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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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 No. 1-6908
AMERICAN EXPRESS CREDIT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 11-1988350
(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
One Christina Centre, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code:(302) 594-3350.
Securities registered pursuant to
Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
------------------------------- -------------------------
6 1/8% Senior Debentures due June 15, 2000 New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION J(1)(a) AND (b) OF FORM 10-K AND HAS THEREFORE OMITTED
CERTAIN ITEMS FROM THIS REPORT IN ACCORDANCE WITH THE REDUCED
DISCLOSURE FORMAT PERMITTED UNDER INSTRUCTION J.
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 by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
American Express Company, through a wholly-owned subsidiary, owns
all of the outstanding common stock of the Registrant.
Accordingly, there is no market for the Registrant's common stock.
At March 31, 1997, 1,504,938 shares were outstanding.
Documents incorporated by reference: None
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PART I
Item 1. BUSINESS.
Introduction
American Express Credit Corporation (including its subsidiaries,
where appropriate, "Credco") was incorporated in Delaware in 1962
and was acquired by American Express Company ("American Express")
in December 1965. On January 1, 1983, Credco became a wholly-owned
subsidiary of American Express Travel Related Services Company,
Inc. (including its subsidiaries, where appropriate, "TRS"), a
wholly-owned subsidiary of American Express.
Credco is primarily engaged in the business of purchasing most
charge Cardmember receivables arising from the use of the American Express
Card, including the American Express-R Gold Card, Platinum Card-R and
Corporate Card issued in the United States, and in designated currencies
outside the United States. Credco also purchases certain revolving
credit receivables arising from the use of the Optima-R Card and interest-
bearing extended payment plan Sign & Travel-R receivables arising
from travel service sales. The American Express Card and the
Optima Card are referred to herein as the "Card".
American Express Card Business
TRS currently issues the Card in 37 currencies. The Card, which is
issued to individual consumers for their personal account or
through a corporate account established by their employer for its
business purposes, permits Cardmembers to charge purchases of goods
and services in the United States and in most countries around the
world at establishments that have agreed to accept the Card. TRS
accepts and processes from each participating establishment the charges
arising from Cardmember purchases at a discount that varies with the type
of participating establishment, the charge volume, the timing and
method of payment to the establishment, the method of submission of
charges, and in certain instances, the average charge amount and
the amount of information provided.
Except in the case of the Optima Card, a family of revolving credit
cards which is marketed in the United States and several other countries,
the charge Card is primarily designed as a method of payment and not as a
means of financing purchases of goods and services and carries no pre-set
spending limit. Charges are approved based on a Cardmember's account
history, credit record and personal resources. Except in the case of the
Optima Card and certain extended payment plans, payment of the full amount
billed each month is due from the Cardmember upon receipt of the bill, and
no finance charges are assessed. Charge Card accounts that are past due by
approximately 50 days are subject, in most cases, to a delinquency
assessment and, if not brought to current status, subject to cancellation.
The American Express charge Card and consumer lending businesses are
subject to extensive regulation in the United States under a number
of federal laws and regulations, including the Equal Credit
Opportunity Act, which generally prohibits discrimination in the
granting and handling of credit; the Fair Credit Reporting Act,
which, among other things, regulates use by creditors of consumer credit
reports and credit prescreening practices and requires certain disclosures
when an application for credit is rejected; the Truth in Lending Act,
which, among other things, requires extensive disclosure of the terms upon
which credit is granted; the Fair Credit Billing Act, which, among other
things, regulates the manner in which billing inquiries are handled and
specifies certain billing requirements; and the Fair Credit and
Charge Card Disclosure Act, which mandates certain disclosures on
credit and charge card applications. Federal legislation also
regulates abusive debt collection practices. In addition, a number of
1
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states and foreign countries have similar consumer credit
protection and disclosure laws. These laws and regulations have
not had, and are not expected to have, a material adverse effect on
the charge Card and consumer lending business, either in the United States
or on a worldwide basis.
General Nature of Credco's Business
Credco purchases certain Cardmember receivables arising from the
use of the Card throughout the world pursuant to agreements (the
"Receivables Agreements") with TRS. Net income primarily depends
on the volume of receivables arising from the use of the Card
purchased by Credco, the discount rates applicable thereto, the
relationship of total discount to Credco's interest expense and
the collectibility of the receivables purchased. The average life
and collectibility of accounts receivable generated by the use of
the Card are affected by factors such as general economic
conditions, overall levels of consumer debt and the number of new
Cards issued.
Credco purchases Cardmember receivables without recourse. Amounts
resulting from unauthorized charges (for example, those made with a
lost or stolen Card) are excluded from the definition of
"receivables" under the Receivables Agreements and are not eligible
for purchase by Credco. If the unauthorized nature of the charge
is discovered after purchase by Credco, TRS repurchases the charge
from Credco.
Credco generally purchases non-interest-bearing charge Cardmember
receivables at face amount less a specified discount agreed upon
from time to time and interest-bearing revolving credit Cardmember
receivables at face amount. The Receivables Agreements generally
require that non-interest-bearing receivables be purchased at
discount rates which yield to Credco earnings of not less than 1.25
times its fixed charges on an annual basis. The Receivables Agreements
also provide that consideration will be given from time to time to
revising the discount rate applicable to purchases of new
receivables to reflect changes in money market rates or significant
changes in the collectibility of receivables. New groups of
Cardmember receivables are generally purchased net of reserve
balances applicable thereto.
Extended payment plan receivables are primarily funded by
subsidiaries of TRS other than Credco; however, Credco purchases
certain extended payment plan receivables. At December 31, 1996
and 1995, extended payment plan receivables owned by Credco totaled
$1.8 billion and $1.7 billion, respectively, representing 10.4
percent and 10.1 percent, respectively, of all interests in
receivables owned by Credco. These extended payment plan
receivables consist of certain interest-bearing extended payment
plan receivables comprised principally of Optima and Sign & Travel
accounts arising from travel service sales and non-interest-bearing
deferred merchandise receivables arising from direct mail
merchandise sales by TRS.
Credco, through a subsidiary, Credco Receivables Corp. ("CRC"),
purchases gross participation interests in the seller's interest in
both non-interest-bearing and interest-bearing Cardmember
receivables owned by two master trusts formed by TRS as part of its
asset securitization program. The gross participation interests
represent undivided interests in the receivables originated by TRS
and by American Express Centurion Bank, a subsidiary of TRS. See
note 3 in "Notes to Consolidated Financial Statements" appearing
herein.
The Card issuers, at their expense and as agents for Credco,
perform accounting, clerical and other services necessary to bill
and collect all Cardmember receivables owned by Credco. The
Receivables Agreements provide that, without prior written consent
of Credco, the credit standards used to determine whether a Card is
to be issued to an applicant may not be materially reduced and that
the policy as to the cancellation of Cards for credit reasons may
not be materially liberalized.
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American Express, as the parent of TRS, has agreed with Credco that
it will take all necessary steps to assure performance of certain
of TRS' obligations under the Receivables Agreement between TRS and
Credco. The Receivables Agreements may be terminated at any time
by the parties thereto, generally upon little or no notice.
Alternatively, such parties may agree to reduce the required 1.25
fixed charge coverage ratio, which could result in lower discount
rates and, consequently, lower revenues and net income of Credco.
The obligations of Credco are not guaranteed under the Receivables
Agreement or otherwise by American Express or the Card issuers.
Volume of Business
The following table shows the volume of Cardmember receivables
purchased by Credco, net of Cardmember receivables sold to
affiliates, during each of the years indicated, together with
receivables owned by Credco at the end of such years (millions):
Volume of Cardmember Cardmember Receivables Owned
Receivables Purchased at December 31,
Year Domestic Foreign Total Domestic Foreign Total
---- -------- ------- ----- -------- ------- -----
1996 $ 100,512 $ 35,299 $135,811 $ 13,530 $ 3,829 $ 17,359
1995 91,299 30,638 121,937 13,179 3,260 16,439
1994 83,851 25,639 109,490 11,273 2,747 14,020
1993 80,202 14,635 94,837 10,758 2,210 12,968
1992 81,311 13,041 94,352 10,412 1,287 11,699
The card business has not experienced significant seasonal
fluctuation, although Card billed business tends to be moderately
higher in the fourth quarter than in other calendar quarters.
TRS' asset securitization program disclosed above reduced the
volume of domestic Cardmember receivables purchased in 1996, 1995
and 1994 and the amount owned by Credco at December 31, 1996, 1995
and 1994.
In July 1993, Credco began purchasing certain foreign currency
Cardmember receivables which had been sold to an affiliate during
the period from December 1991 through June 1993. In December 1993,
Credco repurchased participation interests in a portion of its
foreign receivables which had previously been sold to an affiliate
during the period from December 1991 through November 1993. These
transactions increased the volume of foreign Cardmember receivables
purchased in 1993 and subsequent years and the amount owned by
Credco at December 31, 1993 and subsequent dates.
The average life of Cardmember receivables owned by Credco for each
of the five years ending December 31, 1996 (based upon the ratio of
the average amount of both billed and unbilled receivables owned by
Credco at the end of each month during the years indicated to the
volume of Cardmember receivables purchased by Credco, net of
Cardmember receivables sold to affiliates) was 43 days.
3
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The following table shows the aging of billed, non-interest-bearing
charge Cardmember receivables:
December 31,
1996 1995
--------------------------------------------------------------------
Current 76.7% 77.3%
30 to 59 days 17.2 16.5
60 to 89 days 2.6 2.5
90 days and over 3.5 3.7
Loss Experience
Credco generally writes off against its reserve for doubtful
accounts the total balance in an account for which any portion
remains unpaid 12 months from the date of original billing for non-
interest-bearing charge Card receivables and after six contractual
payments are past due for interest-bearing revolving credit
receivables. Accounts are written off earlier if deemed uncollectible.
The following table sets forth Credco's write-offs, net of
recoveries, expressed in millions and as a percentage of the volume
of Cardmember receivables purchased by Credco, net of Cardmember
receivables sold to affiliates, in each of the years indicated:
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Write-offs, net of recoveries $630 $508 $444 $529 $663
% of net Cardmember
receivables purchased .46% .42% .41% .57% .70%
Sources of Funds
Credco's business is financed by short-term borrowings consisting
principally of commercial paper, borrowings under bank lines of
credit and issuances of medium and long-term debt, as well as
through operations. The weighted average interest costs on an
annual basis of all borrowings, after giving effect to commitment
fees under lines of credit and the impact of interest rate swaps,
during the following years were:
Weighted Average
Year Interest Cost
---- -------------
1996 5.67%
1995 6.30
1994 5.06
1993 4.61
1992 5.80
4
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From time to time, American Express and certain of its subsidiaries
purchase Credco's commercial paper at prevailing rates, enter into
variable rate note agreements at interest rates generally above the
13-week treasury bill rate and provide lines of credit. The
largest amount of borrowings from American Express or its
subsidiaries at any month end during the five years ended December
31, 1996 was $4.0 billion. At December 31, 1996, the amount
borrowed was $2.2 billion. See notes 4 and 5 in "Notes to
Consolidated Financial Statements" appearing herein for information
about Credco's debt, including Credco's lines of credit from
various banks and long-term debt.
Foreign Operations
See notes 2, 7 and 10 in "Notes to Consolidated Financial
Statements" appearing herein for information about Credco's foreign
exchange risks and operations in different geographical regions.
Employees
At December 31, 1996 Credco had 30 employees.
Item 2. PROPERTIES.
Credco neither owns nor leases any material physical properties.
Item 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which Credco or
its subsidiaries is a party or of which any of their property is
the subject. Credco knows of no such proceedings being
contemplated by government authorities or other parties.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
American Express, through a wholly-owned subsidiary, TRS, owns all
of the outstanding common stock of Credco. Therefore, there is no
market for Credco's common stock.
Credco paid dividends of $150 million to TRS in both December, 1996
and 1995.
For information about limitations on Credco's ability to pay
dividends, see note 6 in "Notes to Consolidated Financial
Statements" appearing herein.
5
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Item 6. SELECTED FINANCIAL DATA.
The following summary of certain consolidated financial information
of Credco was derived from audited financial statements for the
five years ended December 31, 1996.
(dollars in millions) 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Income Statement Data
Revenues 2,166 1,988 1,401 1,282 1,605
Interest expense 1,117 1,054 736 599 728
Provision for doubtful
accounts, net of
recoveries 712 625 443 475 661
Income tax provision 115 105 75 64 70
Extraordinary charges,
net of taxes - - - 22 -
Net income 215 197 139 115 138
Balance Sheet Data
Accounts receivable 17,359 16,439 14,020 12,968 11,699
Reserve for doubtful
accounts (638) (624) (498) (542) (603)
Total assets 20,165 20,192 16,868 14,943 13,631
Short-term debt 14,537 14,202 11,525 9,738 7,581
Current portion of
long-term debt 211 409 405 692 969
Long-term debt 2,469 2,673 2,282 1,776 2,303
Shareholder's equity 1,845 1,780 1,733 1,662 1,672
Cash dividends 150 150 100 125 250
6
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
Credco's receivables portfolio consists of charge card receivables
and revolving credit receivables purchased without recourse
from TRS throughout the world and participation interests purchased
without recourse in the seller's interest in both non-interest-
bearing and interest-bearing Cardmember receivables owned by two
master trusts formed by TRS as part of its asset securitization
program. At December 31, 1996 and 1995, respectively, Credco owned
$15.6 billion and $14.8 billion of charge card receivables and
participations in charge card receivables, representing 89.6
percent and 89.9 percent of the total receivables owned, and $1.8
billion and $1.7 billion of revolving credit receivables,
representing 10.4 percent and 10.1 percent of the total receivables
owned.
As part of Credco's business of funding receivables, Credco makes
variable rate loans to American Express Centurion Bank ("Centurion
Bank") which are secured by Optima receivables owned by Centurion
Bank. At both December 31, 1996 and 1995, $2 billion of such loans
were outstanding. The loan agreements require Centurion Bank to
maintain, as collateral, Optima receivables equal to the
outstanding loan balance plus an amount equal to three times the
receivable reserve applicable to such Optima receivables.
Credco's assets are financed through a combination of short-term
debt, long-term senior notes, equity capital and retained earnings.
Daily funding requirements are met primarily by the sale of
commercial paper. Credco has readily sold the volume of commercial
paper necessary to meet its funding needs as well as to cover the
daily maturities of commercial paper issued. The average amount of
commercial paper outstanding was $14.7 billion for 1996 and $12.1
billion for 1995.
An alternate source of borrowing consists of committed credit line
facilities. The aggregate commitment of these facilities is
generally maintained at 50 percent of short-term debt, net of short-
term investments and cash equivalents. Total committed
credit line facilities at December 31, 1996 and 1995 totaled $6.6
billion and $5.8 billion, respectively. Credco, through its wholly-
owned subsidiary, American Express Overseas Credit Corporation
Limited ("AEOCC"), had no outstanding borrowings at December 31,
1996 and $54 million in outstanding borrowings at December 31,
1995, under these committed lines of credit. In addition, Credco,
through AEOCC, had short-term borrowings under uncommitted lines of
credit totaling $200 million and $342 million at December 31, 1996
and 1995, respectively.
During 1995, Credco issued long-term senior notes of $250 million
at 6 3/4 percent due 2001, $250 million at 6 1/2 percent due 2000
and $300 million at 6 1/8 percent due 2001, the proceeds of which
were used to reduce short-term debt. During 1996, 1995 and 1994,
Credco's average long-term debt outstanding was $2.9 billion, $2.0
billion and $2.6 billion, respectively. At December 31, 1996,
Credco had the ability to issue $1.0 billion of medium and long-
term debt securities under shelf registrations filed with the
Securities and Exchange Commission.
In addition, during 1996, TRS, Credco, AEOCC and American Express
Bank Ltd. established a program for the issuance, exclusively outside
the United States to non-U.S. persons, of debt instruments to be listed
on the Luxembourg Stock Exchange. The maximum aggregate principal
amount of debt instruments outstanding at any one time under the program
will not exceed $3 billion. At December 31, 1996, this program had the
ability to issue $2.7 billion medium and long-term debt securities.
Credco and AEOCC have no debt issued under this program.
7
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Credco paid dividends to TRS of $150 million in both December, 1996
and 1995.
See note 7 in "Notes to Consolidated Financial Statements"
appearing herein for a discussion of Credco's use of derivatives.
Results of Operations
Credco purchases Cardmember receivables without recourse from TRS.
Non-interest-bearing charge Cardmember receivables are purchased at face
amount less a specified discount agreed upon from time to time, and
interest-bearing revolving credit Cardmember receivables are generally
purchased at face amount. Non-interest-bearing receivables are purchased
under Receivables Agreements that generally provide that the discount
rate shall not be lower than a rate that yields earnings of at
least 1.25 times fixed charges on an annual basis. The ratio of
earnings to fixed charges was 1.30 in 1996, and 1.29 in both 1995
and 1994. The Receivables Agreements also provide that
consideration will be given from time to time to revising the
discount rate applicable to purchases of new receivables to reflect
changes in money market interest rates or significant changes in
the collectibility of the receivables. Pretax income depends
primarily on the volume of Cardmember receivables purchased, the
discount rates applicable thereto, the relationship of total
discount to Credco's interest expense and the collectibility of
receivables purchased. The average life of Cardmember receivables
was 43 days for each of the years ended December 31, 1996, 1995 and 1994.
Credco's increase in revenues in 1996 is primarily due to an
increase in volume of receivables purchased. Increased interest
income in 1996 was attributable to increased levels of average
investments. Interest expense increased in 1996 reflecting
increased volume offset by a decrease in borrowing rates.
Provision for doubtful accounts in 1996 increased primarily
reflecting volume growth.
The following is a further analysis of the increase (decrease) in
key revenue and expense accounts (millions):
--------------------------------------------------------------
1996 1995 1994
--------------------------------------------------------------
Revenue earned from purchased
accounts receivable-changes
attributable to:
Volume of receivables purchased $ 166 $ 149 $ 186
Discount and interest rates (28) 313 (112)
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Total $ 138 $ 462 $ 74
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Interest income from affiliates-
changes attributable to:
Volume of average investments
outstanding $ 5 $ 28 $ 3
Interest rates (15) 41 28
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Total $ (10) $ 69 $ 31
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Interest income from investments-
changes attributable to:
Volume of average investments
outstanding $ 71 $ 17 $ (8)
Interest rates (19) 40 21
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Total $ 52 $ 57 $ 13
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Interest expense (affiliates)-
changes attributable to:
Volume of average debt outstanding $ 11 $ 15 $ 29
Interest rates (13) 25 19
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Total $ (2) $ 40 $ 48
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Interest expense (other) - changes
attributable to:
Volume of average debt outstanding $ 178 $ 96 $ 37
Interest rates (113) 182 52
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Total $ 65 $ 278 $ 89
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Provision for doubtful accounts-
changes attributable to:
Volume of receivables purchased $ 91 $ 70 $ 104
Provision rates and volume of
recoveries (4) 112 (136)
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Total $ 87 $ 182 $ (32)
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
1. Financial Statements.
See "Index to Financial Statements" at page F-1 hereof.
2. Supplementary Financial Information.
Selected quarterly financial data. See note 11 in
"Notes to Consolidated Financial Statements" appearing
herein.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
9
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Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted pursuant to General Instruction J(2) (c) to Form 10-K.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements:
See "Index to Financial Statements" at page F-1 hereof.
2. Financial Statement Schedule:
See "Index to Financial Statements" at page F-1 hereof.
3. Exhibits:
See "Exhibit Index" hereof.
(b) Reports on Form 8-K:
None.
10
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 CREDIT CORPORATION
(Registrant)
DATE March 31, 1997 /s/ Vincent P. Lisanke
-------------------------------------------------------------
Vincent P. Lisanke
President, Chief Executive Officer
and Director
Pursuant to the requirement of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities on the dates indicated.
DATE March 31, 1997 /s/ Vincent P. Lisanke
-------------------------------------------------------------
Vincent P. Lisanke
President, Chief Executive
Officer and Director
(principal executive and
principal accounting officer)
DATE March 31, 1997 /s/ Richard K. Goeltz
-------------------------------------------------------------
Richard K. Goeltz
Chairman of the Board
and Director (principal
financial officer)
DATE March 31, 1997 /s/ Jay B. Stevelman
-------------------------------------------------------------
Jay B. Stevelman
Treasurer and Director
11
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AMERICAN EXPRESS CREDIT CORPORATION
INDEX TO FINANCIAL STATEMENTS
COVERED BY REPORT OF INDEPENDENT AUDITORS
(Item 14(a))
Page Number
-----------
Financial Statements
Report of independent auditors............ F - 2
Consolidated statements of income for each
of the three years ended December 31, 1996,
1995 and 1994............................. F - 3
Consolidated balance sheets at December
31, 1996 and 1995......................... F - 4
Consolidated statements of cash flows for each
of the three years ended December 31, 1996,
1995 and 1994............................... F - 5
Consolidated statements of shareholder's
equity for each of the three years ended
December 31, 1996, 1995 and 1994........... F - 6
Notes to consolidated financial statements. F - 7 to F - 15
Schedule:
II - Valuation and qualifying accounts for
the three years ended December 31, 1996 F - 16
All other schedules are omitted since the required information
is not present or not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the consolidated financial statements or notes thereto.
F-1
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REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------
The Board of Directors
American Express Credit Corporation
We have audited the accompanying consolidated balance sheets of
American Express Credit Corporation as of December 31, 1996 and
1995, and the related consolidated statements of income,
shareholder's equity and cash flows for each of the three years in
the period ended December 31, 1996. Our audits also included the
financial statement schedule listed in the Index at Item 14 (a).
These financial statements and schedule are the responsibility of
American Express Credit Corporation's management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of American Express Credit Corporation at December 31,
1996 and 1995, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ Ernst & Young LLP
New York, New York
February 7, 1997
F-2
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AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(millions)
----------------------------------------------------------------
Year Ended December 31, 1996 1995 1994
----------------------------------------------------------------
Revenues
Revenue earned from purchased
accounts receivable $1,813 $1,675 $1,213
Interest income from affiliates 160 170 101
Interest income from investments 189 137 80
Other income 4 6 7
----------------------------------------------------------------
Total 2,166 1,988 1,401
----------------------------------------------------------------
Expenses
Interest expense - affiliates 134 136 96
Interest expense - other 983 918 640
Provision for doubtful
accounts, net of recoveries
of $186, $176 and $177 712 625 443
Other expenses 7 7 8
----------------------------------------------------------------
Total 1,836 1,686 1,187
----------------------------------------------------------------
Income before taxes 330 302 214
Income tax provision 115 105 75
----------------------------------------------------------------
Net income $ 215 $ 197 $ 139
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
See notes to consolidated financial statements.
F-3
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AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED BALANCE SHEETS
(millions)
----------------------------------------------------------------
December 31, 1996 1995
----------------------------------------------------------------
Assets
Cash and cash equivalents $ 267 $ 1,190
Accounts receivable 17,359 16,439
Less reserve for doubtful accounts 638 624
----------------------------------------------------------------
16,721 15,815
Loans and deposits with affiliates 2,850 2,850
Deferred charges and other assets 327 337
----------------------------------------------------------------
Total assets $20,165 $20,192
----------------------------------------------------------------
----------------------------------------------------------------
Liabilities and shareholder's equity
Short-term debt with affiliates $ 1,275 $ 1,087
Short-term debt - other 13,262 13,115
Current portion of long-term debt 211 409
Long-term debt with affiliate 910 910
Long-term debt - other 1,559 1,763
-------- -------
Total debt 17,217 17,284
Due to affiliates 858 882
Accrued interest and other
liabilities 145 130
----------------------------------------------------------------
Total liabilities 18,220 18,296
----------------------------------------------------------------
Deferred discount revenue 100 116
----------------------------------------------------------------
Shareholder's equity
Common stock-authorized 3,000,000
shares of $.10 par value; issued
and outstanding 1,504,938 shares 1 1
Capital surplus 161 161
Retained earnings 1,683 1,618
----------------------------------------------------------------
Total shareholder's equity 1,845 1,780
----------------------------------------------------------------
----------------------------------------------------------------
Total liabilities and
shareholder's equity $20,165 $20,192
----------------------------------------------------------------
----------------------------------------------------------------
See notes to consolidated financial statements.
F-4
<PAGE>
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
- -----------------------------------------------------------------------
Year Ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------
Cash Flows From Operating Activities:
Net Income $ 215 $ 197 $ 139
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for doubtful accounts,
net of recoveries 712 625 443
Amortization of deferred underwriting
fees and bond discount / premium 1 - 2
(Decrease) increase in deferred
discount revenue (16) 21 48
(Increase) decrease in deferred tax
assets (11) (56) 38
Increase in interest receivable
and operating assets (6) (5) (23)
(Decrease) increase in accrued interest
and other liabilities (18) 3 24
Increase (decrease) in due to affiliates 79 (27) (10)
- -------------------------------------------------------------------------
Net cash and cash equivalents provided
by operating activities 956 758 661
- -------------------------------------------------------------------------
Cash Flows From Investing Activities:
Increase in accounts receivable (3,194) (3,047) (2,434)
Sale of net accounts receivable to an
affiliate 2,294 - 1,192
Sale of participation interest in
seller's interest in accounts
receivable to an affiliate 1,304 - 920
Purchase of participation interest in
seller's interest in accounts
receivable from an affiliate (2,178) - (1,170)
Purchase of net secured receivables from
an affiliate - - (85)
Recoveries of accounts receivable
previously written off 186 176 177
Loans and deposits with affiliates - (200) (650)
(Decrease) increase in due to affiliates
from purchased receivables (57) 182 (487)
- --------------------------------------------------------------------------
Net cash and cash equivalents used in
investing activities (1,645) (2,889) (2,537)
- --------------------------------------------------------------------------
Cash Flows From Financing Activities:
Net increase (decrease) in short-term
debt with affiliates with maturities
less than ninety days 188 (40) 539
Net increase (decrease) in short-term
debt - other with maturities less than
ninety days 4,469 (5,178) 4,699
Proceeds from issuance of debt 9,684 20,039 2,633
Redemption of debt (14,425) (11,810) (5,692)
Dividends paid to TRS (150) (150) (100)
- --------------------------------------------------------------------------
Net cash and cash equivalents (used in)
provided by financing activities (234) 2,861 2,079
- --------------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents (923) 730 203
- --------------------------------------------------------------------------
Cash and cash equivalents at beginning
of year 1,190 460 257
- --------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 267 $ 1,190 $ 460
- --------------------------------------------------------------------------
See notes to consolidated financial statements.
F-5
<PAGE>
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
Years ended December 31, 1996, 1995 and 1994
(millions)
---------------------------------------------
Total
Shareholder's Common Capital Retained
Equity Stock Surplus Earnings
---------------------------------------------
Balances at
January 1, 1994 $ 1,662 $ 1 $ 129 $ 1,532
Net income 139 139
Dividends to TRS (100) (100)
Contributions from TRS 32 - 32 -
-------- ------- ------- --------
Balances at
December 31, 1994 1,733 1 161 1,571
Net income 197 197
Dividends to TRS (150) - - (150)
-------- ------- ------- -------
Balances at
December 31, 1995 1,780 1 161 1,618
-------- ------- ------- -------
Net income 215 215
Dividends to TRS (150) - - (150)
-------- ------ ------ -------
Balances at
December 31, 1996 $ 1,845 $ 1 $ 161 $ 1,683
======== ====== ====== =======
See notes to consolidated financial statements.
F-6
<PAGE>
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
American Express Credit Corporation together with its subsidiaries
("Credco") is a wholly-owned subsidiary of American Express Travel
Related Services Company, Inc. ("TRS"), which is a wholly-owned
subsidiary of American Express Company ("American Express").
American Express Overseas Credit Corporation Limited together with
its subsidiaries ("AEOCC") and Credco Receivables Corp. ("CRC")
are wholly-owned subsidiaries of Credco.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Credco and all its subsidiaries. All significant
intercompany transactions have been eliminated.
Use of Estimates and Assumptions
Credco's financial statements include amounts determined using
estimates and assumptions. For example, estimates and assumptions
are used in determining the reserves related to accounts
receivable. While these estimates are based on the best judgment
of management, actual results could differ from these estimates.
Revenue Earned from Purchased Accounts Receivable
A portion of discount revenue earned on purchases of non-interest-
bearing Cardmember receivables equal to the provision for doubtful
accounts is recognized as revenue at the time of purchase; the
remaining portion is deferred and recorded as revenue ratably over
the period that the receivables are outstanding.
Finance charge income on interest-bearing extended payment plan
receivables is recognized as it is earned. Credco ceases accruing
this income after six contractual payments are past due, or
earlier, if deemed uncollectible. Accruals that cease generally
are not resumed.
Reserve for Doubtful Accounts
The reserve for doubtful accounts is based on historical
collection experience and evaluation of the current status of existing
receivable balances. Credco generally writes off against its
reserve for doubtful accounts the total balance in an account for
which any portion remains unpaid twelve months from the date of
original billing for non-interest-bearing Cardmember receivables
and after six contractual payments are past due for interest-
bearing Cardmember receivables. Accounts are written off earlier
if deemed uncollectible.
Fair Values of Financial Instruments
The fair values of financial instruments are estimates based upon
current market conditions and perceived risks at December 31, 1996
and 1995 and require varying degrees of management judgment. The
fair values of the financial instruments presented may not be indicative
of their future fair values.
F-7
<PAGE>
<PAGE>
The fair values of long-term debt and derivative instruments are
included in the related footnotes. For all other financial
instruments, the carrying amounts in the consolidated balance
sheets approximate the fair values.
Interest Rate Transactions
Credco enters into various interest rate agreements as a means of
managing its interest rate exposure. Interest rates charged on
consumer lending receivables are linked to a floating base rate and
generally reprice monthly. Credco generally enters into interest
rate agreements paying a rate that reprices when the base rate of
the underlying receivables changes. These interest rate agreements
which modify the terms of an underlying debt obligation are
accounted for by recording interest expense using the revised
interest rate with any fees or other payments amortized as yield
adjustments. It is Credco's normal practice not to terminate, sell
or dispose of interest rate agreements or the underlying debt to
which the agreements are designated prior to maturity. In the
event Credco terminates, sells or disposes of an agreement prior to
maturity, the gain or loss would be deferred and recognized as an
adjustment of yield over the remaining life of the underlying debt.
Foreign Currency
Foreign currency assets and liabilities are translated into their
U.S. dollar equivalents based on rates of exchange prevailing at
the end of each year. Revenue and expense accounts are translated
at exchange rates prevailing during the year. Credco enters into
various foreign exchange contracts as a means of managing foreign
exchange exposure.
Cash and Cash Equivalents
Credco has defined cash and cash equivalents as cash and short-term
investments with a maturity of ninety days or less at the time of
purchase. At December 31, 1996 and 1995, included in cash and cash
equivalents was $100 million and $420 million, respectively, of
overnight securities purchased to resell.
3. Accounts Receivable
At December 31, 1996 and 1995, respectively, Credco owned $15.6
billion and $14.8 billion of charge card receivables and
participations in charge card receivables, representing 89.6
percent and 89.9 percent, respectively, of the total receivables
owned. In connection with TRS' securitization program for U.S.
consumer Cardmember receivables, CRC purchases from American
Express Receivables Financing Corporation ("RFC"), a subsidiary of
TRS, a participation interest in RFC's seller's interest in the
receivables owned by the American Express Master Trust, which was
formed in 1992 to securitize U.S. consumer Cardmember receivables.
In September 1996, the American Express Master Trust issued an
additional $1.25 billion of accounts receivable trust certificates
to the public. At that time, CRC sold to RFC, at face amount less
applicable reserve, $1.3 billion of its gross participation
interest. The gross participation interests represent undivided
interests in the receivables conveyed to the American Express
Master Trust by RFC. At December 31, 1996 and 1995 Credco owned
approximately $3.4 billion and $2.3 billion, respectively, of
participation interests in receivables owned by the trust,
representing 19.3 percent and 14.1 percent, respectively, of its
total accounts receivable.
F-8
<PAGE>
<PAGE>
Credco owned extended payment plan receivables totaling $1.8
billion and $1.7 billion, including revolving credit loans
purchased directly from American Express Centurion Bank ("Centurion
Bank"), a subsidiary of TRS, at December 31, 1996 and 1995,
representing 10.4 percent and 10.1 percent, respectively, of its
total interests in accounts receivable. The extended payment plan
receivables owned at December 31, 1996 include $104 million of
participation interest owned by CRC. This represents a
participation interest in the seller's interest in revolving credit
receivables that have been conveyed to the American Express Credit
Account Master Trust, formed by Centurion Bank during the second
quarter of 1996 to securitize revolving credit loans.
Statement of Financial Accounting Standards (SFAS) No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," is effective January 1, 1997.
With respect to existing securitizations, the new rule is not
expected to have a material effect on Credco's results of operations
or financial condition. The consequences of additional securitizations
could be material depending on their level.
4. Short-term Debt
At December 31, short-term debt consisted of (millions) :
------------------------------------------------------------
1996 1995
------------------------------------------------------------
Commercial paper $ 12,966 $ 12,633
Borrowings from affiliates 1,275 1,087
Borrowings under lines of credit 200 396
Borrowing agreements with bank
trust departments and others 96 86
------------------------------------------------------------
Total short-term debt $ 14,537 $ 14,202
------------------------------------------------------------
Credco has various facilities available to obtain short-term
credit, including the issuance of commercial paper and agreements
with banks.
Credco had unused committed credit lines totaling $6.6 billion and
$5.8 billion at December 31, 1996 and 1995, respectively. Credco
pays fees to the financial institutions that provide these credit
line facilities. The fair value of the unused lines of credit is
not significant at December 31, 1996 and 1995.
At December 31, 1996 and 1995, Credco, through AEOCC, had short-
term borrowings under uncommitted lines of credit totaling $200
million and $342 million, respectively. In addition, there were no
outstanding borrowings under committed lines of credit at December
31, 1996 and $54 million at December 31, 1995.
Credco's annual weighted average short-term interest rate was 5.57
percent, 6.16 percent and 4.74 percent for the years ended December
31, 1996, 1995 and 1994, respectively. These rates include the
cost of maintaining credit line facilities for the periods and the
impact of interest rate swaps. At December 31, 1996, $300 million
of short-term debt outstanding was modified by interest rate swaps,
resulting in a year-end weighted average effective interest rate of
5.64%.
Credco paid $913 million, $942 million and $508 million of interest
on short-term debt obligations in 1996, 1995 and 1994,
respectively.
F-9
<PAGE>
<PAGE>
5. Long-term Debt
- ------------------------------------------------------------------------------
1996
- ------------------------------------------------------------------------------
Year-End
Year-End Effective
Notional Stated Rate Interest
December 31, (millions) Outstanding Amount of on Debt Rate With Maturity
Balance Swaps (a,b) Swaps(b) of Swaps
- ------------------------------------------------------------------------------
Senior notes
due 1997-2005 $1,725 $1,650 6.79% 6.25% 1997-2005
Variable rate debt
with American
Express due 2004 910 - 5.36% - -
Medium-term notes
due 1997 36 - 7.17% - -
Other senior notes
due 1999-2017 2 - 7.65% - -
Swiss franc notes
due 1998-2003 10 - 3.45% - -
Japanese yen senior
bonds due 1996 - - - - -
Net unamortized
bond discount (3) - - - -
- -------------------------------------------------------------------------------
Total long-term debt $2,680 $1,650
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1995
- -------------------------------------------------------------------------------
Notional Year-End
December 31, (millions) Outstanding Amount of Stated Rate
Balance Swaps on Debt(b)
- -------------------------------------------------------------------------------
Senior notes
due 1997-2005 $2,008 $1,400 6.98%
Variable rate debt with
American Express due 2004 910 - 5.59%
Medium-term notes due 1997 61 - 7.02%
Other senior notes due 1999-2017 5 - 7.34%
Swiss franc notes due 1998-2003 3 - 4.75%
Japanese yen senior bonds due 1996 98 98 8.00%
Net unamortized bond discount (3) - -
- -------------------------------------------------------------------------------
Total long-term debt $3,082 $1,498
- -------------------------------------------------------------------------------
(a) For the floating rate debt issuance, the stated rate was based on
the rate at December 31, 1996; this rate is not an indication of
future interest rates.
(b) Weighted average rates were determined where appropriate.
The above table includes the current portion of long-term debt of
$211 million and $409 million at December 31, 1996 and 1995,
respectively.
The book value of variable rate long-term debt that reprices within
a year approximates fair value. The fair value of other long-term
debt is based on quoted market price or discounted cash flow. The
aggregate fair value of long-term debt, including the current
portion outstanding at December 31, 1996 and 1995, was $2.7 billion
and $3.1 billion, respectively.
Aggregate annual maturities of long-term debt for the five years
ending December 31, 2001 are as follows (millions): 1997 - $215,
1998 - $4, 1999 - $355, 2000 - $550, 2001 - $550.
Credco paid $217 million in 1996, $218 million in 1995, and $222
million in 1994 of interest on long-term debt obligations.
6. Restrictions as to Dividends and Limitations on Indebtedness
The most restrictive limitation on dividends imposed by the debt
instruments issued by Credco is the requirement that Credco
maintain a minimum consolidated net worth of $50 million. There
are no limitations on the amount of debt that can be issued by
Credco.
7. Derivative Instruments
Credco uses derivative financial instruments for nontrading
purposes to manage its exposure to interest and foreign exchange
rate risks and to manage its funding costs.
There are a number of risks associated with derivatives. Market
risk is the possibility that the value of the derivative financial
instrument will change. Credco is not exposed to market risk
related to derivatives held for nontrading purposes beyond that
inherent in cash market transactions. Credco does not enter into
derivative contracts with embedded options or other features that
would leverage or multiply its market risk.
F-10
<PAGE>
<PAGE>
Credit risk is the possibility that the counterparty will not
fulfill the terms of the contract. It is monitored through
established approval procedures, including setting concentration
limits by counterparty and country, reviewing credit ratings and
requiring collateral where appropriate. A significant portion of
Credco's transactions are with counterparties rated A or better by
nationally recognized credit rating agencies. Credco also uses
master netting agreements, which allow Credco to settle multiple
contracts with a single counterparty in one net receipt or payment
in the event of counterparty default. At December 31, 1996 and 1995,
the aggregate notional amount of Credco's derivative instruments was
$6.4 billion ($233 million with affiliates) and $4.9 billion ($46
million with an affiliate), respectively. Credit risk approximates the
fair value of contracts in a gain position (asset) and totaled $37
million ($2.2 million with affiliates) at December 31, 1996 and $34
million ($.4 million with an affiliate) at December 31, 1995.
The fair value represents the replacement cost and is determined by
market values, dealer quotes or pricing models.
The following tables detail information regarding Credco's
derivatives (millions):
Notional Carrying Value Fair Value
December 31, 1996 Amount Asset Liability Asset Liability
- ----------------- -------- ----- --------- ----- ---------
Interest rate products $4,386 $ 19 $ 50 $ 25 $ 87
Forward contracts 1,972 14 31 12 30
------- ----- -------- ------ ---------
Total $6,358 $ 33 $ 81 $ 37 $117
------- ----- -------- ----- ---------
Notional Carrying Value Fair Value
December 31, 1995 Amount Asset Liability Asset Liability
- ----------------- -------- ----- --------- ----- ---------
Interest rate products $3,723 $ 19 $ 48 $ 28 $136
Forward contracts 1,185 6 3 6 3
------- ----- --------- ----- ---------
Total $4,908 $ 25 $ 51 $ 34 $139
------ ----- --------- ----- ---------
Interest Rate Products
Credco uses interest rate products to maintain a predetermined mix
of fixed and variable rate debt in order to achieve a desired level
of interest rate exposure to manage funding costs related to its
Cardmember receivables and Cardmember loans. The principal product
used is interest rate swaps, which involve the exchange for a
specified period of time of fixed or floating rate interest
payments based on a notional or contractual amount. Credco also
enters into currency swaps to convert U.S. dollar denominated debt
into other currencies in order to match foreign denominated
receivables with funding of the same currency and to achieve a
desired level of interest rate exposure. Currency swap agreements
are contracts to exchange currency and interest payments for a
specific period of time.
Interest rates charged on Credco's revolving credit receivables are
linked to a floating rate base and generally reprice each month. Credco
generally enters into interest rate swaps paying rates that reprice
when the base rates of the underlying loans change.
As interest rate products manage interest rate exposure, interest
is accrued and reported in accounts receivable and other assets, or
accrued interest and other liabilities, and interest expense, as
appropriate.
Aggregate annual expirations of interest rate swaps are as follows
(notional amount in millions):
1997 - $1,575, 1998 - $846, 1999 - $474, 2000 - $809, 2001 - $682.
F-11
<PAGE>
<PAGE>
The following table details information regarding Credco's interest
rate products at December 31, 1996 (millions):
-------------------------------------------------------------------------
Notional Primary Variable Weighted Average Interest Rate
Type Amount Rate Index Fixed Floating
-------------------------------------------------------------------------
Floating
to fixed $2,320 1 month LIBOR and 6.94% 5.71%
1 month Commercial paper
Fixed to
floating $2,066 1 month Commercial paper 6.37% 5.71%
Foreign Currency Products
Credco uses foreign currency products to manage transactions
denominated in foreign currencies.
Foreign currency exposures are hedged, where practical and
economical, through foreign currency forward contracts. Foreign
currency forward contracts involve the purchase or sale of a
designated currency at an agreed upon rate for settlement on a
specified date. As Credco is exposed to transaction risk with
regard to receivables denominated in foreign currencies and since
foreign currency forward contracts reduce that exposure, the
contracts are accounted for as hedges. These foreign currency
forward contracts are marked to the current spot rate with the gain
or loss recorded in income to offset the transaction gain or loss
resulting from the receivables. The receivable or payable with the
counterparty to the foreign currency forward contracts which result
from this process are reported in other assets or liabilities, as
appropriate. The discount or premium on foreign currency forward
contracts is reported in other assets or liabilities, as
appropriate, and amortized to interest expense over the terms of
the contracts.
The following table summarizes Credco's forward contracts by major
currencies as of December 31 (millions):
---------------------------------------------------
1996 1995
---------------------------------------------------
Canadian Dollar $ 334 $ 281
Pound Sterling 578 233
Australian Dollar 307 198
Hong Kong Dollar 199 144
German Mark 218 120
Other 336 209
---------------------------------------------------
Total forward contracts $1,972 $1,185
---------------------------------------------------
Foreign currency forward contracts generally mature within one
year. At December 31, 1996, Credco had no significant unhedged
foreign currency exposures.
F-12
<PAGE>
<PAGE>
8. Transactions with Affiliates
In 1996, 1995 and 1994, Credco purchased Cardmember receivables
without recourse from TRS and certain of its subsidiaries totaling
approximately $136 billion, $122 billion and $109 billion,
respectively. Agreements for the purchase of non-interest-bearing
receivables generally provide that Credco purchase such receivables
at a discount rate which yields earnings to Credco equal to at
least 1.25 times its fixed charges on an annual basis.
The agreements require TRS, at its expense, to perform accounting,
clerical and other services necessary to bill and collect all
Cardmember receivables owned by Credco. Since settlements under
the agreements occur monthly, an amount due from, or payable to,
such affiliates may arise at the end of the month.
In 1996, as part of TRS' asset securitization program for U.S. consumer
Cardmember receivables, Credco sold back to TRS approximately $2.2 billion
of gross receivables arising under specified U.S. consumer Cardmember
accounts. TRS sold these receivables, together with the right to
receive subsequent receivables arising from such Cardmember
accounts, to its subsidiary, RFC. RFC, in turn, conveyed them to
the American Express Master Trust (the "Trust"). This resulted in
an increase in the gross participation interest in RFC's seller's
interest in the securitized receivables owned by CRC, for which CRC
paid $2.2 billion. In September 1996, the Trust issued $1.25
billion of receivables trust certificates in two series. At the
time of such issuance, CRC sold, at face amount less applicable
reserve, $1.3 billion of its gross participation interest in RFC's
seller's interest back to RFC.
The extended payment plan receivables owned at December 31, 1996
include $104 million of participation interest owned by CRC. This
represents a participation interest in the seller's interest in
revolving credit receivables that have been conveyed to the
American Express Credit Account Master Trust, formed by Centurion
Bank during the second quarter of 1996 to securitize revolving
credit loans.
Other transactions with American Express and its subsidiaries for
the years ended December 31 were as follows (millions):
--------------------------------------------------------------------
1996 1995 1994
--------------------------------------------------------------------
Cash and cash equivalents at December 31 $ 2 $ 9 $ -
Maximum month-end level of cash and
cash equivalents during the year 9 12 20
Secured loans to American Express
Centurion Bank at December 31 2,000 2,000 2,000
Other loans and deposits to an
affiliate at December 31 850 850 650
Maximum month-end level of loans and
deposits to affiliates during the year 2,850 2,850 2,650
Borrowings at December 31 2,185 1,997 2,037
Maximum month-end level of
borrowings during the year 4,024 3,709 2,734
Interest income 160 170 101
Other income 4 6 6
Interest expense 134 136 96
--------------------------------------------------------------------
F-13
<PAGE>
<PAGE>
At December 31, 1996, 1995 and 1994, Credco held $2 billion of
variable rate secured loans to Centurion Bank. At both December
31, 1996 and 1995, Credco also held variable rate loans to American
Express due in 2004 of $850 million and $650 million at December 31, 1994.
The loans to Centurion Bank are secured by certain interest-bearing
extended payment plan receivables owned by Centurion Bank.
Interest income from these variable rate loans was $160 million,
$169 million, and $101 million for 1996, 1995 and 1994,
respectively.
In 1994, TRS made a noncash contribution to Credco of AEB(CFS)
Limited, a foreign company incorporated to fund certain Optima Card
receivables outside the U.S., for book value.
9. Income Taxes
The taxable income of Credco is included in the consolidated U.S.
federal income tax return of American Express. Under an agreement
with TRS, taxes are recognized on a stand-alone basis. If benefits
for all future tax deductions, foreign tax credits and net
operating losses cannot be recognized on a stand-alone basis, such
benefits are then recognized based upon a share, derived by
formula, of those deductions and credits that are recognizable on a
TRS consolidated reporting basis.
Deferred income tax assets and liabilities result from the
recognition of temporary differences. Temporary differences are
differences between the tax bases of assets and liabilities and
their reported amounts in the financial statements that will result
in differences between income for tax purposes and income for
financial statement purposes in future years. The current and
deferred components of the provision (benefit) for income taxes
consist of the following (millions):
------------------------------------------------------------------
1996 1995 1994
------------------------------------------------------------------
Current $ 126 $ 161 $ 36
Deferred (11) (56) 39
------------------------------------------------------------------
Total income tax provision $ 115 $ 105 $ 75
------------------------------------------------------------------
Credco's net deferred tax assets, which are included in other
assets, consisted of the following (millions):
-----------------------------------------------------------
1996 1995
-----------------------------------------------------------
Gross deferred tax assets:
Reserve for loan losses $ 218 $ 207
-----------------------------------------------------------
Total gross deferred tax assets 218 207
Gross deferred tax liabilities:
Foreign exchange contracts (1) (1)
------------------------------------------------------------
Total gross deferred tax liabilities (1) (1)
------------------------------------------------------------
Net deferred tax assets $ 217 $ 206
F-14
<PAGE>
<PAGE>
At December 31, 1996 and 1995, no valuation allowances were required.
A federal tax overpayment of $27 million and underpayment of $3
million at December 31, 1996 and 1995, respectively, are included
in due to affiliates.
Income taxes paid to TRS during 1996, 1995 and 1994 were $155
million, $125 million and $55 million, respectively.
The U.S. statutory tax rate and effective tax rate for 1996, 1995
and 1994 was approximately 35 percent.
10. Geographic Segments
Credco is principally engaged in the business of purchasing
Cardmember receivables arising from the use of the American Express
Card in the United States and foreign locations. The following
presents information about operations in different geographic areas
(millions):
-----------------------------------------------------------------
1996 1995 1994
-----------------------------------------------------------------
Revenues
United States $ 1,855 $ 1,695 $ 1,180
International 311 293 221
-----------------------------------------------------------------
Consolidated $ 2,166 $ 1,988 $ 1,401
-----------------------------------------------------------------
Income before taxes
United States $ 275 $ 244 $ 171
International 55 58 43
-----------------------------------------------------------------
Consolidated $ 330 $ 302 $ 214
-----------------------------------------------------------------
Identifiable assets
United States $ 16,444 $ 17,027 $ 14,174
International 3,721 3,165 2,694
-----------------------------------------------------------------
Consolidated $ 20,165 $ 20,192 $ 16,868
-----------------------------------------------------------------
11. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data is as follows (millions):
---------------------------------------------------------------
Quarter Ended 12/31 9/30 6/30 3/31
---------------------------------------------------------------
1996
---------------------------------------------------------------
Revenues $ 523 $ 540 $ 571 $ 532
Income before taxes 82 89 74 85
Net income 54 58 48 55
---------------------------------------------------------------
1995
---------------------------------------------------------------
Revenues $ 569 $ 480 $ 479 $ 460
Income before taxes 90 69 66 77
Net income 59 45 43 50
---------------------------------------------------------------
F-15
<PAGE>
<PAGE>
AMERICAN EXPRESS CREDIT CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(millions)
1996 1995 1994
---- ---- ----
Reserve for doubtful accounts:
Balance at beginning of year $ 624 $ 498 $ 542
Additions:
Provision for doubtful accounts
charged to income (1) 898 801 620
Other credits (2) 94 7 75
Foreign translation 2 2 3
Deductions:
Accounts written off 816 684 621
Other charges (3) 164 - 121
------ ------ ------
Balance at end of year $ 638 $ 624 $ 498
====== ====== ======
Reserve for doubtful accounts
as a percentage of Cardmember
receivables owned at year end 3.68% 3.79% 3.55%
====== ====== ======
(1) Before recoveries on accounts previously written off of (millions):
1996-$186, 1995-$176 and 1994-$177.
(2) Reserve balances applicable to new groups of Cardmember
receivables purchased from TRS and certain of its subsidiaries
and participation interests purchased from affiliates.
(3) Reserve balances applicable to certain groups of Cardmember
receivables and participation interests sold to affiliates.
F-16
<PAGE>
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Exhibit No. Description
3(a) Registrant's Certificate Incorporated by
of Incorporation, as amended reference to
Exhibit 3(a) to
Registrant's
Registration
Statement on
Form S-1 dated
February 25, 1972
(File No. 2-43170).
3(b) Registrant's By-Laws, Incorporated by
amended and restated as of reference to
November 24, 1980 Exhibit 3 (b)
to Registrant's
Annual Report
on Form 10-K
for the year ended
December 31, 1985.
(Commission File
No. 1-6908)
4(a) Registrant's Debt Incorporated by
Securities reference to
Indenture dated as of Exhibit 4 (s)
September 1, 1987 to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
4(b) Form of Note with optional Incorporated by
redemption provisions reference to
Exhibit 4 (t)
to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
4(c) Form of Debenture with Incorporated by
optional redemption and reference to
sinking fund provisions Exhibit 4 (u)
to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
<PAGE>
<PAGE>
4(d) Form of Original Issue Incorporated by
Discount Note with reference to
optional redemption Exhibit 4 (v)
provision to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
4(e) Form of Zero Coupon Note Incorporated by
with optional redemption reference to
provisions Exhibit 4 (w)
to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
4(f) Form of Variable Rate Note Incorporated by
with optional redemption reference to
and repayment provisions Exhibit 4 (x)
to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
4(g) Form of Extendible Note Incorporated by
with optional redemption reference to
and repayment provisions Exhibit 4 (y)
to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
4(h) Form of Fixed Rate Medium- Incorporated by
Term Note reference to
Exhibit 4 (z)
to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
4(i) Form of Floating Rate Incorporated by
Medium-Term Note reference to
Exhibit 4 (aa)
to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).<PAGE>
<PAGE>
4(j) Form of Warrant Agreement Incorporated by
reference to
Exhibit 4 (bb)
to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
4(k) Form of Supplemental Incorporated by
Indenture reference to
Exhibit 4 (cc)
to Registrant's
Registration
Statement on
Form S-3 dated
September 2, 1987
(File No. 33-16874).
4(l) Terms and Conditions of Debt Electronically filed
Instruments to be issued herewith.
outside the U.S.
4(m) The Registrant hereby
agrees to furnish the
Commission, upon request,
with copies of the
instruments defining the
rights of holders of each
issue of long-term debt of
the Registrant for which
the total amount of
securities authorized
thereunder does not exceed
10% of the total assets of
the Registrant
10(a) Receivables Agreement Incorporated by
dated as of January 1, reference to
1983 between the Exhibit 10 (b)
Registrant and American to Registrant's
Express Travel Related Annual Report on
Services Company, Inc. Form 10-K for the year
ended December 31, 1987.
(Commission File
No. 1-6908)
10(b) Secured Loan Agreement Incorporated by
dated as of June 30, 1988 reference to
between the Registrant and Exhibit 10 (b)
American Express Centurion to Registrant's
Bank Annual Report on
Form 10-K for the year
ended December 31, 1988.
(Commission File
No. 1-6908)
<PAGE>
<PAGE>
10(c) Participation Agreement Incorporated by
dated as of August 3, 1992 reference to
between American Express Exhibit 10(c)
Receivables Financing to Registrant's
Corporation and Credco Annual Report on
Receivables Corp. Form 10-K for the year
ended December 31, 1992.
(Commission File
No. 1-6908)
12.1 Computation in Support of Electronically
Ratio of Earnings to Fixed filed herewith.
Charges of American
Express Credit Corporation
12.2 Computation in Support of Electronically
Ratio of Earnings to Fixed filed herewith.
Charges of American
Express Company
23 Consent of Independent Electronically
Auditors filed herewith.
27 Financial Data Schedule Electronically
filed herewith.
<PAGE>
<PAGE>
EXHIBIT 4(l)
TERMS AND CONDITIONS OF THE INSTRUMENTS
Note: The instruments described in this Exhibit has not been and will
not be registered under the Securities Act of 1933 and may not
be offered or sold in the United States or to, or for the
account or benefit of, U.S. persons except in transactions
exempt from the registration requirements of the Securities
Act of 1933.
1. FORM AND DENOMINATION
1.01 Instruments are issued in bearer form and are serially numbered.
1.02 Each Tranche of Instruments is represented upon issue by a temporary
global Instrument (a "Temporary Global Instrument")-Interests in the
Temporary Global Instrument may be exchanged for:
(i) interests in a permanent global Instrument (a "Permanent Global
Instrument"); or
(ii) if so specified in the Pricing Supplement, definitive
instruments in bearer form ("Definitive Instruments")
Exchanges of interests in a Temporary Global Instrument for
Definitive Instruments or, as the case may be, a Permanent
Global Instrument will be made only on or after the Exchange
Date (as specified in the Pricing Supplement) and provided
certification as to non-U.S. beneficial ownership thereof (or
as to ownership thereof by or through a financial institution
in compliance with the applicable provisions of U.S. law) as
required by U.S. Treasury regulations (in substantially the
form set out in the Temporary Global Instrument or in such
other form as is customarily issued in such circumstances by
the relevant clearing system) has been received.
1.03 The bearer of any Temporary Global Instrument shalt not (unless, upon
due presentation of such Temporary Global Instrument for exchange (in whole
but not in part only) for a Permanent Global Instrument or for delivery of
Definitive Instruments, such exchange or delivery is improperly withheld or
refused and such withholding or refusal is continuing at the relevant
payment date) be entitled to receive any payment in respect of the
Instruments represented by such Temporary Global Instrument which falls due
on or after the Exchange Date or be entitled to exercise any option on a
date after the Exchange Date.
1.04 Subject to Condition 1.03 above, if any date on which a payment of
interest is due on the Instruments of a Tranche occurs whilst any of the
Instruments of that Tranche are represented by a Temporary Global
Instrument, the related interest payment will be made on the Temporary
Global Instrument only to the extent that certification as to the non-U.S.
beneficial ownership thereof as required by U.S. Treasury regulations (in
substantially the form set out in the Temporary Global Instrument or in
such other form as is customarily issued in such circumstances by the
relevant clearing system) has been received by Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the Euroclear System
("Euroclear") or Cedel Bank, societe anonyme ("Cedel Bank") or any other
relevant clearing system (including, in the case of Instruments listed on
the Paris Bourse, Sicovam S.A. and the Intermediaires financiers habilities
authorized to maintain accounts therein (together, the "Sicovam") and the
Deutscher Kassenverein AG).
1.05 Interests in a Permanent Global Instrument will be exchanged by the
Issuer in whole but not in part only at the option of the Holder of such
Permanent Global Instrument, for Definitive Instruments, (a) if an Event of
Default (as defined in Condition 7) occurs in respect of any Instrument of
the relevant Series; or (b) if either Euroclear or Cedel Bank or any other
relevant clearing system (including Sicovam) is closed for business for a
continuous period of fourteen days (other than by reason of public
holidays) or announces an intention to cease business permanently or in
fact does so; or (c) if so specified in the Pricing Supplement, at the
option of the Holder of such Permanent Global Instrument upon such Holder's
request, in all cases at the cost and expense of the Issuer, unless
otherwise specified in the Pricing Supplement. In order to exercise the
option contained in paragraph (c) of the preceding sentence, the Holder
must, not less than forty-five days before the date upon which the delivery
of such Definitive Instruments is required, deposit the relevant Permanent
Global Instrument with the Fiscal Agent at its specified office with the
form of exchange notice endorsed thereon duly completed. If the Issuer
does not make the required delivery of Definitive Instruments by 6.00 p.m.
(London time) on the day on which the relevant notice period expires or, as
the case may be, the thirtieth day after the day on which such Permanent
Global Instrument becomes due to be exchanged and, in the case of (a)
above, such Instrument is not duly redeemed (or the funds required for such
redemption are not available to the Fiscal Agent for the purposes of
effecting such redemption and remain available for such purpose) by 6.00
p.m. (London time) on the thirtieth day after the day at which such
Instrument became immediately redeemable then each Holder (as defined in
Condition 2.01) or its successors or assigns may, without the consent and
to the exclusion of the bearer thereof, file any claim, take any action or
institute any proceeding to enforce, directly against the Issuer, the
obligation of the Issuer to pay any amount due in respect of each
Instrument represented by the Permanent Global Instrument which is credited
to such Holders' securities account with a clearing agent as fully as
though such Instrument were evidenced by a Definitive Instrument without
the production of a Permanent Global Instrument, provided that the bearer
thereof shall not theretofore have filed a claim, taken action or
instituted proceedings to enforce the same in respect of such instrument.
1.06 Interest-bearing Definitive Instruments have attached thereto at the
time of their initial delivery coupons ("Coupons"), presentation of which
will be a prerequisite to the payment of interest save in certain
circumstances specified herein. Interest-bearing Definitive Instruments,
if so specified in the Pricing Supplement, have attached thereto at the
time of their initial delivery, a talon ("Talon") for further coupons and
the expression "Coupons" shall, where the context so requires, include
Talons.
1.07 Instruments, the principal amount of which is repayable by
instalments ("Instalment Instruments") which are Definitive Instruments,
have attached thereto at the time of their initial delivery, payment
receipts ("Receipts") in respect of the instalments of principal.
DENOMINATION OF INSTRUMENTS
1.08 Instruments are in the denomination or denominations (each of which
denomination is integrally divisible by each smaller denomination)
specified in the Pricing Supplement. Instruments of one denomination may
not be exchanged for Instruments of any other denomination.
CURRENCY OF INSTRUMENTS
1.09 The Instruments are denominated in such currency as may be specified
in the Pricing Supplement. Any currency may be so specified, subject to
compliance with all applicable legal and/or regulatory and/or central bank
requirements. For these purposes, the ECU (as defined in Condition 8C) is
deemed to be a currency.
PARTLY PAID INSTRUMENTS
1.10 Instruments may be issued on a partly paid basis ("Partly Paid
Instruments") if so specified in the Pricing Supplement. The subscription
moneys therefor shall be paid in such number of instalments ("Partly Paid
Instalments") in such amounts, on such dates and in such manner as may be
specified in the Pricing Supplement. The first such instalment shall be
due and payable on the date of issue of the Instruments. For the purposes
of these Terms and Conditions, in respect of any Partly Paid Instrument,
("Paid Up Amount") means the aggregate amount of all Partly Paid
Instalments in respect thereof as shall have fallen due and been paid up in
full in accordance with the Terms and Conditions.
Not less than 14 days nor more than 31 days prior to the due date for
payment of any Partly Paid Instalment (other than the first such
Instalment) the Issuer shall publish a notice in accordance with Condition
14 stating the due date for payment thereof and stating that failure to pay
any such Partly Paid Instalment on or prior to such date will entitle the
Issuer to forfeit the Instruments with effect from such date ("Forfeiture
Date") as may be specified in such notice (not being less than 14 days
after the due date for payment of such Partly Paid Instalment), unless
payment of the relevant Partly Paid Instalment together with any interest
accrued thereon is paid prior to the Forfeiture Date. The Issuer shall
procure that any Partly Paid Instalments paid in respect of any Instruments
subsequent to the Forfeiture Date in respect thereof shall be returned
promptly to the persons entitled thereto. The Issuer shall not be liable
for any interest on any Partly Paid Instalment so returned.
Interest shall accrue on any Partly Paid Instalment which is not paid
on or prior to the due date for payment thereof at the Interest Rate (in
the case of non-interest bearing Instruments, at the rate applicable to
overdue payments) and shall be calculated in the same manner and on the
same basis as if it were interest accruing on the Instruments for the
period from and including the due date for payment of the relevant Partly
Paid Instalment up to but excluding the Forfeiture Date. For the purpose
of the accrual of interest, any payment of any Partly Paid Instalment made
after the due date for payment shall be treated as having been made on the
day preceding the Forfeiture Date (whether or not a Business Day as defined
in Condition 5.09).
Unless an Event of Default (or an event which with the giving of
notice, the lapse of time or the making or giving of any determination or
certification would constitute an Event of Default) shall have occurred and
be continuing, on the Forfeiture Date, the Issuer shall be entitled to
forfeit all of the Instruments in respect of which any Partly Paid
Instalment shall not have been duly paid, whereupon the Issuer shall be
entitled to retain all Partly Paid Instalments previously paid in respect
of such Instruments and shall be discharged from any obligation to repay
such amount or to pay interest thereon, or (where such Instruments are
represented by a Temporary Global Instrument or a Permanent Global
Instrument) to exchange any interests in such Instrument for interests in a
Permanent Global Instrument or to deliver Definitive Instruments in respect
thereof, but shall have no other rights against any person entitled to the
Instruments which have been so forfeited.
Without prejudice to the right of the Issuer to forfeit any
Instruments, for so long as any Partly Paid Instalment remains due but
unpaid, and except in the case where an Event of Default shall have
occurred and be continuing no interests in a Temporary Global Instrument
may be exchanged for interests in a Permanent Global Instrument.
Until such time as all the subscription moneys in respect of Partly Paid
Instruments shall have been paid in full and except in the case where an
Event of Default shall have occurred and be continuing or if any of
Euroclear or Cedel Bank or any other relevant clearing system (including
Sicovam) is closed for business for a continuous period of 14 days (other
than by reason of public holidays) or announces an intention to cease
business permanently or in fact does so, no interests in a Temporary Global
Instrument or a Permanent Global Instrument may be exchanged for Definitive
Instruments.
2. TITLE AND TRANSFER
2.01 Title to definitive Instruments, Receipts and Coupons passes by
delivery. References herein to the "Holders" of Instruments or of Receipts
or Coupons are to the bearers of such definitive Instruments or such
Receipts or Coupons. Each person who is shown in the records of Euroclear
or Cedel Bank or any other relevant clearing system (including Sicovam) as
entitled to a particular number of Instruments by way of an interest in a
Temporary Global Instrument or Permanent Global Instrument will be treated
by the Issuer, the Fiscal Agent and any Paying Agent as the holder of such
number of instruments, and the expression "Holders" shall be construed
accordingly.
2.02 The Holder of any Instrument or Coupon will (except as otherwise
required by applicable law or regulatory requirement) be treated as its
absolute owner for all purposes (whether or not it is overdue and
regardless of any notice of ownership, trust or any interest thereof or
therein, any writing thereon, or any theft or loss thereof) and no person
shall be liable for so treating such Holder.
3. STATUS OF THE INSTRUMENTS
3A STATUS - UNSUBORDINATED INSTRUMENTS
3A.01 This Condition 3A is applicable in relation to Instruments specified
in the relevant Pricing Supplement as being unsubordinated or not specified
as being subordinated.
3A.02 The Instruments constitute direct, unsubordinated and unsecured
indebtedness for borrowed money of the Issuer and rank pari passu without
any preference among themselves and at least pari passu in right of payment
with all other unsubordinated and unsecured indebtedness for borrowed money
of the Issuer, present and future (save for certain mandatory exceptions
provided by law).
3B STATUS - SUBORDINATED INSTRUMENTS
3B.01 This Condition 3B is applicable to Instruments issued by American
Express Bank Ltd. specified in the Pricing Supplement as being subordinated
("Subordinated Instruments"). Subordinated Instruments may also be issued
by any other Issuer, upon the terms and containing the subordination
provisions specified in the relevant Pricing Supplement. Subordinated
Instruments issued by American Express Bank Ltd. will be subject to such
other provisions, if any, as specified in the relevant Pricing Supplement.
3B.02 Subordinated Instruments and Additional Amounts (as defined below) of
the Issuer, if any, will be unsecured and subordinated in right of payment
to all present and future Senior Indebtedness (as defined below) and will
rank pari passu without any preference among themselves.
"Senior Indebtedness" means the Issuer's obligations to its
depositors (including uninsured depositors), its obligations under banker's
acceptances and letters of credit, its obligations in respect of customers'
credit balances, and its obligations to its other creditors, including any
obligations to any Federal Reserve Bank and the Federal Deposit Insurance
Corporation, whether now outstanding or hereafter incurred (except any
other obligations which rank on a parity with or junior to the Subordinated
Instruments). There will be no restrictions on the Issuer's ability to
incur additional Senior Indebtedness from time to time.
No payment pursuant to the Subordinated Instruments or related
Coupons may be made, and no holder of the Subordinated Instruments or
related Coupons shall be entitled to demand or receive any such payment,
unless all amounts of principal, premium, if any, and interest then due but
unpaid on all Senior Indebtedness of the Issuer have been paid in full or
duly provided for and, at the time of such payment or immediately after
giving effect thereto, there does not exist with respect to any such Senior
Indebtedness any event of default permitting the holders thereof to
accelerate the maturity thereof or any event which, with notice or lapse of
time or both, would become such an event of default. Upon any distribution
of the assets of the Issuer upon dissolution, winding-up, liquidation or
reorganisation, the holders of Senior Indebtedness of the Issuer will be
entitled to receive payment in full of principal, premium, if any, and
interest before any payment is made on the Subordinated Instruments. By
reason of such subordination, in the event of the insolvency of the Issuer,
holders of Senior Indebtedness might receive more, ratably, and holders of
the Subordinated Instruments might receive less, ratably, than the other
creditors of the Issuer. The Subordination of the Subordinated Instruments
will not prevent the occurrence of any event of default in respect of the
Subordinated Instruments. See Condition 7 for limitations on the rights of
acceleration.
4. NEGATIVE PLEDGE
4.01 This Condition 4 is applicable in relation to Instruments issued by
TRS, Credco or AEOCC only.
4.02 So long as any Instruments remain outstanding, the Issuer will not,
and will not permit any Material Subsidiary of the Issuer (as defined
below) to, create, assume, or suffer to exist any Lien securing any
indebtedness for borrowed money on any asset now owned or hereafter
acquired by it, except:
(a) Liens on real property to secure the payment of all or any part
of the purchase price of such real property or the cost of
construction thereof or the cost of improvements thereon or to
secure any debt incurred prior to, at the time of or after the
acquisition of such real property for the purpose of financing
all or any part of the purchase price thereof, the costs of
construction thereof or the costs of improvements thereto;
(b) Liens on property existing at the time of acquisition of such
property by the Issuer or any Material Subsidiary or to secure
the payment of all or any part of the purchase price of such
property or the cost of construction thereof or to secure any
debt incurred prior to, at the time of, or within 270 days
following the acquisition of such property for the purpose of
financing all or any part of the purchase price thereof, the
costs of construction thereof, or the costs of improvements to
such property, provided that such Lien attaches to such
property concurrently with or within 270 days after the
acquisition thereof by the Issuer or such Material Subsidiary
or, in the case of construction of or improvements to property,
within 270 days after the Issuer or such Material Subsidiary
incurs the debt secured by such Lien;
(c) Liens on any assets of a corporation existing at the time such
corporation is merged into or consolidated with the Issuer or a
Material Subsidiary or at the time of the sale, lease or other
disposition of the properties of such corporation to the Issuer
or a Material Subsidiary and not created in contemplation of
such event;
(d) Liens arising out of capitalized lease obligations;
(e) Liens on any assets of any corporation at the time such
corporation becomes a Material Subsidiary and not created in
contemplation of such event;
(f) Liens on any asset of the Issuer or any Material Subsidiary in
favor of the United States of America or any State thereof or
any department, agency or instrumentality or political
subdivision of the United States of America or any state
thereof, or in favor of any other country or any political
subdivision thereof, to secure partial, progress, advance or
other payments pursuant to any contract or statute;
(g) Liens in favor of any customer to secure partial, progress,
advance or other payments for goods produced for, or services
rendered to, such customer by the Issuer or any Material
Subsidiary in the ordinary course of business not exceeding the
amount of such payments;
(h) Liens for taxes, assessments and governmental charges or levies
not required to be paid at any time and Liens resulting from or
arising out of legal proceedings being contested in good faith
or not involving amounts claimed at any time aggregating in
excess of U.S. $20,000,000;
(i) Liens created by the Issuer or any Material Subsidiary as
security for indebtedness owing to American Express Company or
to a wholly-owned Subsidiary of American Express Company or
Liens arising from any Non-Recourse Receivables Transaction or
the sale or disposition of notes, accounts receivable or other
rights to receive payment by the Issuer or any Material
Subsidiary to American Express Company or to any wholly-owned
Subsidiary of American Express Company including without
limitation Liens granted by the Issuer or any Material
Subsidiary to secure its obligations in connection with the
collection of such notes, accounts receivable or other rights
to receive payment;
(j) Liens arising out of any extension, renewal or replacement of
any Lien permitted by clauses (a), (b), (c), (d) and (e) or any
debt secured thereby; provided that the principal amount of
debt secured thereby shall not be increased and that any such
extension, renewal or replacement Lien shall not extend to or
cover any property of the Issuer or any Material Subsidiary
other than the property specified in such clauses and
improvements and accessions thereto;
(k) Liens arising out of deposits with, or the giving of security
to, or as required by any governmental agency or any body
created or approved by law or governmental regulation, which
are required as a condition to the transaction of any business
(including the issuance of travelers' cheques or money orders
or the insuring of risk) or the obtaining or exercise of any
privilege or license or to enable the Issuer or any Material
Subsidiary to maintain self-insurance or to participate in any
arrangements established by law to cover any insurance risks or
in connection with workmen's compensation, unemployment
insurance, old age pensions, social security or similar
matters;
(l) Liens incurred by the Issuer or any Material Subsidiary in
connection with any transaction (including an agreement with
respect thereto) now existing or hereafter entered into which
is a rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency
swap transaction, cross-currency rate swap transaction or any
other similar transaction (including any option with respect to
any of these transactions) and any combination of these
transactions, parallel loans, back-to-back loans or other
similar arrangements or contracts, in each case entered into in
the ordinary course of business for the purpose of asset and
liability management;
(m) Liens (in addition to those Liens permitted under the other
clauses herein) on real property of the Issuer or any Material
Subsidiary so long as the aggregate amount of the debt secured
by such Liens does not exceed, in the case of property other
than the World Financial Center, 200 Vesey Street, New York,
New York (the "World Financial Center"), U.S.$300,000,000 in
the aggregate at any one time outstanding, and in the case of
the World Financial Center, the excess of (A) 80 percent of the
fair market value of the World Financial Center as determined
by an independent real estate appraiser of recognized standing
as of a date not more than two years prior to the date on which
any such Lien is created or incurred over (B) the outstanding
principal amount of any debt secured by Liens on the World
Financial Center permitted by clause (a) above;
(n) Liens on shares of capital stock of an acquired company
incurred in connection with the acquisition thereof until such
time as such acquired company shall become a wholly-owned
Subsidiary of the Issuer;
(o) Liens arising out of the financing by the Issuer or any
Material Subsidiary of the Issuer of accounts receivable or
other rights to receive payment arising in connection with the
business conducted by the Issuer or any Material Subsidiary of
the Issuer, including, without limitation, the business of
issuing American Express-R Cards;
(p) Liens arising by operation of law such as carriers', workmen's,
mechanics', materialmen's or other similar Liens;
(q) Liens on deposits of the Issuer or any Material Subsidiary with
banks so long as such deposits are made in connection with
loans made by such banks to American Express Company or any
wholly-owned Subsidiary of American Express, provided that the
amount of any such deposit does not exceed the amount of the
related loan and that the Issuer or such Material Subsidiary,
as the case may be, is by agreement with the bank fully
subrogated to the rights of the bank to receive payments under
such loan, in the event and to the extent such deposit is used
to reimburse the bank under such loan;
(r) Liens on cash, cash equivalents or securities issued or fully
guaranteed by the United States Government or any agency of the
United States Government owned by the Issuer or any Material
Subsidiary created to secure obligations owing by the Issuer or
any affiliate of the Issuer to American Express Centurion Bank,
or to any of its successors or to other Subsidiaries of TRS
that are subject to federal or state banking regulation, so
long as they are wholly-owned by TRS, or to any of their
wholly-owned Subsidiaries in connection with the card or
merchandise services business;
(s) Liens on any assets of a corporation or on the stock thereof
existing at the time such corporation is merged into or
consolidated with the Issuer or a Material Subsidiary or at the
time of the sale, lease or other disposition of the assets or
stock of such corporation to the Issuer or a Material
Subsidiary if created to secure payment of the purchase price
paid by the Issuer or such Material Subsidiary in connection
with such merger, consolidation, sale, lease or other
disposition;
(t) Other Liens (whether or not on real property) so long as the
aggregate of all debt secured thereby does not, at any time on
or after the date which is six months after the date of
incurrence of any such Lien, exceed in the aggregate at any one
time outstanding, 10 percent of consolidated shareholder's
equity of the Issuer and its consolidated Subsidiaries as of
the end of the previous fiscal year, as shown on the most
recent annual consolidated balance sheet of the Issuer and its
consolidated Subsidiaries.
4.03 For the purposes of these Terms and Conditions:
"Material Subsidiary" means at any time with respect to Credco and TRS, any
Subsidiary of such Issuer which, together with its consolidated
Subsidiaries, has consolidated assets at such time in excess of U.S.$l
billion. "Material Subsidiary" means at any time with respect to AEOCC,
any Subsidiary of such Issuer as to which the Issuer's and its other
Subsidiaries' investment in and advances to the Subsidiary exceed 10
percent of the total assets of the Issuer and its consolidated Subsidiaries
as of the most recently completed fiscal year or as to which the Issuer's
and its other Subsidiaries' proportionate share of the total assets (after
intercompany eliminations) of the Subsidiary exceeds 10 percent of the
total assets of the Issuer and its Subsidiaries consolidated as of the end
of the most recently completed fiscal year;
"Subsidiary" means as to any person any corporation or other entity of
which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such
person; and
"Non-Recourse Receivables Transaction" means a sale, transfer, pledge, or
assignment of accounts receivable in respect of which the transferee has
expressly agreed that it has no recourse against the transferor or any of
its affiliates.
5. INTEREST
Interest
5.01 Instruments may be interest-bearing or non interest-bearing, as
specified in the Pricing Supplement. Words and expressions appearing in
this Condition 5 and not otherwise defined herein or in the Pricing
Supplement shall have the meanings given to them in Condition 5.09.
INTEREST-BEARING INSTRUMENTS
5.02 Unless otherwise specified in the Pricing Supplement, Instruments
which are specified in the Pricing Supplement as being interest-bearing
shall bear interest from their Interest Commencement Date at the Interest
Rate payable in arrears on each Interest Payment Date.
FLOATING RATE INSTRUMENTS
5.03 If the Pricing Supplement specifies the Interest Rate applicable to
the Instruments as being Floating Rate it shall also specify which page
(the "Relevant Screen Page") on the Reuters Screen or Telerate or any other
information vending service shall be applicable. If such a page is so
specified, the Interest Rate applicable to the relevant Instruments for
each Interest Accrual Period shall be determined by the Calculation Agent
on the following basis:
(i) the Calculation Agent will determine the offered rate for
deposits (or, as the case may require, the arithmetic mean
(rounded, if necessary, to the nearest ten thousandth of a
percentage point, 0.00005 being rounded upwards) of the offered
rates for deposits) in the relevant currency for a period of
the duration of the relevant Interest Accrual Period on the
Relevant Screen Page as of the Relevant Time on the relevant
Interest Determination Date;
(ii) if, on any Interest Determination Date, no such rate for
deposits so appears (or, as the case may be, if fewer than two
such rates for deposits so appear) or if the Relevant Screen
Page is unavailable, the Calculation Agent will request
appropriate quotations and will determine the arithmetic mean
(rounded as aforesaid) of the rates at which deposits in the
relevant currency are offered by four major banks in the London
interbank market, selected by the Calculation Agent, at
approximately the Relevant Time on the Interest Determination
Date to prime banks in the London interbank market for a period
of the duration of the relevant Interest Accrual Period and in
an amount that is representative for a single transaction in
the relevant market at the relevant time;
(iii)if, on any Interest Determination Date, only two or three rates
are so quoted, the Calculation Agent will determine the
arithmetic mean (rounded as aforesaid) of the rates so quoted;
or
(iv) if fewer than two rates are so quoted, the Calculation Agent
will determine the arithmetic mean (rounded as aforesaid) of
the rates quoted by four major banks in the Relevant Financial
Centre (or, in the case of Instruments denominated in ECU, in
such financial centre or centres as the Calculation Agent may
select) selected by the Calculation Agent, at approximately
11.00 a.m. (Relevant Financial Centre time (or local time at
such other financial centre or centres as aforesaid)) on the
first day of the relevant Interest Accrual Period for loans in
the relevant currency to leading European banks for a period
for the duration of the relevant Interest Accrual Period and in
an amount that is representative for a single transaction in
the relevant market at the relevant time, and the Interest Rate
applicable to such Instruments during each Interest Accrual
Period will be the sum of the relevant margin (the "Relevant
Margin") specified in the Pricing Supplement and the rate (or,
as the case may be, the arithmetic mean (rounded as aforesaid)
of the rates) so determined provided, however, that, if the
Calculation Agent is unable to determine a rate (or, as the
case may be, an arithmetic mean of rates) in accordance with
the above provisions in relation to any Interest Accrual
Period, the Interest Rate applicable to such Instruments during
such Interest Accrual Period will be the sum of the Relevant
Margin and the rate (or, as the case may be, the arithmetic
mean (rounded as aforesaid) of the rates) determined in
relation to such Instruments in respect of the last preceding
Interest Accrual Period.
ISDA RATE INSTRUMENTS
5.04 If the Pricing Supplement specifies the Interest Rate applicable to
the Instruments as being ISDA Rate, each Instrument shall bear interest as
from such date, and at such rate or in such amounts, and such interest will
be payable on such dates, as would have applied (regardless of any event of
default or termination event or tax event thereunder) if the Issuer had
entered into an interest rate swap transaction with the Holder of such
Instrument under the terms of an agreement to which the ISDA Definitions
applied and under which:
- - the Fixed Rate Payer, Fixed Amount Payer, Fixed Price Payer, Floating
Rate Payer, Floating Amount Payer or, as the case may be, the
Floating Price Payer is the Issuer (as specified in the Pricing
Supplement);
- - the Effective Date is the Interest Commencement Date;
- - the Termination Date is the Maturity Date;
- - the Calculation Agent is the Calculation Agent as defined in
Condition 4.09;
- - the Calculation Periods are the Interest Accrual Periods;
- - the Period End Dates are the Interest Period End Dates;
- - the Payment Dates are the Interest Payment Dates;
- - the Reset Dates are the Interest Period End Dates;
- - the Calculation Amount is the principal amount of such Instrument;
- - the Day Count Fraction applicable to the calculation of any amount is
that specified in the Pricing Supplement or, if none is so specified,
as may be determined in accordance with the ISDA Definitions;
- - the Applicable Business Day Convention applicable to any date is that
specified in the Pricing Supplement or, if none is so specified, as
may be determined in accordance with the ISDA Definitions; and
- - the other terms are as specified in the Pricing Supplement.
MAXIMUM OR MINIMUM INTEREST RATE
5.05 If any Maximum or Minimum Interest Rate is specified in the Pricing
Supplement, then the Interest Rate shall in no event be greater than the
maximum or be less than the minimum so specified.
ACCRUAL OF INTEREST
5.06 Interest shall accrue on the Outstanding Principal Amount of each
Instrument during each Interest Accrual Period from the Interest
Commencement Date. Interest will cease to accrue from the due date for
redemption therefor (or, in the case of an Instalment Instrument, in
respect of each instalment of principal, on the due date for payment of the
relevant Instalment Amount) unless upon due presentation or surrender
thereof (if required), payment in full of the Redemption Amount (as defined
in Condition 6.10) or the relevant Instalment Amount is improperly withheld
or refused or default is otherwise made in the payment thereof in which
case interest shall continue to accrue on the principal amount in respect
of which payment has been improperly withheld or refused or default has
been made (as well after as before any demand or judgment) at the Interest
Rate then applicable or such other rate as may be specified for this
purpose in the Pricing Supplement until the date on which, upon due
presentation or surrender of the relevant Instrument (if required), the
relevant payment is made or, if earlier (except where presentation or
surrender of the relevant Instrument is not required as a precondition of
payment), the seventh day after the date on which, the Fiscal Agent having
received the funds required to make such payment, notice is given to the
Holders of the Instruments in accordance with Condition 14 that the Fiscal
Agent has received the required funds (except to the extent that there is
failure in the subsequent payment thereof to the relevant Holder).
INTEREST AMOUNT(S), CALCULATION AGENT AND REFERENCE BANKS
5.07 If a Calculation Agent is specified in the Pricing Supplement, the
Calculation Agent, as soon as practicable after the Relevant Time on each
Interest Determination Date (or such other time on such date as the
Calculation Agent may be required to calculate any Redemption Amount or
Instalment Amount, obtain any quote or make any determination or
calculation) will determine the Interest Rate and calculate the amount(s)
of interest payable (the "Interest Amount(s)") in respect of each
Denomination of the Instruments for the relevant Interest Accrual Period,
calculate the Redemption Amount or Instalment Amount, obtain such quote or
make such determination or calculation, as the case may be, and cause the
Interest Rate and the Interest Amounts for each Interest Period and the
relevant Interest Payment Date or, as the case may be, the Redemption
Amount or any Instalment Amount to be notified to the Fiscal Agent, the
Issuer, the Holders in accordance with Condition 14 and, if the Instruments
are listed on a stock exchange and the rules of such exchange so require,
such exchange as soon as possible after their determination or calculation
but in no event later than the fourth London Banking Day thereafter or, if
earlier in the case of notification to the stock exchange, the time
required by the relevant stock exchange. The Interest Amounts and the
Interest Payment Date so notified may subsequently be amended (or
appropriate alternative arrangements made by way of adjustment) without
notice in the event of an extension or shortening of an Interest Accrual
Period or the Interest Period. If the Instruments become due and payable
under Condition 7, the Interest Rate and the accrued interest payable in
respect of the Instruments shall nevertheless continue to be calculated as
previously in accordance with this Condition but no publication of the
Interest Rate or the Interest Amount so calculated need be made. The
determination of each Interest Rate, Interest Amount, Redemption Amount and
Instalment Amount, the obtaining of each quote and the making of each
determination or calculation by the Calculation Agent shall (in the absence
of manifest error) be final and binding upon the Issuer and the Holders and
neither the Calculation Agent nor any Reference Bank shall have any
liability to the Holders in respect of any determination, calculation,
quote or rate made or provided by it.
The Issuer will procure that there shall at all times be such
Reference Banks as may be required for the purpose of determining the
Interest Rate applicable to the Instruments and a Calculation Agent, if
provision is made for one in the Terms and Conditions.
If the Calculation Agent is incapable or unwilling to act as such or
if the Calculation Agent fails duly to establish the Interest Rate for any
Interest Accrual Period or to calculate the Interest Amounts or any other
requirements, the Issuer will appoint the London office of a leading bank
engaged in the London interbank market to act as such in its place. The
Calculation Agent may not resign its duties without a successor having been
appointed as aforesaid.
CALCULATIONS AND ADJUSTMENTS
5.08 The amount of interest payable in respect of any Instrument for any
period shall be calculated by multiplying the product of the Interest Rate
and the Outstanding Principal Amount by the Day Count Fraction, save that
(i) if the Pricing Supplement specifies a specific amount in respect of
such period, the amount of interest payable in respect of such Instrument
for such period will be equal to such specified amount and (ii) in the case
of Instruments where the Interest Rate is fixed, the interest shall be
calculated on the basis of a 360-day year consisting of 12 months of 30
days each and, in the case of an incomplete month, the number of days
elapsed. Where any Interest Period comprises two or more Interest Accrual
Periods, the amount of interest payable in respect of such Interest Period
will be the sum of the amounts of interest payable in respect of each of
those Interest Accrual Periods.
For the purposes of any calculations referred to in these Terms and
Conditions (unless otherwise specified in the Pricing Supplement), (a) all
percentages resulting from such calculations will be rounded, if necessary,
to the nearest one hundred-thousandth of a percentage point (with 0.000005
percent being rounded up to 0.00001 percent), (b) all United States dollar
amounts used in or resulting from such calculations will be rounded to the
nearest cent (with one half cent being rounded up), (c) all Japanese Yen
amounts used in or resulting from such calculations will be rounded
downwards to the next lower whole Japanese Yen amount, (d) all Italian Lira
and Spanish Peseta amounts will be rounded to the nearest Italian Lira or
Spanish Peseta (with one half Italian Lira or Spanish Peseta being rounded
up) and (e) all amounts denominated in any other currency used in or
resulting from such calculations will be rounded to the nearest two decimal
places in such currency, with 0.005 being rounded upwards.
DEFINITIONS
5.09 "Applicable Business Day Convention" means the "Business Day
Convention" which may be specified in the Pricing Supplement as applicable
to any date in respect of the Instruments unless the Pricing Supplement
specifies "No Adjustment" in relation to any date in which case such date
shall not be adjusted in accordance with any Business Day Convention.
Different Business Day Conventions may apply, or be specified in relation
to, the Interest Payment Dates, Interest Period End Dates and any other
date or dates in respect of any Instruments.
"Banking Day" means, in respect of any city, any day on which
commercial banks are open for business (including dealings in foreign
exchange and foreign currency deposits) in that city.
"Business Day" means a day (other than a Saturday or Sunday) on which
commercial banks and foreign exchange markets are open for business and
settle payments in the relevant currency in the Relevant Financial Centre
in respect of the relevant Instruments and/or in any other place or any
other days as may be specified in the Pricing Supplement or, in relation to
Instruments payable in ECU, which is an ECU Settlement Day (as defined in
the ISDA Definitions but disregarding, for this purpose, paragraph (b) of
such definition).
"Business Day Convention" means a convention for adjusting any date
if it would otherwise fall on a day that is not a Business Day and the
following Business Day Conventions, where specified in the Pricing
Supplement in relation to any date applicable to any Instruments, shall
have the following meanings:
(i) "Following Business Day Convention" means that such date shall
be postponed to the first following day that is a Business Day;
(ii) "Modified Following Business Day Convention" or "Modified
Business Day Convention" means that such date shall be
postponed to the first following day that is a Business Day
unless that day falls in the next calendar month in which case
that date will be the first preceding day that is a Business
Day;
(iii)"Preceding Business Day Convention" means that such date shall
be brought forward to the first preceding day that is a
Business Day; and
(iv) "FRN Convention" or "Eurodollar Convention" means that each
such date shall be the date which numerically corresponds to
the preceding such date in the calendar month which is the
number of months specified in the Pricing Supplement after the
calendar month in which the preceding such date occurred
Provided that:
(a) if there is no such numerically corresponding day in the
calendar month in which any such date should occur, then
such date will be the last day which is a Business Day in
that calendar month;
(b) if any such date would otherwise fall on a day which is
not a Business Day, then such date will be the first
following day which is a Business Day unless that day
falls in the next calendar month, in which case it will
be the first preceding day which is a Business Day; and
(c) if the preceding such date occurred on the last day in a
calendar month which was a Business Day, then all
subsequent such dates will be the last day which is a
Business Day in the calendar month which is the specified
number of months after the calendar month in which the
preceding such date occurred.
"Calculation Agent" means such agent as may be specified in the
Pricing Supplement as the Calculation Agent.
"Day Count Fraction" means, in respect of the calculation of an
amount for any period of time ("Calculation Period"), such day count
fraction as may be specified in the Pricing Supplement and:
(i) if "Actual/365" or "Actual/Actual" is so specified, means the
actual number of days in the Calculation Period divided by 365
(or, if any portion of the Calculation Period falls in a leap
year, the sum of (A) the actual number of days in that portion
of the Calculation Period falling in a leap year divided by 366
and (B) the actual number of days in that portion of the
Calculation Period falling in a non-leap year divided by 365);
(ii) if "Actual/360" is so specified, means the actual number of
days in the Calculation Period divided by 360; and
(iii)if "30E/360" or "Eurobond Basis" is so specified means, the
number of days in the Calculation Period divided by 360 (the
number of days to be calculated on the basis of a year of 360
days with 12-30-day months, without regard to the date of the
first day or last day of the Calculation Period unless, in the
case of the final Calculation Period, the date of final
maturity is the last day of the month of February, in which
case the month of February shall not be considered to be
lengthened to a 30-day month).
"Interest Accrual Period" means, in respect of an Interest Period,
each successive period beginning on and including an Interest Period End
Date and ending on but excluding the next succeeding Interest Period End
Date during that Interest Period provided always that the first Interest
Accrual Period shall commence on and include the Interest Commencement Date
and the final Interest Accrual Period shall end on but exclude the date of
final maturity.
"Interest Commencement Date" means the date of issue of the
Instruments (as specified in the Pricing Supplement) or such other date as
may be specified as such in the Pricing Supplement.
"Interest Determination Date" means, in respect of any Interest
Accrual Period, the date falling such number (if any) of Banking Days in
such city(ies) as may be specified in the Pricing Supplement prior to the
first day of such Interest Accrual Period, or if none is specified:
(i) in the case of Instruments denominated in Pounds Sterling, the
first day of such Interest Accrual Period; or
(ii) in any other case, the date falling two London Banking Days
prior to the first day of such Interest Accrual Period.
"Interest Payment Date" means the date or dates specified as such in,
or determined in accordance with the provisions of, the Pricing Supplement
and, if an Applicable Business Day Convention is specified in the Pricing
Supplement, as the same may be adjusted in accordance with the Applicable
Business Day Convention or if the Applicable Business Day Convention is the
FRN Convention and an interval of a number of calendar months is specified
in the Pricing Supplement as being the Interest Period, each of such dates
as may occur in accordance with the FRN Convention at such specified period
of calendar months following the date of issue of the Instruments (in the
case of the first Interest Payment Date) or the previous Interest Payment
Date (in any other case).
"Interest Period" means each successive period beginning on and
including an Interest Payment Date and ending on but excluding the next
succeeding Interest Payment Date provided always that the first Interest
Period shall commence on and include the Interest Commencement Date and the
final Interest Period shall end on but exclude the date of final maturity.
"Interest Period End Date" means the date or dates specified as such
in, or determined in accordance with the provisions of the Pricing
Supplement and, if an Applicable Business Day Convention is specified in
the Pricing Supplement, as the same may be adjusted in accordance with the
Applicable Business Day Convention or, if the Applicable Business Day
Convention is the FRN Convention and an interval of a number of calendar
months is specified in the Pricing Supplement as the Interest Accrual
Period, such dates as may occur in accordance with the FRN Convention at
such specified period of calendar months following the Interest
Commencement Date (in the case of the first Interest Period End Date) or
the previous Interest Period End Date (in any other case) or, if none of
the foregoing is specified in the Pricing Supplement, means the date or
each of the dates which correspond with the Interest Payment Date(s) in
respect of the Instruments.
"Interest Rate" means the rate or rates (expressed as a percentage
per annum) or amount or amounts (expressed as a price per unit of relevant
currency) of interest payable in respect of the Instruments specified in,
or calculated or determined in accordance with the provisions of, the
Pricing Supplement.
"ISDA Definitions" means the 1991 ISDA Definitions (as amended and
updated as at the date of issue of the first Tranche of the Instruments of
the relevant Series (as specified in the Pricing Supplement) as published
by the International Swaps and Derivatives Association, Inc. (formerly the
International Swap Dealers Association, Inc.)).
"Outstanding Principal Amount" means, in respect of an Instrument,
its principal amount less, in respect of any Instalment Instrument, any
principal amount on which interest shall have ceased to accrue in
accordance with Condition 5.06 or, in the case of a Partly Paid Instrument,
the Paid Up Amount of such Instrument or otherwise as indicated in the
Pricing Supplement.
"Reference Banks" means such banks as may be specified in the Pricing
Supplement as the Reference Banks or, if none are specified, "Reference
Banks" has the meaning given in the ISDA Definitions, mutatis mutandis.
"Relevant Financial Centre" means such financial centre or centres as
may be specified in relation to the relevant currency for the purposes of
the definition of "Business Day" in the ISDA Definitions.
"Relevant Time" means the time as of which any rate is to be
determined as specified in the Pricing Supplement or, if none is specified,
at which it is customary to determine such rate.
"Reuters Screen" means, when used in connection with a designated
page and any designated information, the display page so designated on the
Reuter Monitor Money Rates Service (or such other page as may replace that
page on that service for the purpose of displaying such information).
"Telerate" means, when used in connection with any designated page
and any designated information, the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on that
service, or such other service as may be nominated as the information
vendor, for the purpose of displaying such information).
NON-INTEREST BEARING INSTRUMENTS
5.10 If any Maturity Redemption Amount (as defined in Condition 6.01) in
respect of any Instrument which is non-interest bearing is not paid when
due, interest shall accrue on the overdue amount at a rate per annum
(expressed as a percentage per annum) equal to the Amortisation Yield
defined in, or determined in accordance with the provisions of, the Pricing
Supplement or at such other rate as may be specified for this purpose in
the Pricing Supplement until the date on which, upon due presentation or
surrender of the relevant Instrument (if required), the relevant payment is
made or, if earlier (except where presentation or surrender of the relevant
Instrument is not required as a precondition of payment), the seventh day
after the date on which, the Fiscal Agent having received the funds
required to make such payment, notice is given to the Holders of the
Instruments in accordance with Condition 14 that the Fiscal Agent has
received the required funds (except to the extent that there is failure in
the subsequent payment thereof to the relevant Holder). The amount of any
such interest shall be calculated in accordance with the provisions of
Condition 5.08 as if the Interest Rate was the Amortisation Yield, the
Outstanding Principal Amount was the overdue sum and the Day Count Fraction
was as specified for this purpose in the Pricing Supplement or, if not so
specified, 30E/360 (as defined in Condition 5.09).
6. REDEMPTION AND PURCHASE
REDEMPTION AT MATURITY
6.01 Unless previously redeemed, or purchased and cancelled of unless such
Instrument is stated in the Pricing Supplement as having no fixed maturity
date, each Instrument shall be redeemed at its maturity redemption amount
(the "Maturity Redemption Amount") (which shall be its Outstanding
Principal Amount or such other redemption amount as may be specified in or
determined in accordance with the Pricing Supplement) (or, in the case of
Instalment Instruments, in such number of instalments and in such amounts
("Instalment Amounts") as may be specified in, or determined in accordance
with the provisions of, the Pricing Supplement) on the date or dates (or,
in the case of Instruments which bear interest at a floating rate of
interest, on the date or dates upon which interest is payable) specified in
the Pricing Supplement.
EARLY REDEMPTION FOR TAXATION REASONS
6.02 (i) If in relation to any Series of Instruments as a result of any
actual or proposed change in or amendment to the laws (or any regulations
or rulings promulgated thereunder) of the Island of Jersey or of the United
States of America or any political subdivision or authority thereof or
agency therein or thereof having the power to tax, or any change or
proposed change or amendment in the application, interpretation,
administration or enforcement of such laws, regulations or rulings, which
becomes effective or issued on or after the date of issue of such
Instruments or any other date specified in the Pricing Supplement, (such
laws, regulations or rulings with respect to the United States being
hereinafter collectively referred to as "United States Law"), there is a
substantial likelihood that the Issuer will or may be required to pay any
Additional Amounts as provided in Condition 8, and such obligation cannot
be avoided by the Issuer taking reasonable measures available to it (which
measures in the good faith opinion of the Issuer will not have an adverse
impact on the Issuer's business) and such circumstances are evidenced by
the delivery by the Issuer to the Fiscal Agent of a certificate signed by
two authorized officers of the Issuer stating that the said circumstances
prevail and describing the facts leading thereto, the Issuer may, at its
option and having given no less than thirty nor more than sixty days'
notice (ending, in the case of Instruments which bear interest at a
floating rate, on a day upon which interest is payable) to the Holders of
the Instruments in accordance with Condition 14 (which notice shall be
irrevocable), redeem all (but not some only) of the outstanding Instruments
comprising the relevant Series at their early tax redemption amount (the
"Early Redemption Amount (Tax)") (which shall be their Outstanding
Principal Amount or, in the case of Instruments which are non-interest
bearing, their Amortized Face Amount (as defined in Condition 6.11) or such
other redemption amount as may be specified in, or determined in accordance
with the provisions of, the Pricing Supplement), together with accrued
interest (if any) therein, provided, however, that no such notice of
redemption may be given earlier than 90 days (or, in the case of
Instruments which bear interest at a floating rate a number of days which
is equal to the aggregate of the number of days falling within the then
current interest period applicable to the Instruments plus 60 days) prior
to the earliest date on which the Issuer would be obliged to pay such
Additional Amounts were a payment in respect of the Instruments then due.
The Issuer may not exercise such option in respect of any Instrument
which is the subject of the prior exercise by the Holder thereof of its
option to require the redemption of such Instrument under Condition 6.06.
(ii) (A) If, as a result of a change in current or future United
States Law, the Issuer shall determine that any payment
by the Issuer or any of the Paying Agents in respect of
any Instrument or Coupon would be subject to any
certification, documentation, identification, information
or other reporting requirement of any kind the effect of
which requirement is the disclosure to the Issuer, any
Paying Agent or any governmental authority of the
nationality, residence or identity of a beneficial owner
of such Instrument or Coupon who is, for United States
federal income tax purposes, a foreign corporation, a
non-resident alien individual or a non-resident alien
fiduciary of a foreign estate or trust or a foreign
partnership to the extent one or more partners is, as to
the United States, a foreign corporation, a non-resident
alien individual or a non-resident alien fiduciary of a
foreign estate or trust (a "United States Alien") (other
than a requirement (a) that would not be applicable to a
payment by the Issuer or any one of the Paying Agents to
a custodian, nominee or other agent of the beneficial
owner, or (b) that can be satisfied by such custodian,
nominee or other agent certifying to the effect that the
beneficial owner is a United States Alien, provided that,
in any case referred to in clauses (a) or (b) payment by
the custodian, nominee or agent to the beneficial owner
is not otherwise subject to any such requirement, or (c)
that would not be applicable to a payment by at least one
other Paying Agent, or (d) that would be applicable only
to a payment by a custodian, nominee or other agent of
the beneficial owner to the beneficial owner), the
Issuer, at its option, either (x) shall redeem all (but
not some only) of the outstanding Instruments at any
time, or on a day upon which interest is payable in the
case of Instruments which bear interest at a floating
rate or (y) if the conditions of paragraph (D) below are
satisfied, shall pay the Additional Amounts specified in
paragraph (D) below but provided that if any Holder fails
to present its Instrument, together with all appurtenant
Coupons, if any, for redemption as specified in clause
(x) above, such Holder will not be entitled to any
Additional Amounts.
(B) The Issuer shall select its option pursuant to paragraph
(A) above as soon as practicable and publish prompt
notice thereof (the "Determination Notice") stating (x)
the effective date of such certification, documentation,
identification, information or other reporting
requirement, (y) whether the Issuer will redeem the
Instruments or, if the conditions of paragraph (D) below
are satisfied, pay the Additional Amounts specified in
paragraph (D) below, and (z) (if applicable) the last
date by which the redemption of the Instruments must take
place, as provided below.
If the Instruments are to be redeemed pursuant to this
paragraph (B), such redemption shall take place on such
date, not later than one year after the publication of
the Determination Notice, as the Issuer, subject as
provided above and in paragraph (C) below, shall elect by
notice to the Fiscal Agent at least 45 days before the
date fixed for redemption. Notice of such redemption of
the Instruments will be given to the Holders of the
Instruments no less than thirty nor more than sixty days'
notice prior to the date fixed for redemption by
publication in accordance with Condition 14.
(C) Notwithstanding the foregoing, the Issuer shall not be
obliged so to redeem the Instruments if the Issuer shall
subsequently determine not fewer than 30 days prior to
the date fixed for redemption that subsequent payments on
the Instruments and Coupons would not be subject to any
such certification, documentation, identification,
information or other reporting requirement, in which case
the Issuer shall give prompt notice of such subsequent
determination by publication in accordance with Condition
14 and any earlier redemption notice shall be revoked and
of no further effect.
(D) Notwithstanding the foregoing, and as long as such
certification, documentation, identification, information
or other reporting requirement would be fully satisfied
by payment of backup withholding tax or similar charge,
the Issuer may elect to pay such Additional Amounts as
may be necessary so that every net payment following the
effective date of such requirement by the Issuer or any
of the Paying Agents in respect of any Instrument or any
Coupon of which the beneficial owner is a United States
Alien (but without any requirement that the nationality,
residence or identity, other than status as a United
States Alien, of such beneficial owner be disclosed to
the Issuer, any Paying Agent or any governmental
authority), after deduction or withholding for or on
account of such backup withholding tax or similar charge
will not be less than the amount provided for in such
Instrument or Coupon to be then due and payable, provided
that the backup withholding tax or similar charge is not
a charge which:
(i) would not be applicable in the circumstances set
forth in the parenthetical clause of (A) above;
(ii) is imposed as a result of the fact that the Company
or any paying agent has actual knowledge that the
beneficial owner of such Note or Coupon is a U.S.
person; or
(iii)is imposed as a result of presentation of such Note
or Coupon for payment more than 10 days after the
date on which such payment becomes due and payable
or on which payment thereof is duty provided for,
whichever occurs later.
If the Issuer elects to pay Additional Amounts pursuant
to this paragraph, and the Issuer is obligated to pay
such Additional Amounts, the Issuer shall, on giving not
fewer than 30 days prior notice in accordance with
Condition 14, have the right to redeem all (but not some
only) of the outstanding Instruments at any time. If the
Issuer elects to pay Additional Amounts pursuant to this
paragraph and the condition specified in the first
sentence of this paragraph should no longer be satisfied,
then the Issuer shall redeem the Instruments pursuant to
the provisions of paragraph (B) but subject to paragraph
(C).
(E) Instruments redeemed pursuant to this Condition 6.02(ii),
will be redeemed at their Early Redemption Amount (Tax)
referred to in Condition 6.02(i), together with accrued
interest (if any) to but excluding the date fixed for
redemption.
OPTIONAL EARLY REDEMPTION (CALL)
6.03 If this Condition 6.03 is specified in the Pricing Supplement as
being applicable, then the Issuer may, having given the appropriate notice
and subject to such conditions as may be specified in the Pricing
Supplement, redeem all (but not, unless and to the extent that the Pricing
Supplement specifies otherwise, some only) of the Instruments of the
relevant Series at their call early redemption amount (the "Early
Redemption Amount (Call)") (which shall be their Outstanding Principal
Amount or, in the case of Instruments which are non-interest bearing, their
Amortised Face Amount (as defined in Condition 6.11) or such other
redemption amount as may be specified in, or determined in accordance with
the provisions of, the Pricing Supplement), together with accrued and
unpaid interest (if any) thereon on the date specified in such notice to
but excluding the date fixed for redemption.
The Issuer may not exercise such option in respect of any Instrument
which is the subject of the prior exercise by the Holder thereof of its
option to require the redemption of such Instrument under Condition 6.06.
6.04 The appropriate notice referred to in Condition 6.03 is a notice
given by the Issuer to the Holders of the Instruments of the relevant
Series in accordance with Condition 14, which notice shall be irrevocable
and shall specify:
- - the Series of Instruments subject to redemption;
- - whether such Series is to be redeemed in whole or in part only and,
if in part only, the aggregate principal amount of and (except in the
case of a Temporary Global Instrument or Permanent Global Instrument)
the serial numbers of the Instruments of the relevant Series which
are to be redeemed;
- - the due date for such redemption, which shall be not less than thirty
days nor more than sixty days after the date on which such notice is
given and which shall be such date or the next of such dates ("Call
Option Date(s)") or a day failing within such period ("Call Option
Period"), as may be specified in the Pricing Supplement and which is,
in the case of Instruments which bear interest at a floating rate, a
date upon which interest is payable; and
- - the Early Redemption Amount (Call) at which such Instruments are to
be redeemed.
PARTIAL REDEMPTION
6.05 If the Instruments of a Series are to be redeemed in part only on any
date in accordance with Condition 6.03:
- - in the case of Instruments other than a Temporary Global Instrument
or Permanent Global Instrument, the Instruments to be redeemed shall
be drawn by lot in such European city as the Fiscal Agent may
specify, or identified in such other manner or in such other place as
the Fiscal Agent may approve and deem appropriate and fair;
- - in the case of a Temporary Global Instrument or a Permanent Global
Instrument, the Instruments to be redeemed shall be selected in
accordance with the rules of Euroclear and/or Cedel Bank and/or any
other relevant clearing system;
and subject always to compliance with all applicable laws and the
requirements of any stock exchange on which the relevant Instruments may be
listed.
OPTIONAL EARLY REDEMPTION (PUT)
6.06 If this Condition 6.06 is specified in the Pricing Supplement as
being applicable, then the Issuer shall, upon the exercise of the relevant
option by the Holder of any Instrument of the relevant Series, and subject
to such conditions, if any, as may be specified in the Pricing Supplement
redeem such Instrument on the date specified in the relevant Put Notice (as
defined below) at its put early redemption amount (the "Early Redemption
Amount (Put)") (which shall be its Outstanding Principal Amount or, if such
Instrument is non-interest bearing, its Amortised Face Amount (as defined
in Condition 6.11) or such other redemption amount as may be specified in,
or determined in accordance with the provisions of, the Pricing
Supplement), together with accrued and unpaid interest (if any) thereon to
but excluding the date fixed for redemption. In order to exercise such
option, the Holder must, not less than forty-five days before the date on
which such redemption is required to be made as specified in the Put Notice
(which date shall be such date or the next of the dates ("Put Date(s)") or
a day falling within such period ("Put Period") as may be specified in the
Pricing Supplement), deposit the relevant Instrument (together, in the case
of an interest-bearing Definitive Instrument, with all unmatured Coupons
appertaining thereto other than any Coupon maturing on or before the date
of redemption (failing which the provisions of Condition 9A.06 apply))
during normal business hours at the specified office of any Paying Agent
together with a duty completed early redemption notice ("Put Notice") in
the form which is available from the specified office of any of the Paying
Agents specifying, in the case of a Temporary Global Instrument or
Permanent Global Instrument, the aggregate principal amount in respect of
which such option is exercised (which must be the minimum denomination
specified in the Pricing Supplement or an integral multiple thereof). No
Instrument so deposited and option exercised may be withdrawn (except as
provided in the Issue and Paying Agency Agreement).
The holder of an Instrument may not exercise such option in respect
of any Instrument which is the subject of an exercise by the Issuer of its
option to redeem such Instrument under either Condition 6.02 or 6.03.
PURCHASE OF INSTRUMENTS
6.07 Subject to any conditions specified in the Pricing Supplement with
respect to Subordinated Instruments, the Issuer or any of its subsidiaries
may at any time purchase Instruments in the open market or otherwise and at
any price provided that all unmatured Receipts and Coupons appertaining
thereto are purchased therewith.
CANCELLATION OF REDEEMED AND PURCHASED INSTRUMENTS
6.08 All unmatured Instruments and Coupons redeemed or purchased otherwise
than in the ordinary course of business of dealing in securities or as a
nominee in accordance with this Condition 6 will be cancelled forthwith and
may not be reissued or resold.
FURTHER PROVISIONS APPLICABLE TO REDEMPTION AMOUNT AND INSTALMENT AMOUNTS
6.09 The provisions of Condition 5.07 and the last paragraph of Condition
5.08 shall apply to any determination or calculation of the Redemption
Amount or any Instalment Amount required by the Pricing Supplement to be
made by the Calculation Agent (as defined in Condition 5.09).
6.10 References herein to "Redemption Amount" shalt mean, as appropriate,
the Maturity Redemption Amount, the final Instalment Amount, Early
Redemption Amount (Tax), Early Redemption Amount (Call), Early Redemption
Amount (Put) and Early Termination Amount or such other amount in the
nature of a redemption amount as may be specified in, or determined in
accordance with the provisions of, the Pricing Supplement.
6.11 In the case of any Instrument which is non-interest bearing, the
"Amortised Face Amount" shall be an amount equal to the sum of:
(i) the Issue Price specified in the Pricing Supplement; and
(ii) the product of the Amortisation Yield being applied to the
Issue Price from (and including) the Issue Date specified in
the Pricing Supplement to (but excluding) the date fixed for
redemption or (as the case may be) the date upon which such
Instrument becomes due and repayable.
Were such calculation is to be made for a period which is not a
whole number of years, the calculation in respect of the period
of less than a full year shall be made on the basis of the Day
Count Fraction (as defined in Condition 5.09) specified in the
Pricing Supplement for the purposes of this Condition 6.11.
6.12 If any Redemption Amount (other than the Maturity Redemption Amount)
is improperly withheld or refused or default is otherwise made in the
payment thereof, the Amortised Face Amount shall be calculated as provided
in Condition 6.11 but as if references in subparagraph (ii) to the date
fixed for redemption or the date upon which such Instrument becomes due and
repayable were replaced by references to the earlier of:
(i) the date on which, upon due presentation or surrender of the
relevant Instrument (if required), the relevant payment is
made; and
(ii) (except where presentation or surrender of the relevant
Instrument is not required as a precondition of payment), the
seventh day after the date on which, the Fiscal Agent having
received the funds required to make such payment, notice is
given to the Holders of the Instruments in accordance with
Condition 14 of that circumstance (except to the extent that
there is a failure in the subsequent payment thereof to the
relevant Holder).
7. EVENTS OF DEFAULT
UNSUBORDINATED INSTRUMENTS
7.01 The following events or circumstances as modified by, and/or such
other events as may be specified in, the Pricing Supplement shall be Events
of Default (each an "Event of Default") in relation to the Instruments of
any Series of Unsubordinated Instruments, namely:
(i) the Issuer fails to pay any amount of principal in respect of,
or premium, if any, on the Instruments of the relevant Series
or any of them on the due date for payment thereof, and such
failure to pay principal or premium continues unremedied for a
period of 2 days, or fails to pay any amount of interest in
respect of the Instruments of the relevant Series or any of
them on the due date for payment thereof, and such failure to
pay interest continues unremedied for a period of 30 days; or
(ii) the Issuer defaults in the performance or observance of any
other of its material obligations under the Instruments of the
relevant Series or the Issue and Paying Agency Agreement and
such default remains unremedied for 60 days after written
notice requiring such default to be remedied has been delivered
to the Issuer at the specified office of the Fiscal Agent by
the Holders of at least 25 per cent. in aggregate principal
amount of the Instruments of such Series then outstanding; or
(iii)default in the payment when due and continuance of such default
beyond any applicable grace period thereto by the Issuer with
respect to any principal of, premium or interest on any debt
outstanding in principal amount of U.S. $25,000,000 or more in
the aggregate (exclusive of the Instruments) of the Issuer or
any Material Subsidiary (as defined in Condition 4); or the
occurrence, and continuance beyond any applicable grace period
thereto, of any other event or condition under any agreement or
instrument relating to such debt, if any, specified in such
agreement or instrument, if the effect of such event or
condition is to cause the acceleration of the maturity of such
debt; or any such debt shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or an
offer to prepay, redeem, purchase or defease such debt shalt be
required to be made, in each case prior to the stated maturity
of such debt; and written notice declaring any event described
in this paragraph (iii) to be an Event of Default has been
delivered to the Issuer at the specified office of the Fiscal
Agent by the Holders of at least 25 per cent. in aggregate
principal amount of the Instruments of the relevant Series then
outstanding; or
(iv) the entry by a court or a governmental authority having
jurisdiction in the premises of (A) a decree or order for
relief in respect of the Issuer in an involuntary case or
proceeding under any applicable U.S. federal or state
bankruptcy, insolvency, reorganisation or other similar law, or
any similar applicable law of Jersey (including a declaration
of en desastre in the case of AEOCC), or (B) a decree or order
adjudging the Issuer a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganisation, arrangement,
adjustment or composition of or in respect of the Issuer, under
any applicable U.S. federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Issuer or
substantially all of its assets, or ordering the winding up or
liquidation of the affairs of the Issuer, and the continuance
of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive
days; or
(v) the commencement by the Issuer of a voluntary case or
proceeding under any applicable U.S. federal or state
bankruptcy, insolvency, reorganisation or other similar law, or
any similar applicable law of Jersey (including a declaration
of en desastre in the case of AEOCC) or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in
respect of the Issuer in an involuntary case or proceeding
under any applicable U.S. federal or state bankruptcy,
insolvency, reorganisation or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding
against it, or the filing by it of a petition or answer or
consent seeking reorganisation or relief under any applicable
U.S. federal or state bankruptcy, insolvency, reorganisation or
other similar law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Issuer or
substantially all of its assets, or to an order for the winding
up or liquidation of the affairs of the Issuer.
SUBORDINATED INSTRUMENTS
7.02 The following events or circumstances as modified by, and/or such
other events as may be specified in, the Pricing Supplement shalt be Events
of Default (each an "Event of Default") in relation to the Instruments of
any Series of Subordinated Instruments, namely:
(i) the entry by a court having jurisdiction in the premises of (a)
a decree or order for relief in respect of the Issuer in an
involuntary case or proceeding under any applicable U.S.
federal or state bankruptcy, insolvency, reorganisation or
other similar law or (b) a decree or order adjudging the Issuer
a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganisation, arrangement, adjustment or
composition of or in respect of the Issuer under any applicable
U.S. federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar
official of the Issuer or of any substantial part of its
property, or ordering the liquidation of its affairs, and the
continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
consecutive days; or
(ii) the commencement by the Issuer or a voluntary case or
proceedings under any applicable U.S. federal or state
bankruptcy, insolvency, reorganisation or other similar law or
of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or
order for relief in respect of it in an involuntary case or
proceeding under any applicable U.S. federal or state
bankruptcy, insolvency, reorganisation or other similar law or
to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganisation or relief under any
applicable U.S. federal or state law, or the consent by it to
the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Issuer or of
any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they
become due, or the taking or corporate action by the Issuer in
furthermore of any such action.
7.03 The Issuer may, without the consent of the holders of the
Instruments, consolidate with, merge into, or sell, convey, transfer or
lease its properties and assets as an entirety, or substantially as an
entirety, to any person provided that the successor assumes all obligations
of the Issuer under the Instruments, the Coupons and the Issue and Paying
Agency Agreement.
7.04 If any Event of Default shalt occur in relation to any Series of
Instruments, any Holder of an Instrument of the relevant Series may, by
written notice to the Issuer, at the specified office of the Fiscal Agent,
declare that such Instrument and (if the Instrument is interest-bearing)
all interest then accrued but unpaid on such Instrument shall be due and
payable upon the date such written notice thereof is received by the Fiscal
Agent, unless prior to such date all Events of Default in respect of all
the Instruments of the relevant Series have been cured or waived, whereupon
the same shall become immediately due and payable at its early termination
amount (the "Early Termination Amount") (which shall be its Outstanding
Principal Amount or, if such Instrument is non-interest bearing, its
Amortised Face Amount (as defined in Condition 6.11) or such other
redemption amount as may be specified in, or determined in accordance with
the provisions of, the Pricing Supplement), together with all interest (if
any) accrued and unpaid thereon to but excluding the date of payment,
without presentment, demand, protest or other notice of any kind, all of
which the Issuer expressly waives anything contained in such Instrument to
the contrary notwithstanding.
WITH RESPECT TO THE INSTRUMENTS OF ANY SERIES OF SUBORDINATED INSTRUMENTS,
THERE IS NO RIGHT OF ACCELERATION OF THE PAYMENT OF PRINCIPAL IN THE CASE
OF A DEFAULT IN THE PAYMENT OF PRINCIPAL, INTEREST, ADDITIONAL INTEREST, IF
ANY, AND PREMIUM, IF ANY, ON THE INSTRUMENTS OR IN THE PERFORMANCE OF ANY
OTHER COVENANT OF THE ISSUER IN THE INSTRUMENTS OR THE ISSUE AND PAYING
AGENCY AGREEMENT.
8. TAXATION
8.01 All amounts payable (whether in respect of principal, interest or
otherwise) in respect of the Instruments will be made free and clear of and
without withholding or deduction for or on account of any present or future
taxes, duties, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of the United States or, in the case of
Instruments issued by AEOCC, the Island of Jersey or, in either case, any
political subdivision thereof or any authority or agency therein or thereof
having power to tax, unless the withholding or deduction of such taxes,
duties, assessments or governmental charges is required by law. In that
event, the Issuer will pay such additional amounts (the "Additional
Amounts") as may be necessary in order that the net amounts receivable by
the Holder after such withholding or deduction for or on account of such
payment shall equal the respective amounts which would have been receivable
by such Holder in the absence of such withholding or deduction; except that
no such Additional Amounts shall be payable in relation to any payment in
respect of any Instrument or Coupon for or on account of:
(i) any tax, duty, assessment or other governmental charge which
would not have been imposed but for (x) the existence of any
present or former connection between such Holder (or between a
fiduciary, settlor, beneficiary of, member or shareholder of,
or possessor of a power over, such Holder, if such Holder is an
estate, trust, partnership or corporation) and the United
States or, as applicable, the Island of Jersey, including,
without limitation, such Holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having
been a citizen or resident or treated as a resident thereof or
being or having been engaged in trade or business or present
therein, or having or having had a permanent establishment
therein, or (y) the presentation of an Instrument or Coupon for
payment on a date more than 10 days after the Relevant Date (as
defined below); or
(ii) any estate, inheritance, gift, sales, transfer, excise,
personal property or similar tax, assessment or other
governmental charge; or
(iii)any tax, duty, assessment or other governmental charge imposed
by reason of such Holder's past or present status as a passive
foreign investment company, a controlled foreign corporation, a
personal holding company or foreign personal holding company
with respect to the United States as a private foundation or
other tax exempt organisation for United States federal income
tax purposes, or as a corporation which accumulates earnings to
avoid United States federal income tax; or
(iv) any tax, duty, assessment or other governmental charge which is
payable otherwise than by withholding from payment of principal
of or interest on any Instrument or Coupon; of
(v) any tax, duty, assessment or other governmental charge required
to be withheld by any paying agent appointed by the Issuer from
any payment of principal of or interest on any Instrument or
Coupon if such payment can be made without withholding by any
other paying agent appointed by the Issuer; or
(vi) any tax, duty, assessment or other governmental charge that
would not have been so imposed but for (x) failure of a
beneficial owner of any Instrument or Coupon appertaining
thereto to provide or cause to be provided such certification,
information or documentation that the Issuer may require, on or
before the date that the Issuer may require, in accordance with
income tax laws and regulations of the United States or any
political subdivision or taxing authority thereof or therein,
to establish the status of such Holder as a United States Alien
or otherwise to establish entitlement to an exemption from such
tax, assessment or charge in respect of such payment or (y) a
determination by a taxing authority or a court of competent
jurisdiction in the United States that a certification or other
proof provided to establish an exemption from such tax,
assessment or charge is not acceptable; or
(vii)any tax, duty, assessment or other governmental charge imposed
on (A) such Holder that (x) is the actual or constructive owner
of 10 percent or more of the total combined voting power of all
shares of the Issuer entitled to vote as determined under
section 871(h)(3)(B) of the U.S. Internal Revenue Code of 1986,
as amended (the "Code"), (y) is not a bank for United States
tax purposes whose receipt of interest under the Instrument or
Coupon is described in Section 881(c)(3)(A) of the Code, or (z)
is a controlled foreign corporation for United States tax
purposes that is related to the Issuer through stock ownership;
or (B) the interest that is contingent interest described in
section 871(h) (4) of the Code, related primarily to interest
based on or determined by reference to income, profits, cash
flow and other comparable attributes of the obligor or a party
related to the obligor; or
(viii)any amount payable under any present backup withholding
provision of the United States tax laws or regulations
thereunder; or
(ix) any combination of items (i) through (viii);
nor shall any Additional Amounts be paid to any Holder who is a
fiduciary or partnership or other than the sole beneficial
owner of such Instrument or Coupon to the extent that a
beneficiary or settlor with respect to such fiduciary, or a
member of such partnership or a beneficial owner thereof would
not have been entitled to the payment of such Additional
Amounts had such beneficiary, settlor, member or beneficial
owner been the Holder of such Instrument or Coupon.
8.02 For the purposes of these Terms and Conditions, the "Relevant Date"
means, in respect of any payment, the date on which such payment first
becomes due and payable, but if the full amount of the moneys payable has
not been received by the Fiscal Agent on or prior to such due date, it
means the first date on which, the full amount of such moneys having been
so received and being available for payment to Holders, notice to that
effect shall have been duly given to the Holders of the Instruments of the
relevant Series in accordance with Condition 14.
8.03 If the Issuer becomes subject generally at any time to any taxing
jurisdiction other than or in addition to the United States, or, in the
case of AEOCC, the Island of Jersey and where the Issuer is AEB acting
through a branch or subsidiary located in a jurisdiction other than the
United States, references in Condition 6.02 and Condition 8.01 to the
United States shall be read and construed as references to the United
States and/or to such other jurisdiction(s).
8.04 The Issuer shall pay all stamp and other duties, if any, which may be
imposed by the United Kingdom or any political subdivision thereof or
taxing authority therein with respect to the execution and delivery of the
Issue and Paying Agency Agreement or the issuance of any Instruments or
Coupons.
8.05 Any reference in these Terms and Conditions to "principal" and/or
"interest" in respect of the Instruments shall be deemed also to refer to
any additional amounts which may be payable under this Condition 8. Unless
the context otherwise requires, any reference in these Terms and Conditions
to "principal" shall include any premium payable in respect of an
Instrument, any Instalment Amount or Redemption Amount and any other
amounts in the nature of principal payable pursuant to these Terms and
Conditions and "interest" shall include all amounts payable pursuant to
Condition 5 and any other amounts in the nature of interest payable
pursuant to these Terms and Conditions.
9. PAYMENTS
9A.01 Payment of amounts (other than interest) due in respect of
Instruments will be made against presentation and (save in the case of
partial payment or payment of an Instalment Amount (other than the final
Instalment Amount)) surrender of the relevant Instruments at the specified
office of any of the Paying Agents.
Payment of Instalment Amounts (other than the final Instalment
Amount) in respect of an Instalment Instrument which is a Definitive
Instrument with Receipts will be made against presentation of the
Instrument together with the relevant Receipt and surrender of such
Receipt.
The Receipts are not and shall not in any circumstances be deemed to
be documents of title and if separated from the Instrument to which they
relate will not represent any obligation of the Issuer. Accordingly, the
presentation of an Instrument without the relative Receipt or the
presentation of a Receipt without the Instrument to which it appertains
shall not entitle the Holder to any payment in respect of the relevant
Instalment Amount.
9A.02 Payment of amounts in respect of interest on Instruments will be
made:
(i) in the case of a Temporary Global Instrument or Permanent
Global Instrument, against presentation of the relevant
Temporary Global Instrument or Permanent Global Instrument at
the specified office of any of the Paying Agents outside
(unless Condition 9A.03 applies) the United States and, in the
case of a Temporary Global Instrument, upon due certification
as required therein;
(ii) in the case of Definitive Instruments without Coupons attached
thereto at the time of their initial delivery, against
presentation of the relevant Definitive Instruments at the
specified office of any of the Paying Agents outside (unless
Condition 9A.03 applies) the United States; and
(iii)in the case of Definitive Instruments delivered with Coupons
attached thereto at the time of their initial delivery, against
surrender of the relevant Coupons or, in the case of interest
due otherwise than on a scheduled date for the payment of
interest, against presentation of the relevant Definitive
Instruments, in either case at the specified office of any of
the Paying Agents outside (unless Condition 9A.03 applies) the
United States.
9A.03 Payments of amounts due in respect of interest on the Instruments and
exchanges of Talons for Coupon sheets in accordance with Condition 9A.06
will not be made at the specified office of any Paying Agent in the United
States (as defined in the United States Internal Revenue Code and
Regulations thereunder) unless (a) payment in full of amounts due in
respect of interest on such Instruments when due or, as the case may be,
the exchange of Talons at all the specified offices of the Paying Agents
outside the United States is illegal or effectively precluded by exchange
controls or other similar restrictions and (b) such payment or exchange is
permitted by applicable United States law. If paragraphs (a) and (b) of
the previous sentence apply, the Issuer shall forthwith appoint a further
Paying Agent with a specified office in New York City.
9A.04 If the due date for payment of any amount due in respect of any
Instrument is not a Relevant Financial Centre Day (as defined in Condition
9B.02), then the Holder thereof will not be entitled to payment thereof
until the next day which is such a day, and from such day and thereafter
will be entitled to receive payment by cheque on any local banking day, and
will be entitled to payment by transfer to a designated account on any day
which is a local banking day, a Relevant Financial Centre Day and a day on
which commercial banks and foreign exchange markets settle payments in the
relevant currency in the place where the relevant designated account is
located and no further payment on account of interest or otherwise shall be
due in respect of such postponed payment unless there is a subsequent
failure to pay in accordance with these Terms and Conditions in which event
interest shall continue to accrue as provided in Condition 5.06 or, if
appropriate, Condition 5.10.
9A.05 Each Definitive Instrument initially delivered with Coupons, Talons
or Receipts attached thereto should be presented and, save in the case of
partial payment of the Redemption Amount, surrendered for final redemption
together with all unmatured Receipts, Coupons and Talons relating thereto,
failing which:
(i) if the Pricing Supplement specifies that this paragraph (i) of
Condition 9A.05 is applicable (and, in the absence of
specification, this paragraph (i) shall apply to Definitive
Instruments which bear interest at a fixed rate or rates or in
fixed amounts) and subject as hereinafter provided, the amount
of any missing unmatured Coupons (or, in the case of a payment
not being made in full, that portion of the amount of such
missing Coupon which the Redemption Amount paid bears to the
total Redemption Amount due) (excluding, for this purpose, but
without prejudice to paragraph (iii) below, Talons) will be
deducted from the amount otherwise payable on such final
redemption, the amount so deducted being payable against
surrender of the relevant Coupon at the specified office of any
of the Paying Agents at any time within ten years of the
Relevant Date applicable to payment of such Redemption Amount;
(ii) if the Pricing Supplement specifies that this paragraph (ii) of
Condition 9A.05 is applicable (and, in the absence of
specification, this paragraph (ii) shall apply to Instruments
which bear interest at a floating rate or rates or in variable
amounts) all unmatured Coupons (excluding, for this purpose,
but without prejudice to paragraph (iii) below, Talons)
relating to such Definitive Instruments (whether or not
surrendered therewith) shall become void and no payment shall
be made thereafter in respect of them;
(iii)in the case of Definitive Instruments initially delivered with
Talons attached thereto, all unmatured Talons (whether or not
surrendered therewith) shall become void and no exchange for
Coupons shall be made thereafter in respect of them; and
(iv) in the case of Definitive Instruments initially delivered with
Receipts attached thereto, all Receipts relating to such
Instruments in respect of a payment of an Instalment Amount
which (but for such redemption) would have fallen due on a date
after such due date for redemption (whether or not surrendered
therewith) shall become void and no payment shall be made
thereafter in respect of them.
The provisions of paragraph (i) of this Condition 9A.05
notwithstanding, if any Definitive Instruments should be issued with a
maturity date and an Interest Rate or Rates such that, on the presentation
for payment of any such Definitive Instrument without any unmatured Coupons
attached thereto or surrendered therewith, the amount required by paragraph
(i) to be deducted would be greater tan the Redemption Amount otherwise due
for payment, then, upon the due date for redemption of any such Definitive
Instrument, such unmatured Coupons (whether or not attached) shall become
void (and no payment shall be made in respect thereof) as shall be required
so that, upon application of the provisions of paragraph (i) in respect of
such Coupons as have not so become void, the amount required by paragraph
(i) to be deducted would not be greater than the Redemption Amount
otherwise due for payment. Where the application of the foregoing sentence
requires some but not all of the unmatured Coupons relating to a Definitive
Instrument to become void, the relevant Paying Agent shall determine which
unmatured Coupons are to become void, and shall select for such purpose
Coupons maturing on later dates in preference to Coupons maturing on
earlier dates.
9A.06 In relation to Definitive Instruments initially delivered with Talons
attached thereto, on or after the due date for the payment of interest
on which the final Coupon comprised in any Coupon sheet matures, the Talon
comprised in the Coupon sheet may be surrendered at the specified office of
any Paying Agent outside (unless Condition 9A.03 applies) the United States
in exchange for a further Coupon sheet (including any appropriate further
Talon), subject to the provisions of Condition 9 below. Each Talon shall,
for the purpose of these Conditions, be deemed to mature on the Interest
Payment Date on which the final Coupon comprised in the relative Coupon
sheet matures.
9B PAYMENTS - GENERAL PROVISIONS
9B.01 Payments of amounts due (whether principal, interest or otherwise) in
respect of Instruments will be made in the currency in which such amount is
due (a) by cheque (in the case of payment in Japanese Yen to a non-resident
of Japan, drawn on an authorized foreign exchange bank and, in the case of
payment in sterling, drawn on a town clearing branch of a bank in the city
of London) or (b) at the option of the payee, by transfer to an account
denominated in the relevant currency specified by the payee (in the case of
payment in Japanese Yen to a non-resident of Japan, a non-resident account
with an authorized foreign exchange bank specified by the payee). Payments
will, without prejudice to the provisions of Condition 8, be subject in all
cases to any applicable fiscal or other laws and regulations.
9B.02 For the purposes of these Terms and Conditions:
(i) "Relevant Financial Centre Day" means, in the case of any
currency other than ECU, a day on which commercial banks and
foreign exchange markets settle payments in the Relevant
Financial Centre and in any other place specified in the
Pricing Supplement or in the case of payment in ECU, a day
which is an ECU Settlement Day (as defined in the ISDA
Definitions but disregarding, for this purpose, paragraph (b)
of such definition); and
(ii) "local banking day" means a day (other than a Saturday or
Sunday) on which commercial banks are open for business
(including dealings in foreign exchange and foreign currency
deposits) in the place of presentation of the relevant
Instrument or, as the case may be, Coupon.
9B.03 No commissions or expenses shall be charged to the holders of
Instruments or Coupons in respect of such payments.
9C VALUE OF THE ECU
9C.01 This Condition 9C and Condition 9D below are applicable in relation
to Instruments denominated in ECU or Instruments having the ECU as a
currency of account and payment.
9C.02 For the purposes of these Conditions and subject as provided below,
the ECU in which the Instruments are denominated is the same as the ECU
that is from time to time used as the unit of account of the European
Communities. Changes to the ECU may be made by the European Communities,
in which event the ECU will change accordingly.
9D PAYMENTS IN A COMPONENT CURRENCY OF ECU
9D.01 In the event that the ECU is used neither as the unit of account of
the European Communities nor as the currency of the European Union then,
with effect from the ECU Conversion Date, any obligation under the terms of
the Instruments to make a payment in ECU will be replaced by an obligation
on the part of the Issuer to make a payment in the Selected Currency in the
Equivalent Amount.
9D.02 For the purposes of these Terms and Conditions:
(i) "Component Amount" means, in respect of a Component Currency,
the number of units (including decimals) of that currency
represented in the ECU on the ECU Conversion Date;
(ii) "Component Currency" means any currency that, on the ECU
Conversion Date, is a component currency of the ECU;
(iii)"ECU Conversion Date" means the last day on which the ECU was
used as the unit of account of the European Communities;
(iv) "Equivalent Amount" means, in respect of a Selected Currency,
an amount determined by the Fiscal Agent by adding the results
obtained by converting the Component Amount of each Component
Currency into United States dollars at the Market Exchange Rate
for converting that Component Currency into United States
dollars and then converting the sum of those United States
dollar amounts (unless the Selected Currency is the United
States dollar) into the Selected Currency at the Market
Exchange Rate for converting United States dollars into the
Selected Currency;
(v) "Market Exchange Rate" means, in respect of any Component
Currency or the United States dollar, the arithmetic mean of
the middle spot delivery quotations for that currency for cable
transfers quoted at approximately 2.30 p.m. (London time) on
the Valuation Date by three leading foreign exchange dealers,
selected by the Fiscal Agent, in the Relevant Financial Centre
for the relevant Component Currency or, as the case may be, the
United States dollar; in the event that quotations are not
available for a currency as of the Valuation Date from any of
the banks selected by the Fiscal Agent for this purpose because
foreign exchange markets are closed in the country of issue of
the currency or for any other reason, the most recent direct
quotations for that currency obtained by, or on behalf of, the
Fiscal Agent shall be used in computing the Equivalent Amount
of the Selected Currency on the Valuation Date if those rates
were prevailing in the country of issue not more than two
Banking Days before the Valuation Date; if the only rates
available for such purpose are as of a date more than two
Banking Days before the Valuation Date, the Fiscal Agent shall
convert the Component Amount into United States dollars or that
amount into the Selected Currency on the basis of cross rates
derived from the arithmetic mean of the middle spot delivery
quotations for such currencies prevailing at approximately 2.30
p.m. (London time) on the Valuation Date, as obtained by the
Fiscal Agent from one or more major banks, in a country other
than the country of issue of such currency; for the purpose of
determining a Market Exchange Rate, quotations will be obtained
from the market in which a non-resident issuer of securities
denominated in that currency would purchase that currency in
order to make payment for the securities;
(vi) "Selected Currency" means a currency selected by the Fiscal
Agent from among the Component Currencies and the United States
dollar;
(vii)"Valuation Date" means, in respect of any payment deemed to be
payable in a Selected Currency, the day that is two Banking
Days preceding the due date of the applicable payment.
9D.03 For the purposes of this Condition 9D and any other provision of
these Terms and Conditions notwithstanding, "Banking Day" means a day on
which commercial banks and foreign exchange markets settle payments in the
relevant currency in London and in the Relevant Financial Centre for the
relevant Component Currency.
9D.04 The determination by the Fiscal Agent of all rates and amounts for
the purposes of this Condition 9D shall, in the absence of manifest error,
be final and binding on the Issuer and the Holders of Instruments and
Coupons. The Fiscal Agent will notify the Issuer, the Paying Agents or, as
the case may be, the Registrar of the Selected Currency and of all rates
and amounts determined by it for the purposes of this Condition 9D (from
whose respective specified offices such information will be available).
9D.05 From the start of the third stage of European monetary union, all
payments in respect of Instruments denominated in ECU will be made in Euro
at the rate then established in accordance with the Treaty. This Condition
9 will not result in payment in a component currency in such circumstances.
10. PRESCRIPTION
10.01 Claims against the Issuer for payment of principal and interest in
respect of Instruments will be prescribed and become void unless made, in
the case of principal, within ten years or, in the case of interest, five
years after the Relevant Date (as defined in Condition 8.02) for payment
thereof.
10.02 In relation to Definitive Instruments initially delivered with Talons
attached thereto, there shall not be included in any Coupon sheet issued
upon exchange of a Talon any Coupon which would be void upon issue pursuant
to Condition 9A.05 or the due date for the payment of which would fall
after the due date for the redemption of the relevant Instrument or which
would be void pursuant to this Condition 10 or any Talon the maturity date
of which would fall after the due date for redemption of the relevant
Instrument.
11 THE PAYING AGENTS AND THE CALCULATION AGENT
11.01 The initial Paying Agents and their respective initial specified
offices are specified below.
Calculation Agent in respect of any Instruments shall be specified in
the Pricing Supplement. The Issuer reserves the right at any time to vary
or terminate the appointment of any Paying Agent (including the Fiscal
Agent) or the Calculation Agent and to appoint additional or other Paying
Agents or another Calculation Agent Provided that it will at all times
maintain (i) a Fiscal Agent, (ii) a Paying Agent (which may be the Fiscal
Agent) with a specified office in a continental European city, (iii) so
long as the Instruments are listed on the Luxembourg Stock Exchange and/or
any other stock exchange, a Paying Agent (which may be the Fiscal Agent)
with a specified office in Luxembourg and/or in such other place as may be
required by such other stock exchange, (iv) in the circumstances described
in Condition 9A.03, a Paying Agent with a specified office in New York
City, and (v) a Calculation Agent where required by the Terms and
Conditions applicable to any Instruments (in the case of (i), (ii) and
(iii) with a specified office located in such place (if any) as may be
required by the Terms and Conditions). The Paying Agents and the
Calculation Agent reserve the right at any time to change their respective
specified offices to some other specified office in the same city. Notice
of all changes in the identities or specified offices of any Paying Agent
or the Calculation Agent will be given promptly by the Issuer to the
Holders in accordance with Condition 14.
11.02 The Paying Agents and the Calculation Agent act solely as agents of
the Issuer and, save as provided in the Issue and Paying Agency Agreement
or any other agreement entered into with respect to its appointment, do not
assume any obligations towards or relationship of agency or trust for any
Holder of any Instrument, Receipt or Coupon and each of them shall only be
responsible for the performance of the duties and obligations expressly
imposed upon it in the Issue and Paying Agency Agreement or other agreement
entered into with respect to its appointment or incidental thereto.
12. REPLACEMENT OF INSTRUMENTS
If any Instrument, Receipt or Coupon is lost, stolen, mutilated, defaced or
destroyed, it may be replaced at the specified office of the Fiscal Agent
or such Paying Agent or Paying Agents as may be specified for such purpose
in the Pricing Supplement ("Replacement Agent"), subject to all applicable
laws and the requirements of any stock exchange on which the Instruments
are listed, upon payment by the claimant of all expenses incurred in
connection with such replacement, including any tax or other governmental
charge that may be imposed in relation thereto, and upon such terms as to
evidence, security, indemnity and otherwise as the Issuer and the
Replacement Agent may require. Mutilated or defaced Instruments, Receipts
and Coupons must be surrendered before replacements will be delivered
therefor.
13. MEETINGS OF HOLDERS AND MODIFICATION
The Issue and Paying Agency Agreement contains provisions for convening
meetings of Holders of Instruments to consider any matter affecting their
interests. Other than in the case of an Extraordinary Resolution described
below, a majority in aggregate principal amount of Instruments of a Series
voted at a meeting duty called, by proxy or in person, may, with the
written consent of the Issuer, modify, amend or supplement the terms of
Instruments of such Series or waive any breaches or proposed breaches of
the terms of Instruments of such Series, and any resolution passed at a
meeting of Holders of Instruments will be binding on all Holders of
Instruments of such Series, whether or not they are present at the meeting,
and on all Holders of Coupons appertaining thereto, and shall be binding on
the Holders and all future Holders of any Instruments issued in exchange
therefor, whether or not a notation is made on the Instruments.
Modification by Extraordinary Resolution of certain terms and conditions of
the Instruments or other provisions of the Issue and Paying Agreement
(including terms of the payment of principal and interest on Instruments)
requires special voting. In the case of any Series of Instruments, the
quorum at any such meeting of Holders of Instruments for passing an
Extraordinary Resolution will be any person or persons holding or
representing not less than two-thirds, or at any adjourned such meeting not
less than one-third, in principal amount of the Instruments of such Series
for the time outstanding and entitled to be voted at such meeting and an
Extraordinary Resolution may be passed by the affirmative vote of not less
than 75 percent in aggregate principal amount of such Instruments voted in
respect of such Extraordinary Resolution.
The Fiscal Agent may agree, without the consent of the Holders of
Instruments, Coupons or Talons, to any modification (except as aforesaid)
of, or to any waiver or authorisation of any breach or proposed breach of,
any of the Terms and Conditions of the Instruments or any other provisions
of the Issue and Paying Agency Agreement which does not adversely affect
the interest of any Holder of such Instruments in any material respect or
to any modification which is of a minor or technical nature or to correct a
manifest error as set forth in the Issue and Paying Agency Agreement.
14. NOTICES
Notices to Holders of Instruments will, save where another means of
effective communication has been specified herein or in the Pricing
Supplement, be deemed to be validly given if (i) published in a leading
daily newspaper having general circulation in London (which is expected to
be the Financial Times) (ii) in the case of Instruments which are listed on
the Luxembourg Stock Exchange (so long as such Instruments are listed on
the Luxembourg Stock Exchange and the rules of that exchange so require),
in a leading newspaper having general circulation in Luxembourg (which is
expected to be the Luxemburger Wort) and (iii) in the case of any
Instruments which are listed on the Paris Bourse (so long as such
Instruments are listed on the Paris Bourse and that exchange so requires),
in a daily newspaper having general circulation in Paris (which is expected
to be Les Echos or La Tribune) or (in the case of (i) or (ii), if such
publication is not practicable, if published in a leading English language
daily newspaper having general circulation in Europe or, in the case of
(iii), if such publication is not practicable, if published in a leading
French language daily newspaper having general circulation in the Republic
of France) (or, if permitted by the rules of the relevant stock exchange,
in the case of Instruments represented by a Temporary Global Instrument or
Permanent Global Instrument, if delivered to Euroclear and Cedel Bank
and/or any other relevant clearing system for communication by them to the
persons shown in their respective records as having interests therein).
The Issuer shall also ensure that notices are duly published in compliance
with the requirements of each stock exchange on which the Instruments are
listed. In the case of Instruments which are listed on the Paris Bourse,
notices will be required to be published in a daily newspaper in all cases.
Any notice so given will be deemed to have been validly given on the date
of first such publication (or,if required to be published in more than one
newspaper, on the first date on which publication shall have been made in
all the required newspapers) or, as the case may be, on the fourth weekday
after the date of such delivery to Euroclear and Cedel Bank and/or such
other clearing system. Holders of Coupons will be deemed for au purposes
to have notice of the contents of any notice given to Holders of
Instruments in accordance with this Condition.
15. FURTHER ISSUES
The Issuer may from time to time, without the consent of the Holders
of any Instruments or Coupons, create and issue further instruments, bonds
or debentures having the same terms and conditions as such Instruments in
all respects (or in all respects except for the first payment of interest,
if any, on them and/or the denomination thereof) so as to form a single
series with the Instruments of any particular Series.
16. CURRENCY INDEMNITY
The currency in which the Instruments are denominated or, if
different, payable, as specified in the Pricing Supplement (or, in the case
of Instruments to which Condition 9D applies, the Selected Currency (as
defined in Condition 9D.02)) (the "Contractual Currency"), is the sole
currency of account and payment for all sums payable by the Issuer in
respect of the Instruments, including damages. Any amount received or
recovered in a currency other than the Contractual Currency (whether as a
result of, or of the enforcement of, a judgment or order of a court of any
jurisdiction or otherwise) by any Holder of an Instrument or Coupon in
respect of any sum expressed to be due to it from the Issuer shall only
constitute a discharge to the Issuer to the extent of the amount in the
Contractual Currency which such Holder is able to purchase with the amount
so received or recovered in that other currency on the date of that receipt
or recovery (or, if it is not practicable to make that purchase on that
date, on the first date on which it is practicable to do so). If that
amount is less than the amount in the Contractual Currency expressed to be
due to any Holder of an Instrument or Coupon in respect of such Instrument
or Coupon the Issuer shalt indemnify such Holder against any toss sustained
by such Holder as a result. In any event, the Issuer shall indemnify each
such Holder against any cost of making such purchase which is reasonably
incurred. These indemnities constitute a separate and independent
obligation from the Issuer's other obligations, shall give rise to a
separate and independent cause of action, shall apply irrespective of any
indulgence granted by any Holder of an Instrument or Coupon and shall
continue in full force and effect despite any judgment, order, claim or
proof for a liquidated amount in respect of any sum due in respect of the
Instruments or any judgment or order. Any such loss aforesaid shall be
deemed to constitute a loss suffered by the relevant Holder of an
Instrument or Coupon and no proof or evidence of any actual loss will be
required by the Issuer.
17. WAIVER AND REMEDIES
No failure to exercise, and no delay in exercising, on the part of
the Holder of any Instrument, any right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof precludeany other
or future exercise thereof or the exercise of any other right. Rights
hereunder shall be in addition to all other rights provided by taw. No
notice or demand given in any case shall constitute a waiver of rights to
take other action in the same, similar or other instances without such
notice or demand.
18. LAW AND JURISDICTION
18.01 The Instruments and the Issue and Paying Agency Agreement are
governed by, and shall be construed in accordance with, the laws of the
State of New York.
18.02 The Issuer irrevocably agrees for the benefit of the Holders of the
Instruments that any New York State or United States federal court sitting
in New York City, the Borough of Manhattan and the courts of England shall
have jurisdiction to hear and determine any suit, action or proceedings,
and to settle any disputes, which may arise out of or in connection with
the Instruments (respectively, "Proceedings" and "Disputes") and, for such
purposes, irrevocably submits to the jurisdiction of such Court.
18.03 The Issuer irrevocably waives any objection which it might now or
hereafter have to any New York State or United Sates federal court sitting
in New York City, the Borough of Manhattan and the courts of England being
nominated as the forum to hear and determine any Proceedings and to settle
any Disputes and agrees not to claim that any such court is not a
convenient or appropriate forum.
18.04 The Issuer agrees that the process by which any proceedings in New
York City are begun may be served on it by being delivered to the General
Counsel of the Issuer at TRS' headquarters in New York and that the process
by which any proceedings in England are begun may be served on it by being
delivered to the General Counsel's office of TRS (in the case of TRS,
Credco and AEOCC) and of AEB at their headquarters in London at American
Express Bank Ltd., 60 Buckingham Palace Road, London, SWLW ORU, United
Kingdom (AEB), and American Express Europe Ltd., Portland House, Stag
Place, London, SWLE 5BZ, United Kingdom (TRS). If the appointment of the
person mentioned in this Condition 18.04 ceases to be effective, the Issuer
shall forthwith appoint a further person in New York City or in England, as
the case may be, to accept service of process on its behalf in New York
City or in England, as the case may be, and notify the name and address of
such person to the Fiscal Agent and, failing such appointment within
fifteen days, any Holder of an Instrument shalt be entitled to appoint such
a person by written notice addressed to the Issuer and delivered to the
Issuer or to the specified office of the Fiscal Agent. Nothing contained
herein shall affect the right of any Holder of an Instrument to serve
process in any other manner permitted by law.
18.05 The submission to the jurisdiction of the New York State or United
States federal courts sitting in New York City or in the Borough of
Manhattan and courts of England shall not (and shall not be construed so as
to) limit the right of the Holders of the Instruments or any of them to
take Proceedings in any other court of competent jurisdiction nor shall the
taking of proceedings in any one or more jurisdictions preclude the taking
of Proceedings in any other jurisdiction (whether concurrently or not) if
and to the extent permitted by applicable law.
<PAGE>
<PAGE>
EXHIBIT 12.1
AMERICAN EXPRESS CREDIT CORPORATION
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(millions)
Year Ended December 31,
-----------------------
------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Earnings:
Income before
extraordinary charge $ 215 $ 197 $ 139 $ 137 $ 138
Income tax provision 115 105 75 64 70
Interest expense 1,117 1,054 736 599 728
------ ------ ------ ------ ------
Total earnings $1,447 $1,356 $ 950 $ 800 $ 936
====== ====== ====== ====== ======
Fixed charges -
interest expense $1,117 $1,054 $ 736 $ 599 $ 728
====== ====== ====== ====== ======
Ratio of earnings to
fixed charges 1.30 1.29 1.29 1.34* 1.29
Note: Gross rentals on long-term leases were minimal in
amount in each of the periods shown.
* The ratio of earnings to fixed charges calculated in
accordance with the Receivables Agreements after the impact
of the extraordinary charge of $34 million (pretax) was 1.28.
<PAGE>
<PAGE>
EXHIBIT 12.2
AMERICAN EXPRESS COMPANY
COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES
(millions)
Year Ended December 31,
-----------------------
-------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Earnings:
Pretax income from
continuing operations $ 2,664 $ 2,183 $ 1,891 $ 2,326 $ 896
Interest expense 2,160 2,343 1,925 1,776 2,171
Other adjustments 139 95 103 88 196
------- ------- ------- ------- -------
Total earnings (a) $ 4,963 $ 4,621 $ 3,919 $ 4,190 $ 3,263
======= ======= ======= ======= =======
Fixed charges:
Interest expense $ 2,160 $ 2,343 $ 1,925 $ 1,776 $ 2,171
Other adjustments 130 135 142 130 154
------- ------- ------- ------- -------
Total fixed charges (b) $ 2,290 $ 2,478 $ 2,067 $ 1,906 $ 2,325
======= ======= ======= ======= =======
Ratio of earnings to
fixed charges (a/b) 2.17 1.86 1.90 2.20 1.40
Included in interest expense in the above computation is interest
expense related to the international banking operations of American
Express 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 Statement
of Income of American Express.
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 American Express, the minority interest in the
earnings of majority-owned subsidiaries with fixed charges, and the
interest component of rental expense and subtracting undistributed
net income of affiliates accounted for at equity.
For purposes of the "fixed charges" computation, other adjustments
include capitalized interest costs and the interest component of
rental expense.
On May 31, 1994, American Express completed the spin-off of Lehman
Brothers through a dividend to American Express common
shareholders. Accordingly, Lehman Brothers' results are reported
as a discontinued operation and are excluded from the above
computation for all periods presented. In March 1993, American
Express reduced its ownership in First Data Corporation to
approximately 22 percent through a public offering. As a result,
beginning in 1993, FDC was reported as an equity investment in the
above computation. In the fourth quarter of 1995, American
Express' ownership was further reduced to approximately 10 percent
as a result of shares issued by FDC in connection with a merger
transaction. Accordingly, as of December 31, 1995, American
Express' investment in FDC is accounted for as Investments -
Available for Sale.
<PAGE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
registration statements on Form S-3 (Registration Statement Nos. 33-
47497 and 33-62797) of American Express Credit Corporation and in
the related prospecti of our report dated February 7, 1997, with
respect to the consolidated financial statements and schedule of
American Express Credit Corporation included in this Annual Report
on Form 10-K for the year ended December 31, 1996.
/s/ Ernst & Young LLP
New York, New York
March 25, 1997
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Credco's
Condensed Consolidated Balance Sheet at December 31, 1996 and Condensed
Consolidated Statement of Income for the twelve months ended December 31, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 267
<SECURITIES> 0
<RECEIVABLES> 17,359
<ALLOWANCES> 638
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,165
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 1,844
<TOTAL-LIABILITY-AND-EQUITY> 20,165
<SALES> 0
<TOTAL-REVENUES> 2,166
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7
<LOSS-PROVISION> 712
<INTEREST-EXPENSE> 1,117
<INCOME-PRETAX> 330
<INCOME-TAX> 115
<INCOME-CONTINUING> 215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
