-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lYZAbd4I7FaJ1/c9n80/4v7FjiQzvnskfcmGHA5ahPalHS9LoKm4QZUftc/3hlXF XnNysS5oeda/1xfgRLhKSQ== 0000004962-94-000031.txt : 19941116 0000004962-94-000031.hdr.sgml : 19941116 ACCESSION NUMBER: 0000004962-94-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN EXPRESS CO CENTRAL INDEX KEY: 0000004962 STANDARD INDUSTRIAL CLASSIFICATION: 6211 IRS NUMBER: 134922250 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07657 FILM NUMBER: 94559661 BUSINESS ADDRESS: STREET 1: AMERICAN EXPRESS TWR STREET 2: WORLD FINANCIAL CTR CITY: NEW YORK STATE: NY ZIP: 10285 BUSINESS PHONE: 2126402000 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1994 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to ----------------- ------------------ Commission file number 1-7657 AMERICAN EXPRESS COMPANY (Exact name of registrant as specified in its charter) New York State 13-4922250 - ----------------------------------- -------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) American Express Tower, World Financial Center, New York, NY 10285 - ------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 640-2000 --------------------- None - ------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at October 31, 1994 - --------------------------------------- ------------------------------- Common Shares (par value $.60 per share) 506,864,526 shares AMERICAN EXPRESS COMPANY FORM 10-Q INDEX Part I. Financial Information: Consolidated Statement of Income--Three and 1-2 nine months ended September 30, 1994 and 1993 Consolidated Balance Sheet--September 30, 3 1994 and December 31, 1993 Consolidated Statement of Cash Flows--Nine 4 months ended September 30, 1994 and 1993 Notes to Consolidated Financial Statements 5-6 Management's Discussion and Analysis of 7-16 Financial Condition and Results of Operations Review Report of Independent Auditors 17 Part II. Other Information 18 PART I--FINANCIAL INFORMATION AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENT OF INCOME (millions, except per share amounts) (Unaudited) Three Months Ended September 30, -------------------- 1994 1993 Net Revenues: ------- ------- Commissions and fees $ 2,157 $ 1,981 Interest and dividends, net 1,046 1,038 Life insurance premiums 209 179 Other 192 171 ------- ------- Total 3,604 3,369 ------- ------- Expenses: Human resources 958 847 Provisions for losses and benefits: Annuities and investment certificates 295 309 Banking, credit and other 249 291 Life insurance 201 166 Marketing and promotion 280 279 Interest 251 232 Occupancy and equipment 243 240 Professional services 173 141 Communications 92 91 Other 364 357 ------- ------- Total 3,106 2,953 ------- ------- Pretax income from continuing operations 498 416 Income tax provision 129 103 ------- ------- Income from continuing operations 369 313 Discontinued operations, net of income taxes - 107 ------- ------- Net income $ 369 $ 420 ======= ======= Income per common share from continuing operations $ 0.71 $ 0.61 Income per common share from discontinued operations - 0.22 ------- ------- Net income per common share $ 0.71 $ 0.83 ======= ======= Weighted average number of common shares outstanding (000's) 512,579 503,623 ======= ======= Cash dividends declared per common share $ 0.225 $ 0.25 ======= ======= See notes to Consolidated Financial Statements. 1 AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENT OF INCOME (millions, except per share amounts) (Unaudited) Nine Months Ended September 30, -------------------- 1994 1993 Net Revenues: ------- ------- Commissions and fees $ 6,253 $ 5,764 Interest and dividends, net 3,078 2,993 Life insurance premiums 585 522 Other 564 496 ------- ------- Total 10,480 9,775 ------- ------- Expenses: Human resources 2,751 2,461 Provisions for losses and benefits: Annuities and investment certificates 867 958 Banking, credit and other 777 930 Life insurance 563 445 Marketing and promotion 794 800 Interest 741 653 Occupancy and equipment 728 703 Professional services 485 413 Communications 272 264 Other 1,086 993 Gain on sale of FDC - (779) ------- ------- Total 9,064 7,841 ------- ------- Pretax income from continuing operations 1,416 1,934 Income tax provision 371 620 ------- ------- Income from continuing operations 1,045 1,314 Discontinued operations, net of income taxes 33 (235) ------- ------- Net income $ 1,078 $ 1,079 ======= ======= Income per common share from continuing operations $ 2.02 $ 2.62 Income (loss) per common share from discontinued operations 0.07 (0.48) ------- ------- Net income per common share $ 2.09 $ 2.14 ======= ======= Weighted average number of common shares outstanding (000's) 510,672 498,862 ======= ======= Cash dividends declared per common share $ 0.70 $ 0.75 ======= ======= See notes to Consolidated Financial Statements. 2 AMERICAN EXPRESS COMPANY CONSOLIDATED BALANCE SHEET (millions) (Unaudited) September 30, December 31, Assets 1994 1993 - ------ ------------- ------------ Cash and cash equivalents $ 6,959 $ 3,312 Accounts receivable and accrued interest, less reserves: 1994, $788; 1993, $796 15,743 16,142 Investments 39,495 39,308 Loans and discounts, less reserves: 1994, $515; 1993, $655 14,665 14,796 Land, buildings and equipment--at cost, less accumulated depreciation: 1994, $1,570; 1993, $1,441 1,905 1,976 Assets held in segregated asset accounts 10,700 8,992 Deferred acquisition costs 2,201 2,025 Other assets 6,527 7,581 ------ ------ Total assets $ 98,195 $ 94,132 ====== ====== Liabilities and Shareholders' Equity Customers' deposits and credit balances $ 11,226 $ 11,131 Travelers Cheques outstanding 5,753 4,800 Accounts payable 4,378 3,737 Insurance and annuity reserves: Fixed annuities 19,556 19,149 Life and disability policies 4,591 4,257 Investment certificate reserves 2,726 2,752 Short-term debt 14,338 12,489 Long-term debt 7,986 8,561 Liabilities related to segregated asset accounts 10,700 8,992 Other liabilities 10,080 9,530 ------ ------ Total liabilities 91,334 85,398 Shareholders' equity: Preferred shares, $1.66 2/3 par value, authorized 20,000,000 shares Convertible Exchangeable Preferred shares, issued and outstanding 4,000,000 shares, stated at liquidation value 200 200 $216.75 CAP Preferred shares, issued and outstanding 122,448.98 shares in 1993, stated at par value (liquidation value of $300) - 1 Common shares, $.60 par value, authorized 1,200,000,000 shares; issued and outstanding 507,663,152 shares in 1994 and 489,827,852 shares in 1993 305 294 Capital surplus 3,948 3,784 Net unrealized securities gains (losses) (219) 7 Foreign currency translation adjustment (67) (73) Deferred compensation (112) (128) Retained earnings 2,806 4,649 ------ ------ Total shareholders' equity 6,861 8,734 ------ ------ Total liabilities and shareholders' equity $ 98,195 $ 94,132 ====== ====== See notes to Consolidated Financial Statements. 3 AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (millions) (Unaudited) Nine Months Ended September 30, ----------------- 1994 1993 ---- ---- Cash Flows from Operating Activities Income from continuing operations $1,045 $ 1,314 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Provisions for losses and benefits 1,061 1,245 Depreciation, amortization, deferred taxes and other 188 434 Changes in operating assets and liabilities, net of effects of acquisitions/dispositions: Accounts receivable and accrued interest (529) (341) Other assets 855 (820) Accounts payable and other liabilities 552 245 Increase in Travelers Cheques outstanding 953 546 Increase in insurance reserves 352 301 Gain on sale of FDC - (779) Net cash flows (used) provided by operating activities of discontinued operations (3,656) 1,669 ----- ----- Net cash provided by operating activities 821 3,814 ----- ----- Cash Flows from Investing Activities Proceeds from FDC public offerings, net of cash sold in 1993 - 871 Sale of investments 3,678 2,186 Maturity and redemption of investments 5,802 5,754 Purchase of investments (10,480) (10,194) Net increase in Cardmember receivables (887) (563) Cardmember accounts receivable sold to Trust 900 600 Proceeds from repayment of loans 15,731 13,317 Issuance of loans (15,309) (13,490) Purchase of land, buildings and equipment (193) (235) Sale of land, buildings and equipment 87 55 Acquisitions/dispositions, net of cash acquired/sold (375) 132 Net cash flows (used) provided by investing activities of discontinued operations (36) 49 ----- ----- Net cash used by investing activities (1,082) (1,518) ----- ----- Cash Flows from Financing Activities Net (decrease) increase in customers' deposits and credit balances (95) 914 Sale of investment and annuity certificates 4,281 4,044 Redemption of investment and annuity certificates (3,993) (2,760) Net increase (decrease) in debt with maturities of 3 months or less 5,948 (492) Issuance of debt 3,220 9,614 Principal payments on debt (8,018) (7,845) Issuance of American Express common shares 173 215 Repurchase of American Express common shares (137) - Cash infusion to Lehman Brothers (904) - Dividends paid (386) (393) Net cash flows provided (used) by financing activities of discontinued operations 3,737 (966) ----- ----- Net cash provided by financing activities 3,826 2,331 Net change in cash and cash equivalents of discontinued operations 45 752 Effect of exchange rate changes on cash 127 (49) ----- ----- Net increase in cash and cash equivalents 3,647 3,826 Cash and cash equivalents at beginning of period 3,312 3,408 ----- ----- Cash and cash equivalents at end of period $6,959 $ 7,234 ===== ===== See notes to Consolidated Financial Statements. 4 AMERICAN EXPRESS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements should be read in conjunction with the financial statements presented in the Annual Report on Form 10-K of American Express Company (the Company or American Express) for the year ended December 31, 1993. Certain prior year's amounts have been reclassified to conform to the current year's presentation. Significant accounting policies disclosed therein have not changed, except as disclosed in Note 4. The consolidated financial statements are unaudited; however, in the opinion of management, they include all normal recurring adjustments necessary for a fair presentation of the consolidated financial position of the Company at September 30, 1994 and December 31, 1993, the consolidated results of its operations for the three and nine months ended September 30, 1994 and 1993 and cash flows for the nine months ended September 30, 1994 and 1993. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. 2. Interest and dividends, net, reflects gross interest and dividends, net of $240 million and $207 million of interest expense for the quarters ended September 30, 1994 and September 30, 1993, respectively, and $668 million and $643 million for the nine months ended September 30, 1994 and September 30, 1993, respectively, related to the Company's international banking operations and Travel Related Services' consumer lending activities. 3. On May 31, 1994, the Company completed the spin-off of Lehman Brothers Holdings Inc. (Lehman Brothers) through a dividend to its common shareholders of all of the Lehman Brothers common stock held by American Express on that date. See Consolidated Financial Condition, which is incorporated herein by reference. As a result of this transaction, Lehman Brothers' results are reported as a discontinued operation in the Consolidated Financial Statements through May 31, 1994. For the period ended December 31, 1993, the assets and liabilities of Lehman Brothers have been reported in the Consolidated Balance Sheet as net assets of discontinued operations and are included in Other Assets. 4. As of January 1, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Under SFAS No. 115, debt securities for which the Company has both the positive intent and the ability to hold to maturity are carried at amortized cost. Other debt securities and all marketable equity securities are classified as either Available for Sale or Trading and are carried at fair value. Unrealized holding gains and losses on securities classified as Available for Sale are reported as a separate component of Shareholders' Equity. Unrealized holding gains and losses on securities classified as Trading are recognized in earnings. 5 The following is a summary of investments at September 30, 1994 (in millions): Held to Maturity, at amortized cost $22,197 (fair value $21,997) Available for Sale, at fair value 14,424 (cost $14,775) Trading 349 Mortgage loans 2,525 ------ $39,495 ====== The change in unrealized securities losses to $219 million (after-tax) at September 30, 1994 from $147 million (after-tax) at June 30, 1994, is the result of changes in the fair values of investments classified as Available for Sale. The majority of the decline was in mortgage- backed securities, primarily due to rising interest rates. 5. Net income taxes paid during the nine months ended September 30, 1994 and 1993 were approximately $131 million and $519 million, respectively. Interest paid during the nine months ended September 30, 1994 and 1993 was approximately $1.1 billion and $1.3 billion, respectively. 6. In the first quarter of 1993, the Company reduced its 54 percent ownership of First Data Corporation (FDC) to 22 percent through a public offering of FDC shares. The Company recognized a gain from the sale of $433 million ($779 million pretax), which is included in the Consolidated Statement of Income for the nine months ended September 30, 1993. The Company's ownership of FDC was reduced to 21 percent in the second quarter of 1994 due to the Company's contribution of FDC shares to the American Express Foundation. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Consolidated Financial Condition On April 29, 1994, the Company's Board of Directors declared a dividend to its common shareholders of all of the Lehman Brothers Holdings Inc. (Lehman Brothers) common stock held by American Express on the dividend distribution date. The dividend was distributed on May 31, 1994 to shareholders of record on May 20, 1994 and represented approximately 98.2 million shares of Lehman Brothers common stock. Shareholders of American Express received one share of Lehman Brothers common stock for each five common shares of American Express that they held on the record date. Prior to the distribution, the Company added approximately $1.1 billion of additional equity capital to Lehman Brothers representing: The Company's purchase of approximately $903.8 million of Lehman Brothers common stock, which was included in the dividend to American Express common shareholders. The Company sold approximately $11.1 million of Lehman Brothers common stock from its holdings to certain Lehman Brothers executive officers; and The Company's purchase of $200 million of Lehman Brothers cumulative voting preferred stock which is being held for investment purposes. In addition, approximately $57 million of Lehman Brothers common stock was acquired by Lehman Brothers employees through an existing employee ownership plan, and approximately $89.2 million of the common stock was acquired by Nippon Life Insurance Company (Nippon Life). The Company also purchased 928 shares and Nippon Life purchased 72 shares of Lehman Brothers redeemable voting preferred stock for a nominal dollar amount. The redeemable voting preferred stock entitles its holders to receive an aggregate annual dividend of 50 percent of Lehman Brothers net income over $400 million for each of the next eight years, with a maximum of $50 million in any one year. In addition, the Company and Nippon Life will be entitled to receive 92.8 percent and 7.2 percent, respectively, of certain contingent revenue and earnings related payouts from Travelers Corporation (Travelers), which were assigned by Lehman Brothers to American Express and Nippon Life in connection with the spin-off transaction. The Travelers participations will yield a maximum of $50 million pretax annually for three years, depending on the revenues of Smith Barney (of which the first installment was received in the first quarter), plus 10 percent of after-tax profits of Smith Barney in excess of $250 million per year over a five-year period. As a result of this transaction, Lehman Brothers' results are reported as a discontinued operation in the Consolidated Financial Statements through the spin-off date. The assets and liabilities of Lehman Brothers have been reported in the Consolidated Balance Sheet as net assets of discontinued operations; accordingly $1.5 billion is included in Other Assets at December 31, 1993. 7 In the second quarter of 1994, the Company reduced its quarterly dividend to $0.225 per common share, representing an adjustment to its previous $0.25 per share quarterly dividend rate, to reflect the Lehman Brothers spin-off. During the second quarter of 1994, the Company purchased four million of its common shares in the open market in order to offset any dilution resulting from the 1994 conversions of American Express Company 9% Convertible Notes Series A-G, convertible prior to April 1, 1994 at $17.755. Of the $160 million in Notes originally issued, $58 million was outstanding at December 31, 1993 and was converted into approximately 3.3 million shares during the first quarter. In August 1994, the Company mandatorily redeemed 122,448.98 CAP Preferred shares issued to subsidiaries of Berkshire Hathaway Inc. in 1991, through the issuance to such subsidiaries of 13,997,141 common shares in accordance with the terms of the preferred shares. The number of common shares issued was adjusted to reflect the spin-off of Lehman Brothers. During the third quarter of 1994, the Company's Board of Directors approved a plan to purchase up to 20 million of the Company's common shares subject to market conditions. The plan aims to reduce the number of outstanding common shares and common share equivalents to slightly less than 500 million shares by year end, and to target the number of shares at that level. This repurchase program will also permit the Company to offset any issuance of new shares as part of employee compensation plans. The Company will also fund Company contributions to other employee plans through share purchases in the open market or with cash instead of through the issuance of new shares. As of November 10, 1994, approximately 5.1 million shares were repurchased under this plan. In November 1994, in connection with the share buyback program, the Company sold 4 million put options with maturities ranging from approximately one to twelve months. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities", as of January 1, 1994. See Note 4 which is incorporated herein by reference. At September 30, 1994, approximately 37 percent, or $14.4 billion, of the Company's securities were classified as Available for Sale. This does not mean that the Company expects to sell these securities, but that under SFAS No. 115 positive intent criteria, these securities are available to meet possible liquidity needs should there be significant changes in market interest rates, customer demand, funding sources and terms, or foreign currency risk. The following sections discuss changes during the nine months ended September 30, 1994 in the financial condition of each of the Company's business segments. Except where indicated otherwise, comparisons of September 30, 1994 balance sheet amounts are made with comparable amounts at December 31, 1993. Travel Related Services (TRS) TRS' total assets were $42.8 billion at September 30, 1994 and $38.8 billion at December 31, 1993. The increase in total assets reflects seasonal growth in the Travelers Cheque portfolio, higher lending 8 receivables and increased liquidity. Accounts receivable and accrued interest totaled $15.4 billion at September 30, 1994 and $15.7 billion at December 31, 1993. In the third quarter of 1994, TRS sold certain Cardmember receivables to a subsidiary, which transferred such receivables to a trust. The trust issued $900 million of trust certificates in a public offering, in three series of $300 million due September 15, 1998, September 17, 2001, and September 15, 2004, respectively. The net impact of the transaction on TRS' results is immaterial. Loans and discounts were $8.8 billion at September 30, 1994 and $8.2 billion at December 31, 1993. TRS' prior year's assets have been restated to reflect the transfer of certain international consumer financial services businesses to American Express Bank. IDS Financial Services (IDS) IDS' total owned assets increased to $39.2 billion at September 30, 1994 from $37.4 billion at December 31, 1993. This growth primarily reflects an increase in assets held in segregated asset accounts, reflecting strong net sales, partially offset by market depreciation. Assets held in segregated accounts totaled $10.7 billion and $9.0 billion at September 30, 1994 and December 31, 1993, respectively. These assets, primarily investments carried at market value, are held for the exclusive benefit of variable annuity and variable life insurance contract holders. IDS earns investment management and administration fees from the related funds. Assets under management increased to $65.2 billion at September 30, 1994 from $62.3 billion at December 31, 1993, reflecting strong net sales, partially offset by market depreciation. During the first quarter of 1994, IDS Financial Corporation issued and sold $70 million of 6.5% Medium-Term Notes due 2004 and $50 million of 6.625% Medium-Term Notes due 2006. The Notes were sold in private placements to institutional investors. The proceeds from these issuances were used for general corporate purposes. American Express Bank (the Bank) The Bank's assets totaled $14.2 billion and $14.1 billion at September 30, 1994 and December 31, 1993, respectively. The Bank's prior year's assets have been restated to reflect the transfer of certain international consumer financial services businesses from TRS. Total loans were $5.4 billion at September 30, 1994 and $5.6 billion at year-end 1993. The reserve for credit losses was $118 million at September 30, 1994, compared with $126 million at December 31, 1993. The Bank's credit loss reserve coverage was 2.2 percent of total loans at both September 30, 1994 and December 31, 1993. Total loan write-offs, net of recoveries, were $17 million during the first nine months of 1994, compared with $40 million during the first nine months of 1993. Nonperforming loans totaled $33 million at September 30, 1994 and $43 million at December 31, 1993, while other nonperforming assets totaled $57 million at September 30, 1994, compared with $89 million at year-end 1993. The decline in nonperforming loans and other nonperforming assets primarily reflects write-offs and the sale of a foreclosed property, respectively. 9 American Express Bank Ltd.'s (AEBL) risk-based capital ratios were 6.7 percent for Tier 1 Capital and 13.0 percent for Total Capital at September 30, 1994, compared with 6.3 percent and 10.2 percent, respectively, at year-end 1993. AEBL's leverage ratio was 4.2 percent at September 30, 1994 and 4.4 percent at December 31, 1993. The increase in the Total Capital ratio at September 30, 1994 was primarily due to the issuance and sale outside the United States of $250 million of Floating Rate Subordinated Notes due 2004. The proceeds of this issuance were used for general corporate purposes. RESULTS OF OPERATIONS Three Months Ended September 30, 1994 and 1993 The Company reported consolidated net income of $369 million in the third quarter of 1994, compared with income from continuing operations of $313 million last year. Including discontinued operations, third quarter 1993 results were $420 million. Consolidated net revenues totaled $3.6 billion in the third quarter of 1994, compared with $3.4 billion a year ago. The Company's effective tax rate was 26 percent in the third quarter of 1994, compared with 25 percent a year ago. Both years' rates were reduced by tax-advantaged investment income. In October 1994, the Company announced a series of decisions that represent a continuation of a reengineering program launched in 1992 to provide better customer value at significantly lower costs. The decision will result in significant staff reductions throughout the Company over the next several years. Costs related to these initiatives are not expected to have a material impact on current or future earnings. Future savings generated by these actions will be reinvested in the business and help facilitate the achievement of the Company's business objectives. Nine Months Ended September 30, 1994 and 1993 The Company reported consolidated income from continuing operations of $1.0 billion for the first nine months of 1994, compared with $1.3 billion last year, including the 1993 gain of $433 million ($779 million pretax) on the sale of First Data Corporation (FDC) stock. Including Lehman Brothers, which is reflected as a discontinued operation through May 31, 1994, the spin-off date, net income totaled $1.1 billion for the first nine months of 1994 and 1993. Consolidated net revenues for the first nine months of 1994 were $10.5 billion, compared with $9.8 billion last year. The Company's effective tax rate was 26 percent in the first nine months of 1994, compared with 32 percent a year ago. This year's rate was reduced by tax-advantaged investment income, while the prior year's rate reflects tax- advantaged investment income, partially offset by the tax effects of the FDC gain. 10 Travel Related Services Three Months Ended September 30, 1994 and 1993 TRS reported net income of $264 million in the third quarter of 1994, compared with $234 million last year. Pretax income totaled $364 million, compared with $311 million a year ago. TRS' prior year's results have been restated to reflect the transfer of certain international consumer financial services businesses to the Bank. Worldwide Card billed business increased 15 percent to $35.5 billion in the third quarter of 1994 from $30.8 billion last year, reflecting higher spending per Cardmember and an increase in the number of Cards outstanding. U.S. Card billed business was $25.2 billion, compared with $22.5 billion a year ago. Non-U.S. Card billed business totaled $10.3 billion, compared with $8.3 billion last year. Worldwide Cards in force totaled 35.6 million, compared with 34.2 million a year ago. U.S. Cards in force totaled 24.7 million, compared with 23.6 million last year. Non-U.S. Cards in force were 10.9 million at September 30, 1994, compared with 10.6 million a year ago. Basic Cards in force totaled 26.1 million, compared with 24.9 million last year. The increase in worldwide Cards in force reflects the addition of approximately 1.1 million Cards issued to U.S. Government employees beginning late in 1993. The number of service establishments increased 8.8 percent to 3.8 million from 3.5 million last year. Travelers Cheque sales totaled $8.4 billion in the third quarter of 1994, compared with $8.0 billion last year. Average Travelers Cheques outstanding totaled $5.9 billion, compared with $5.5 billion a year ago. Net revenues (total revenues net of lending interest expense) increased 9.0 percent to $2.6 billion, reflecting the increase in worldwide Card billed business and growth in Business Travel sales. Discount revenue increased to $996 million from $897 million last year. Net Card fees totaled $435 million, compared with $433 million a year ago, reflecting a change in the mix of Card products. Lending finance charge revenue increased to $317 million from $295 million a year ago. Lending net finance charge revenue increased 1.3 percent to $237 million. Interest and dividend revenue increased to $206 million from $196 million last year. Other revenues increased 15.9 percent to $727 million primarily due to increased travel sales. Total expenses, excluding lending interest expense, increased 7.8 percent to $2.2 billion for the third quarter of 1994, compared with $2.1 billion in the third quarter of 1993, reflecting business travel acquisitions and growth, as well as investments in certain business initiatives. The provision for losses and claims declined 2.3 percent to $365 million from $374 million a year ago. The worldwide charge Card provision declined to $153 million in the third quarter of 1994 from $156 million last year, reflecting continued improvement in Card credit experience, partially offset by an increase in billed business. The worldwide lending provision was $81 million, compared to $98 million a year ago, reflecting a continued decline in write-offs. Interest expense, excluding lending interest expense which is included in net revenues above, totaled $208 million in the third quarter of 1994, down from $210 million last year. Worldwide charge Card interest expense totaled $164 million, compared with $173 million last year. Human resources expense increased to $651 million in the third quarter of 1994 from $556 million a year ago, primarily reflecting growth in the Business Travel and Corporate Card businesses. Marketing and promotion expense was $274 million in the third quarter of 1994, compared with $275 million last year. 11 TRS' asset securitization program resulted in net discount expense of $93 million in the third quarter of 1994 and $55 million in 1993 and servicing fee revenue of $26 million in 1994 and $12 million in 1993, reduced the provision for credit losses by $30 million in 1994 and $21 million in 1993, and reduced interest expense, with no material impact on net income in the third quarter of 1994 or 1993. Nine Months Ended September 30, 1994 and 1993 TRS' net income increased 13 percent to $762 million in the first nine months of 1994, compared with $676 million last year. Pretax income totaled $1.1 billion, compared with $890 million a year ago. Worldwide Card billed business increased 13 percent to $101.9 billion in the first nine months of 1994 from $90.0 billion last year, reflecting higher spending per Cardmember, growth in Corporate Card billed business and an increase in the number of Cards outstanding. U.S. Card billed business was $73.5 billion, compared with $65.3 billion a year ago. Non-U.S. Card billed business totaled $28.4 billion, compared with $24.7 billion last year. Travelers Cheque sales increased to $19.8 billion in the first nine months of 1994 from $18.8 billion last year. Average Travelers Cheques outstanding totaled $5.3 billion, compared with $5.1 billion a year ago. Net revenues increased 7.3 percent to $7.5 billion, reflecting the increase in worldwide Card billed business and growth in Business Travel sales. This increase was partially offset by discount rate reductions from SE repricing implemented throughout 1993. Discount revenue increased 9.3 percent to $2.9 billion from $2.6 billion last year. Net Card fees totaled $1.3 billion, unchanged from a year ago. Lending finance charge revenue increased to $912 million from $890 million last year. Lending net finance charge revenue increased slightly to $700 million from $696 million last year. Interest and dividend revenue increased to $567 million from $547 million last year. Other revenues increased 14 percent to $2.0 billion primarily due to increased travel sales. Total expenses, excluding lending interest expense, increased 5.6 percent to $6.4 billion for the first nine months of 1994, compared with $6.1 billion last year. The provision for losses and claims declined 5.6 percent to $1.1 billion from $1.2 billion a year ago. The worldwide charge Card provision declined to $478 million in the first nine months of 1994 from $528 million last year, reflecting continued improvement in Card credit experience, partially offset by an increase in billed business. The worldwide lending provision was $258 million, compared with $311 million a year ago, reflecting a continued decline in write-offs. Interest expense, excluding lending interest expense which is included in net revenues above, totaled $600 million for the first nine months of 1994, down from $609 million last year, reflecting lower borrowing rates, partially offset by increased funding requirements. Worldwide charge Card interest expense totaled $490 million, compared with $520 million last year. Excluding interest and the provision for losses, total expenses increased 8.2 percent, in part, reflecting business travel acquisitions and growth and investments in certain business initiatives. Human resources expense increased 15 percent to $1.9 billion in the first nine months of 1994 from $1.6 billion a year ago, primarily reflecting growth in the Business Travel and Corporate Card businesses. Marketing and promotion expense decreased slightly to $776 million in the first nine months of 1994 from $785 million last year. Marketing and promotion expenses for the full year are expected to be approximately the same as a year ago. 12 In the first nine months of 1994 and 1993, TRS' asset securitization program resulted in net discount expense of $228 million and $154 million, respectively, and servicing fee revenue of $57 million and $35 million, respectively, reduced the provision for credit losses by $86 million and $65 million, respectively, and reduced interest expense, with no material impact on net income in the first nine months of 1994 or 1993. IDS Financial Services Three Months Ended September 30, 1994 and 1993 IDS' net income increased 19 percent to $114 million in the third quarter of 1994 from $96 million last year. Revenues increased to $822 million in the third quarter of 1994 from $816 million a year ago. Revenue and earnings growth benefited primarily from an increase in fees related to higher levels of assets under management, as well as an increase in life insurance in force. These benefits were partially offset by lower investment margins. Pretax income totaled $168 million, compared with $140 million last year. IDS' financial planning field force totaled 7,847 at September 30, 1994, compared with 7,655 and 7,554 at December 31, 1993 and September 30, 1993, respectively. Product sales generated from financial plans were approximately 64 percent of total sales, compared with approximately 58 percent a year ago. Fees from financial plans were $9.6 million in the third quarter of 1994 and 1993. Mutual fund sales totaled $2.0 billion in the third quarter of 1994, down 3.6 percent from $2.1 billion last year. Sales of equity mutual funds and money market mutual funds increased over a year ago, while sales of income mutual funds decreased. Annuity sales were $1.1 billion in the third quarter of 1994, up slightly from a year ago. Sales of investment certificates increased significantly to $324 million in the third quarter of 1994 from $155 million last year. This increase reflects sales of longer-term certificates. Life and other insurance sales totaled $78 million in the third quarter of 1994, down from $81 million a year ago. Life insurance in force increased 14 percent to $50.9 billion at September 30, 1994 from $46.1 billion at December 31, 1993 and $44.8 billion at September 30, 1993. Investment income decreased to $498 million in the third quarter of 1994 from $527 million last year, reflecting lower yields, partially offset by higher invested assets. Commissions and fees totaled $200 million in the third quarter of 1994, up from $188 million a year ago, reflecting management fees earned on a higher asset base. Total expenses were $654 million in the third quarter of 1994, compared with $676 million last year. The provision for annuity benefits, the largest component of expenses, decreased to $256 million from $270 million a year ago, reflecting lower accrual rates, partially offset by higher annuities in force. The provision for insurance benefits increased to $95 million from $80 million a year ago. The provision for investment certificates totaled $30 million, up from $29 million last year. Human resources expense increased to $213 million from $200 million a year ago, reflecting an increase in the number of employees and financial planners. Other operating expenses decreased to $60 million in the third quarter of 1994 from $95 million last year, reflecting primarily a lower provision for insurance industry guarantee association assessments, as well as lower amortization of deferred acquisition costs. 13 Nine Months Ended September 30, 1994 and 1993 IDS' net income increased 21 percent to $314 million in the first nine months of 1994 from $260 million last year. Revenues increased 4.3 percent to $2.5 billion in the first nine months of 1994 from $2.3 billion a year ago. Revenue and earnings growth benefited primarily from an increase in fees related to higher levels of assets under management, increased life insurance in force and wider investment margins compared to year-ago levels. Pretax income totaled $465 million, compared with $379 million last year. Total product sales increased during the first nine months of 1994 compared to last year. Product sales generated from financial plans were approximately 62 percent of total sales, compared with approximately 57 percent a year ago. Fees from financial plans were $29.4 million in the first nine months of 1994, compared with $27.4 million last year. Mutual fund sales totaled $6.9 billion in the first nine months of 1994, up 10 percent from $6.2 billion last year. This increase reflects higher sales of equity funds. Annuity sales increased 6.7 percent in the first nine months of 1994 to $3.3 billion from $3.1 billion a year ago, reflecting increased sales of annuities with variable investment options. Sales of investment certificates totaled $695 million in the first nine months of 1994, up from $453 million last year. Life and other insurance sales totaled $231 million in the first nine months of 1994, up 4.9 percent from $220 million a year ago, reflecting increased sales of universal life insurance. Investment income totaled $1.5 billion in the first nine months of 1994 and 1993, reflecting lower yields offset by higher invested assets. Commissions and fees totaled $604 million in the first nine months of 1994, up 14 percent from $530 million a year ago, reflecting management fees earned on a higher asset base. Total expenses were $2.0 billion in the first nine months of 1994 and 1993. The provision for annuity benefits, the largest component of expenses, decreased to $762 million from $801 million a year ago, reflecting lower accrual rates, partially offset by higher annuities in force. The provision for insurance benefits increased to $268 million from $237 million a year ago, reflecting growth in insurance in force. The provision for investment certificates totaled $77 million, down from $97 million last year, reflecting lower investment certificates in force and lower accrual rates. Human resources expense increased to $620 million from $560 million a year ago, reflecting an increase in the number of employees and financial planners, and increased commissionable sales. Other operating expenses decreased to $258 million in the first nine months of 1994 from $271 million last year, reflecting a lower provision for insurance industry guarantee association assessments, partially offset by increased amortization of deferred acquisition costs and surrenders as a result of an annuity exchange plan announced during the first quarter of 1994. American Express Bank Three Months Ended September 30, 1994 and 1993 The Bank reported net income of $20 million in the third quarter of 1994, compared with $29 million a year ago. Last year's results included a $5 million benefit from the change in the U.S. federal income tax rate. The Bank's results for the third quarter of 1994 reflect lower revenues and higher operating expenses, primarily reflecting spending related to systems technology. This decline in results was partially offset by a reduction in the provision for credit losses. Pretax income totaled $31 million, 14 compared with $37 million last year. The Bank's prior year's results have been restated to reflect the transfer of certain international consumer financial services businesses from TRS to the Bank. Net interest income totaled $89 million in the third quarter of 1994, compared with $93 million a year ago. Noninterest income, consisting primarily of commissions, fees and other revenues, decreased to $74 million in the third quarter of 1994 from $78 million last year. Noninterest expenses, excluding the provision for credit losses, totaled $132 million in the third quarter of 1994, compared with $125 million a year ago. No provision for credit losses was recorded in the third quarter of 1994, compared with $9.4 million a year ago. Nine Months Ended September 30, 1994 and 1993 The Bank's net income totaled $64 million in the first nine months of 1994, compared with $68 million a year ago. The Bank's results for the first nine months of 1994 reflect a decline in net interest income, primarily due to higher short-term funding costs and lower investment income, as well as higher operating expenses. Partially offsetting this decline was a lower provision for credit losses. Pretax income totaled $94 million, compared with $99 million last year. Net interest income totaled $264 million in the first nine months of 1994, compared with $274 million a year ago, reflecting higher short-term funding costs and lower investment income. Noninterest income increased to $229 million in the first nine months of 1994 from $224 million last year, primarily reflecting growth in fee income. Noninterest expenses, excluding the provision for credit losses, totaled $390 million in the first nine months of 1994, compared with $364 million a year ago. Increased expense levels primarily reflected spending related to systems technology and higher human resources expense. The provision for credit losses was $8.3 million in the first nine months of 1994, compared with $35 million a year ago, reflecting a lower level of nonperforming loans. Corporate and Other Three Months Ended September 30, 1994 and 1993 Corporate and Other reported 1994 third quarter net expenses of $29 million, compared with $46 million last year. Corporate expenses for 1993 included a $5 million expense from the change in the U.S. federal income tax rate. Nine Months Ended September 30, 1994 and 1993 Corporate and Other reported net expenses of $95 million in the first nine months of 1994, compared with $123 million in 1993, before a $433 million ($779 million pretax) gain from the sale of FDC stock last year. Results for the first nine months of 1994 include income from the Company's share of the Travelers revenue participation, in accordance with an agreement related to the 1993 sale of SLB, as well as a capital gain on the sale of Travelers preferred stock and warrants which were acquired as part of the 1993 sale. These gains were offset by the Company's costs associated with the Lehman Brothers spin-off and certain business building initiatives. 15 Results for the first nine months of 1993 included the first quarter gain on the sale of FDC stock mentioned above, which reduced the Company's ownership in FDC from 54 percent to approximately 22 percent. 16 INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Shareholders and Board of Directors American Express Company We have reviewed the accompanying consolidated balance sheet of American Express Company (the "Company") as of September 30, 1994, the related consolidated statements of income for the three-month and nine-month periods ended September 30, 1994 and 1993, and the consolidated statement of cash flows for the nine-month periods ended September 30, 1994 and 1993. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of the Company as of December 31, 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended (not presented herein), and in our report dated February 3, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1993, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ERNST & YOUNG LLP /s/Ernst & Young LLP New York, New York November 14, 1994 17 PART II. OTHER INFORMATION AMERICAN EXPRESS COMPANY Item 1. Legal Proceedings On June 2, 1994, two former employees of American Express Bank International ("AEBI"), a wholly-owned subsidiary of American Express Bank Ltd. ("AEB"), were convicted in a federal district court in Texas of money laundering, bank fraud and misapplication of funds in connection with the account of a Mexican client. AEBI was not a party in this case. However, the United States Attorney's Office and a federal grand jury in the Southern District of Texas are continuing the investigation, and a subpoena for the production of documents has been issued to AEBI. AEBI is cooperating in the investigation. If AEBI were charged with a violation of law, substantial fines, civil penalties, forfeitures and possibly criminal sanctions could result. A criminal charge and conviction could also have adverse collateral consequences for AEB and AEBI, as well as certain of the registrant's other businesses. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index on page E-1 hereof. (b) Reports on Form 8-K: Form 8-K, dated July 25, 1994, Item 5, reporting the registrant's earnings for the quarter ended June 30, 1994. Form 8-K, dated October 5, 1994, Item 5, reporting a continuation of the registrant's reengineering program. Form 8-K, dated October 24, 1994, Item 5, reporting the registrant's earnings for the quarter ended September 30, 1994. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized. AMERICAN EXPRESS COMPANY (Registrant) Date: November 14, 1994 By /s/ Michael P. Monaco -------------------------- Michael P. Monaco Executive Vice President, Chief Financial Officer and Treasurer Date: November 14, 1994 /s/ Daniel T. Henry ------------------------- Daniel T. Henry Senior Vice President and Comptroller (Chief Accounting Officer) EXHIBIT INDEX The following exhibits are filed as part of this Quarterly Report: Exhibit Description 10.1 Amendment of American Express Senior Executive Severance Plan. 10.2 Amendment of American Express Company Executives' Incentive Compensation Plan. 10.3 Amendment of American Express Company Key Executive Life Insurance Plan. 10.4 Amendment of American Express Salary/Bonus Deferral Plan. 10.5 Amendment of American Express Supplementary Pension Plan. 10.6 Amendment of Long-Term Incentive Awards under the American Express Company 1979 and 1989 Long-Term Incentive Plan. 12.1 Computation in Support of Ratio of Earnings to Fixed Charges. 12.2 Computation in Support of Ratio of Earnings to Fixed Charges and Preferred Share Dividends. 15 Letter re Unaudited Interim Financial Information. 27 Financial Data Schedule. E-1 EX-10 2 Exhibit 10.1 AMENDMENT OF AMERICAN EXPRESS SENIOR EXECUTIVE SEVERANCE PLAN RESOLVED, that pursuant to Section 7.1 thereof, effective as of the date hereof the American Express Senior Executive Severance Plan (the "Plan") is amended as follows: 1. Article One of the Plan is amended by (i) the deletion of Section 1.10 and the new definition for Committee set forth below shall be used throughout the Plan wherever the term "CBN Committee" had been used previously, and (ii) the addition of the following new sections thereto to appear in the appropriate alphabetical order with all current numbering of sections within this Article One and in cross references in the Plan to be renumbered accordingly, as follows: "1.6 "Change in Control" means the happening of any of the following: (a) Any individual, entity or group (a "Person") (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (i) the then outstanding common shares of the Company (the "Outstanding Company Common Shares") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that such beneficial ownership shall not constitute a Change in Control if it occurs as a result of any of the following acquisitions of securities: (i) any acquisition directly from the Company, (ii) any acquisition by the Company or any corporation, partnership, trust or other entity controlled by the Company (a "Subsidiary"), (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 1.6 are satisfied. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") became the beneficial owner of 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company which, by reducing the number of Outstanding Company Common Shares or Outstanding Company Voting Securities, increases the proportional number of shares beneficially owned by the Subject Person; provided, that if a Change in Control would be deemed to have occurred (but for the operation of this sentence) as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the beneficial owner of any additional Outstanding Company Common Shares or Outstanding Company Voting Securities which increases the percentage of the Outstanding Company Common Shares or Outstanding Company Voting Securities beneficially owned by the Subject Person, then a Change in Control shall then be deemed to have occurred; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, a Subsidiary or such corporation resulting from such reorganization, merger or consolidation or any subsidiary thereof, and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale, lease, exchange or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale, lease, exchange or other disposition (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such sale, lease, exchange or other disposition, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or a Subsidiary or such corporation or a subsidiary thereof and any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale, lease, exchange or other disposition of assets of the Company. 1.8 "Committee" means the Compensation and Benefits Committee of the Board of Directors or any successor committee appointed by the Board of Directors. 1.12 "Constructive Termination" means resignation or other employment termination by an Employee from an Employing Company as a result of one or more of the following without the Employee's written consent: a. a reduction in Base Salary, except for across-the-board reductions in the Base Salary that similarly affect all Employees included in the Plan, b. the Employing Company's requirement that the Employee be based more than 50 miles from the location at which the Employee was based immediately prior to the Change in Control and which location is more than 35 miles from the Employee's residence, c. the assignment to the Employee of any duties that are materially inconsistent with the Employee's duties prior to the Change in Control, or d. a significant reduction in the Employee's position, duties, or responsibilities from those in effect prior to the Change in Control. 1.13 "Defined Termination" means a termination of employment by an Employee within two years after a Change in Control that occurs as a result of either: a. an Involuntary Termination, or b. a Constructive Termination. 1.18 "Good Cause" means a discontinuance of an Employee's employment by an Employing Company upon one of the following: a. an Employee's Willful and continued failure to adequately perform substantially all of the Employee's duties with an Employing Company, b. an Employee's Willful engagement in conduct which is demonstrably and materially injurious to an Employing Company or an affiliate thereof, monetarily or otherwise, or c. conviction of a felony by the Employee. 1.19 "Involuntary Termination" means any involuntary discontinuance of an Employee's employment by an Employing Company for reasons other than Good Cause. 1.27 "Willful" means that an act or failure to act on an Employee's part is done, or omitted to be done, by the Employee in a manner that is not in good faith, and that is without reasonable belief that such action or omission was in the best interests of an Employing Company." 2. Article Two of the Plan is amended by deleting subsections 2.1.7 and 2.1.8 and adding the following in place thereof: "2.1.7 Transfer to unsuitable position; 2.1.8 Relocation, provided Employee continues at work through the transition period; or 2.1.9 If the Employee has a Defined Termination." 3. Article Three of the Plan is amended by deleting the period at the end of Section 3.5 and adding the following to the end thereof: "; provided, however, that in the event the Employee has a Defined Termination, such restrictive covenants shall: (a) be reasonable under the applicable facts and circumstances; (b) include the following: (i) non-solicitation of customers and employees; (ii) confidentiality of business data; (iii) full release of claims; and (iv) non-denigration of the Company and its affiliates, and their officers, directors and agents; and (c) not include any non- competition limitations." 4. Article Three of the Plan is amended by adding the following new Section 3.6 to the end thereof: "3.6 Notwithstanding any other provision of this Plan to the contrary, if all or any portion of the payments or benefits to which the Employee will be entitled under this Plan, either alone or together with other payments or benefits which the Employee receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement, would constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision thereto and the regulations thereunder (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto), such payment or benefits provided to the Employee under this Plan, and any other payments or benefits which the Employee receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement which would constitute a parachute payment, shall be reduced (but not below zero) as described below to the extent necessary so that no portion thereof would constitute such a parachute payment as previously defined (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto). Whether payments or benefits to the Employee are to be reduced pursuant to the first sentence of this paragraph, and the extent to which they are to be so reduced, will be determined by the firm serving, immediately prior to the Change in Control, as the Company's independent auditors, or if that firm refuses to serve, by another qualified firm, whether or not serving as independent auditors, designated by the Administration Committee under the American Express Senior Executive Severance Plan (the "Firm"). The Firm will be paid reasonable compensation by the Company for such services. If the Firm concludes that its determination is inconsistent with a final determination of a court or the Internal Revenue Service, the Firm shall, based on such final determination, redetermine whether the amount payable to the Employee should have been reduced and, if applicable, the amount of any such reduction. If the Firm determines that a lesser payment should have been made to the Employee, then an amount equal to the amount of the excess of the earlier payment over the redetermined amount (the "Excess Amount") will be deemed for all purposes to be a loan to the Employee made on the date of the Employee's receipt of such Excess Amount, which the Employee will have an obligation to repay to the Company on the fifth business day after demand, together with interest on such amount at the lowest applicable Federal rate (as defined in Section 1274(d) of the Code or any successor provision thereto), compounded semi-annually (the "Section 1274 Rate") from the date of the Employee's receipt of such Excess Amount until the date of such repayment (or such lesser rate (including zero) as may be designated by the Firm such that the Excess Amount and such interest will not be treated as a parachute payment as previously defined). If the Firm determines that a greater payment should have been made to the Employee, within five business days of such determination, the Company will pay to the Employee the amount of the deficiency, together with interest thereon from the date such amount should have been paid to the date of such payment, at the Section 1274 Rate (or such lesser rate (including zero) as may be designated by the Firm such that the amount of such deficiency and such interest will not be treated as a parachute payment as previously defined). If a reduction is to be made pursuant to this paragraph, the Firm will have the right to determine which payments and benefits will be reduced as described below based on the following hierarchy from the first to be reduced to the last (or on such other hierarchy chosen by the Firm in its sole discretion), either those under this Plan alone or such other payments or benefits which the Employee receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as previously defined, under any other plan, agreement or arrangement: (I) nonqualified stock option awards; (II) restricted stock awards, awards in lieu of restricted stock awards, and restricted stock units; (III) amounts payable under deferred compensation (including, but not limited to, base salary, cash bonus or annual incentive awards, and long-term incentive awards) programs; (IV) any other awards or amounts not described in (I), (II) or (III) above that would be payable or provided upon a Change in Control; (V) amounts payable under severance benefit plans; (VI) amounts payable under annual incentive (e.g., cash bonus) plans; (VII) portfolio grant awards and performance grant awards; (VIII) amounts payable under employee welfare benefit plans, such as life insurance plans (including, but not limited to, the American Express Key Executive Life Insurance Plan); (IX) amounts payable under nonqualified employee pension benefit plans; and (X) any other awards or amounts not described in (V), (VI), (VII), (VIII) or (IX) above that would be payable or provided upon Defined Termination. The payments and benefits subject to reduction pursuant to this paragraph include one or more attributes thereof, including, but not limited to, acceleration of the time for the vesting or payment thereof and the crediting of additional interest equivalents thereunder. Such reduction may be effected by the reduction or elimination, in whole or in part, of any such payment or benefit (including any or all attributes thereof). If a payment or benefit (including any or all attributes thereof) is reduced in part, the remaining portion of the payment or benefit (including any or all attributes thereof) will continue in full force and effect under the provisions of such payment or benefit (including any or all attributes thereof) as if the Change in Control did not occur and without regard to such reduction or elimination. Nothing in the preceding three sentences of this paragraph is intended or should be interpreted to change the calculated reduction amounts and procedure of this paragraph." 5. Article Four of the Plan is amended by deleting the period at the end of Section 4.1 and adding the following to the end thereof: "; provided, however, that in the event the Employee has a Defined Termination, the severance benefit under the Plan will be paid within five days after the date of such Change in Control." 6. Sections 7.1 and 7.2 of Article Seven of the Plan are each amended by adding the following to the end thereof: "The foregoing sentence to the contrary notwithstanding, neither the Board of Directors nor the Committee may terminate this Plan or amend this Plan in a manner that is detrimental to the rights of any participant of the Plan without his written consent (i) with respect to the provisions of the Plan which become applicable upon a Change in Control, and (ii) with respect to all provisions of the Plan for a period of two years and one day after the date of a Change in Control." EX-10 3 Exhibit 10.2 AMENDMENT OF AMERICAN EXPRESS COMPANY EXECUTIVES' INCENTIVE COMPENSATION PLAN RESOLVED, that pursuant to Paragraph (b) of Article IX thereof, the American Express Company Executives' Incentive Compensation Plan (the "Plan") is amended effective as of the date hereof, as follows: 1. Paragraph (a) of Article V of the Plan is amended by deleting the period at the end thereof and adding the following: "; provided, however, that if, within two years following the occurrence of a Change in Control (as defined below in Article VI), a participant under the Plan experiences a termination of employment that would otherwise entitle him to receive the payment of severance benefits under the provisions of the severance plan that are in effect and that he participates in as of the date of such Change in Control, and is at Job Band 50 or higher on the date of such termination of employment, then such participant in the Plan shall be paid, within five days after the date of such termination of employment, a prorata award under the Plan equal to (i) (A) the average award paid or payable to such participant under the Plan (or any other annual incentive award program of the Company or one of its subsidiaries at the time of such prior payment) for the two years prior to the Change in Control, or (B) if such participant has not received two such awards, the most recent award paid or payable (or target amount so payable, if such participant has not previously received any such award) to such participant under the Plan (or any other annual incentive award program of the Company or one of its subsidiaries at the time of such prior payment), multiplied by (ii) the number of full or partial months that have elapsed during the performance year under the Plan at the time of such termination of employment divided by 12, provided, further, that in the event such termination of employment occurs after the end of the performance year under the Plan but before the payment date under the Plan, then such participant shall also be paid, within five days after such termination of employment, an award under the Plan equal to (X) the average award paid or payable to such participant under the Plan (or any other annual incentive award program of the Company or one of its subsidiaries at the time of such prior payment) for the two years prior to the Change in Control, or (Y) if such participant has not received two such awards, the most recent award paid or payable (or target amount so payable, if such participant has not previously received any such award) to such participant under the Plan (or any other annual incentive award program of the Company or one of its subsidiaries at the time of such prior payment)." 2. Article VI of the Plan is amended by the addition of new paragraphs (f), (g) and (h) thereto, to read as follows: "(f) Notwithstanding anything to the contrary contained in this Plan (except for Paragraph VI(h)), upon the occurrence of a Change in Control (as defined below), the value of any incentive award, the payment of which has been deferred as of the date of such Change in Control (including any earnings equivalents accrued thereon, plus additional interest equivalents for a period of 24 months from the date of the Change in Control, based on the deferral rate in effect for the plan year prior to the date of the Change in Control), shall be paid to the participant within five days following the date of such Change in Control. For purposes of the preceding sentence, any participant whose incentive award is deferred in whole or in part shall be deemed to have had such portion of his account credited with interest equivalents from the date of deferral to the date of the Change in Control at the higher of the deferral rates (applicable to the alternative chosen by the participant) in effect during such deferral period (but not less than zero)." (g) For purposes of this Plan, "Change in Control" means the happening of any of the following: (i) Any individual, entity or group (a "Person") (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (A) the then outstanding common shares of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that such beneficial ownership shall not constitute a Change in Control if it occurs as a result of any of the following acquisitions of securities: (W) any acquisition directly from the Company, (X) any acquisition by the Company or any corporation, partnership, trust or other entity controlled by the Company (a "Subsidiary"), (Y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (Z) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (A), (B) and (C) of subsection (iii) of this Section (g) are satisfied. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") became the beneficial owner of 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company which, by reducing the number of Outstanding Company Common Shares or Outstanding Company Voting Securities, increases the proportional number of shares beneficially owned by the Subject Person; provided, that if a Change in Control would be deemed to have occurred (but for the operation of this sentence) as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the beneficial owner of any additional Outstanding Company Common Shares or Outstanding Company Voting Securities which increases the percentage of the Outstanding Company Common Shares or Outstanding Company Voting Securities beneficially owned by the Subject Person, then a Change in Control shall then be deemed to have occurred; or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation; or (iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (A) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation, (B) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, a Subsidiary or such corporation resulting from such reorganization, merger or consolidation or any subsidiary thereof, and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) Approval by the shareholders of the Company of (A) a complete liquidation or dissolution of the Company or (B) the sale, lease, exchange or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale, lease, exchange or other disposition (X) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such sale, lease, exchange or other disposition, (Y) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or a Subsidiary or such corporation or a subsidiary thereof and any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (Z) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale, lease, exchange or other disposition of assets of the Company. (h) Notwithstanding any other provision of this Plan to the contrary, if all or any portion of the payments or benefits to which the participant will be entitled under this Plan, either alone or together with other payments or benefits which the participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement, would constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision thereto and the regulations thereunder (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto), such payment or benefits provided to the participant under this Plan, and any other payments or benefits which the participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement which would constitute a parachute payment, shall be reduced (but not below zero) as described below to the extent necessary so that no portion thereof would constitute such a parachute payment as previously defined (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto). Whether payments or benefits to the participant are to be reduced pursuant to the first sentence of this paragraph, and the extent to which they are to be so reduced, will be determined by the firm serving, immediately prior to the Change in Control, as the Company's independent auditors, or if that firm refuses to serve, by another qualified firm, whether or not serving as independent auditors, designated by the Administration Committee under the American Express Senior Executive Severance Plan (the "Firm"). The Firm will be paid reasonable compensation by the Company for such services. If the Firm concludes that its determination is inconsistent with a final determination of a court or the Internal Revenue Service, the Firm shall, based on such final determination, redetermine whether the amount payable to the participant should have been reduced and, if applicable, the amount of any such reduction. If the Firm determines that a lesser payment should have been made to the participant, then an amount equal to the amount of the excess of the earlier payment over the redetermined amount (the "Excess Amount") will be deemed for all purposes to be a loan to the participant made on the date of the participant's receipt of such Excess Amount, which the participant will have an obligation to repay to the Company on the fifth business day after demand, together with interest on such amount at the lowest applicable Federal rate (as defined in Section 1274(d) of the Code or any successor provision thereto), compounded semi-annually (the "Section 1274 Rate") from the date of the participant's receipt of such Excess Amount until the date of such repayment (or such lesser rate (including zero) as may be designated by the Firm such that the Excess Amount and such interest will not be treated as a parachute payment as previously defined). If the Firm determines that a greater payment should have been made to the participant, within five business days of such determination, the Company will pay to the participant the amount of the deficiency, together with interest thereon from the date such amount should have been paid to the date of such payment, at the Section 1274 Rate (or such lesser rate (including zero) as may be designated by the Firm such that the amount of such deficiency and such interest will not be treated as a parachute payment as previously defined). If a reduction is to be made pursuant to this paragraph, the Firm will have the right to determine which payments and benefits will be reduced as described below based on the following hierarchy from the first to be reduced to the last (or on such other hierarchy chosen by the Firm in its sole discretion), either those under this Plan alone or such other payments or benefits which the participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as previously defined, under any other plan, agreement or arrangement: (I) nonqualified stock option awards; (II) restricted stock awards, awards in lieu of restricted stock awards, and restricted stock units; (III) amounts payable under deferred compensation (including, but not limited to, base salary, cash bonus or annual incentive awards, and long-term incentive awards) programs; (IV) any other awards or amounts not described in (I), (II) or (III) above that would be payable or provided upon a Change in Control; (V) amounts payable under severance benefit plans; (VI) amounts payable under annual incentive (e.g., cash bonus) plans; (VII) portfolio grant awards and performance grant awards; (VIII) amounts payable under employee welfare benefit plans, such as life insurance plans (including, but not limited to, the American Express Key Executive Life Insurance Plan); (IX) amounts payable under nonqualified employee pension benefit plans; and (X) any other awards or amounts not described in (V), (VI), (VII), (VIII) or (IX) above that would be payable or provided upon a termination of employment that occurs within two years after a Change in Control as described in Paragraph V(a) above. The payments and benefits subject to reduction pursuant to this paragraph include one or more attributes thereof, including, but not limited to, acceleration of the time for the vesting or payment thereof and the crediting of additional interest equivalents thereunder. Such reduction may be effected by the reduction or elimination, in whole or in part, of any such payment or benefit (including any or all attributes thereof). If a payment or benefit (including any or all attributes thereof) is reduced in part, the remaining portion of the payment or benefit (including any or all attributes thereof) will continue in full force and effect under the provisions of such payment or benefit (including any or all attributes thereof) as if the Change in Control did not occur and without regard to such reduction or elimination. Nothing in the preceding three sentences of this paragraph is intended or should be interpreted to change the calculated reduction amounts and procedure of this paragraph." 3. Paragraph (b) of Article IX of the Plan is amended in its entirety, to read as follows: "The Board of Directors of the Company may amend this Plan in whole or in part from time to time, and may terminate it at any time. The foregoing sentence to the contrary notwithstanding, the Board of Directors of the Company may not amend or terminate this Plan in a manner that is detrimental to the rights of any participant with respect to the provisions which are applicable upon a Change in Control, without his written consent. The Board of Directors of the Company shall cause all companies that are or have been Participating Companies to be notified promptly of any amendment or termination. No amendment or termination shall deprive any participant, former participant, beneficiary or legal representatives of a former participant of any right under this Plan as such right exists at the time of such amendment or termination, nor increase the obligations of any company that is or has been a Participating Company without its consent." EX-10 4 Exhibit 10.3 AMENDMENT OF AMERICAN EXPRESS COMPANY KEY EXECUTIVE LIFE INSURANCE PLAN RESOLVED, that pursuant to Section 10.01 thereof, the American Express Company Key Executive Life Insurance Plan (the "Plan") is amended effective as of the date hereof, as follows: 1. Article II of the Plan is amended by the addition of new Section 2.19 as follows: "2.19 For purposes of this Plan, "Change in Control" means the happening of any of the following: (a) Any individual, entity or group (a "Person") (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (i) the then outstanding common shares of the Company (the "Outstanding Company Common Shares") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that such beneficial ownership shall not constitute a Change in Control if it occurs as a result of any of the following acquisitions of securities: (i) any acquisition directly from the Company, (ii) any acquisition by the Company or any corporation, partnership, trust or other entity controlled by the Company (a "Subsidiary"), (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 2.19 are satisfied. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") became the beneficial owner of 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company which, by reducing the number of Outstanding Company Common Shares or Outstanding Company Voting Securities, increases the proportional number of shares beneficially owned by the Subject Person; provided, that if a Change in Control would be deemed to have occurred (but for the operation of this sentence) as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the beneficial owner of any additional Outstanding Company Common Shares or Outstanding Company Voting Securities which increases the percentage of the Outstanding Company Common Shares or Outstanding Company Voting Securities beneficially owned by the Subject Person, then a Change in Control shall then be deemed to have occurred; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, a Subsidiary or such corporation resulting from such reorganization, merger or consolidation or any subsidiary thereof, and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale, lease, exchange or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale, lease, exchange or other disposition (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such sale, lease, exchange or other disposition, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or a Subsidiary or such corporation or a subsidiary thereof and any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale, lease, exchange or other disposition of assets of the Company." 2. Section 7.02 of the Plan is amended by adding the following to the end thereof: "d. (i) Notwithstanding any other provision of this Plan to the contrary (except for Section 7.02(d)(ii)), following the occurrence of a Change in Control (as defined below), in the event a Participant under the Plan whose job is classified at grade level 50 or above experiences a Defined Termination as such term is defined in the Company's Senior Executive Severance Plan (regardless of whether or not the Participant is eligible under such plan), then the Policy Owner shall transfer ownership of the Policy to the Participant (or Assignee), who shall become sole owner of the Policy free of all provisions and restrictions of this Plan, within five days after the date of such Defined Termination. (ii) Notwithstanding any other provision of this Plan to the contrary, if all or any portion of the payments or benefits to which the Participant will be entitled under this Plan, either alone or together with other payments or benefits which the Participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement, would constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision thereto and the regulations thereunder (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto), such payment or benefits provided to the Participant under this Plan, and any other payments or benefits which the Participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement which would constitute a parachute payment, shall be reduced (but not below zero) as described below to the extent necessary so that no portion thereof would constitute such a parachute payment as previously defined (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto). Whether payments or benefits to the Participant are to be reduced pursuant to the first sentence of this paragraph, and the extent to which they are to be so reduced, will be determined by the firm serving, immediately prior to the Change in Control, as the Company's independent auditors, or if that firm refuses to serve, by another qualified firm, whether or not serving as independent auditors, designated by the Administration Committee under the American Express Senior Executive Severance Plan (the "Firm"). The Firm will be paid reasonable compensation by the Company for such services. If the Firm concludes that its determination is inconsistent with a final determination of a court or the Internal Revenue Service, the Firm shall, based on such final determination, redetermine whether the amount payable to the Participant should have been reduced and, if applicable, the amount of any such reduction. If the Firm determines that a lesser payment should have been made to the Participant, then an amount equal to the amount of the excess of the earlier payment over the redetermined amount (the "Excess Amount") will be deemed for all purposes to be a loan to the Participant made on the date of the Participant's receipt of such Excess Amount, which the Participant will have an obligation to repay to the Company on the fifth business day after demand, together with interest on such amount at the lowest applicable Federal rate (as defined in Section 1274(d) of the Code or any successor provision thereto), compounded semi-annually (the "Section 1274 Rate") from the date of the Participant's receipt of such Excess Amount until the date of such repayment (or such lesser rate (including zero) as may be designated by the Firm such that the Excess Amount and such interest will not be treated as a parachute payment as previously defined). If the Firm determines that a greater payment should have been made to the Participant, within five business days of such determination, the Company will pay to the Participant the amount of the deficiency, together with interest thereon from the date such amount should have been paid to the date of such payment, at the Section 1274 Rate (or such lesser rate (including zero) as may be designated by the Firm such that the amount of such deficiency and such interest will not be treated as a parachute payment as previously defined). If a reduction is to be made pursuant to this paragraph, the Firm will have the right to determine which payments and benefits will be reduced as described below based on the following hierarchy from the first to be reduced to the last (or on such other hierarchy chosen by the Firm in its sole discretion), either those under this Plan alone or such other payments or benefits which the Participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as previously defined, under any other plan, agreement or arrangement: (I) nonqualified stock option awards; (II) restricted stock awards, awards in lieu of restricted stock awards, and restricted stock units; (III) amounts payable under deferred compensation (including, but not limited to, base salary, cash bonus or annual incentive awards, and long-term incentive awards) programs; (IV) any other awards or amounts not described in (I), (II) or (III) above that would be payable or provided upon a Change in Control; (V) amounts payable under severance benefit plans; (VI) amounts payable under annual incentive (e.g., cash bonus) plans; (VII) portfolio grant awards and performance grant awards; (VIII) amounts payable under employee welfare benefit plans, such as life insurance plans (including, but not limited to, the American Express Key Executive Life Insurance Plan); (IX) amounts payable under nonqualified employee pension benefit plans; and (X) any other awards or amounts not described in (V), (VI), (VII), (VIII) or (IX) above that would be payable or provided upon a Defined Termination as described in Section 7.02(d). The payments and benefits subject to reduction pursuant to this paragraph include one or more attributes thereof, including, but not limited to, acceleration of the time for the vesting or payment thereof and the crediting of additional interest equivalents thereunder. Such reduction may be effected by the reduction or elimination, in whole or in part, of any such payment or benefit (including any or all attributes thereof). If a payment or benefit (including any or all attributes thereof) is reduced in part, the remaining portion of the payment or benefit (including any or all attributes thereof) will continue in full force and effect under the provisions of such payment or benefit (including any or all attributes thereof) as if the Change in Control did not occur and without regard to such reduction or elimination. Nothing in the preceding three sentences of this paragraph is intended or should be interpreted to change the calculated reduction amounts and procedure of this paragraph." 3. Sections 10.01 and 11.01 of the Plan is each amended by adding the following to the end thereof: "The foregoing sentence to the contrary notwithstanding, the Company may not amend or terminate this Plan in a manner that is detrimental to the rights of any Participant with respect to the provisions which are applicable upon a Change in Control, without his written consent." EX-10 5 Exhibit 10.4 AMENDMENT OF AMERICAN EXPRESS SALARY/BONUS DEFERRAL PLAN RESOLVED, that pursuant to Section 7.1 thereof, the American Express Salary/Bonus Deferral Plan (the "Plan") is amended effective as of the date hereof, as follows: 1. Article I of the Plan is amended by adding new Section 1.22 thereto, to read as follows: "1.22 'Change in Control' means the happening of any of the following: (a) Any individual, entity or group (a "Person") (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (i) the then outstanding common shares of the Company (the "Outstanding Company Common Shares") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that such beneficial ownership shall not constitute a Change in Control if it occurs as a result of any of the following acquisitions of securities: (i) any acquisition directly from the Company, (ii) any acquisition by the Company or any corporation, partnership, trust or other entity controlled by the Company (a "Subsidiary"), (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 1.22 are satisfied. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") became the beneficial owner of 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company which, by reducing the number of Outstanding Company Common Shares or Outstanding Company Voting Securities, increases the proportional number of shares beneficially owned by the Subject Person; provided, that if a Change in Control would be deemed to have occurred (but for the operation of this sentence) as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the beneficial owner of any additional Outstanding Company Common Shares or Outstanding Company Voting Securities which increases the percentage of the Outstanding Company Common Shares or Outstanding Company Voting Securities beneficially owned by the Subject Person, then a Change in Control shall then be deemed to have occurred; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, a Subsidiary or such corporation resulting from such reorganization, merger or consolidation or any subsidiary thereof, and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale, lease, exchange or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale, lease, exchange or other disposition (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such sale, lease, exchange or other disposition, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or a Subsidiary or such corporation or a subsidiary thereof and any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale, lease, exchange or other disposition of assets of the Company." 2. Section 6.5 of the Plan is renumbered Section 6.7 and new Sec- tions 6.5 and 6.6 are added, to read as follows: "6.5 Notwithstanding anything to the contrary contained in the Plan (except for Section 6.6), upon the occurrence of a Change in Control, the amounts credited to a Participant's Deferred Compensation Account as of the date of such Change in Control (including any earnings equivalents accrued thereon, plus additional interest equivalents for a period of 24 months from the date of the Change in Control, based on the deferral rate in effect for the plan year prior to the date of the Change in Control) shall be paid to the Participant within five days follow- ing the date of such Change in Control. For purposes of the preceding sentence, any Deferred Compensation Account shall be deemed to have been credited with interest equivalents from the date of deferral to the date of the Change in Control at the higher of the deferral rates (applicable to the alternative chosen by the Participant) in effect during such deferral period (but not less than zero)." "6.6 Notwithstanding any other provision of this Plan to the contrary, if all or any portion of the payments or benefits to which the Participant will be entitled under this Plan, either alone or together with other payments or benefits which the Participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement, would constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision thereto and the regulations thereunder (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto), such payment or benefits provided to the Participant under this Plan, and any other payments or benefits which the Participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement which would constitute a parachute payment, shall be reduced (but not below zero) as described below to the extent necessary so that no portion thereof would constitute such a parachute payment as previously defined (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto). Whether payments or benefits to the Participant are to be reduced pursuant to the first sentence of this paragraph, and the extent to which they are to be so reduced, will be determined by the firm serving, immediately prior to the Change in Control, as the Company's independent auditors, or if that firm refuses to serve, by another qualified firm, whether or not serving as independent auditors, designated by the Administration Committee under the American Express Senior Executive Severance Plan (the "Firm"). The Firm will be paid reasonable compensation by the Company for such services. If the Firm concludes that its determination is inconsistent with a final determination of a court or the Internal Revenue Service, the Firm shall, based on such final determination, redetermine whether the amount payable to the Participant should have been reduced and, if applicable, the amount of any such reduction. If the Firm determines that a lesser payment should have been made to the Participant, then an amount equal to the amount of the excess of the earlier payment over the redetermined amount (the "Excess Amount") will be deemed for all purposes to be a loan to the Participant made on the date of the Participant's receipt of such Excess Amount, which the Participant will have an obligation to repay to the Company on the fifth business day after demand, together with interest on such amount at the lowest applicable Federal rate (as defined in Section 1274(d) of the Code or any successor provision thereto), compounded semi-annually (the "Section 1274 Rate") from the date of the Participant's receipt of such Excess Amount until the date of such repayment (or such lesser rate (including zero) as may be designated by the Firm such that the Excess Amount and such interest will not be treated as a parachute payment as previously defined). If the Firm determines that a greater payment should have been made to the Participant, within five business days of such determination, the Company will pay to the Participant the amount of the deficiency, together with interest thereon from the date such amount should have been paid to the date of such payment, at the Section 1274 Rate (or such lesser rate (including zero) as may be designated by the Firm such that the amount of such deficiency and such interest will not be treated as a parachute payment as previously defined). If a reduction is to be made pursuant to this paragraph, the Firm will have the right to determine which payments and benefits will be reduced as described below based on the following hierarchy from the first to be reduced to the last (or on such other hierarchy chosen by the Firm in its sole discretion), either those under this Plan alone or such other payments or benefits which the Participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as previously defined, under any other plan, agreement or arrangement: (I) nonqualified stock option awards; (II) restricted stock awards, awards in lieu of restricted stock awards, and restricted stock units; (III) amounts payable under deferred compensation (including, but not limited to, base salary, cash bonus or annual incentive awards, and long-term incentive awards) programs; (IV) any other awards or amounts not described in (I), (II) or (III) above that would be payable or provided upon a Change in Control; (V) amounts payable under severance benefit plans; (VI) amounts payable under annual incentive (e.g., cash bonus) plans; (VII) portfolio grant awards and performance grant awards; (VIII) amounts payable under employee welfare benefit plans, such as life insurance plans (including, but not limited to, the American Express Key Executive Life Insurance Plan); (IX) amounts payable under nonqualified employee pension benefit plans; and (X) any other awards or amounts not described in (V), (VI), (VII), (VIII) or (IX) above that would be payable or provided (i) upon a Defined Termination, or (ii) upon a termination of employment within two years after a Change in Control if the Participant is in a job classified as Job Band 50, and if such termination of employment would otherwise entitle him to receive the payment of severance benefits under the provisions of the severance plan that are in effect and that he participates in as of the date of such Change in Control, as the case may be. The payments and benefits subject to reduction pursuant to this paragraph include one or more attributes thereof, including, but not limited to, acceleration of the time for the vesting or payment thereof and the crediting of additional interest equivalents thereunder. Such reduction may be effected by the reduction or elimination, in whole or in part, of any such payment or benefit (including any or all attributes thereof). If a payment or benefit (including any or all attributes thereof) is reduced in part, the remaining portion of the payment or benefit (including any or all attributes thereof) will continue in full force and effect under the provisions of such payment or benefit (including any or all attributes thereof) as if the Change in Control did not occur and without regard to such reduction or elimination. Nothing in the preceding three sentences of this paragraph is intended or should be interpreted to change the calculated reduction amounts and procedure of this paragraph." 3. Section 7.1 of the Plan is amended in its entirety, to read as follows: "7.1 The Committee may at any time and from time to time modify or amend any or all of the provisions of the Plan (including, but not limited to, acceleration of payment(s)) or may at any time terminate the Plan; provided that no such action shall materially adversely affect the rights of any Participant hereunder without his consent thereto, as determined by the Committee in its sole discretion. The foregoing sentence to the contrary notwithstanding, the Board of Directors, the Committee or any other person may not amend or terminate this Plan in a manner that is detrimental to the rights of any Participant of the Plan with respect to the provisions which become applicable upon a Change in Control, without his written consent." EX-10 6 Exhibit 10.5 AMENDMENT OF AMERICAN EXPRESS SUPPLEMENTARY PENSION PLAN RESOLVED, that pursuant to Section 9 thereof, effective as of the date hereof the American Express Supplementary Pension Plan (the "Plan") is amended, as follows: 1. Section 2 of the Plan is amended by adding at the end thereof new definitions, to read as follows: "'Change in Control' means the happening of any of the following: (a) Any individual, entity or group (a "Person") (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (i) the then outstanding common shares of the Company (the "Outstanding Company Common Shares") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that such beneficial ownership shall not constitute a Change in Control if it occurs as a result of any of the following acquisitions of securities: (i) any acquisition directly from the Company, (ii) any acquisition by the Company or any corporation, partnership, trust or other entity controlled by the Company (a "Subsidiary"), (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 2 are satisfied. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") became the beneficial owner of 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company which, by reducing the number of Outstanding Company Common Shares or Outstanding Company Voting Securities, increases the proportional number of shares beneficially owned by the Subject Person; provided, that if a Change in Control would be deemed to have occurred (but for the operation of this sentence) as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the beneficial owner of any additional Outstanding Company Common Shares or Outstanding Company Voting Securities which increases the percentage of the Outstanding Company Common Shares or Outstanding Company Voting Securities beneficially owned by the Subject Person, then a Change in Control shall then be deemed to have occurred; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, a Subsidiary or such corporation resulting from such reorganization, merger or consolidation or any subsidiary thereof, and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale, lease, exchange or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale, lease, exchange or other disposition (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such sale, lease, exchange or other disposition, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or a Subsidiary or such corporation or a subsidiary thereof and any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale, lease, exchange or other disposition of assets of the Company. 2. Section 4 of the Plan is amended by adding at the end thereof new sentences, to read as follows: "Notwithstanding anything to the contrary contained in either this Supplementary Pension Plan or the Retirement Plan (except for the provision in this Section 4 dealing with a limitation under Section 280G of the Internal Revenue Code of 1986, as amended), upon a Change in Control all accrued benefits under the Plan as of the date of the Change in Control shall be funded by the Company within five days following the Change in Control in the form of a so-called "rabbi" grantor trust, in an amount determined by the then current actuary for this Supplementary Pension Plan to be sufficient to pay all accrued liabilities as of the date of the Change in Control including additional accrued benefits as described below in this paragraph. If, during the first year following a Change in Control, an Employee experiences a Defined Termination, as such term is defined in the Com- pany's Senior Executive Severance Plan (provided that the Employee is eligible under such plan), then such Employee shall be deemed to have rendered two additional years of Credited Service and to have attained two additional years of age for all purposes under the Plan from his date of termination, and shall also be credited with an additional accrued benefit under the Plan that is equivalent to the Pension benefit that would have accrued under the Retirement Plan if the Employee had rendered such two additional years of Credited Service and had attained such additional two years of age for all purposes under the Retirement Plan. Upon such a termination of employment (as described in the preceding sentence) during the second year following a Change in Control, then such Employee shall be deemed to have rendered one additional year of Credited Service and to have attained one additional year of age for all purposes under the Plan and the Retirement Plan, as described in the preceding sentence. Notwithstanding any other provision of this Plan to the contrary, if all or any portion of the payments or benefits to which the Employee will be entitled under this Plan, either alone or together with other payments or benefits which the Employee receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement, would constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision thereto and the regulations thereunder (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto), such payment or benefits provided to the Employee under this Plan, and any other payments or benefits which the Employee receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement which would constitute a parachute payment, shall be reduced (but not below zero) as described below to the extent necessary so that no portion thereof would constitute such a parachute payment as previously defined (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto). Whether payments or benefits to the Employee are to be reduced pursuant to the first sentence of this paragraph, and the extent to which they are to be so reduced, will be determined by the firm serving, immediately prior to the Change in Control, as the Company's independent auditors, or if that firm refuses to serve, by another qualified firm, whether or not serving as independent auditors, designated by the Administration Committee under the American Express Senior Executive Severance Plan (the "Firm"). The Firm will be paid reasonable compensation by the Company for such services. If the Firm concludes that its determination is inconsistent with a final determination of a court or the Internal Revenue Service, the Firm shall, based on such final determination, redetermine whether the amount payable to the Employee should have been reduced and, if applicable, the amount of any such reduction. If the Firm determines that a lesser payment should have been made to the Employee, then an amount equal to the amount of the excess of the earlier payment over the redetermined amount (the "Excess Amount") will be deemed for all purposes to be a loan to the Employee made on the date of the Employee's receipt of such Excess Amount, which the Employee will have an obligation to repay to the Company on the fifth business day after demand, together with interest on such amount at the lowest applicable Federal rate (as defined in Section 1274(d) of the Code or any successor provision thereto), compounded semi-annually (the "Section 1274 Rate") from the date of the Employee's receipt of such Excess Amount until the date of such repayment (or such lesser rate (including zero) as may be designated by the Firm such that the Excess Amount and such interest will not be treated as a parachute payment as previously defined). If the Firm determines that a greater payment should have been made to the Employee, within five business days of such determination, the Company will pay to the Employee the amount of the deficiency, together with interest thereon from the date such amount should have been paid to the date of such payment, at the Section 1274 Rate (or such lesser rate (including zero) as may be designated by the Firm such that the amount of such deficiency and such interest will not be treated as a parachute payment as previously defined). If a reduction is to be made pursuant to this paragraph, the Firm will have the right to determine which payments and benefits will be reduced as described below based on the following hierarchy from the first to be reduced to the last (or on such other hierarchy chosen by the Firm in its sole discretion), either those under this Plan alone or such other payments or benefits which the Employee receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as previously defined, under any other plan, agreement or arrangement: (I) nonqualified stock option awards; (II) restricted stock awards, awards in lieu of restricted stock awards, and restricted stock units; (III) amounts payable under deferred compensation (including, but not limited to, base salary, cash bonus or annual incentive awards, and long-term incentive awards) programs; (IV) any other awards or amounts not described in (I), (II) or (III) above that would be payable or provided upon a Change in Control; (V) amounts payable under severance benefit plans; (VI) amounts payable under annual incentive (e.g., cash bonus) plans; (VII) portfolio grant awards and performance grant awards; (VIII) amounts payable under employee welfare benefit plans, such as life insurance plans (including, but not limited to, the American Express Key Executive Life Insurance Plan); (IX) amounts payable under nonqualified employee pension benefit plans; and (X) any other awards or amounts not described in (V), (VI), (VII), (VIII) or (IX) above that would be payable or provided upon Defined Termination. The payments and benefits subject to reduction pursuant to this paragraph include one or more attributes thereof, including, but not limited to, acceleration of the time for the vesting or payment thereof and the crediting of additional interest equivalents thereunder. Such reduction may be effected by the reduction or elimination, in whole or in part, of any such payment or benefit (including any or all attributes thereof). If a payment or benefit (including any or all attributes thereof) is reduced in part, the remaining portion of the payment or benefit (including any or all attributes thereof) will continue in full force and effect under the provisions of such payment or benefit (including any or all attributes thereof) as if the Change in Control did not occur and without regard to such reduction or elimination. Nothing in the preceding three sentences of this paragraph is intended or should be interpreted to change the calculated reduction amounts and procedure of this paragraph." 3. Section 9 of the Plan is amended by the deletion of the first sentence thereof, and its replacement with the following sentences, to read as follows: "The Board of Directors of American Express Company retains the right, at any time and from time to time, to alter, amend, change, suspend, substitute, delete, revoke or terminate this Plan in whole or in part, for any reason, and without either the consent of, or prior notification to, any person. The Board of Directors of American Express Company shall have the right to delegate its authority and power here- under, or any portion thereof, to any committee of the Board of Directors of American Express Company, and the right to rescind any such delegation to such committee in whole or in part. The two foregoing sentences to the contrary notwithstanding, neither the Board of Directors of American Express Company nor its delegate may terminate this Plan or amend this Plan in any manner that is detrimental to the rights of any Employee with respect to the provisions which become applicable upon a Change in Control, without his written consent." EX-10 7 Exhibit 10.6 AMENDMENT OF LONG-TERM INCENTIVE AWARDS UNDER THE AMERICAN EXPRESS COMPANY 1979 AND 1989 LONG-TERM INCENTIVE PLAN (THE "PLANS") All long-term incentive awards under the Plans that are outstanding as of the date hereof are amended as of the date hereof by adding the following paragraph to the end thereof, as applicable: I. Nonqualified Stock Options ("Options") Change in Control. Notwithstanding anything in this Agreement to the contrary (except for the provision dealing with a limitation under Section 280G of the Internal Revenue Code of 1986, as amended), upon a Change in Control (as defined below), the awardholder shall immediately be 100% vested in the total number of shares covered hereby such that they shall be fully exercisable. The Committee may not amend or delete this section of this Agreement in a manner that is detrimental to the awardholder, without his written consent. A "Change in Control" means the happening of any of the following: [See long definition in Section VI below.] II. Restricted Stock Awards ("RSA's") Change in Control. Notwithstanding anything in this Agreement to the contrary (except for the provision dealing with a limitation under Section 280G of the Internal Revenue Code of 1986, as amended), upon a Change in Control (as defined below), the awardholder shall immediately be 100% vested in the total number of shares covered hereby such that they shall no longer be subject to any transfer restrictions imposed by this Agreement. The Committee may not amend or delete this section of this Agreement in a manner that is detrimental to the awardholder, without his written consent. A "Change in Control" means the happening of any of the following: [See long definition in Section VI below.] III. Letters of Intent in lieu of RSA's Change in Control. Notwithstanding anything in this Agreement to the contrary (except for the provision dealing with a limitation under Section 280G of the Internal Revenue Code of 1986, as amended), upon a Change in Control (as defined below), the awardholder shall immediately be entitled to receive the total number of shares covered hereby such that they shall no longer be subject to any restrictions on issuance imposed by this Agreement. The Committee may not amend or delete this section of this Agreement in a manner that is detrimental to the awardholder, without his written consent. A "Change in Control" means the happening of any of the following: [See long definition in Section IV below.] IV. Restricted Stock Units ("RSU's") Change in Control. Notwithstanding anything in this Agreement to the contrary (except for the provision dealing with a limitation under Section 280G of the Internal Revenue Code of 1986, as amended), upon a Change in Control (as defined below), the awardholder shall immediately be entitled to receive, within five days after the date of such Change in Control, that number of common shares of American Express Company equal in value to the awardholder's Retirement Parity Value, plus the value of "dividend equivalents" on such shares to the extent such "dividend equivalents" have not already been paid to the awardholder under Section 3.1 of this Agreement, and such shares shall no longer be subject to any transfer restrictions imposed by this Agreement or to any non-compete, consulting or other restrictions under Section 3.3 of this Agreement. The Committee may not amend or delete this section of this Agreement in a manner that is detrimental to the awardholder, without his written consent. A "Change in Control" means the happening of any of the following: [See long definition in Section VI below.] V. Portfolio Grant Awards ("PG-III's, PG-IV's and PG-V's") and Performance Grants (also known as Annual Incentive Awards) Change in Control. Notwithstanding anything in this Agreement to the contrary (except for the provision dealing with a limitation under Section 280G of the Internal Revenue Code of 1986, as amended), if, within two years after the date of a Change in Control (as defined below), the awardholder experiences a termination of employment that would otherwise entitle him to receive the payment of severance benefits under the provisions of the severance plan that are in effect and that he participates in as of the date of such Change in Control, (i) the awardholder shall immediately be 100% vested in the Award; (ii) the Committee shall determine the value of the Award as of the date of such termination of employment as if the Award Period had just ended, based on results against the percentage performance measures to the last day of calendar quarter ending on or immediately prior to such date (that is, based on the percentage of grant value produced by such interim results), but prorated based on (a) the total number of full and partial months of the Award Period which have elapsed between (X) January 1 of the year in which the Award Date occurs, and (Y) the date of such termination of employment, divided by (b) the total number of months in the Award Period; and (iii) such value of the Award shall be paid to the awardholder within five days after the date of such termination of employment. The Committee may not amend or delete this section of this Agreement in a manner that is detrimental to the awardholder, without his written consent. A "Change in Control" means the happening of any of the following: [See long definition in Section VI below.] VI. Definition of "Change in Control" (a) Any individual, entity or group (a "Person") (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (i) the then outstanding common shares of the Company (the "Outstanding Company Common Shares") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that such beneficial ownership shall not constitute a Change in Control if it occurs as a result of any of the following acquisitions of securities: (i) any acquisition directly from the Company, (ii) any acquisition by the Company or any corporation, partnership, trust or other entity controlled by the Company (a "Subsidiary"), (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Change in Control Section are satisfied. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") became the beneficial owner of 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company which, by reducing the number of Outstanding Company Common Shares or Outstanding Company Voting Securities, increases the proportional number of shares beneficially owned by the Subject Person; provided, that if a Change in Control would be deemed to have occurred (but for the operation of this sentence) as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the beneficial owner of any additional Outstanding Company Common Shares or Outstanding Company Voting Securities which increases the percentage of the Outstanding Company Common Shares or Outstanding Company Voting Securities beneficially owned by the Subject Person, then a Change in Control shall then be deemed to have occurred; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, a Subsidiary or such corporation resulting from such reorganization, merger or consolidation or any subsidiary thereof, and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale, lease, exchange or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale, lease, exchange or other disposition (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such sale, lease, exchange or other disposition, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or a Subsidiary or such corporation or a subsidiary thereof and any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale, lease, exchange or other disposition of assets of the Company. VII. Applicable to all awards in I through V above: Notwithstanding any other provision of this Agreement to the contrary, if all or any portion of the payments or benefits to which the participant will be entitled under this Agreement, either alone or together with other payments or benefits which the participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement, would constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision thereto and the regulations thereunder (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto), such payment or benefits provided to the participant under this Agreement, and any other payments or benefits which the participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as hereinafter defined, under any other plan, agreement or arrangement which would constitute a parachute payment, shall be reduced (but not below zero) as described below to the extent necessary so that no portion thereof would constitute such a parachute payment as previously defined (except that "2.95" shall be used instead of "3" under Section 280G(b)(2)(A)(ii) of the Code or any successor provision thereto). Whether payments or benefits to the participant are to be reduced pursuant to the first sentence of this paragraph, and the extent to which they are to be so reduced, will be determined by the firm serving, immediately prior to the Change in Control, as the Company's independent auditors, or if that firm refuses to serve, by another qualified firm, whether or not serving as independent auditors, designated by the Administration Committee under the American Express Senior Executive Severance Plan (the "Firm"). The Firm will be paid reasonable compensation by the Company for such services. If the Firm concludes that its determination is inconsistent with a final determination of a court or the Internal Revenue Service, the Firm shall, based on such final determination, redetermine whether the amount payable to the participant should have been reduced and, if applicable, the amount of any such reduction. If the Firm determines that a lesser payment should have been made to the participant, then an amount equal to the amount of the excess of the earlier payment over the redetermined amount (the "Excess Amount") will be deemed for all purposes to be a loan to the participant made on the date of the participant's receipt of such Excess Amount, which the participant will have an obligation to repay to the Company on the fifth business day after demand, together with interest on such amount at the lowest applicable Federal rate (as defined in Section 1274(d) of the Code or any successor provision thereto), compounded semi-annually (the "Section 1274 Rate") from the date of the participant's receipt of such Excess Amount until the date of such repayment (or such lesser rate (including zero) as may be designated by the Firm such that the Excess Amount and such interest will not be treated as a parachute payment as previously defined). If the Firm determines that a greater payment should have been made to the participant, within five business days of such determination, the Company will pay to the participant the amount of the deficiency, together with interest thereon from the date such amount should have been paid to the date of such payment, at the Section 1274 Rate (or such lesser rate (including zero) as may be designated by the Firm such that the amount of such deficiency and such interest will not be treated as a parachute payment as previously defined). If a reduction is to be made pursuant to this paragraph, the Firm will have the right to determine which payments and benefits will be reduced as described below based on the following hierarchy from the first to be reduced to the last (or on such other hierarchy chosen by the Firm in its sole discretion), either those under this Agreement alone or such other payments or benefits which the participant receives or is entitled to receive directly or indirectly from the Company or any of its subsidiaries or any other person or entity that would be treated as a payor of parachute payments as previously defined, under any other plan, agreement or arrangement: (I) nonqualified stock option awards; (II) restricted stock awards, awards in lieu of restricted stock awards, and restricted stock units; (III) amounts payable under deferred compensation (including, but not limited to, base salary, cash bonus or annual incentive awards, and long-term incentive awards) programs; (IV) any other awards or amounts not described in (I), (II) or (III) above that would be payable or provided upon a Change in Control; (V) amounts payable under severance benefit plans; (VI) amounts payable under annual incentive (e.g., cash bonus) plans; (VII) portfolio grant awards and performance grant awards; (VIII) amounts payable under employee welfare benefit plans, such as life insurance plans (including, but not limited to, the American Express Key Executive Life Insurance Plan); (IX) amounts payable under nonqualified employee pension benefit plans; and (X) any other awards or amounts not described in (V), (VI), (VII), (VIII) or (IX) above that would be payable or provided upon a termination of employment that occurs within two years after a Change in Control as described in the Change in Control provision above. The payments and benefits subject to reduction pursuant to this paragraph include one or more attributes thereof, including, but not limited to, acceleration of the time for the vesting or payment thereof and the crediting of additional interest equivalents thereunder. Such reduction may be effected by the reduction or elimination, in whole or in part, of any such payment or benefit (including any or all attributes thereof). If a payment or benefit (including any or all attributes thereof) is reduced in part, the remaining portion of the payment or benefit (including any or all attributes thereof) will continue in full force and effect under the provisions of such payment or benefit (including any or all attributes thereof) as if the Change in Control did not occur and without regard to such reduction or elimination. Nothing in the preceding three sentences of this paragraph is intended or should be interpreted to change the calculated reduction amounts and procedure of this paragraph. EX-12 8 EXHIBIT 12.1 AMERICAN EXPRESS COMPANY COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions) Nine Months Ended Years Ended December 31, September 30, ----------------------------------- 1994 1993 1992 1991 1990 Earnings: ------------ ---- ---- ---- ---- Pretax income from continuing operations $1,416 $2,326 $ 896 $ 622 $1,578 Interest expense 1,409 1,783 2,171 2,761 3,160 Other adjustments 101 88 196 142 209 ----- ----- ----- ----- ----- Total earnings (a) $2,926 $4,197 $3,263 $3,525 $4,947 ----- ----- ----- ----- ----- Fixed charges: Interest expense $1,409 $1,783 $2,171 $2,761 $3,160 Other adjustments 99 130 154 147 143 ----- ----- ----- ----- ----- Total fixed charges (b) $1,508 $1,913 $2,325 $2,908 $3,303 ----- ----- ----- ----- ----- Ratio of earnings to fixed charges (a/b) 1.94 2.19 1.40 1.21 1.50 Included in interest expense in the above computation is interest expense related to the Company's international banking operations and Travel Related Services' consumer lending activities, which is netted against interest and dividends in the Consolidated Statement of Income. For purposes of the "earnings" computation, other adjustments include adding the amortization of capitalized interest, the net loss of affiliates accounted for at equity whose debt is not guaranteed by the Company, the minority interest in the earnings of majority-owned subsidiaries with fixed charges, and the interest component of rental expense and subtracting undistributed net income of affiliates accounted for at equity. For purposes of the "fixed charges" computation, other adjustments include capitalized interest costs and the interest component of rental expense. On May 31, 1994, the Company completed the spin-off of Lehman Brothers through a dividend to American Express common shareholders. Accordingly, Lehman Brothers' results are reported as a discontinued operation and are excluded from the above computation for all periods presented. In March 1993, the Company reduced its ownership in First Data Corporation to approximately 22 percent through a public offering. As a result, beginning in 1993 FDC is reported as an equity investment in the above computation. EX-12 9 EXHIBIT 12.2 AMERICAN EXPRESS COMPANY COMPUTATION IN SUPPORT OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED SHARE DIVIDENDS (Dollars in millions) Nine Months Ended Years Ended December 31, September 30, ---------------------------------- 1994 1993 1992 1991 1990 Earnings: ---- ---- ---- ---- ---- Pretax income from continuing operations $1,416 $2,326 $ 896 $ 622 $1,578 Interest expense 1,409 1,783 2,171 2,761 3,160 Other adjustments 101 88 196 142 209 ----- ----- ----- ----- ----- Total earnings (a) $2,926 $4,197 $3,263 $3,525 $4,947 ----- ----- ----- ----- ----- Fixed charges and preferred share dividends: Interest expense $1,409 $1,783 $2,171 $2,761 $3,160 Dividends on preferred shares 44 66 65 61 74 Other adjustments 99 130 154 147 143 ----- ----- ----- ----- ----- Total fixed charges and preferred share dividends (b) $1,552 $1,979 $2,390 $2,969 $3,377 ----- ----- ----- ----- ----- Ratio of earnings to fixed charges and preferred share dividends (a/b) 1.89 2.12 1.37 1.19 1.46 Included in interest expense in the above computation is interest expense related to the Company's international banking operations and Travel Related Services' consumer lending activities, which is netted against interest and dividends in the Consolidated Statement of Income. For purposes of the "earnings" computation, other adjustments include adding the amortization of capitalized interest, the net loss of affiliates accounted for at equity whose debt is not guaranteed by the Company, the minority interest in the earnings of majority-owned subsidiaries with fixed charges, and the interest component of rental expense and subtracting undistributed net income of affiliates accounted for at equity. For purposes of the "fixed charges and preferred share dividends" computation, dividends on outstanding preferred shares have been increased to an amount representing the pretax earnings required to cover such dividend requirements. Other adjustments include capitalized interest costs and the interest component of rental expense. On May 31, 1994, the Company completed the spin-off of Lehman Brothers through a dividend to American Express common shareholders. Accordingly, Lehman Brothers' results are reported as a discontinued operation and are excluded from the above computation for all periods presented. In March 1993, the Company reduced its ownership in First Data Corporation to approximately 22 percent through a public offering. As a result, beginning in 1993 FDC is reported as an equity investment in the above computation. EX-15 10 Exhibit 15 November 14, 1994 The Shareholders and Board of Directors American Express Company We are aware of the incorporation by reference in Registration Statements (Forms S-8 No. 2-46918, No. 2-59230, No. 2-64285, No. 2-73954, No. 2-74368, No. 2-89115, No. 2-89680, No. 2-93654, No. 2-97617, No. 33-01771, No. 33-02980, No. 33-05875, No. 33-06350, No. 33-17133, No. 33-19724, No. 33-24675, No. 33-28721, No. 33-32876, No. 33-33552, No. 33-34005, No. 33-34625, No. 33-36422, No. 33-37882, No. 33-38777, No. 33-43671, No. 33-43695, No. 33-45584, No. 33-48629, No. 33-55344, No. 33-62124 and 33-65008; Forms S-3 No. 2-89469, No. 2-95771, No. 33-06038, No. 33-07435, No. 33-17706, No. 33-40636, No. 33-43268, No. 33-66654 and No. 33-50997) of American Express Company of our report dated November 14, 1994 relating to the unaudited consolidated interim financial statements of American Express Company which are included in its Form 10-Q for the three-month and nine-month periods ended September 30, 1994. Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. /s/Ernst & Young LLP New York, New York EX-27 11
5 This schedule contains summary financial information extracted from the Company's Consolidated Balance Sheet at September 30, 1994 and Consolidated Statement of Income for the nine months ended September 30, 1994 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1994 SEP-30-1994 6,959 39,495 16,531 788 0 0 3,475 1,570 98,195 0 22,324 305 0 200 6,356 98,195 0 10,480 0 5,030 1,086 2,207 741 1,416 371 1,045 33 0 0 1,078 2.09 0
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