of severance benefits under the provisions
of the severance plan that are in effect and that he
participates in as of the date of such Change in
Control, as the case may be.
The payments and benefits subject to reduction pursuant to this
paragraph include one or more attributes thereof, including, but
not limited to, acceleration of the time for the vesting or
payment thereof and the crediting of additional interest
equivalents thereunder. Such reduction may be effected by the
reduction or elimination, in whole or in part, of any such payment
or benefit (including any or all attributes thereof). If a
payment or benefit (including any or all attributes thereof) is
reduced in part, the remaining portion of the payment or benefit
(including any or all attributes thereof) will continue in full
force and effect under the provisions of such payment or benefit
(including any or all attributes thereof) as if the Change in
Control did not occur and without regard to such reduction or
elimination. Nothing in the preceding three sentences of this
paragraph is intended or should be interpreted to change the
calculated reduction amounts and procedure of this paragraph."
3. Section 7.1 of the Plan is amended in its entirety, to read as
follows:
"7.1 The Committee may at any time and from time to time modify
or amend any or all of the provisions of the Plan
(including, but not limited to, acceleration of payment(s))
or may at any time terminate the Plan; provided that no such
action shall materially adversely affect the rights of any
Participant hereunder without his consent thereto, as
determined by the Committee in its sole discretion. The
foregoing sentence to the contrary notwithstanding, the
Board of Directors, the Committee or any other person may
not amend or terminate this Plan in a manner that is
detrimental to the rights of any Participant of the Plan
with respect to the provisions which become applicable upon
a Change in Control, without his written consent."
<PAGE>
Exhibit 10.5
AMENDMENT OF
AMERICAN EXPRESS
SUPPLEMENTARY PENSION PLAN
RESOLVED, that pursuant to Section 9 thereof, effective as of the
date hereof the American Express Supplementary Pension Plan (the "Plan") is
amended, as follows:
1. Section 2 of the Plan is amended by adding at the end thereof
new definitions, to read as follows:
"'Change in Control' means the happening of any of the following:
(a) Any individual, entity or group (a "Person") (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
25% or more of either (i) the then outstanding common shares of the
Company (the "Outstanding Company Common Shares") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that such
beneficial ownership shall not constitute a Change in Control if it
occurs as a result of any of the following acquisitions of securities:
(i) any acquisition directly from the Company, (ii) any acquisition by
the Company or any corporation, partnership, trust or other entity
controlled by the Company (a "Subsidiary"), (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary or (iv) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the conditions described
in clauses (i), (ii) and (iii) of subsection (c) of this Section 2 are
satisfied. Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person")
became the beneficial owner of 25% or more of the Outstanding Company
Common Shares or Outstanding Company Voting Securities as a result of
the acquisition of Outstanding Company Common Shares or Outstanding
Company Voting Securities by the Company which, by reducing the number
of Outstanding Company Common Shares or Outstanding Company Voting
Securities, increases the proportional number of shares beneficially
owned by the Subject Person; provided, that if a Change in Control would
be deemed to have occurred (but for the operation of this sentence) as a
result of the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the
beneficial owner of any additional Outstanding Company Common Shares or
Outstanding Company Voting Securities which increases the percentage of
the Outstanding Company Common Shares or Outstanding Company Voting
Securities beneficially owned by the Subject Person, then a Change in
Control shall then be deemed to have occurred; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an
<PAGE>
actual or threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board, including by reason of agreement intended to avoid or
settle any such actual or threatened contest or solicitation; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following
such reorganization, merger or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Shares and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, (ii) no Person (excluding
the Company, any employee benefit plan (or related trust) of the
Company, a Subsidiary or such corporation resulting from such
reorganization, merger or consolidation or any subsidiary thereof, and
any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% or
more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale, lease,
exchange or other disposition of all or substantially all of the assets
of the Company, other than to a corporation, with respect to which
following such sale, lease, exchange or other disposition (A) more than
60% of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting Securities immediately
prior to such sale, lease, exchange or other disposition, (B) no Person
(excluding the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary or such corporation or a subsidiary
thereof and any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or indirectly, 25%
or more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of
the members of the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company.
<PAGE>
2. Section 4 of the Plan is amended by adding at the end thereof
new sentences, to read as follows:
"Notwithstanding anything to the contrary contained in either this
Supplementary Pension Plan or the Retirement Plan (except for the
provision in this Section 4 dealing with a limitation under Section 280G
of the Internal Revenue Code of 1986, as amended), upon a Change in
Control all accrued benefits under the Plan as of the date of the Change
in Control shall be funded by the Company within five days following the
Change in Control in the form of a so-called "rabbi" grantor trust, in
an amount determined by the then current actuary for this Supplementary
Pension Plan to be sufficient to pay all accrued liabilities as of the
date of the Change in Control including additional accrued benefits as
described below in this paragraph.
If, during the first year following a Change in Control, an Employee
experiences a Defined Termination, as such term is defined in the Com-
pany's Senior Executive Severance Plan (provided that the Employee is
eligible under such plan), then such Employee shall be deemed to have
rendered two additional years of Credited Service and to have attained
two additional years of age for all purposes under the Plan from his
date of termination, and shall also be credited with an additional
accrued benefit under the Plan that is equivalent to the Pension benefit
that would have accrued under the Retirement Plan if the Employee had
rendered such two additional years of Credited Service and had attained
such additional two years of age for all purposes under the Retirement
Plan. Upon such a termination of employment (as described in the
preceding sentence) during the second year following a Change in
Control, then such Employee shall be deemed to have rendered one
additional year of Credited Service and to have attained one additional
year of age for all purposes under the Plan and the Retirement Plan, as
described in the preceding sentence.
Notwithstanding any other provision of this Plan to the contrary, if all
or any portion of the payments or benefits to which the Employee will be
entitled under this Plan, either alone or together with other payments
or benefits which the Employee receives or is entitled to receive
directly or indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor of parachute
payments as hereinafter defined, under any other plan, agreement or
arrangement, would constitute a "parachute payment" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code") or any successor provision thereto and the regulations
thereunder (except that "2.95" shall be used instead of "3" under
Section 280G(b)(2)(A)(ii) of the Code or any successor provision
thereto), such payment or benefits provided to the Employee under this
Plan, and any other payments or benefits which the Employee receives or
is entitled to receive directly or indirectly from the Company or any of
its subsidiaries or any other person or entity that would be treated as
a payor of parachute payments as hereinafter defined, under any other
plan, agreement or arrangement which would constitute a parachute
payment, shall be reduced (but not below zero) as described below to the
extent necessary so that no portion thereof would constitute such a
parachute payment as previously defined (except that "2.95" shall be
used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto). Whether payments or benefits to the
Employee are to be reduced pursuant to the first sentence of this
paragraph, and the extent to which they are to be so reduced, will be
determined by the firm serving, immediately prior to the Change in
Control, as the Company's independent auditors, or if that firm refuses
to serve, by another qualified firm, whether or not serving as
independent auditors, designated by the Administration Committee under
the American Express Senior Executive Severance Plan (the "Firm"). The
Firm will be paid reasonable compensation by the Company for such
<PAGE>
services. If the Firm concludes that its determination is inconsistent
with a final determination of a court or the Internal Revenue Service,
the Firm shall, based on such final determination, redetermine whether
the amount payable to the Employee should have been reduced and, if
applicable, the amount of any such reduction. If the Firm determines
that a lesser payment should have been made to the Employee, then an
amount equal to the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for all
purposes to be a loan to the Employee made on the date of the Employee's
receipt of such Excess Amount, which the Employee will have an
obligation to repay to the Company on the fifth business day after
demand, together with interest on such amount at the lowest applicable
Federal rate (as defined in Section 1274(d) of the Code or any successor
provision thereto), compounded semi-annually (the "Section 1274 Rate")
from the date of the Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero) as may be
designated by the Firm such that the Excess Amount and such interest
will not be treated as a parachute payment as previously defined). If
the Firm determines that a greater payment should have been made to the
Employee, within five business days of such determination, the Company
will pay to the Employee the amount of the deficiency, together with
interest thereon from the date such amount should have been paid to the
date of such payment, at the Section 1274 Rate (or such lesser rate
(including zero) as may be designated by the Firm such that the amount
of such deficiency and such interest will not be treated as a parachute
payment as previously defined). If a reduction is to be made pursuant
to this paragraph, the Firm will have the right to determine which
payments and benefits will be reduced as described below based on the
following hierarchy from the first to be reduced to the last (or on such
other hierarchy chosen by the Firm in its sole discretion), either those
under this Plan alone or such other payments or benefits which the
Employee receives or is entitled to receive directly or indirectly from
the Company or any of its subsidiaries or any other person or entity
that would be treated as a payor of parachute payments as previously
defined, under any other plan, agreement or arrangement:
(I) nonqualified stock option awards;
(II) restricted stock awards, awards in lieu of restricted
stock awards, and restricted stock units;
(III) amounts payable under deferred compensation
(including, but not limited to, base salary, cash
bonus or annual incentive awards, and long-term
incentive awards) programs;
(IV) any other awards or amounts not described in (I), (II)
or (III) above that would be payable or provided upon
a Change in Control;
(V) amounts payable under severance benefit plans;
(VI) amounts payable under annual incentive (e.g., cash
bonus) plans;
(VII) portfolio grant awards and performance grant awards;
(VIII) amounts payable under employee welfare benefit plans,
such as life insurance plans (including, but not
limited to, the American Express Key Executive Life
Insurance Plan);
(IX) amounts payable under nonqualified employee pension
benefit plans; and
<PAGE>
(X) any other awards or amounts not described in (V),
(VI), (VII), (VIII) or (IX) above that would be
payable or provided upon Defined Termination.
The payments and benefits subject to reduction pursuant to this
paragraph include one or more attributes thereof, including, but
not limited to, acceleration of the time for the vesting or
payment thereof and the crediting of additional interest
equivalents thereunder. Such reduction may be effected by the
reduction or elimination, in whole or in part, of any such payment
or benefit (including any or all attributes thereof). If a
payment or benefit (including any or all attributes thereof) is
reduced in part, the remaining portion of the payment or benefit
(including any or all attributes thereof) will continue in full
force and effect under the provisions of such payment or benefit
(including any or all attributes thereof) as if the Change in
Control did not occur and without regard to such reduction or
elimination. Nothing in the preceding three sentences of this
paragraph is intended or should be interpreted to change the
calculated reduction amounts and procedure of this paragraph."
3. Section 9 of the Plan is amended by the deletion of the
first sentence thereof, and its replacement with the following sentences, to
read as follows:
"The Board of Directors of American Express Company retains the
right, at any time and from time to time, to alter, amend, change,
suspend, substitute, delete, revoke or terminate this Plan in whole or
in part, for any reason, and without either the consent of, or prior
notification to, any person. The Board of Directors of American Express
Company shall have the right to delegate its authority and power here-
under, or any portion thereof, to any committee of the Board of
Directors of American Express Company, and the right to rescind any such
delegation to such committee in whole or in part. The two foregoing
sentences to the contrary notwithstanding, neither the Board of
Directors of American Express Company nor its delegate may terminate
this Plan or amend this Plan in any manner that is detrimental to the
rights of any Employee with respect to the provisions which become
applicable upon a Change in Control, without his written consent."
<PAGE>
Exhibit 10.6
AMENDMENT OF
LONG-TERM INCENTIVE AWARDS
UNDER THE AMERICAN EXPRESS COMPANY
1979 AND 1989 LONG-TERM INCENTIVE PLAN (THE "PLANS")
All long-term incentive awards under the Plans that are outstanding as of the
date hereof are amended as of the date hereof by adding the following
paragraph to the end thereof, as applicable:
I. Nonqualified Stock Options ("Options")
Change in Control. Notwithstanding anything in this Agreement to the
contrary (except for the provision dealing with a limitation under
Section 280G of the Internal Revenue Code of 1986, as amended), upon a
Change in Control (as defined below), the awardholder shall immediately
be 100% vested in the total number of shares covered hereby such that
they shall be fully exercisable. The Committee may not amend or delete
this section of this Agreement in a manner that is detrimental to the
awardholder, without his written consent. A "Change in Control" means
the happening of any of the following:
[See long definition in Section VI below.]
II. Restricted Stock Awards ("RSA's")
Change in Control. Notwithstanding anything in this Agreement to the
contrary (except for the provision dealing with a limitation under
Section 280G of the Internal Revenue Code of 1986, as amended), upon a
Change in Control (as defined below), the awardholder shall immediately
be 100% vested in the total number of shares covered hereby such that
they shall no longer be subject to any transfer restrictions imposed by
this Agreement. The Committee may not amend or delete this section of
this Agreement in a manner that is detrimental to the awardholder,
without his written consent. A "Change in Control" means the happening
of any of the following:
[See long definition in Section VI below.]
III. Letters of Intent in lieu of RSA's
Change in Control. Notwithstanding anything in this Agreement to the
contrary (except for the provision dealing with a limitation under
Section 280G of the Internal Revenue Code of 1986, as amended), upon a
Change in Control (as defined below), the awardholder shall immediately
be entitled to receive the total number of shares covered hereby such
that they shall no longer be subject to any restrictions on issuance
imposed by this Agreement. The Committee may not amend or delete this
section of this Agreement in a manner that is detrimental to the
awardholder, without his written consent. A "Change in Control" means
the happening of any of the following:
[See long definition in Section IV below.]
<PAGE>
IV. Restricted Stock Units ("RSU's")
Change in Control. Notwithstanding anything in this Agreement to the
contrary (except for the provision dealing with a limitation under
Section 280G of the Internal Revenue Code of 1986, as amended), upon a
Change in Control (as defined below), the awardholder shall immediately
be entitled to receive, within five days after the date of such Change
in Control, that number of common shares of American Express Company
equal in value to the awardholder's Retirement Parity Value, plus the
value of "dividend equivalents" on such shares to the extent such
"dividend equivalents" have not already been paid to the awardholder
under Section 3.1 of this Agreement, and such shares shall no longer be
subject to any transfer restrictions imposed by this Agreement or to any
non-compete, consulting or other restrictions under Section 3.3 of this
Agreement. The Committee may not amend or delete this section of this
Agreement in a manner that is detrimental to the awardholder, without
his written consent. A "Change in Control" means the happening of any
of the following:
[See long definition in Section VI below.]
V. Portfolio Grant Awards ("PG-III's, PG-IV's and PG-V's") and Performance
Grants (also known as Annual Incentive Awards)
Change in Control. Notwithstanding anything in this Agreement to the
contrary (except for the provision dealing with a limitation under
Section 280G of the Internal Revenue Code of 1986, as amended), if,
within two years after the date of a Change in Control (as defined
below), the awardholder experiences a termination of employment that
would otherwise entitle him to receive the payment of severance benefits
under the provisions of the severance plan that are in effect and that
he participates in as of the date of such Change in Control, (i) the
awardholder shall immediately be 100% vested in the Award; (ii) the
Committee shall determine the value of the Award as of the date of such
termination of employment as if the Award Period had just ended, based
on results against the percentage performance measures to the last day
of calendar quarter ending on or immediately prior to such date (that
is, based on the percentage of grant value produced by such interim
results), but prorated based on (a) the total number of full and partial
months of the Award Period which have elapsed between (X) January 1 of
the year in which the Award Date occurs, and (Y) the date of such
termination of employment, divided by (b) the total number of months in
the Award Period; and (iii) such value of the Award shall be paid to the
awardholder within five days after the date of such termination of
employment. The Committee may not amend or delete this section of this
Agreement in a manner that is detrimental to the awardholder, without
his written consent. A "Change in Control" means the happening of any
of the following:
[See long definition in Section VI below.]
VI. Definition of "Change in Control"
(a) Any individual, entity or group (a "Person") (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
25% or more of either (i) the then outstanding common shares of the
Company (the "Outstanding Company Common Shares") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that such
beneficial ownership shall not constitute a Change in Control if it
<PAGE>
occurs as a result of any of the following acquisitions of securities:
(i) any acquisition directly from the Company, (ii) any acquisition by
the Company or any corporation, partnership, trust or other entity
controlled by the Company (a "Subsidiary"), (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary or (iv) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the conditions described
in clauses (i), (ii) and (iii) of subsection (c) of this Change in
Control Section are satisfied. Notwithstanding the foregoing, a Change
in Control shall not be deemed to occur solely because any Person (the
"Subject Person") became the beneficial owner of 25% or more of the
Outstanding Company Common Shares or Outstanding Company Voting
Securities as a result of the acquisition of Outstanding Company Common
Shares or Outstanding Company Voting Securities by the Company which, by
reducing the number of Outstanding Company Common Shares or Outstanding
Company Voting Securities, increases the proportional number of shares
beneficially owned by the Subject Person; provided, that if a Change in
Control would be deemed to have occurred (but for the operation of this
sentence) as a result of the acquisition of Outstanding Company Common
Shares or Outstanding Company Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person becomes
the beneficial owner of any additional Outstanding Company Common Shares
or Outstanding Company Voting Securities which increases the percentage
of the Outstanding Company Common Shares or Outstanding Company Voting
Securities beneficially owned by the Subject Person, then a Change in
Control shall then be deemed to have occurred; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an
actual or threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board, including by reason of agreement intended to avoid or
settle any such actual or threatened contest or solicitation; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following
such reorganization, merger or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Shares and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, (ii) no Person (excluding
the Company, any employee benefit plan (or related trust) of the
Company, a Subsidiary or such corporation resulting from such
reorganization, merger or consolidation or any subsidiary thereof, and
any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% or
more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
<PAGE>
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale, lease,
exchange or other disposition of all or substantially all of the assets
of the Company, other than to a corporation, with respect to which
following such sale, lease, exchange or other disposition (A) more than
60% of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting Securities immediately
prior to such sale, lease, exchange or other disposition, (B) no Person
(excluding the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary or such corporation or a subsidiary
thereof and any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or indirectly, 25%
or more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of
the members of the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company.
VII. Applicable to all awards in I through V above:
Notwithstanding any other provision of this Agreement to the contrary,
if all or any portion of the payments or benefits to which the
participant will be entitled under this Agreement, either alone or
together with other payments or benefits which the participant receives
or is entitled to receive directly or indirectly from the Company or any
of its subsidiaries or any other person or entity that would be treated
as a payor of parachute payments as hereinafter defined, under any other
plan, agreement or arrangement, would constitute a "parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code") or any successor provision thereto and the
regulations thereunder (except that "2.95" shall be used instead of "3"
under Section 280G(b)(2)(A)(ii) of the Code or any successor provision
thereto), such payment or benefits provided to the participant under
this Agreement, and any other payments or benefits which the participant
receives or is entitled to receive directly or indirectly from the
Company or any of its subsidiaries or any other person or entity that
would be treated as a payor of parachute payments as hereinafter
defined, under any other plan, agreement or arrangement which would
constitute a parachute payment, shall be reduced (but not below zero) as
described below to the extent necessary so that no portion thereof would
constitute such a parachute payment as previously defined (except that
"2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of
the Code or any successor provision thereto).
Whether payments or benefits to the participant are to be reduced
pursuant to the first sentence of this paragraph, and the extent to
which they are to be so reduced, will be determined by the firm serving,
<PAGE>
immediately prior to the Change in Control, as the Company's independent
auditors, or if that firm refuses to serve, by another qualified firm,
whether or not serving as independent auditors, designated by the
Administration Committee under the American Express Senior Executive
Severance Plan (the "Firm"). The Firm will be paid reasonable
compensation by the Company for such services. If the Firm concludes
that its determination is inconsistent with a final determination of a
court or the Internal Revenue Service, the Firm shall, based on such
final determination, redetermine whether the amount payable to the
participant should have been reduced and, if applicable, the amount of
any such reduction. If the Firm determines that a lesser payment should
have been made to the participant, then an amount equal to the amount of
the excess of the earlier payment over the redetermined amount (the
"Excess Amount") will be deemed for all purposes to be a loan to the
participant made on the date of the participant's receipt of such Excess
Amount, which the participant will have an obligation to repay to the
Company on the fifth business day after demand, together with interest
on such amount at the lowest applicable Federal rate (as defined in
Section 1274(d) of the Code or any successor provision thereto),
compounded semi-annually (the "Section 1274 Rate") from the date of the
participant's receipt of such Excess Amount until the date of such
repayment (or such lesser rate (including zero) as may be designated by
the Firm such that the Excess Amount and such interest will not be
treated as a parachute payment as previously defined). If the Firm
determines that a greater payment should have been made to the
participant, within five business days of such determination, the
Company will pay to the participant the amount of the deficiency,
together with interest thereon from the date such amount should have
been paid to the date of such payment, at the Section 1274 Rate (or such
lesser rate (including zero) as may be designated by the Firm such that
the amount of such deficiency and such interest will not be treated as a
parachute payment as previously defined). If a reduction is to be made
pursuant to this paragraph, the Firm will have the right to determine
which payments and benefits will be reduced as described below based on
the following hierarchy from the first to be reduced to the last (or on
such other hierarchy chosen by the Firm in its sole discretion), either
those under this Agreement alone or such other payments or benefits
which the participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or any other
person or entity that would be treated as a payor of parachute payments
as previously defined, under any other plan, agreement or arrangement:
(I) nonqualified stock option awards;
(II) restricted stock awards, awards in lieu of restricted stock
awards, and restricted stock units;
(III) amounts payable under deferred compensation (including, but
not limited to, base salary, cash bonus or annual incentive
awards, and long-term incentive awards) programs;
(IV) any other awards or amounts not described in (I), (II) or
(III) above that would be payable or provided upon a Change
in Control;
(V) amounts payable under severance benefit plans;
(VI) amounts payable under annual incentive (e.g., cash bonus)
plans;
(VII) portfolio grant awards and performance grant awards;
<PAGE>
(VIII) amounts payable under employee welfare benefit plans, such
as life insurance plans (including, but not limited to, the
American Express Key Executive Life Insurance Plan);
(IX) amounts payable under nonqualified employee pension benefit
plans; and
(X) any other awards or amounts not described in (V), (VI),
(VII), (VIII) or (IX) above that would be payable or
provided upon a termination of employment that occurs within
two years after a Change in Control as described in the
Change in Control provision above.
The payments and benefits subject to reduction pursuant to this
paragraph include one or more attributes thereof, including, but not
limited to, acceleration of the time for the vesting or payment thereof
and the crediting of additional interest equivalents thereunder. Such
reduction may be effected by the reduction or elimination, in whole or
in part, of any such payment or benefit (including any or all attributes
thereof). If a payment or benefit (including any or all attributes
thereof) is reduced in part, the remaining portion of the payment or
benefit (including any or all attributes thereof) will continue in full
force and effect under the provisions of such payment or benefit
(including any or all attributes thereof) as if the Change in Control
did not occur and without regard to such reduction or elimination.
Nothing in the preceding three sentences of this paragraph is intended
or should be interpreted to change the calculated reduction amounts and
procedure of this paragraph.
<PAGE>
EXHIBIT 12.1
AMERICAN EXPRESS COMPANY
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Nine Months
Ended Years Ended December 31,
September 30, -----------------------------------
1994 1993 1992 1991 1990
Earnings: ------------ ---- ---- ---- ----
Pretax income from
continuing operations $1,416 $2,326 $ 896 $ 622 $1,578
Interest expense 1,409 1,783 2,171 2,761 3,160
Other adjustments 101 88 196 142 209
----- ----- ----- ----- -----
Total earnings (a) $2,926 $4,197 $3,263 $3,525 $4,947
----- ----- ----- ----- -----
Fixed charges:
Interest expense $1,409 $1,783 $2,171 $2,761 $3,160
Other adjustments 99 130 154 147 143
----- ----- ----- ----- -----
Total fixed charges (b) $1,508 $1,913 $2,325 $2,908 $3,303
----- ----- ----- ----- -----
Ratio of earnings to
fixed charges (a/b) 1.94 2.19 1.40 1.21 1.50
Included in interest expense in the above computation is interest
expense related to the Company's international banking operations and
Travel Related Services' consumer lending activities, which is netted
against interest and dividends in the Consolidated Statement of Income.
For purposes of the "earnings" computation, other adjustments include
adding the amortization of capitalized interest, the net loss of
affiliates accounted for at equity whose debt is not guaranteed by the
Company, the minority interest in the earnings of majority-owned
subsidiaries with fixed charges, and the interest component of rental
expense and subtracting undistributed net income of affiliates accounted
for at equity.
For purposes of the "fixed charges" computation, other adjustments
include capitalized interest costs and the interest component of rental
expense.
On May 31, 1994, the Company completed the spin-off of Lehman Brothers
through a dividend to American Express common shareholders.
Accordingly, Lehman Brothers' results are reported as a discontinued
operation and are excluded from the above computation for all periods
presented. In March 1993, the Company reduced its ownership in First
Data Corporation to approximately 22 percent through a public offering.
As a result, beginning in 1993 FDC is reported as an equity investment
in the above computation.
<PAGE>
EXHIBIT 12.2
AMERICAN EXPRESS COMPANY
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED SHARE DIVIDENDS
(Dollars in millions)
Nine Months
Ended Years Ended December 31,
September 30, ----------------------------------
1994 1993 1992 1991 1990
Earnings: ---- ---- ---- ---- ----
Pretax income from
continuing operations $1,416 $2,326 $ 896 $ 622 $1,578
Interest expense 1,409 1,783 2,171 2,761 3,160
Other adjustments 101 88 196 142 209
----- ----- ----- ----- -----
Total earnings (a) $2,926 $4,197 $3,263 $3,525 $4,947
----- ----- ----- ----- -----
Fixed charges and
preferred share
dividends:
Interest expense $1,409 $1,783 $2,171 $2,761 $3,160
Dividends on preferred
shares 44 66 65 61 74
Other adjustments 99 130 154 147 143
----- ----- ----- ----- -----
Total fixed charges and
preferred share
dividends (b) $1,552 $1,979 $2,390 $2,969 $3,377
----- ----- ----- ----- -----
Ratio of earnings to
fixed charges and
preferred share
dividends (a/b) 1.89 2.12 1.37 1.19 1.46
Included in interest expense in the above computation is interest
expense related to the Company's international banking operations and
Travel Related Services' consumer lending activities, which is netted
against interest and dividends in the Consolidated Statement of Income.
For purposes of the "earnings" computation, other adjustments include
adding the amortization of capitalized interest, the net loss of
affiliates accounted for at equity whose debt is not guaranteed by the
Company, the minority interest in the earnings of majority-owned
subsidiaries with fixed charges, and the interest component of rental
expense and subtracting undistributed net income of affiliates accounted
for at equity.
For purposes of the "fixed charges and preferred share dividends"
computation, dividends on outstanding preferred shares have been
increased to an amount representing the pretax earnings required to
cover such dividend requirements. Other adjustments include capitalized
interest costs and the interest component of rental expense.
On May 31, 1994, the Company completed the spin-off of Lehman Brothers
through a dividend to American Express common shareholders.
Accordingly, Lehman Brothers' results are reported as a discontinued
operation and are excluded from the above computation for all periods
presented. In March 1993, the Company reduced its ownership in First
Data Corporation to approximately 22 percent through a public offering.
As a result, beginning in 1993 FDC is reported as an equity investment
in the above computation.
<PAGE>
Exhibit 15
November 14, 1994
The Shareholders and Board of Directors
American Express Company
We are aware of the incorporation by reference in Registration Statements
(Forms S-8 No. 2-46918, No. 2-59230, No. 2-64285, No. 2-73954,
No. 2-74368, No. 2-89115, No. 2-89680, No. 2-93654, No. 2-97617, No. 33-01771,
No. 33-02980, No. 33-05875, No. 33-06350, No. 33-17133, No. 33-19724,
No. 33-24675, No. 33-28721, No. 33-32876, No. 33-33552, No. 33-34005,
No. 33-34625, No. 33-36422, No. 33-37882, No. 33-38777, No. 33-43671,
No. 33-43695, No. 33-45584, No. 33-48629, No. 33-55344, No. 33-62124 and
33-65008; Forms S-3 No. 2-89469, No. 2-95771, No. 33-06038, No. 33-07435,
No. 33-17706, No. 33-40636, No. 33-43268, No. 33-66654 and No. 33-50997) of
American Express Company of our report dated November 14, 1994 relating to the
unaudited consolidated interim financial statements of American Express
Company which are included in its Form 10-Q for the three-month and nine-month
periods ended September 30, 1994.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a
part of the registration statement prepared or certified by accountants within
the meaning of Section 7 or 11 of the Securities Act of 1933.
/s/Ernst & Young LLP
New York, New York
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Company's Consolidated Balance Sheet at September 30,
1994 and Consolidated Statement of Income for the nine months
ended September 30, 1994 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 6,959
<SECURITIES> 39,495
<RECEIVABLES> 16,531
<ALLOWANCES> 788
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,475
<DEPRECIATION> 1,570
<TOTAL-ASSETS> 98,195
<CURRENT-LIABILITIES> 0
<BONDS> 22,324
<COMMON> 305
0
200
<OTHER-SE> 6,356
<TOTAL-LIABILITY-AND-EQUITY> 98,195
<SALES> 0
<TOTAL-REVENUES> 10,480
<CGS> 0
<TOTAL-COSTS> 5,030
<OTHER-EXPENSES> 1,086
<LOSS-PROVISION> 2,207
<INTEREST-EXPENSE> 741
<INCOME-PRETAX> 1,416
<INCOME-TAX> 371
<INCOME-CONTINUING> 1,045
<DISCONTINUED> 33
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,078
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 0
</TABLE>
