<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
---------------- ----------------
Commission file number 1-7657
AMERICAN EXPRESS COMPANY
------------------------
(Exact name of registrant as specified in its charter)
New York 13-4922250
-------------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
World Financial Center, 200 Vesey Street, New York, NY 10285
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 640-2000
--------------
None
- ------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 2000
- ----------------------------------------- -----------------------------
Common Shares (par value $.20 per share) 1,335,914,757 shares
<PAGE>
AMERICAN EXPRESS COMPANY
FORM 10-Q
INDEX
Page No.
Part I. Financial Information:
Consolidated Statements of Income - Three
months ended March 31, 2000 and 1999 1
Consolidated Balance Sheets - March 31, 2000
and December 31, 1999 2
Consolidated Statements of Cash Flows - Three
months ended March 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4-6
Review Report of Independent Accountants 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-23
Part II. Other Information 24
<PAGE>
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
--------------------
2000 1999
---- ----
<S> <C> <C>
Revenues:
Discount revenue $1,805 $1,514
Interest and dividends, net 796 795
Management and distribution fees 688 522
Net card fees 405 403
Travel commissions and fees 438 426
Other commissions and fees 551 417
Cardmember lending net finance charge revenue 293 347
Life and other insurance premiums 138 123
Other 543 424
----- -----
Total 5,657 4,971
----- -----
Expenses:
Human resources 1,635 1,431
Provisions for losses and benefits:
Annuities and investment certificates 348 334
Life insurance, international banking and other 177 157
Charge card 241 182
Cardmember lending 176 235
Interest 299 234
Marketing and promotion 370 297
Occupancy and equipment 362 308
Professional services 318 281
Communications 127 122
Other 684 599
----- -----
Total 4,737 4,180
----- -----
Pretax income 920 791
Income tax provision 264 216
----- -----
Net income $656 $575
=== ===
Earnings Per Common Share:
Post stock split basis:
Basic $0.49 $0.43
==== ====
Diluted $0.48 $0.42
Pre stock split basis: ==== ====
Basic $1.48 $1.28
==== ====
Diluted $1.44 $1.26
==== ====
Average common shares outstanding for
earnings per common share (millions):
Post stock split basis:
Basic 1,331 1,343
===== =====
Diluted 1,362 1,369
===== =====
Pre stock split basis:
Basic 444 448
=== ===
Diluted 454 456
=== ===
Cash dividends declared per common share:
Post stock split basis $0.08 $0.075
==== =====
Pre stock split basis $0.225 $0.225
===== =====
</TABLE>
See notes to Consolidated Financial Statements.
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
CONSOLIDATED BALANCE SHEETS
(millions)
(Unaudited)
March 31, December 31,
Assets 2000 1999
---- ----
<S> <C> <C>
Cash and cash equivalents $7,425 $7,471
Accounts receivable and accrued interest:
Cardmember receivables, less reserves:
2000, $755; 1999, $728 22,223 22,541
Other receivables, less reserves:
2000, $86; 1999, $78 3,979 3,926
Investments 42,534 43,052
Loans:
Cardmember lending, less reserves:
2000, $544; 1999, $581 17,628 17,666
International banking, less reserves:
2000, $170; 1999, $169 4,898 4,928
Other, net 969 988
Separate account assets 38,431 35,895
Deferred acquisition costs 3,294 3,235
Land, buildings and equipment--at cost, less
accumulated depreciation: 2000, $2,174;
1999,$2,109 2,084 1,996
Other assets 7,197 6,819
Total assets ------- -------
$150,662 $148,517
======= =======
Liabilities and Shareholders' Equity
Customers' deposits $11,936 $12,197
Travelers Cheques outstanding 6,029 6,213
Accounts payable 8,414 7,309
Insurance and annuity reserves:
Fixed annuities 20,212 20,552
Life and disability policies 4,516 4,459
Investment certificate reserves 6,237 5,951
Short-term debt 29,342 30,627
Long-term debt 5,170 5,995
Separate account liabilities 38,431 35,895
Other liabilities 9,622 8,724
------- -------
Total liabilities 139,909 137,922
------- -------
Guaranteed preferred beneficial interests in
the company's junior subordinated deferrable
interest debentures 500 500
Shareholders' equity:
Common shares, $.20 par value, authorized
3.6 billion shares; issued and outstanding
1,334 million shares in 2000 and 1,341
million shares in 1999 267 268
Capital surplus 5,291 5,196
Retained earnings 5,160 5,033
Other comprehensive income, net of tax:
Net unrealized securities losses (366) (296)
Foreign currency translation adjustments (99) (106)
------- -------
Accumulated other comprehensive loss (465) (402)
------- -------
Total shareholders' equity 10,253 10,095
------- -------
Total liabilities and shareholders' equity $150,662 $148,517
======= =======
</TABLE>
See notes to Consolidated Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(Unaudited)
Three Months Ended
March 31,
-----------------------
Cash Flows from Operating Activities 2000 1999
---- ----
<S> <C> <C>
Net income $656 $575
Adjustments to reconcile net income to
net cash provided by operating activities:
Provisions for losses and benefits 611 576
Depreciation, amortization, deferred taxes and other 67 66
Changes in operating assets and liabilities, net of
effects of acquisitions and dispositions:
Accounts receivable and accrued interest 34 (410)
Other assets (227) (98)
Accounts payable and other liabilities 1,697 868
Decrease in Travelers Cheques outstanding (182) (52)
Increase in insurance reserves 54 40
----- -----
Net cash provided by operating activities 2,710 1,565
----- -----
Cash Flows from Investing Activities
Sale of investments 357 341
Maturity and redemption of investments 2,163 2,334
Purchase of investments (2,120) (2,367)
Net (increase) decrease in Cardmember receivables (126) 237
Cardmember loans/receivables sold to trust, net 996 -
Proceeds from repayment of loans 6,189 5,605
Issuance of loans (7,302) (5,464)
Purchase of land, buildings and equipment (175) (198)
Sale of land, buildings and equipment 1 7
Acquisitions, net of cash acquired (12) (17)
----- -----
Net cash (used) provided by investing activities (29) 478
----- -----
Cash Flows from Financing Activities
Net decrease in customers' deposits (126) (233)
Sale of annuities and investment certificates 1,352 1,282
Redemption of annuities and investment certificates (1,486) (1,196)
Net increase (decrease) in debt with maturities of three
months or less 2,477 (728)
Issuance of debt 1,925 3,544
Principal payments on debt (6,398) (2,991)
Issuance of American Express common shares 46 77
Repurchase of American Express common shares (397) (334)
Dividends paid (101) (101)
----- -----
Net cash used in financing activities (2,708) (680)
----- -----
Effect of exchange rate changes on cash (19) (17)
----- -----
Net (decrease) increase in cash and cash equivalents (46) 1,346
Cash and cash equivalents at beginning of period 7,471 4,092
----- -----
Cash and cash equivalents at end of period $7,425 $5,438
===== =====
</TABLE>
See notes to Consolidated Financial Statements.
3
<PAGE>
AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements should be read in conjunction with the
financial statements in the Annual Report on Form 10-K of American Express
Company (the company or American Express) for the year ended December 31, 1999.
Significant accounting policies disclosed therein have not changed. Certain
reclassifications of prior period amounts have been made to conform to the
current presentation.
Cardmember Lending Net Finance Charge Revenue is presented net of interest
expense of $231 million and $156 million for the first quarter of 2000 and 1999,
respectively. Interest and Dividends is presented net of interest expense of
$133 million and $121 million for the first quarter of 2000 and 1999,
respectively, related primarily to the company's international banking
operations.
The interim financial information in this report has not been audited. In the
opinion of management, all adjustments necessary for a fair presentation of the
consolidated financial position and the consolidated results of operations for
the interim periods have been made. All adjustments made were of a normal,
recurring nature. Results of operations reported for interim periods are not
necessarily indicative of results for the entire year.
In April 2000, the company's shareholders approved an increase in authorized
shares to effectuate a three-for-one stock split for shareholders of record as
of April 25, 2000. All of the information in this financial report reflects the
effect of the stock split. Additionally, certain information is provided on both
a pre stock split and post stock split basis for information purposes. Refer to
the "Other Matters" section of the financial review for further information.
2. Investment Securities
<TABLE>
<CAPTION>
The following is a summary of investments at March 31, 2000 and December 31,
1999:
March 31, December 31,
(in millions) 2000 1999
---- ----
<S> <C> <C>
Held to Maturity, at amortized cost
(fair value: 2000, $9,038; 1999, $9,218) $9,056 $9,221
Available for Sale, at fair value
(cost: 2000, $29,791; 1999, $30,053) 29,197 29,570
Investment mortgage loans
(fair value: 2000, $3,950; 1999, $3,901) 3,966 3,984
Trading 315 277
------ ------
Total $42,534 $43,052
====== ======
</TABLE>
4
<PAGE>
3. Comprehensive Income
Comprehensive income is defined as the aggregate change in shareholders' equity,
excluding changes in ownership interests. For the company, it is the sum of net
income and changes in (i) unrealized gains or losses on available-for-sale
securities and (ii) foreign currency translation adjustments. The components of
comprehensive income, net of related tax, for the three months ended March 31,
2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
(in millions) 2000 1999
---- ----
<S> <C> <C>
Net income $656 $575
Change in:
Net unrealized securities
gains/losses (70) (210)
Foreign currency translation
adjustments 7 12
--- ---
Total $593 $377
=== ===
</TABLE>
4. Taxes and Interest
Net income taxes paid during the three months ended March 31, 2000 and 1999 were
approximately $68 million and $97 million, respectively. Interest paid during
the three months ended March 31, 2000 and 1999 was approximately $855 million
and $588 million, respectively.
5. Earnings per Share
<TABLE>
<CAPTION>
The computations of basic and diluted earnings per common share (EPS) for the
three months ended March 31, 2000 and 1999 are as follows:
(in millions, except per (Post stock split basis)(Pre stock split basis)
share amounts) Three Months Ended Three Months Ended
March 31, March 31,
------------------ -------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator: Net income $656 $575 $656 $575
Denominator:
Denominator for basic EPS -
weighted-average shares 1,331 1,343 444 448
Effect of dilutive securities:
Stock Options and Restricted
Stock Awards 31 26 10 8
----- ----- --- ---
Potentially dilutive
common shares 31 26 10 8
----- ----- --- ---
Denominator for diluted EPS 1,362 1,369 454 456
----- ----- --- ---
Basic EPS $0.49 $0.43 $1.48 $1.28
----- ----- ----- -----
Diluted EPS $0.48 $0.42 $1.44 $1.26
----- ----- ----- -----
</TABLE>
5
<PAGE>
6. Segment Information
<TABLE>
<CAPTION>
The following tables present first quarter results for the company's operating
segments, based on management's internal reporting structure. Net revenues
(managed basis) exclude the effect of securitizations at TRS, and provisions for
losses and benefits for annuities, insurance and investment certificate products
of AEFA:
Net Revenues Three Months Ended
(managed basis) March 31,
------------------
(in millions) 2000 1999
---- ----
<S> <C> <C>
Travel Related Services $4,044 $3,434
American Express
Financial Advisors 1,019 885
American Express Bank/
Travelers Cheque 251 247
Corporate and Other (55) (42)
----- -----
Total $5,259 $4,524
===== =====
<CAPTION>
Revenues (GAAP basis) Three Months Ended
March 31,
------------------
(in millions) 2000 1999
---- ----
<S> <C> <C>
Travel Related Services $3,955 $3,421
American Express
Financial Advisors 1,506 1,345
American Express Bank/
Travelers Cheque 251 247
Corporate and Other (55) (42)
----- -----
Total $5,657 $4,971
===== =====
<CAPTION>
Net Income Three Months Ended
March 31,
------------------
(in millions) 2000 1999
---- ----
<S> <C> <C>
Travel Related Services $416 $363
American Express
Financial Advisors 245 214
American Express Bank/
Travelers Cheque 40 41
Corporate and Other (45) (43)
--- ---
Total $656 $575
=== ===
</TABLE>
6
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Shareholders and Board of Directors
American Express Company
We have reviewed the accompanying consolidated balance sheet of American
Express Company (the "Company") as of March 31, 2000 and the related
consolidated statements of income and cash flows for the three-month periods
ended March 31, 2000 and 1999. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the consolidated financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1999, and the related consolidated statements of income, shareholders' equity,
and cash flows for the year then ended (not presented herein), and in our
report dated February 3, 2000, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of December 31, 1999 is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/Ernst & Young LLP
New York, New York
May 15, 2000
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Consolidated Results of Operations for the Three Months Ended March 31, 2000
The company's consolidated net income and diluted earnings per share both rose
14 percent in the three-month period ended March 31, 2000 from a year ago. The
company's return on equity was 25.4 percent.
Consolidated net revenues on a managed basis grew 16 percent for the three
months ended March 31, 2000, reflecting an increase in worldwide billed business
and Cardmember loans at Travel Related Services (TRS) and greater management and
distribution fees at American Express Financial Advisors (AEFA). Consolidated
expenses rose due to greater marketing and promotion and interest costs, larger
provisions for losses, and higher human resource and operating expenses. The
increases were principally due to greater volume and business building
initiatives.
These results met the company's long-term targets of 12-15 percent earnings per
share growth, at least 8 percent revenue growth and a return on equity of 18-20
percent.
This financial review is presented on the basis used by management to evaluate
operations. It differs in two respects from the accompanying financial
statements, which are prepared in accordance with U.S. Generally Accepted
Accounting Principles (GAAP). First, results are presented as if there had been
no asset securitizations at TRS. This format is generally termed on a "managed
basis." Second, revenues are shown net of AEFA's provisions for annuities,
insurance and investment certificate products, which are essentially spread
businesses.
Consolidated Liquidity and Capital Resources
In the first three months of 2000, the company repurchased 8.5 million common
shares at an average price of $48.61 per share under its repurchase program.
In the first quarter 2000, the company entered into an agreement under which a
third party will purchase up to 3 million company common shares in the open
market over a period of up to eight months. During the term of the agreement the
company will periodically issue shares to or receive shares from the third party
so that the value of the shares held by the third party equals the original
purchase price for the shares. At maturity in five years, the company is
required to deliver to the third party an amount equal to such original purchase
price. The company may elect to settle this amount (i) physically, by paying
cash against delivery of the shares held by the third party or (ii) on a net
cash or net share basis. The company may also prepay outstanding amounts at any
time prior to the end of the five-year term. The foregoing is in addition to a
similar agreement entered into in August 1999 under which a third party
purchased 7 million of the company's common shares at an average purchase price
of approximately $146 per share. During the first quarter 2000, settlements
under the August 1999 agreement resulted in the company receiving 113,480
shares. These
8
<PAGE>
agreements, which partially offset the company's exposure from its
stock option program, are separate from the company's previously authorized
share repurchase program.
Other Matters
In January 2000, the company's Board of Directors voted for a three-for-one
split of the company's common stock, subject to shareholder approval of an
increase in authorized shares. At the company's annual meeting on April 24,
2000, the company's shareholders approved such increase in shares to effectuate
the stock split for shareholders of record as of April 25, 2000. All of the
information in this financial report reflects the effect of the stock split.
Additionally, certain data is provided on both a pre stock split and
post stock split basis for informational purposes.
9
<PAGE>
<TABLE>
<CAPTION>
Travel Related Services
Results of Operations for the Three Months Ended March 31, 2000 and 1999
Statements of Income
--------------------
(Unaudited, Managed Basis)
(Dollars in millions)
Three Months Ended
March 31,
------------------ Percentage
2000 1999 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,805 $1,514 19.3 %
Net Card Fees 405 403 0.5
Travel Commissions and Fees 438 426 2.7
Other Revenues 841 639 31.6
Lending:
Finance Charge Revenue 887 652 36.1
Interest Expense 332 200 66.5
----- -----
Net Finance Charge Revenue 555 452 22.6
----- -----
Total Net Revenues 4,044 3,434 17.7
----- -----
Expenses:
Marketing and Promotion 318 270 17.6
Provision for Losses and Claims:
Charge Card 278 233 19.5
Lending 335 282 18.9
Other 21 14 50.9
----- -----
Total 634 529 20.0
----- -----
Charge Card Interest Expense 314 241 29.6
Human Resources 998 912 9.5
Other Operating Expenses 1,144 928 23.4
----- -----
Total Expenses 3,408 2,880 18.3
----- -----
Pretax Income 636 554 14.7
Income Tax Provision 220 191 14.7
----- -----
Net Income $416 $363 14.7
===== =====
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Travel Related Services
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except where indicated)
Three Months Ended
March 31,
------------------- Percentage
2000 1999 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 31.4 27.9 12.2 %
Outside the United States 16.5 15.0 10.5
---- ----
Total 47.9 42.9 11.6
==== ====
Basic Cards in Force (millions):
United States 24.5 21.8 12.2
Outside the United States 12.6 11.5 9.9
---- ----
Total 37.1 33.3 11.4
==== ====
Card Billed Business:
United States $50.6 $41.6 21.6
Outside the United States 17.7 15.2 16.7
---- ----
Total $68.3 $56.8 20.3
==== ====
Average Discount Rate (A) 2.72% 2.73% -
Average Basic Cardmember
Spending (dollars) (A) $1,980 $1,781 11.2
Average Fee per Card -
Managed (dollars) (A) $37 $40 (7.5)
Non-Amex Brand (B):
Cards in Force (millions) 0.6 0.2 #
Billed Business $0.5 $0.2 #
Travel Sales $5.5 $5.3 3.4
Travel Commissions and Fees/Sales (C) 8.0% 8.0% -
Managed Charge Card Receivables:
Total Receivables $26.8 $23.5 14.1
90 Days Past Due as a % of Total 2.6% 3.0% -
Loss Reserves (millions) $894 $876 2.1
% of Receivables 3.3% 3.7% -
% of 90 Days Past Due 129% 126% -
Net Loss Ratio 0.34% 0.43% -
Managed U.S. Cardmember Lending:
Total Loans $24.2 $16.7 44.6
Past Due Loans as a % of Total:
30-89 Days 1.8% 2.1% -
90+ Days 0.8% 1.0% -
Loss Reserves (millions):
Beginning Balance $672 $619 8.4
Provision 285 244 17.0
Net Charge-Offs/Other (268) (240) 11.5
---- ----
Ending Balance $689 $623 10.6
==== ====
% of Loans 2.8% 3.7% -
% of Past Due 109% 121% -
Average Loans $23.6 $16.7 41.6
Net Write-Off Rate 4.6% 5.9% -
Net Interest Yield 7.8% 9.4% -
(A) Computed from proprietary card activities only.
(B) This data relates to Visa and Eurocards issued in connection
with joint venture activities.
(C) Computed from information provided herein.
# Denotes variance of more than 100%.
</TABLE>
11
<PAGE>
Travel Related Services
Travel Related Services' (TRS) net income rose 15 percent in the first quarter
of 2000 from a year ago. Net revenues increased 18 percent for the same period,
reflecting higher billed business as well as strong growth in Cardmember loans.
The improvement in discount revenue from a year ago is the result of higher
billed business, reflecting higher average spending per Cardmember and an
increase of five million cards in force, up 12 percent from a year ago. The
higher average spending was driven by several factors, including rewards
programs and expanded merchant coverage. The growth in billed business continued
to be primarily the result of increases in retail and "everyday spend"
categories; the rate of growth in airline billings also improved from recent
quarters. The increase in cards in force reflects more proactive consumer card
and small business services activities over the past year, including the
successful launch of Blue and co-branded Costco cards. The net interest yield on
Cardmember loans decreased from year-ago levels, but increased slightly from the
fourth quarter of 1999. The year-over-year decline reflects a greater number of
Cardmembers on introductory rates and a broader mix of lower-rate products.
Other revenues increased, reflecting higher fee income.
The provision for losses on the charge card and lending portfolios grew as a
result of higher volume, partly offset by a continued improvement in credit
quality in the lending portfolio. Charge Card interest expense rose due to
higher volumes and rates. Human resources expenses rose as a result of a higher
average number of employees and merit increases. Other operating expenses
increased on higher costs related to business growth, Cardmember loyalty
programs and various business building initiatives. Results for the current
quarter include a gain on an investment in an Internet company that TRS was
required to write-up when that company was acquired by a third party. This gain
was offset by increased spending on Internet initiatives and therefore had no
material impact on net income or total expenses.
12
<PAGE>
Travel Related Services
The preceding statements of income and related discussion present TRS results on
a managed basis, as if there had been no securitization transactions. On a GAAP
reporting basis, TRS recognized a pretax gain of $36 million ($23 million
after-tax) in the first quarter of 2000 related to the securitization of U.S.
receivables. This gain was invested in additional card acquisition activities in
the first quarter of 2000 and thus had no material effect on net income, total
net revenues or total expenses. The following tables reconcile TRS' income
statements from a managed basis to a GAAP basis. These tables are not complete
statements of income, as they include only those income statement items that are
affected by securitizations.
<TABLE>
<CAPTION>
(Dollars in millions)
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
------------------------------- ---------------------------------
Managed Securitization GAAP Managed Securitization GAAP
Basis Effect Basis Basis Effect Basis
------- -------------- ----- ----- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Net Revenues:
Other Revenues $841 $173 $1,014 $639 $92 $731
Lending Net Finance
Charge Revenue 555 (262) 293 452 (105) 347
Total Net Revenues 4,044 (89) 3,955 3,434 (13) 3,421
Expenses:
Marketing and Promotion 318 21 339 270 - 270
Provision for Losses
and Claims:
Charge Card 278 (37) 241 233 (51) 182
Lending 335 (160) 175 282 (47) 235
Charge Card Interest
Expense 314 (54) 260 241 (58) 183
Net Discount Expense - 126 126 - 143 143
Other Operating Expenses 1,144 15 1,159 928 - 928
Total Expenses 3,408 (89) 3,319 2,880 (13) 2,867
Pretax Income $636 $- $636 $554 $- $554
---------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Travel Related Services
Liquidity and Capital Resources
Selected Balance Sheet Information
----------------------------------
(Unaudited, GAAP Basis)
(Dollars in billions, except percentages)
March 31, December 31, Percentage March 31, Percentage
2000 1999 Inc/(Dec) 1999 Inc/(Dec)
---- ---- ---------- ---- ---------
<S> <C> <C> <C> <C> <C>
Accounts Receivable, net $25.1 $25.3 (1.0)% $20.8 20.6 %
U.S. Cardmember Loans $15.9 $16.1 (0.8) $13.7 16.0
Total Assets $54.6 $56.3 (2.9) $45.3 20.6
Short-term Debt $30.4 $31.4 (3.2) $22.7 34.2
Long-term Debt $3.6 $4.4 (18.7) $5.5 (35.6)
Total Liabilities $49.0 $50.9 (3.6) $40.2 22.1
Total Shareholder's Equity $5.6 $5.4 3.4 $5.1 8.8
Return on Average Equity* 30.5% 30.1% - 28.4% -
Return on Average Assets* 3.2% 3.2% - 3.3% -
* Computed based on the past twelve months of net income and excludes the
effect of SFAS No. 115.
</TABLE>
In the first quarter of 2000, the American Express Credit Account Master Trust
(the Trust) securitized $1 billion of loans through the public issuance of
investor certificates. The securitized assets consist of loans arising in a
portfolio of designated consumer American Express credit card, Optima Line of
Credit and Sign & Travel/Special Purchase Account revolving credit accounts or
features and, in the future, may include other charge or credit accounts or
features or products. In May 2000, the Trust securitized an additional $1
billion of loans.
In the first quarter of 2000, American Express Credit Corporation (Credco), a
wholly-owned subsidiary of TRS, called $150 million 1.125% Cash Exchangeable
Notes due 2003. These notes were exchangeable for an amount in cash which was
linked to the price of the common shares of American Express. Credco had entered
into agreements to fully hedge its obligations. Accordingly, the related hedging
agreements were called at the same time.
14
<PAGE>
<TABLE>
<CAPTION>
American Express Financial Advisors
Results of Operations for the Three Months Ended March 31, 2000 and 1999
Statements of Income
--------------------
(Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Net Revenues:
Investment Income $572 $595 (3.9)%
Management and Distribution Fees 688 522 31.7
Other Revenues 246 228 8.2
----- -----
Total Revenues 1,506 1,345 12.0
Provision for Losses and Benefits:
Annuities 259 270 (4.3)
Insurance 139 126 10.4
Investment Certificates 89 64 40.6
----- -----
Total 487 460 6.0
----- -----
Net Revenues 1,019 885 15.1
----- -----
Expenses:
Human Resources 498 416 19.7
Other Operating Expenses 166 157 5.5
----- -----
Total Expenses 664 573 15.8
----- -----
Pretax Income 355 312 13.8
Income Tax Provision 110 98 12.3
----- -----
Net Income $245 $214 14.5
===== =====
</TABLE>
15
<PAGE>
<TABLE>
American Express Financial Advisors
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except percentages and where indicated)
Three Months Ended
March 31,
----------------- Percentage
2000 1999 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
Life Insurance in Force (billions) $91.7 $82.9 10.6
Deferred Annuities in Force (billions) $51.0 $44.0 16.0
Assets Owned, Managed or
Administered (billions):
Assets Managed for Institutions $57.4 $46.8 22.7
Assets Owned, Managed or Administered
for Individuals:
Owned Assets:
Separate Account Assets 38.4 28.2 36.2
Other Owned Assets 39.8 37.4 6.4
----- -----
Total Owned Assets 78.2 65.6 19.2
Managed Assets 122.7 96.0 27.8
Administered Assets 31.2 18.7 66.8
----- -----
Total $289.5 $227.1 27.5
===== =====
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $2,332 $912 #
Other Owned Assets $(120) $(204) (41.2)
Total Managed Assets $7,020 $3,018 #
Cash Sales:
Mutual Funds $12,104 $8,483 42.7
Annuities 1,362 793 71.7
Investment Certificates 835 702 18.9
Life and Other Insurance Products 237 158 50.1
Institutional 1,551 743 #
Other 573 885 (35.0)
------ ------
Total Cash Sales $16,662 $11,764 41.6
====== ======
Number of Financial Advisors 11,094 10,372 7.0
Fees from Financial Plans and
Advice Services $26.3 $21.3 23.6
Percentage of Total Sales from Financial
Plans and Advice Services 66.9% 66.5% -
* Excluding the effect of SFAS No. 115.
# Denotes variance of more than 100%.
Note: Reporting of data related to cash sales and assets owned,
managed and administered has been revised to better reflect
AEFA's multiple sales channel strategy and broadening of
its product portfolio through additional non-proprietary
offerings.
</TABLE>
16
<PAGE>
American Express Financial Advisors
American Express Financial Advisors' (AEFA) net income in the first quarter of
2000 increased 15 percent from a year ago. Net revenues and earnings grew due to
greater fee revenues. Management fees rose as a result of increased managed
asset levels, including separate account assets, and distribution fees grew
reflecting greater mutual fund sales and asset levels. The growth in managed
assets from last year reflects positive net sales and market appreciation over
the past twelve months. Investment income, net of provisions for losses and
benefits, decreased due to a lower average yield on invested assets and losses
related to the high yield investment portfolio, partly offset by a higher level
of invested assets. Other revenues benefited from higher insurance premiums and
greater fees from financial planning and advice services.
Human resources expenses were higher, largely as a result of a volume-driven
increase in advisors' compensation, reflecting growth in sales and asset levels.
Other operating expenses increased slightly; such limited growth reflects
particularly high levels of spending on business building initiatives (e.g. new
advisor platforms) last year, an investment spending plan in 2000 that is more
skewed toward coming quarters, and continued control of core operating expense
growth.
17
<PAGE>
<TABLE>
<CAPTION>
American Express Financial Advisors
Liquidity and Capital Resources
Selected Balance Sheet Information
----------------------------------
(Unaudited)
(Dollars in billions, except percentages)
March 31, December 31, Percentage March 31, Percentage
2000 1999 Inc/(Dec) 1999 Inc/(Dec)
---- ---- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
Investments $30.3 $30.3 0.3 % $30.6 (1.0)%
Separate Account Assets $38.4 $35.9 7.1 $28.2 36.2
Total Assets $78.2 $74.6 4.8 $65.6 19.2
Client Contract Reserves $31.0 $31.0 - $30.5 1.6
Total Liabilities $74.3 $70.7 5.0 $61.6 20.6
Total Shareholder's Equity $3.9 $3.9 0.9 $4.1 (4.9)
Return on Average Equity* 23.0% 22.9% - 22.6% -
* Computed based on the past twelve months of net income and excludes the
effect of SFAS No. 115.
</TABLE>
Separate account assets and liabilities increased due to higher net sales and
market appreciation.
18
<PAGE>
<TABLE>
<CAPTION>
American Express Bank/Travelers Cheque (AEB/TC)
Results of Operations for the Three Months Ended March 31, 2000 and 1999
Statements of Income
--------------------
(Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
------------------ Percentage
2000 1999 Inc/(Dec)
---- ---- ---------
<S> <C> <C> <C>
Net Revenues:
Interest Income $183 $193 (5.2)%
Interest Expense 118 119 (1.3)
--- ---
Net Interest Income 65 74 (11.5)
TC Investment Income 91 79 15.0
Commissions and Fees 54 43 26.7
Foreign Exchange Income & Other Revenue 41 51 (20.8)
--- ---
Total Net Revenues 251 247 1.7
--- ---
Expenses:
Human Resources 84 82 2.2
Other Operating Expenses 148 136 9.2
Provision for Losses 16 17 (4.4)
--- ---
Total Expenses 248 235 5.8
--- ---
Pretax Income 3 12 (76.9)
Income Tax Benefit (37) (29) 28.4
--- ---
Net Income $40 $ 41 (2.9)
=== ===
<CAPTION>
Selected Statistical Information
(Amounts in billions, except percentages) --------------------------------
Three Months Ended
March 31,
------------------ Percentage
2000 1999 Inc/(Dec)
---- ---- ----------
<S> <C> <C> <C>
American Express Bank:
Assets Managed* / Administered $9.4 $6.3 49.7 %
Assets of Non-Consolidated Joint
Ventures $2.4 $2.6 (8.2)
Travelers Cheque:
Sales $5.1 $4.6 10.5
Average Outstanding $6.1 $5.8 4.7
Average Investments $6.0 $5.6 6.1
Tax Equivalent Yield 8.9% 8.9% -
* Includes assets managed by American Express Financial Advisors.
</TABLE>
19
<PAGE>
American Express Bank/Travelers Cheque (AEB/TC)
AEB/TC reported net income of $40 million for the first quarter of 2000,
compared with $41 million a year ago. Net income at American Express Bank was
unchanged from year ago levels. Net interest income declined from a year ago,
primarily due to the effects of a lower loan portfolio and higher funding costs.
Commissions and fees rose due to higher Private Banking, Correspondent Banking
and Personal Financial Services fees. Foreign exchange income and other revenue
declined, as stable currencies in key markets decreased client related trading
activities. Travelers Cheque results fell slightly from a year ago due to higher
marketing and promotion spending in the current quarter.
20
<PAGE>
<TABLE>
<CAPTION>
American Express Bank/Travelers Cheque (AEB/TC)
Liquidity and Capital Resources
Selected Balance Sheet Information
----------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
March 31, December 31, Percentage March 31, Percentage
2000 1999 Inc/(Dec) 1999 Inc/(Dec)
---- ---- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
Total Assets $19.3 $18.9 2.3% $18.2 6.0%
Total Liabilities $18.4 $18.0 2.1 $17.0 7.6
Total Shareholder's
Equity (millions) $943 $875 7.8 $1,148 (17.8)
Return on Average Assets* 0.81% 0.82% - 0.90% -
Return on Average Common Equity* 17.3% 17.5% - 19.7% -
American Express Bank:
Shareholder's Equity (millions) $697 $691 0.9 $733 (4.9)
Total Loans $5.0 $5.1 (1.7) $5.3 (5.1)
Total Non-performing
Loans (millions) $174 $168 3.7 $209 (16.9)
Other Non-performing
Assets (millions) $31 $37 (15.4) $64 (51.6)
Reserve for Credit
Losses (millions)** $189 $189 0.2 $261 (27.7)
Loan Loss Reserves as
Percentage of Total Loans 3.4% 3.3% - 4.1% -
Deposits $8.4 $8.3 0.4 $7.9 6.6
Risk-Based Capital Ratios:
Tier 1 10.1% 9.9% - 9.8% -
Total 11.6% 12.0% - 12.1% -
Leverage Ratio 5.6% 5.6% - 5.4% -
Travelers Cheque:
Travelers Cheque Investments $6.0 $6.0 0.6 $6.1 (0.9)
Travelers Cheques Outstanding $6.0 $6.2 (3.0) $5.8 4.5
* Computed based on the past twelve
months of net income and excludes
the effect of SFAS No. 115.
** Allocation (Millions):
Loans $170 $169 $218
Other Assets, primarily
derivatives 15 16 41
Other Liabilities 4 4 2
--- --- ---
Total Credit Loss Reserves $189 $189 $261
=== === ===
</TABLE>
AEB had loans outstanding of $5.0 billion at March 31, 2000, down from $5.1
billion at December 31, 1999 and $5.3 billion at March 31, 1999. The reduction
since first quarter 1999 resulted from a $600 million decrease in corporate and
correspondent bank loans, partially offset by an increase in consumer and
private banking loans of $270 million ($540 million excluding the effect of
asset sales and securitizations in the consumer loan portfolio). Since December
31, 1999, corporate and correspondent bank loans fell by $200 million and
consumer and private banking loans rose by $77 million. As of March 31, 2000,
consumer and private banking loans comprised 40% of total loans versus 35% at
December 31, 1999 and 32% at March 31, 1999.
21
<PAGE>
As presented in the table below, there are other banking activities, such as
forward contracts, various contingencies and market placements, which added
approximately $7.7 billion to AEB's credit exposures at March 31, 2000, compared
with $7.6 billion at both March 31, 1999 and December 31, 1999. Of the $7.7
billion of exposures other than loans at March 31, 2000, $5.2 billion were
relatively less risky cash and securities related balances.
<TABLE>
<CAPTION>
American Express Bank
Exposures By Country and Region
(Unaudited)
($ in billions)
Net
Guarantees 3/31/00 12/31/99
FX and and Total Total
Country Loans Derivatives Contingents Other* Exposure** Exposure**
--------- ----- ----------- ----------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong $0.5 - $0.1 $0.1 $0.7 $0.8
Indonesia 0.2 - - 0.1 0.3 0.4
Singapore 0.5 - 0.1 0.1 0.7 0.6
Korea 0.1 - - 0.2 0.4 0.3
Taiwan 0.3 - 0.1 0.1 0.4 0.4
China - - - - - -
Japan - - - - 0.1 0.1
Thailand - - - - - -
Other - - - 0.2 0.3 0.3
------ ----------- --------- -------- ---------- ----------
Total Asia/Pacific
Region** 1.6 - 0.3 0.9 2.9 2.9
------ ----------- ---------- -------- ---------- ----------
Chile 0.2 - - 0.1 0.4 0.3
Brazil 0.2 - - 0.1 0.3 0.3
Mexico 0.1 - - - 0.1 0.1
Peru - - - - - -
Argentina 0.1 - - - 0.1 0.1
Other 0.2 - 0.1 0.1 0.5 0.5
------- ----------- ---------- -------- ---------- ----------
Total Latin America** 0.7 - 0.2 0.3 1.3 1.2
------- ----------- ---------- -------- ---------- ----------
India 0.3 - 0.1 0.3 0.7 0.7
Pakistan 0.1 - - 0.1 0.3 0.3
Other 0.1 - 0.1 0.1 0.2 0.2
------- ----------- ---------- -------- ----------- ---------
Total Subcontinent** 0.4 - 0.2 0.6 1.2 1.2
------- ----------- ---------- -------- ---------- ----------
Egypt 0.3 - - 0.2 0.5 0.5
Other 0.1 - - - 0.2 0.2
------- ----------- ---------- -------- ---------- ---------
Total Middle East
& Africa** 0.4 - 0.1 0.2 0.8 0.8
------- ----------- ---------- -------- ---------- ---------
Total Europe*** 1.4 $0.1 0.7 2.5 4.7 4.7
Total North America** 0.3 0.1 0.2 1.3 1.8 2.0
------- ----------- ---------- -------- ---------- ---------
Total Worldwide** $5.0 $0.3 $1.6 $5.8 $12.7 $12.7
======= =========== ========== ======== ========== =========
* Includes cash, placements and securities.
** Individual items may not add to totals due to rounding.
*** Total exposures at 3/31/00 and 12/31/99 include $10
million and $11 million of exposures to Russia, respectively.
</TABLE>
Note: Includes cross-border and local exposure and does not net local funding or
liabilities against any local exposure.
22
<PAGE>
Corporate and Other
Corporate and Other reported net expenses of $45 million, compared with $43
million a year ago. Results for both years include a preferred stock dividend
based on earnings from Lehman Brothers. That dividend was offset by expenses
related to business building initiatives in both years and by Y2K expenses a
year ago.
23
<PAGE>
PART II.--OTHER INFORMATION
AMERICAN EXPRESS COMPANY
Item 1. Legal Proceedings
ITEM 1. LEGAL PROCEEDINGS
The Company commenced an action, AMERICAN EXPRESS COMPANY V. THE
UNITED STATES, on September 16, 1997 in the United States Court of Federal
Claims (the "Court") seeking a refund from the United States of Federal income
taxes paid (plus related interest) for the year 1987. The Company contends
that the Internal Revenue Service abused its discretion by denying the
Company's request to include annual fees from Cardmembers in taxable income
ratably over the twelve-month period to which the fees relate rather than in
full at the time they are billed. On October 14, 1999, the Company filed a
Motion for Summary Judgment; oral arguments occurred on April 12, 2000.
Since October 1, 1999, six former female financial advisors at
American Express Financial Advisors ("AEFA") have filed charges with the Equal
Employment Opportunity Commission ("EEOC"), including class claims on behalf
of all women advisors at AEFA, alleging that they and other women were
discriminated against in hiring, assignment of work, distribution of leads,
training and promotions. Four of the charges were filed with the EEOC in
Minnesota and two in New Jersey. The claimants are seeking monetary and
injunctive relief. AEFA is responding to all charges. If this matter is not
resolved at the EEOC and is filed in Federal Court, AEFA intends to vigorously
defend the charges.
The matters described above were previously reported in the Company's Form
10-K for the year ended December 31, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
<TABLE>
<CAPTION>
The Company's annual meeting of shareholders was held on April 24,
2000. The matters that were voted upon at the meeting, and the number of votes
cast for, against or withheld, as well as the number of abstentions and broker
non-votes, as to each such matter, where applicable, are set forth below.
Votes Votes Votes Broker
For Against Withheld Abstentions Non-Votes
----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Proposal relating to the
Amendment of the Certificate
of Incorporation 361,946,647 5,547,431 -- 2,048,384 4,698
Proposal relating to the amendment
of the American Express Company
1993 Directors' Stock Option Plan 338,140,686 27,805,546 -- 3,600,620 308
Selection of Ernst & Young LLP
as independent auditors 336,517,612 842,482 -- 2,187,066 --
Shareholder proposal
relating to political contributions 9,740,752 287,811,598 -- 12,223,370 59,771,440
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Election of Directors:
D.F. Akerson 366,318,508 -- 3,288,652 -- --
E.L. Artzt 366,105,735 -- 3,411,425 -- --
W.G. Bowen 366,237,910 -- 3,309,250 -- --
K.I. Chenault 366,272,769 -- 3,274,391 -- --
R.L. Crandall 365,973,857 -- 3,573,303 -- --
H. Golub 366,252,966 -- 3,294,194 -- --
B. Sills Greenough 365,795,642 -- 3,751,518 -- --
F.R. Johnson 365,608,103 -- 3,939,057 -- --
V.E. Jordan, Jr 364,917,828 -- 4,629,332 -- --
J. Leschly 366,266,344 -- 3,280,816 -- --
D. Lewis 366,054,755 -- 3,492,405 -- --
R.A. McGinn 366,197,468 -- 3,349,692 -- --
F.P. Popoff 366,183,438 -- 3,363,722 -- --
</TABLE>
24
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on page E-1 hereof.
(b) Reports on Form 8-K:
Form 8-K, dated January 26, 2000, Item 5, reporting the Company's
earnings for the quarter and year ended December 31, 1999 and
including a Fourth Quarter/Full Year Earnings Supplement.
Form 8-K, dated February 3, 2000, Item 5, reporting certain
information from speeches presented by Harvey Golub, the Company's
Chairman and Chief Executive Officer and David Hubers, President,
AXP Advisors, to the financial community on February 2, 2000.
Form 8-K, dated April 26, 2000, Item 5, reporting the Company's
earnings for the quarter ended March 31, 2000 and including a
First Quarter Earnings Supplement.
Form 8-K, dated April 27, 2000, Item 5, announcing the appointment
of Gary Crittenden as its executive vice president and chief
financial officer.
Form 8-K, dated May 3, 2000, Item 5, 1) announcing a leave of
absence of Steve Alesio, President of the Small Business Services
group, and resulting organizational changes and 2) making publicly
available a consolidated five-year and quarterly summary of
restated common share statistics to reflect the Company's recent
3-for-1 stock split.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN EXPRESS COMPANY
------------------------
(Registrant)
Date: May 15, 2000 By /s/ Richard Karl Goeltz
----------------------- ------------------------
Richard Karl Goeltz
Vice Chairman and
Chief Financial Officer
Date: May 15, 2000 /s/ Daniel T. Henry
----------------------- -----------------------
Daniel T. Henry
Senior Vice President and
Comptroller
(Chief Accounting Officer)
26
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly Report:
Exhibit Description
------- -----------
3.1 Company's Certificate of Amendment of the Certificate of
Incorporation.
10.1 Amendment of American Express Company 1998 Incentive Compensation
Plan Master Agreement dated April 27, 1998.
10.2 Amendment of American Express Company 1989 Long-Term Incentive
Compensation Plan Master Agreement dated February 27, 1995.
10.3 Amendment of American Express Company Supplemental Retirement
Plan Amended and Restated Effective March 1, 1995.
10.4 Amendment of American Express Key Executive Life Insurance Plan.
10.5 Amendment of American Express Salary/Bonus Deferral Plan.
10.6 American Express Annual Incentive Award Plan.
10.7 Action To Amend IDS Current Service Deferred Compensation Plan.
10.8 Description of Pay for Performance Deferral Program.
10.9 Amendment To The American Express Pay For Performance Deferral
Programs.
10.10 American Express Senior Executive Severance Plan Effective
January 1, 1994 (as amended and restated through May 1, 2000).
10.11 American Express Company 1993 Directors' Stock Option Plan, as
amended.
12 Computation in Support of Ratio of Earnings to Fixed
Charges.
15 Letter re Unaudited Interim Financial Information.
27 Financial Data Schedule.
E-1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
AMERICAN EXPRESS COMPANY
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
* * * * *
1. The name of the corporation is American Express Company.
2. The certificate of incorporation of said corporation was filed by the
Department of State on June 10, 1965.
3. (a) The certificate of incorporation is amended to change the
1,200,000,000 common shares of the par value of $.60 to 3,600,000,000
common shares of the par value of $.20.
(b) To effect the foregoing, Section 4(1) of the Certificate of
Incorporation is amended to read as follows:
"1. The aggregate number of shares of all classes which the
corporation shall have the authority to issue is 3,620,000,000
shares, consisting of 20,000,000 preferred shares of the par
value of $1.66 2/3 each and 3,600,000,000 common shares of the
par value of $.20 each."
4. (a) The presently authorized and issued 448,285,538 common shares with
a par value of $.60 per share are hereby changed into 1,344,856,614
issued common shares with a par value of $.20 per share in the ratio of
3 shares with a par value of $.20 per share for each share with a par
value of $.60.
(b) The presently authorized and unissued 751,714,462 common shares
with a par value of $.60 per share are hereby changed into
2,255,143,386 unissued common shares with a par value of $.20 per share
in the ratio of 3 shares with a par value of $.20 per share for each
share with a par value of $.60.
5. The amendment was authorized in the following manner:
The Board of Directors of American Express Company unanimously
authorized this amendment to its Certificate of Incorporation on
January 24, 2000. The shareholders of American Express Company approved
this amendment by vote of a majority of all outstanding shares entitled
to vote thereon at the annual meeting of shareholders held on April 24,
2000.
/s/ Stephen P. Norman
----------------------------
Stephen P. Norman
Secretary
AMENDMENT OF
AMERICAN EXPRESS COMPANY
1998 INCENTIVE COMPENSATION PLAN
MASTER AGREEMENT
DATED APRIL 27, 1998
RESOLVED, that pursuant to Section 12 of the American Express Company 1998
Incentive Compensation Plan (the "Plan"), the American Express Company 1998
Incentive Compensation Plan Master Agreement, dated April 27, 1998 (the
"Master Agreement"), is amended effective as of February 28, 2000 (the
"Effective Date"), as follows:
1. Section I, Subparagraph 3(c) is hereby amended, with respect to
Options granted on or after February 28, 2000, by adding the
following proviso to the last sentence thereof, to read as
follows:
;PROVIDED, HOWEVER, with respect to Options granted on or
after February 28, 2000, if within two years following a
Change in Control (utilizing the definition of a Change in
Control for Awards granted after February 28, 2000), a
Participant is terminated under circumstances that would
entitle the Participant to severance under an applicable
U.S. severance Plan (other than Constructive Termination, as
defined in the applicable plan), the Participant may, at any
time within ninety (90) days following such termination (but
in no event after the expiration of this Option under
Paragraph 2(a) above with respect to ten years from the Date
of Grant), exercise this Option with respect to the number
of shares as to which the Participant could have exercised
this Option on the date of such termination. For any other
Participant not covered by a U.S. severance plan, the 90 day
extension period shall apply if the Participant is
terminated within two years following a Change in Control
and the Participant would have been entitled to severance
under the applicable U.S. severance plan had the Participant
been a U.S. employee.
<PAGE>
2. The introductory language to Subparagraph 1 of Section V is
deleted and is hereby replaced with the following new
introductory language:
1. Notwithstanding anything in this Agreement to the
contrary (but subject to those provisions in
Subparagraph 3 or 4 below which could reduce payments
hereunder as a result of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), upon a
Change in Control (as applicable to a particular
award), the awardholder shall immediately be:
3. Section V, Subparagraph 2(c), with respect to Awards granted
prior to February 28, 2000, is hereby deleted in its entirety and
replaced with a new Subparagraph 2(c) to read as follows:
(c) The consummation of a reorganization, merger or
consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 60%
of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting
Securities immediately prior to such reorganization, merger
or consolidation, in substantially the same proportions as
their ownership immediately prior to such reorganization,
merger or consolidation of such Outstanding Company Common
Shares and Outstanding Company Voting Shares, as the case
may be, (ii) no Person (excluding the Company, any employee
benefit plan (or related trust) of the Company, a Subsidiary
or such corporation resulting from such reorganization,
merger or consolidation or any parent or a subsidiary
thereof, and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation,
directly or indirectly, 25% or more of the Outstanding Comp-
2
<PAGE>
any Common Shares or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
(or any parent thereof) or the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation; or
4. Section V, Subparagraph 2(d), with respect to Awards granted
prior to February 28, 2000, is hereby deleted in its entirety and
replaced with a new Subparagraph 2(d) to read as follows:
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased,
exchanged or disposed of to a corporation with respect to
which following such sale, lease, exchange or other
disposition (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other
disposition of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, (B)
no Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or a Subsidiary of
such corpora-
3
<PAGE>
tion or a subsidiary thereof and any Person beneficially
owning, immediately prior to such sale, lease, exchange or
other disposition, directly or indirectly, 25% or more of
the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of such corporation
(or any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors and (C) at least a majority of the
members of the board of directors of such corporation (or
any parent thereof) were members of the Incumbent Board at
the time of the execution of the initial agreement or action
of the Board providing for such sale, lease, exchange or
other disposition of assets of the Company; or
5. Section V, Subparagraph 2(c), with respect to Awards granted on
or after February 28, 2000, is hereby deleted in its entirety and
replaced with a new Subparagraph 2(c) to read as follows:
(c) The consummation of a reorganization, merger or
consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 50%
of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, in
substantially the same proportions as their ownership
immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, (ii)
no Person (excluding the Company, any employee benefit plan
4
<PAGE>
(or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation
(or any parent thereof) were members of the Incumbent Board
at the time of the execution of the initial agreement or
action of the Board providing for such reorganization,
merger or consolidation; or
6. Section V, Subparagraph 2(d), with respect to Awards granted on
or after February 28, 2000, is hereby deleted in its entirety and
replaced with a new Subparagraph 2(d) to read as follows:
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased,
exchanged or disposed of to a corporation with respect to
which following such sale, lease, exchange or other
disposition (A) more than 50% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially
5
<PAGE>
the same proportions as their ownership immediately prior to
such sale, lease, exchange or other disposition of such
Outstanding Company Common Shares and Outstanding Company
Voting Shares, as the case may be, (B) no Person (excluding
the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary of such corporation or a
subsidiary thereof and any Person beneficially owning,
immediately prior to such sale, lease, exchange or other
disposition, directly or indirectly, 25% or more of the
Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of such corporation
(or any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors and (C) at least a majority of the
members of the board of directors of such corporation (or
any parent thereof) were members of the Incumbent Board at
the time of the execution of the initial agreement or action
of the Board providing for such sale, lease, exchange or
other disposition of assets of the Company; or
7. Section V, Subparagraph 3 is hereby deleted in its entirety and
replaced with a new Subparagraph 3 to read as follows:
(3)(a) Paragraph 3 shall apply in the event of a Major
Transaction. A Major Transaction shall mean a transaction
described in either Section (1) or (2) below:
(1) The consummation of a reorganization, merger or
consolidation, in each case, if, following such
reorganization, merger or consolidation, more than 50%
but not more than 60% of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or
consolidation (or any parent thereof) and the combined
voting power of the then outstanding voting securities
of such corporation (or any parent thereof) entitled to
vote generally in the election of directors is then
beneficially owned, directly or
6
<PAGE>
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially
the same proportions as their ownership immediately prior to
such reorganization, merger or consolidation of such
Outstanding Company Common Shares and Outstanding Company
Voting Shares, as the case may be, but only if:
(A) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation.
(2) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company to a corporation with respect to which following
such sale, lease, exchange or other disposition more
than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and
7
<PAGE>
the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange
or other disposition in substantially the same proportions
as their ownership immediately prior to such sale, lease,
exchange or other disposition of such Outstanding Company
Common Shares and Outstanding Company Voting Shares, as the
case may be, but only if:
(A) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for such sale, lease, exchange or other disposition of
assets of the Company.
(b) If all or any portion of the payments or benefits to which
the Participant will be entitled under the Plan, either
alone or together with other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or
8
<PAGE>
entity that would be treated as a payor of parachute
payments as hereinafter defined, under any other plan,
agreement or arrangement, would constitute a "parachute
payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code") or any
successor provision thereto and regulations or other
guidance thereunder (except that "2.95" shall be used
instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or
benefits provided to the Participant under this Plan, and
any other payments or benefits which the Participant
receives or is entitled to receive directly or indirectly
from the Company or any of its subsidiaries or any other
person or entity that would be treated as a payor of
parachute payments as hereinafter defined, under any other
plan, agreement or arrangement which would constitute a
parachute payment, shall be reduced (but not below zero) as
described below to the extent necessary so that no portion
thereof would constitute such a parachute payment as
previously defined (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto). Whether payments or benefits
to the Participant would constitute a "parachute payment",
whether such payments or benefits are to be reduced pursuant
to the first sentence of this paragraph, and the extent to
which they are to be so reduced, will be determined by the
firm serving, immediately prior to the Major Transaction, as
the Company's independent auditors, or if that firm refuses
to serve, by another qualified firm, whether or not serving
as independent auditors, designated by the Administration
Committee under the American Express Senior Executive
Severance Plan (the "Firm"). The Firm will be paid
reasonable compensation by the Company for such services. If
the Firm concludes that its determination is inconsistent
with a final determination of a court or the Internal
Revenue Service, the Firm shall, based on such final
determination, redetermine whether the amount payable to the
Participant should have been reduced and, if applicable, the
amount of any such reduction. If the Firm determines that a
lesser payment should have been made to the Participant,
then an amount equal to the amount of the excess of the
earlier
9
<PAGE>
payment over the redetermined amount (the "Excess Amount")
will be deemed for all purposes to be a loan to the
Participant made on the date of the Participant's receipt of
such Excess Amount, which the Participant will have an
obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section
1274(d) of the Code or any successor provision thereto),
compounded semi-annually (the "Section 1274 Rate") from the
date of the Participant's receipt of such Excess Amount
until the date of such repayment (or such lesser rate
(including zero) as may be designated by the Firm such that
the Excess Amount and such interest will not be treated as a
parachute payment as previously defined). If the Firm
determines that a greater payment should have been made to
the Participant, within five business days of such
determination, the Company will pay to the Participant the
amount of the deficiency, together with interest thereon
from the date such amount should have been paid to the date
of such payment, at the Section 1274 Rate (or such lesser
rate (including zero) as may be designated by the Firm such
that the amount of such deficiency and such interest will
not be treated as a parachute payment as previously
defined). If a reduction is to be made pursuant to this
paragraph, the Firm will have the right to determine which
payments and benefits will be reduced, either those under
this Plan alone or such other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as previously defined, under any other
plan, agreement or arrangement.
8. Section V is hereby amended by adding the following new
Subparagraph 4 to read as follows:
4. (a) This Subparagraph 4 shall apply in the event of a Change
in Control (utilizing the definition of a Change in Control
as applicable to Awards granted on or after February 28,
2000, whether the Award giving rise to the payments or
10
<PAGE>
benefits hereunder was granted before, on or after February
28, 2000).
(b) In the event that any payment or benefit received or to
be received by a Participant hereunder in connection with a
Change in Control or termination of such Participant's
employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred
to collectively as the "Payments"), will be subject to the
excise tax referred to in Section 4999 of the Code (the
"Excise Tax"), then (i) in the case of a Participant who is
classified in Band 70 (or its equivalent) or above
immediately prior to such Change in Control (a "Tier 1
Employee"), the Company shall pay to such Tier 1 Employee,
within five days after receipt by such Tier 1 Employee of
the written statement referred to in paragraph (e) below, an
additional amount (the "Gross-Up Payment") such that the net
amount retained by such Tier 1 Employee, after deduction of
any Excise Tax on the Payments and any federal, state and
local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Payments and (ii) in
the case of a Participant other than a Tier 1 Employee, the
Payments shall be reduced to the extent necessary so that no
portion of the Payments is subject to the Excise Tax but
only if (A) the net amount of all Total Payments (as
hereinafter defined), as so reduced (and after subtracting
the net amount of federal, state and local income and
employment taxes on such reduced Total Payments), is greater
than or equal to (B) the net amount of such Total Payments
without any such reduction (but after subtracting the net
amount of federal, state and local income and employment
taxes on such Total Payments and the amount of Excise Tax to
which the Participant would be subject in respect of such
unreduced Total Payments); provided, however, that the
Participant may elect in writing to have other components of
his or her Total Payments reduced prior to any reduction in
the Payments hereunder.
(c) For purposes of determining whether the Payments will be
subject to the Excise Tax, the amount of such Excise
11
<PAGE>
Tax and whether any Payments are to be reduced hereunder:
(i) all payments and benefits received or to be received by
the Participant in connection with such Change in Control or
the termination of such Participant's employment, whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person (as
such term is defined in Subparagraph 2 above) whose actions
result in such Change in Control or any Person affiliated
with the Company or such Person (all such payments and
benefits, excluding the Gross-Up Payment and any similar
gross-up payment to which a Tier 1 Employee may be entitled
under any such other plan, arrangement or agreement, being
hereinafter referred to as the "Total Payments"), shall be
treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of
the Firm, such payments or benefits (in whole or in part) do
not constitute parachute payments, including by reason of
section 280G(b)(2)(A) or section 280G(b)(4)(A) of the Code;
(ii) no portion of the Total Payments the receipt or
enjoyment of which the Participant shall have waived at such
time and in such manner as not to constitute a "payment"
within the meaning of section 280G(b) of the Code shall be
taken into account; (iii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall
be treated as subject to the Excise Tax unless, in the
opinion of the Firm, such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax; and (iv) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Firm in accordance with the principles of
sections 280G(d)(3) and (4) of the Code and regulations or
other guidance thereunder. For purposes of determining the
amount of the Gross-Up Payment in respect of a Tier 1
Employee and whether any Payments in respect of a
Participant (other than a Tier 1 Employee) shall be reduced,
a Participant shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation (and
state and local income taxes at the highest mar-
12
<PAGE>
ginal rate of taxation in the state and locality of such
Participant's residence, net of the maximum reduction in
federal income taxes which could be obtained from deduction
of such state and local taxes) in the calendar year in which
the Gross-Up Payment is to be made (in the case of a Tier 1
Employee) or in which the Payments are made (in the case of
a Participant other than a Tier 1 Employee). The Firm will
be paid reasonable compensation by the Company for its
services.
(d) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, then an amount equal to
the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for
all purposes to be a loan to the Tier 1 Employee made on the
date of the Tier 1 Employee's receipt of such Excess Amount,
which the Tier 1 Employee will have an obligation to repay
to the Company on the fifth business day after demand,
together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the
Tier 1 Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero)
as may be designated by the Firm such that the Excess Amount
and such interest will not be treated as a parachute payment
as previously defined). In the event that the Excise Tax is
finally determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment),
within five business days of such determination, the Company
will pay to the Tier 1 Employee an additional amount,
together with interest thereon from the date such additional
amount should have been paid to the date of such payment, at
the Section 1274 Rate (or such lesser rate (including zero)
as may be designated by the Firm such that the amount of
such deficiency and such interest will not be
13
<PAGE>
treated as a parachute payment as previously defined). The
Tier 1 Employee and the Company shall each reasonably
cooperate with the other in connection with any
administrative or judicial proceedings concerning the amount
of any Gross-Up Payment.
(e) As soon as practicable following a Change in Control,
the Company shall provide to each Tier 1 Employee and to
each other Participant with respect to whom it is proposed
that Payments be reduced, a written statement setting forth
the manner in which the Total Payments in respect of such
Tier 1 Employee or other Participant were calculated and the
basis for such calculations, including, without limitation,
any opinions or other advice the Company has received from
the Firm or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to
the statement).
14
AMENDMENT OF
AMERICAN EXPRESS COMPANY
1989 LONG-TERM INCENTIVE COMPENSATION PLAN
MASTER AGREEMENT
DATED FEBRUARY 27, 1995
RESOLVED, that pursuant to Section 11 of the American Express Company 1989
Incentive Compensation Plan (the "Plan"), the American Express Company 1989
Incentive Compensation Plan Master Agreement, dated February 27, 1995 (the
"Master Agreement"), is amended effective as of February 28, 2000 (the
"Effective Date"), as follows:
1. The introductory language to Subparagraph 1 of Section V is
deleted and is hereby replaced with the following new
introductory language:
1. Notwithstanding anything in this Agreement to the contrary,
(but subject to those provisions in Subparagraph 3 or 4
below which could reduce payments hereunder as a result of
Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code")), upon a Change in Control, the
awardholder shall immediately be:
2. Section V, Subparagraph 2(c) is hereby deleted in its entirety
and replaced with a new Subparagraph 2(c) to read as follows:
(c) The consummation of a reorganization, merger or
consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 60%
of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the
<PAGE>
Outstanding Company Common Shares and Outstanding Company
Voting Securities immediately prior to such reorganization,
merger or consolidation, in substantially the same
proportions as their ownership immediately prior to such
reorganization, merger or consolidation of such Outstanding
Company Common Shares and Outstanding Company Voting Shares,
as the case may be, (ii) no Person (excluding the Company,
any employee benefit plan (or related trust) of the Company,
a Subsidiary or such corporation resulting from such
reorganization, merger or consolidation or any parent or a
subsidiary thereof, and any Person beneficially owning,
immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of the
Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
(or any parent thereof) or the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors and (iii) at least a majority of the
members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation
(or any parent thereof) were members of the Incumbent Board
at the time of the execution of the initial agreement or
action of the Board providing for such reorganization,
merger or consolidation; or
3. Section V, Subparagraph 2(d) is hereby deleted in its entirety
and replaced with a new Subparagraph 2(d) to read as follows:
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased,
exchanged or disposed of to a corporation with respect to
which following such sale, lease, exchange or other
disposition (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securi-
2
<PAGE>
ties of such corporation (or any parent thereof) entitled to
vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange
or other disposition in substantially the same proportions
as their ownership immediately prior to such sale, lease,
exchange or other disposition of such Outstanding Company
Common Shares and Outstanding Company Voting Shares, as the
case may be, (B) no Person (excluding the Company and any
employee benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors and
(C) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for such sale, lease, exchange or other disposition of
assets of the Company; or
4. Section V, Subparagraph 3 is hereby deleted in its entirety and
replaced with a new Subparagraph 3 to read as follows:
(3)(a) Subparagraph 3 shall apply in the event of a Major
Transaction (as defined below). A Major Transaction shall
mean a transaction described in either (1) or (2) below:
(1) The consummation of a reorganization, merger or
consolidation, in each case, if, following such
reorganization, merger or
3
<PAGE>
consolidation, more than 50% but not more than 60% of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger
or consolidation (or any parent thereof) and the combined
voting power of the then outstanding voting securities of
such corporation (or any parent thereof) entitled to vote
generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Shares and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation, in
substantially the same proportions as their ownership
immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but
only if:
(A) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation.
4
<PAGE>
(2) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company to a corporation with respect to which following
such sale, lease, exchange or other disposition more
than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other
disposition of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but
only if:
(A) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for
5
<PAGE>
such sale, lease, exchange or other disposition of assets of
the Company
(b) If all or any portion of the payments or benefits to
which the Participant will be entitled under the Plan,
either alone or together with other payments or benefits
which the Participant receives or is entitled to receive
directly or indirectly from the Company or any of its
subsidiaries or any other person or entity that would be
treated as a payor of parachute payments as hereinafter
defined, under any other plan, agreement or arrangement,
would constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") or any successor provision thereto and
regulations or other guidance thereunder (except that "2.95"
shall be used instead of "3" under Section 280G(b)(2)(A)(ii)
of the Code or any successor provision thereto), such
payment or benefits provided to the Participant under this
Plan, and any other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as hereinafter defined, under any
other plan, agreement or arrangement which would constitute
a parachute payment, shall be reduced (but not below zero)
as described below to the extent necessary so that no
portion thereof would constitute such a parachute payment as
previously defined (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto). Whether payments or benefits
to the Participant would constitute a "parachute payment",
whether such payments or benefits are to be reduced pursuant
to the first sentence of this paragraph, and the extent to
which they are to be so reduced, will be determined by the
firm serving, immediately prior to the Major Transaction, as
the Company's independent auditors, or if that firm refuses
to serve, by another qualified firm, whether or not serving
as independent auditors, designated by the Administration
Committee under the American Express Senior Executive
Severance Plan (the "Firm"). The Firm will be paid
reasonable compensation by the Com-
6
<PAGE>
pany for such services. If the Firm concludes that its
determination is inconsistent with a final determination of
a court or the Internal Revenue Service, the Firm shall,
based on such final determination, redetermine whether the
amount payable to the Participant should have been reduced
and, if applicable, the amount of any such reduction. If the
Firm determines that a lesser payment should have been made
to the Participant, then an amount equal to the amount of
the excess of the earlier payment over the redetermined
amount (the "Excess Amount") will be deemed for all purposes
to be a loan to the Participant made on the date of the
Participant's receipt of such Excess Amount, which the
Participant will have an obligation to repay to the Company
on the fifth business day after demand, together with
interest on such amount at the lowest applicable Federal
rate (as defined in Section 1274(d) of the Code or any
successor provision thereto), compounded semi-annually (the
"Section 1274 Rate") from the date of the Participant's
receipt of such Excess Amount until the date of such
repayment (or such lesser rate (including zero) as may be
designated by the Firm such that the Excess Amount and such
interest will not be treated as a parachute payment as
previously defined). If the Firm determines that a greater
payment should have been made to the Participant, within
five business days of such determination, the Company will
pay to the Participant the amount of the deficiency,
together with interest thereon from the date such amount
should have been paid to the date of such payment, at the
Section 1274 Rate (or such lesser rate (including zero) as
may be designated by the Firm such that the amount of such
deficiency and such interest will not be treated as a
parachute payment as previously defined). If a reduction is
to be made pursuant to this paragraph, the Firm will have
the right to determine which payments and benefits will be
reduced, either those under this Plan alone or such other
payments or benefits which the Participant receives or is
entitled to receive directly or indirectly from the Company
or any of its subsidiaries or any other person or entity
that would be treated as a payor of parachute payments as
previously defined, under any other plan, agreement or
arrangement.
7
<PAGE>
5. Section V is hereby amended by (i) adding a new Subparagraph 4 to
read as follows and (ii) renumbering the subsequent Sections
accordingly:
(4)(a) This Subparagraph 4 shall apply in the event of a
transaction that falls within the definition of Change in
Control (but only if such transaction does not constitute a
Major Transaction, as defined in Subparagraph 3 hereof).
(b) In the event that any payment or benefit received or to
be received by a Participant hereunder in connection with a
Change in Control or termination of such Participant's
employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred
to collectively as the "Payments"), will be subject to the
excise tax referred to in Section 4999 of the Code (the
"Excise Tax"), then (i) in the case of a Participant who is
classified in Band 70 (or its equivalent) or above
immediately prior to such Change in Control (a "Tier 1
Employee"), the Company shall pay to such Tier 1 Employee,
within five days after receipt by such Tier 1 Employee of
the written statement referred to in paragraph (e) below, an
additional amount (the "Gross-Up Payment") such that the net
amount retained by such Tier 1 Employee, after deduction of
any Excise Tax on the Payments and any federal, state and
local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Payments and (ii) in
the case of a Participant other than a Tier 1 Employee, the
Payments shall be reduced to the extent necessary so that no
portion of the Payments is subject to the Excise Tax but
only if (A) the net amount of all Total Payments (as
hereinafter defined), as so reduced (and after subtracting
the net amount of federal, state and local income and
employment taxes on such reduced Total Payments), is greater
than or equal to (B) the net amount of such Total Payments
without any such reduction (but after subtracting the net
amount of federal, state and local income and employment
taxes on such Total Payments and the amount of Excise Tax to
which the Participant would be subject in respect of such
unreduced Total Payments); PROVIDED, HOWEVER, that the Par-
8
<PAGE>
ticipant may elect in writing to have other components of
his or her Total Payments reduced prior to any reduction in
the Payments hereunder.
(c) For purposes of determining whether the Payments will be
subject to the Excise Tax, the amount of such Excise Tax and
whether any Payments are to be reduced hereunder: (i) all
payments and benefits received or to be received by the
Participant in connection with such Change in Control or the
termination of such Participant's employment, whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person (as
such term is defined in Subparagraph 2 above) whose actions
result in such Change in Control or any Person affiliated
with the Company or such Person (all such payments and
benefits, excluding the Gross-Up Payment and any similar
gross-up payment to which a Tier 1 Employee may be entitled
under any such other plan, arrangement or agreement, being
hereinafter referred to as the "Total Payments"), shall be
treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of
the Firm, such payments or benefits (in whole or in part) do
not constitute parachute payments, including by reason of
section 280G(b)(2)(A) or section 280G(b)(4)(A) of the Code;
(ii) no portion of the Total Payments the receipt or
enjoyment of which the Participant shall have waived at such
time and in such manner as not to constitute a "payment"
within the meaning of section 280G(b) of the Code shall be
taken into account; (iii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall
be treated as subject to the Excise Tax unless, in the
opinion of the Firm, such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax; and (iv) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Firm in accordance with the principles of
9
<PAGE>
sections 280G(d)(3) and (4) of the Code and regulations or
other guidance thereunder. For purposes of determining the
amount of the Gross-Up Payment in respect of a Tier 1
Employee and whether any Payments in respect of a
Participant (other than a Tier 1 Employee) shall be reduced,
a Participant shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation (and
state and local income taxes at the highest marginal rate of
taxation in the state and locality of such Participant's
residence, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state
and local taxes) in the calendar year in which the Gross-Up
Payment is to be made (in the case of a Tier 1 Employee) or
in which the Payments are made (in the case of a Participant
other than a Tier 1 Employee). The Firm will be paid
reasonable compensation by the Company for its services.
(d) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, then an amount equal to
the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for
all purposes to be a loan to the Tier 1 Employee made on the
date of the Tier 1 Employee's receipt of such Excess Amount,
which the Tier 1 Employee will have an obligation to repay
to the Company on the fifth business day after demand,
together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the
Tier 1 Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero)
as may be designated by the Firm such that the Excess Amount
and such interest will not be treated as a parachute payment
as previously defined). In the event that the Excise Tax is
finally determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment),
within five business days of such
10
<PAGE>
determination, the Company will pay to the Tier 1 Employee
an additional amount, together with interest thereon from
the date such additional amount should have been paid to the
date of such payment, at the Section 1274 Rate (or such
lesser rate (including zero) as may be designated by the
Firm such that the amount of such deficiency and such
interest will not be treated as a parachute payment as
previously defined). The Tier 1 Employee and the Company
shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning
the amount of any Gross-Up Payment.
(e) As soon as practicable following a Change in Control,
the Company shall provide to each Tier 1 Employee and to
each other Participant with respect to whom it is proposed
that Payments be reduced, a written statement setting forth
the manner in which the Total Payments in respect of such
Tier 1 Employee or other Participant were calculated and the
basis for such calculations, including, without limitation,
any opinions or other advice the Company has received from
the Firm or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to
the statement).
11
AMENDMENT OF
AMERICAN EXPRESS COMPANY
SUPPLEMENTAL RETIREMENT PLAN
AMENDED AND RESTATED
EFFECTIVE MARCH 1, 1995
RESOLVED, that pursuant to Section 7(F) of the American Express Company
Supplemental Retirement Plan (the "Plan"), effective as of March 1, 1995,
the Plan is amended, effective as of February 28, 2000 (the "Effective
Date"), as follows:
1. Section VIII, Subsection A(c) is hereby deleted in its entirety and
replaced with a new Subsection A(c) to read as follows:
(c) The consummation of a reorganization, merger or consolidation,
in each case, unless, following such reorganization, merger or
consolidation, (i) more than 50% of, respectively, the then
outstanding shares of common stock of the corporation resulting
from such reorganization, merger or consolidation (or any parent
thereof) and the combined voting power of the then outstanding
voting securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Shares and Outstanding Company Voting Securities immediately prior
to such reorganization, merger or consolidation, in substantially
the same proportions as their ownership immediately prior to such
reorganization, merger or consolidation of such Outstanding
Company Common Shares and Outstanding Company Voting Shares, as
the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company, a
Subsidiary or such corporation resulting from such reorganization,
merger or consolidation or any parent or a subsidiary thereof, and
any Person beneficially owning, immediately prior to such
reorganization, merger or
<PAGE>
consolidation, directly or indirectly, 25% or more of the
Outstanding Company Common Shares or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) or
the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof) entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation (or any parent thereof) were members of the
Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such
reorganization, merger or consolidation; or
2. Section VIII, Subsection A(d) is hereby deleted in its entirety and
replaced with a new Subsection A(d) to read as follows:
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased, exchanged or
disposed of to a corporation with respect to which following such
sale, lease, exchange or other disposition more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation (or any parent thereof) and the combined voting power
of the then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting Securities
immediately prior to such sale, lease, exchange or other
disposition in substantially the same proportions as their
ownership immediately prior to such sale, lease, exchange or other
disposition of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, (B) no
Person (excluding the Company and any
2
<PAGE>
employee benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and any
Person beneficially owning, immediately prior to such sale, lease,
exchange or other disposition, directly or indirectly, 25% or more
of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly
or indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of such corporation (or any parent thereof)
and the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof) entitled to
vote generally in the election of directors and (C) at least a
majority of the members of the board of directors of such
corporation (or any parent thereof) were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale, lease, exchange or
other disposition of assets of the Company; or
3. Section VIII, Subsection (B) is hereby deleted in its entirety and
replaced with a new Subsection (B) to read as follows:
(B)(I) Subsection (B) shall apply in the event of a Major
Transaction. A Major Transaction shall mean a transaction
described in either (1) or (2) below:
(1) The consummation of a reorganization, merger or consolidation,
in each case, if, following such reorganization, merger or
consolidation, more than 50% but not more than 60% of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger or
consolidation (or any parent thereof) and the combined voting
power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally
in the election of directors is then beneficially owned,
directly or indirectly, by all or
3
<PAGE>
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or
consolidation, in substantially the same proportions as their
ownership immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but only
if:
(A) no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or more
of, respectively, the then outstanding shares of common stock
of the corporation resulting from such reorganization, merger
or consolidation (or any parent thereof) or the combined voting
power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally
in the election of directors; and
(B) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof)
were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board
providing for such reorganization, merger or consolidation.
(2) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company to a corporation with respect to which following such
sale, lease, exchange or other disposition more than 50%
but not more than 60% of, respectively, the then outstanding
shares of common stock of such corporation (or any parent
thereof) and the combined voting power of the then outstanding
voting securities of such corporation (or
4
<PAGE>
any parent thereof) entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Shares and Outstanding Company
Voting Securities immediately prior to such sale, lease,
exchange or other disposition in substantially the same
proportions as their ownership immediately prior to such sale,
lease, exchange or other disposition of such Outstanding
Company Common Shares and Outstanding Company Voting Shares, as
the case may be, but only if:
(A) no Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or a Subsidiary of such
corporation or a subsidiary thereof and any Person beneficially
owning, immediately prior to such sale, lease, exchange or
other disposition, directly or indirectly, 25% or more of the
Outstanding Company Common Shares or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of such corporation (or any parent
thereof) and the combined voting power of the then outstanding
voting securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution of
the initial agreement or action of the Board providing for such
sale, lease, exchange or other disposition of assets of the
Company.
(II) If all or any portion of the payments or benefits to which
the Participant will be entitled under the Plan, either alone
or together with other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the
5
<PAGE>
Company or any of its subsidiaries or any other person or
entity that would be treated as a payor of parachute payments
as hereinafter defined, under any other plan, agreement or
arrangement, would constitute a "parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code") or any successor provision thereto and
regulations or other guidance thereunder (except that "2.95"
shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of
the Code or any successor provision thereto), such payment or
benefits provided to the Participant under this Plan, and any
other payments or benefits which the Participant receives or is
entitled to receive directly or indirectly from the Company or
any of its subsidiaries or any other person or entity that
would be treated as a payor of parachute payments as
hereinafter defined, under any other plan, agreement or
arrangement which would constitute a parachute payment, shall
be reduced (but not below zero) as described below to the
extent necessary so that no portion thereof would constitute
such a parachute payment as previously defined (except that
"2.95" shall be used instead of "3" under Section
280G(b)(2)(A)(ii) of the Code or any successor provision
thereto). Whether payments or benefits to the Participant would
constitute a "parachute payment", whether such payments or
benefits are to be reduced pursuant to the first sentence of
this paragraph, and the extent to which they are to be so
reduced, will be determined by the firm serving, immediately
prior to the Major Transaction, as the Company's independent
auditors, or if that firm refuses to serve, by another
qualified firm, whether or not serving as independent auditors,
designated by the Administration Committee under the American
Express Senior Executive Severance Plan (the "Firm"). The Firm
will be paid reasonable compensation by the Company for such
services. If the Firm concludes that its determination is
inconsistent with a final determination of a court or the
Internal Revenue Service, the Firm shall, based on such final
determination, redetermine whether the amount payable to the
Participant should have been reduced and, if applicable, the
amount of any such reduction. If the Firm determines that a lesser
6
<PAGE>
payment should have been made to the Participant, then
an amount equal to the amount of the excess of the earlier
payment over the redetermined amount (the "Excess Amount") will
be deemed for all purposes to be a loan to the Participant made
on the date of the Participant's receipt of such Excess Amount,
which the Participant will have an obligation to repay to the
Company on the fifth business day after demand, together with
interest on such amount at the lowest applicable Federal rate
(as defined in Section 1274(d) of the Code or any successor
provision thereto), compounded semi-annually (the "Section 1274
Rate") from the date of the Participant's receipt of such
Excess Amount until the date of such repayment (or such lesser
rate (including zero) as may be designated by the Firm such
that the Excess Amount and such interest will not be treated as
a parachute payment as previously defined). If the Firm
determines that a greater payment should have been made to the
Participant, within five business days of such determination,
the Company will pay to the Participant the amount of the
deficiency, together with interest thereon from the date such
amount should have been paid to the date of such payment, at
the Section 1274 Rate (or such lesser rate (including zero) as
may be designated by the Firm such that the amount of such
deficiency and such interest will not be treated as a parachute
payment as previously defined). If a reduction is to be made
pursuant to this paragraph, the Firm will have the right to
determine which payments and benefits will be reduced, either
those under this Plan alone or such other payments or benefits
which the Participant receives or is entitled to receive
directly or indirectly from the Company or any of its
subsidiaries or any other person or entity that would be
treated as a payor of parachute payments as previously defined,
under any other plan, agreement or arrangement.
4. Section VIII is hereby amended by adding a new Subsection (C), read
as follows:
(C)(1) This Subsection (C) shall apply in the event of a Change in
Control, as defined herein.
7
<PAGE>
(2) In the event that any payment or benefit received or to be
received by a Participant hereunder in connection with a
Change in Control or termination of such Participant's
employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred
to collectively as the "Payments"), will be subject to the
excise tax referred to in Section 4999 of the Code (the
"Excise Tax"), then (i) in the case of a Participant who is
classified in Band 70 (or its equivalent) or above
immediately prior to such Change in Control (a "Tier 1
Employee"), the Company shall pay to such Tier 1 Employee,
within five days after receipt by such Tier 1 Employee of
the written statement referred to in paragraph (5) below, an
additional amount (the "Gross-Up Payment") such that the net
amount retained by such Tier 1 Employee, after deduction of
any Excise Tax on the Payments and any federal, state and
local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Payments and (ii) in
the case of a Participant other than a Tier 1 Employee, the
Payments shall be reduced to the extent necessary so that no
portion of the Payments is subject to the Excise Tax but
only if (A) the net amount of all Total Payments (as
hereinafter defined), as so reduced (and after subtracting
the net amount of federal, state and local income and
employment taxes on such reduced Total Payments), is greater
than or equal to (B) the net amount of such Total Payments
without any such reduction (but after subtracting the net
amount of federal, state and local income and employment
taxes on such Total Payments and the amount of Excise Tax to
which the Participant would be subject in respect of such
unreduced Total Payments); PROVIDED, HOWEVER, that the
Participant may elect in writing to have other components of
his or her Total Payments reduced prior to any reduction in
the Payments hereunder.
8
<PAGE>
(3) For purposes of determining whether the Payments will be
subject to the Excise Tax, the amount of such Excise Tax and
whether any Payments are to be reduced hereunder: (i) all
payments and benefits received or to be received by the
Participant in connection with such Change in Control or the
termination of such Participant's employment, whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person (as
such term is defined in Subparagraph 2 above) whose actions
result in such Change in Control or any Person affiliated
with the Company or such Person (all such payments and
benefits, excluding the Gross-Up Payment and any similar
gross-up payment to which a Tier 1 Employee may be entitled
under any such other plan, arrangement or agreement, being
hereinafter referred to as the "Total Payments"), shall be
treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of
the Firm, such payments or benefits (in whole or in part) do
not constitute parachute payments, including by reason of
section 280G(b)(2)(A) or section 280G(b)(4)(A) of the Code;
(ii) no portion of the Total Payments the receipt or
enjoyment of which the Participant shall have waived at such
time and in such manner as not to constitute a "payment"
within the meaning of section 280G(b) of the Code shall be
taken into account; (iii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall
be treated as subject to the Excise Tax unless, in the
opinion of the Firm, such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax; and (iv) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Firm in accordance with the principles of
sections 280G(d)(3) and (4) of the Code and regulations or
other guidance thereunder. For purposes of determining the
amount of the Gross-Up Payment in respect of a Tier 1
Employee and whether any Payments in
9
<PAGE>
respect of a Participant (other than a Tier 1 Employee) shall
be reduced, a Participant shall be deemed to pay federal
income tax at the highest marginal rate of federal income
taxation (and state and local income taxes at the highest
marginal rate of taxation in the state and locality of such
Participant's residence, net of the maximum reduction in
federal income taxes which could be obtained from deduction
of such state and local taxes) in the calendar year in which
the Gross-Up Payment is to be made (in the case of a Tier 1
Employee) or in which the Payments are made (in the case of
a Participant other than a Tier 1 Employee). The Firm will
be paid reasonable compensation by the Company for its
services.
(4) In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the
Gross-Up Payment, then an amount equal to the amount of the
excess of the earlier payment over the redetermined amount (the
"Excess Amount") will be deemed for all purposes to be a loan to
the Tier 1 Employee made on the date of the Tier 1 Employee's
receipt of such Excess Amount, which the Tier 1 Employee will
have an obligation to repay to the Company on the fifth business
day after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the Tier
1 Employee's receipt of such Excess Amount until the date of such
repayment (or such lesser rate (including zero) as may be
designated by the Firm such that the Excess Amount and such
interest will not be treated as a parachute payment as previously
defined). In the event that the Excise Tax is finally determined
to exceed the amount taken into account hereunder in calculating
the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of
the Gross-Up Payment), within five business days of such
determination, the Company will pay to the Tier 1 Employee an
additional amount, together with interest thereon from the date
such additional amount should have been paid to the date of such
payment, at the Section
10
<PAGE>
1274 Rate (or such lesser rate (including zero) as may be
designated by the Firm such that the amount of such deficiency
and such interest will not be treated as a parachute payment as
previously defined). The Tier 1 Employee and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the amount of
any Gross-Up Payment.
(5) As soon as practicable following a Change in Control, the Company
shall provide to each Tier 1 Employee and to each other
Participant with respect to whom it is proposed that Payments be
reduced, a written statement setting forth the manner in which
the Total Payments in respect of such Tier 1 Employee or other
Participant were calculated and the basis for such calculations,
including, without limitation, any opinions or other advice the
Company has received from the Firm or other advisors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
11
AMENDMENT OF
AMERICAN EXPRESS
KEY EXECUTIVE LIFE INSURANCE PLAN
RESOLVED, that pursuant to Section 10.01 of the American Express Company
Key Executive Life Insurance Plan (the "Plan"), the Plan is amended
effective as of February 28, 2000 (the "Effective Date"), as follows:
1. Article II, Section 2.19, Subsection (c) of the Plan is hereby
deleted in its entirety and replaced with a new Subsection (c) to
read as follows:
(c) The consummation of a reorganization, merger or
consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 50%
of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, in
substantially the same proportions as their ownership
immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, (ii)
no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the
<PAGE>
then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
(or any parent thereof) or the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation; or
2. Article II, Section 2.19 Subsection (d) is hereby deleted in its
entirety and replaced with a new Subsection (d) to read as
follows:
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased,
exchanged or disposed of to a corporation with respect to
which following such sale, lease, exchange or other
disposition (A) more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange
or other disposition in substantially the same proportions
as their ownership immediately prior to such sale, lease,
exchange or other disposition of such Outstanding Company
Common Shares and Outstanding Company Voting Shares, as the
case may be, (B) no Person (excluding the Company and any
employee benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or
2
<PAGE>
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of
such corporation (or any parent thereof) and the combined
voting power of the then outstanding voting securities of
such corporation (or any parent thereof) entitled to vote
generally in the election of directors and (C) at least a
majority of the members of the board of directors of such
corporation (or any parent thereof) were members of the
Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale,
lease, exchange or other disposition of assets of the
Company; or
3. Article VII, Section 7.02, Subsection (d)(ii) is hereby deleted
in its entirety and replaced with a new Subsection (d)(ii) to
read as follows:
(d)(ii)(A) This Subsection (d)(ii) shall apply in the event
of a Major Transaction. A Major Transaction shall mean a
transaction described in either paragraph (1) or (2) below:
(1) The consummation of a reorganization, merger or
consolidation, in each case, if, following such
reorganization, merger or consolidation, more than 50% but
not more than 60% of, respectively, the then outstanding
shares of common stock of the corporation resulting from
such reorganization, merger or consolidation (or any parent
thereof) and the combined voting power of the then
outstanding voting securities of such corporation (or any
parent thereof) entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially
the same proportions as their ownership immediately prior to
such reorganization, merger or consolidation of such
Outstanding Company Common Shares and Outstanding Company
Voting Shares, as the case may be, but only if:
3
<PAGE>
(A) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation.
(2) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company to a corporation with respect to which following
such sale, lease, exchange or other disposition more
than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other
disposition of
4
<PAGE>
such Outstanding Company Common Shares and Outstanding
Company Voting Shares, as the case may be, but only if:
(A) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for such sale, lease, exchange or other disposition of
assets of the Company.
(B) If all or any portion of the payments or benefits to which
the Participant will be entitled under the Plan, either
alone or together with other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as hereinafter defined, under any
other plan, agreement or arrangement, would constitute a
"parachute payment" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code")
or any successor provision thereto and regulations or other
guidance thereunder (except that "2.95" shall be used
instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or
benefits provided to the Participant under this Plan, and
any other payments or benefits which the
5
<PAGE>
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as hereinafter defined, under any
other plan, agreement or arrangement which would constitute
a parachute payment, shall be reduced (but not below zero)
as described below to the extent necessary so that no
portion thereof would constitute such a parachute payment as
previously defined (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto). Whether payments or benefits
to the Participant would constitute a "parachute payment",
whether such payments or benefits are to be reduced pursuant
to the first sentence of this paragraph, and the extent to
which they are to be so reduced, will be determined by the
firm serving, immediately prior to the Major Transaction, as
the Company's independent auditors, or if that firm refuses
to serve, by another qualified firm, whether or not serving
as independent auditors, designated by the Administration
Committee under the American Express Senior Executive
Severance Plan (the "Firm"). The Firm will be paid
reasonable compensation by the Company for such services. If
the Firm concludes that its determination is inconsistent
with a final determination of a court or the Internal
Revenue Service, the Firm shall, based on such final
determination, redetermine whether the amount payable to the
Participant should have been reduced and, if applicable, the
amount of any such reduction. If the Firm determines that a
lesser payment should have been made to the Participant,
then an amount equal to the amount of the excess of the
earlier payment over the redetermined amount (the "Excess
Amount") will be deemed for all purposes to be a loan to the
Participant made on the date of the Participant's receipt of
such Excess Amount, which the Participant will have an
obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section
1274(d) of the Code or any successor provision thereto),
compounded semi-annually (the "Section 1274 Rate") from the
date of the Participant's receipt of such Excess Amount
until the date of such repayment (or
6
<PAGE>
such lesser rate (including zero) as may be designated by
the Firm such that the Excess Amount and such interest will
not be treated as a parachute payment as previously
defined). If the Firm determines that a greater payment
should have been made to the Participant, within five
business days of such determination, the Company will pay to
the Participant the amount of the deficiency, together with
interest thereon from the date such amount should have been
paid to the date of such payment, at the Section 1274 Rate
(or such lesser rate (including zero) as may be designated
by the Firm such that the amount of such deficiency and such
interest will not be treated as a parachute payment as
previously defined). If a reduction is to be made pursuant
to this paragraph, the Firm will have the right to determine
which payments and benefits will be reduced, either those
under this Plan alone or such other payments or benefits
which the Participant receives or is entitled to receive
directly or indirectly from the Company or any of its
subsidiaries or any other person or entity that would be
treated as a payor of parachute payments as previously
defined, under any other plan, agreement or arrangement.
4. Article VII, Section 7.02, Subsection (d)(iii) is hereby amended
by adding a new Subsection (d)(iii) to read as follows:
(d)(iii)(A) This Section (d)(iii) shall apply in the event
of a Change in Control, as defined in Section 2.19 hereof.
(B) In the event that any payment or benefit received or to
be received by a Participant hereunder in connection with a
Change in Control or termination of such Participant's
employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred
to collectively as the "Payments"), will be subject to the
excise tax referred to in Section 4999 of the Code (the
"Excise Tax"), then (i) in the case of a Participant who is
classified in Band 70 (or its equivalent) or above
immediately prior to such Change in Control (a "Tier 1
Employee"), the Company shall pay to such Tier 1 Employee,
within five days after receipt by such Tier 1 Employee of
the written statement referred to in
7
<PAGE>
paragraph (E) below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by such Tier 1
Employee, after deduction of any Excise Tax on the Payments
and any federal, state and local income and employment taxes
and Excise Tax upon the Gross-Up Payment, shall be equal to
the Payments and (ii) in the case of a Participant other
than a Tier 1 Employee, the Payments shall be reduced to the
extent necessary so that no portion of the Payments is
subject to the Excise Tax but only if (A) the net amount of
all Total Payments (as hereinafter defined), as so reduced
(and after subtracting the net amount of federal, state and
local income and employment taxes on such reduced Total
Payments), is greater than or equal to (B) the net amount of
such Total Payments without any such reduction (but after
subtracting the net amount of federal, state and local
income and employment taxes on such Total Payments and the
amount of Excise Tax to which the Participant would be
subject in respect of such unreduced Total Payments);
PROVIDED, HOWEVER, that the Participant may elect in writing
to have other components of his or her Total Payments
reduced prior to any reduction in the Payments hereunder.
(C) For purposes of determining whether the Payments will be
subject to the Excise Tax, the amount of such Excise Tax and
whether any Payments are to be reduced hereunder: (i) all
payments and benefits received or to be received by the
Participant in connection with such Change in Control or the
termination of such Participant's employment, whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person (as
such term is defined in Section 1.22 above) whose actions
result in such Change in Control or any Person affiliated
with the Company or such Person (all such payments and
benefits, excluding the Gross-Up Payment and any similar
gross-up payment to which a Tier 1 Employee may be entitled
under any such other plan, arrangement or agreement, being
hereinafter referred to as the "Total Payments"), shall be
treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of
the Firm,
8
<PAGE>
such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of
section 280G(b)(2)(A) or section 280G(b)(4)(A) of the Code;
(ii) no portion of the Total Payments the receipt or
enjoyment of which the Participant shall have waived at such
time and in such manner as not to constitute a "payment"
within the meaning of section 280G(b) of the Code shall be
taken into account; (iii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall
be treated as subject to the Excise Tax unless, in the
opinion of the Firm, such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax; and (iv) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Firm in accordance with the principles of
sections 280G(d)(3) and (4) of the Code and regulations or
other guidance thereunder. For purposes of determining the
amount of the Gross-Up Payment in respect of a Tier 1
Employee and whether any Payments in respect of a
Participant (other than a Tier 1 Employee) shall be reduced,
a Participant shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation (and
state and local income taxes at the highest marginal rate of
taxation in the state and locality of such Participant's
residence, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state
and local taxes) in the calendar year in which the Gross-Up
Payment is to be made (in the case of a Tier 1 Employee) or
in which the Payments are made (in the case of a Participant
other than a Tier 1 Employee). The Firm will be paid
reasonable compensation by the Company for its services.
(D) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, then an amount equal to
the amount of the excess of the earlier payment over the
redeter-
9
<PAGE>
mined amount (the "Excess Amount") will be deemed for all
purposes to be a loan to the Tier 1 Employee made on the
date of the Tier 1 Employee's receipt of such Excess Amount,
which the Tier 1 Employee will have an obligation to repay
to the Company on the fifth business day after demand,
together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the
Tier 1 Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero)
as may be designated by the Firm such that the Excess Amount
and such interest will not be treated as a parachute payment
as previously defined). In the event that the Excise Tax is
finally determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment),
within five business days of such determination, the Company
will pay to the Tier 1 Employee an additional amount,
together with interest thereon from the date such additional
amount should have been paid to the date of such payment, at
the Section 1274 Rate (or such lesser rate (including zero)
as may be designated by the Firm such that the amount of
such deficiency and such interest will not be treated as a
parachute payment as previously defined). The Tier 1
Employee and the Company shall each reasonably cooperate
with the other in connection with any administrative or
judicial proceedings concerning the amount of any Gross-Up
Payment.
(E) As soon as practicable following a Change in Control,
the Company shall provide to each Tier 1 Employee and to
each other Participant with respect to whom it is proposed
that Payments be reduced, a written statement setting forth
the manner in which the Total Payments in respect of such
Tier 1 Employee or other Participant were calculated and the
basis for such calculations, including, without limitation,
any opinions or other advice the Company has received from
the Firm
10
<PAGE>
or other advisors or consultants (and any such opinions or
advice which are in writing shall be attached to the
statement).
5. Article X, Section 10.01 and Article XI, Section 11.01 of the
Plan is each amended by deleting the last sentence thereof and
adding the following new sentence, to read as follows:
The forgoing sentence to the contrary notwithstanding,
for a period of two years and one day after the date of
a Change in Control, neither the Board of Directors nor
the Committee may terminate this Plan or amend this
Plan in a manner that is detrimental to the rights of
any participant of the Plan without his or her written
consent.
11
AMENDMENT OF
AMERICAN EXPRESS
SALARY/BONUS DEFERRAL PLAN
RESOLVED, that pursuant to Section 7.1 of the American Express Salary/Bonus
Deferral Plan (the "Plan"), the Plan is amended effective as of February
28, 2000 (the "Effective Date"), as follows:
1. Article I, Section 1.22, Subsection (c) of the Plan is hereby
deleted in its entirety and replaced with a new Subsection (c) to
read as follows:
(c) The consummation of a reorganization, merger or
consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 50%
of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, in
substantially the same proportions as their ownership
immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, (ii)
no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially
<PAGE>
owns, directly or indirectly, 25% or more of, respectively,
the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation (or any parent thereof) or the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from
such reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation; or
2 Article I, Section 1.22 Subsection (d) is hereby deleted in its
entirety and replaced with a new Subsection (d) to read as
follows:
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased,
exchanged or disposed of to a corporation with respect to
which following such sale, lease, exchange or other
disposition (A) more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange
or other disposition in substantially the same proportions
as their ownership immediately prior to such sale, lease,
exchange or other disposition of such Outstanding Company
Common Shares and Outstanding Company Voting Shares, as the
case may be, (B) no Person (excluding the Company and any
employee benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly,
2
<PAGE>
25% or more of the Outstanding Company Common Shares or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of
such corporation (or any parent thereof) and the combined
voting power of the then outstanding voting securities of
such corporation (or any parent thereof) entitled to vote
generally in the election of directors and (C) at least a
majority of the members of the board of directors of such
corporation (or any parent thereof) were members of the
Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale,
lease, exchange or other disposition of assets of the
Company; or
3. Article VI, Section 6.6, Subsection (d)(ii) is hereby deleted in
its entirety and replaced with a Subsection (d)(ii) to read as
follows:
(d)(ii)(a) This Subsection (d)(ii) shall apply in the event of a Major
Transaction. A Major Transaction shall mean a transaction
described in either (1) or (2) below:
(1) The consummation of a reorganization, merger or
consolidation, in each case, if, following such
reorganization, merger or consolidation, more than 50% but
not more than 60% of, respectively, the then outstanding
shares of common stock of the corporation resulting from
such reorganization, merger or consolidation (or any parent
thereof) and the combined voting power of the then
outstanding voting securities of such corporation (or any
parent thereof) entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially
the same proportions as their ownership immediately prior to
such reorganization, merger or consolidation of such
Outstanding Company Common Shares and Outstanding Company
Voting Shares, as the case may be, but only if:
3
<PAGE>
(A) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation.
(2) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company to a corporation with respect to which following
such sale, lease, exchange or other disposition more
than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other
disposition of
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such Outstanding Company Common Shares and Outstanding
Company Voting Shares, as the case may be, but only if:
(A) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for such sale, lease, exchange or other disposition of
assets of the Company.
(b) If all or any portion of the payments or benefits to which
the Participant will be entitled under the Plan, either
alone or together with other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as hereinafter defined, under any
other plan, agreement or arrangement, would constitute a
"parachute payment" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code")
or any successor provision thereto and regulations or other
guidance thereunder (except that "2.95" shall be used
instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or
benefits provided to the Participant under this Plan, and
any other payments or benefits which the
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Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as hereinafter defined, under any
other plan, agreement or arrangement which would constitute
a parachute payment, shall be reduced (but not below zero)
as described below to the extent necessary so that no
portion thereof would constitute such a parachute payment as
previously defined (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto). Whether payments or benefits
to the Participant are to be reduced pursuant to the first
sentence of this paragraph, and the extent to which they are
to be so reduced, will be determined by the firm serving,
immediately prior to the Major Transaction, as the Company's
independent auditors, or if that firm refuses to serve, by
another qualified firm, whether or not serving as
independent auditors, designated by the Administration
Committee under the American Express Senior Executive
Severance Plan (the "Firm"). The Firm will be paid
reasonable compensation by the Company for such services. If
the Firm concludes that its determination is inconsistent
with a final determination of a court or the Internal
Revenue Service, the Firm shall, based on such final
determination, redetermine whether the amount payable to the
Participant should have been reduced and, if applicable, the
amount of any such reduction. If the Firm determines that a
lesser payment should have been made to the Participant,
then an amount equal to the amount of the excess of the
earlier payment over the redetermined amount (the "Excess
Amount") will be deemed for all purposes to be a loan to the
Participant made on the date of the Participant's receipt of
such Excess Amount, which the Participant will have an
obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section
1274(d) of the Code or any successor provision thereto),
compounded semi-annually (the "Section 1274 Rate") from the
date of the Participant's receipt of such Excess Amount
until the date of such repayment (or such lesser rate
(including zero) as may be designated by the
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Firm such that the Excess Amount and such interest will not
be treated as a parachute payment as previously defined). If
the Firm determines that a greater payment should have been
made to the Participant, within five business days of such
determination, the Company will pay to the Participant the
amount of the deficiency, together with interest thereon
from the date such amount should have been paid to the date
of such payment, at the Section 1274 Rate (or such lesser
rate (including zero) as may be designated by the Firm such
that the amount of such deficiency and such interest will
not be treated as a parachute payment as previously
defined). If a reduction is to be made pursuant to this
paragraph, the Firm will have the right to determine which
payments and benefits will be reduced, either those under
this Plan alone or such other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as previously defined, under any other
plan, agreement or arrangement.
4. Article VI, Section 6.06, Subsection (d)(iii) is hereby amended
by adding a new Subsection (d)(iii) to read as follows:
(d)(iii)(A) This Section shall apply in the event of a
Change in Control, as defined in Section 1.22, hereof.
(B) In the event that any payment or benefit received or to
be received by a Participant hereunder in connection with a
Change in Control or termination of such Participant's
employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred
to collectively as the "Payments"), will be subject to the
excise tax referred to in Section 4999 of the Code (the
"Excise Tax"), then (i) in the case of a Participant who is
classified in Band 70 (or its equivalent) or above
immediately prior to such Change in Control (a "Tier 1
Employee"), the Company shall pay to such Tier 1 Employee,
within five days after receipt by such Tier 1 Employee of
the written statement referred to in paragraph (E) below, an
additional amount (the "Gross-Up
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<PAGE>
Payment") such that the net amount retained by such Tier 1
Employee, after deduction of any Excise Tax on the Payments
and any federal, state and local income and employment taxes
and Excise Tax upon the Gross-Up Payment, shall be equal to
the Payments and (ii) in the case of a Participant other
than a Tier 1 Employee, the Payments shall be reduced to the
extent necessary so that no portion of the Payments is
subject to the Excise Tax but only if (A) the net amount of
all Total Payments (as hereinafter defined), as so reduced
(and after subtracting the net amount of federal, state and
local income and employment taxes on such reduced Total
Payments), is greater than or equal to (B) the net amount of
such Total Payments without any such reduction (but after
subtracting the net amount of federal, state and local
income and employment taxes on such Total Payments and the
amount of Excise Tax to which the Participant would be
subject in respect of such unreduced Total Payments);
PROVIDED, HOWEVER, that the Participant may elect in writing
to have other components of his or her Total Payments
reduced prior to any reduction in the Payments hereunder.
(C) For purposes of determining whether the Payments will be
subject to the Excise Tax, the amount of such Excise Tax and
whether any Payments are to be reduced hereunder: (i) all
payments and benefits received or to be received by the
Participant in connection with such Change in Control or the
termination of such Participant's employment, whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person (as
such term is defined in Section 1.22 above) whose actions
result in such Change in Control or any Person affiliated
with the Company or such Person (all such payments and
benefits, excluding the Gross-Up Payment and any similar
gross-up payment to which a Tier 1 Employee may be entitled
under any such other plan, arrangement or agreement, being
hereinafter referred to as the "Total Payments"), shall be
treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of
the Firm, such payments or benefits (in whole or in part) do
not consti-
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tute parachute payments, including by reason of section
280G(b)(2)(A) or section 280G(b)(4)(A) of the Code; (ii) no
portion of the Total Payments the receipt or enjoyment of
which the Participant shall have waived at such time and in
such manner as not to constitute a "payment" within the
meaning of section 280G(b) of the Code shall be taken into
account; (iii) all "excess parachute payments" within the
meaning of section 280G(b)(l) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of the
Firm, such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4)(B) of the
Code) in excess of the Base Amount (within the meaning of
section 280G(b)(3) of the Code) allocable to such reasonable
compensation, or are otherwise not subject to the Excise
Tax; and (iv) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Firm
in accordance with the principles of sections 280G(d)(3) and
(4) of the Code and regulations or other guidance
thereunder. For purposes of determining the amount of the
Gross-Up Payment in respect of a Tier 1 Employee and whether
any Payments in respect of a Participant (other than a Tier
1 Employee) shall be reduced, a Participant shall be deemed
to pay federal income tax at the highest marginal rate of
federal income taxation (and state and local income taxes at
the highest marginal rate of taxation in the state and
locality of such Participant's residence, net of the maximum
reduction in federal income taxes which could be obtained
from deduction of such state and local taxes) in the
calendar year in which the Gross-Up Payment is to be made
(in the case of a Tier 1 Employee) or in which the Payments
are made (in the case of a Participant other than a Tier 1
Employee). The Firm will be paid reasonable compensation by
the Company for its services.
(D) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, then an amount equal to
the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for
all
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<PAGE>
purposes to be a loan to the Tier 1 Employee made on the
date of the Tier 1 Employee's receipt of such Excess Amount,
which the Tier 1 Employee will have an obligation to repay
to the Company on the fifth business day after demand,
together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the
Tier 1 Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero)
as may be designated by the Firm such that the Excess Amount
and such interest will not be treated as a parachute payment
as previously defined). In the event that the Excise Tax is
finally determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment),
within five business days of such determination, the Company
will pay to the Tier 1 Employee an additional amount,
together with interest thereon from the date such additional
amount should have been paid to the date of such payment, at
the Section 1274 Rate (or such lesser rate (including zero)
as may be designated by the Firm such that the amount of
such deficiency and such interest will not be treated as a
parachute payment as previously defined). The Tier 1
Employee and the Company shall each reasonably cooperate
with the other in connection with any administrative or
judicial proceedings concerning the amount of any Gross-Up
Payment.
(E) As soon as practicable following a Change in Control,
the Company shall provide to each Tier 1 Employee and to
each other Participant with respect to whom it is proposed
that Payments be reduced, a written statement setting forth
the manner in which the Total Payments in respect of such
Tier 1 Employee or other Participant were calculated and the
basis for such calculations, including, without limitation,
any opinions or other advice the Company has received from
the Firm or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to
the statement).
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5. Article VII, Section 7.01 of the Plan is amended by deleting the
last sentence thereof and adding the following new sentence, to
read as follows:
The forgoing sentence to the contrary notwithstanding, for a
period of two years and one day after the date of a Change
in Control, neither the Board of Directors nor the Committee
may terminate this Plan or amend this Plan in a manner that
is detrimental to the rights of any participant of the Plan
without his or her written consent.
11
AMERICAN EXPRESS ANNUAL INCENTIVE AWARD PLAN
ARTICLE I
PURPOSE
The purpose of this Plan is to provide added incentive for those
officers and key executives of American Express Company (the "Company") and
its subsidiaries who are in a position to make substantial contributions to
the earnings and growth of these companies and to reward them collectively
and individually for performance which contributes significantly toward
such earnings and growth. The companies participating in this Plan (the
"Participating Companies") include the Company and such other corporations
as may be taking part in this Plan from time to time pursuant to Article
VIII hereof.
ARTICLE II
ADMINISTRATION OF THE PLAN
This plan shall be administered by the Compensation and Benefits
Committee of the Board of Directors of the Company (the "Committee") as
constituted from time to time, unless and until the Board of Directors of
the Company provides otherwise.
The Committee shall be responsible for the general administration
of the Plan. It shall also be responsible for the interpretation of the
Plan and the determination of all questions arising hereunder. It shall
have power to establish, interpret, enforce, amend and revoke from time to
time such rules and regulations for the administration of the Plan and the
conduct of its business as it deems appropriate. The Committee shall also
have the power to delegate any of its authority under the Plan as allowed
by law. Any action taken by the Committee within the scope of its authority
shall be final and binding upon the Participating Companies, upon each and
every person who participates in the Plan and any successors in interest of
such persons, and any and all other persons claiming under or through any
such person.
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ARTICLE III
ANNUAL PERFORMANCE GOALS AND AWARD GUIDELINES
(a) As soon as practicable at the beginning of each calendar year, the
Committee shall determine the individual, division/group, Company, and/or other
appropriate performance goals, and award guidelines for such year. In fixing
such goals and guidelines, the Committee shall receive and consider the
recommendations of the chief executive officer of the Company who, in turn,
shall have received and considered the respective recommendations of other
appropriate officers and executives of the Company and the Participating
Companies.
(b) If the Committee finds, during the course of and with respect to any
year, that any of the performance goals and/or award guidelines determined as
herein above provided would not be justified for such year in the circumstances,
it may in its sole discretion fix such performance goals and/or award guidelines
for such year at such different levels as it deems appropriate.
ARTICLE IV
PARTICIPATION IN THE PLAN
(a) Those eligible to participate for any calendar year shall include
such key executives of the Participating Companies as shall be designated by the
Committee. In designating such persons the Committee shall receive and consider
the recommendations of the chief executive officer of the Company who, in turn,
shall have received and considered the respective recommendations of other
appropriate officers and executives of the Company and the Participating
Companies. However, the Committee shall have full authority to act in the matter
and its determination shall be in all respects final and conclusive. Further,
the Committee shall have full authority to delegate eligibility determination.
Participants shall be designated prior to the beginning of the year or as soon
as practicable thereafter, but new executives or executives whose duties and
responsibilities have been materially increased during the year may be
designated participants for such year at any time during the year. Designation
as a participant shall not of itself entitle a person to an award under the
Plan. The Committee has the sole discretion to consider an award (if any) for a
participant in the event of termination, retirement, disability, death, or other
individual circumstances. Participants must generally remain in continuous
active employment with the Company (or an Affiliate), through the end of the
performance period (year end) and up until the payment date, and shall also make
progress towards goals and fulfill Article VII. The Committee, upon
recommendations provided by management, will approve to what extent, if any,
payment of an award should be made if termination occurs after December 31, but
before an actual payment date. No member of the Committee shall be eligible to
participate in or receive awards or deferred payments of awards under the Plan.
(b) The Committee may, by rules and regulations of general or specific
application, establish one or more classes of awards, the payment of which
shall, in whole or in part, be deferred and made at such later time or times, in
a lump sum or in such installments, as the Committee shall prescribe, provided
that the participant shall have fulfilled the conditions specified in Article
VII hereof. At the time each year that an employee shall be designated as a
participant in the Plan, or as soon as practicable thereafter, the Committee, in
or without consultation with such employee, shall determine what proportion, if
any, of any award that may be made to him for such year shall be paid to him
immediately and what proportion shall consist of a class or classes of awards so
established by the Committee. If the Committee shall have failed to make such a
determination in the case of any participant for any year, the award to such
participant shall be paid in cash as soon as practicable after the award shall
be made.
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<PAGE>
ARTICLE V
DETERMINATION OF INCENTIVE AWARDS
(a) As soon as practicable after the end of each calendar year, the
Committee shall fix the amount of each award. The Committee shall also have the
power to delegate to the chief executive officer of the Company the authority to
approve individual awards and award changes for employees below the Senior Vice
President level (below Band 70). Notwithstanding the previous sentence, the
Committee shall continue to approve annual awards for Senior Vice Presidents and
higher (Band 70 and above), and to approve the aggregate annual incentive awards
for all plan participants in Bands 35 and above, subject to adjustment for
delegated award changes after each February. In determining the aggregate annual
incentive awards, the Committee, may approve the establishment of maximum award
guidelines for employees of a participating company, division, business unit or
other designated group, based upon specified Company and other applicable
organizational performance goals subject to applicable past limitations. The
Committee shall also have the authority to approve payments upon retirement and
disability termination for Band 70 and above executives. In fixing such awards
the Committee shall receive and consider the recommendations of the chief
executive officer of the Company who, in turn, shall have received and
considered the respective recommendations of other appropriate officers and
executives of the Company and the Participating Companies, as to whether and to
what extent the individual, division/group, and/or Company performance goals
have been met for such year, and as to where in the range of award guidelines
each participant's performance falls. Individual awards shall then be calculated
based on the AIA award grid subject to available pool monies. If the employment
of a participant shall have terminated during a calendar year for any reason,
including, but without limitation, as the result of termination by a
Participating Company without cause, he, or, in the event of his death, his
widow, legal representatives, or such other person or persons, as the Committee
may in its discretion select, may (but need not) be granted such award, if any,
on such basis, as the Committee may in its discretion determine; provided,
however, that if within two years following the occurrence of a Change in
Control (as defined below in Article VI), a participant under the Plan
experiences a termination of employment that would otherwise entitle him to
receive the payment of severance benefits under the provisions of the severance
plan that are in effect and that he participates in as of the date of such
Change in Control, and is at Job Band 50 or higher on the date of such
termination of employment, then such participant in the Plan shall,
notwithstanding the provisions of Article III, be paid, within five days after
the date of such termination of employment, a prorata award under the Plan equal
to (i) (A) the average award paid or payable to such participant under the Plan
(or any other annual incentive award program of the Company or one of its
subsidiaries at the time of such prior payment) for the two years prior to the
Change in Control, or (B) if such participant has not received two such awards,
the most recent award paid or payable (or target amount so payable if such
participant has not previously received any such award) to such participant
under the Plan (or any other annual incentive award program of the Company or
one of its subsidiaries at the time of such prior payment), multiplied by (ii)
the number of full or partial months that have elapsed during the performance
year under the Plan at the time of such termination of employment divided by 12,
provided, further, that in the event such termination of employment occurs after
the end of the performance year under the Plan but before the payment date under
the Plan, then such participant shall also be paid, within five days after such
termination of employment, an award under the Plan equal to (X) the average
award paid or payable to such participant under the Plan (or any other annual
incentive award program of the Company or one of its subsidiaries at the time of
such prior payment) for the two years prior to the Change in Control, or (Y) if
such participant has not received two such awards, the most recent award paid or
payable (or target amount so payable, if such participant has not previously
received any such award) to such participant under the Plan (or any other annual
incentive award program of the Company or one of its subsidiaries at the time of
such prior payment).
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(b) The Committee, upon recommendations as provided by paragraph (a) of
this Article, may also make special awards to a limited number of participants
under the Plan. The chief executive officer may also authorize special awards
under the Plan, at any time or times during the year, provided that any special
awards authorized by the chief executive officer shall be reported to the
Committee at its next regular meeting. These special awards shall be made in
recognition of outstanding individual achievement.
(c) Except for awards payable as a result of a Change in Control Pursuant
to section (a) above, no award to a single participant or employee for any year
shall exceed (i) 200% of this total award guideline for such year, or (ii) 200%
of his base salary for such year.
(d) No award to any participant pursuant to paragraph (a) (other than an
award granted in the event of a Change in Control) or to any employee pursuant
to paragraph (b) of this Article shall become final, unless and until the same
has been approved by the Board of Directors of the Company.
ARTICLE VI
PAYMENT OF INCENTIVE AWARDS
(a) Each incentive award shall be paid as soon as practicable after the
amount of the award shall have been determined, or at such subsequent time or
times as the Committee shall determine. Such payment shall be made in cash
unless the Committee shall, at any time or from time to time, according to rules
and regulations of general application, provide for a different method of
payment, in whole or in part, of incentive awards. Such payment may be made (i)
by the issuance or transfer of securities or other property, including common
shares or other securities of American Express Company, another corporation or
of a regulated investment company or companies, subject to restrictions and
requirements to assure compliance with the conditions set forth in Article VII
hereof and elsewhere in the Plan and such other restrictions and requirements as
the Committee shall prescribe, (ii) by undertaking to issue or transfer such
securities or other property in the future, together with a sum or sums equal to
dividend equivalents and other income equivalents earned thereon from the date
of such undertaking until the date or dates of payment, (iii) in cash measured
by the value of such securities or other property, or of a portfolio comprised
of either securities or other property or both, together with dividend
equivalents and other income equivalents earned thereon from the date that such
measure has been established until the date or dates of payment, or (iv) by
undertaking to pay cash in the future together with such additional amounts of
income equivalents earned thereon until the date or dates of payment, such
additional amounts to be determined by a measure established by the Committee in
its discretion.
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(b) If any incentive award or installment thereof shall become payable by
reason of or following the death of a participant or former participant, such
award or installment shall be payable, at the same time or times and in the same
manner as if such participant or former participant were alive, to such
beneficiaries of the participant or former participant as he shall have
designated in the manner described herein. If such participant or former
participant shall have failed to designate any beneficiary, or if no such
beneficiary shall survive him, then such payments shall be made to his legal
representatives. With the approval of the Committee, a participant or former
participant may designate one or more beneficiaries by executing and delivering
to the Committee or its delegate written notice thereof at any time prior to his
death, and may revoke or change the beneficiaries designated therein without
their consent by written notices similarly executed and delivered to the
Committee at any time and from time to time prior to his death.
(c) Any company required to make payments under this Plan shall deduct
and withhold from any such payment all amounts which its officers believe in
good faith it is required to deduct or withhold pursuant to the laws of any
jurisdiction whatsoever or, in the event that any such payment shall be made in
securities, shall require that arrangements satisfactory to such company shall
be made for the payment of all such amounts before such securities are
delivered. No such company is required to pay any amount to the beneficiary or
legal representatives of any former participant until such beneficiary or legal
representatives shall have furnished evidence satisfactory to it of the payment
or provision for the payment of all estate, transfer, inheritance and death
taxes, if any, which may be payable with respect thereto.
(d) The obligation of any company under the Plan to make deferred
payments or awards when due is merely contractual and no amount credited to an
account of a participant or former participant on the books of any company shall
be deemed to be held in trust for such participant or former participant or for
his beneficiary or legal representatives. Nothing contained in the Plan shall
require any company under the Plan to segregate or earmark any cash or other
property. Any securities or other property held or acquired by any such company
specifically for use under the Plan or otherwise shall, unless and until
transferred in accordance with the terms and conditions of the Plan, be and at
all times remain the property of such company, irrespective of whether such
securities or other property are entered in a special account for the purpose of
the Plan, and such securities or other property shall at all times be and remain
available for any corporate purpose.
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(e) Upon a deferral of the payment of an incentive award, the terms of
such deferral and the payments thereunder shall be governed by the provision of
the deferral plan where such deferral has been made.
(f) For purposes of this Plan, "Change in Control" means the happening of
any of the following:
(I) Any individual, entity or group (a "Person") (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) becomes the beneficial owner (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 25% or more of either (A) the then
outstanding common shares of American Express Company (the "Outstanding Company
Common Shares") or (B) the combined voting power of the then outstanding voting
securities of American Express Company ("Company") entitled to vote generally in
the election of directors (the "Outstanding Voting Securities"); provided,
however, that such beneficial ownership shall not constitute a Change in Control
if it occurs as a result of any of the following acquisitions of securities: (W)
any acquisition directly from the Company, (X) any acquisition by the Company or
any corporation, partnership, trust or other entity controlled by the Company (a
"Subsidiary"), (Y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary or (Z) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation, the
conditions described in clauses (A), (B) and (C) of subsection (iii) of this
Section (f) are satisfied. Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the "Subject Person")
became the beneficial owner of 25% or more of the Outstanding Common Shares or
Outstanding Voting Securities as a result of the acquisition of Outstanding
Common Shares or Outstanding Voting Securities by the Company which, by reducing
the number of Outstanding Common Shares or Outstanding Voting Securities,
increases the proportional number of shares beneficially owned by the Subject
Person; provided, that if a Change in Control would be deemed to have occurred
(but for the operation of this sentence) as a result of the acquisition of
Outstanding Common Shares or Outstanding Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person becomes the
beneficial owner of any additional Outstanding Common Shares or Outstanding
Voting Securities which increases the percentage of the Outstanding Common
Shares or Outstanding Voting Securities beneficially owned by the Subject
Person, then a Change n Control shall then be deemed to have occurred; or
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(II) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Incumbent Board, including
by reason of agreement intended to avoid or settle any such actual or threatened
contest or solicitation; or
(III) The consummation of a reorganization, merger or consolidation, in
each case, unless, following such reorganization, merger or consolidation, (i)
more than 50% of, respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger or consolidation (or
any parent thereof) and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation, in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation of such
Outstanding Company Common Shares and Outstanding Company Voting Shares, as the
case may be, (ii) no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company, a Subsidiary or such corporation resulting
from such reorganization, merger or consolidation or any parent or a subsidiary
thereof, and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% or more of
the Outstanding Company Common Shares or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation (or any parent
thereof) or the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation (or any
parent thereof) were members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing for such
reorganization, merger or consolidation; or
7
<PAGE>
(IV) The consummation of the sale, lease, exchange or other disposition
of all or substantially all of the assets of the Company, unless such assets
have been sold, leased, exchanged or disposed of to a corporation with respect
to which following such sale, lease, exchange or other disposition (A) more than
50% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof) entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Shares
and Outstanding Company Voting Securities immediately prior to such sale, lease,
exchange or other disposition in substantially the same proportions as their
ownership immediately prior to such sale, lease, exchange or other disposition
of such Outstanding Company Common Shares and Outstanding Company Voting Shares,
as the case may be, (B) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or a Subsidiary of such
corporation or a subsidiary thereof and any Person beneficially owning,
immediately prior to such sale, lease, exchange or other disposition, directly
or indirectly, 25% or more of the Outstanding Company Common Shares or
Outstanding Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the election
of directors and (C) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale, lease, exchange or other disposition of
assets of the Company; or
(V) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company:
(g) Major Transaction
(a) This Section (g) shall apply in the event of a Major Transaction. A
Major Transaction shall mean a transaction described in either (1) or (2) below.
8
<PAGE>
(1) The consummation of a reorganization, merger or consolidation, in
each case, if, following such reorganization, merger or consolidation, more than
50% but not more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization, merger or
consolidation (or any parent thereof) and the combined voting power of the then
outstanding voting securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation, in substantially the same
proportions as their ownership immediately prior to such reorganization, merger
or consolidation of such Outstanding Company Common Shares and Outstanding
Company Voting Shares, as the case may be, but only if:
(A) no Person (excluding the Company, any employee benefit plan (or
related trust) of the Company, a Subsidiary or such corporation resulting from
such reorganization, merger or consolidation or any parent or a subsidiary
thereof, and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% or more of
the Outstanding Company Common Shares or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation (or any parent
thereof) or the combined voting power of the then outstanding voting securities
of such corporation (or any parent thereof) entitled to vote generally in the
election of directors; and
(B) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation (or any
parent thereof) were members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing for such
reorganization, merger or consolidation.
9
<PAGE>
(2) The consummation of the sale, lease, exchange or other disposition of
all or substantially all of the assets of the Company to a corporation with
respect to which following such sale, lease, exchange or other disposition
more than 50% but not more than 60% of, respectively, the then outstanding
shares of common stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such sale, lease, exchange or
other disposition in substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other disposition of such
Outstanding Company Common Shares and Outstanding Company Voting Shares, as the
case may be, but only if:
(A) no Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or a Subsidiary of such corporation or a
subsidiary thereof and any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or indirectly, 25% or more
of the Outstanding Company Common Shares or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 25%
or more of, respectively, the then outstanding shares of common stock of such
corporation (or any parent thereof) and the combined voting power of the then
outstanding voting securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of directors of such
corporation (or any parent thereof) were members of the Incumbent Board at the
time of the execution of the initial agreement or action of the Board providing
for such sale, lease, exchange or other disposition of assets of the Company.
10
<PAGE>
(b) If all or any portion of the payments or benefits to which the
Employee will be entitled under this Plan, either alone or together with other
payments or benefits which the Employee receives or is entitled to receive
directly or indirectly from the Company or any of its subsidiaries or any other
person or entity that would be treated as a payor of parachute payments as
hereinafter defined, under any other plan, agreement or arrangement, would
constitute a "parachute payment" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") or any successor
provision thereto and regulations or other guidance thereunder (except that
"2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or benefits provided to the
Employee under this Plan, and any other payments or benefits which the Employee
receives or is entitled to receive directly or indirectly from the Company or
any of its subsidiaries or any other person or entity that would be treated as a
payor of parachute payments as hereinafter defined, under any other plan,
agreement or arrangement which would constitute a parachute payment, shall be
reduced (but not below zero) as described below to the extent necessary so that
no portion thereof would constitute such a parachute payment as previously
defined (except that "2.95" shall be used instead of "3" under Section
280G(b)(2)(A)(ii) of the Code or any successor provision thereto). Whether
payments or benefits to the Employee would constitute a "parachute payment",
whether such payments or benefits are to be reduced pursuant to the first
sentence of this paragraph, and the extent to which they are to be so reduced,
will be determined by the firm serving, immediately prior to the Major
Transaction, as the Company's independent auditors, or if that firm refuses to
serve, by another qualified firm, whether or not serving as independent
auditors, designated by the Administration Committee (the "Firm"). The Firm will
be paid reasonable compensation by the Company for such services. If the Firm
concludes that its determination is inconsistent with a final determination of a
court or the Internal Revenue Service, the Firm shall, based on such final
determination, redetermine whether the amount payable to the Employee should
have been reduced and, if applicable, the amount of any such reduction. If the
Firm determines that a lesser payment should have been made to the Employee,
then an amount equal to the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for all purposes to be
a loan to the Employee made on the date of the Employee's receipt of such Excess
Amount, which the Employee will have an obligation to repay to the Company on
the fifth business day after demand, together with interest on such amount at
the lowest applicable Federal rate (as defined in Section 1274(d) of the Code or
any successor provision thereto), compounded semi-annually (the "Section 1274
Rate") from the date of the Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero) as may be
designated by the Firm such that the Excess Amount and such interest will not be
treated as a parachute payment as previously defined). If the Firm determines
that a greater payment should have been made to the Employee, within five
business days of such determination, the Company will pay to the Employee the
amount of the deficiency, together with interest thereon from the date such
amount should have been paid to the date of such payment, at the Section 1274
Rate (or such lesser rate (including zero) as may be designated by the Firm such
that the amount of such deficiency and such interest will not be treated as a
parachute payment as previously defined). If a reduction is to be made pursuant
to this paragraph, the Firm will have the right to determine which payments and
benefits will be reduced, either those under this Plan alone or such other
payments or benefits which the Employee receives or is entitled to receive
directly or indirectly from the Company or any of its subsidiaries or any other
person or entity that would be treated as a payor of parachute payments as
previously defined, under any other plan, agreement or arrangement.
11
<PAGE>
(h) This Section (h) shall apply in the event of Change in Control, as
defined in Section (g) above.
(a) In the event that any payment or benefit received or to be received
by an Employee hereunder in connection with a Change in Control or termination
of such Employee's employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred to collectively as
the "Payments"), will be subject to the excise tax (the "Excise Tax") referred
to in Section 4999 of the Code, then (i) in the case of an Employee who is
classified in Band 70 (or its equivalent) or above immediately prior to such
Change in Control (a "Tier 1 Employee"), the Company shall pay to such Tier 1
Employee, within five days after receipt by such Tier 1 Employee of the written
statement referred to in paragraph (d) below, an additional amount (the
"Gross-Up Payment") such that the net amount retained by such Tier 1 Employee,
after deduction of any Excise Tax on the Payments and any federal, state and
local income and employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Payments, and (ii) in the case of a Tier 1 Employee (in
the event clause (i) above does not apply) and in the case of any other
Employee, the Payments shall be reduced to the extent necessary so that no
portion of the Payments is subject to the Excise Tax but only if (A) the net
amount of all Total Payments (as hereinafter defined), as so reduced (and after
subtracting the net amount of federal, state and local income and employment
taxes on such reduced Total Payments), is greater than or equal to (B) the net
amount of such Total Payments without any such reduction (but after subtracting
the net amount of federal, state and local income and employment taxes on such
Total Payments and the amount of Excise Tax to which an Employee would be
subject in respect of such unreduced Total Payments); PROVIDED, HOWEVER, that
the Employee may elect in writing to have other components of his or her Total
Payments reduced prior to any reduction in the Payments hereunder.
12
<PAGE>
(b) For purposes of determining whether the Payments will be subject to
the Excise Tax, the amount of such Excise Tax and whether any Payments are to be
reduced hereunder: (i) all payments and benefits received or to be received by
an Employee in connection with such Change in Control or the termination of such
Employee's employment, whether pursuant to the terms of this Plan or any other
plan, arrangement or agreement with the Company, any Person (as such term is
defined in Section (g)) whose actions result in such Change in Control or any
Person affiliated with the Company or such Person (all such payments and
benefits, excluding the Gross-Up Payment and any similar gross-up payment to
which a Tier 1 Employee may be entitled under any such other plan, arrangement
or agreement, being hereinafter referred to as the "Total Payments"), shall be
treated as "parachute payments" (within the meaning of section 280G(b)(2) of the
Code) unless, in the opinion of the accounting firm which was, immediately prior
to the Change in Control, the Company's independent auditor, or if that firm
refuses to serve, by another qualified firm, whether or not serving as
independent auditors, designated by the Administration Committee (the
"Auditor"), such payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of section 280G(b)(2)(A) or section
280G(b)(4)(A) of the Code; (ii) no portion of the Total Payments the receipt or
enjoyment of which the Employee shall have waived at such time and in such
manner as not to constitute a "payment" within the meaning of section 280G(b) of
the Code shall be taken into account; (iii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall be treated as subject
to the Excise Tax unless, in the opinion of the Auditor, such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the Base Amount (within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise not subject to the
Excise Tax; and (iv) the value of any noncash benefits or any deferred payment
or benefit shall be determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code and regulations or other guidance
thereunder. For purposes of determining the amount of the Gross-Up Payment in
respect of a Tier 1 Employee and whether any Payments in respect of a Employee
(other than a Tier 1 Employee) shall be reduced, the Employee shall be deemed to
pay federal income tax at the highest marginal rate of federal income taxation
(and state and local income taxes at the highest marginal rate of taxation in
the state and locality of such Employee's residence, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes) in the calendar year in which the Gross-Up Payment is to
be made (in the case of a Tier 1 Employee) or in which the Payments are made (in
the case of an Employee other than a Tier 1 Employee). The Auditor will be paid
reasonable compensation by the Company for its services.
13
<PAGE>
(c) In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the Gross-Up
Payment, then an amount equal to the amount of the excess of the earlier payment
over the redetermined amount (the "Excess Amount") will be deemed for all
purposes to be a loan to the Tier 1 Employee made on the date of the Tier 1
Employee's receipt of such Excess Amount, which the Tier 1 Employee will have an
obligation to repay to the Company on the fifth business day after demand,
together with interest on such amount at the lowest applicable Federal rate (as
defined in Section 1274(d) of the Code or any successor provision thereto),
compounded semi-annually (the "Section 1274 Rate") from the date of the Tier 1
Employee's receipt of such Excess Amount until the date of such repayment (or
such lesser rate (including zero) as may be designated by the Auditor such that
the Excess Amount and such interest will not be treated as a parachute payment
as previously defined). In the event that the Excise Tax is finally determined
to exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), within five business
days of such determination, the Company will pay to the Tier 1 Employee an
additional amount, together with interest thereon from the date such additional
amount should have been paid to the date of such payment, at the Section 1274
Rate (or such lesser rate (including zero) as may be designated by the Auditor
such that the amount of such deficiency and such interest will not be treated as
a parachute payment as previously defined). The Tier 1 Employee and the Company
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the amount of any Gross-Up
Payment.
(d) As soon as practicable following a Change in Control, the Company
shall provide to each Tier 1 Employee and to each other Employee with respect to
whom it is proposed that Payments be reduced, a written statement setting forth
the manner in which the Total Payments in respect of such Tier 1 Employee or
other Employee were calculated and the basis for such calculations, including,
without limitation, any opinions or other advice the Company has received from
the Auditor or other advisors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
14
<PAGE>
ARTICLE VII
CONDITIONS AND FORFEITURES
(a) In addition to any other condition that may be imposed by the
Committee, the payment of all awards (or any part thereof) deferred under the
Plan shall be contingent on the following:
(1) The participant or former participant entitled thereto shall
refrain from engaging (A) in any business or other activity which,
in the judgment of the Committee, is competitive with any activity
of any Participating Company or any affiliate thereof, in which he
was engaged at any time during the last five years of his
employment by a Participating Company or any affiliate thereof, or
(B) in any business or other activity which is so competitive and
of which he shall have special knowledge as the result of having
been employed by the Participating Company or any affiliate
thereof; and from counseling or otherwise assisting any person,
firm or organization that is so engaged;
(2) He shall not furnish, divulge or disclose to any unauthorized
person, firm or other organization any trade secrets, information
or data with respect to any Participating Company or any affiliate
thereof, or any of their employees, that he shall have reason to
believe is confidential;
(3) He will make himself available for such consultation and advice
concerning matters with respect to which he was familiar while
employed by any Participating Company or affiliate as may
reasonably be requested, taking fairly into consideration his age,
health, residence and individual circumstances and the total
amount of the payments that he is receiving, and shall render such
assistance and cooperation (including testimony and depositions)
in respect of matters of which he shall have knowledge, as may
reasonably be requested in any action, proceeding or other
dispute, pending or prospective, to which any Participating
Company or affiliate may be a party or in which it may have an
interest. The participant or former participant shall have no
obligation to render any services after he shall have ceased to be
an employee of the Participating Companies and affiliates thereof,
except as may be required under this subparagraph, and the death
of the participant or former participant, or the failure to call
upon him for the rendition of services called for under this
subparagraph, shall not in any way affect the right of the
participant or former participant or his beneficiary or legal
representatives, as the case may be, to receive any unpaid portion
of any amounts payable to him;
15
<PAGE>
(4) His employment by any Participating Company, subsidiary or any
affiliate thereof, shall not have terminated as a result of his
gross negligence, willful misconduct or poor performance and he
shall not, while employed by a Participating Company, subsidiary
or affiliate, have engaged in conduct which, had it been known at
the time, would have resulted, on grounds of gross negligence or
willful misconduct, in the termination of his employment by the
Participating Company, subsidiary or affiliate by which he had
been employed.
(b) If, in the judgment of the Committee, reasonably exercised, a
participant or former participant shall have failed at any time to comply with
any of the conditions set forth in paragraph (a) of this Article VII, the
obligation of the employing company to make further payments to such participant
or former participant or his beneficiary or legal representatives shall
forthwith terminate, provided that no installment or amount delivered or paid
prior to the date of any such determination by the Committee shall be required
to be repaid.
(c) No payment of any award under the Plan shall be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt so to anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge the same shall be void. No payment of any award shall
be subject to any jurisdictional payment requirement upon death or termination.
No such payments shall be in any manner liable for or subject to the debts,
contracts, liabilities, engagements or torts of the person entitled thereto,
except as specifically provided in rules or regulations established by the
Committee under the Plan; and in the event that any participant, former
participant or beneficiary under the Plan becomes bankrupt or attempts to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any
such payment or a part thereof, then all such payments due him shall cease and
in that event, the Participating Company shall hold and apply the same to or for
his benefit or that of his spouse, children, or other dependents, or any of
them, in such manner and in such proportions as the Committee, with the approval
of the chief executive officer of such company, may deem proper.
16
<PAGE>
ARTICLE VIII
PARTICIPATING COMPANIES
(a) Any subsidiary which (1) the Committee, based on the recommendations
of the chief executive officer of the Company, or (2) the Board of Directors of
the Company, has approved as a Participating Company may, with such approval,
become a Participating Company upon delivering to the Committee certified copies
of resolutions duly adopted by its Board of Directors to the effect that it (i)
adopts this Plan and (ii) consents to have the Plan administered by the
Committee as constituted from time to time.
(b) Any subsidiary which is a Participating Company may cease to be a
Participating Company at any time and shall cease to be one upon delivering to
the Committee certified copies of an appropriate resolution duly adopted by its
Board of Directors terminating its participation. If any Participating Company
hereunder ceases to be a subsidiary, such corporation may continue to be a
Participating Company hereunder only upon such terms and conditions as the
Company and such corporation shall agree upon in writing. In no event shall the
termination of a corporation's participation in this Plan relieve it of
obligations theretofore incurred by it under the Plan, except to the extent that
the same have been assumed by another corporation pursuant to paragraph (c) of
this Article VIII.
(c) Any corporation which succeeds to all or any part of the business or
assets of a Participating Company may, by appropriate resolution of its Board of
Directors, adopt this Plan and shall thereupon succeed to such rights and assume
such obligations hereunder as such corporation, such Participating Company and
the Company shall have agreed upon in writing.
(d) For the purposes of this Article VIII the term "subsidiary" shall
mean any corporation (other than the Company and any non-Participating Company
specifically designated by the Committee) in one or more unbroken chains of
corporations connected through stock ownership with the Company, if the Company
directly or indirectly through one or more such chains owns stock possessing
more than 50% of the total combined voting power of all classes of stock and
more than 50% of each class of non-voting stock of such corporation.
17
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
(a) No member of the Committee shall be liable for anything done or
omitted to be done by him or by any other member of the Committee in connection
with the Plan, unless such act or omission constitutes willful misconduct on his
part.
(b) The Board of Directors of the Company may amend this Plan in whole or
in part from time to time, and may terminate it at any time, without prior
notice to any interested party. The Board of Directors may delegate its
amendment power to such individual or individuals as it deems appropriate in its
sole discretion. The foregoing sentence to the contrary notwithstanding, for a
period of two years and one day following a Change in Control, neither the Board
of Directors nor the Committee may amend this Plan in a manner that is
detrimental to the rights of any participant of the Plan without his or her
written consent. No amendment or termination shall deprive any participant,
former participant, beneficiary or legal representatives of a former participant
of any right under this Plan as such right exists at the time of such amendment
or termination, nor increase the obligations of any company that is or has been
a Participating Company without its consent.
(c) Nothing in this Plan shall be construed as giving any person employed
by a company which is or has been a Participating Company the right to be
retained in the employ of such company or any right to any payment whatsoever,
except to the extent provided by the Plan. Each such company shall have the
right to dismiss any employee at any time with or without cause and without
liability for the effect which such dismissal might have upon him as a
participant under the Plan.
(c) The Plan shall not be deemed a substitute for any other employee
benefit or compensation plans or arrangements that may now or hereafter be
provided for employees. The Plan shall not preclude any group, division,
subsidiary or affiliate of the Company, whether or not a Participating Company,
from continuing or adopting one or more separate or additional such plans or
arrangements for all or a defined class of the employees of such group,
division, subsidiary or affiliate. Any payment under any such plan or
arrangement may be made independently of the Plan.
(d) By accepting any benefits under the Plan, each participant, each
beneficiary and each person claiming under or through him shall be conclusively
bound by any action or decision taken or made, or to be taken or to be made
under the Plan, by the Company, the Board of Directors of the Company, or the
Committee.
(e) The masculine pronoun means the feminine, the singular the plural,
and vice versa wherever appropriate.
(f) This Plan shall be governed by and construed in accordance with the
laws of the State of New York.
18
ACTION TO AMEND
IDS CURRENT SERVICE
DEFERRED COMPENSATION PLAN
RESOLVED, that pursuant to Section 5(f) of the IDS Current Deferred
Compensation Plan (the "Plan"), the Plan is hereby amended as follows:
1. Section 8 is hereby added to the Plan to read as follows:
8. Major Transaction
-----------------
(a) This Section (8) shall apply in the event of a Major
Transaction (as defined below). A Major Transaction shall
mean a transaction described in either (1) or (2) below:
(1) The consummation of a reorganization, merger or
consolidation, in each case, if, following such
reorganization, merger or consolidation, more than 50% but
not more than 60% of, respectively, the then outstanding
shares of common stock of the corporation resulting from
such reorganization, merger or consolidation (or any parent
thereof) and the combined voting power of the then
outstanding voting securities of such corporation (or any
parent thereof) entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially
the same proportions as their ownership immediately prior to
such reorganization, merger or consolidation of such
Outstanding Company Common Shares and Outstanding Company
Voting Shares, as the case may be, but only if:
(A) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
<PAGE>
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation.
(2) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company to a corporation with respect to which following
such sale, lease, exchange or other disposition more
than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other
disposition of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but
only if:
2
<PAGE>
(A) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for such sale, lease, exchange or other disposition of
assets of the Company.
(b) If all or any portion of the payments or benefits to which
the Participant will be entitled under the Program, either
alone or together with other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as hereinafter defined, under any
other plan, agreement or arrangement, would constitute a
"parachute payment" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code")
or any successor provision thereto and regulations or other
guidance thereunder (except that "2.95" shall be used
instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or
benefits provided to the Participant under this Plan, and
any other payments or benefits which the Participant
receives or is entitled to receive directly or indirectly
from the Company or any of its subsidiaries or any other
3
<PAGE>
person or entity that would be treated as a payor of
parachute payments as hereinafter defined, under any other
plan, agreement or arrangement which would constitute a
parachute payment, shall be reduced (but not below zero) as
described below to the extent necessary so that no portion
thereof would constitute such a parachute payment as
previously defined (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto). Whether payments or benefits
to the Participant would constitute a "parachute payment",
whether such payments or benefits are to be reduced pursuant
to the first sentence of this paragraph, and the extent to
which they are to be so reduced, will be determined by the
firm serving, immediately prior to the Major Transaction, as
the Company's independent auditors, or if that firm refuses
to serve, by another qualified firm, whether or not serving
as independent auditors, designated by the Administration
Committee (the "Firm"). The Firm will be paid reasonable
compensation by the Company for such services. If the Firm
concludes that its determination is inconsistent with a
final determination of a court or the Internal Revenue
Service, the Firm shall, based on such final determination,
redetermine whether the amount payable to the Participant
should have been reduced and, if applicable, the amount of
any such reduction. If the Firm determines that a lesser
payment should have been made to the Participant, then an
amount equal to the amount of the excess of the earlier
payment over the redetermined amount (the "Excess Amount")
will be deemed for all purposes to be a loan to the
Participant made on the date of the Participant's receipt of
such Excess Amount, which the Participant will have an
obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section
1274(d) of the Code or any successor provision thereto),
compounded semi-annually (the "Section 1274 Rate") from the
date of the Participant's receipt of such Excess Amount
until the date of such repayment (or such lesser rate
(including zero) as may be designated by the Firm such that
the Excess Amount and such interest will not be treated as a
parachute payment as previously defined). If
4
<PAGE>
the Firm determines that a greater payment should have been
made to the Participant, within five business days of such
determination, the Company will pay to the Participant the
amount of the deficiency, together with interest thereon
from the date such amount should have been paid to the date
of such payment, at the Section 1274 Rate (or such lesser
rate (including zero) as may be designated by the Firm such
that the amount of such deficiency and such interest will
not be treated as a parachute payment as previously
defined). If a reduction is to be made pursuant to this
paragraph, the Firm will have the right to determine which
payments and benefits will be reduced, either those under
this Plan alone or such other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as previously defined, under any other
plan, agreement or arrangement.
2. Section 9 is added to the Plan as follows:
9. Change in Control Payments
--------------------------
(a) This Section 9 shall apply in the event in a Change in
Control, as defined in paragraph 7 above.
(b) In the event that any payment or benefit received or to
be received by a Participant hereunder in connection with a
Change in Control or termination of such Participant's
employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred
to collectively as the "Payments"), will be subject to the
excise tax (the "Excise Tax") referred to in Section 4999 of
the Code, then (i) in the case of a Participant who is
classified in Band 70 (or its equivalent) or above
immediately prior to such Change in Control (a "Tier 1
Employee"), the Company shall pay to such Tier 1 Employee,
within five days after receipt by such Tier 1 Employee of
the written statement referred to in paragraph (d) below, an
additional amount (the "Gross-Up
5
<PAGE>
Payment") such that the net amount retained by such Tier 1
Employee, after deduction of any Excise Tax on the Payments
and any federal, state and local income and employment taxes
and Excise Tax upon the Gross-Up Payment, shall be equal to
the Payments, and (ii) in the case of a Tier 1 Employee (in
the event clause (i) above does not apply) and in the case
of any other Participant, the Payments shall be reduced to
the extent necessary so that no portion of the Payments is
subject to the Excise Tax but only if (A) the net amount of
all Total Payments (as hereinafter defined), as so reduced
(and after subtracting the net amount of federal, state and
local income and employment taxes on such reduced Total
Payments), is greater than or equal to (B) the net amount of
such Total Payments without any such reduction (but after
subtracting the net amount of federal, state and local
income and employment taxes on such Total Payments and the
amount of Excise Tax to which a Participant would be subject
in respect of such unreduced Total Payments); PROVIDED,
HOWEVER, that the Participant may elect in writing to have
other components of his or her Total Payments reduced prior
to any reduction in the Payments hereunder.
(c) For purposes of determining whether the Payments will be
subject to the Excise Tax, the amount of such Excise Tax and
whether any Payments are to be reduced hereunder: (i) all
payments and benefits received or to be received by a
Participant in connection with such Change in Control or the
termination of such Participant's employment, whether
pursuant to the terms of this Plan or any other plan,
arrangement or agreement with the Company, any Person (as
such term is defined in definition of a Change in Control)
whose actions result in such Change in Control or any Person
affiliated with the Company or such Person (all such
payments and benefits, excluding the Gross-Up Payment and
any similar gross-up payment to which a Tier 1 Employee may
be entitled under any such other plan, arrangement or
agreement, being hereinafter referred to as the "Total
Payments"), shall be treated as "parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in
the opinion of the account-
6
<PAGE>
ing firm which was, immediately prior to the Change in Control,
the Company's independent auditor, or if that firm refuses to
serve, by another qualified firm, whether or not serving as
independent auditors, designated by the Administration Committee
(the "Auditor"), such payments or benefits (in whole or in part)
do not constitute parachute payments, including by reason of
section 280G(b)(2)(A) or section 280G(b)(4)(A) of the Code; (ii)
no portion of the Total Payments the receipt or enjoyment of
which the Participant shall have waived at such time and in such
manner as not to constitute a "payment" within the meaning of
section 280G(b) of the Code shall be taken into account; (iii)
all "excess parachute payments" within the meaning of section
280G(b)(l) of the Code shall be treated as subject to the Excise
Tax unless, in the opinion of the Auditor, such excess parachute
payments (in whole or in part) represent reasonable compensation
for services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount (within
the meaning of section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the
Excise Tax; and (iv) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4) of
the Code and regulations or other guidance thereunder. For
purposes of determining the amount of the Gross-Up Payment in
respect of a Tier 1 Employee and whether any Payments in respect
of a Participant (other than a Tier 1 Employee) shall be reduced,
the Participant shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation (and state and
local income taxes at the highest marginal rate of taxation in
the state and locality of such Participant's residence, net of
the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes) in the
calendar year in which the Gross-Up Payment is to be made (in the
case of a Tier 1 Employee) or in which the Payments are made (in
the case of a participant other than a Tier 1 Employee). The Firm
will be paid reasonable compensation by the Company for its
services.
7
<PAGE>
(d) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, then an amount equal to
the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for
all purposes to be a loan to the Tier 1 Employee made on the
date of the Tier 1 Employee's receipt of such Excess Amount,
which the Tier 1 Employee will have an obligation to repay
to the Company on the fifth business day after demand,
together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the
Tier 1 Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero)
as may be designated by the Auditor such that the Excess
Amount and such interest will not be treated as a parachute
payment as previously defined). In the event that the Excise
Tax is finally determined to exceed the amount taken into
account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up
Payment), within five business days of such determination,
the Company will pay to the Tier 1 Employee an additional
amount, together with interest thereon from the date such
additional amount should have been paid to the date of such
payment, at the Section 1274 Rate (or such lesser rate
(including zero) as may be designated by the Auditor such
that the amount of such deficiency and such interest will
not be treated as a parachute payment as previously
defined). The Tier 1 Employee and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the amount
of any Gross-Up Payment.
(e) As soon as practicable following a Change in Control,
the Company shall provide to each Tier 1 Employee and to
each other Participant with respect to whom it is proposed
that Payments be reduced, a written statement setting forth
the manner in which the Total Payments in respect of such
Tier 1
8
<PAGE>
Employee or other Participant were calculated and the basis
for such calculations, including, without limitation, any
opinions or other advice the Company has received from the
Firm or other advisors or consultants (and any such opinions
or advice which are in writing shall be attached to the
statement).
9
EXHIBIT 10.8
The Company has maintained the American Express Pay for Performance
Deferral Program each year since 1994-99 as described below:
Description of Pay for Performance Deferral Program
The Pay for Performance Deferral Program permits eligible participants to
defer annual compensation up to a maximum of one times base salary. Deferred
amounts are linked to Company performance until paid out. The program annually
credits interest equivalents to, or reduces the value of, deferred amounts
according to a schedule based on the reported annual return on equity ("ROE")
of American Express Company (the "Company"). The Compensation and Benefits
Committee of the Board of Directors (the "Committee") may adjust the schedule
for major accounting changes, if the Company's ROE objectives change
significantly, or if the annual return on a benchmark treasury note falls
below or rises above a specified level. Deferred balances are reduced in value
if the annual ROE is zero or less for a given year. If a participant elects to
defer any compensation under this program, he or she must defer such
compensation for a least five years. The Committee may delay payments under
the program until they are fully deductible under Section 162(m) of the U.S.
Internal Revenue Code of 1986, as amended.
AMENDMENT TO THE
AMERICAN EXPRESS
PAY FOR PERFORMANCE DEFERRAL PROGRAMS
RESOLVED, that American Express Company's (the "Company") Pay for
Performance Deferral Programs for 1994 - 1999 (the "Programs"), are hereby
amended, effective as of February 28, 2000, as follows:
The following new paragraphs are added to the Programs:
1. Definition of Change in Control
-------------------------------
A Change in Control shall have a meaning as set forth below:
(a) Any individual, entity or group (a "Person") (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 as amended (the "Exchange Act") becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of either (i) the then outstanding common
shares of the Company (the "Outstanding Company Common Shares")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that such beneficial ownership
shall not constitute a Change in Control if it occurs as a result
of any of the following acquisitions of securities: (i) any
acquisition directly from the Company, (ii) any acquisition by
the Company or any corporation, partnership, trust or other
entity controlled by the Company (a "Subsidiary"), (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary or (iv)
any acquisition by any corporation pursuant to a reorganization,
merger or consolidation if, following such reorganization, merger
or consolidation, the conditions described in clauses (i), (ii)
and (iii) of subsection (c) of this Change in Control Section are
satisfied. Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") became the beneficial owner of 25% or more of
the Outstanding
<PAGE>
Company Common Shares or Outstanding Company Voting Securities as
a result of the acquisition of Outstanding Company Common Shares
or Outstanding Company Voting Securities by the Company which, by
reducing the number of Outstanding Company Common Shares or
Outstanding Company Voting Securities, increases the proportional
number of shares beneficially owned by the Subject Person;
provided, that if a Change in Control would be deemed to have
occurred (but for the operation of this sentence) as a result of
the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes
the beneficial owner of any additional Outstanding Company Common
Shares or Outstanding Company Voting Securities which increases
the percentage of the Outstanding Company Common Shares or
Outstanding Company Voting Securities beneficially owned by the
Subject Person, then a Change in Control shall then be deemed to
have occurred; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board, including by reason of agreement intended to avoid or
settle any such actual or threatened contest or solicitation; or
(c) The consummation of a reorganization, merger or consolidation, in
each case, unless, following such reorganization, merger or
consolidation, (i) more than 50% of, respectively, the then
outstanding shares of common stock of the corporation resulting
from such reorganization, merger or consolidation (or any parent
thereof) and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election
2
<PAGE>
of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or
consolidation, in substantially the same proportions as their
ownership immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, (ii) no
Person (excluding the Company, any employee benefit plan (or
related trust) of the Company, a Subsidiary or such corporation
resulting from such reorganization, merger or consolidation or
any parent or a subsidiary thereof, and any Person beneficially
owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of the
Outstanding Company Common Shares or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof)
or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors and (iii) at least a majority of the
members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board
providing for such reorganization, merger or consolidation; or
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased, exchanged or
disposed of to a corporation with respect to which following such
sale, lease, exchange or other disposition (A) more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting
3
<PAGE>
Securities immediately prior to such sale, lease, exchange or
other disposition in substantially the same proportions as their
ownership immediately prior to such sale, lease, exchange or
other disposition of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or a Subsidiary of such corporation
or a subsidiary thereof and any Person beneficially owning,
immediately prior to such sale, lease, exchange or other
disposition, directly or indirectly, 25% or more of the
Outstanding Company Common Shares or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of such corporation (or any parent
thereof) and the combined voting power of the then outstanding
voting securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors and (C)
at least a majority of the members of the board of directors of
such corporation (or any parent thereof) were members of the
Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company; or
(e) Approval by the shareholder of the Company of a complete
liquidation or dissolution of the Company.
2. Additional Interest and Payout upon A Change in Control
-------------------------------------------------------
Notwithstanding anything to the contrary contained in the
Programs, upon the occurrence of a Change in Control, the amounts
credited to your participant's Deferral Bookkeeping Account as of
the date of such Change in Control (including any earnings
equivalents accrued thereon, plus interest equivalents for an
additional period of 24 months, based on the deferral rate in
effect for the Program year prior to the date of the Change in
Control, assuming all balances have been deferred for at least
five years) shall be paid to you within five days following the
date of such Change in Control.
4
<PAGE>
3. Major Transaction
-----------------
(a) This paragraph (3) shall apply in the event of a Major
Transaction (as defined below). A Major Transaction shall mean a
transaction described in either (1) or (2) below:
(1) The consummation of a reorganization, merger or
consolidation, in each case, if, following such
reorganization, merger or consolidation, more than 50% but
not more than 60% of, respectively, the then outstanding
shares of common stock of the corporation resulting from
such reorganization, merger or consolidation (or any parent
thereof) and the combined voting power of the then
outstanding voting securities of such corporation (or any
parent thereof) entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially
the same proportions as their ownership immediately prior to
such reorganization, merger or consolidation of such
Outstanding Company Common Shares and Outstanding Company
Voting Shares, as the case may be, but only if:
(A) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the
5
<PAGE>
corporation resulting from such reorganization, merger or
consolidation (or any parent thereof) or the combined voting
power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote
generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation.
(2) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company to a corporation with respect to which following
such sale, lease, exchange or other disposition more
than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other
disposition of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but
only if:
(A) no Person (excluding the Company and any employee
benefit plan (or related trust) of the
6
<PAGE>
Company or a Subsidiary of such corporation or a subsidiary
thereof and any Person beneficially owning, immediately
prior to such sale, lease, exchange or other disposition,
directly or indirectly, 25% or more of the Outstanding
Company Common Shares or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly
or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors; and
(B) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for such sale, lease, exchange or other disposition of
assets of the Company.
(b) If all or any portion of the payments or benefits to which
the Participant will be entitled under the Program, either
alone or together with other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as hereinafter defined, under any
other plan, agreement or arrangement, would constitute a
"parachute payment" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code")
or any successor provision thereto and regulations or other
guidance thereunder (except that "2.95" shall be used
instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or
benefits provided to the Participant under this Plan, and
any other payments or benefits which the Participant
receives or is entitled to receive directly or
7
<PAGE>
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as hereinafter defined, under any
other plan, agreement or arrangement which would constitute
a parachute payment, shall be reduced (but not below zero)
as described below to the extent necessary so that no
portion thereof would constitute such a parachute payment as
previously defined (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto). Whether payments or benefits
to the Participant would constitute a "parachute payment",
whether such payments or benefits are to be reduced pursuant
to the first sentence of this paragraph, and the extent to
which they are to be so reduced, will be determined by the
firm serving, immediately prior to the Major Transaction, as
the Company's independent auditors, or if that firm refuses
to serve, by another qualified firm, whether or not serving
as independent auditors, designated by the Administration
Committee (the "Firm"). The Firm will be paid reasonable
compensation by the Company for such services. If the Firm
concludes that its determination is inconsistent with a
final determination of a court or the Internal Revenue
Service, the Firm shall, based on such final determination,
redetermine whether the amount payable to the Participant
should have been reduced and, if applicable, the amount of
any such reduction. If the Firm determines that a lesser
payment should have been made to the Participant, then an
amount equal to the amount of the excess of the earlier
payment over the redetermined amount (the "Excess Amount")
will be deemed for all purposes to be a loan to the
Participant made on the date of the Participant's receipt of
such Excess Amount, which the Participant will have an
obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section
1274(d) of the Code or any successor provision thereto),
compounded semi-
8
<PAGE>
annually (the "Section 1274 Rate") from the date of the
Participant's receipt of such Excess Amount until the date
of such repayment (or such lesser rate (including zero) as
may be designated by the Firm such that the Excess Amount
and such interest will not be treated as a parachute payment
as previously defined). If the Firm determines that a
greater payment should have been made to the Participant,
within five business days of such determination, the Company
will pay to the Participant the amount of the deficiency,
together with interest thereon from the date such amount
should have been paid to the date of such payment, at the
Section 1274 Rate (or such lesser rate (including zero) as
may be designated by the Firm such that the amount of such
deficiency and such interest will not be treated as a
parachute payment as previously defined). If a reduction is
to be made pursuant to this paragraph, the Firm will have
the right to determine which payments and benefits will be
reduced, either those under this Plan alone or such other
payments or benefits which the Participant receives or is
entitled to receive directly or indirectly from the Company
or any of its subsidiaries or any other person or entity
that would be treated as a payor of parachute payments as
previously defined, under any other plan, agreement or
arrangement.
(5) Change in Control Payments
(a) This Paragraph 5 shall apply in the event in a Change in
Control, as defined in paragraph 1 above.
(b) In the event that any payment or benefit received or to
be received by a Participant hereunder in connection with a
Change in Control or termination of such Participant's
employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred
to collectively as the "Payments"), will be subject to the
excise tax (the "Excise Tax") referred to in Section 4999 of
the Code,
9
<PAGE>
then (i) in the case of a Participant who is classified in
Band 70 (or its equivalent) or above immediately prior to
such Change in Control (a "Tier 1 Employee"), the Company
shall pay to such Tier 1 Employee, within five days after
receipt by such Tier 1 Employee of the written statement
referred to in paragraph (d) below, an additional amount
(the "Gross-Up Payment") such that the net amount retained
by such Tier 1 Employee, after deduction of any Excise Tax
on the Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Payments, and (ii) in the case of a
Tier 1 Employee (in the event clause (i) above does not
apply) and in the case of any other Participant, the
Payments shall be reduced to the extent necessary so that no
portion of the Payments is subject to the Excise Tax but
only if (A) the net amount of all Total Payments (as
hereinafter defined), as so reduced (and after subtracting
the net amount of federal, state and local income and
employment taxes on such reduced Total Payments), is greater
than or equal to (B) the net amount of such Total Payments
without any such reduction (but after subtracting the net
amount of federal, state and local income and employment
taxes on such Total Payments and the amount of Excise Tax to
which a Participant would be subject in respect of such
unreduced Total Payments); PROVIDED, HOWEVER, that the
Participant may elect in writing to have other components of
his or her Total Payments reduced prior to any reduction in
the Payments hereunder.
(c) For purposes of determining whether the Payments will be
subject to the Excise Tax, the amount of such Excise Tax and
whether any Payments are to be reduced hereunder: (i) all
payments and benefits received or to be received by a
Participant in connection with such Change in Control or the
termination of such Participant's employment, whether
pursuant to the terms of this Plan or any other plan,
arrangement or agreement with the Company, any
10
<PAGE>
Person (as such term is defined in Section 1.6) whose
actions result in such Change in Control or any Person
affiliated with the Company or such Person (all such
payments and benefits, excluding the Gross-Up Payment and
any similar gross-up payment to which a Tier 1 Employee may
be entitled under any such other plan, arrangement or
agreement, being hereinafter referred to as the "Total
Payments"), shall be treated as "parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in
the opinion of the accounting firm which was, immediately
prior to the Change in Control, the Company's independent
auditor, or if that firm refuses to serve, by another
qualified firm, whether or not serving as independent
auditors, designated by the Administration Committee (the
"Auditor"), such payments or benefits (in whole or in part)
do not constitute parachute payments, including by reason of
section 280G(b)(2)(A) or section 280G(b)(4)(A) of the Code;
(ii) no portion of the Total Payments the receipt or
enjoyment of which the Participant shall have waived at such
time and in such manner as not to constitute a "payment"
within the meaning of section 280G(b) of the Code shall be
taken into account; (iii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall
be treated as subject to the Excise Tax unless, in the
opinion of the Auditor, such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax; and (iv) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code and regulations
or other guidance thereunder. For purposes of determining
the amount of the Gross-Up Payment in respect of a Tier 1
Employee and
11
<PAGE>
whether any Payments in respect of a Participant (other than
a Tier 1 Employee) shall be reduced, the Participant shall
be deemed to pay federal income tax at the highest marginal
rate of federal income taxation (and state and local income
taxes at the highest marginal rate of taxation in the state
and locality of such Participant's residence, net of the
maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes) in
the calendar year in which the Gross-Up Payment is to be
made (in the case of a Tier 1 Employee) or in which the
Payments are made (in the case of a participant other than a
Tier 1 Employee). The Auditor will be paid reasonable
compensation by the Company for its services.
(d) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, then an amount equal to
the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for
all purposes to be a loan to the Tier 1 Employee made on the
date of the Tier 1 Employee's receipt of such Excess Amount,
which the Tier 1 Employee will have an obligation to repay
to the Company on the fifth business day after demand,
together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the
Tier 1 Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero)
as may be designated by the Auditor such that the Excess
Amount and such interest will not be treated as a parachute
payment as previously defined). In the event that the Excise
Tax is finally determined to exceed the amount taken into
account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or
12
<PAGE>
amount of which cannot be determined at the time of the
Gross-Up Payment), within five business days of such
determination, the Company will pay to the Tier 1 Employee
an additional amount, together with interest thereon from
the date such additional amount should have been paid to the
date of such payment, at the Section 1274 Rate (or such
lesser rate (including zero) as may be designated by the
Auditor such that the amount of such deficiency and such
interest will not be treated as a parachute payment as
previously defined). The Tier 1 Employee and the Company
shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning
the amount of any Gross-Up Payment.
(e) As soon as practicable following a Change in Control,
the Company shall provide to each Tier 1 Employee and to
each other Participant with respect to whom it is proposed
that Payments be reduced, a written statement setting forth
the manner in which the Total Payments in respect of such
Tier 1 Employee or other Participant were calculated and the
basis for such calculations, including, without limitation,
any opinions or other advice the Company has received from
the Firm or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to
the statement).
13
AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN
EFFECTIVE JANUARY 1, 1994
Generally
(As amended and restated through May 1, 2000)
<PAGE>
AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN
------------------------------------------------
TABLE OF CONTENTS
-----------------
Articles Page
-------- ----
Introduction 1
ONE Definitions 2
TWO Participation 9
THREE Amount of Benefits 11
FOUR Method of Payment 18
FIVE Administration of the Plan 19
SIX Adopting Companies and Plan Mergers 21
SEVEN Amendment and Termination 21
EIGHT Financial Provisions 22
NINE Liability and Indemnification 22
TEN Miscellaneous 25
<PAGE>
AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN
INTRODUCTION
------------
The Board of Directors of American Express Company established the American
Express Senior Executive Severance Plan (hereinafter referred to as the "Plan")
effective as of January l, l994, to provide for severance benefits for certain
eligible executive officers of American Express Company and its participating
subsidiaries whose employment is terminated under certain conditions. Severance
benefits under the Plan are to be provided to such eligible executives in
exchange for a signed agreement that includes a release of all claims.
1
<PAGE>
ARTICLE ONE
DEFINITIONS
1.1 "Administration Committee" means the Committee established and appointed
by the Board of Directors or by a committee of the Board of Directors.
1.2 "Affiliated Company" means any corporation which is a member of a
controlled group of corporations (determined in accordance with Section
4l4(b) of the Code) of which the Company is a member and any other trade
or business (whether or not incorporated) which is controlled by, or
under common control (determined in accordance with Section 4l4(c) of the
Code) with the Company, but which has not been admitted to participation
in the Plan.
1.3 "Base Salary" means the regular basic cash remuneration before deductions
for taxes and other items withheld, payable to an Employee for services
rendered to an Employing Company, but not including pay for bonuses,
incentive compensation, special pay, awards or commissions.
1.4 "Board of Directors" means the board of directors of the Company.
1.5 "Bonus" means annual incentive compensation paid to an Employee over and
above Base Salary earned and paid in cash or otherwise under any
executive bonus or sales incentive plan or program of an Employing
Company.
2
<PAGE>
1.6 "Change in Control" means the happening of any of the following:
(a) Any individual, entity or group (a "Person") (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more
of either (i) the then outstanding common shares of the Company (the
"Outstanding Company Common Shares") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that such beneficial ownership shall not
constitute a Change in Control if it occurs as a result of any of the
following acquisitions of securities: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company or any corporation,
partnership, trust or other entity controlled by the Company (a
"Subsidiary"), (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Subsidiary
or (iv) any acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and (iii) of
subsection (c) of this "Change in Control" Section are satisfied.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") became the
beneficial owner of 25% or more of the Outstanding Company Common Shares
or Outstanding Company Voting Securities as a result of the acquisition
of Outstanding Company Common Shares or Outstanding Company Voting
Securities by the Company which, by reducing the number of Outstanding
Company Common Shares or Outstanding Company Voting Securities, increases
the proportional number of shares beneficially owned by the Subject
Person; provided, that if a Change in Control would be deemed to have
occurred (but for the operation of this sentence) as a result of the
acquisition of Outstanding Company Common Shares or Outstanding Company
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the beneficial owner of any
additional Outstanding Company Common Shares or Outstanding Company
Voting Securities which increases the percentage of the Outstanding
Company Common Shares or Outstanding Company Voting Securities
beneficially owned by the Subject Person, then a Change in Control shall
then be deemed to have occurred; or
3
<PAGE>
(b) individuals who, as of the date hereof, constitute the board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board, including by
reason of agreement intended to avoid or settle any such actual or
threatened contest or solicitation; or
(c) The consummation of a reorganization, merger or consolidation, in
each case, unless, following such reorganization, merger or
consolidation, (i) more than 50% of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such reorganization,
merger or consolidation, in substantially the same proportions as their
ownership immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and Outstanding
Company Voting Shares, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan (or related trust) of the Company, a
Subsidiary or such corporation resulting from such reorganization, merger
or consolidation or any parent or a subsidiary thereof, and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of the Outstanding
Company Common Shares or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
(or any parent thereof) or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation (or any parent thereof) were
members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for such
reorganization, merger or consolidation; or
4
<PAGE>
(d) The consummation of the sale, lease, exchange or other disposition of
all or substantially all of the assets of the Company, unless such assets
have been sold, leased, exchanged or disposed of to a corporation with
respect to which following such sale, lease, exchange or other
disposition (A) more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation (or any
parent thereof) entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to such sale,
lease, exchange or other disposition in substantially the same
proportions as their ownership immediately prior to such sale, lease,
exchange or other disposition of such Outstanding Company Common Shares
and Outstanding Company Voting Shares, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary of such corporation or a subsidiary
thereof and any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or indirectly, 25%
or more of the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of such corporation (or any parent thereof) and the combined
voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
board of directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company; or
(e) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.8 "Committee" means the Compensation and Benefits Committee of the Board of
Directors or any successor committee appointed by the Board of Directors.
1.9 "Company" means American Express Company, a New York corporation, its
successors and assigns.
1.10 "Comparable Position" means a job with the Company, an Employing Company,
an Affiliated Company or successor company at the same or higher Base
Salary as an Employee's current job and at a work location within
reasonable commuting distance from an Employee's home, as determined by
such Employee's Employing Company. For employees in the Employing
Company's international expatriate program, Comparable Position means a
job with an Employing Company, an Affiliated Company or successor company
at the same or higher Base Salary as an Employee's current job and at a
work location in the Employee's country of assignment, home country or
career base country.
5
<PAGE>
1.11 "Completed Years of Service" means the number of full one year periods
that have transpired since the Employee's original date of hire or, in
the case of someone who has incurred a break in service as defined in the
American Express Retirement Plan, the adjusted date of hire, through the
Employee's last day of active employment with the Company. For employees
of American Express Tax and Business Services, "original date of hire"
shall mean the American Express Transition Date.
1.12 "Constructive Termination" means resignation or other employment
termination by an Employee from an Employing Company as a result of one
or more of the following without the Employee's written consent within
two years after a Change in Control:
(a) a reduction in Base Salary, except for across-the-board changes
similarly affecting all Employees of the Company and all Employees of any
Person in control of the Company, or any material reduction in the
aggregate of the Employee's annual and long term incentive opportunity,
in each case from that in effect immediately prior to the Change in
Control,
(b) the Employing Company's requirement that the Employee be based more
than 50 miles from the location at which the Employee was based
immediately prior to the Change in Control and which location is more
than 35 miles from the Employee's residence,
(c) the assignment to the Employee of any duties that are materially
inconsistent with the Employee's duties prior to the Change in Control,
or
(d) a significant reduction in the Employee's position, duties, or
responsibilities from those in effect prior to the Change in Control.
1.13 "Defined Termination" means a termination of employment of an Employee
within two years after a Change in Control that occurs as a result of
either:
(a) an Involuntary Termination, or
(b) a Constructive Termination.
6
<PAGE>
1.14 "Employee" means any person, at the senior executive level as defined by
the Administration Committee, paid through the payroll department of the
Employing Company (as opposed to the accounts payable department of the
Employing Company) and employed on a regular full-time basis (i.e., an
employee whose scheduled workweek is consistent with the standard
workweek schedule of a business unit or department) or regular part-time
basis (i.e., an employee who is scheduled to work at least 20 hours per
week, but fewer than the hours of a regular full-time employee) by an
Employing Company, who receives from an Employing Company a regular
stated compensation and an annual IRS Form W-2; provided, however, that
an Employing Company or operating business unit thereof, due to business,
marketplace or employee relations reasons, may, in its sole discretion,
by policy exclude from the definition of Employee under the Plan any
category or level of Employee employed in a non-exempt, exempt or
executive level position or in an initial probationary or trial period of
employment. The term "Employee" shall not include any person who has
entered into an independent contractor agreement , consulting agreement,
franchise agreement or any similar agreement with an Employing Company,
nor the employees of any such person, regardless of whether that person
(including his or her employees) is later found to be an employee by any
court of law or regulatory authority.
1.15 "Employing Company" means the Company and such of its subsidiaries and
affiliated companies and other trades or businesses as have adopted the
Plan and have been admitted to participation by the CBC or any one or
more of them, and any corporation or other entity succeeding to the
rights and assuming the obligations of any such company hereunder in the
manner described in Section 6.1.
1.16 "ERISA" means the Employee Retirement Income Security Act of l974, as
amended from time to time.
1.17 "Good Cause" means a discontinuance of an Employee's employment by an
Employing Company upon one of the following:
a. an Employee's willful and continued failure to adequately perform
substantially all of the Employee's duties with an Employing Company,
b. an Employee's willful engagement in conduct which is demonstrably and
materially injurious to an Employing Company or an affiliate thereof,
monetarily or otherwise, or
c. conviction of a felony by the Employee.
1.18 "Involuntary Termination" means any involuntary discontinuance of an
Employee's employment by an Employing Company for reasons other than Good
Cause within two years after a Change in Control.
1.19 "Leave of Absence" means the period during which an Employee is absent
from work pursuant to a leave of absence granted by an Employing Company.
1.20 "Plan" means the American Express Senior Executive Severance Plan, as set
forth herein and as hereafter amended from time to time.
1.21 "Plan Year" means calendar year 1994 and any subsequent calendar year.
1.22 "Predecessor Company" means any corporation or unincorporated entity
heretofore or hereafter merged or consolidated with or otherwise absorbed
by an Employing Company or any substantial part of the business of which
has been or shall be acquired by an Employing Company.
7
<PAGE>
1.23 "Retirement" means early, normal or deferred retirement as defined in and
meeting the terms and conditions of the American Express Retirement Plan
or IDS Retirement Plan, as amended, or any successor plans.
1.24 "Separation Period" means the period of time over which an Employee
receives severance benefits under the Plan in biweekly or other
installment payments.
1.25 "Termination of Active Employment" means the date on which an Employee
ceases performing services for an Employing Company.
1.26 "Willful" means that an act or failure to act on an Employee's part is
done, or omitted to be done, by the Employee in a manner that is not in
good faith, and that is without reasonable belief that such action or
omission was in the best interests of an Employing Company.
1.27 The masculine pronoun shall be construed to mean the feminine and the
singular shall be construed to mean the plural, wherever appropriate
herein.
1.28 Headings in this document are for identification purposes only and do not
constitute a part of the Plan.
8
<PAGE>
ARTICLE TWO
PARTICIPATION
2.1 ELIGIBILITY FOR PARTICIPATION. Each Employee shall be eligible to
participate in the Plan in the event his employment is terminated by an
Employing Company for one of the following reasons:
2.1.1 Reduction in force;
2.1.2 Position elimination;
2.1.3 Office closing;
2.1.4 Poor performance;
2.1.5 Mutually satisfactory resignation;
2.1.6 Relocation of an employee's current position that does not meet
the definition of Comparable Position;
2.1.7 Defined Termination, as defined in Section 1.13, (applicable only
within two years after a Change in Control), and notwithstanding
any provision of Section 2.3.
The CBC may, in its discretion, grant participation eligibility to any
Employee or group of Employees employed in a business unit of the Company
or an Employing Company who terminate employment due to a sale of such
business unit not later than six months following such sale.
2.2 LIMITATIONS ON ELIGIBILITY. In the event an Employee who is otherwise
eligible for participation in the Plan is offered a Comparable Position
(whether the position is accepted or rejected by the Employee), he will
not be eligible to participate in the Plan. In addition, an Employee is
not eligible to participate in the Plan if the Employee accepts any
position in the Employing Company, an Affiliated Company or successor
company (regardless of whether it is a Comparable Position). An Employee
who is a member of the Company's Planning and Policy Committee and who
otherwise meets the eligibility criteria may only participate in the Plan
if approved by the CBC in advance.
9
<PAGE>
2.3 INELIGIBILITY FOR PARTICIPATION. An Employee is ineligible to participate
in the Plan in the event his employment by an Employing Company
terminates for a reason other than those enumerated in Section 2.1 above,
including, but not limited to, the following:
2.3.1 Voluntary resignation;
2.3.2 Failure to report for work;
2.3.3 Failure to return from leave;
2.3.4 Return from a Leave of Absence which extends beyond the policy
reinstatement period, if applicable, and no position is
available;
2.3.5 Excessive absenteeism or lateness;
2.3.6 Merger, acquisition, sale, transfer, outsourcing or reorganization
of all or part of the Employing Company where either (i) a
Comparable Position is offered with, or (ii) the Employee accepts
any position (regardless of whether it is a Comparable Position)
with, a Successor Company, whether affiliated or unaffiliated with
the Employing Company, including an outside contractor, and
whether or not the Successor Company adopts the plan.
2.3.7 Violation of a policy or procedure of the Employing Company,
insubordination, unwillingness to perform the duties of a
position, suspected dishonesty, or other misconduct;
2.3.8 Retirement, including the acceptance of any Employing Company
sponsored retirement incentive; provided, however, that in the
event an Employee is otherwise eligible for a severance pay
benefit in accordance with Section 2.1 above and also eligible for
Retirement, the Employee shall be eligible to participate in the
Plan in accordance with Article 3 below; or
2.3.9 Death.
10
<PAGE>
ARTICLE THREE
AMOUNT OF BENEFITS
3.1 AMOUNT OF BENEFITS. The severance benefit payable to an eligible
Employee under the Plan shall be based on his Completed Years of
Service with the Company, Employing Company or an Affiliated Company.
The formula for determining an Employee's severance benefit payment
shall be calculated by first adding together (i) the Employee's
annual Base Salary in effect immediately prior to the date of
Termination of Active Employment and (ii) the last annual Bonus
received by the Employee or approved by the CBC as of the date the
Employee signs the agreement required pursuant to section 3.5 of the
Plan. In the case of a recently hired Employee who has not yet
received a Bonus, the Employee's designated target Bonus may be used
as the subparagraph (ii) portion of the calculation above. The sum of
subparagraphs (i) and (ii) above shall then be divided by 52 to
calculate the weekly severance benefit. The amount of the total
severance benefit shall be determined according to the following
schedule:
<TABLE>
<CAPTION>
Schedule for Severance Pay Benefits
Number of Weekly Severance Number of Weekly Severance
Credited Years of Service Benefit Payments Benefit Payments
- ---------------------------------- ------------------------------- ---------------------------------
Executives Planning and Policy Committee
<S> <C> <C> <C>
12 or fewer 52 104
13 56 104
14 60 104
15 65 104
16 69 104
17 73 104
18 or more 78 Maximum 104 Maximum
</TABLE>
For purposes of executive eligibility an Employing Company may define
eligibility in accordance with its policies and practice and may in its
discretion exclude defined levels of executives in accordance with subparagraph
1.14.
11
<PAGE>
3.2 LIMITATIONS ON AMOUNT OF SEVERANCE BENEFITS. The number of weeks of
severance benefits payable to any eligible Employee under the Plan shall
not exceed 104 weeks. Such benefits payable under the Plan shall be
inclusive of and offset by any other severance, redundancy or termination
payment made by an Employing Company, including, but not limited to, any
amounts paid pursuant to federal, state, local or foreign government
worker notification (e.g., Worker Adjustment and Retraining Notification
Act) or office closing requirements and any amounts owed the Employee
pursuant to a contract with Employing Company, unless the contract
specifically provides otherwise.
3.3 REEMPLOYMENT. In the event an Employee is reemployed by the Employing
Company or an Affiliated Company within the period covered by the
schedule of severance benefits in Section 3.1 above, the severance
benefits, if any, that are in excess of the number of weeks between the
Termination of Active Employment and the rehire date shall be repaid by
the Employee or withheld by the Employing Company, as the case may be. In
the further event an eligible Employee who is receiving severance
benefits under the Plan is later rehired by an Employing Company or an
Affiliated Company, and employment later terminates under conditions
making such Employee eligible for severance benefits under the Plan, the
amount of the second severance benefit will be based on such Employee's
rehire date and not the original date of employment; provided, however,
that any benefits withheld or repaid in accordance with the preceding
sentence shall be additionally paid to the terminating Employee. The
total amount of severance calculated pursuant to Section 3.3 shall not
exceed 78 weeks for Employees not on the Planning and Policy Committee or
104 weeks for Planning and Policy Committee members.
3.4 WITHHOLDING TAX. The Employing Company shall deduct from the amount of
any severance benefits payable under the Plan, any amount required to be
withheld by the Employing Company by reason of any law or regulation, for
the payment of taxes or otherwise to any federal, state, local or foreign
government. In determining the amount of any applicable tax, the
Employing Company shall be entitled to rely on the number of personal
exemptions on the official form(s) filed by the Employee with the
Employing Company for purposes of income tax withholding on regular
wages.
12
<PAGE>
3.5 REQUIREMENT OF SIGNED AGREEMENT. Receipt of severance benefits under the
Plan is conditioned upon the Employee signing an Agreement with the
Employee's Employing Company in a form satisfactory to the Company and in
accordance with the requirements of applicable law. The Agreement must
include a release of claims and may include whatever other terms the
Employing Company deems appropriate, including a restrictive covenant. If
the terms of the Agreement are found to be legally unenforceable, the
Employee must return any severance benefits paid pursuant to Section 3.1
of the Plan plus the value of any Long Term Incentive Awards which vested
during the Separation Period; provided, however, that in the event the
Employee has a Defined Termination, such restrictive covenants shall: (a)
be reasonable under the applicable facts and circumstances; (b) include
the following (i) non-solicitation of customers and employees; (ii)
confidentiality of business data; (iii) full release of claims; and (iv)
non-denigration of the Company and its affiliates, and their officers,
directors and agents and (c) not include any non-competition limitations.
Notwithstanding anything herein to the contrary, the Company shall, for a
period of two years and one day following a Change in Control, be
prohibited from entering into any agreement with an Employee, which
contains a more expansive Competitor List (as provided in Section 2 of
the Consent to the Application of Forfeiture and Detrimental Conduct
Provision to Incentive Compensation Plan Award) than that which was in
effect for such Employee immediately prior to the date of such Change in
Control.
3.6 MAJOR TRANSACTION.
(a) Section 3.6 shall apply in the event of a Major Transaction. A Major
Transaction shall mean a transaction described in either (1) or (2)
below:
(1) The consummation of a reorganization, merger or consolidation, in
each case, if, following such reorganization, merger or consolidation,
more than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Shares
and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially the same
proportions as their ownership immediately prior to such reorganization,
merger or consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but only if:
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(A) no Person (excluding the Company, any employee benefit plan (or
related trust) of the Company, a Subsidiary or such corporation resulting
from such reorganization, merger or consolidation or any parent or a
subsidiary thereof, and any Person beneficially owning, immediately prior
to such reorganization, merger or consolidation, directly or indirectly,
25% or more of the Outstanding Company Common Shares or Outstanding
Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the
election of directors; and
(B) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation
(or any parent thereof) were members of the Incumbent Board at the time
of the execution of the initial agreement or action of the Board
providing for such reorganization, merger or consolidation.
(2) The consummation of the sale, lease, exchange or other disposition of
all or substantially all of the assets of the Company to a corporation
with respect to which following such sale, lease, exchange or other
disposition more than 50% but not more than 60% of, respectively, the
then outstanding shares of common stock of such corporation (or any
parent thereof) and the combined voting power of the then outstanding
voting securities of such corporation (or any parent thereof) entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange or other
disposition in substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other disposition of
such Outstanding Company Common Shares and Outstanding Company Voting
Shares, as the case may be, but only if:
(A) no Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or a Subsidiary of such corporation or a
subsidiary thereof and any Person beneficially owning, immediately prior
to such sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common Shares or
Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of such corporation (or any parent
thereof) and the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof) entitled to vote
generally in the election of directors; and
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(B) at least a majority of the members of the board of directors of such
corporation (or any parent thereof) were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the
Board providing for such sale, lease, exchange or other disposition of
assets of the Company. (b) If all or any portion of the payments or
benefits to which the Employee will be entitled under the Plan, either
alone or together with other payments or benefits which the Employee
receives or is entitled to receive directly or indirectly from the
Company or any of its subsidiaries or any other person or entity that
would be treated as a payor of parachute payments as hereinafter defined,
under any other plan, agreement or arrangement, would constitute a
"parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code") or any successor provision
thereto and regulations or other guidance thereunder (except that "2.95"
shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or benefits provided to
the Employee under this Plan, and any other payments or benefits which
the Employee receives or is entitled to receive directly or indirectly
from the Company or any of its subsidiaries or any other person or entity
that would be treated as a payor of parachute payments as hereinafter
defined, under any other plan, agreement or arrangement which would
constitute a parachute payment, shall be reduced (but not below zero) as
described below to the extent necessary so that no portion thereof would
constitute such a parachute payment as previously defined (except that
"2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of
the Code or any successor provision thereto). Whether payments or
benefits to the Employee would constitute a "parachute payment", whether
such payments or benefits are to be reduced pursuant to the first
sentence of this paragraph, and the extent to which they are to be so
reduced, will be determined by the firm serving, immediately prior to the
Major Transaction, as the Company's independent auditors, or if that firm
refuses to serve, by another qualified firm, whether or not serving as
independent auditors, designated by the Administration Committee (the
"Firm"). The Firm will be paid reasonable compensation by the Company for
such services. If the Firm concludes that its determination is
inconsistent with a final determination of a court or the Internal
Revenue Service, the Firm shall, based on such final determination,
redetermine whether the amount payable to the Employee should have been
reduced and, if applicable, the amount of any such reduction. If the Firm
determines that a lesser payment should have been made to the Employee,
then an amount equal to the amount of the excess of the earlier payment
over the redetermined amount (the "Excess Amount") will be deemed for all
purposes to be a loan to the Employee made on the date of the Employee's
receipt of such Excess Amount, which the Employee will have an obligation
to repay to the Company on the fifth business day after demand, together
with interest on such amount at the lowest applicable Federal rate (as
defined in Section 1274(d) of the Code or any successor provision
thereto), compounded semi-annually (the "Section 1274 Rate") from the
date of the Employee's receipt of such Excess Amount until the date of
such repayment (or such lesser rate (including zero) as may be designated
by the Firm such that the Excess Amount and such interest will not be
treated as a parachute payment as previously defined). If the Firm
determines that a greater payment should have been made to the Employee,
within fifteen business days of such determination, the Company will pay
to the Employee the amount of the deficiency, together with interest
thereon from the date such amount should have been paid to the date of
such payment, at the Section 1274 Rate (or such lesser rate (including
zero) as may be designated by the Firm such that the amount of such
deficiency and such interest will not be treated as a parachute payment
as previously defined). If a reduction is to be made pursuant to this
paragraph, the Firm will have the right to determine which payments and
benefits will be reduced, either those under this Plan alone or such
other payments or benefits which the Employee receives or is entitled to
receive directly or indirectly from the Company or any of its
subsidiaries or any other person or entity that would be treated as a
payor of parachute payments as previously defined, under any other plan,
agreement or arrangement.
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3.7 EXCISE TAX.
(a) Section 3.7 shall apply in the event of a Change in Control, as
defined in Section 1.6 hereof.
(b) In the event that any payment or benefit received or to be received
by an Employee hereunder in connection with a Change in Control or
termination of such Employee's employment (such payments and benefits,
excluding Gross-Up Payment (as hereinafter defined), being hereinafter
referred to collectively as the "Payments"), will be subject to the
excise tax (the "Excise Tax") referred to in Section 4999 of the Code,
then (i) in the case of an Employee who is classified in Band 70 (or its
equivalent) or above immediately prior to such Change in Control (a "Tier
1 Employee"), the Company shall pay to such Tier 1 Employee, within five
days after receipt by such Tier 1 Employee of the written statement
referred to in paragraph (d) below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by such Tier 1 Employee,
after deduction of any Excise Tax on the Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Payments, and (ii) in the case of a Tier 1
Employee (in the event clause (i) above does not apply) and in the case
of any other Employee, the Payments shall be reduced to the extent
necessary so that no portion of the Payments is subject to the Excise Tax
but only if (A) the net amount of all Total Payments (as hereinafter
defined), as so reduced (and after subtracting the net amount of federal,
state and local income and employment taxes on such reduced Total
Payments), is greater than or equal to (B) the net amount of such Total
Payments without any such reduction (but after subtracting the net amount
of federal, state and local income and employment taxes on such Total
Payments and the amount of Excise Tax to which an Employee would be
subject in respect of such unreduced Total Payments); provided, however,
that the Employee may elect in writing to have other components of his or
her Total Payments reduced prior to any reduction in the Payments
hereunder.
(c) For purposes of determining whether the Payments will be subject to
the Excise Tax, the amount of such Excise Tax and whether any Payments
are to be reduced hereunder: (i) all payments and benefits received or to
be received by an Employee in connection with such Change in Control or
the termination of such Employee's employment, whether pursuant to the
terms of this Plan or any other plan, arrangement or agreement with the
Company, any Person (as such term is defined in Section 1.6) whose
actions result in such Change in Control or any Person affiliated with
the Company or such Person (all such payments and benefits, excluding the
Gross-Up Payment and any similar gross-up payment to which a Tier 1
Employee may be entitled under any such other plan, arrangement or
agreement, being hereinafter referred to as the "Total Payments"), shall
be treated as "parachute payments" (within the meaning of section
280G(b)(2) of the Code) unless, in the opinion of the accounting firm
which was, immediately prior to the Change in Control, the Company's
independent auditor, or if that firm refuses to serve, by another
qualified firm, whether or not serving as independent auditors,
designated by the Administration Committee (the "Auditor"), such payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b)(2)(A) or section 280G(b)(4)(A) of
the Code; (ii) no portion of the Total Payments the receipt or enjoyment
of which the Employee shall have waived at such time and in such manner
as not to constitute a "payment" within the meaning of section 280G(b) of
the Code shall be taken into account; (iii) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall be
treated as subject to the Excise Tax unless, in the opinion of the
Auditor, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base
Amount (within the meaning of section 280G(b)(3) of the Code) allocable
to such reasonable compensation, or are otherwise not subject to the
Excise Tax; and (iv) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Auditor in accordance with
the principles of sections 280G(d)(3) and (4) of the Code and regulations
or other guidance thereunder. For purposes of determining the amount of
the Gross-Up Payment in respect of a Tier 1 Employee and whether any
Payments in respect of a Employee (other than a Tier 1 Employee) shall be
reduced, the Employee shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation (and state and local
income taxes at the highest marginal rate of taxation in the state and
locality of such Employee's residence, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state
and local taxes) in the calendar year in which the Gross-Up Payment is to
be made (in the case of a Tier 1 Employee) or in which the Payments are
made (in the case of an Employee other than a Tier 1 Employee). The
Auditor will be paid reasonable compensation by the Company for its
services.
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(d) In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the Gross-Up
Payment, then an amount equal to the amount of the excess of the earlier
payment over the redetermined amount (the "Excess Amount") will be deemed
for all purposes to be a loan to the Tier 1 Employee made on the date of
the Tier 1 Employee's receipt of such Excess Amount, which the Tier 1
Employee will have an obligation to repay to the Company on the fifth
business day after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section 1274(d) of the Code
or any successor provision thereto), compounded semi-annually (the
"Section 1274 Rate") from the date of the Tier 1 Employee's receipt of
such Excess Amount until the date of such repayment (or such lesser rate
(including zero) as may be designated by the Auditor such that the Excess
Amount and such interest will not be treated as a parachute payment as
previously defined). In the event that the Excise Tax is finally
determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
Gross-Up Payment), within five business days of such determination, the
Company will pay to the Tier 1 Employee an additional amount, together
with interest thereon from the date such additional amount should have
been paid to the date of such payment, at the Section 1274 Rate (or such
lesser rate (including zero) as may be designated by the Auditor such
that the amount of such deficiency and such interest will not be treated
as a parachute payment as previously defined). The Tier 1 Employee and
the Company shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning the amount of
any Gross-Up Payment.
(e) As soon as practicable following a Change in Control, the Company
shall provide to each Tier 1 Employee and to each other Employee with
respect to whom it is proposed that Payments be reduced, a written
statement setting forth the manner in which the Total Payments in respect
of such Tier 1 Employee or other Employee were calculated and the basis
for such calculations, including, without limitation, any opinions or
other advice the Company has received from the Firm or other advisors or
consultants (and any such opinions or advice which are in writing shall
be attached to the statement).
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ARTICLE FOUR
METHOD OF PAYMENT
4.1 PAYMENT. A severance benefit under the Plan may be payable in biweekly or
other installments at the sole discretion of the Employing Company;
provided, however, that in the event the Employee has a Defined
Termination, the severance benefit under the Plan will be paid within
fifteen days after the date of such Change in Control. Notwithstanding
anything in this Plan to the contrary, if the Employee's employment
terminates within two years following a Change in Control and if the
Employee receives lump sum severance, the Employee shall continue to be
eligible to receive benefits under the Company's medical and dental plans
for the applicable period as if the Employee were paid severance in
installments, such benefits to be substantially identical to the benefits
provided immediately prior to the Change in Control.
4.2 INACTIVE EMPLOYMENT STATUS. During the Separation Period (where severance
benefits are paid in biweekly or other installments) the Employee
receiving such payments will remain in an inactive employment status
until receipt of such payments is completed, at which time employment
will be terminated. During the Separation Period, certain other employee
benefits may be continued, payment for which shall be deducted from such
severance payments in accordance with the Employee's previously elected
benefit coverage. During the Separation Period, the Company reserves the
right to continue other programs such as Long Term Incentive Awards and
Perquisites in accordance with its policies, which may be changed or
terminated from time to time. Nothing in this paragraph shall create a
contract to provide such benefits.
4.3 LIMITATIONS ON SEVERANCE PAYMENTS. In no event shall the period of time
during which an Employee receives severance payments exceed 104 weeks.
Nothing in this Section shall affect the total number of weeks payable
under the Plan pursuant to Section 3.1, including, but not limited to,
the 104-week maximum payment.
4.4 DEATH. In the event an Employee dies before full receipt of severance
benefits payable under the Plan, the remaining severance benefits will be
paid to the legal representative of such Employee's estate in a lump sum
as soon as practicable after receipt of notice of such death and evidence
satisfactory to the Company of the payment or provision for the payment
of any estate, transfer, inheritance or death taxes which may be payable
with respect thereto.
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ARTICLE FIVE
ADMINISTRATION OF THE PLAN
5.1 POWERS OF THE EMPLOYING COMPANY. The Employing Company shall have such
powers, authorities and discretion as are necessary or appropriate in
order to carry out its duties under the Plan, including, but not limited
to, the power:
5.1.1 To obtain such information as it shall deem necessary or
appropriate in order to carry out its duties under the Plan;
5.1.2 To make determinations with respect to the grounds for termination
of employment of any Employee; and
5.1.3 To establish and maintain necessary records.
5.2 EMPLOYING COMPANY AUTHORITY. Nothing contained in the Plan shall be
deemed to qualify, limit or alter in any manner the Employing Company's
sole and complete authority and discretion to establish, regulate,
determine or modify at any time, the terms and conditions of employment,
including, but not limited to, levels of employment, hours of work, the
extent of hiring and employment termination, when and where work shall be
done, marketing of its products, or any other matter related to the
conduct of its business or the manner in which its business is to be
maintained or carried on, in the same manner and to the same extent as if
the Plan were not in existence.
5.3 ADMINISTRATION COMMITTEE DUTIES AND POWERS. The Administration Committee
shall be responsible for the general administration and interpretation of
the Plan and the proper execution of its provisions and shall have full
discretion to carry out its duties. The Administration Committee shall be
the "Administrator" of the Plan and shall be, in its capacity as
Administrator, a "Named Fiduciary," as such terms are defined or used in
ERISA. For the purposes of carrying out its duties as Administrator, the
Administration Committee may, in its sole discretion, allocate its
responsibilities under the Plan among its members, and may, in its sole
discretion, designate persons other than members of the Administration
Committee to carry out such of its responsibilities under the Plan as it
may deem fit. In addition to the powers of the Administration Committee
specified elsewhere in the Plan, the Administration Committee shall have
all discretionary powers necessary to discharge its duties under the
Plan, including, but not limited to, the following discretionary powers
and duties:
5.3.1 To interpret or construe the Plan, and resolve ambiguities,
inconsistencies and omissions;
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5.3.2 To make and enforce such rules and regulations and prescribe the
use of such forms as it deems necessary or appropriate for the
efficient administration of the Plan; and
5.3.3 To decide all questions on appeal concerning the Plan and the
eligibility of any person to participate in the Plan.
5.4 DETERMINATIONS. The determination of the Administration Committee as to
any question involving the general administration and interpretation or
construction of the Plan shall be within its sole discretion and shall be
final, conclusive and binding on all persons, except as otherwise
provided herein or by law.
5.5 CLAIMS REVIEW PROCEDURE. Consistent with the requirements of ERISA and
the regulations thereunder as promulgated by the Secretary of Labor from
time to time, the following claims review procedure shall be followed
with respect to the denial of severance benefits to any Employee:
5.5.1 Within thirty (30) days from the date of an Employee's termination
of active Employment, the Employing Company shall furnish such
Employee either an agreement offering severance benefits under the
Plan or notice of such Employee's ineligibility for or denial of
severance benefits, either in whole or in part. Such notice from
the Employing Company will be in writing and sent to the Employee
or the legal representatives of his estate stating the reasons for
such ineligibility or denial and, if applicable, a description of
additional information that might cause a reconsideration by the
Administration Committee or its delegate of the decision and an
explanation of the Plan's claims review procedure. In the event
such notice is not furnished within thirty (30) days, any claim
for severance benefits shall be deemed denied and the Employee
shall be permitted to proceed to Section 5.5.2 below.
5.5.2 Within sixty (60) days after receiving notice of such denial or
ineligibility or within ninety (90) days after employment
termination if no notice is received, the Employee, the legal
representatives of his estate or a duly authorized representative
may then submit to the Administration Committee a written request
for a review of such decision of denial.
5.5.3 The Administration Committee will review the claim and within
sixty (60) days (or one hundred twenty (120) days in special
circumstances) provide a written response to the appeal setting
forth specific reasons for such decision. In the event the
decision on review is not furnished within such time period, the
claim shall be deemed denied.
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ARTICLE SIX
ADOPTING COMPANIES AND PLAN MERGERS
6.1 ADOPTING COMPANIES. Any corporation which succeeds to the business and
assets of the Company or any part of its operations, may by appropriate
resolution adopt the Plan and shall thereupon succeed to such rights and
assume such obligations hereunder as the Company and said corporation
shall have agreed upon in writing. Any corporation which succeeds to the
business of any Employing Company other than the Company, or any part of
the operations of such Employing Company, may by appropriate resolution
adopt the Plan and shall thereupon succeed to such rights and assume such
obligations hereunder as such Employing Company and said corporation
shall have agreed upon in writing; provided, however, that such adoption
and the terms thereof agreed upon in such writing have been approved by
the Company.
ARTICLE SEVEN
AMENDMENT AND TERMINATION
7.1 RIGHT TO AMEND OR TERMINATE. The Company reserves the right, by action of
the Board of Directors or the CBC, to amend or terminate this Plan in
whole or in part at any time and from time to time, and any amendment or
effective date of termination may be given retroactive effect. The
foregoing sentence to the contrary notwithstanding, for a period of two
years and one day after the date of an occurrence of a Major Transaction
or a Change in Control, neither the Board of Directors nor the Committee
may terminate this Plan or amend this Plan in a manner that is
detrimental to the rights of any participant of the Plan without his or
her written consent.
7.2 TERMINATION BY AN EMPLOYING COMPANY. Any Employing Company other than the
Company may withdraw from participation in the Plan at any time by
delivering to the Administration Committee written notification to that
effect signed by such Employing Company's chief executive officer or his
delegate. Withdrawal by any Employing Company pursuant to this paragraph
or complete discontinuance of severance benefits under the Plan by any
Employing Company other than the Company, shall constitute termination of
the Plan with respect to such Employing Company. The foregoing sentence
to the contrary notwithstanding, neither the Board of Directors nor the
Committee may terminate this Plan or amend this Plan in a manner that is
detrimental to the rights of any participant of the Plan without his
written consent (i) with respect to the provisions of the Plan which
become applicable upon a Change in Control, and (ii) with respect to all
provisions of the Plan for a period of two years and one day after the
date of a Change in Control.
7.3 LIMITATION ON BENEFITS. In the event any Employing Company withdraws from
participation or the Company terminates the Plan as provided in this
Article Seven, no Employee shall be entitled to receive benefits
hereunder for Employment either before or after such action.
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ARTICLE EIGHT
FINANCIAL PROVISIONS
8.1 FUNDING. All severance benefits payable under the Plan shall be payable
and provided for solely from the general assets of the Employing Company
in accordance with the Plan, at the time such severance benefits are
payable, unless otherwise determined by the Employing Company. The
Employing Company shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the
payment of any severance benefits under the Plan.
ARTICLE NINE
LIABILITY AND INDEMNIFICATION
9.1 STANDARD OF CONDUCT. To the extent permitted by ERISA and other
applicable law, no member (which term, as used in this Article Nine,
shall include any employee of any Employing Company designated to carry
out any responsibility of the Administration Committee pursuant to
Section 5.3 above) of the Administration Committee shall be liable for
anything done or omitted to be done by him in connection with the Plan,
unless the member failed to act (1) in good faith and (2) for a purpose
which such member reasonably believed to be in accordance with the intent
of the Plan. The Company or Employing Company as applicable hereby
indemnifies each person made, or threatened to be made, a party to an
action or proceeding, whether civil or criminal, or against whom any
claim or demand is made, by reason of the fact that he, his testator or
intestate, was or is a member of the Administration Committee, against
judgments, fines, amounts paid in settlement and reasonable expenses
(including attorney's fees) actually and necessarily incurred as a result
of such action or proceeding, or any appeal therein, or as a result of
such claim or demand, if such member of the Administration Committee
acted in good faith for a purpose which he reasonably believed to be in
accordance with the intent of the Plan and, in criminal actions or
proceedings, in addition, had no reasonable cause to believe that his
conduct was unlawful.
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9.2 PRESUMPTION OF GOOD FAITH. The termination of any such civil or criminal
action or proceeding or the disposition of any such claim or demand, by
judgment, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not in itself create a presumption that any such
member of the Administration Committee did not act (1) in good faith and
(2) for a purpose which he reasonably believed to be in accordance with
the intent of the Plan.
9.3 SUCCESSFUL DEFENSE. A person who has been wholly successful, on the
merits or otherwise, in the defense of a civil or criminal action or
proceeding or claim or demand of the character described in Section 9.1
above shall be entitled to indemnification as authorized in such Section
9.1.
9.4 UNSUCCESSFUL DEFENSE. Except as provided in Section 9.3 above, any
indemnification under Sections 9.1 and 9.2 above, unless ordered by a
court of competent jurisdiction, shall be made by the Company only if
authorized in the specific case:
9.4.1 By the Board of Directors acting by a quorum consisting of
directors who are not parties to such action, proceeding, claim or
demand, upon a finding that the member of the Administration
Committee has met the standard of conduct set forth in Section 9.1
above; or
9.4.2 If a quorum under Section 9.4.1 above is not obtainable with due
diligence:
9.4.2.1 By the Board of Directors upon the opinion in writing of
independent legal counsel (who may be counsel to any
Employing Company) that indemnification is proper in the
circumstances because the standard of conduct set forth
in Section 9.1 above has been met by such member of the
Administration Committee; or
9.4.2.2 By the shareholders of the Company upon a finding that
the member of the Administration Committee has met the
standard of conduct set forth in such Section 9.1 above.
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9.5 ADVANCE PAYMENTS. Expenses incurred in defending a civil or criminal
action or proceeding or claim or demand may be paid by the Company or
Employing Company as applicable in advance of the final disposition of
such action or proceeding, claim or demand, if authorized in the manner
specified in Section 9.4 above, except that, in view of the obligation of
repayment set forth in Section 9.6 below, there need be no finding or
opinion that the required standard of conduct has been met.
9.6 REPAYMENT OF ADVANCE PAYMENTS. All expenses incurred in defending a civil
or criminal action or proceeding, claim or demand, which are advanced by
the Company or Employing Company as applicable under Section 9.5 above
shall be repaid in case the person receiving such advance is ultimately
found, under the procedures set forth in this Article Nine, not to be
entitled to indemnification or, where indemnification is granted, to the
extent the expenses so advanced by the Company exceed the indemnification
to which he is entitled.
9.7 RIGHT TO INDEMNIFICATION. Notwithstanding the failure of the Company or
Employing Company as applicable to provide indemnification in the manner
set forth in Section 9.4 or 9.5 above, and despite any contrary
resolution of the Board of Directors or of the shareholders in the
specific case, if the member of the Administration Committee has met the
standard of conduct set forth in Section 9.1 above, the person made or
threatened to be made a party to the action or proceeding or against whom
the claim or demand has been made, shall have the legal right to
indemnification from the Company or Employing Company as applicable as a
matter of contract by virtue of this Plan, it being the intention that
each such person shall have the right to enforce such right of
indemnification against the Company or Employing Company as applicable in
any court of competent jurisdiction.
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ARTICLE TEN
MISCELLANEOUS
10.1 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan shall be construed
as giving any Employee the right to be retained in the employ of any
Employing Company or any right to any payment whatsoever, except to the
extent of the severance benefits provided for by the Plan. Each Employing
Company expressly reserves the right to dismiss any Employee at any time
and for any reason without liability for the effect which such dismissal
might have upon him as a participant of the Plan.
10.2 CONSTRUCTION. This Plan shall be governed by and construed in accordance
with the substantive laws but not the choice of law rules of the state of
New York, except to the extent that such laws have been superseded by
federal law.
10.3 EXPENSES OF THE PLAN. The expenses of establishment and administration of
the Plan shall be paid by the Employing Companies. Any expenses paid by
the Company pursuant to this Section 10.3 and indemnification under
Article Nine shall be subject to reimbursement by the other Employing
Companies of their proportionate shares of such expenses and
indemnification, as determined by the Administration Committee in its
sole discretion.
25
EXHIBIT 10.11
AMERICAN EXPRESS COMPANY
1993 DIRECTORS' STOCK OPTION PLAN
1. PURPOSE. The purpose of the American Express Company 1993 Directors'
Stock Option Plan (the 'Plan') is to advance the interests of American Express
Company (the 'Company') and its shareholders by encouraging increased share
ownership by members of the Board of Directors of the Company (the 'Board')
who are not employees of the Company or any of its subsidiaries, in order to
promote long-term shareholder value through continuing ownership of the
Company's common shares.
2. ADMINISTRATION. The Plan shall be administered by the Board. The Board
shall have all the powers vested in it by the terms of the Plan, such powers
to include authority (within the limitations described herein) to prescribe
the form of the agreement embodying awards of nonqualified stock options made
under the Plan ('Options'). The Board shall, subject to the provisions of the
Plan, grant Options under the Plan and shall have the power to construe the
Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable. Any decisions of the Board in the administration of the Plan, as
described herein, shall be final and conclusive. The Board may act only by a
majority of its members in office, except that the members thereof may
authorize any one or more of their number or the Secretary or any other
officer of the Company to execute and deliver documents on behalf of the
Board. No member of the Board shall be liable for anything done or omitted to
be done by him or by any other member of the Board in connection with the
Plan, except for his own willful misconduct or as expressly provided by
statute.
3. PARTICIPATION. Each member of the Board who is not an employee of the
Company or any of its subsidiaries (a 'Non-Employee Director') and certain
other individuals who were directors of Shearson Lehman Hutton Holdings Inc.
('SLHH') as provided in Paragraph 5 below, shall be eligible to receive an
Option in accordance with Paragraph 5 below. As used herein, the term
'subsidiary' means any corporation at least 40% of whose outstanding voting
stock is owned, directly or indirectly, by the Company.
4. AWARDS UNDER THE PLAN. (a) TYPE OF AWARDS. Awards under the Plan shall
include only Options, which are rights to purchase common shares of the
Company having a par value of $.60 per share (the
<PAGE>
'common shares'). Such Options are subject to the terms, conditions and
restrictions specified in Paragraph 5 below.
(b) MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED. There may be issued under
the Plan pursuant to the exercise of Options an aggregate of not more than
250,000 common shares, subject to adjustment as provided in Paragraph 6 below.
If any Option is cancelled, terminates or expires unexercised, in whole or in
part, any common shares that would otherwise have been issuable pursuant
thereto will be available for issuance under new Options.
(c) RIGHTS WITH RESPECT TO SHARES. A Non-Employee Director to whom an
Option is granted (and any person succeeding to such a Non-Employee Director's
rights pursuant to the Plan) shall have no rights as a shareholder with
respect to any common shares issuable pursuant to any such Option until the
date of the issuance of a stock certificate to him for such shares. Except as
provided in Paragraph 6 below, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether
in cash, securities or other property) for which the record date is prior to
the date such stock certificate is issued.
5. NONQUALIFIED STOCK OPTIONS. Each Option granted under the Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time
to time in accordance with the Plan and shall comply with the following terms
and conditions:
(a) The Option exercise price shall be the fair market value of the
common shares subject to such Option on the date the Option is granted,
which shall be the average of the high and the low sales prices of a
common share on the date of grant as reported on the New York Stock
Exchange Composite Transactions Tape or, if the New York Stock Exchange is
closed on that date, on the last preceding date on which the New York
Stock Exchange was open for trading; but in no event will such Option
exercise price be less than the par value of such a common share.
(b) Each year beginning in 1994, as of the date of his election or
re-election as a member of the Board at the annual meeting of shareholders
of the Company, each Non-Employee Director shall automatically receive an
Option for 1,000 common shares, subject to adjustment as provided in
Paragraph 6 below.
(c) The Option shall not be transferable by the optionee otherwise
than by will or the laws of descent and distribution, and shall be
exercisable during his lifetime only by him.
(d) The Option shall not be exercisable:
2
<PAGE>
(i) before the expiration of one year from the date it is granted
and after the expiration of ten years from the date it is granted, and
may be exercised during such period as follows: one-third (33 1/3%) of
the total number of common shares covered by the Option shall become
exercisable each year beginning with the first anniversary of the date
it is granted; provided that an Option shall automatically become
immediately exercisable in full when the Non-Employee Director ceases
to be a Non-Employee Director for any reason other than death;
(ii) unless payment in full is made for the common shares being
acquired thereunder at the time of exercise; such payment shall be
made
(A) in United States dollars by cash or check, or
(B) in lieu thereof, by tendering to the Company common shares
owned by the person exercising the Option and having a fair market
value equal to the cash exercise price applicable to such Option,
such fair market value to be the average of the high and the low
sales prices of a common share on the date of exercise as reported
on the New York Stock Exchange Composite Transactions Tape, or, if
the New York Stock Exchange is closed on that date, on the last
preceding date on which the New York Stock Exchange was open for
trading, or
(C) by a combination of United States dollars and common shares
as aforesaid; and
(iii) unless the person exercising the Option has been at all
times during the period beginning with the date of grant of the Option
and ending on the date of such exercise, a Non-Employee Director of
the Company, except that
(A) if such person shall cease to be such a Non-Employee
Director for reasons other than death, while holding an Option
that has not expired and has not been fully exercised, such
person, at any time within three years of the date he ceased to be
such a Non-Employee Director (but in no event after the Option has
expired under the provisions of subparagraph 5(d)(i) above), may
exercise the Option with respect to any common shares as to which
he has not exercised the Option on the date he ceased to be such a
Non-Employee Director; or
(B) if any person to whom an Option has been granted shall die
holding an Option that has not expired
3
<PAGE>
and has not been fully exercised, his executors, administrators,
heirs or distributees, as the case may be, may, at any time within
one year after the date of such death (but in no event after the
Option has expired under the provisions of subparagraph 5(d)(i)
above), exercise the Option with respect to any shares as to which
the decedent could have exercised the Option at the time of his
death.
Notwithstanding anything in the Plan to the contrary, in accordance with
the applicable provisions of the Agreement and Plan of Merger dated as of
March 26, 1990 (the 'Merger Agreement') relating to the merger of SLHH with a
subsidiary of the Company, as of April 26, 1993 Options shall be granted under
the Plan to certain individuals who were directors of SLHH in full
satisfaction of the Company's obligations under the Merger Agreement to
replace options previously granted under the Shearson Lehman Brothers Holdings
Inc. Stock Option Plan for Non-Employee Directors.
6. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding common shares of the Company by reason of any stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by the Company of all or part of its assets, any distribution
to shareholders other than a normal cash dividend, or other extraordinary or
unusual event, (i) the number or kind of shares that may be issued under the
Plan pursuant to subparagraph 4(b) above, and the number or kind of shares
subject to, and the Option price per share under, all outstanding Options
shall be automatically adjusted so that the proportionate interest of the
participant shall be maintained as before the occurrence of such event; such
adjustment in outstanding Options shall be made without change in the total
Option exercise price applicable to the unexercised portion of such Options
and with a corresponding adjustment in the Option exercise price per share,
and (ii) the number or kind of shares for which grants are subsequently to be
made pursuant to paragraph 5(b) above shall automatically be equitably
adjusted to reflect such changes. Any such adjustment shall be conclusive and
binding for all purposes of the Plan.
7. MISCELLANEOUS PROVISIONS.
(a) Except as expressly provided for in the Plan, no Non-Employee
Director or other person shall have any claim or right to be granted an
Option under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any Non-Employee Director any right to be
retained in the service of the Company.
4
<PAGE>
(b) Except as may be approved by the board, an option or a
participant's rights and interest under the Plan may not be assigned or
transferred, hypothecated or encumbered in whole or in part either
directly or by operation of law or otherwise (except in the event of a
participant's death, by will or the laws of descent and distribution),
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner, and no such right
or interest of any participant in the Plan shall be subject to any
obligation or liability of such participant.
(c) No common shares shall be issued hereunder unless counsel for the
Company shall be satisfied that such issuance will be in compliance with
applicable federal, state, local and foreign securities, securities
exchange and other applicable laws and requirements.
(d) It shall be a condition to the obligation of the Company to issue
common shares upon exercise of an Option, that the participant (or any
beneficiary or person entitled to act under subparagraph 5(d)(iii)(B)
above) pay to the Company, upon its demand, such amount as may be
requested by the Company for the purpose of satisfying any liability to
withhold federal, state, local or foreign income or other taxes. If the
amount requested is not paid, the Company may refuse to issue common
shares.
(e) The expenses of the Plan shall be borne by the Company.
(f) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares upon exercise of any Option under
the Plan, and rights to the issuance of shares upon exercise of Options
shall be subordinate to the claims of the Company's general creditors.
(g) By accepting any Option or other benefit under the Plan, each
participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of,
and consent to, any action taken under the Plan by the Company or the
Board.
(h) The masculine pronoun means the feminine and the singular means
the plural in the Plan, wherever appropriate.
(i) The appropriate officers of the Company shall cause to be filed
any reports, returns or other information regarding Options hereunder or
any common shares issued pursuant hereto as may be required by Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, or any other
applicable statute, rule or regulation.
5
<PAGE>
8. AMENDMENT OR DISCONTINUANCE. The Plan may be amended at any time and
from time to time by the Board as the Board shall deem advisable; provided,
however, that no amendment shall become effective without shareholder approval
if such shareholder approval is required by law, rule or regulation, and
provided further, to the extent required by Rule 16b-3 under Section 16 of the
Securities Exchange Act of 1934, in effect from time to time. Plan provisions
relating to the amount, price and timing of Options shall not be amended more
than once every six months, except that the foregoing shall not preclude any
amendment to comport with changes in the Internal Revenue Code of 1986, the
Employee Retirement Income Security Act of 1974 or the rules thereunder in
effect from time to time. No amendment of the Plan shall materially and
adversely affect any right of any participant with respect to any Option
theretofore granted without such participant's written consent.
9. TERMINATION. This Plan shall terminate upon the earlier of the following
dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating the Plan;
or
(b) ten years from the date the Plan is initially approved and adopted
by the shareholders of the Company in accordance with Paragraph 10 below.
No termination of the Plan shall materially and adversely affect any of the
rights or obligations of any person, without his consent, under any Option
theretofore granted under the Plan.
10. SHAREHOLDER APPROVAL AND ADOPTION. Except as set forth below, the Plan
shall be submitted to the shareholders of the Company for their approval and
adoption on or before April 26, 1993. The Plan shall not be effective and no
Option shall be granted hereunder unless and until the Plan has been so
approved and adopted. The shareholders shall be deemed to have approved and
adopted the Plan only if it is approved and adopted at a meeting of the
shareholders duly held on or before that date (or any adjournment of said
meeting occurring subsequent to such date) by vote taken in the manner
required by the laws of the State of New York.
6
<TABLE>
<CAPTION>
EXHIBIT 12
AMERICAN EXPRESS COMPANY
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGE
(Dollars in millions)
Three Months Years Ended December 31,
Ended Mar. 31, ----------------------------------------
2000
(Unaudited) 1999 1998 1997 1996 1995
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income from
continuing operations $920 $3,438 $2,925 $2,750 $2,664 $2,183
Interest expense 664 2,178 2,224 2,122 2,160 2,343
Other adjustments 38 151 124 127 139 95
----- ----- ----- ----- ----- -----
Total earnings (a) $1,622 $5,767 $5,273 $4,999 $4,963 $4,621
----- ----- ----- ----- ----- -----
Fixed charges:
Interest expense $664 $2,178 $2,224 $2,122 $2,160 $2,343
Other adjustments 40 152 129 129 130 135
--- ----- ----- ----- ----- -----
Total fixed charges (b) $704 $2,330 $2,353 $2,251 $2,290 $2,478
--- ----- ----- ----- ----- -----
Ratio of earnings to
fixed charges (a/b) 2.30 2.48 2.24 2.22 2.17 1.86
</TABLE>
Included in interest expense in the above computation is interest expense
related to the international banking operations of American Express Company (the
company) and Travel Related Services' Cardmember lending activities, which is
netted against interest and dividends and Cardmember lending net finance charge
revenue, respectively, in the Consolidated Statements of Income.
For purposes of the "earnings" computation, other adjustments include adding the
amortization of capitalized interest, the net loss of affiliates accounted for
at equity whose debt is not guaranteed by the company, the minority interest in
the earnings of majority-owned subsidiaries with fixed charges, and the interest
component of rental expense and subtracting undistributed net income of
affiliates accounted for at equity.
For purposes of the "fixed charges" computation, other adjustments include
capitalized interest costs and the interest component of rental expense.
In the fourth quarter of 1995, the companys ownership in First Data Corporation
(FDC) was 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 companys investment in FDC is accounted for as Investments -
Available for Sale.
Exhibit 15
May 15, 2000
The Shareholders and Board of Directors
American Express Company
We are aware of the incorporation by reference in the Registration
Statements (Form S-8 No. 2-46918, No. 2-59230, No. 2-64285, No. 2-73954,
No. 2-89680, No. 33-01771, No. 33-02980, No. 33-28721, No. 33-33552,
No. 33-36422, No. 33-48629, No. 33-62124, No. 33-65008, No. 33-53801,
No. 333-12683, No. 333-41779, No. 333-52699 and No. 333-73111;
Form S-3 No. 2-89469, No. 33-43268, No. 33-50997, No. 333-32525, No. 333-45445,
No. 333-47085 and No. 333-55761) of American Express Company of our
report dated May 15, 2000 relating to the unaudited consolidated
interim financial statements of American Express Company which are included in
its Form 10-Q for the three-month period ended March 31, 2000.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a
part of the registration statement prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
New York, New York
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Company's Consolidated Balance Sheet at March 31, 2000 and
Consolidated Statement of Income for the three months ended
March 31, 2000 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,425
<SECURITIES> 42,534
<RECEIVABLES> 27,043
<ALLOWANCES> 841
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,258
<DEPRECIATION> 2,174
<TOTAL-ASSETS> 150,662
<CURRENT-LIABILITIES> 0
<BONDS> 34,512
0
0
<COMMON> 267
<OTHER-SE> 9,986
<TOTAL-LIABILITY-AND-EQUITY> 150,662
<SALES> 0
<TOTAL-REVENUES> 5,657
<CGS> 0
<TOTAL-COSTS> 2,812
<OTHER-EXPENSES> 684
<LOSS-PROVISION> 942
<INTEREST-EXPENSE> 299
<INCOME-PRETAX> 920
<INCOME-TAX> 264
<INCOME-CONTINUING> 656
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 656
<EPS-BASIC> 0.49<F1>
<EPS-DILUTED> 0.48
<FN>
<F1> Represents basic earnings per share
</FN>
</TABLE>
