<PAGE>
RULE NO. 424(b)(2)
REGISTRATION NO. 333-55761
REGISTRATION NO. 333-55761-01
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE +
+ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 9, 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 24, 1998
20,000,000 PREFERRED SECURITIES
AMERICAN EXPRESS COMPANY CAPITAL TRUST I
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES, SERIES I (QUIPS SM)*
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
AMERICAN EXPRESS COMPANY
LOGO ----------
The % Cumulative Quarterly Income Preferred Securities, Series I (the
"QUIPS" or "Capital Securities"), offered hereby represent beneficial interests
in American Express Company Capital Trust I, a statutory business trust created
under the laws of the State of Delaware (the "Issuer"). American Express
Company, a New York corporation (the "Corporation"), will be the owner of all
of the beneficial interests represented by common securities of the Issuer (the
"Common Securities" and, collectively with the Capital Securities, the "Trust
Securities"). Bankers Trust Company is the Property Trustee of the Issuer. The
Issuer exists for the sole purpose of issuing the Trust Securities and
investing the proceeds thereof in $515,464,000 initial principal amount of %
Junior Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures"), to be issued by the Corporation and engaging in only those other
activities necessary or incidental thereto. The Subordinated Debentures will
mature on , 2028, which date may be shortened to a date not earlier than
, 2013.
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-5 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE CAPITAL SECURITIES.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) THE ISSUER(3)(4)
----------------- ------------- ----------------
<S> <C> <C> <C>
Per Capital Security................... $ (3) $
Total.................................. $ (3) $
</TABLE>
- -----
(1) Plus accrued Distributions, if any, from , 1998.
(2) The Issuer and the Corporation have each agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(3) In view of the fact that the proceeds of the sale of the QUIPS will be
invested in the Junior Subordinated Debentures, the Corporation has agreed
to pay to the Underwriters as compensation ("Underwriters' Compensation")
for their arranging the investment therein of such proceeds $ per QUIP
(or $ in the aggregate). See "Underwriting".
(4) Expenses of the offering which are payable by the Corporation are estimated
to be $ .
The QUIPS offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Capital Securities will be ready for delivery in book-entry form only through
the facilities of The Depository Trust Company in New York, New York, on or
about , 1998, against payment therefor in immediately available funds. See
"Underwriting".
- -----
*QUIPS is a servicemark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
----------
The date of this Prospectus Supplement is , 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CAPITAL
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING
AND AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
----------------
(cover page continued)
The Capital Securities will have a preference under certain circumstances
with respect to cash distributions and amounts payable on liquidation,
redemption or otherwise over the Common Securities. See "Description of
Capital Securities--Subordination of Common Securities" in the accompanying
Prospectus.
Holders of the Capital Securities will be entitled to receive preferential
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on the first day of , , and
of each year, commencing on , 1998, at the annual rate of % of the
Liquidation Amount of $25 per Capital Security ("Distributions"). Subject to
certain exceptions, as described herein, the Corporation has the right to
defer payment of interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarters with
respect to each deferral period (each, an "Extension Period"), provided that
no Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all interest then accrued and unpaid (together with interest
thereon at the rate of % per annum, compounded quarterly, to the extent
permitted by applicable law), the Corporation may elect to begin a new
Extension Period subject to the requirements set forth herein. If interest
payments on the Junior Subordinated Debentures are so deferred, Distributions
on the Capital Securities will also be deferred and the Corporation will not
be permitted, subject to certain exceptions described herein, to declare or
pay any cash distributions with respect to the Corporation's capital stock or
debt securities that rank pari passu with or junior to the Junior Subordinated
Debentures. During an Extension Period, interest on the Junior Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Capital Securities are entitled will accumulate) at the rate of
% per annum, compounded quarterly from the relevant payment date for such
interest, and holders of Capital Securities will be required to accrue
interest income for United States federal income tax purposes. See "Certain
Terms of Junior Subordinated Debentures--Option to Defer Interest Payments"
and "U.S. Federal Income Tax Consequences--Interest Income and Original Issue
Discount".
The Junior Subordinated Debentures are unsecured and subordinated to all
Senior Debt (as defined in the accompanying Prospectus). Substantially all of
the Corporation's existing indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate
in any distribution of assets of any subsidiary, including American Express
Travel Related Services Company, Inc., American Express Financial Corporation
and American Express Bank Ltd., upon such subsidiary's liquidation or
reorganization or otherwise (and, thus, the ability of holders of Capital
Securities to benefit indirectly from such distribution), is subject to the
prior claims of creditors of that subsidiary except to the extent that the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Junior Subordinated Debentures (and therefore the Capital
Securities) will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders thereof should look
only to the assets of the Corporation for payments on the Junior Subordinated
Debentures. See "Description of Junior Subordinated Debentures--Subordination"
in the accompanying Prospectus.
S-2
<PAGE>
The Corporation has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein), taken together, fully, irrevocably and unconditionally
guaranteed all of the Issuer's obligations under the Capital Securities. See
"Relationship Among the Capital Securities, the Corresponding Junior
Subordinated Debentures, the Expense Agreement and the Guarantees--Full and
Unconditional Guarantee" in the accompanying Prospectus. The Guarantee of the
Corporation guarantees the payment of Distributions and payments on
liquidation or redemption of the Capital Securities, but only in each case to
the extent of funds held by the Issuer, as described herein (the "Guarantee").
See "Description of Guarantees" in the accompanying Prospectus. If the
Corporation does not make interest payments on the Junior Subordinated
Debentures held by the Issuer, the Issuer will have insufficient funds to pay
Distributions on the Capital Securities. The Guarantee does not cover payment
of Distributions when the Issuer has insufficient funds to pay such
Distributions. In such event, a holder of Capital Securities may institute a
legal proceeding directly against the Corporation pursuant to the terms of the
Indenture to enforce payment of amounts equal to such Distributions to such
holder. See "Description of Junior Subordinated Debentures--Enforcement of
Certain Rights By Holders of Capital Securities" in the accompanying
Prospectus. The obligations of the Corporation under the Guarantee and the
Capital Securities are subordinate and junior in right of payment to all
Senior Debt of the Corporation.
The Capital Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the Junior Subordinated Debentures at maturity or
their earlier redemption. The Junior Subordinated Debentures are redeemable
prior to maturity at the option of the Corporation (i) on or after ,
2003, in whole at any time or in part from time to time or (ii) at any time
prior to , 2003 in whole (but not in part) at any time within 90 days
following the occurrence and continuation of a Tax Event or an Investment
Company Event (each as defined herein), in each case at the redemption price
set forth herein, which includes the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption.
The Corporation will have the right at any time to terminate the Issuer and
cause the Junior Subordinated Debentures to be distributed to the holders of
the Capital Securities in liquidation of the Issuer.
In the event of the termination of the Issuer, after satisfaction of
liabilities to creditors of the Issuer as required by applicable law, the
holders of the Capital Securities will be entitled to receive a Liquidation
Amount of $25 per Capital Security plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a distribution of
such amount in Junior Subordinated Debentures, subject to certain exceptions.
See "Description of Capital Securities--Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
Application has been made to list the Capital Securities on the New York
Stock Exchange under the symbol " ." If the Junior Subordinated Debentures
are distributed to the holders of Capital Securities upon the liquidation of
the Issuer, the Corporation will use its best efforts to list the Junior
Subordinated Debentures on the New York Stock Exchange or such other stock
exchanges or other automated quotation systems, if any, on which the Capital
Securities are then listed or traded.
The Capital Securities will be represented by global certificates registered
in the name of The Depository Trust Company ("DTC") or its nominee. Beneficial
interests in the Capital Securities will be shown on, and transfers thereof
will be effected only through, records maintained by participants in DTC.
Except as described in the accompanying Prospectus, Capital Securities in
certificated form will not be issued in exchange for the global certificates.
See "Book-Entry Issuance" in the accompanying Prospectus.
S-3
<PAGE>
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT SUPPLEMENTS AND SHOULD BE READ
IN CONJUNCTION WITH THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS.
AS USED HEREIN, (I) THE "INDENTURE" MEANS THE JUNIOR SUBORDINATED INDENTURE,
AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME, BETWEEN THE CORPORATION AND
BANKERS TRUST COMPANY, AS TRUSTEE (THE "DEBENTURE TRUSTEE"), (II) THE "TRUST
AGREEMENT" MEANS THE AMENDED AND RESTATED TRUST AGREEMENT RELATING TO THE
ISSUER AMONG THE CORPORATION, AS DEPOSITOR, BANKERS TRUST COMPANY, AS PROPERTY
TRUSTEE (THE "PROPERTY TRUSTEE") AND BANKERS TRUST (DELAWARE), AS DELAWARE
TRUSTEE (THE "DELAWARE TRUSTEE") (COLLECTIVELY, THE "ISSUER TRUSTEES") AND
(III) THE "GUARANTEE" MEANS THE GUARANTEE AGREEMENT RELATING TO THE CAPITAL
SECURITIES, AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME, BETWEEN THE
CORPORATION AND BANKERS TRUST COMPANY, AS GUARANTEE TRUSTEE. EACH OF THE OTHER
CAPITALIZED TERMS USED IN THIS PROSPECTUS SUPPLEMENT AND NOT OTHERWISE DEFINED
IN THIS PROSPECTUS SUPPLEMENT HAS THE MEANING SET FORTH IN THE ACCOMPANYING
PROSPECTUS.
S-4
<PAGE>
RISK FACTORS
Prospective purchasers of the Capital Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following
matters. In addition, because holders of Capital Securities may receive Junior
Subordinated Debentures in exchange therefor upon liquidation of the Issuer,
prospective purchasers of Capital Securities are also making an investment
decision with regard to the Junior Subordinated Debentures and should
carefully review all the information regarding the Junior Subordinated
Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Corporation under the Guarantee issued by the
Corporation for the benefit of the holders of Capital Securities and under the
Junior Subordinated Debentures are unsecured and rank subordinate and junior
in right of payment to all Senior Debt of the Corporation. Substantially all
of the Corporation's existing indebtedness constitutes Senior Debt. Because
the Corporation is a holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary, including
American Express Travel Related Services Company, Inc., American Express
Financial Corporation and American Express Bank Ltd., upon such subsidiary's
liquidation or reorganization or otherwise (and, thus, the ability of holders
of the Capital Securities to benefit indirectly from such distribution), is
subject to the prior claims of creditors of that subsidiary, except to the
extent that the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures (and, therefore,
the Capital Securities) will be effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders thereof
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. See "The Corporation". None of the Indenture, the
Guarantee, the Trust Agreement or the Expense Agreement places any limitation
on the amount of secured or unsecured debt, including Senior Debt, that may be
incurred by the Corporation. See "Description of Guarantees--Status of the
Guarantees" and "Description of Junior Subordinated Debentures--Subordination"
in the accompanying Prospectus.
The ability of the Issuer to pay amounts due on the Capital Securities is
solely dependent upon the Corporation making payments on the Junior
Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no event of default under the Indenture has occurred or is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Junior Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such deferral, quarterly Distributions on the Capital Securities by the Issuer
will also be deferred (and the amount of Distributions to which holders of the
Capital Securities are entitled will accumulate additional Distributions
thereon at the rate of % per annum, compounded quarterly from the relevant
payment date for such Distributions) during any such Extension Period. During
any Extension Period, the Corporation may not (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of the Corporation's capital stock or (ii) make
any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Corporation that rank pari
passu in all respects with or junior in interest to the Junior Subordinated
Debentures (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Corporation in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
one or more employees, officers, directors or consultants, in connection with
a
S-5
<PAGE>
dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Corporation (or securities convertible
into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series
of the Corporation's capital stock, (c) the purchase of fractional interests
in shares of the Corporation's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise
of such warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks pari passu with or junior to such stock).
Prior to the termination of any such Extension Period, the Corporation may
further defer the payment of interest, provided that no Extension Period may
exceed 20 consecutive quarters or extend beyond the Stated Maturity of the
Junior Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all interest then accrued and unpaid (together with
interest thereon at the annual rate of %, compounded quarterly from the
relevant Interest Payment Date (as defined herein) for such interest, to the
extent permitted by applicable law), the Corporation may elect to begin a new
Extension Period subject to the above requirements. There is no limitation on
the number of times that the Corporation may elect to begin an Extension
Period. See "Certain Terms of Capital Securities--Distributions" and "Certain
Terms of Junior Subordinated Debentures--Option to Defer Interest Payments".
Should an Extension Period occur, a holder of Capital Securities will be
required to recognize income (in the form of original issue discount on a
constant yield method) in respect of its pro rata share of the Junior
Subordinated Debentures held by the Issuer for United States federal income
tax purposes. As a result, a holder of Capital Securities will be required to
include such income in gross income for United States federal income tax
purposes in advance of the receipt of cash attributable to such income, and
will not receive the cash related to such income from the Issuer if the holder
disposes of the Capital Securities prior to the record date for the payment of
Distributions. See "U.S. Federal Income Tax Consequences--Interest Income and
Original Issue Discount" and "--Sale or Redemption of Capital Securities".
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. However, should the Corporation elect to exercise
such right in the future, the market price of the Capital Securities is likely
to be affected. A holder that disposes of its Capital Securities during an
Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Capital Securities.
TAX EVENT OR INVESTMENT COMPANY EVENT--REDEMPTION
Upon the occurrence and continuation of a Tax Event or an Investment Company
Event, the Corporation has the right to redeem the Junior Subordinated
Debentures in whole (but not in part) within 90 days following the occurrence
and continuation of such Tax Event or Investment Company Event and thereby
cause a mandatory redemption of the Capital Securities. See "U.S. Federal
Income Tax Consequences--Possible Tax Law Changes".
A "Tax Event" means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of (a) any
amendment to or change (including any announced prospective change) in the
laws or any regulations thereunder of the United States or any political
S-6
<PAGE>
subdivision or taxing authority thereof or therein, or (b) any judicial
decision or any official administrative pronouncement (including any private
letter ruling, technical advice memorandum or field service advice) or
regulatory procedure (an "Administrative Action"), regardless of whether such
judicial decision or Administrative Action is issued to or in connection with
a proceeding involving the Corporation or the Issuer and whether or not
subject to review or appeal, which amendment, change, Administrative Action or
decision is enacted, promulgated or announced, in each case, on or after the
date of this Prospectus Supplement, there is more than an insubstantial risk
that (i) the Issuer is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to income received or
accrued on the Junior Subordinated Debentures, (ii) interest payable by the
Corporation or original issue discount accruing on the Junior Subordinated
Debentures is not, or within 90 days of such opinion, will not be, deductible
by the Corporation, in whole or in part, for United States federal income tax
purposes, or (iii) the Issuer is, or will be within 90 days of the date of the
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means the receipt by the Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a written change (including any
announced prospective change) in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Capital Securities.
EXCHANGE OF CAPITAL SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES
The holders of all of the outstanding Common Securities have the right at
any time to terminate the Issuer and, after satisfaction of liabilities to
creditors of the Issuer as required by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities and Common Securities in exchange therefor upon liquidation of the
Issuer. See "Certain Terms of Capital Securities--Liquidation of Issuer and
Distribution of Junior Subordinated Debentures to Holders".
Under current United States federal income tax law and interpretations, a
distribution of the Junior Subordinated Debentures upon liquidation of the
Issuer would not be a taxable event to holders of the Capital Securities.
However, if any event described in clauses (a) and (b) of the definition of
"Tax Event" above were to occur which would cause the Issuer to be subject to
United States federal income tax with respect to income received or accrued on
the Junior Subordinated Debentures, as the case would be if, for example, the
Issuer were treated as an association taxable as a corporation, a distribution
of the Junior Subordinated Debentures by the Issuer could be a taxable event
to the Issuer and the holders of the Capital Securities. See "U.S. Federal
Income Tax Consequences--Distribution of the Junior Subordinated Debentures to
Holders of Capital Securities Upon Liquidation of the Issuer".
SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
The Corporation will have the right at any time to shorten the maturity of
the Junior Subordinated Debentures to a date not earlier than , 2013 and
thereby cause the Capital Securities to be redeemed on such earlier date.
MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures that may be distributed in exchange for Capital
Securities upon liquidation of the Issuer. Accordingly, the Capital Securities
that an investor may purchase, whether pursuant to the offer made hereby or in
the secondary market, or the Junior Subordinated Debentures that a holder of
Capital
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<PAGE>
Securities may receive on liquidation of the Issuer, may trade at a discount
to the price that the investor paid to purchase the Capital Securities offered
hereby. As a result of the existence of the Corporation's right to defer
interest payments, the market price of the Capital Securities (which represent
preferred beneficial interests in the Issuer) may be more volatile than the
market prices of other securities on which original issue discount accrues
that are not subject to such deferrals. In addition, because the Corporation
has the right to shorten the Stated Maturity of the Junior Subordinated
Debentures, there can be no assurance that the Corporation will not exercise
its option to change the maturity of the Junior Subordinated Debentures as
permitted by the terms thereof and of the Indenture. If the Corporation does
exercise such option, there can be no assurance that the shortening the
maturity of the Junior Subordinated Debentures will not have an effect on the
market price of the Capital Securities. See "Certain Terms of the Junior
Subordinated Debentures" and "Description of Junior Subordinated Debentures--
Corresponding Junior Subordinated Debentures" in the accompanying Prospectus.
RIGHTS UNDER THE GUARANTEE; DIRECT ACTION
The Guarantee guarantees to the holders of the Capital Securities the
following payments, to the extent not paid by the Issuer: (i) any accumulated
and unpaid Distributions required to be paid on the Capital Securities, to the
extent that the Issuer has funds on hand available therefor at such time,
(ii) the redemption price with respect to any Trust Securities called for
redemption, to the extent that the Issuer has funds on hand available therefor
at such time, and (iii) upon a voluntary or involuntary dissolution, winding-
up or liquidation of the Issuer (unless the Junior Subordinated Debentures are
distributed to holders of the Trust Securities), the lesser of (a) the
aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment to the extent that the Issuer has funds
on hand available therefor at such time and (b) the amount of assets of the
Issuer remaining available for distribution to holders of the Capital
Securities. The Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Bankers Trust
Company will act as the indenture trustee under the Guarantee (the "Guarantee
Trustee") for the purposes of compliance with the Trust Indenture Act and will
hold the Guarantee for the benefit of the holders of the Capital Securities.
Bankers Trust Company will also act as Debenture Trustee for the Junior
Subordinated Debentures and as Property Trustee under the Trust Agreement and
Bankers Trust (Delaware) will act as Delaware Trustee under the Trust
Agreement.
The holders of not less than a majority in aggregate liquidation amount of
the outstanding Capital Securities have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Guarantee. Any
holder of the Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Issuer, the Guarantee Trustee
or any other person or entity. If the Corporation were to default on its
obligation to pay amounts payable under the Junior Subordinated Debentures,
the Issuer would lack funds for the payment of Distributions or amounts
payable on redemption of the Capital Securities or otherwise, and, in such
event, holders of the Capital Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, in the event a Debenture Event
of Default shall have occurred and be continuing and such event is
attributable to the failure of the Corporation to pay interest on or principal
of the Junior Subordinated Debentures on the payment date on which such
payment is due and payable, then a holder of Capital Securities may institute
a legal proceeding directly against the Corporation for enforcement of payment
to such holder of the principal of or interest on such Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Capital Securities of such holder (a "Direct Action"). In connection
with such Direct Action, the Corporation will have a right of set-off under
the Indenture to the extent of any payment made by the Corporation to such
holder of Capital Securities in the Direct Action. Except as described herein,
holders of Capital Securities will not be able to exercise directly any other
remedy available to the
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<PAGE>
holders of the Junior Subordinated Debentures or assert directly any other
rights in respect of the Junior Subordinated Debentures. See "Description of
Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of
Capital Securities" and "--Debenture Events of Default" and "Description of
Guarantees" in the accompanying Prospectus. The Trust Agreement provides that
each holder of Capital Securities by acceptance thereof agrees to the
provisions of the Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities generally will have limited voting rights
relating generally to the modification of the Capital Securities and the
Guarantee and the exercise of the Issuer's rights as holder of Junior
Subordinated Debentures. Holders of Capital Securities will not be entitled to
vote to appoint, remove or replace the Property Trustee or the Delaware
Trustee except upon the occurrence of certain events described in the
accompanying Prospectus. The Property Trustee and the holders of all of the
Common Securities may, subject to certain conditions, amend the Trust
Agreement without the consent of holders of Capital Securities to ensure that
(i) the Issuer will be classified for United States federal income tax
purposes as a grantor trust or as other than as an association taxable as a
corporation, (ii) the Junior Subordinated Debentures will be treated as
indebtedness of the Corporation or (iii) the Issuer will not be required to
register as an "investment company" under the Investment Company Act. See
"Description of Capital Securities--Voting Rights; Amendment of Each Trust
Agreement" and "--Removal of Issuer Trustees; Appointment of Successors" in
the accompanying Prospectus.
TRADING CHARACTERISTICS OF CAPITAL SECURITIES
Application has been made to list the Capital Securities on the New York
Stock Exchange under the symbol " ". The Capital Securities may trade at
prices that do not fully reflect the value of accrued but unpaid interest with
respect to the underlying Junior Subordinated Debentures. A holder of Capital
Securities that disposes of its Capital Securities between record dates for
payments of Distributions (and consequently does not receive a Distribution
from the Issuer for the period prior to such disposition) will nevertheless be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income for
U.S. federal income tax purposes. Such holder will recognize a capital loss to
the extent the selling price (which may not fully reflect the value of accrued
but unpaid interest) is less than its adjusted tax basis. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "U.S. Federal Income Tax
Consequences--Sale or Redemption of Capital Securities".
As indicated above, application has been made to list the Capital Securities
on the New York Stock Exchange. If the Capital Securities are not listed on a
national securities exchange or the NASDAQ National Market and the
underwriters do not make a market for the securities, the liquidity of the
Capital Securities could be adversely affected.
AMERICAN EXPRESS COMPANY CAPITAL TRUST I
American Express Company Capital Trust I is a statutory business trust
created under Delaware law pursuant to (i) the Trust Agreement executed by the
Corporation, as Depositor and Bankers Trust (Delaware), as Delaware Trustee
and (ii) the filing of a certificate of trust with the Delaware Secretary of
State on May 29, 1998. The Issuer's business and affairs are conducted by its
trustees: initially Bankers Trust Company, as Property Trustee and Bankers
Trust (Delaware), as Delaware Trustee. In addition, two individuals who are
employees or officers of or affiliated with the holder of a majority of the
Common Securities will act as administrators with respect to the Issuer (the
"Administrators"). The
S-9
<PAGE>
Administrators will be selected by the holders of the Common Securities. See
"Description of Capital Securities--Miscellaneous" in the accompanying
Prospectus. The Issuer exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, (ii) using the proceeds from the sale of Trust
Securities to acquire Junior Subordinated Debentures issued by the Corporation
and (iii) engaging in only those other activities necessary or incidental
thereto (such as registering the transfer of the Capital Securities).
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Issuer, and payments under the Junior Subordinated Debentures will be the sole
revenue of the Issuer.
All of the Common Securities will be initially owned by the Corporation. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Capital Securities, except that upon the occurrence and
continuance of an event of default under the Trust Agreement resulting from an
event of default under the Indenture, the rights of the Corporation, as holder
of the Common Securities, to payment in respect of Distributions and payments
upon liquidation, redemption or otherwise will be subordinated to the rights
of the holders of the Capital Securities. See "Description of Capital
Securities--Subordination of Common Securities" in the accompanying
Prospectus. The Corporation will acquire Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of the Issuer. The Issuer
has a term of 55 years, but may terminate earlier as provided in the Trust
Agreement. The principal executive office of the Issuer is at World Financial
Center, 200 Vesey Street, New York, New York 10285, and its telephone number
is (212) 640-2000. See "The Issuers" in the accompanying Prospectus.
It is anticipated that the Issuer will not be subject to the reporting
requirements under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
THE CORPORATION
Through its subsidiaries, the Corporation is primarily engaged in the
business of providing travel related services, financial advisory services and
international banking services throughout the world.
Travel related services are offered principally through American Express
Travel Related Services Company, Inc. and its subsidiaries ("TRS") and include
a variety of products and services, including the American Express(R) Card,
the Optima Card(R) and other consumer and corporate lending products (the
"Cards"), the American Express(R) Travelers Cheque (the "Travelers Cheque")
and other stored value products, business expense management products and
services, tax preparation and bookkeeping services, corporate and consumer
travel products and services, magazine publishing, and management and merchant
transaction processing, point of sale and back office products and services.
At December 31, 1997, there were 42.7 million Cards in force worldwide, and
worldwide Card billed business for the year ended December 31, 1997 was $209.2
billion. U.S. consumer lending operations are conducted by American Express
Centurion Bank, a wholly-owned subsidiary of TRS whose deposits are insured by
the Federal Deposit Insurance Corporation. Travelers Cheque sales for the year
ended December 31, 1997 were $25 billion.
American Express Financial Corporation ("AEFC") and its subsidiaries are
engaged in providing a variety of financial products and services to help
individuals, businesses and institutions establish and achieve their financial
goals. AEFC's products and services include financial planning and advice,
insurance and annuities, a variety of investment products, including
investment certificates, mutual funds and limited partnerships, investment
advisory services, trust and employee plan administration services, personal
auto and homeowner's insurance and retail securities brokerage services. At
December 31, 1997, American Express Financial Advisors Inc. ("AEFA"), AEFC's
principal marketing subsidiary, maintained a nationwide financial planning
field force of 8,776 persons. At December 31, 1997, AEFA's assets owned and/or
managed totaled approximately $173.4 billion.
S-10
<PAGE>
American Express Bank Ltd., together with its subsidiaries ("AEBL") offers
products that meet the financial services needs of four client groups:
corporations, financial institutions, affluent individuals and retail
customers. AEBL's five primary business lines are corporate banking and
finance, correspondent banking, private banking, personal financial services
and global trading. AEBL does not do business in the United States except as
an incident to its activities outside the United States.
The Corporation has its principal executive offices at World Financial
Center, 200 Vesey Street, New York, New York 10285, and its telephone number
is (212) 640-2000.
S-11
<PAGE>
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Corporation's ratios of earnings to fixed
charges for the years and periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31 YEAR ENDED DECEMBER 31,
------------- ------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 2.09 2.26 2.22 2.17 1.86 1.90 2.20
</TABLE>
In computing the ratio of earnings to fixed charges, "earnings" consist of
pretax income from continuing operations plus interest expense and other
adjustments. For purposes of computing "earnings", other adjustments included
adding the amortization of capitalized interest, the net loss of affiliates
accounted for under the equity method whose debt is not guaranteed by the
Corporation, 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 under the
equity method.
"Fixed charges" consist of interest expense and other adjustments, including
capitalized interest costs and the interest component of rental expense.
Interest expense includes interest expense related primarily to the
international banking operations of the Corporation and TRS's Cardmember
lending activities, which is netted against interest and dividends and
Cardmember lending net finance charge revenue, respectively, in the
Corporation's Consolidated Statements of Income.
On May 31, 1994, the Corporation completed the spin-off of Lehman Brothers
Holdings, Inc. ("Lehman Brothers") through a dividend to common shareholders
of the Corporation. 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 Corporation reduced its ownership in
First Data Corporation ("FDC") to approximately 22 percent through a public
offering. As a result, beginning in 1993, FDC was reported as an equity
investment in the above computation. In the fourth quarter of 1995, the
Corporation's ownership was further reduced to approximately 10 percent as a
result of shares issued by FDC in connection with a merger transaction.
Accordingly, as of December 31, 1995, the Corporation's investment in FDC is
accounted for as Investments--Available for sale.
S-12
<PAGE>
USE OF PROCEEDS
All of the proceeds from the sale of Capital Securities will be invested by
the Issuer in Junior Subordinated Debentures. The Corporation intends that the
proceeds from the sale of such Junior Subordinated Debentures will be used for
general corporate purposes.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries (in millions) as of December 31, 1997 and as
adjusted to give effect to the consummation of the offering of the Capital
Securities. The following data should be read in conjunction with the
consolidated financial statements and notes thereto included in the documents
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
OUTSTANDING
DECEMBER 31, AS
1997 ADJUSTED
------------ --------
<S> <C> <C>
LONG-TERM INDEBTEDNESS
Notes due June 15, 2000................................ $ 300 $
Notes due November 15, 2001............................ 299
Notes due August 15, 2001.............................. 299
Floating Rate Notes due December 18, 2001.............. 300
Floating Rate Notes due May 1, 2002.................... 399
Notes due August 12, 2002.............................. 400
Notes due June 23, 2004................................ 499
Other Fixed Senior Notes due 1998-2022................. 1,509
Other Floating Senior Notes due 1998-2002.............. 3,106
Other Floating Rate Notes due 1999-2004................ 506
Other Fixed Rate Notes due 1998-2006................... 256
------- -----
Total................................................ $ 7,873 $
Guaranteed Preferred Beneficial Interests in the
Corporation's Junior Subordinated Deferrable Interest
Debentures(1)........................................... --
STOCKHOLDERS' EQUITY
Common shares; par value $.60 a share (authorized 1.2
billion shares; 466.4 million shares issued and
outstanding).......................................... 280
Capital surplus........................................ 4,624
Net unrealized securities gains........................ 579
Foreign currency translation adjustments............... (97)
Retained earnings...................................... 4,188
------- -----
Total stockholders' equity........................... 9,574
------- -----
Total Capitalization..................................... $17,447 $
======= =====
</TABLE>
- --------
(1) As described herein, the sole assets of the Issuer will be $515,464,000
of % Junior Subordinated Debentures, issued by the Corporation to the
Issuer. The Junior Subordinated Debentures will mature on , 2028
which date may be shortened to a date not earlier than , 2013. The
Corporation owns all of the Common Securities of the Issuer, which accrue
distributions at the rate of % per annum.
Except as set forth herein, there has been no material change in the
consolidated capitalization of the Corporation and its subsidiaries since
December 31, 1997 to the date of this Prospectus Supplement.
S-13
<PAGE>
SELECTED FINANCIAL DATA
The following table presents summary consolidated financial data derived
from the consolidated financial statements of the Corporation. This summary is
qualified in its entirety by the financial statements and the notes thereto
included in the documents incorporated herein by reference. See "Incorporation
of Certain Documents by Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- ------- -------
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net revenues............. $ 4,521 $ 4,164 $ 17,760 $ 16,380 $ 15,921 $14,342 $13,301
Percent increase
(decrease).............. 9% 7% 8% 3% 11% 8% (7%)
Expenses................. 3,907 3,524 15,010 13,716 13,738 12,451 10,975
Income from continuing
operations before
accounting changes
As reported............. 460 454 1,991 1,901 1,564 1,380 1,605
Adjusted(1)............. 460 454 1,991 1,739 1,564 1,380 1,172
Net income............... 460 454 1,991 1,901 1,564 1,413 1,478
Return on average
shareholders'
equity(2)............... 23.1% 23.0% 23.5% 22.8% 22.0% 20.3% 20.9%
<CAPTION>
AS OF MARCH 31, AS OF AND FOR YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- ------- -------
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
Cash and cash
equivalents............. $ 4,342 $ 3,170 $ 4,179 $ 2,677 $ 3,200 $ 3,433 $ 3,312
Accounts receivable and
accrued interest, net... 20,094 19,164 21,774 20,491 19,914 17,147 16,142
Investments.............. 39,876 38,140 39,648 38,339 42,561 40,108 39,308
Loans, net............... 19,416 19,182 20,109 18,518 16,091 14,722 14,796
Total assets............. 120,303 108,105 120,003 108,512 107,405 97,006 94,132
Customers' deposits...... 9,724 10,603 9,444 9,555 9,889 10,013 11,131
Travelers Cheques
outstanding............. 5,585 5,766 5,634 5,838 5,697 5,271 4,800
Insurance and annuity
reserves................ 26,039 25,817 26,165 25,674 25,157 24,849 23,406
Short-term debt.......... 18,151 17,324 20,570 18,402 17,654 14,810 12,489
Long-term debt........... 8,140 6,331 7,873 6,552 7,570 7,162 8,561
Shareholders' equity..... 9,425 8,382 9,574 8,528 8,220 6,433 8,734
</TABLE>
- --------
(1) Adjusted to exclude: in 1996--a $300 million gain on the exchange of the
Corporation's DECS and a $138 million restructuring charge; 1993--a $433
million gain on the sale of FDC shares.
(2) Return on average shareholders' equity is based on adjusted income from
continuing operations before accounting changes and excludes the effect of
SFAS No. 115 beginning in 1994.
S-14
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer will be treated as a subsidiary
of the Corporation and, accordingly, the accounts of the Issuer will be
included in the consolidated financial statements of the Corporation. The
Capital Securities will be presented as a separate line item in the
consolidated balance sheets of the Corporation, entitled "Guaranteed Preferred
Beneficial Interests in the Company's Junior Subordinated Deferrable Interest
Debentures" and appropriate disclosures about the Capital Securities, the
Guarantee and the Junior Subordinated Debentures will be included in the notes
to the consolidated financial statements. For financial reporting purposes,
the Corporation will record Distributions payable on the Capital Securities as
an expense in the consolidated statements of income.
The Corporation has determined that future financial reports of the
Corporation will: (i) include in a footnote to the financial statements
disclosure that the sole assets of the Issuer are the Junior Subordinated
Debentures; and (ii) if Staff Accounting Bulletin 53 treatment is sought,
include, in an audited footnote to the financial statements, disclosure that
(a) the trust is wholly owned, (b) the sole assets of the Issuer are the
Junior Subordinated Debentures and (c) the obligations of the Corporation
under the Junior Subordinated Debentures, the Indenture, Trust Agreement,
Guarantee and Expense Agreement, in the aggregate, constitute a full and
unconditional guarantee by the Corporation of the Issuer's obligations under
the Capital Securities.
CERTAIN TERMS OF CAPITAL SECURITIES
GENERAL
The following summary of certain terms and provisions of the Capital
Securities supplements the description of the terms and provisions of the
Capital Securities set forth in the accompanying Prospectus under the heading
"Description of Capital Securities", to which description reference is hereby
made. This summary of certain terms and provisions of the Capital Securities,
which summarizes the material provisions thereof, does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Trust Agreement to which reference is hereby made. The form of Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and accompanying Prospectus form a part.
DISTRIBUTIONS
The Capital Securities represent beneficial interests in the Issuer, and
Distributions on the Capital Securities will be payable at the annual rate of
% of the stated Liquidation Amount of $25, payable quarterly in arrears on
, , and of each year (each a "Distribution Date"), to
the holders of the Capital Securities at the close of business on the
fifteenth day (whether or not a Business Day (as defined below)) next
preceding the relevant Distribution Date. Distributions will accumulate from
the date of original issuance. The first Distribution payment date for the
Capital Securities will be , 1998. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-
day months. In the event that any date on which Distributions are payable on
the Capital Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any additional Distributions or other
payment in respect of any such delay) with the same force and effect as if
made on the date such payment was originally payable. The Paying Agent for the
Capital Securities shall be Bankers Trust Company. See "Description of Capital
Securities--Distributions" in the accompanying Prospectus.
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Junior Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to
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<PAGE>
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such deferral of interest payments by the Corporation, quarterly Distributions
on the Capital Securities will also be deferred by the Issuer during any such
Extension Period. Distributions to which holders of the Capital Securities are
entitled will accumulate additional Distributions thereon at the rate per
annum of % thereof, compounded quarterly from the relevant payment date for
such Distributions. The term "Distributions" as used herein shall include any
such additional Distributions. During any such Extension Period, the
Corporation may not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Corporation's capital stock or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to the Junior Subordinated Debentures (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of
the Corporation in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of
capital stock of the Corporation (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series
of the Corporation's capital stock, (c) the purchase of fractional interests
in shares of the Corporation's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise
of such warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks pari passu with or junior to such stock).
Prior to the termination of any such Extension Period, the Corporation may
further defer the payment of interest on the Junior Subordinated Debentures,
provided that no Extension Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the rate of % per
annum, compounded quarterly, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period. There is no limitation
on the number of times that the Corporation may elect to begin an Extension
Period. See "Certain Terms of Junior Subordinated Debentures--Option to Defer
Interest Payments" and "U.S. Federal Income Tax Consequences--Interest Income
and Original Issue Discount".
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Junior
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined
in the accompanying Prospectus) of Trust Securities, upon not less than 30 nor
more than 60 days notice prior to the date fixed for repayment or redemption,
at a redemption price (the "Redemption Price"), equal to the aggregate
Liquidation Amount of such Trust Securities plus accumulated and unpaid
Distributions thereon to the date of redemption (the "Redemption Date"). See
"Description of Capital Securities--Redemption or Exchange" in the
accompanying Prospectus. For a description of the Stated Maturity and
redemption provisions of the Junior Subordinated Debentures, see "Certain
Terms of Junior Subordinated Debentures--General" and "--Redemption".
S-16
<PAGE>
The Corporation has the right to redeem the Junior Subordinated Debentures
(i) on or after , 2003, in whole at any time or in part from time to
time, or (ii) at any time prior to , 2003, in whole (but not in part) at
any time within 90 days following the occurrence and during the continuation
of a Tax Event or Investment Company Event at the Redemption Price. A
redemption of the Junior Subordinated Debentures would cause a mandatory
redemption of a Like Amount of the Capital Securities and Common Securities.
A "Tax Event" means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of (a) any
amendment to or change (including any announced prospective change) in the
laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or (b) any judicial
decision or any official administrative pronouncement (including any private
letter ruling, technical advice memorandum or field service advice) or
regulatory procedure (an "Administrative Action"), regardless of whether such
judicial decision or Administrative Action is issued to or in connection with
a proceeding involving the Corporation or the Issuer and whether or not
subject to review or appeal, which amendment, change, Administrative Action or
decision is enacted, promulgated or announced, in each case, on or after the
date of this Prospectus Supplement, there is more than an insubstantial risk
that (i) the Issuer is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to income received or
accrued on the Junior Subordinated Debentures, (ii) interest payable by the
Corporation or original issue discount accruing on the Junior Subordinated
Debentures is not, or within 90 days of such opinion, will not be, deductible
by the Corporation, in whole or in part, for United States federal income tax
purposes, or (iii) the Issuer is, or will be within 90 days of the date of the
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means the receipt by the Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a written change (including any
announced prospective change) in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Capital Securities.
Payment of Additional Sums. If a Tax Event described in clause (i) or (iii)
of the definition of Tax Event has occurred and is continuing and the Issuer
is the holder of all of the Junior Subordinated Debentures, the Corporation
will pay Additional Sums (as defined below), if any, on the Junior
Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by the Issuer on the
outstanding Capital Securities and Common Securities will not be reduced as a
result of certain additional taxes, duties and other governmental charges to
which the Issuer has become subject as a result of a Tax Event.
LIQUIDATION OF ISSUER AND DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO
HOLDERS
The amount payable on the Capital Securities in the event of any liquidation
of the Issuer is $25 per Capital Security plus accumulated and unpaid
Distributions, subject to certain exceptions, which may be in the form of a
distribution of such amount in Junior Subordinated Debentures.
The holders of all of the outstanding Common Securities will have the right
at any time to liquidate the Issuer and cause the Junior Subordinated
Debentures to be distributed to the holders of the Capital Securities and
Common Securities in exchange therefor upon liquidation of the Issuer.
S-17
<PAGE>
Under current United States federal income tax law, a distribution of Junior
Subordinated Debentures in exchange for Capital Securities would not be a
taxable event to holders of the Capital Securities. However, should any event
described in clauses (a) and (b) of the definition of "Tax Event" above occur,
the distribution of the Junior Subordinated Debentures could be a taxable
event to holders of the Capital Securities. See "U.S. Federal Income Tax
Consequences--Distribution of Junior Subordinated Debentures to Holders of
Capital Securities Upon Liquidation of the Issuer". If the Corporation elects
neither to redeem the Junior Subordinated Debentures prior to maturity nor to
liquidate the Issuer and distribute the Junior Subordinated Debentures to
holders of the Capital Securities in exchange therefor, the Capital Securities
will remain outstanding until the Stated Maturity of the Junior Subordinated
Debentures.
If the Corporation elects to liquidate the Issuer and thereby causes the
Junior Subordinated Debentures to be distributed to holders of the Capital
Securities in exchange therefor upon liquidation of the Issuer, the
Corporation shall continue to have the right to shorten the maturity of the
Junior Subordinated Debentures, subject to certain conditions as described
under "Certain Terms of Junior Subordinated Debentures--General".
REGISTRATION OF CAPITAL SECURITIES
The Capital Securities will be represented by global certificates registered
in the name of DTC or its nominee. Beneficial interests in the Capital
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by Participants in DTC (as defined in the
accompanying Prospectus). Except as described below and in the accompanying
Prospectus, Capital Securities in certificated form will not be issued in
exchange for the global certificates. See "Book-Entry Issuance" in the
accompanying Prospectus.
A global security shall be exchangeable for Capital Securities registered in
the names of persons other than DTC or its nominee only if (i) DTC notifies
the Issuer that it is unwilling or unable to continue as a depositary for such
global security and no successor depositary shall have been appointed, or if
at any time DTC ceases to be a clearing agency registered under the Exchange
Act, at a time when DTC is required to be so registered to act as such
depositary, (ii) the Issuer in its sole discretion determines that such global
security shall be so exchangeable or (iii) there shall have occurred and be
continuing an event of default under the Indenture with respect to the Junior
Subordinated Debentures. Any global security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for definitive certificates
registered in such names as DTC shall direct. It is expected that such
instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such global
security. In the event that Capital Securities are issued in definitive form,
such Capital Securities will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Capital Securities represented by a global security will be made
to DTC, as depositary for the Capital Securities. In the event Capital
Securities are issued in certificated form, the Liquidation Amount and
Distributions will be payable, the transfer of the Capital Securities will be
registrable, and Capital Securities will be exchangeable for Capital
Securities of other denominations of a like aggregate Liquidation Amount, at
the corporate office of the Property Trustee in New York, New York, or at the
offices of any paying agent or transfer agent chosen by the Property Trustee
and acceptable to the Administrators, provided that payment of any
Distribution may be made by check mailed to the address of the persons
entitled thereto or by wire transfer. In addition, if the Capital Securities
are issued in certificated form, the record dates for payment of Distributions
will be the 15th day of the month in which the relevant Distribution payment
is scheduled to be made. For a description of DTC and the terms of DTC
arrangements relating to payments, transfers, voting rights, redemptions, and
other notices and other matters, see "Book-Entry Issuance" in the accompanying
Prospectus.
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CERTAIN TERMS OF JUNIOR SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Junior
Subordinated Debentures supplements the description of the terms and
provisions of the Corresponding Junior Subordinated Debentures set forth in
the accompanying Prospectus under the headings "Description of Junior
Subordinated Debentures", to which description reference is hereby made. The
summary of certain terms and provisions of the Junior Subordinated Debentures
set forth below, which describes the material provisions thereof, does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture to which reference is hereby made. The form of
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus Supplement and accompanying Prospectus form a part.
Concurrently with the issuance of the Capital Securities, the Issuer will
invest the proceeds thereof, together with the consideration paid by the
Corporation for the Common Securities, in the Junior Subordinated Debentures
issued by the Corporation. The Junior Subordinated Debentures will have an
aggregate principal amount of $515,464,000 and will bear interest at the
annual rate of % of the principal amount thereof, payable quarterly in
arrears on , , and of each year (each, an "Interest
Payment Date"), commencing , 1998, to the person in whose name each
Junior Subordinated Debenture is registered, subject to certain exceptions, at
the close of business on the Business Day next preceding such Interest Payment
Date. It is anticipated that, until the liquidation, if any, of the Issuer,
the Junior Subordinated Debentures will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Junior Subordinated Debentures is not a Business
Day, then payment of the interest payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on the date such payment was originally payable. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of % thereof, compounded quarterly from the relevant
Interest Payment Date. The term "interest" as used herein shall include
quarterly interest payments, interest on quarterly interest payments not paid
on the applicable Interest Payment Date and Additional Sums, as applicable.
The Junior Subordinated Debentures will be issued under the Indenture. The
Junior Subordinated Debentures will mature on , 2028 (such date, as it
may be shortened or extended as hereinafter described, the "Stated Maturity").
Such date may be shortened to a date not earlier than , 2013. In the
event the Corporation elects to shorten the Stated Maturity of the Junior
Subordinated Debentures, it shall give notice to the Debenture Trustee, and
the Debenture Trustee shall give notice of such shortening to the holders of
the Junior Subordinated Debentures no more than 30 and no less than 60 days
prior to the effectiveness thereof.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt of the Corporation.
See "Description of Junior Subordinated Debentures--Subordination" in the
accompanying Prospectus. Substantially all of the Corporation's existing
indebtedness constitutes Senior Debt. Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary, including TRS, AEFC and AEBL, upon such subsidiary's
liquidation or reorganization or otherwise (and thus the ability of holders of
the Capital Securities to benefit indirectly from such distribution), is
subject to the prior claims of creditors of that subsidiary, except to the
extent that the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures will be
effectively
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subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Junior Subordinated Debentures should look only
to the assets of the Corporation for payments on the Junior Subordinated
Debentures. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Corporation, including Senior Debt, whether
under the Indenture or any existing or other indenture that the Corporation
may enter into in the future or otherwise. See "Description of Junior
Subordinated Debentures--Subordination" in the accompanying Prospectus.
OPTION TO DEFER INTEREST PAYMENTS
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture at any time or
from time to time during the term of the Junior Subordinated Debentures to
defer payment of interest on the Junior Subordinated Debentures for a period
not exceeding 20 consecutive quarters with respect to each Extension Period,
provided that no Extension Period may extend beyond the Stated Maturity of the
Junior Subordinated Debentures. At the end of such Extension Period, the
Corporation must pay all interest then accrued and unpaid on the Junior
Subordinated Debentures (together with interest on such unpaid interest at the
annual rate of %, compounded quarterly from the relevant Interest Payment
Date, to the extent permitted by applicable law). During an Extension Period,
interest will continue to accrue and holders of Junior Subordinated Debentures
(or holders of Capital Securities while they are outstanding) will be required
to accrue interest income for United States federal income tax purposes. See
"U.S. Federal Income Tax Consequences--Interest Income and Original Issue
Discount".
During any such Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock or
(ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Corporation that rank
pari passu in all respects with or junior in interest to the Junior
Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Corporation in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or
in connection with the issuance of capital stock of the Corporation (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the
applicable Extension Period, (b) as a result of any exchange or conversion of
any class or series of the Corporation's capital stock (or any capital stock
of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c)
the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in
the form of stock, warrants, options or other rights where the dividend stock
or the stock issuable upon exercise of such warrants, options or other rights
is the same stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock). Prior to the termination of any such
Extension Period, the Corporation may further defer the payment of interest on
the Junior Subordinated Debentures, provided that no Extension Period may
exceed 20 consecutive quarters or extend beyond the Stated Maturity of the
Junior Subordinated Debentures. Upon the termination of any such Extension
Period and the payment of all interest then accrued and unpaid (together with
interest thereon at the rate of % per annum compounded quarterly, to the
extent permitted by applicable law), the Corporation may elect to begin a new
Extension Period subject to the above requirements. No interest shall be due
and payable during an Extension Period, except at the end thereof. The
Corporation must give the Issuer Trustees notice of its election to begin such
Extension Period at least one Business Day prior to the earlier of (i) the
date interest on the Junior
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Subordinated Debentures would have been payable except for the election to
begin such Extension Period or (ii) the date the Debenture Trustee is required
to give notice to the New York Stock Exchange, the Nasdaq National Market or
other applicable stock exchange or automated quotation system on which the
Capital Securities are then listed or quoted or to holders of Junior
Subordinated Debentures of the record date or (iii) the date such interest is
payable, but in any event not less than one Business Day prior to such record
date. The Debenture Trustee shall give notice of the Corporation's election to
begin a new Extension Period to the holders of the Junior Subordinated
Debentures. There is no limitation on the number of times that the Corporation
may elect to begin an Extension Period. See "Description of Junior
Subordinated Debentures--Option to Defer Interest Payments" in the
accompanying Prospectus.
ADDITIONAL SUMS
The Corporation has covenanted in the Indenture that, if and for so long as
(i) the Issuer is the holder of all Junior Subordinated Debentures and (ii)
the Issuer is required to pay certain additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debentures such amounts as shall
be required so that the Distributions payable by the Issuer shall not be
reduced as a result of any such additional taxes, duties or other governmental
charges. See "Description of Capital Securities--Redemption".
Pursuant to the Agreement as to Expenses and Liabilities, the Corporation
will agree to pay all debts and other obligations (other than with respect to
the Capital Securities) and all costs and expenses of the Issuer (including
costs and expenses relating to the organization of the Issuer, the fees and
expenses of the Issuer Trustees and the costs and expenses relating to the
operation of the Issuer). The form of Agreement as to Expenses and Liabilities
is included as Exhibit D in the form of Trust Agreement, which has been filed
as an exhibit to the Registration Statement of which this Prospectus
Supplement and accompanying Prospectus form a part.
REDEMPTION
The Junior Subordinated Debentures are redeemable prior to maturity at the
option of the Corporation (i) on or after , 2003 in whole at any time or
in part from time to time, or (ii) at any time prior to , 2003, in whole
(but not in part) at any time within 90 days following the occurrence and
during the continuation of a Tax Event or Investment Company Event, in either
case at a redemption price equal to the accrued and unpaid interest on the
Junior Subordinated Debentures so redeemed to the date fixed for redemption,
plus 100% of the principal amount thereof. See "Description of Junior
Subordinated Debentures--Redemption" in the accompanying Prospectus. The
proceeds of any such redemption will be used by the Issuer to redeem the
Capital Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
As described under "Certain Terms of Capital Securities--Liquidation of
Issuer and Distribution of Junior Subordinated Debentures to Holders", under
certain circumstances involving the termination of the Issuer, Junior
Subordinated Debentures may be distributed to the holders of the Capital
Securities in exchange therefor upon liquidation of the Issuer after
satisfaction of liabilities to creditors of the Issuer as provided by
applicable law. If distributed to holders of Capital Securities, the Junior
Subordinated Debentures will initially be issued in the form of one or more
global securities and DTC, or any successor depositary for the Capital
Securities, will act as depositary for the Junior Subordinated Debentures. It
is anticipated that DTC arrangements for the Junior Subordinated Debentures
would be substantially identical to those in effect for the Capital
Securities. If Junior Subordinated Debentures are distributed to the holders
of Capital Securities in exchange therefor upon liquidation of the Issuer, the
Corporation will use its best efforts to list the Junior Subordinated
Debentures on the New York Stock Exchange or such other stock exchanges or
automated quotation
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system, if any, on which the Capital Securities are then listed or quoted.
There can be no assurance as to the market price of any Junior Subordinated
Debentures that may be distributed to the holders of Capital Securities.
REGISTRATION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures will be represented by global
certificates registered in the name of DTC or its nominee. Beneficial
interests in the Junior Subordinated Debentures will be shown on, and
transfers thereof will be effected only through, records maintained by
Participants in DTC. Except as described below and in the accompanying
Prospectus, Junior Subordinated Debentures in certificated form will not be
issued in exchange for the global certificates. See "Book-Entry Issuance" in
the accompanying Prospectus.
A global security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Corporation that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have
been appointed, or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act, at a time when DTC is required to be so
registered to act as such depositary, (ii) the Corporation in its sole
discretion determines that such global security shall be so exchangeable, or
(iii) there shall have occurred and be continuing an event of default under
the Indenture with respect to the Junior Subordinated Debentures. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants with respect to ownership of beneficial
interests in such global security. In the event that Junior Subordinated
Debentures are issued in definitive form, such Junior Subordinated Debentures
will be in denominations of $25 and integral multiples thereof and may be
transferred or exchanged at the offices described below.
Payments on Junior Subordinated Debentures represented by a global security
will be made to DTC, as depositary for the Junior Subordinated Debentures. In
the event Junior Subordinated Debentures are issued in certificated form,
principal and interest will be payable, the transfer of the Junior
Subordinated Debentures will be registrable, and Junior Subordinated
Debentures will be exchangeable for Junior Subordinated Debentures of other
denominations of a like aggregate principal amount, at the corporate office of
the Debenture Trustee in New York, New York, or at the offices of any paying
agent or transfer agent appointed by the Corporation, provided that payment of
interest may be made at the option of the Corporation by check mailed to the
address of the persons entitled thereto or by wire transfer. For a description
of DTC and the terms of the depositary arrangements relating to payments,
transfers, voting rights, redemptions and other notices and other matters, see
"Book-Entry Issuance" in the accompanying Prospectus.
CERTAIN TERMS OF GUARANTEE
The Guarantee guarantees to the holders of the Capital Securities the
following payments, to the extent not paid by the Issuer: (i) any accumulated
and unpaid Distributions required to be paid on the Capital Securities, to the
extent that the Issuer has funds on hand available therefor at such time, (ii)
the Redemption Price with respect to any Capital Securities called for
redemption, to the extent that the Issuer has funds on hand available therefor
at such time, and (iii) upon a voluntary or involuntary dissolution, winding-
up or liquidation of the Issuer (unless the Junior Subordinated Debentures are
distributed to holders of the Capital Securities), the lesser of (a) the
aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment, to the extent that the Issuer has funds
on hand available therefor at such time, and (b) the amount of assets of the
Issuer remaining available for distribution to holders of the Capital
Securities after payment of creditors of the
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Issuer as required by applicable law. The Guarantee will be qualified as an
indenture under the Trust Indenture Act. Bankers Trust Company will act as the
Guarantee Trustee for the purposes of compliance with the Trust Indenture Act
and will hold the Guarantee for the benefit of the holders of the Capital
Securities. Bankers Trust Company will also act as Debenture Trustee for the
Junior Subordinated Debentures and as Property Trustee.
The holders of not less than a majority in aggregate Liquidation Amount of
the Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect to the Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of the
Capital Securities may institute a legal proceeding directly against the
Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Issuer, the Guarantee Trustee or
any other person or entity. If the Corporation were to default on its
obligation to pay amounts payable under the Junior Subordinated Debentures,
the Issuer would lack funds for the payment of Distributions or amounts
payable on redemption of the Capital Securities or otherwise, and, in such
event, holders of the Capital Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, if any event of default under
the Indenture shall have occurred and be continuing and such event is
attributable to the failure of the Corporation to pay interest or premium, if
any, on or principal of the Junior Subordinated Debentures on the applicable
payment date, then a holder of Capital Securities may institute a Direct
Action against the Corporation pursuant to the terms of the Indenture for
enforcement of payment to such holder of the principal of or interest or
premium, if any, on such Junior Subordinated Debentures having a principal
amount equal to the aggregate Liquidation Amount of the Capital Securities of
such holder. In connection with such Direct Action, the Corporation will have
a right to set-off under the Indenture to the extent of any payment made by
the Corporation to such holder of Capital Securities in the Direct Action.
Except as described herein, holders of Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures or assert directly any other rights in respect of the
Junior Subordinated Debentures. See "Description of Guarantees" in the
accompanying Prospectus. The Trust Agreement provides that each holder of
Capital Securities by acceptance thereof agrees to the provisions of the
Guarantee, the Expense Agreement and the Indenture.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of U.S. federal income tax consequences material
to the purchase, ownership and disposition of Capital Securities. This summary
does not purport to be a comprehensive description of all of the tax
consequences that may be relevant to a decision to purchase Capital Securities
by any particular investor, including tax consequences that arise from rules
of general application to all taxpayers or to certain classes of taxpayers or
that are generally assumed to be known by investors. This summary addresses
the tax consequences only to a person that acquires Capital Securities on
their original issue at their original offering price and that is (i) an
individual citizen or resident of the United States, (ii) a corporation or
partnership organized in or under the laws of the United States or any state
thereof or the District of Columbia or (iii) otherwise subject to U.S. federal
income taxation on a net income basis in respect of the Capital Securities (a
"United States Holder"). This summary also does not address the tax
consequences to (i) persons that are not United States Holders, except as
described below under "--United States Alien Holders" (ii) persons that may be
subject to special treatment under United States federal income tax law, such
as banks, insurance companies, thrift institutions, regulated investment
companies, real estate investment trusts, tax-exempt organizations, traders in
securities that elect to mark to market and dealers in securities or
currencies, (iii) persons that will hold Capital Securities as part of a
position in a "straddle" or as part of a "hedging," "conversion" or other
integrated investment transaction for federal income tax purposes, (iv)
persons whose functional currency is not the United States dollar or (v)
persons that do not hold Capital Securities as capital assets.
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This summary is based upon the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations, Internal Revenue Service rulings
and pronouncements and judicial decisions now in effect, all of which are
subject to change at any time. Such changes may be applied retroactively in a
manner that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting a beneficial owner
of Capital Securities. For example, a judicial decision could be issued or
legislation could be enacted that would adversely affect the Corporation's
ability to deduct interest or original issue discount on the Junior
Subordinated Debentures, either of which might in turn permit the Corporation
to cause a redemption of the Capital Securities. See "--Possible Tax Law
Changes". The authorities on which this summary is based are subject to
various interpretations, and it is therefore possible that the federal income
tax treatment of the purchase, ownership and disposition of Capital Securities
may differ from the treatment described below. All references herein to
federal tax refer to United States federal tax.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE UNITED STATES FEDERAL
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF CAPITAL
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES AND THE ISSUER
In connection with the issuance of the Junior Subordinated Debentures,
Cleary, Gottlieb, Steen & Hamilton will render its opinion that, under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Junior Subordinated Debentures will be treated for United
States federal income tax purposes as indebtedness of the Corporation. By
acceptance of a Capital Security, each United States Holder covenants to treat
the Junior Subordinated Debentures as indebtedness of the Corporation and the
Capital Securities as an undivided beneficial ownership interest in the Junior
Subordinated Debentures.
In connection with the issuance of the Capital Securities, Cleary, Gottlieb,
Steen & Hamilton will render its opinion that, under then current law and
assuming full compliance with the terms of the Trust Agreement and the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Issuer will be treated for United
States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Accordingly, for United States federal
income tax purposes, each United States Holder of Capital Securities will be
considered the owner of an undivided beneficial ownership interest in the
Junior Subordinated Debentures, and each United States Holder will be required
to include in its gross income any interest (or original issue discount
accrued) with respect to its allocable share of those Junior Subordinated
Debentures. See "--Interest Income and Original Issue Discount".
An opinion of Cleary, Gottlieb, Steen & Hamilton is not binding on the
Internal Revenue Service (the "IRS") or the courts. Prospective investors
should note that no rulings have been or are expected to be sought from the
IRS with respect to any of these issues and no assurance can be given that the
IRS will not take contrary positions. Moreover, no assurance can be given that
any of the opinions expressed herein will not be challenged by the IRS or, if
challenged, that such challenge will not be successful. See "--Possible Tax
Law Changes".
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under Treasury regulations applicable to debt instruments issued on or after
August 13, 1996 (the "Regulations"), a contingency that stated interest will
not be timely paid that is "remote", because of the terms of the relevant debt
instrument, will be ignored in determining whether such debt instrument
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is issued with original issue discount ("OID"). As a result of terms and
conditions of the Junior Subordinated Debentures that prohibit certain
payments with respect to the Corporation's capital stock and indebtedness if
the Corporation elects to extend interest payment periods, the Corporation
believes that the likelihood of its exercising its option to defer payments is
remote. See "Certain Terms of Junior Subordinated Debentures--Option to Defer
Interest Payments". Based on the foregoing, the Corporation believes that the
Junior Subordinated Debentures will not be considered to be issued with OID at
the time of their original issuance and, accordingly, a United States Holder
should include in gross income such holder's allocable share of interest on
the Junior Subordinated Debentures in accordance with such holder's normal
method of accounting for tax purposes.
If the option to defer any payment of interest was determined not to be
"remote" or if the Corporation exercises its option to defer any payment of
interest, the Junior Subordinated Debentures would be treated as issued with
OID at the time of issuance or at the time of such exercise, as the case may
be, and all stated interest on the Junior Subordinated Debentures would
thereafter be treated as OID as long as the Junior Subordinated Debentures
remained outstanding. In such event, all of a United States Holder's taxable
interest income with respect to the Junior Subordinated Debentures would be
accounted for as OID on a constant yield method regardless of such holder's
method of tax accounting, and actual distributions of stated interest would
not be reported as taxable income. Consequently, a United States Holder would
be required to include OID in gross income even though the Corporation would
not make any actual cash payments during an Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate United States Holders of the Capital Securities will not be entitled
to a dividends-received deduction with respect to any income taken into
account with respect to the Capital Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL
SECURITIES UPON LIQUIDATION OF THE ISSUER
Under current law, a distribution by the Issuer of the Junior Subordinated
Debentures as described under the caption "Certain Terms of Capital
Securities--Liquidation of Issuer and Distribution of Junior Subordinated
Debentures to Holders" will be non-taxable and will result in the United
States Holder receiving directly its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Issuer, with a holding
period and aggregate tax basis equal to the holding period and aggregate tax
basis such United States Holder had in its Capital Securities before such
distribution. If, however, the liquidation of the Issuer were to occur because
the Issuer is subject to United States federal income tax with respect to
income accrued or received on the Junior Subordinated Debentures, as would be
the case if, for example, the Issuer were treated as an association taxable as
a corporation, the distribution of Junior Subordinated Debentures to a United
States Holder by the Issuer would be a taxable event to the Issuer and each
United States Holder, and each United States Holder would recognize gain or
loss as if the United States Holder had exchanged its Capital Securities for
the Junior Subordinated Debentures it received upon the liquidation of the
Issuer. A United States Holder will include interest in income in respect of
Junior Subordinated Debentures received from the Issuer in the manner
described above under "--Interest Income and Original Issue Discount".
SALE OR REDEMPTION OF CAPITAL SECURITIES
A United States Holder that sells (including a redemption for cash of its
Capital Securities) Capital Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Capital Securities and
the amount realized on the sale of such Capital Securities. Assuming that the
Corporation does not exercise its option to defer payment of interest on the
Junior Subordinated
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Debentures and the Junior Subordinated Debentures are not considered issued
with OID, a United States Holder's adjusted tax basis in the Capital
Securities generally will be its initial purchase price. If the Junior
Subordinated Debentures are deemed to be issued with OID, as a result of the
Corporation's deferral of interest payments, a United States Holder's adjusted
tax basis in the Capital Securities generally will be its initial purchase
price, increased by OID previously includible in such United States Holder's
gross income to the date of disposition and decreased by Distributions or
other payments received on the Capital Securities since and including the date
of the first Extension Period. Such gain or loss generally will be a capital
gain or loss (except to the extent any amount realized is treated as a payment
of accrued interest with respect to such United States Holder's pro rata share
of the Junior Subordinated Debentures required to be included in income).
Capital gain derived by non-corporate United States Holders on the sale of
Capital Securities that have been held for more than eighteen months will be
subject to a 20% maximum tax rate and capital gain derived by non-corporate
United States Holders on the sale of Capital Securities that have been held
for more than one year but less than eighteen months will be subject to a 28%
maximum tax rate. To the extent the selling price is less than the United
States Holder's adjusted tax basis, such holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A United States Holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debentures are deemed to have been issued with OID) who disposes
of its Capital Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, possibly, OID), and to add such amount to the
United States Holder's adjusted tax basis in the pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. To the extent
the selling price is less than the United States Holder's adjusted tax basis
(which will include all accrued but unpaid interest), a United States Holder
will recognize a capital loss. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for U.S. federal income tax
purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest income paid and OID accrued on the Capital Securities
held of record by United States Holders (other than corporations and other
exempt United States Holders) will be reported to the IRS. "Backup"
withholding at a rate of 31% will apply to payments of interest to a nonexempt
United States Holder unless the United States Holder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
Payment of the proceeds from the disposition of Capital Securities to or
through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Any amounts withheld from a United States Holder under the backup
withholding rules will be allowed as a refund or a credit against such United
States Holder's United States federal income tax liability, provided the
required information is furnished to the IRS.
It is anticipated that income on the Capital Securities will be reported to
holders on Form 1099-INT or, if the Corporation exercises its option to defer
any payment of interest, on Form 1099-OID, and mailed to holders of the
Capital Securities by January 31 following each calendar year.
S-26
<PAGE>
POSSIBLE TAX LAW CHANGES
Prospective investors should be aware that Enron Corporation has filed a
petition in U.S. Tax Court challenging the proposed disallowance by the IRS of
the deduction of interest expense on securities issued by Enron Corporation in
1993 and 1994 that are similar to, although different in a number of respects
from, the Junior Subordinated Debentures. It is possible that a decision in
that case could give rise to a Tax Event, which would permit the Corporation
to cause a redemption of the Capital Securities, as described more fully under
"Description of Capital Securities--Redemption or Exchange" in the
accompanying Prospectus. Prospective investors also should be aware that
legislation has been proposed by the Clinton Administration in the past that,
if enacted, would have denied an interest expense deduction to issuers of
instruments such as the Junior Subordinated Debentures. No such legislation is
currently pending. There can be no assurance, however, that similar
legislation will not ultimately be enacted into law, or that other
developments will not occur on or after the date hereof that would adversely
affect the tax treatment of the Junior Subordinated Debentures or the Issuer.
Such changes also could give rise to a Tax Event.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is a holder
of Capital Securities that is a nonresident alien individual or a foreign
corporation. Under present United States federal income tax laws: (i) payments
by the Issuer or any of its paying agents to any holder of a Capital Security
who or which is a United States Alien Holder will not be subject to
withholding of United States federal income tax; provided that, (a) the
beneficial owner of the Capital Security does not actually or constructively
own 10 percent or more of the total combined voting power of all classes of
stock of the Corporation entitled to vote, (b) the beneficial owner of the
Capital Security is not a controlled foreign corporation that is related to
the Corporation through stock ownership, and (c) either (A) the beneficial
owner of the Capital Security certifies to the Issuer or its agent, under
penalty of perjury, that it is not a United States Holder and provides its
name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business (a "Financial Institution"), and holds the Capital
Security in such capacity, certifies to the Issuer or its agent, under penalty
of perjury, that such statement has been received from the beneficial owner by
it or by a Financial Institution between it and the beneficial owner and
furnishes the Issuer or its agent with a copy thereof; and (ii) a United
States Alien Holder of a Capital Security will generally not be subject to
withholding of United States federal income tax on any gain realized upon the
sale or other disposition of a Capital Security provided the gain is not
effectively connected with the conduct of a trade or business in the United
States by the United States Alien Holder.
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which may make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
S-27
<PAGE>
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an
investment in the Capital Securities. Accordingly, among other factors, the
fiduciary should consider whether the investment would satisfy the prudence
and diversification requirements of ERISA and would be consistent with the
documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code ("Parties in Interest") with respect to
such Plan. A violation of these "prohibited transaction" rules may result in
an excise tax or other liabilities under ERISA and/or Section 4975 of the Code
for such persons, unless exemptive relief is available under an applicable
statutory or administrative exemption.
Certain transactions involving the Issuer could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Capital Securities of the Issuer were
acquired with "plan assets" of such Plan. For example, if the Corporation is a
Party in Interest with respect to an investing Plan (either directly or by
reason of its ownership of its subsidiaries), an indirect extension of credit
prohibited by Section 406(a) (1) (B) of ERISA and Section 4975(c) (1) (B) of
the Code between the Corporation and the investing Plan may be deemed to
occur, unless exemptive relief were available under an applicable
administrative exemption (see below).
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited
transactions resulting from the purchase or holding of the Capital Securities,
assuming that assets of the Issuer were deemed to be "plan assets" of Plans
investing in the Issuer (see above). Those class exemptions are PTCE 96-23
(for certain transactions determined by in-house asset managers), PTCE 95-60
(for certain transactions involving insurance company general accounts), PTCE
91-38 (for certain transactions involving bank collective investment funds),
PTCE 90-1 (for certain transactions involving insurance company separate
accounts), and PTCE 84-14 (for certain transactions determined by independent
qualified asset managers).
Any purchaser or holder of the Capital Securities or any interest therein
will be deemed to have represented by its purchase and holding thereof that it
either (a) is not a Plan or a Plan Asset Entity and is not purchasing such
securities on behalf of or with "plan assets" of any Plan or (b) is eligible
for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-
14 with respect to such purchase or holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries or other persons considering
purchasing the Capital Securities on behalf of or with "plan assets" of any
Plan consult with their counsel regarding the availability of exemptive relief
under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
S-28
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Corporation and the Issuer have agreed that the Issuer will sell to each
of the Underwriters named below, and each of such Underwriters, for whom
Goldman, Sachs & Co., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan Stanley & Co. Incorporated, PaineWebber
Incorporated, Prudential Securities Incorporated and Salomon Brothers Inc are
acting as representatives, has severally agreed to purchase from the Issuer,
the respective number of Capital Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
CAPITAL
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Goldman, Sachs & Co. ..............................................
Lehman Brothers Inc. ..............................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.................
Morgan Stanley & Co. Incorporated..................................
PaineWebber Incorporated...........................................
Prudential Securities Incorporated.................................
Salomon Brothers Inc...............................................
Total............................................................
=====
</TABLE>
Under the terms and conditions of the Underwriting Agreement and the Pricing
Agreement, the Underwriters are committed to take and pay for all of the
Capital Securities, if any are taken.
The Underwriters propose to offer the Capital Securities to the public at
the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain dealers at such price less a
concession not in excess of $ per Capital Security. The Underwriters may
allow, and such dealers may re-allow, a discount not in excess of $ per
Capital Security to certain brokers and dealers. After the Capital Securities
are released for sale to the public, the public offering price, and other
selling terms may from time to time be varied by the Underwriters.
In view of the fact that the proceeds from the sale of the Capital
Securities will be used to purchase the Junior Subordinated Debentures issued
by the Corporation, the Underwriting Agreement provides that the Corporation
will pay as Underwriters' compensation for the Underwriters' arranging the
investment therein of such proceeds an amount of $ per Capital Security for
the accounts of the several Underwriters.
The Corporation and the Issuer have agreed that, during the period beginning
from the date of the Underwriting Agreement and continuing to and including
the earlier of (i) the termination of trading restrictions on the Capital
Securities, as determined by the Underwriters, and (ii) 30 days after the
closing date, they will not offer, sell, contract to sell or otherwise dispose
of any Capital Securities, any other beneficial interests in the assets of the
Issuer, or any preferred securities or any other securities of the Issuer or
the Corporation which are substantially similar to the Capital Securities,
including any guarantee of such securities, or any securities convertible into
or exchangeable for or representing the right to receive securities, preferred
securities or any such substantially similar securities of either the Issuer
or the Corporation, without the prior written consent of the Underwriters,
except for the Capital Securities offered in connection with this offering.
S-29
<PAGE>
Prior to this offering, there has been no public market for the Capital
Securities. Application has been made to list the Capital Securities on the
NYSE under the symbol " ". In order to meet one of the requirements for
listing the Capital Securities on the NYSE, the Underwriters will undertake to
sell lots of 100 or more to a minimum of 400 beneficial holders. Trading of
the Capital Securities on the NYSE is expected to commence within 30 days
after the initial delivery of the Capital Securities. The representatives of
the Underwriters have advised the Corporation that they intend to make a
market in the Capital Securities prior to commencement of trading on the NYSE,
but are not obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the Capital Securities.
In connection with the offering, the Underwriters may purchase and sell the
Capital Securities in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. Stabilizing transactions
consist of certain bids or purchases for the purpose of preventing or
retarding a decline in the market price of the Capital Securities, and
syndicate short positions involve the sale by the Underwriters of a greater
number of Capital Securities than they are required to purchase from the
Issuer in the offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-
dealers in respect of the Capital Securities sold in the offering for their
account may be reclaimed by the syndicate if such Capital Securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Capital Securities, which may be higher than the price that might otherwise
prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the NYSE, in
the over-the-counter market or otherwise.
The Corporation and the Issuer have agreed to indemnify the several
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to the Corporation and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Capital
Securities, the enforceability of the Trust Agreement and the formation of the
Issuer will be passed upon by Richards, Layton & Finger, P.A., special
Delaware Counsel to the Corporation and the Issuer. The validity of the
Guarantee and the Junior Subordinated Debentures will be passed upon for the
Corporation by Louise M. Parent, Executive Vice President and General Counsel
of the Corporation and for the Underwriters by Sullivan & Cromwell. Sullivan &
Cromwell will rely on the opinion of Richards, Layton & Finger, P.A. as to
matters of Delaware law. Certain matters relating to United States federal
income tax considerations will be passed upon for the Corporation by Cleary,
Gottlieb, Steen & Hamilton.
S-30
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMA-
TION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AMERICAN EXPRESS COMPANY CAPITAL
TRUST I OR AMERICAN EXPRESS COMPANY SINCE SUCH DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Risk Factors.............................................................. S-5
American Express Company Capital Trust I.................................. S-9
The Corporation........................................................... S-10
Consolidated Ratio of Earnings to Fixed Charges........................... S-12
Use of Proceeds........................................................... S-13
Capitalization............................................................ S-13
Selected Financial Data................................................... S-14
Accounting Treatment...................................................... S-15
Certain Terms of Capital Securities....................................... S-15
Certain Terms of Junior Subordinated Debentures........................... S-19
Certain Terms of Guarantee................................................ S-22
U.S. Federal Income Tax Consequences...................................... S-23
Certain ERISA Considerations.............................................. S-28
Underwriting.............................................................. S-29
Validity of Securities.................................................... S-30
PROSPECTUS
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 4
The Corporation........................................................... 5
The Issuers............................................................... 6
Use of Proceeds........................................................... 7
Description of Junior Subordinated Debentures............................. 7
Description of Capital Securities......................................... 19
Book-Entry Issuance....................................................... 31
Description of Guarantees................................................. 34
The Expense Agreements.................................................... 36
Relationship Among the Capital Securities the Corresponding Junior
Subordinated Debentures, the Expense Agreements and the Guarantees....... 37
Plan of Distribution...................................................... 38
Validity of Securities.................................................... 39
Experts................................................................... 39
</TABLE>
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20,000,000 PREFERRED SECURITIES
AMERICAN EXPRESS COMPANY CAPITAL TRUST I
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES, SERIES I (QUIPS SM)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
AMERICAN EXPRESS COMPANY
-----------
LOGO
-----------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
REPRESENTATIVES OF THE UNDERWRITERS
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