SCHEDULESecurities and Exchange Commission
Washington, D.C. 20549
Schedule 14A INFORMATIONInformation
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sectionss. 240.14a-11(c) or Sectionss. 240.14a-12
American Express Company
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ]No fee required
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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AMERICAN EXPRESS COMPANY
[logo]
200 VESEY STREET
NEW YORK, NEW YORK 10285
- --------------------------------------------------------------------------------[LOGO] --------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1996
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that theTo Be Held April 28, 1997
--------------------------------------------------------------
The Annual Meeting of Shareholders of American Express Company, a New
York corporation, will be held at the executive offices of the Company, 200
Vesey Street, 26th Floor, New York, New York 10285 (see directions on back
cover), on Monday, April 22, 199628, 1997 at 10:00 A.M., local time, for the following
purposes:
1. To elect directors;
2. To ratify the selection by the Company's Board of Directors of Ernst &
Young LLP, independent auditors, to audit the accounts of the Company and its
subsidiaries for 1996;1997;
3. To vote upon a proposal to amend and restate the Company's Certificate
of Incorporation to eliminate obsolete material;
4. 5. 6. and 7. To consider and vote upon a proposal to approve amendments to the
Company's 1989 Long-Term Incentive Plan to authorize an additional 23.7 million
common shares for issuance and to permit the Company to continue the deduction
for tax purposes of certain compensation under the Plan;
4. To consider and vote upon afour shareholder proposalproposals
relating to cumulative voting, executive compensation, the CERES Principles and
charitable giving, respectively, each of which the Board of Directors opposes;
and
To transact such other business as may properly come before the meeting or
any adjournment thereof.meeting.
By Order of the Board of Directors:
STEPHEN P. NORMAN
SECRETARY
March 11, 199612, 1997
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE.
This Statement is printed on recycled paper.
[recycle logo]
[LOGO] AMERICAN EXPRESS COMPANY
[logo]
200 VESEY STREET
NEW YORK, NEW YORK 10285
March 11, 199612, 1997
PROXY STATEMENT
VOTE BY PROXY
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company for the Annual Meeting of
Shareholders to be held on Monday, April 22, 1996,28, 1997, and for any adjournment thereof.of
the meeting. A copy of the notice of the meeting is attached. This proxy
statement and the
accompanying form of proxy are first being mailed to shareholders on or about
March 13, 1996.12, 1997.
You are cordially invited to attend the meeting, but whether or not you
expect to attend in person, you are urged to sign and date the enclosed proxy
and return it in the enclosed prepaid envelope. Shareholders have the right to
revoke their proxies at any time prior to the time their shares are actually
voted. If a shareholder attends the meeting and desires to vote in person, his
or her proxy will not be used.
The enclosed proxy indicates on its face the number of common shares
registered in the name of each shareholder of record on March 4, 1996,10, 1997,
including shares enrolled in the Company's Shareholder's Stock Purchase Plan.
Proxies furnished to employees indicate the number of shares credited to
their employee benefit plan accounts. Accordingly, proxies returned by employees
who participate in such plans will be considered to be voting instructions to be
followed by the respective plan trustees or administrators with respect totrustee in voting these shares credited to suchthese accounts.
CONFIDENTIAL VOTING
As a matter of Company practice, the proxies, ballots and voting
tabulations relating to individual shareholders are kept private by the Company.
Such documents are available for examination only by the Inspectors of Election
and certain employees of the Company's independent tabulating agent engaged in
processing proxy cards and tabulating votes. The vote of any individual
shareholder is not disclosed to management except as may be necessary to meet
legal requirements. However, because all comments directed to management from shareholders whether writtenmade on the
proxy card or elsewhere,cards will be forwarded to management.management, the votes of the commenting
shareholders may be revealed.
GENERAL
Unless contrary instructions are indicated on the proxy, all shares
represented by valid proxies received pursuant to this solicitation (and not
revoked before they are voted) will be voted as follows:
FOR the election of all nominees for directorships named herein,in the proxy
statement,
FOR ratification of the selection of Ernst & Young LLP as independent
auditors for 1996,1997,
FOR the amendmentsamendment and restatement of the Company's Certificate of
Incorporation,
AGAINST the shareholder proposal relating to cumulative voting,
AGAINST the shareholder proposal relating to executive compensation,
AGAINST the shareholder proposal relating to the Company's 1989 Long-Term Incentive Plan to
authorize additional shares for issuance and to permit the continued
deductibility of certain compensation paid thereunder,CERES Principles, and
AGAINST the shareholder proposal relating to cumulative voting.charitable contributions.
In the event a shareholder specifies a different choice on the proxy, his
or her shares will be voted in accordance with the specification sothat is made.
The closing price of the Company's common shares on March 4, 1996,7, 1997, as
reported by the New York Stock Exchange Composite Transactions Tape, was $46.875$66.75
per share.
The Company's 19951996 Annual Report has been mailed to shareholders in
connection with this solicitation. A COPY OF THE COMPANY'S 19951996 FORM 10-K,
EXCLUSIVE OF CERTAIN EXHIBITS, MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO
STEPHEN P. NORMAN, SECRETARY, AMERICAN EXPRESS COMPANY, 200 VESEY STREET, NEW
YORK, NEW YORK 10285-5005.
COST OF PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. Proxies may
be solicited on behalf of the Company by directors, officers or employees of the
Company in person or by telephone, facsimile transmission or telegram. The
Company has engaged the firm of Morrow & Co. to assist the Company in the
distribution and solicitation of proxies. The Company has agreed to pay Morrow &
Co. a fee of $12,500 plus expenses for these services.
The Company will also reimburse brokerage houses and other custodians,
nominees and fiduciaries for their expenses, in accordance with the regulations
of the Securities and Exchange Commission ("SEC"), the New York Stock Exchange
and other exchanges, for sending proxies and proxy material to the beneficial
owners of common shares.
2
THE SHARES VOTING
The only voting securities of the Company are common shares, of which
there were 479,695,263472,791,925 shares outstanding as of March 4, 1996,10, 1997, each share being
entitled to one vote. To the knowledge of management, no person beneficially
owned, as of the dates hereinafter mentioned,December 31, 1996, more than five percent of the outstanding common
shares of the Company, except as set forth in the table below.
NUMBER OF AMERICAN
NAME(S)NAMES AND ADDRESS(ES)ADDRESSES EXPRESS COMMON SHARES PERCENT OF
OF BENEFICIAL OWNER(S)OWNERS BENEFICIALLY OWNED CLASS (%)
------------------------------------------- --------------------- ---------
Warren E. Buffett, 49,456,900 (1) 10.2%10.5%
Berkshire Hathaway Inc.
and subsidiaries
1440 Kiewit Plaza
Omaha, Nebraska 68131
Edward C. Johnson 3d, 41,866,48147,689,240 (2) 8.7%10.1%
Abigail P. Johnson and
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109
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(1) Reflects shares beneficially owned as of December 31, 1995,1996, according to
information provided by Berkshire Hathaway Inc. ("Berkshire"). Of the
shares shown, 39,005,293 shares were beneficially owned by National
Indemnity Company, a subsidiary of Berkshire. Mr. Buffett, Berkshire and
the subsidiaries share voting and dispositive power over the shares shown.
Mr. Buffett, his spouse and a trust of which Mr. Buffett is a trustee, but
in which he has no economic interest, own approximately 43.3%41.8% of the
outstanding shares of Berkshire. As a result of such ownership and control,
Mr. Buffett may be deemed to be the beneficial owner of shares beneficially
owned by Berkshire.
In connection with obtaining the approval of the Board of Governors of the
Federal Reserve System to acquire up to 17% of the outstanding voting
shares of the Company, Berkshire and the Company have entered into an
agreement (effective for such time as Berkshire owns 10% or more of the
Company's outstanding voting securities), and Berkshire has made
commitments to the Board of Governors, designed to ensure that Berkshire's
investment in the Company will at all times be passive. Pursuant to an
additional agreement, so long as Berkshire owns 5% or more of the Company's
voting securities and Harvey Golub is the Company's Chief Executive
Officer, Berkshire and its subsidiaries will vote all Company common shares
owned by them in accordance with the recommendations of the Board of
Directors of the Company. Subject to certain exceptions, Berkshire and its
subsidiaries will not sell Company common shares to any person who owns
more than 5% of the Company's voting securities or who seeks to change the
control of the Company without the consent of the Company.
(2) Reflects shares beneficially owned as of December 31, 1995,1996, according to a
statement on Schedule 13G filed with the SEC. According to such Schedule
13G, beneficial ownership was held as
3
13G, FMRfollows: sole dispositive power--FMR Corp. ("FMR"), Mr. Johnson and Ms.
Johnson - 47,682,740 shares; sole voting power--FMR - 3,474,751 shares, Mr.
Johnson - 5,393 shares, and Ms. Johnson - 0 shares; shared dispositive and
shared voting power--FMR and Mr. Johnson held sole dispositive power with
respect to 41,859,781 shares, sole voting power with respect to 3,206,838
shares, shared dispositive power with respect to- 5,000 shares and shared
voting power with respect to 5,000Ms. Johnson - 0
shares. Of the shares shown, 36,614,16342,365,609 shares were beneficially owned by
FMR's wholly-owned subsidiary, Fidelity Management and Research Company,
and 272,000275,400 shares were beneficially owned by Fidelity International
Limited ("FIL"). Mr. Johnson and members of the Johnson family form a
controlling group with respect to FMR. Approximately 47% of the voting
stock of FIL is owned by a partnership controlled by Mr. Johnson and
members of his immediate
family. Mr. Johnson, Ms. Johnson, members of their family and associated
trusts form a controlling group with respect to FMR. Mr. Johnson serves as Chairman of FMR and FIL. As a
result of such common ownership and control, FMR may be deemed to be a
beneficial owner of the shares owned by FIL. FMR disclaims beneficial
ownership of the 272,000275,400 shares beneficially owned by FIL.
VOTE REQUIRED
The 1314 nominees receiving the greatest number of votes cast by the holders
of the Company's common shares entitled to vote at the meeting will be elected
directors of the Company.
The affirmative vote of the holders of a majority of all outstanding
shares entitled to vote is necessary for the adoptionamendment and restatement of the
amendments to the
Company's 1989 Long-Term Incentive Plan.Certificate of Incorporation. The affirmative vote of a majority of
the votes cast at the meeting is necessary for the ratification of the selection
of auditors and approval of the shareholder proposal.proposals.
METHOD OF COUNTING VOTES
Each common share is entitled to one vote. Votes will be counted and
certified by the Inspectors of Election, who are employees of Chemical MellonChaseMellon
Shareholders Services, L.L.C., the Company's independent Transfer Agent and
Registrar. Under SEC rules, boxes and a designated blank space are provided on
the proxy card for shareholders to mark if they wish either to abstain on one or
more of the proposals or to withhold authority to vote for one or more nominees
for director. In accordance with New York State law, such abstentions are not
counted in determining the votes cast in connection with the selection of
auditors, and approval of the shareholder proposal.proposals. However, abstentions are
considered in determining the numbers of votes required to attain a majority of
the outstanding shares in connection with the proposal to amend and restate the 1989
Long-Term Incentive Plan.Company's
Certificate of Incorporation. Because this proposal requires the affirmative
vote of a majority of all outstanding shares entitled to vote for approval, an
abstention on this proposal will have the same legal effect as a vote against suchthe
proposal. Votes withheld in connection with the election of one or more of the nominees for
director will not be counted as votes cast for such individuals.those nominees.
The New York Stock Exchange has informed the Company that all of
management's proposals are considered "discretionary" items upon whichitems. This means that
brokerage firms may vote in their discretion on behalf of their clients if suchtheir
clients have not furnished voting instructions at least fifteen days prior to
the date of the shareholders' meeting. However, each of the shareholder
proposalproposals is "non-discretionary," and brokers who have received no instructions
from their clients do not have discretion to vote on this item.these items. Such "broker
non-votes" will not be considered as votes cast in determining the outcome of
the shareholder proposal.proposals.
4
SHAREHOLDERS ENTITLED TO VOTE
Only shareholders of record at the close of business on March 4, 199610, 1997
will be entitled to notice of and to vote at the Annual Meeting of Shareholders.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 4, 1996, beneficial ownership
of10, 1997, common shares of the
Company owned by each current director and nominee for director and by all
current directors and executive officers of the Company as a group. Except as
described below, each of the persons and group listed below has sole voting and investment
power with respect to the shares shown. No current
director or nominee beneficially owns any ofThe table also shows the Company's outstanding preferred
shares.
NUMBER OF
AMERICAN EXPRESS
NUMBER OF COMMON SHARES
AMERICAN EXPRESS WHICH MAY BE
NAMES OF DIRECTORS COMMON ACQUIRED WITHIN
AND NOMINEES SHARES OWNED (1)(2) 60 DAYS (3)
----------------- ----------------- ----------------
Daniel F. Akerson.................... 10,000 333
Anne L. Armstrong.................... 1,500 9,074
Edwin L. Artzt....................... 2,000 333
William G. Bowen..................... 3,600 6,793
David M. Culver...................... 9,609 713
Charles W. Duncan Jr................. 52,060 9,074
Harvey Golub......................... 303,005 765,575
Beverly Sills Greenough.............. 2,000 4,513
F. Ross Johnson...................... 14,000 9,074
Vernon E. Jordan Jr.................. 1,752 9,074
Henry A. Kissinger................... 2,400 9,074
Drew Lewis........................... 15,000 9,074
Aldo Papone.......................... 39,145 3,373
Frank P. Popoff...................... 6,420 1,093
All current Directors and
Executive Officers
as a group (33 individuals) (4).... 1,279,257 2,865,943
- -------------
(1) The number of shares ownedcommon share
equivalent units held by Mr. Golub and all current directors and
executive officers as a group includes 672 and 39,358 shares held in their
respective employee benefit plan accounts as of February 20, 1996.
In addition to the share amounts shown in this column, the following
directors have invested all or a portion of their directors' retainers in
Company Common Share Equivalent Units under the Directors' Deferred Compensation
Plan
for Directors described on page 11.
As of December 31, 1995 the number of
share equivalent units credited was as follows: Mr. Akerson--1,210 units;
Mrs. Armstrong--6,521 units; Mr. Duncan--21,272 units; Mr. Jordan--12,355
units; and Dr. Kissinger--8,090 units.
5
The number of common shares shown includes 2,000 shares held by a trust of
which Mr. Popoff is a trustee, 1,100 shares held by a trust of which an
executive officer is co-trustee and 432 shares owned by children of such
executive officer. The number of common shares shown does not include
shares as to which the nominees and all current directors and executive
officers have disclaimed beneficial ownership, as follows: 400 shares
owned by the wife of Mr. Culver, 2,018 shares held by a trust of which Mr.
Culver is a co-trustee, 6,060 shares held by Duncan Investors Ltd. of
which Mr. Duncan is a partner, 445 shares held by a trust of which Mr.
Golub's wife is the sole trustee, 2,927 shares owned by a child of Mr.
Golub, and 29,872 shares disclaimed by all current directors and executive
officers.
(2) The number of shares owned by Mr. Golub and all current directors and
executive officers as a group includes 132,505 and 658,692 shares,
respectively, of restricted stock as to which the holders possess sole
voting power, but no investment power, during the restricted period.
Restrictions on the sale or transfer of such restricted stock lapse over a
period of years ending in the year 2003.
(3) Shares shown include common shares subject to stock options and common
shares issuable upon conversion of convertible debentures. Mr. Golub and
all current directors and executive officers as a group hold debentures
that are convertible into 11,810 and 22,641 shares, respectively.
(4) The Company's current directors and executive officers as a group
beneficially owned approximately 4.1 million of the Company's common
shares as of March 4, 1996, representing approximately 0.9
NUMBER OF COMMON SHARES
AMERICAN EXPRESS WHICH MAY BE
NAMES OF DIRECTORS COMMON ACQUIRED WITHIN COMMON SHARE
AND NOMINEES SHARES OWNED (1)(2) 60 DAYS (3) EQUIVALENTS
- ------------------ ----------------- ----------------- -----------------
Daniel F. Akerson............... 10,000 999 2,564
Anne L. Armstrong............... 4,921 6,699 7,978
Edwin L. Artzt.................. 4,300 699 --
William G. Bowen................ 5,880 5,559 --
Kenneth I. Chenault............. 195,944 273,637 --
David M. Culver................. 10,322 1,046 --
Charles W. Duncan, Jr........... 54,341 7,839 23,929
Harvey Golub.................... 345,421 896,057 --
Beverly Sills Greenough......... 3,140 4,419 --
F. Ross Johnson................. 14,000 10,120 --
Vernon E. Jordan, Jr............ 3,848 6,699 12,593
Jan Leschly..................... -- -- --
Drew Lewis...................... 20,000 1,597 --
Aldo Papone..................... 21,646 4,419 --
Frank P. Popoff................. 6,420 2,139 --
All current Directors and
Executive Officers as a --------- --------- --------
group (33 individuals) (4).... 1,361,713 3,175,232 47,064
- -------------
(1) The number of shares owned by Messrs. Golub and Chenault and all current
directors and executive officers as a group includes 718, 5,115 and 39,575
shares held in their respective employee benefit plan accounts as of
February 28, 1997.
The number of common shares shown includes 2,000 shares held by a trust of
which Mr. Popoff is a trustee. The number of common shares shown also
includes 1,100 shares held by a trust of which an executive officer is
co-trustee and 432 shares owned by children of such executive officer. The
number of common shares shown does not include shares as to which the
5
nominees and all current directors and executive officers as a group have
disclaimed beneficial ownership, as follows: 400 shares owned by the wife
of Mr. Culver, 2,018 shares held by a trust of which Mr. Culver is a
co-trustee, 6,060 shares held by Duncan Investors Ltd. of which Mr. Duncan
is a partner, 5,855 shares held by a trust of which Mr. Golub's wife is the
sole trustee, 2,980 shares owned by a child of Mr. Golub, 14,342 shares
held by Mr. Chenault's wife outright or as trustee or custodian for their
children and 32,686 shares disclaimed by all current directors and
executive officers as a group.
(2) The number of shares owned by Messrs. Golub and Chenault and all current
directors and executive officers as a group includes 95,441, 110,660 and
477,393 shares, respectively, of restricted stock as to which the holders
possess sole voting power, but no investment power, during the restricted
period. Restrictions on the sale or transfer of these restricted shares
lapse over a period of years ending in the year 2004.
(3) Shares shown include common shares subject to stock options and common
shares issuable upon conversion of convertible debentures. Messrs. Golub
and Chenault and all current directors and executive officers as a group
hold debentures that are convertible into 11,810, 3,980 and 22,641 shares
respectively.
(4) The Company's current directors and executive officers as a group
beneficially owned approximately 4.5 million of the Company's common shares
as of February 28, 1997, representing less than one percent of the
Company's outstanding common shares.
-------------
SHARE OWNERSHIP GUIDELINES FOR DIRECTORS
The Board of Directors believes that as a matter of governance each
director should acquire and maintain a meaningful investment in the Company.
Accordingly, the Board of Directors has observed since February 1994 a voluntary
share ownership guideline of 10,000 Company shares or share equivalents for each
director, such number of shares to be acquired over a five-year period
commencing February 1994 or on the date of such director's first election to the
Board, whichever is later.
6
SECURITY OWNERSHIP OF NAMED EXECUTIVES
The following table sets forth, as of March 4, 1996,10, 1997, beneficial ownership
of common shares of the Company by Harvey Golub, Chief Executive Officer of the
Company, and each of the four other most highly compensated executive officers
of the Company at the end of 19951996 (collectively, the "named executives"). Except
as described below, each of the named executives has sole voting and investment
power with respect to the shares shown.
None of the named executives
beneficially owns any of the Company's outstanding preferred shares.
AMERICAN EXPRESS
NUMBER OF AMERICAN COMMON SHARES
EXPRESS COMMON WHICH MAY BE ACQUIRED PERCENT OF
NAME SHARES OWNED (1)(2) WITHIN 60 DAYS (3) CLASS (%)
- ---- ------------------- ------------------ -------------- -------------------- -------------------- ----------
H. Golub............. 303,005 765,575 0.22Golub.............. 345,421 896,057 0.26
K. I. Chenault....... 104,752 374,710Chenault........ 195,944 273,637 0.10
G. L. Farr........... 75,000 -0- 0.02Farr............ 65,603 143,332 0.04
J. S. Linen.......... 154,440 391,102 0.11Linen........... 162,083 403,529 0.12
D. R. Hubers......... 47,311 134,331Hubers.......... 52,969 138,804 0.04
- -------------
(1) The number of shares owned by Messrs. Golub, Chenault, Farr, Linen and
Hubers includes 672, 4,930, 7,308718, 5,115, 172, 7,618, and 215254 shares held in their
respective employee benefit plan accounts as of February 20, 1996.28, 1997.
The number of common shares shown does not include shares as to which
Messrs. Golub and Chenault have disclaimed beneficial ownership, as
follows: 4455,855 shares held by a trust of which Mr. Golub's wife is the sole
trustee, 2,9272,980 shares owned by a child of Mr. Golub, and 14,342 shares held
by Mr. Chenault's wife outright or as trustee or custodian for their
children. The number of common shares owned by Mr. Linen includes 1,100
shares held by a trust of which he is a co-trustee and 432 shares owned by
his children.
(2) The number of shares owned by Messrs. Golub, Chenault, Farr, Linen and
Hubers includes 132,505, 87,765, 75,000, 42,19595,441, 110,660, 50,000, 19,387 and 17,33410,492 restricted
shares, respectively, of restricted stock as to which shares the holders possess sole voting power,
but no investment power, during the restricted period. Restrictions on the
sale or transfer of suchthese restricted stockshares lapse over a period of years
ending in the year 2002.2004.
(3) Shares shown include common shares subject to stock options and common
shares issuable upon conversion of convertible debentures. Messrs. Golub
and Chenault hold debentures that are convertible into 11,810 and 3,980
shares, respectively.
7
GOVERNANCE OF THE COMPANY
In accordance with applicable New York State law, theThe business of the Company is managed under the direction of its Board of
Directors. Traditionally, the large majority of directors has consisted of
persons who are neither officers nor employees of the Company or any of its
subsidiaries. Of the 1314 director nominees, only Mr.Messrs. Golub is an employeeand Chenault are
employees of the Company or a subsidiary.
There are currently six standing committees of the Board of Directors.
Committee memberships, the number of committee meetings held during 19951996 and the
functions of those committees are described below.
AUDIT COMMITTEE
The current members of the Audit Committee are Charles W. Duncan, Jr.
(Chairman), Daniel F. Akerson, Edwin L. Artzt, William G. Bowen Beverly Sills Greenough, Henry A.
Kissinger and Drew Lewis.
The Audit Committee represents the Board in discharging its
responsibilities relating to the accounting, reporting, financial and internal
control practices of the Company and its subsidiaries. The Committee has general
responsibility for reviewing with management the financial and internal controls
and the accounting, audit and reporting activities of the Company and its
subsidiaries. The Committee annually reviews the qualifications and objectivity
of the Company's independent auditors, makes recommendations to the Board as to
their selection, reviews the scope, fees and results of their audit, reviews
their non-audit services and related fees, is informed of their significant
audit findings and management's responses thereto, and annually reviews the
status of significant current and potential legal matters. In addition, the
Committee reviews the scope of the internal auditors' plans each year and the
results of their audits. The Committee also receives reports on the U.S. Federal
Sentencing Compliance program, including a review of the distribution of and
compliance with the Company's Code of Conduct, which is sent periodically to
employees of the Company and its subsidiaries around the world, and receives
reports as to compliance with the Code. The Committee is also empowered to
conduct its own investigations into issues related to the aforementioned
responsibilities and to retain independent counsel or outside experts for such
purposes.
During 19951996 the Audit Committee met sevenfive times.
COMPENSATION AND BENEFITS COMMITTEE
The current members of the Compensation and Benefits Committee are Frank P.
Popoff (Chairman), Anne L. Armstrong, Edwin L. Artzt, F. Ross Johnson and
Vernon E. Jordan Jr.Beverly Sills Greenough.
The Compensation and Benefits Committee consists solely of directors who
are not current or former employees of the Company or a subsidiary and oversees
incentive compensation plans for officers and key employees, approves standards
for setting compensation levels for Company executives and administers the
Company's executive incentive compensation plans for senior executives. The
Committee also approves the compensation of certain employees whose salaries are
above specified levels and makes recommendations to the Board for approval as
required. The Committee conducts an annual review of the performance of the
Company's Chief Executive Officer. It also
8
reviews senior management development programs and appraises senior management's
performance. The Committee is authorized to hire and regularly consult with
independent compensation advisors.
8
The Committee represents the Board in discharging its responsibilities
with respect to the Company's employee pension, savings and welfare benefit
plans. It appoints the members of management who serve on the Employee Benefits
Administration Committee and the Benefit Plans Investment Committee, which are
responsible, respectively, for the administration of the plans of the Company
and for the custody and management of assets of those plans that are funded. The
Committee receives periodic reports from the Employee Benefits Administration
and Benefit Plans Investment Committees on their activities.
During 19951996 the Compensation and Benefits Committee met eightfive times.
COMMITTEE ON DIRECTORS
The current members of the Committee on Directors are Vernon E. Jordan, Jr.
(Chairman), Anne L. Armstrong, David M. Culver and Charles W. Duncan, Jr.
The Committee on Directors identifies and recommends candidates for
election to the Board. It advises the Board on all matters relating to
directorship practices, including the criteria for selecting directors, policies
relating to tenure and retirement of directors, and compensation and benefit
programs for non-employee directors. The Committee makes recommendations
relating to the duties and membership of committees of the Board.
The Committee recommends processes to evaluate the performance and
contributions of individual directors and the Board as a whole and approves procedures designed to
provide that adequate orientation and training are provided to new members of
the Board.
The Committee also considers candidates who are recommended by
shareholders in accordance with the early notification and other requirements
set forth on page 43.39. Any shareholder who wishes to recommend a candidate for
election to the Board should submit such recommendation to the Secretary of the
Company.
During 19951996 the Committee on Directors met twice.two times.
EXECUTIVE COMMITTEE
The current members of the Executive Committee are Harvey Golub (Chairman),
William G. Bowen, David M. Culver, Charles W. Duncan, Jr., Vernon E. Jordan, Jr.
and Frank P. Popoff.
The Executive Committee is empowered to meet in place of the full Board
when emergency issues or scheduling makes it difficult to convene all of the
directors. The Committee may act on behalf of the Board on all matters permitted
by New York State law. All actions taken by the Committee must be reported at
the Board's next meeting.
The Executive Committee held no meetings during 1995.1996.
9
FINANCE COMMITTEE
The current members of the Finance Committee are David M. Culver
(Chairman), Daniel F. Akerson, F. Ross Johnson, Henry A. Kissinger, Drew Lewis and Aldo Papone.
9
The Finance Committee oversees the investing of the Company's funds,
reviews the parameters of investment programs, receives reports on the progress
of investment activities and considers strategies as they relate to changing
economic and market conditions. The Committee's duties also include
responsibility for reviewing with management the capital needs and allocations
of the Company and its subsidiaries, including the Company's external and
intra-company dividend policies. The Committee also provides consultation on the
financial aspects of divestitures, acquisitions, major capital commitments,
major borrowings and proposed issuances of debt or equity securities, whether
privately or publicly distributed.
During 19951996 the Finance Committee met three times.
PUBLIC RESPONSIBILITY COMMITTEE
The current members of the Public Responsibility Committee are William G. Bowen
(Chairman), Daniel F. Akerson, Beverly Sills Greenough, Vernon E. Jordan, Jr. and Aldo Papone.
The Public Responsibility Committee reviews and considers the Company's
position and practices on issues in which the business community interacts with
the public, such as consumer policies, employment opportunities for minorities
and women, protection of the environment, purchasing from minority-owned
businesses, philanthropic contributions, privacy, shareholder proposals
involving issues of public interest, and similar issues, including those
involving the Company's positions in international affairs.
During 19951996 the Public Responsibility Committee met three times.
DIRECTORS' FEES AND OTHER COMPENSATION
Directors who are not current employees of the Company or one of its
subsidiaries receive a retainer of $16,000 per quarter with the proviso that
directors who attend fewer than 75 percent of the meetings of the Board and
committees on which they serve do not receive the fourth quarterly retainer.
Each non-employee director who serves as the chairman of one of the Board's
standing committees receives an annual retainer of $10,000. Directors do not
receive separate fees for attendance at Board or committee meetings. Directors
are reimbursed for their customary and usual expenses incurred in attending
Board, committee and shareholder meetings, including those for travel, food and
lodging. Directors who are current employees of the Company or a subsidiary
receive no fees for service on the Board or Board committees of the Company or
any of its subsidiaries.
TheIn March 1996 the Company recently amended its Retirement Plan for Non-Employee
Directors (the "Retirement Plan"). Pursuant to the amendment, non-employee
directors elected to the Board after March 31, 1996 for the first time are not
eligible to participate in the Retirement Plan. The Retirement Plan is an
unfunded, non-qualifiednonqualified plan that covers directors of the Company whose Board
service began on or prior to March 31, 1996 and who are not current or former
employees of the
10
Company or its subsidiaries. Under the Retirement Plan, such non-employee
directors who serve at least five full years are eligible to receive, upon their
retirement from the Board of Directors, an annual benefit of $30,000. The
benefit is payable for a period of years equal to the number of
10
full years of
service as a director or until death occurs, whichever is earlier. In addition,
the Retirement Plan provides discretion for the Board to grant benefits to any
current non-employee director who does not otherwise qualify for a benefit under
the Retirement Plan, although no such discretionary grants have been made and
none are contemplated.
The Company also provides each non-employee director with group term life
insurance coverage of $50,000 and accidental death and dismemberment insurance
coverage of $300,000. Non-employee directors are also eligible to purchase
$50,000 of additional group term life insurance coverage. In 1995 seven1996 six
non-employee directors purchased such insurance.
The Company maintains a Deferred Compensation Plan for Directors under
which directors may defer all or a portion of their annual compensation in
either a cash-based account or in Company Common Share Equivalent Units until
retirement or another specified date. A Company Common Share Equivalent Unit is
an amount payable in cash which is designed to replicate the value of an
investment in an American Express common share, including reinvested dividends.
During 19951996 deferred amounts credited to the cash-based account earned interest
at a rate equivalent to the Moody's Average Corporate Bond Yield, and amounts
credited to the Company Common Share Equivalent Units were valued on the basis
of the price of the Company's common shares plus reinvested dividend
equivalents. At the present time fivefour directors participate in the plan, and
their accumulated Common Share Equivalent Units are shown in footnote (1) on page 5.
In 1993 the shareholders of the Company approved a Directors' Stock Option
Plan (the "1993 Plan"), which provides for the automatic annual grant to each
non-employee director of a nonqualified option to purchase 1,000 common shares
of the Company, onas of the date of each annual meeting of shareholders at which
the director is elected or re-elected. Under the 1993 Plan the option exercise
price is 100 percent of the fair market value of a common share on the date of
grant. Each option has a ten-year term and generally becomes exercisable in
three equal annual installments beginning on the first anniversary of the date
of grant. On April 24, 199522, 1996 each of the 13 then incumbent non-employee directors
(12(11 of whom are also current nominees for re-election as directors) received
options to purchase 1,000 shares at an exercise price of $34.81$47.50 per share.
In 1988 asAs part of its overall program to promote charitable giving as a means to
enhance the quality of life in the many communities in which the Company's
businesses operate, the Company establishedmaintains a Directors' Charitable Award Program
pursuant to which the Company has purchased life insurance policies on the lives
of participating directors and advisors to the Board who previously served as
directors. Upon the death of an individual director or advisor, the Company
expects to receive a $1 million death benefit, or $500,000 in the case of such
advisors. The Company in turn expects to donate one-half of the individual death
benefit to the American Express Foundation and one-half to one or more
qualifying charitable organizations recommended by the individual director or
advisor. Individual directors and advisors derive no financial benefit from this
program since all charitable deductions accrue solely to the Company. The
program results in only nominal cost to the Company,
11
and benefits paid to the Company's Foundation reduce the amount of funding that
the Company provides to the Foundation.
11
Messrs. Duncan and Papone serve as directors of American Express Bank Ltd.
("AEB"), for which each receives an annual retainer of $20,000$25,000 and fees of
$1,000 for attendance at each board meeting. Mr. Duncan also receives an annual
retainer of $5,000 as chairman of AEB's Audit Committee and $750 for attendance
at each committee meeting.
Effective December 31, 1990, Mr. Papone retired as Chairman and Chief
Executive Officer of American Express Travel Related Services Company, Inc.
("TRS"). Mr. Papone is continuing to serve as a director of the Company. During 19951996 Mr. Papone served as Senior Advisor and provided consulting
services individually and through his firm to the Company and TRS pursuant to
two consulting agreements providing for compensation of $18,750 per month under
the Company agreement and $250,000 for 19951996 under the TRS agreement. These
arrangements are expected to continue in 1996. In 19951997. Mr. Jordan is a senior partner of
Akin, Gump, Strauss, Hauer & Feld, L.L.P. which provided legal services to the
Company paid
Kissinger Associates, Inc., of which Dr. Kissinger is chairman, $100,000 for
consultingin 1996 at customary and international advisory services.
Dr. Kissinger is retiring as a director of the Company on April 22, 1996
pursuant to the Board's mandatory retirement policies for directors. At that
time Dr. Kissinger's directors fees will cease and his consulting arrangements
willusual rates. This firm may also terminate. However,provide legal
services in order to continue to benefit from Dr.
Kissinger's advice and involvement on behalf of the Company's businesses, the
Board of Directors has offered, and Dr. Kissinger has accepted, a position as
Advisor to the Board, effective May 1, 1996, for which he will be paid $100,000
on an annual basis.1997.
ELECTION OF DIRECTORS
An entire Board of Directors, consisting of 1314 members, is to be elected
at the meeting, to hold office until the next Annual Meeting of Shareholders. In
the case of a vacancy, the Board of Directors, upon the recommendation of the
Committee on Directors, may elect another director as a replacement or may leave
the vacancy unfilled. Decisions regarding the election of new directors during
the year normally are based upon such considerations as the size of the Board
and the need to obtain fresh perspectives or to replace the particular skills or
experience of former directors. Mr. Culver is retiring as a director of the
Company on April 28, 1997 pursuant to the Board's mandatory retirement policies.
During 19951996 the Board of Directors met 109 times and each of the current
directors attended at leastmore than 75 percent of the meetings of the Board and of the
Board committees on which the director served.
Unless authority to vote is withheld, the persons specified in the
enclosed proxy intend to vote for the following nominees, all of whom have
consented to being named in this proxy statement and to serveserving if elected.
Although management knows of no reason why any nominee would be unable to serve,
the persons designated as proxies reserve full discretion to vote for another
person in the event any nominee is unable to serve.
12
The following information is provided with respect to the nominees for
directorships. Italicized wording indicates principal occupation.
DANIEL F. AKERSON Director since 1995 Age 48
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, NEXTEL COMMUNICATIONS, INC., ana domestic
and international digital wireless communications company, March 1996 to
present; General Partner, Forstmann Little & Co., an investment banking firm,
1994 to March 1996; Chairman and Chief Executive Officer, General Instrument
Corporation, a company engaged in developing technology, systems and product
solutions for the interactive delivery of video, voice and data, 1993 to 1995;
President and Chief Operating Officer, MCI Communications Corporation, a
telecommunications company, 1992 to 1993, Chief Operating Officer 1992,
Executive Vice President and Group Executive, 1990 to 1992; Director, General
Instrument Corporation; Member, Board of
Directors, the Business School of the College of William and Mary.
ANNE L. ARMSTRONG Director since 1983 Age 6869
CHAIRMAN OF THE BOARD OF TRUSTEES, CENTER FOR STRATEGIC AND INTERNATIONAL
STUDIES, a non-profit public policy institution, 1987 to present; former
Chairman, President's Foreign Intelligence Advisory Board; former United States
Ambassador to Great Britain and Northern Ireland; Director, General Motors
Corporation, Halliburton Company, Boise Cascade Corporation and Glaxo Wellcome
plc.; Member, Board of Overseers, Hoover Institution; Member, American Academy
of Diplomacy, Council of American Ambassadors and Council on Foreign
Relations.
EDWIN L. ARTZT Director since 1994 Age 6566
CHAIRMAN OF THE EXECUTIVE COMMITTEE AND DIRECTOR OF THE PROCTER & GAMBLE
COMPANY, a worldwide consumer products company, 1995 to present, Chairman of the
Board and Chief Executive Officer, 1990 to 1995; Director, Delta Air Lines,
Inc., GTE Corporation, Teradyne, Inc. and Barilla S.p.A.; Member, The Business
Council.
WILLIAM G. BOWEN Director since 1988 Age 6263
PRESIDENT, THE ANDREW W. MELLON FOUNDATION, a not-for-profit corporation engaged
in philanthropy, 1988 to present; former President, Princeton University;
Director, Merck, Inc., and Reader's Digest Association Inc. and The Rockefeller
Group, Inc.; Member, Board of
Trustees, Denison University; Member, Board of Overseers, TIAA-CREF.
DAVID M. CULVER Director since 1980KENNETH I. CHENAULT Candidate for election Age 71
CHAIRMAN, CAI CAPITAL CORPORATION, a Canadian-based equity investment fund, 199045
PRESIDENT AND CHIEF OPERATING OFFICER, AMERICAN EXPRESS COMPANY, AND CHIEF
EXECUTIVE OFFICER, AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.,
February 1997 to present;present, Vice Chairman D. Culver & Co. Investments,of American Express Company, January
1995 to February 1997; President - USA, American Express Travel Related Services
Company, Inc., a private investment
firm,1993 to 1995; President, Consumer Card Group, USA, American
Express Travel Related Services Company, Inc., 1989 to present; former Chairman1993; Director, Quaker
Oats Company, Brooklyn Union Gas Co., the National Collegiate Athletic
Association, NYU Medical Center, the Arthur Ashe Institute for Urban Health and
Chief Executive Officer, Alcan
Aluminium Limited; Director, The Seagram Company Ltd.; Member, Advisorythe Council of the Institute of International Studies of Stanford University, Board of
Governors of The Joseph H. Lauder Institute of Management and International
Studies (University of Pennsylvania) and Board of Trustees of the Lester B.
Pearson College of the Pacific.on Foreign Relations.
13
CHARLES W. DUNCAN, JR. Director since 1981 Age 6970
CHAIRMAN, DUNCAN INTERESTS, 1985 to present; Director, American Express Bank
Ltd., Chemical Banking Corporation, The Coca-Cola Company, Newfield Exploration Company, PanEnergy
Corp, Texas Commerce Bank, N.A.,Corporation, United Technologies Corporation and The Robert A. Welch Foundation;
Member, International Advisory Board, Elf Aquitaine; Former Chairman of the
Board of Governors, Rice University; Member, Council on Foreign Relations.
HARVEY GOLUB Director since 1990 Age 5758
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, AMERICAN EXPRESS COMPANY, August 1993 to
present, President and Chief Executive Officer, February 1993 to August 1993,
President, 1991 to 1993, Vice Chairman, 1990 to 1991; Chairman and Chief Executive Officer, American Express
Travel Related Services Company, Inc., 1991 to present; Chief Executive Officer, American Express Financial Corporation
(previously known as IDS Financial Corporation), a national financial planning,
insurance and investment advisory firm, 1984 to 1991;1997; Director, American
Express Bank Ltd. and Campbell Soup Company; Candidate for election, Dow Jones &
Company, Inc.; Director, The New York and Presbyterian Hospitals, Inc.; Member,
Board of Trustees, Carnegie Hall, New York City Partnership, New York Chamber of
Commerce and Industry and United Way of New York City; Member, President's
CommitteeCommission for the Arts and the Humanities and The Business Roundtable.
BEVERLY SILLS GREENOUGH Director since 1990 Age 6667
CHAIRMAN, LINCOLN CENTER FOR THE PERFORMING ARTS, 1994 to present; Managing
Director, Metropolitan Opera, 1991 to present; former General Director and
President, New York City Opera; Director, Time Warner Inc., Human Genome
Sciences, Inc., and Lincoln Center Theater, Hospital for Special Surgery,
National Society for Multiple Sclerosis Society andSclerosis; Member, President's Task Force on the
Harvard Partners Council.Arts.
F. ROSS JOHNSON Director since 1986 Age 6465
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, RJM GROUP, a management advisory and
investment firm, 1989 to present; Director, National Service Industries, Inc.,
Power Corporation of Canada, Archer
Daniels Midland Company, Midland Financial Corp., and Noma Industries
Ltd.; Chairman, Bionaire, Ltd.;
former Chairman, Economic Club of New York.York; Retired Chairman, RJR/Nabisco, Inc.
VERNON E. JORDAN, JR. Director since 1977 Age 6061
SENIOR PARTNER, AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P., attorneys,
Washington, D.C. and Dallas, Texas, 1982 to present; Director, Bankers Trust
Company, Bankers Trust New York Corporation, Xerox Corporation, J.C. Penney
Company Inc., Dow Jones & Company, Inc., Corning, Incorporated, Revlon Group, Inc., Ryder Systems,
Inc., Sara Lee Corporation and Union Carbide Corporation; Trustee, Ford
Foundation and Howard University;University.
14
JAN LESCHLY Candidate for election Age 56
CHIEF EXECUTIVE AND DIRECTOR, SMITHKLINE BEECHAM PLC, developer and marketer of
pharmaceuticals, over-the-counter medicines and healthcare services including
clinical laboratory testing, disease management and pharmaceutical benefit
management, 1994 to present, Chairman, SmithKline Beecham Pharmaceuticals, 1990
to 1994; Director, British Pharma Group and Pharmaceutical Research and
Manufacturers Association; Trustee, National Foundation for Infectious Diseases
and Member, Board of Governors,
Joint Center for Political and Economic Studies.
14
Emory Business School Dean's Advisory Council.
DREW LEWIS Director since 1986 Age 6465
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER, UNION PACIFIC CORPORATION, a
transportation company, 1987January 1997 to present; Chairman of the Board, Union Pacific
Resources Group Inc., an energy company, 1995 to present;and Chief Executive
Officer, 1987 through December 1996; Director, Ford Motor Company, AT&T Corp.Lucent
Technologies Inc., FPL Group, Inc. and, Gulfstream Corp., Gannett Co., Inc., and
Union Pacific Resources Group Inc.
ALDO PAPONE Director since 1990 Age 6364
SENIOR ADVISOR, AMERICAN EXPRESS COMPANY, 1991 to present; formerRetired Chairman and
Chief Executive Officer, American Express Travel Related Services Company, Inc.;
Director, American Express Bank Ltd., Hyperion Software Corporation, Springs
Industries, Inc., Body Shop International, Guess?, Inc., Hospital for Special
Surgery and The National Corporate Theatre Fund.
FRANK P. POPOFF Director since 1990 Age 6061
CHAIRMAN OF THE BOARD, THE DOW CHEMICAL COMPANY, a producer of chemicals and
chemical products, 19951992 to present, Chairman and Chief Executive Officer, 1992
to 1995, President and Chief Executive Officer, 1987 to 1992;1995,
Director, U S WEST, Inc., United Technologies Corp. and Chemical Financial
Corporation; Member, Indiana University School
of Business Dean's Advisory Council,Foundation, Chemical Manufacturers
Association and The Business Council.
15
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of the Company's Board of
Directors (the "Committee") administers the Company's executive officer
compensation programs. The Committee is composed entirely of non-employee
directors who are not eligible to participate in any of the Company's executive
compensation programs. The Committee has access to independent compensation
consultants and data.
OVERVIEW AND PHILOSOPHY
The objectives of the Company's executive compensation programs have beenare to:
--o Attract, motivate and retain the highest quality executives.
--o Align their financial interests with those of the Company's long-term
investors.
-- Incento Inspire them to achieve tactical and strategic objectives in a manner
consistent with the Company's corporate Values.
In furtherance of these objectives, the Company's executive compensation
policies and programs are designed to:
--o Focus participants on high priority goals to increase shareholder
value.
--o Reward American Express Quality Leadership ("AEQL"). AEQL is the
Company's total quality management process to meet or exceed the
expectations of its three key constituencies: shareholders, customers
and employees.
15
--o Encourage behaviors that exemplify the Company's core Values relating
to customers, quality of performance, employees, integrity, teamwork
and good citizenship.
--o Assess performance based on results and pre-set goals. Establish goals
that link the business activities of each individual and team to the
goals of the applicable business unit and the Company.
--o Increase executive stock ownership to promote a proprietary interest
in the success of the Company.
In November 1993 the Committee adopted mandatory stock ownership levels
for approximately 175 senior executives. Each executive officer of the Company
is required over time to attain an ownership level of Company shares with value
equal to a multiple of base salary at January 1994, subject to adjustment. For
executive officers, the applicable multiple ranges from two times to five times
base salary, depending on job responsibilities. For Mr. Golub, the multiple is
five times his base salary. Restricted stock awards do not count toward
fulfilling the requirement.
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), limits the Company's tax deduction to $1 million per year (the "Million
Dollar Cap") for certain compensation paid in a given year to the Chief
Executive Officer ("CEO") and the four highest compensated executives other than
the CEO named in the proxy statement (the "covered executives"). The Code and
regulations issued under the Code exclude from the Million Dollar Cap
compensation based on attainment of pre-established, objective performance
goals, if certain other requirements are met. The Committee's policy is to
structure compensation awards for covered executives that will be deductible
without limitation where doing so will further the purposes of the Company's
executive compensation programs. The Committee also considers it important to
retain flexibility to design compensation programs that recognize a full range
of performance criteria important to the Company's success, even where
compensation payable under such programs may not be fully deductible. In
accordance with the technical requirements of the Million Dollar Cap, the Board
of Directors is requesting shareholder approval of amendments to the Company's
1989 Long-Term Incentive Plan to set forth the goals upon which
performance-based compensation may be based and certain maximum limits for
awards. These amendments, which are described beginning on page 34, must be
approved by the Company's shareholders at the 1996 Annual Meeting in order to
preserve the Company's tax deduction for future performance-based compensation
paid under the plan.16
EXECUTIVE OFFICER COMPENSATION
FOR 1995
Executive officer compensation for 1995 included base salary, annual
incentive awards and long-term incentive awards. The Committee establishedincludes base salary, annual incentive and
long-term incentive awardawards. The Committee establishes reference points for each
of these elements of compensation for every executive officer position based onposition. The
reference points are compensation guidelines that reflect job responsibilitiesresponsibility
levels within the Company, the need to attract, retain and reward executive
talent and external market practices. For 1996, a reviewcomparative group of
approximately 50 companies was selected with the help of an outside compensation
practices for comparable jobs at otherconsultant. This sample includes selected major corporations in the Standard &
Poor's 500 Index and the Standard & Poor's Financials that compete with the
Company in its primary lines of business or for executive talent, or are of
comparable size and scope of operations. For 1995Market data on comparable jobs from
this sample, including the 50th through 75th percentile pay levels, are taken
into consideration in establishing reference points and other compensation
purposes aguidelines. In setting reference points, the Committee may put more emphasis on
one or more of the considerations mentioned above (for example, relative job
responsibility levels are especially important if reliable closely matched
market data are not available for jobs.) Accordingly, reference points may be
established at levels within, higher or lower than the 50th to 75th percentile
range of the comparative group of over 50 companies was selected with the help of
an outsidegroup. Actual compensation consultant and includes selected companies in the
Standard & Poor's 500 Index and the Standard & Poor's Financials. Actual awards
16
wereis based primarily on the Committee's
discretionarysubjective assessment of Company or business unit performance and individual
performance.
The Committee established aperformance under applicable programs as described below.
Executive officer base salary reference point for each executive
officer position withinmerit increases were based upon individual
performance and the range of the 50th and 65th percentiles of
compensation for comparable jobsexecutive's salary in the comparative group, except thatrelation to the reference point
may fall outsideestablished for the range to reflect relative job
responsibilities. Merit increases in base salary are based on individual
performance.executive's position. In 19951996, the Committee continued the
practice of extending the time interval between merit increases of base salary to 18 months or
longer, except in the case of a promotion or other job change or where warranted
by special circumstances.
For 1995 bonuses, the Committee established an1996, annual incentive target for
each executive officer with referenceincentives were paid to the 50th and 65th percentiles of
compensation for comparable jobs in the comparative group and the relative
responsibilities of the positions. For the named executivesexecutive officers and
certain other executive officers, bonuses were paidexecutives pursuant to 1995 annual incentive1996 awards which were structured to meet the requirements for exclusion from the Million
Dollar Cap. Each 1995 annual incentive award provides for aspecify maximum award
amountamounts for specifiedCompany performance levels. The award value is determined on a
formula basis by application of a performance grid that measures the Company's
19951996 return on equity ("ROE") and 19951996 growth in earnings per share from continuing operations.share. (In each
case, these amounts exclude gains associated with the disposition of First Data
Corporation stock and a restructuring charge.) The Committee retained the
discretion to adjust the formula-driven award valuesformula-derived amounts downward after certifying that
the performance goals set forth in the grid had been met.
The Committee exercised its discretion to determine the final valuesvalue of
each 1996 incentive award. The Committee assessed performance against goals and
leadership performance, with each of these two categories weighted equally. The
goal category included an evaluation of the 1995
annual incentive awards were based upon the Committee's assessment of the
executive's contribution to results in the following performance areas
(weighted
approximately 50%, 25% and 25%, respectively): increase in shareholder value (as
indicated, for example, by(e.g.,
shareholder return, earnings growth and return on equity);, customer satisfaction
(as indicated, for example, by(e.g., customer satisfaction measures, client retention and growth in products
and services); and employee satisfaction (as indicated, for example, by(e.g., the Company's employee valuevalues
survey results). The Committee exercised itsleadership category was evaluated based on the Committee's
subjective judgment in determining eachof leadership performance, including such factors as
innovation, strategic vision, marketplace orientation, customer focus,
collaboration and change management. The named executive officer's final award value, giving the greatest emphasis to results
that contribute to increasing shareholder value at the business unit level (for
business unit officers) and at the Company level (for Company officers). Theofficers were awarded
final values under the 1995ranging from 1.26 to
17
1.76 times target. For 1996, annual incentive awards granted to the named
executives were above target, ranging from 1.1 to approximately 1.55 times
target. The 1995 bonuses for executive officers who
did not participate in the 19951996 annual incentive awards program were determined
in accordance with guidelines that
rangedwhich range from 0 to approximately 200% of target
based uponon the goal and leadership performance in the shareholder,
customer and employee areas described above.
Long-term incentive compensation awards are granted annually, and are
designed to provide competitive, performance-based compensation that links value
to Company, business unit and individual performance over multi-year performance
periods. In 1995 such1996, the Company's long-term compensation program consisted of
Performance Grant-VIPortfolio Grant-VII awards ("PG-VIPG-VII awards") and ten-year stock option awards with an exercise price
equal to fair market value on the date of grant. The Company expects that
compensation derived from the PG-VI and stock option awards will be fully
deductible by the Company and excluded from the limitations of the Million
Dollar Cap. For each executive officer the Committee established reference
17
points for these awards within the range of the 50th to 65th percentiles of
compensation for comparable jobs in the comparative group, except that the
reference points may fall outside the range to reflect relative job
responsibilities. In 1995 the Committee granted awards for the named executives
that were consistent with award reference points.grants.
The size and grant value of actual awards were determined by the Committee after
reviewing the individual's annual performance, applicable award guidelines,the size of previous awards and
relative contributions of the individuals.contributions. The number or value of stock options currently held by
an executive is not taken into account in determining the number of stock
option sharesoptions granted. The PG-VIawards were consistent with established reference points.
The PG-VII awards are long-term performance awards with two components valued and
are payable at the end of thea three-year performance period commencing in January
1995 to1996 and ending in December 1997 performance
period. The value of one1998. One component is valued based on achievement
of specified Company or business unit targets for cumulative earnings (or
earnings per share) and average return on equity.ROE . The value of the second component is valued based on
the Company's average daily share price for the 60-trading-day period prior to
the date of the Committee's meeting in February 1998. Minimum1999. For certain executive
officers, minimum performance levels for cumulative earnings (or earnings per
share) and average ROE are required for the second component to have any value.
In determining the actual final value of the awards, the Committee has retained
the discretion to adjust downward the formula values of the awards.
Non-qualifiedawards, after
certifying that the performance goals have been met.
Nonqualified stock option awards were granted to link executive compensation to the
creation of incremental shareholder value. The ten-year nonqualified stock
option awards reward executives only to the extent that the Company's share
price increases for all shareholders. Each stock option has an exercise price
per share set at the fair market value per share as of the grant date.
Generally, each option becomes fully exercisable over a period of three years
after the grant. Executives are expected underThe Company policy to hold
shares acquired through stock option exercises to meet the aformentioned stock
ownership guidelines, except as required to pay taxes in connection with the
exercise or other identified reasons. The Committee has never repriced stock option awards.
The Committee in its judgment may also grant bonus, restricted stock, stock
optionoptions or other long-term incentive awards to executive officersselected individuals for
performance not recognized by the annual long-term programs. In addition, the
Committee may grant long-term incentive awards or bonuses to recognize special
individual contributions or job promotions, to attract new hires from outside
the Company or in the case of other special circumstances. The Committee may
also accelerate vesting of awards in cases where the circumstances warrant. In
19951996, six executive officers, including Messrs. Golub, Chenault and Farr,
received restricted stock awards. The Committee made these awards to provide a
stock-based retention incentive, and determined the size of the awards based on
its subjective assessment of individual performance and leadership. In addition,
four executive officers hired from the outside received, as applicable, cash
payments, stock options, restricted stock awards and/or Portfolio Grants to
offset amounts forfeited from previous employers, and to start their
participation in the Company's performance incentive programs.
18
The Committee's policy is to structure compensation awards for executive
officers that will be consistent with the requirements of Section 162(m) of the
U.S. Internal Revenue Code of 1986 (the "Code"). Section 162(m) limits the
Company's tax deduction to $1 million per year for certain compensation paid in
a given year to the Chief Executive Officer and the four highest compensated
executives other than the CEO named in the proxy statement. According to the
Code and corresponding regulations, compensation that is based on attainment of
pre-established, objective performance goals and complies with certain other
requirements will be excluded from the $1 million dollar deduction limitation.
The Company's policy is to structure compensation awards for covered executives
that will be fully deductible where doing so will further the purposes of the
Company's executive compensation programs. However, the Committee grantedalso considers
it important to retain flexibility to design compensation programs that
recognize a restricted stock awardfull range of performance criteria important to Mr. Chenault in recognition of his special
contributions and appointment as Vice Chairman. In addition, the Committee
approved a hiring bonus and otherCompany's
success, even where compensation for Mr. Farr to replace
compensation opportunities lost upon termination of employment with his prior
employer, including long-term incentive awards (reflected in the Summary
Compensation Table on page 21 and the Long-Term Incentive Plans-Awards Table on
page 25). Of the foregoing awards, thepayable under such programs may not be fully
deductible. The Company expects that compensation derived from the 1996 annual
incentive, Portfolio Grant-VII (other than those granted to new hires) and stock
option awards will be excluded from the deduction limitation of Section 162(m)
and, therefore, will be fully deductible by the Company. The Company also
expects that the compensation derived from the future vesting of restricted
stock awards grantedgrants to Messrs. Golub, Chenault and Farr and
Performance Grant IV and V awards granted to Mr. Farr willmay be subject to the
Million Dollar Cap.this
limitation.
The Company's executive officers also participate in pension, incentive
savings, perquisite, deferred compensation and otherstock ownership programs. These programs are
designed to be competitive with the practices at other major corporations.
For each ofSince
1994, 1995 and 1996 the Committee has adopted aan annual Pay for Performance Deferral Program, whichProgram.
The program permits eligible participants to defer
annual compensation up to a maximum of one
times base salary. The programsalary each year. Deferral bookkeeping accounts are established for
each participating employee and credited or debited annually credits interestwith "interest"
equivalents to, or reduces the value of, deferred
amounts according to a schedule based on the Company's ROE as reported annual ROE. The
Committee may adjust the schedule for major accounting changes, if the Company's
ROE objectives change significantly, or ifin
the annual return on a benchmark
18
treasury note falls below or rises above specified levels.report. Deferred balances are debited or reduced in value if the
annual ROE is zero or less for a given year. IfThe Committee may adjust the ROE
schedule for major accounting changes, significant changes to the Company's ROE
objectives or if the annual rate of return on a participant elects to defer any compensation under this program, he5-year Treasury note becomes
less than 4% or she must
defer such compensation for at least five years.greater than 8%. The Committee may delay payments under the
program until they are fully deductible under Section 162(m).
Approximately 175 senior officers are required to comply with stock
ownership targets. The ownership levels are equal to a multiple of an officer's
base salary on January 1994 or a date following the Code. Deferred amountsofficer's hire or promotion
date. The applicable multiples range from one times to five times base salary,
depending on job responsibilities. For Mr. Golub, the multiple is five times his
base salary. Restricted stock which has not vested and stock options which have
not been exercised do not count toward fulfilling the requirement. Executives
are linkedexpected to Company performance until paid out.
COMPENSATION OF THEhold stock acquired under the long term program for application
toward their stock ownership guidelines except in the case of stock used for the
payment of taxes or stock used to finance the cost of an option exercise.
CHIEF EXECUTIVE OFFICER FOR 1995COMPENSATION
In 1996, Mr. Harvey Golub, Chairman and CEO, earned an annualized base
salary of $900,000, which was effective in February 19961995. Pursuant to the
Committee's practice of extending the time interval between executive officer
merit increases, he did not receive an increase in 1996.
19
At its February 1997 meeting, the Committee awarded Mr. Golub $1,860,000$1,980,000
as payout of his 19951996 incentive award which was 1.65 times the reference point
established for the award. The formula-derivedAs described on page 17, the maximum award value of the award was
determinedderived from a formula based on the CompanyCompany's 1996 ROE for 1995 of 21.7%23.0% and growth in
Company
earnings per share of 14.8% (both values exclude the gain from continuing operationsthe disposition
of 15.9% for 1995.First Data Corporation stock and the restructuring charge). The Committee
certified that these performance goals had been satisfied. In determining the
actual award, the Committee assessed Company performance in 1995,1996, Mr. Golub's
personal role in achieving that performance, and the economic and competitive
environment in which that performance was achieved.
In reviewing Mr. Golub's performance in 1996 and determining compensation,
the Committee took the following achievements into consideration:
-- Total shareholder return ("TSR") from price appreciation and paid
dividends of 42.8%,39.8% from year-end 19941995 to year-end 1995.1996. This compared
to a TSR of 37.5%22.9% for companies in the Standard & Poor's ("S&P") 500
Index, 53.8%35.1% for the S&P Financials and 36.9%28.8% for the Dow Jones
Industrial Average (which includes companies in both the S&P 500 Index
and the S&P Financials).
-- Increase in Earnings per ShareNet operating income of 15.9% from continuing operations, and
ROE of 21.7%. Record earnings were achieved overall, as well as$1.74 billion, which was the highest in the
TRSCompany's history and an increase of 11.2% over 1995. This growth
includes an 18% increase in net income for American Express Financial
Advisors ("AEFA") segments.and a 13% increase in net operating income for Travel
Related Services.
-- Growth in earnings per share of 14.8% and ROE of 23.0% (values exclude
the gain from the disposition of First Data Corporation stock and the
restructuring charge), the fourth consecutive year in which the Company
met or exceeded its long term financial targets.
-- The Company continued to maintain a strong balance sheet in 1995, with
increases in capital surplus and tangible book value per share.
-- Revenue growthdevelopment of 11% overall, including 12.5% by TRS and 12.9% by
AEFA. The Company continued to develop and invest in growth areas,
including product extensions and co-branding (e.g., Delta(R)
SkyMiles(TM) Credit Card from American Express and Hilton(R) OptimaSM
Card), stored value products, online distribution channels (e.g.,
ExpressNetSM available on America Online) and new domestic and
international markets.
-- Enhancements to customer service and value propositions for customers
in a number of areas. The Company expanded the industry-leading
Membership MilesSM program throughnew products, services and business
lines tailored to specific customer segments including the launch of
Membership RewardsSM
for Cardmembers, combining rewards for airlines, hotelsAmerican Express Financial Direct and retail
establishments.the expansion of the services
available to small and large businesses.
-- Opening of the American Express Card network to banks and other
issuers, as well as the introduction of new proprietary and network
card products in the United States and several other countries. The
Company installed a new systems technology platform
which is intendedalso successfully challenged the policies proposed by VISA to
enable the Company to significantly reduce the
amount of time needed to develop and launch new products. The Company
made progressblock member banks from issuing American Express Cards in increasing merchant coverage of American Express(R)
Cards, including major signings of important new merchants. In
addition, AEFA introduced new investment products and services and
formed several alliances with banks to provide financial planning and
other products to customers of the banks.
19
-- Significant progress in implementing the second phase of reengineering
to improve customer service, reduce cycle time and lower costs relative
to other companies providing similar products and services. Future
annual savings from these efforts are expected to provide opportunities
for reinvestment to strengthen the franchise and achieve long-term
financial targets. Key reengineering efforts included consolidation of
U.S. Card operationsEurope and
the creation of single, company-wide staff
functionsLatin America/Caribbean and shared resource units.Asia/Pacific regions.
-- Sustained employee satisfaction levels onStrengthening the annual, worldwide Values
Survey. These results were attained notwithstandingCompany's international business and forging
alliances and joint ventures with partners in key markets around the
restructuring
and reengineering in many parts of the Company.world.
The Committee also took into account disappointingsome disappointments, including
overall revenue growth that was below long-term targets; the inability to regain
market share in the Company's core card business; a cost structure that is still
too high; weak financial results at American Express Bank, a declineBank; and continued
competitive pressures in market share in TRS' core Card business,
lackall of productivity growth by financial advisors at AEFA, TRS' product
development process that remained relatively slow, and the Company's cost
structure that remained relatively high.businesses.
Overall, the Company madecontinued to make good progress in 1995 to implementtowards implementing
its strategy for reestablishing American Express as a growth company and
achieving its vision of becoming the world's most respected service brand. Mr.
Golub, along with the other members of the Office of the
20
Chief Executive and other top management, ledsenior executives, has performed an integral role in
identifying and developing opportunities for significant growth in financial
services and international markets as well as opening the further
implementation of the corporate brand strategy first articulated in 1994 and the
transition to a "one Company" structure with business units served by
company-wide staff functions.American Express Card
network.
In recognition of these achievements, Mr. Golub's
1995 incentive award was 1.55 times the target value established for such award.
In February 19951996, the Committee granted Mr. Golub long-term incentive awards. The awards
consistedconsisting of a ten-year nonqualified10-year non-qualified stock option to purchase 200,000 common
shares at fair market value at the date of grant and a PG-VIPG-VII award with a grant
value of $1,000,000. The stock option becomes exercisable in cumulative annual
installments of 33 1/3% over three years. The PG-VIPG-VII award earns value as
described on pages 25-26 and
vestspage 18 and is payable after three years. These awards were
consistent with the award reference points established by the Committee as
described above. The Committee also granted Mr. Golub a special restricted stock
award of 35,000 shares. The award vests in equal installments on the second and
fourth anniversary of the grant date.
The three-year performance period for Performance Grant-IV ("PG-IV")Portfolio Grant V awards granted in
May 1993February 1994 ended in December 1995. As described on page 22, the
Committee amended the original PG-IV1996. This award to create two awards, one relating to
the 1993 performance period and the other relating to the 1994-95 performance
period,was structured to meet the
requirements offor excluding compensation from the Million Dollar Cap. Themillion dollar deduction
limitation. At its February 1997 meeting, the Committee certified the results
against thecumulative earnings per share and average ROE goals of the awards, andas
well as the average stock price at the end of the period. The Committee approved
a total payout of $2,603,660$2,593,906 for Mr. Golub. The payout reflects adjustments
approved by the Committee under the terms of the award to take into account
three-year financial results and unusual events including(including restructuring
activities, the spin-off of
Lehman Brothers Holdings Inc. ("Lehman"),spin-off, gains and losses from dispositions and
accounting changes and restructuring results.changes).
COMPENSATION AND BENEFITS COMMITTEE
Frank P. Popoff, Chairman
Anne L. Armstrong
Edwin L. Artzt
Beverly Sills Greenough
F. Ross Johnson
Vernon E. Jordan Jr.
2021
The following table shows, for the fiscal years ending December 31, 1996,
1995 and 1994, and 1993, the cash and other compensation paid or accrued and certain
long-term awards made to the named executives for services in all capacities.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------ ---------------------------------------------------------------- -----------------------------------
AWARDS(4) PAYOUTS
--------------------- ----------
OTHER RESTRICTED LONG-TERM
NAME AND PRINCIPAL ANNUAL STOCK OPTIONS/ INCENTIVE ALL OTHER
POSITION AT COMPENSA- AWARDS SARS PAYOUTS COMPENSA-
DECEMBER 31, 19951996 YEAR SALARY($) BONUS($)(2) TION($)(3) ($)(5) (# SHARES) ($)(6) TION($)(7)
---------------- ---- -------- ---------- ---------- ------------------ -------- ---------- -------------------
H. Golub............. 1996 $900,000 $1,980,000 $246,634 $1,618,750 200,000 $ 2,593,906 $324,882
Chairman and Chief 1995 $876,923 $1,860,000 $250,017876,923 1,860,000 250,017 0 200,000 $2,603,660 $378,344
Chairman and Chief2,603,660 378,344
Executive Officer 1994 800,000 2,040,000 236,729 0 228,093 1,799,872 167,474
Executive Officer 1993 776,923 1,850,000 106,086 $3,390,000 456,166 907,842 228,822
K.I. Chenault........ 1996 550,000 990,000 188,152 1,156,250 110,000 1,129,532 109,717
Vice Chairman 1995 532,692 930,000 202,986 680,000 110,000 1,545,909 177,399
Vice Chairman 1994 475,000 785,000 -- 442,498 79,829 1,008,132 69,643
1993 443,269 625,000 -- 475,000 79,829 84,752 44,718
G.L. Farr............ 1996 550,000 950,000 175,446 1,156,250 110,000 1,037,551 60,737
Vice Chairman 1995(1)359,615 930,000 137,620 1,728,150 160,000 520,741 962,503
Vice Chairman 1994 -- -- -- -- -- -- --
1993 -- -- -- -- -- -- --
J.S. Linen........... 1996 550,000 695,000 184,032 0 50,000 1,426,596 233,878
Vice Chairman 1995 550,000 605,000 192,995 0 50,000 1,432,015 421,068
Vice Chairman 1994 550,000 850,000 190,733 0 62,723 1,360,226 142,879
1993 550,000 660,000 55,307 197,750 62,723 393,870 181,846
D.R. Hubers.......... 1996 425,000 750,000 72,445 0 70,000 1,177,982 112,568
President and Chief 1995 421,154 650,000 55,119 0 70,000 1,174,027 149,787
President and ChiefExecutive Officer- 1994 400,000 660,000 -- 0 79,829 705,175 79,823
Executive Officer- 1993 346,923 450,000 -- 468,272 49,037 261,126 65,964
American Express
Financial Corporation
- -------------
(1) Reflects compensation starting May 1, 1995, the date Mr. Farr commenced
employment with the Company.
(2) 1995 bonuses were paid pursuant to 1995 incentive awards described on page
17.
(3) Amounts reported in this column for 1995 reflect perquisites, other
personal benefits and amounts reimbursed for the payment of taxes.
Included is the cost to the Company of the following: for Mr. Golub, local
travel allowance of $71,261 (plus $58,304 for the payment of related
taxes) and personal travel expenses of $82,097; for Mr. Chenault, local
travel allowance of $84,661 (plus $71,684 for the payment of related
taxes); for Mr. Farr, local travel allowance of $56,441 (plus $46,179 for
the payment of related taxes); for Mr. Linen, local travel allowance of
$84,661 (plus $71,684 for the payment of related taxes); and for Mr.
Hubers, flexible perquisite allowance of $35,000 and personal travel
expenses of $16,243.
(4) Stock-based awards issued under the 1979 and 1989 Long-Term Incentive
Plans and outstanding prior to the Lehman spin-off were adjusted in May
1994 by a factor of approximately 1.1404 to preserve the economic value of
the awards. The numbers of shares underlying grants of restricted stock,
21
stock options and the exercise prices of stock options are shown in the
tables on pages 21 through 24 asAmerican Express
Financial Corporation
- -------------
(1) Reflects compensation starting May 1, 1995, the date Mr. Farr commenced
employment with the Company.
(2) 1996 bonuses were paid pursuant to 1996 incentive awards described on
page 17.
(3) Amounts reported in this column for 1996 reflect perquisites, other
personal benefits and amounts reimbursed for the payment of
taxes. Included is the cost to the Company of the following: for Mr.
Golub, local travel allowance of $71,261 (plus $46,429 for the payment of
related taxes) and personal travel expenses of $93,084; for Mr. Chenault,
local travel allowance of $84,661 (plus $55,159 for the payment of related
taxes); for Mr. Farr, local travel allowance of $84,661 (plus $55,159 for
the payment of related taxes); for Mr. Linen, local travel allowance of
$84,661 (plus $55,159 for the payment of related taxes) and for Mr.
Hubers, flexible perquisite allowance of $35,000 and personal travel
expenses of $16,050.
(4) Stock-based awards issued under the 1979 and 1989 Long-Term Incentive
Plans and outstanding prior to the 1994 spin-off of Lehman Brothers
Holdings Inc. ("Lehman") were adjusted in May 1994 by a factor of
approximately 1.1404 to preserve the economic value of the awards. The
numbers of shares underlying grants of restricted stock, stock options and
the exercise prices of stock options shown in the tables on pages 22
through 25 have been adjusted for the spin-off.
22
(5) Restricted stock awards are valued in the table above at their fair market
value based on the per share closing price of the Company's common shares
on the New York Stock Exchange on the date of grant. Restricted stock
holdings as of December 31, 19951996 and their fair market value based on the
per share closing price of $41.375$56.50 on December 29, 199531, 1996 were as follows:
NUMBER OF VALUE ON
NAME RESTRICTED SHARES DECEMBER 31, 19951996
- ----- --------------- --------------------------------- -----------------
H. Golub.................... 97,505 $4,034,269Golub............... 95,441 $5,392,417
K.I. Chenault............... 62,765 2,596,902Chenault.......... 75,791 4,282,192
G.L. Farr...................Farr.............. 50,000 2,068,7502,825,000
J.S. Linen.................. 42,195 1,745,818Linen............. 27,940 1,578,610
D.R. Hubers................. 20,755 858,738Hubers............ 13,913 786,085
Dividends are payable on the restricted shares to the extent and on the
same date as dividends are paid on Company common shares. In 1993 Mr.
Golub was awarded 114,041 shares of restricted stock which provided for
vesting in equal installments on the first four anniversaries of the date
of grant. In 1995 Mr. Farr
was awarded 50,000 shares of restricted stock which provided for vesting
in equal installments on the first two anniversaries of the date of grant.
In 1996 Messrs. Golub, Chenault and Farr were awarded 35,000, 25,000 and
25,000 shares, respectively, of restricted stock which provided for
vesting in equal installments on the second and fourth anniversary of the
date of grant.
(6) Includes payoutspayout of a PG-IV award granted to Mr. Farr when he joined the
Company in May 1995 and PG-IVPortfolio Grant V awards amended in May 1994 ("Amended PG-IV"
awards) originally granted to the other named executives in May 1993.PG-V awards"). Each PG-IVPG-V
award consisted of two components. Sixty percent of the target value of
each PG-IVPG-V award was allocated to a Financial Incentive component, which
was valued based on cumulative earnings and return on equity targets for
the business segments of the Company or for the Company on a consolidated
basis for the period January 19931994 to December 1995.1996. Forty percent was
allocated to Stock Incentive Units, which were valued based on the
Company's average share price during the 60 trading days prior to February
26, 1996.
22
PG-IV24, 1997. PG-V awards granted to the named executives other(other than Mr.
FarrFarr) were split in 1994 into two awards in orderstructured to satisfy requirements for deductibility of
"performance-based" compensation under the Company's policy of
excluding compensation from the Million Dollar Cap where the Company's
compensation objectives would still be met. The first award covered the
1993 performance period and the second award covered the 1994-95
performance period.million dollar deduction
limitation. The value of the PG-IV awards and the Amended PG-IV
awardsPG-V award was adjusted by the Committee to
take into account three-year financial results and unusual events
including(including restructuring activities, the Lehman spin-off, gains and losses
from dispositions and accounting changes and restructuring activities, and additional
adjustments were made for Mr. Chenault and one other executive officer to
take into account contributions to AEQL and reengineering results.changes).
(7) Amounts reported under "All Other Compensation" for 19951996 include the
dollar value of the following:
EMPLOYER
CONTRIBUTIONS
UNDER ABOVE-MARKET PAYMENTS IN
PAYMENTS PROFIT SHARING, EARNINGS ON VALUE OF CONNECTION WITH
UNDER CAPITAL SAVINGS AND DEFERRED SPLIT-DOLLAR COMMENCEMENT
NAME PARTNERS I AND II RELATED PLANS COMPENSATION LIFE INSURANCE OF EMPLOYMENT
----- ----------------- -------------- ------------- -------------- --------------
H. Golub................. $225,494 $27,373 $58,507 $66,970 --
K.I. Chenault............ 126,566 28,432 825 21,576 --
G.L. Farr................ -0- -0- -0- 62,503 $900,000
J.S. Linen............... 348,423 22,808 17,603 32,234 --
D.R. Hubers.............. 84,378 23,971 6,779 34,609 --
EMPLOYER
PAYMENTS CONTRIBUTIONS ABOVE- VALUE OF
UNDER UNDER PROFIT MARKET SPLIT-
CAPITAL SHARING, EARNINGS ON DOLLAR
PARTNERS SAVINGS AND DEFERRED LIFE
I AND II RELATED PLANS COMPENSATION INSURANCE
-------- ------------- ------------ ---------
H. Golub ............... $ 86,800 $ 65,502 $128,431 $ 44,149
K.I. Chenault .......... 39,930 46,840 772 22,175
G.L. Farr .............. 0 13,415 0 47,322
J.S. Linen ............. 121,668 48,131 31,673 32,406
D.R. Hubers ............ 26,620 37,005 17,298 31,645
23
Capital Partners I and Capital Partners II are limited partnerships
established by Lehman in 1985 and 1988, respectively. Pursuant to these
partnerships, senior officers were offered the opportunity to invest in a
portfolio of high risk investments. An affiliate of Lehman is the general
partner and invested most of the capital of the partnerships. Amounts reported
reflect income distributions and distributions related to the liquidation of
assets.
The amount shown for Mr. Farrfollowing table contains information concerning the grant of
nonqualified stock options in the column "Paymentstandem with stock appreciation rights (SARs) in
Connection with
Commencement of Employment" includes a hiring bonus and an amount to
replace certain compensation opportunities lost upon termination of
employment with his previous employer. See "Board Compensation Committee
Report on Executive Compensation--Executive Officer Compensation for 1995"
above.
The following table contains information concerning the grant of
nonqualified stock options in tandem with stock appreciation rights (SARs) in
19951996 to the named executives:
OPTION/SAR GRANTS IN 1995
1996
INDIVIDUAL GRANTS (1)
-------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS/SARS EMPLOYEES EXERCISE PRICE PRESENT
NAME GRANTED (#) IN 19951996 ($/SH) EXPIRATION DATE VALUE ($)(2)
----$(2)
------ ------------- ----------- ------------ --------------- ------------ ------------- -------------- -----------
H. Golub...................... 200,000 3.4% $34.0002.8% $46.25 2/27/05 $2,146,00026/06 $2,292,000
K.I. Chenault................. 110,000 1.9 34.0001.5 46.25 2/27/05 1,180,30026/06 1,260,600
G.L. Farr..................... 160,000 2.7 34.563 5/1/05 1,649,600110,000 1.5 46.25 2/26/06 1,260,600
J.S. Linen.................... 50,000 0.8 34.0000.7 46.25 2/27/05 536,50026/06 573,000
D.R. Hubers................... 70,000 1.2 34.0001.0 46.25 2/27/05 751,10026/06 802,200
- -------------
(1) Stock options were granted in February 1996 to Messrs. Golub, Chenault,
Farr, Linen and Hubers. Options become exercisable in cumulative annual
installments of 33 1/3 percent per year on each of the first three
anniversaries of the grant date. These options were granted in tandem with
SARs. SARs can be exercised only in very limited circumstances, such as
when the option is about to expire, when the participant retires, or, for
executive officers, when the related stock option becomes fully
exercisable and then only to the extent of 50% of the underlying shares.
Upon exercise of an SAR, the holder may receive cash, common shares or
other consideration equal in value to (or, at the discretion of the
Committee, less than the value of) the difference between the option price
and the fair market value of the Company's common shares, and the
appropriate portion or all of the related stock option is then cancelled.
Upon termination or exercise of any stock option, any tandem SAR
automatically terminates.
(2) These values were calculated as of the grant date using a variation of the
Black-Scholes option pricing model. The model is a complicated
mathematical formula premised on immediate exercisability and
transferability of the options, which are not features of the Company's
options granted to executive officers and other employees. The values
shown are theoretical and do not necessarily reflect the actual values the
recipients may eventually realize. Any actual value to the officer or
other employee will depend on the extent to which market value of the
Company's common shares at a future date exceeds the exercise price. In
addition to the stock prices at grant and the exercise prices, which are
identical, and the seven-year term of each option, the following
assumptions for modeling were used to calculate the values shown: expected
dividend yield (3.1% - the historic average yield for the most recent 60
months prior to the grant dates), expected stock price volatility (.23% -
the most recent volatility for the month-end stock prices of the Company's
common shares for the 60 months prior to the grant
24
dates), and risk-free rate of return (5.9%-equal to the yield on a
zero-coupon seven year bond on the option grant dates). The assumptions and
the calculations used for the model were provided by an independent
consulting firm and are consistent with the assumptions for reporting stock
option valuations in the Company's Annual Report to Shareholders.
- -------------
(1) Stock options were granted in February 1995 to Messrs. Golub, Chenault,
Linen and Hubers and in May 1995 to Mr. Farr. Options become exercisable
in cumulative annual installments of 33 1/3% per year on each of the first
three anniversaries of the grant date. These options were granted in
tandem with SARs. SARs can be exercised only in very limited
circumstances, such as when the option is about to expire, when the
participant retires, or, for executive officers, when the related stock
option becomes fully exercisable and then only to the extent of 50% of the
23
underlying shares. Upon exercise of an SAR, the holder may receive cash,
common shares or other consideration equal in value to (or, at the
discretion of the Committee, less than the value of) the difference
between the option price and the fair market value of the Company's common
shares, and the appropriate portion or all of the related stock option is
then cancelled. Upon termination or exercise of any stock option, any
tandem SAR automatically terminates.
(2) These values were calculated as of the respective grant dates using a
variation of the Black-Scholes option pricing model. The model is a
complicated mathematical formula premised on immediate exercisability and
transferability of the options, which are not features of the Company's
options granted to executive officers and other employees. The values
shown are theoretical and do not necessarily reflect the actual values the
recipients may eventually realize. Any actual value to the officer or
other employee will depend on the extent to which the market value of the
Company's common shares at a future date exceeds the exercise price. In
addition to the stock prices at grant and the exercise prices, which are
identical, and the ten-year term of each option, the following assumptions
for modeling were used to calculate the values shown for options granted
in February and May 1995, respectively: expected dividend yield (3.59% and
3.49%-- the historic average yield for the most recent 60 months prior to
the grant dates), expected stock price volatility (.2623 and .2436--the
most recent volatility for the month-end stock prices of the Company's
common shares for the 60 months prior to the grant dates), and risk-free
rate of return (7.74% and 7.24%-- equal to the yield on a zero-coupon
ten-year bond on the option grant dates). The assumptions and the
calculations used for the model were provided by an independent consulting
firm.
The following table sets forth information for the named executives
regarding the exercise of stock options and/or SARs during 19951996 and unexercised
options and SARs held as of the end of 1995:
AGGREGATED OPTION/SAR EXERCISES IN 1995 AND
YEAR-END 19951996:
AGGREGATED OPTION/SAR EXERCISES IN 1996 AND
YEAR-END 1996 OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES AT DECEMBER 31, 19951996 AT DECEMBER 31, 1995(1)
------------------------ ---------------------------
SHARES1996(1)
ACQUIRED VALUE -------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ----- --------- ------- --------------------- -------- ----------- ------------ ----------------------- ------------
H. Golub................. 161,939 $2,303,267 730,815 504,112 $12,845,616 $6,340,943119,744 $2,984,861 905,821 409,362 $28,346,843 $7,370,617
K.I. Chenault............ 5,702 86,220 307,454 189,831 5,137,034 2,035,64350,862 1,232,922 360,164 209,944 10,944,784 3,592,633
G.L. Farr................ 0 0 0 160,000 0 1,089,92053,332 216,668 1,169,944 3,467,476
J.S. Linen............... 41,055 630,789 380,898 112,724 6,446,220 1,364,32750,178 1,136,212 389,202 104,242 12,433,434 1,902,969
D.R. Hubers.............. 30,335 497,404 130,004 139,567 2,047,585 1,570,23145,616 1,105,754 150,678 143,277 4,288,069 2,582,625
- -------------
(1) Based on the $56.50 closing price of the Company's common shares on the New York Stock Exchange on December 31, 1996.
- -------------
(1) Based onThe following table sets forth information concerning long-term incentive
plan awards made in 1996 to the $41.375 closing price of the Company's common shares on the
New York Stock Exchange on December 29, 1995.
24
named executives:
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1996
The following table sets forth information concerning the grant of
long-term incentive plan awards in 1995 to the named executives:
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1995
ESTIMATED FUTURE PAYOUTS
PERFORMANCE UNDER NON-STOCK PRICE-BASED COMPONENT(1)
--------------------------------------
DOLLAR VALUE($)/ PERFORMANCE--------------------------------------
NAME NUMBER OF UNITS(1) PERIODUNITS PERIOD(1) THRESHOLD ($) TARGET ($) MAXIMUM ($)
- ----- -------------------------------- --------- ------------- ----------- ----------- --------- -------------------------
H. Golub.........PG-VIGolub........PG-VII $600,000 Financial Incentive 1995-971996-98 $450,000 $900,000 $2,700,000
13,1099,282 Stock Incentive Units 1995-971996-98 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
K.I. Chenault....PG-VIChenault...PG-VII $360,000 Financial Incentive 1995-971996-98 270,000 540,000 1,620,000
7,8655,569 Stock Incentive Units 1995-971996-98 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
G.L. Farr........PG-VIFarr.......PG-VII $360,000 Financial Incentive 1995-971996-98 270,000 540,000 1,620,000
7,8655,569 Stock Incentive Units 1995-97 -- -- --
PG-V $240,000 Financial Incentive 1994-96 120,000 240,000 720,000
5,155 Stock Incentive Units 1994-96 -- -- --
PG-IV $120,000 Financial Incentive 1993-95 60,000 120,000 360,000
3,271 Stock Incentive Units 1993-951996-98 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
J.S. Linen.......PG-VILinen......PG-VII $285,000 Financial Incentive 1995-971996-98 213,750 427,500 1,282,500
6,2274,409 Stock Incentive Units 1995-971996-98 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
D.R. Hubers......PG-VIHubers.....PG-VII $285,000 Financial Incentive 1995-971996-98 213,750 427,500 1,282,500
6,2274,409 Stock Incentive Units 1995-971996-98 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Reflects PG-VIPG-VII awards granted to the named executives in February and May
19951996
for the January 19951996 to December 19971998 performance period.
Also
reflects a PG-IV award and Performance Grant-V ("PG-V") award granted in
May 1995 to Mr. Farr for the January 1993 to December 1995 and January
1994 to December 1996 performance periods, respectively. Mr. Farr's PG-IV
award was paid out as described on page 22.25
Performance Grant awards provide competitive compensation to retain
participants in the employment of the Company and incentives toward the
achievement of Company and business unit goals that are important to
shareholders. Each Performance Grant award contains the two components
shown in this table, Financial Incentive and Stock Incentive Units
components. The Financial Incentive component will earn value based on
achievement of the cumulative earnings (or earnings per share) and average
return on equity targets for a business segment of the Company or the
Company on a consolidated basis, depending on whether the executive is
employed by a business unit or the Company. The threshold, target or
maximum amounts may be earned if varying combinations of the
pre-established cumulative earnings (or earnings per share) and average
return on equity targets are met. The component will not earn value unless
minimum levels of these performance measures are achieved during the
performance period. Each Stock Incentive Unit will earn value equal to the
average of the high and low sales prices of the Company's common shares
for the 60 trading days prior to the Committee's meeting in February 1998
25
for PG-VI awards, February 1997 for PG-V awards and February 1996 for
PG-IV awards.1999.
Minimum performance levels for cumulative earnings and return on equity
are required for the Stock Incentive Units of the PG-VIPG-VII awards to have
any value. The Committee has the discretion to make adjustments upward or downward for Mr. Farr's PG-IV and PG-V awards and
downward
only for executive officers' PG-VI awards to the sum of the value of both components based on its assessment of
Company, business unit and individual performance.
PG-VIPG-VII awards granted to the Company's executive officers, except for
awards to two executive officers not named in the table who joined the
Company in the latter half of 1996, were structured to satisfy
requirements for deductibility of "performance-based" compensation under
the Million Dollar Cap. Regulations applicable to the Million Dollar Cap
permit the value produced by these goals to be adjusted downward only. The
threshold, target and maximum estimated future payouts for the Financial
Incentive component of each PG-VIPG-VII award were established as multiples of
the dollar grant value of the component to provide the Committee with
flexibility to adjust downward the values produced by both components of
the award and still maintain the deductibility of the award
payments. The final
value of the awards (including downward adjustments) will be determined by
the Committee based on its assessment of factors such as Company, business
unit and individual performance for the 1995-971996-98 performance period.
26
PERFORMANCE GRAPH
The graph on the following pagebelow compares the cumulative total shareholder return on the
common shares of the Company for the last five fiscal years with the cumulative
total return on the S&P 500 Index and the S&P Financials over the same period
assuming the investment of $100 in the Company's common shares, the S&P 500
Index and the S&P Financials on December 31, 19901991 and the reinvestment of all
dividends. On May 31, 1994 the Company distributed to shareholders all of the
common stock of Lehman owned by it as a special dividend. The graph accounts for
this distribution as though it were paid in cash and reinvested in common shares
of the Company.
26
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
AMERICAN EXPRESS COMPANY, S&P 500 INDEX AND S&P FINANCIALS
[The table below contains the data points used in the Performance Graph which
appears in the printed Proxy Statement.]
Value of Investment
- --------------------------------------------------------------------------------
Year-End Data 1990 1991 1992 1993 1994 1995 - ----1996
------------- ---- ---- ---- ---- ---- ----
American Express ... $100.00 $103.57 $129.88 $166.99 $187.73 $268.03$125.40 $161.20 $181.30 $258.80 $361.80
S&P 500 Index ...... $100.00 $130.34 $140.25 $154.32 $156.42 $214.99$107.60 $118.40 $120.00 $165.00 $202.70
S&P Financials ..... $100.00 $150.55 $185.63 $206.11 $198.97 $306.16$123.30 $136.90 $132.20 $203.40 $274.70
- --------------------------------------------------------------------------------
27
PENSION BENEFITS
The Company maintains the American Express Retirement Plan (the
"Retirement Plan"), which provides benefits for eligible employees. Through June
30, 1995 the Retirement Plan was structured as a traditional, defined benefit
plan. Effective July 1, 1995, the present value of accrued benefits under the
Retirement Plan was converted to a cash balance formula. In addition, the IDS
Retirement Plan, another traditional defined benefit plan maintained by American
Express Financial Corporation, was merged effective July 1, 1995 into the
American Express Retirement Plan and the benefits under the IDS plan were
similarly converted.
Under the cash balance formula, each participant has an account, for
record keeping purposes only, to which credits are allocated each payroll period
based upon a percentage (the "Applicable Percentage") of the participant's base
salary plus bonus paid in the current pay period ("Pensionable Earnings"). The
Applicable Percentageapplicable percentage is determined by the age and years of service of the
participant with the Company and its affiliates as of the end of the current
calendar year. The following table shows the Applicable Percentage used to
determine credits at the age and years of service indicated.
SUM OF AGE PLUS
YEARS OF SERVICE APPLICABLE PERCENTAGE
---------------- ------------------------------------ --------------------
Less than 35 2.50%
35-44 3.25
45-59 4.25
60-74 5.75
75-89 8.00
90 or more 10.00
As of January 1, 19961997 the sum of age plus years of service for Messrs.
Golub, Chenault, Farr, Linen and Hubers was 70, 60, 56, 8072, 62, 58, 82 and 85,87, respectively.
In addition, all balances in the accounts of participants earn a fixed
rate of interest which is credited annually. The interest rate for a particular
year is based on the average of the daily five-year U.S. Treasury Note yields
for the previous October 1 through November 30. The minimum interest rate is 5
percent. The maximum rate is 10 percent or the annual maximum interest rate set
by the U.S. government for determining lump sum values, whichever is less. For
July-December, 1995,1996 the interest rate was 6.96%5.78%, and is 6.13% for 1996 the interest rate
is 5.78%.1997.
At retirement or other termination of employment, an amount equal to the
vested balance then credited to the account is payable to the participant in the
form of an immediate or deferred lump sum or annuity for the entire benefit
under the Plan. Participants may choose a separate form of payment of the
portion of the benefit accrued before July 1, 1995 if the individual
participated in the Retirement Plan or the IDS Retirement Plana predecessor plan before July 1, 1995.
Annuity payment options available before July 1, 1995 are available for this
portion of the benefit.
The table below sets forth the estimated annual benefit payable to each of
the individuals named in the Summary Compensation Table as a single life annuity
at age 65 under the Retirement Plan and the American Express Supplemental
Retirement Plan (the "Supplement"Supplemental Retirement Plan"). The Supplemental
Retirement
28
Plan is an unfunded, non-qualified deferred compensation arrangementarrange-
28
ment that primarily provides benefits that cannot be payable under a qualified
plan like the Retirement Plan because of the maximum limitations imposed on such
plans by the Code. The projections contained in the table are based on the
following assumptions: 1) employment until age 65 at base salaries in effect at
December 31, 19951996 with no increase in salary,salary; 2) annual bonuses equal to the
average bonus over the last five years (1991(1992 through 1995)1996) for Messrs. Golub,
Linen and Chenault; estimatedthe 1996 bonus for Mr. Farr;Farr, and the average of 1994, 1995
and 19951996 bonuses for Mr. Hubers,Hubers; 3) interest credits at the actual rates, 6.96%
for 1995, and 5.78% for 1996, and 6.13% for 1997, and the minimum rate of 5% for
19971998 and later years,years; and 4) the conversion to a straight life annuity at normal
retirement age is based on an interest rate of 7% and the 1983 Group Annuity
Mortality table, which sets forth generally accepted life expectancies. Prior to
May 1, 1985 the Company maintained the American Express Funded Pension Plan (the
"Funded Pension Plan"), which was terminated effective April 30, 1985. In
accordance with applicable federal law, all benefits under the Funded Pension
Plan accrued to the date of termination became fully vested and nonforfeitable.
Paid-up annuities were purchased from an insurance company to cover vested
accrued benefits, except for nominal amounts of vested accrued benefits
distributed in cash. Messrs. Linen and Chenault received past service credit for
the periods during which they were covered by the Funded Pension Plan for
purposes of determining the Applicable Percentage. The table sets forth
separately the annual benefit payable by the insurance company as a single life
annuity at age 65 to Messrs. Linen and Chenault.
RETIREMENT PLAN AND ANNUAL BENEFITS
SUPPLEMENTAL RETIREMENT PLAN PAYABLE BY
EXECUTIVE OFFICER ESTIMATED ANNUAL BENEFITS INSURANCE COMPANY TOTAL ANNUAL BENEFITS
- --------------- ------------------------------------------------------- ------------------ ----------------------------------------
H. Golub................... $ 360,258 $0 $360,258$378,890 0 $378,890
J.S. Linen................. 640,386 65,508 705,894
K.I. Chenault.............. 373,069420,119 5,747 378,816
G. L. Farr................. 81,018425,866
G.L. Farr.................. 102,251 0 81,018
J.S. Linen................. 634,375 65,508 699,883102,251
D.R. Hubers................ 260,586265,846 0 260,586265,846
At the time of Mr. Golub's employment by the Company in 1983, the Company
entered into a separate unfunded, non-qualified deferred compensation
arrangement with him. Under this arrangement, at the time of his retirement, the
Company will calculate the annual pension benefits that would have been payable
to him had he commenced participation in the Retirement Plan and the
Supplemental Retirement Plan effective November 1, 1978. The arrangement1978 (which includes an
additional five years of service above his actual service with the Company (five(six
years) and American Express Financial Corporation (seven years)) in order to
compensate him for benefits he forfeited on termination of his previous
employment. For purposes of this arrangement Mr. Golub's opening cash balance
account value and the ongoing Applicable Percentage were calculated based upon
an additional five years of service. The Company will pay to Mr. Golub an amount
on an unfunded basis to the extent of any difference between such calculation
and amounts he is eligible to receive under the Retirement Plan and Supplemental
Retirement Plan based on his actual years of service under these Plans.
29
The Committee approved an unfunded, non-qualified arrangement for Mr.
Linen, who in 1990 transferred at the request of the Company from his position
at TRS to a position at a predecessor of Lehman. During 1992, Mr. Linen returned
to TRS at the Company's request. The arrangement provides that the total of the
value of the pension benefits to which he would be entitled at the time of his
retirement, plus the value of his base salary and cash bonus received during
such employment, would not be lower than would have been the case had he
remained in his prior position at TRS. The Committee has retained broad
discretion in the methodology for determining the respective values for
comparisons and in making any equitable adjustments deemed necessary to carry
out the intent of the arrangement.
In 1995 the Compensation and Benefits Committee approved an unfunded,
non-qualified arrangement for Mr. Farr. The arrangement provides for an
additional service credit of five years upon the completion of five years of
actual service. At the end of five years of service, eligibility for
29
pension benefits and the value of pension benefits will be determined using a
hire date five years prior to actual date of hire. The Company will pay to Mr.
Farr an amount on an unfunded basis to the extent of any difference between such
calculation and amounts he is eligible to receive under the Retirement Plan and
Supplemental Retirement Plan based on his actual years of service under these
plans.
SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS
During 1993 the Compensation and Benefits Committee and the Board of
Directors adopted a uniform policy for severance arrangements applicable to
senior management (including the named executives) of the Company, effective
January 1, 1994. In addition, in 1994 the Committee and the Board adopted
certain arrangements applicable to senior management and other employees that
would be effective upon a change in control of the Company.
Under the severance policy, in the event that the Company terminates the
employment of participating officers for reasons generally other than
misconduct, or in the event of a termination by mutual agreement, the officer
would be entitled to receive severance payments in installments over a period
not to exceed two years, subject to the execution of an agreement and compliance
with certain restrictive covenants, including a covenant not to compete or
solicit customers or employees, a nondisclosure covenant and a release of
claims. If the officer does not comply with these covenants following
termination of employment, severance payments will be subject to forfeiture or
recovery by the Company. For each named executive officer, the amount of
severance will equal two years' base salary at the then current rate and two
times the amount of bonus earned byapproved for the executive for the prior year.
Senior management of the Company, including the named executives, would be
entitled to receive the same amount of severance in a lump sum (subject to
compliance with certain of the above covenants) if, within two years following a
change in control of the Company, the officer resigns for good reason or is
terminated by the Company for reasons generally other than willful misconduct or
conviction of a felony or the
officer resigns for good reason (the "Termination Conditions"). Good reason means certain
reductions in base salary, certain relocations, the assignment of duties
materially inconsistent with the duties prior to the change in control, or a
significant reduction in the officer's position. A change in control includes
the acquisition of beneficial ownership by certain persons of 25% or
30
more of the
Company's common shares or all outstanding voting securities of the Company, the
current Board members of the Company cease to constitute a majority thereof
(except that any new Board member approved by at least a majority of the current
Board is considered to be a member of the current Board), or approval by
the Company's shareholders of certain events
relating to reorganizations, mergers, consolidations, liquidations or sales of
all or substantially all of the Company's assets.
If either of the Termination Conditions is met, senior officers, including
the named executives, would also receive a pro rata bonus for the year in which
the officer is terminated, based on the average of the bonuses paid to the
officer for the two years prior to a change in control. The Company would also
transfer to the officers the policies under the Company's Key Executive Life
Insurance Plan, which currently provides coverage equal to four times annual
base salary up to a maximum of $1,500,000. Upon a change in control, the Company
would fully fund accrued benefits under the
30
Company's Supplemental Retirement Plan with a lump sum contribution to a trust.
If a termination described above occurs within one year following a change in
control, such officers would be entitled to an additional benefit under the
Supplemental Retirement Plan as though they had been credited with an additional
two years of service and age under the American Express Retirement Plan (or one
year of credit if the termination occurs between one and two years following a
change in control). Upon a change in control, participants in the Company's
deferred compensation plans, including the Pay for Performance Deferral Program,
would receive an additional credit to their accounts of an amount equal to two
years of interest based on the rate for the year prior to the change in control
and a lump sum payment of their balances in these plans. Upon a change in
control, outstanding stock options and restricted stock awards issued to
participants under the Company's 1979 and 1989 Long-Term Incentive Plans (other
than certain options issued outside of the U.S.) would immediately vest. If
either of the Termination Conditions is met, outstanding PerformancePortfolio Grant awards
under the 1989 Plan would immediately vest and a pro rata amount would be paid
based on an award period ending on the date of termination of employment.
Generally, to the extent necessary to avoid the disallowance of the
deductibility of payments or benefits under the plans or programs described
above, such payments or benefits will be reduced to a level such that they will
not constitute parachute"parachute" payments within the meaning of Section 280G of the
Code.
CERTAIN TRANSACTIONS AND OTHER MATTERS
In the ordinary course of business, the Company and its subsidiaries from
time to time engage in transactions with other corporations or financial
institutions whose officers or directors are directors or officers of the
Company or a subsidiary. Transactions with such corporations and financial
institutions are conducted on an arm's-length basis and may not come to the
attention of the directors or officers of the Company or of the other
corporations or financial institutions involved.
From time to time, executive officers and directors of the Company and
their associates may be indebted to certain subsidiaries of the Company under
lending arrangements offered by those subsidiaries to the public. For example,
such persons may during the past year have been indebted to American Express
Centurion Bank for balances on the Optima Card and may be similarly indebted to
other subsidiaries of the Company during 1996.1997. Such indebtedness is in the
ordinary course of the Company's business, is substantially on the same terms,
including interest rates, as those prevailing at the time for comparable
31
transactions with other persons, and does not involve a more than normal risk of
collectibility or present other features unfavorable to the Company. The Company
and its subsidiaries and affiliates, in the ordinary course of business, may
have individuals in their employ who are related to executive officers or
directors of the Company. These individuals are compensated commensurate with
their duties. In addition, such executive officers, directors and associates may
engage in transactions in the ordinary course of business involving other goods
and services provided by the Company and its subsidiaries, such as travel,
insurance and investment services, on terms similar to those extended to
employees of the Company generally.
In the ordinary course of business, the Company and its subsidiaries
maintain various arm's-length relationships with Berkshire Hathaway Inc.
("Berkshire"), FMR Corp. or companies in which they have substantial equity
positions, including the relationships described below. Some of these
31
companies are service establishments that accept the American Express Card for
charges for goods and services and pay TRS fees when the Card is used and may
enter into joint marketing arrangements from time to time. TRS provides
Corporate Card and travel services to and sells American Express(R) Travelers Cheques through, a number of these companies and receives
fees and commissions for these products and services. A company in which Berkshire has a
substantial equity position is a participating airline in TRS' Membership
Rewards program and receives payments from TRS in connection with such
participation. The Company and its subsidiaries also engage in banking, finance,
foreign exchange, advisory, securities brokerage or other commercial
transactions with companies in which Berkshire has a substantial equity position
and pay or receive fees in connection with these transactions.
In 19951996 the Company sold put options on its common shares, including 2.55
million optionsentered into a transaction with a weighted average strike price of $38.91 per share which
were sold to a firm in which
Berkshire has a substantial equity position. The
Company received premium payments of $4.71 million for these options. In
addition, during 1995 the Company purchased an aggregate 1.6 million of its
common shares at an average per share price of $39.71 pursuant to the exercise
of put options previously sold to such firm. Further, in early 1996 the Company
entered into a transaction with such firm in orderposition to hedge a portion of its position
in shares of First Data Corporation common stock. Pursuant to this
transaction, theThe Company purchased
2,530,000 put options with a weighted average strike price of $66.36 and sold
2,530,000 call options with a weighted average strike price of $70.34. The
Company paid to this firm a net premium of approximately $3,300,000 in connection with thisupon
entering into the transaction and approximately $19,988,000 upon settlement of
the transaction.
During 1995,1996, in connection with its ongoing program of repurchasing
Company shares, the Company purchased a total of 180,000195,000 Company common shares
from Fidelity Capital Markets, a subsidiary of FMR. The average price paid per
share was $39.09,$44.59, reflecting the prevailing open market prices at the time of
purchase. The Company also paid a brokerage commission of four cents per share.
In 1983 the shareholders of the Company approved the adoption of the Stock
Purchase Assistance Plan ("SPAP") with the purpose of encouraging members of
senior management to increase their proprietary interest in the future
performance of the Company by providing full recourse loans to key employees for
exercising stock options (and/or for paying any taxes in respect thereof) or for
32
buying Company common shares at fair market value from the Company or in the
open market. The SPAP is administered by the Compensation and Benefits Committee
or its delegate. The maximum aggregate borrowing authority under SPAP is
presently $30 million. Under the terms of SPAP, eligible key employees
(approximately 175 persons, including those named in the Summary Compensation
Table on page 21)22) may borrow a maximum of 300 percent of their respective annual
base salaries, provided that such persons furnish sufficient collateral under
guidelines established from time to time by the Committee (presently 100 percent
of the amount of the loan on the date of grant). Such loans currently have
five-year maturities, bear interest payable quarterly at a variable rate of two
percentage points below the prime rate of a major New York City bank, and are
payable in full upon the occurrence of certain events, including termination of
employment. Based on the current prime rate, such loans bear interest at the
rate of 6.25 percent per annum. During 1995 Messrs. Linen and1996 Mr. Hubers had a maximum amount
outstanding under SPAP of $479,008 and $205,318, respectively.$205,318. As of March 4, 199610, 1997 Mr. Hubers'
indebtedness was the same, and Mr. Linen had repaid
his loan in full.same. For all executive officers as a group, the maximum
aggregate amount outstanding during 19951996 under SPAP was $3,146,977.92,$493,982, and as of
March 4,
199610, 1997 the aggregate amount outstanding was $1,764,449.
Two purported shareholderthe same.
Shareholder derivative actions now consolidated, were brought in October 1990 in New York State Supreme Court, and three purported
derivative actions, also consolidated, were brought in early 1991 in the United
States District Court for the Southern District of New Yorkstate and
federal court against all of the then current directors, certain former directors and
certain former officers and employees of the
32
Company. The consolidated state court complaint allegesaction alleged that the defendants breached their duty
of care in managing the Company, purportedly resulting in losses and in the
Company's payment of $8 million in July 1989 to certain charities agreed to by
the Company and Edmond J. Safra. Plaintiffs inThe federal court actions were dismissed and
the state court action seek a declaratory judgment, unspecified money damages
and an accounting. The federal actions were dismissed in December 1993, and the
dismissal was upheld by the Second Circuit Court of Appeals in November 1994.
Plaintiffs in the federal action subsequently commenced another state court
action raising the same allegations as the consolidated state court complaint.
A purported shareholder derivative action was brought in June 1991 in the
United States District Court for the Eastern District of New York against the
then current directors of the Company. In January 1992 this action was
transferred to the United States District Court for the Central District of
California for coordinated or consolidated proceedings with all other federal
actions related to First Capital Holdings Corp. ("FCH"). The complaint alleges
that the Board of Directors should have required Lehman to divest its investment
in FCH and to write down its investment sooner. In addition, the complaint
alleges that the failure to act constituted a waste of corporate assets and
caused damage to the Company's reputation. The complaint seeks a judgment
declaring that the directors named as defendants breached their fiduciary duties
and duties of loyalty and requiring the defendants to pay money damages to the
Company and remit their compensation for the periods in which the duties were
breached, attorneys' fees and costs and other relief.
The Company contests the allegations made in the above actions.
33
settled.
SELECTION OF AUDITORS
The Board of Directors recommends to the shareholders their ratification
of its selection of Ernst & Young LLP, independent auditors, to audit the
accounts of the Company and its subsidiaries for 1996.1997. The following resolution
will be offered at the shareholders' meeting:
RESOLVED, that the appointment by the Board of Directors of Ernst & Young
LLP, independent auditors, to audit the accounts of the Company and its
subsidiaries for 19961997 is ratified and approved.
In the event the shareholders fail to ratify the appointment, the Board of
Directors will consider it a direction to select other auditors for the
subsequent year. Even if the selection is ratified, the Board of Directors, in
its discretion, may direct the appointment of a new independent accounting firm
at any time during the year, if the Board feels that such a change would be in
the best interests of the Company and its shareholders.
Ernst & Young LLP or a predecessor firm has been serving as the Company's
independent auditors since 1975. Ernst & Young LLP follows a policy of rotating
the partner in charge of the Company's audit every seven years. Other partners
and non-partner personnel are rotated on a periodic basis. The Company paid
Ernst & Young LLP the sum of $9.9$10.5 million for the firm's 19951996 annual
examination of the financial statements of the Company and its subsidiaries.
A representative of Ernst & Young LLP will be present at the shareholders'
meeting with the opportunity to make a statement if he or she desires to do so
and will be available to respond to appropriate questions.
PROPOSAL TO APPROVE AMENDMENTS TOAMEND AND RESTATE THE COMPANY'S
1989 LONG-TERM INCENTIVE PLAN
In April 1989 the Company's shareholders approved the 1989 Long-Term
Incentive Plan (the "1989 Plan") and authorized 30 million shares for issuance
thereunder. In April 1993 the shareholders approved an additional 23.5 million
shares for issuance under the 1989 Plan. In addition, in 1994 the Board
increased the share reserve under the 1989 Plan to reflect the adjustments to
awards outstanding at the time of the Lehman spin-off to preserve the economic
value of the outstanding awards. As of March 4, 1996 approximately 7.8 million
shares remained available for issuance in connection with future grants.CERTIFICATE OF INCORPORATION
On February 26, 1996 the Board of Directors amended the 1989 Plan, subject
to shareholder approval, to:
-- Authorize 23.7 million additional shares for future awards. These
additional shares represent approximately 4.9% of the Company's
outstanding common shares as of the date of this Proxy Statement. The
Board of Directors believes that this additional share reserve is
necessary to continue to provide competitive long-term incentive awards
to key employees that are linked to the creation of shareholder value.
34
-- Specify performance criteria and limits for certain award grants and
payouts. These amendments are intended to meet the technical
requirements of the Million Dollar Cap and will enable the Company to
continue to deduct for tax purposes certain compensation paid to the
Company's chief executive officer ("CEO") and the four highest
compensated executives other than the CEO named in the proxy statement
(the "covered executives"). The amendments are not intended to result
in compensation above the level that would otherwise be provided
without the amendments.
The full text of the 1989 Plan, with the proposed amendments, is attached
to this Proxy Statement as Exhibit A. The principal features of the 1989 Plan
and the proposed amendments are described below, but such description is
qualified in its entirety by reference to the text. The amendments will not
become effective unless shareholder approval is obtained.
As part of its previously announced share repurchase program, the Company
currently intends to continue its practice of minimizing the dilutive effect of
the 1989 Plan and other stock-based programs through the acquisition of shares
to offset share issuances. Since September 1, 1994 the Company has purchased
43.2 million common shares and is currently authorized to purchase an additional
16.8 million common shares.
1989 PLAN DESCRIPTION
The primary objective of the 1989 Plan is to advance the interests of the
Company and its shareholders by providing incentives to key employees and
certain other individuals who perform services for the Company and its
affiliates ("Participants"), including those who contribute significantly to the
strategic and long-term performance objectives and growth of the Company and its
affiliates.
The 1989 Plan is administered by the Compensation and Benefits Committee
of the Board of Directors (the "Committee"), which is comprised exclusively of
non-employee directors. The 1989 Plan provides for the granting of stock
options, stock appreciation rights, restricted stock, performance grants and
other awards deemed by the Committee to be consistent with the purposes of the
1989 Plan (collectively or individually, "Awards"). Certain Awards under the
1989 Plan may be paid in cash, common shares, other Company securities (such as
debentures, preferred stock, warrants, convertible securities and other
securities issued by the Company or an affiliate ("Other Company Securities"))
or other property as determined by the Committee. The Committee has exclusive
discretion to select the Participants to whom Awards will be granted and to
determine the type, size and terms of each Award, and to make all other
determinations which it deems necessary or desirable in the interpretation and
administration of the 1989 Plan. The Committee has the authority to administer,
construe and interpret the 1989 Plan, and its decisions are final, binding and
conclusive.
Common shares and Other Company Securities that are equity securities
issued under the 1989 Plan may be newly issued shares, treasury shares,
reacquired shares or any combination thereof. Awards denominated solely in
common shares (such as shares of restricted stock or stock options) will
initially be counted against the plan maximum upon grant of the Award based upon
the maximum number of common shares underlying the Award. Other Company
Securities that are convertible into or exchangeable for common shares will be
counted against the maximum at the date of grant based upon the maximum number
of common shares that may be issued upon conversion or exchange. Other Company
Securities that are equity securities and not convertible into or exchangeable
for common shares will be counted against the maximum at the date of grant based
35
on the number of shares issued. If any common shares or Other Company Securities
subject to repurchase or forfeiture rights are reacquired by the Company or if
any Award is cancelled, terminates, expires unexercised or is paid in
consideration other than common shares or Other Company Securities, the common
shares or Other Company Securities which were issued, would otherwise have been
issuable, or which were otherwise underlying the Award will become available for
new Awards. In addition, common shares or Other Company Securities withheld by
or tendered to the Company in connection with the payment of the exercise price
of an Award or the satisfaction of tax withholding obligations will be available
for issuance under new Awards.
AWARDS UNDER THE 1989 PLAN.
STOCK OPTIONS. A stock option ("Option"), which may be a non-qualified or
an incentive stock option, is the right to purchase a specified number of common
shares at a price ("Option Price") fixed by the Committee. The Option Price paid
to the Company may be no less than the fair market value of the underlying
common shares on the date of grant. As a consequence Options benefit the
Participant only when a rising stock price benefits all common shareholders.
Options are not transferable during the Participant's lifetime and will
generally expire not later than ten years after the date on which they are
granted. Options become exercisable at such times and in such installments as
the Committee shall determine. Payment of the Option Price must be made in full
at the time of exercise in cash, by tendering to the Company common shares
having a fair market value equal to the Option Price, or by other means that the
Committee deems appropriate.
No Option may be exercised unless the holder has been, at all times during
the period from the date of grant through the date of exercise, employed by or
performing services for the Company or one if its affiliates, provided that the
Committee may determine that such exercise may be made for certain periods
following the date on which a Participant ceases to be employed by or performing
services for the Company or one of its affiliates by reason of a period of
Related Employment (as defined in the 1989 Plan), retirement, disability or
death.
STOCK APPRECIATION RIGHTS. A stock appreciation right ("SAR") may be
granted alone or in tandem with Options or other Awards. Upon exercise of an
SAR, the holder must surrender the SAR and surrender unexercised any related
Option or other Award, and the holder will receive, at the election of the
Committee, cash, common shares, Other Company Securities or other consideration
equal in value to (or, in the discretion of the Committee, less than) the
difference between the exercise price or Option Price per share and the fair
market value per share on the last business day preceding the date of exercise,
multiplied by the number of shares subject to the SAR or Option or other Award.
A Participant to whom an Award of an Option or SAR is made has no rights as a
shareholder with respect to any common shares issuable pursuant to any such
Option or SAR until the date of issuance of a share certificate or the posting
of an uncertificated book entry memo position on the records maintained by the
Company's transfer agent and registrar, as the case may be, with respect to such
shares upon payment of the Option Price or settlement of the SAR.
36
RESTRICTED STOCK. A restricted stock Award is an award of common shares
which are subject to a restriction against transfer (except in the case of
death) for a restricted period specified by the Committee. In the event a
Participant's employment with the Company and its affiliates terminates prior to
the end of the restricted period (except by reason of Related Employment), the
Company has the option to cancel all or a portion of the shares. Prior to the
expiration of the restricted period, a Participant who has received a restricted
stock Award has the right to vote and to receive dividends on the shares subject
to the Award.
PERFORMANCE GRANTS. Performance grants ("Performance Grants") are awards
whose final value, if any, is determined by the degree to which specified
performance objectives are achieved during a specified period, subject to such
adjustments as the Committee may approve based on relevant factors. Performance
objectives are established by the Committee and may be based upon specified
Company, business unit, Participant and/or other performance objectives. The
Committee may make such adjustments in the computation of any performance
measure as it deems appropriate. The maximum value of an Award may be a fixed
dollar amount, an amount that varies from time to time based on the value of a
common share, or an amount that is determinable from other criteria specified by
the Committee.
Payment under an Award may vest over a period of time after the final value is
determined.
Performance Grants may be awarded alone or in conjunction with other
Awards. The Committee will generally determine the value of a Performance Grant
as soon as practicable after the end of the performance period or may determine
value based upon a portion of the performance period upon earlier termination of
the Participant's employment or performance of services including by reason of
death, disability or retirement. The Committee may, however, determine the value
of the Performance Grant and pay it out at any time during the performance
period.
The rights of a Participant in a Performance Grant are provisional and may
be cancelled or paid in whole or in part if the Participant's continuous
employment with, or performance of services for, the Company and its affiliates
terminates during the performance period, except termination by reason of a
period of Related Employment.
Payment of an Award such as a Performance Grant may be made in cash,
common shares, Other Company Securities or other property or a combination
thereof as determined by the Committee. Deferred payments may be made in
installments with a return calculated on the basis of one or more investment
equivalents, as determined by the Committee in its discretion.
OTHER PROVISIONS
Under the 1989 Plan, if there is any change in the outstanding common
shares by reason of any stock split, stock dividend, combination, subdivision or
exchange of shares, recapitalization, merger, consolidation, reorganization or
other extraordinary or unusual event, the Committee may direct that appropriate
changes be made in the number or kind of securities that may be issued under the
1989 Plan and in the terms of outstanding Awards. As described above, the
Committee adjusted outstanding Awards to preserve the economic value of the
Awards following the spin-off of Lehman. The Committee has the discretion to
make appropriate changes in some or all Awards, consistent with the purposes of
37
the 1989 Plan, and under certain circumstances to make appropriate upward or
downward adjustments in Awards (e.g., based upon job changes or transfers
between units of the Company), without the consent of Award holders.
Generally, a Participant's rights under the 1989 Plan may not be assigned
or transferred (except in the event of death). The Committee may permit a
Participant to pay taxes required to be withheld with respect to an Award in any
appropriate manner, including, without limitation, by the surrender to the
Company of common shares owned by such person.
The expenses of the 1989 Plan are borne by the Company and participating
affiliates. Approximately 6,000 persons are eligible to receive Awards under the
1989 Plan. The 1989 Plan will terminate on April 23, 1999 unless extended for up
to an additional five years by action of24, 1997 the Board of Directors of the Company.Company approved and
recommended for submission to shareholders an amendment to the Company's
Certificate of Incorporation to delete the provisions relating to three series
of preferred stock which are no longer outstanding. The Board of Directors may amendamendment also updates
the 1989 Plan for any purpose consistent with
the goals of the 1989 Plan, but no such amendment shall be effective unless and
until the same is approved by shareholders of the Company where the absence of
shareholder approval would adversely affect the compliance of the 1989 Plan with
Rule 16b-3 under the Securities Exchange Act of 1934 or other applicable law or
regulation.
THE PROPOSED AMENDMENTS
ADDITIONAL SHARES. Because of the limited number of remaining shares, the
Board of Directors believes it is appropriate at this time to authorize
additional shares for future awards. The 23.7 million shares for which approval
is sought represent approximately 4.9%address of the Company's outstanding common
shares asstatutory agent for service of process. The purpose
of the date of this Proxy Statement. The awards provided by the 1989
Plan are designedamendment and restatement is solely to align executivestreamline and shareholder interests and to enable the
Company to attract, motivate and retain experienced and highly qualified
individuals.
MILLION DOLLAR CAP. As described on page 16 of this Proxy Statement, the
Million Dollar Cap limitssimplify the
Company's tax deductionCertificate of Incorporation in a single certificate that supersedes
the current certificate and all subsequent amendments.
The Company's Certificate of Incorporation currently contains the terms of
three series of preferred stock, all of which have been redeemed or converted
into common stock since their issuance and are no longer outstanding. The terms
of each series are contained in lengthy certificates of amendment which were
added to $1 million per year for
certain compensation paid to each of the Company's covered executives. This
limitation does not apply to "performance-based compensation." Options and SARs
may qualify as performance-based compensation if shareholders approve a maximum
limit on the numberCertificate of shares underlying such awards that may be granted to any
Participant over a specified period. Other Awards may qualify as
performance-based compensation if payment under such Awards is made (i) on
account of the achievement of one or more objective performance goals
established by a compensation committee consisting exclusively of two or more
outside directors (such as the Committee), (ii) pursuant to certain terms
approved by shareholders, including the maximum amount payable to any individual
and performance goals to be used, and (iii) following certification by such a
compensation committee that the performance goals and other material conditions
precedent to payment have been satisfied. Consistent with the Company's policy
described on page 16, from time to time the Committee may grant Awards under the
1989 Plan which do not qualify as performance-based compensation, in which case
the compensation paid under these Awards is subject to the Million Dollar Cap.
38
Since the Million Dollar Cap became effective, the Company has been
operating under transition rules that do not require shareholder approval of
maximum limits and performance standards for Awards to be treated as
performance-based compensation. However, this transition period will end with
shareholder approval of additional shares for the 1989 Plan. Accordingly, the
Board of Directors is seeking shareholder approval of amendments to the 1989
Plan to permit the Company to continue to deduct for tax purposes compensation
paid to covered executives under awards that qualify as performance-based
compensation ("Qualifying Awards").
The amendments provide that two types of Qualifying Awards may be granted
under the 1989 Plan. The first type is Options and SARs. Commencing with
calendar year 1996, the maximum number of common shares underlying Options and
SARs that may be granted to any Participant in any calendar year is limited to
500,000, subject to anti-dilution adjustments as provided in the 1989 Plan. This
limitation is required for Options and SARs issued under the 1989 Plan to
qualify as performance-based compensation.
The second type includes Performance Grants and any other Award (other
than Options and SARs) whose payment is conditioned upon the attainment of
specific amounts of or changes in one or more of the following performance
objectives: revenues, earnings, shareholders' equity, return on equity, assets,
return on assets, capital, return on capital, book value, economic value added,
operating margins, cash flow, shareholder return, expenses or market share. The
Committee may require that payment of this kind of Qualifying Award be subject
to other conditions, such as completion of a period of service, even if the
performance objectives specified in the Award are satisfied. In addition, the
Committee shall have the discretion, by Participant and by Award, to reduce (but
not to increase) some or all of the amount that would otherwise be payable under
the Qualifying Award upon satisfaction of the performance objectives and other
conditions. In making such determination, the Committee may take into account
such factors as it determines are appropriate, including but not limited to
Company, business unit and individual performance. Since the Million Dollar Cap
became effective, the Committee has granted annual incentive awards and various
Performance Grant awards (such as PG-VI) that qualify as performance-based
compensation. These types of awards are described on pages 17-18 and 25-26 of
this Proxy Statement.
Under all Qualifying Awards of the second type, in any one calendar year:
(i) no Participant may be paid cash, common shares, Other Company Securities or
other property (other than shares of Restricted Stock) or any combination of the
foregoing with a value (as determined by the Committee) in excess of $6.5
million and (ii) no Participant may receive more than 100,000 shares of
Restricted Stock, subject to anti-dilution adjustments as provided in the 1989
Plan. For purposes of the foregoing, the amount paid or received in any calendar
year under a Qualifying Award is deemed to be the value earned under such award
based upon the attainment of performance objectives and any downward
adjustments, as determined by the Committee, as of the date of Committee
determination. These limitations apply only to Qualifying Awards granted on and
after the date of the 1996 Annual Meeting. Amounts paid pursuant to Awards
granted prior to that date will not be counted toward or subject to such limits.
39
The maximum amounts described above do not increase the total amount of
compensation that may be paid under the 1989 Plan. Nor are they designed to
provide any compensation to any Participant above the level that otherwise would
be provided without the amendments. The maximum levels established by the
amendments are designed to preserve flexibility and have been established at
levels that will enable the Company to comply with the technical provisions of
the Million Dollar Cap and preserve the deductibility of performance-based
compensation paid to the covered executives. The tax benefits derived from such
deductions preserve corporate assets and benefit the Company and its
shareholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
Tax counsel for the Company has advised that under current law certain of
the federal income tax consequences to Participants and their employers of
Options granted under the 1989 Plan should generally be as set forth in the
following summary. (For purposes of this discussion, the term "employer" shall
be deemed to include the employer of an employee optionee and the taxpayer for
whom a non-employee optionee performs services.)
An employee to whom an incentive Option which qualifies under Section 422
of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), is granted
will not recognize incomeIncorporation at the time of grant or exerciseissuance. The
Company's Certificate of such Option. No
federal income tax deduction will be allowable toIncorporation currently contains over 45 pages of this
obsolete mate-
33
rial which the employee's employer upon
the grant or exerciseproposed amended and restated Certificate of such Option. However, upon the exercise of an incentive
Option, special alternative minimum tax rules apply for the employee. When the
employee sells such shares more than one year after the date of transfer of such
shares and more than two years after the date of grant of such Option, the
employee will normally recognize a long-term capital gain or loss equal to the
difference, ifIncorporation would
eliminate. It would not, however, change any between the sales price of such shares and the Option
exercise price. If the employee does not hold such shares for this period, when
the employee sells such shares, the employee will recognize ordinary
compensation income and possibly capital gain or loss in such amounts as are
prescribed by the Code and regulations thereunder. Subject to applicable
provisions of the Code and regulations thereunder, including Section 162(m)existing rights or powers of
shareholders or the capitalization of the Code,Company. Nor would it change the
employee's employer will generally be entitledability of the Board to a federal income
tax deductioncreate and issue additional series of preferred stock in
the amount of such ordinary compensation income.
An individual to whom a non-qualified Option (which is treated as an
option for federal income tax purposes) is granted will not recognize income at
the time of grant of such Option. When such optionee exercises such
non-qualified Option, the optionee will recognize ordinary compensation income
equal to the difference, if any, between the Option Price paid and the fair
market value, asfuture without shareholder approval.
A copy of the dateproposed amended and restated Certificate of Option exercise, of the shares the optionee
receives. The tax basis of such sharesIncorporation
appears as Exhibit A to such optionee will be equal to the
Option Price paid plus the amount includable in the optionee's gross income, and
the optionee's holding period for such shares will commence on the day on which
the optionee recognized taxable income in respect of such shares. Subject to
applicable provisions of the Code and regulations thereunder, including those
under Section 162(m) of the Code, the employer of such optionee will generally
be entitled to a federal income tax deduction in respect of non-qualified
Options in an amount equal to the ordinary compensation income recognized by the
40
optionee. Any compensation includable in the gross income of an employee in
respect of a non-qualified Option will be subject to appropriate federal income
and employment taxes.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of Options or their
employers or to describe tax consequences based on particular circumstances and
does not address Awards other than Options. It is based on federal income tax
law and interpretational authorities as of the date of this proxy statement,
which are subject to change at any time.statement.
ACCORDINGLY, YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING
RESOLUTION:
RESOLVED, that effective as of April 22, 1996, the amendments to the Company's 1989 Long-Term Incentive Plan describedCertificate of Incorporation be amended and
restated substantially as set forth in Exhibit A to the Company's Proxy
Statement dated March 11, 199612, 1997, and that the Chairman, any Vice Chairman, any
Executive Vice President and the Secretary of the Company be and they hereby are
approved.authorized to execute and file a Restated Certificate of Incorporation of the
Company pursuant to the Business Corporation Law of the State of New York and to
do all acts and things necessary in connection therewith.
SHAREHOLDER PROPOSALS
Management receives proposals during the year from shareholders, some of
which may be either implemented by management or withdrawn by the proponent
after review and discussion and therefore need not be presented to shareholders
in the proxy statement.
PROPOSAL RELATING TO CERES PRINCIPLES
A proposal to endorse the CERES Principles was filed by the American
Baptist Home Mission Society and other religious groups. The proponents have
agreed to withdraw the proposal from this year's proxy material in exchange for
the Company's commitment to maintain its dialogue with the proponents in an
effort to seek common ground on this issue. A representative of the CERES
Principles is expected to attend the Company's Annual Meeting and speak on
behalf of the Principles.
PROPOSAL RELATING TO DIRECTORS' RETIREMENT BENEFITS
A proposal to repeal directors' retirement benefits submitted by William
Steiner, 4 Radcliff Drive, Great Neck, New York 11024, was withdrawn in
consideration of the Company's decision to not grant benefits under the
Retirement Plan for Non-Employee Directors to future non-employee directors.
PROPOSAL RELATING TO CHANGE-IN-CONTROL ARRANGEMENTS
A proposal relating to future compensation arrangements contingent upon a
change in control submitted by Kenneth Steiner, 14 Stoner Avenue, Suite 2-M,
Great Neck, New York 11021, was withdrawn following a discussion concerning
management's views regarding change-in-control compensation arrangements.
PROPOSAL RELATING TO POLITICAL NON-PARTISANSHIP
The Company received a proposal from Mrs. Evelyn Y. Davis, Watergate
Office Building, 2600 Virginia Avenue, N.W., Suite 215, Washington, D.C. 20037,
asking that the Company affirm its political non-partisanship by avoiding such
practices as having supervisors furnish political contribution cards of a single
political party to employees, bundling individual employee contributions,
41
requesting employees to issue contribution checks blank as to payee,
distributing one party's cards at management meetings and placing a
preponderance of one party's cards at employee mail stations.
The Company agrees that the foregoing practices are potentially coercive
and prohibits such practices. The Company feels that employees should be free to
support the candidates or parties of their choice in an atmosphere free from
undue influence. In light of the Company's agreement with the proposal, the
proponent withdrew the proposal.
Other resolutions from shareholders, such as the oneones presented below, are
regarded by management as being not in the best interests of the Company and its
shareholders, and are presented to the shareholders for a vote.
SHAREHOLDER PROPOSAL 1
Mr. John J. Gilbert and/or Ms. Margaret R. Gilbert, 29 East 64th Street,
New York, New York 10021-7043, record owners of 360 shares and representing
additional family interests of 266 shares, will cause to be introduced from the
floor the following resolution:
"RESOLVED: That the stockholders of American Express Company, assembled in
annual meeting in person and by proxy, hereby request the Board of Directors to
take the steps necessary to provide for cumulative voting in the election of
directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit."
SHAREHOLDERS' REASONS IN SUPPORT OF PROPOSAL:
"Continued very strong support along the lines we suggest were shown at the
last annual meeting when 32%25.1%, approximately 3,5003,250 owners of 122,434,62681,456,870 shares,
were cast in favor of this proposal. The vote against included 3,619approximately
3,316 unmarked proxies.
"AA California law enacted in California provides that all state pension holdings and state
college funds, invested in shares must be voted in favor of cumulative voting
proposals, showing increasing recognition of the importance of this democratic
means of electing directors.
"TheThe National Bank Act provides for cumulative voting. Unfortunately, inIn many cases
companies get around it by forming holding companies without cumulative voting.
Banking authorities have the right to
34
question the capability of directors to be on banking boards. Unfortunately, inIn many cases
authorities come in after and say the director or directors were not qualified.
We were delighted to see that the SEC has finally taken action to prevent bad
directors from being on the boards of public companies. "WeThe SEC should have hearings
to prevent such persons becoming directors before they harm investors.
We think cumulative voting is the answer to find new directors for various
committees. Additionally, someSome recommendations have been made to carry
outcarryout the CERES 10 points.
The 11th, should be, in our opinion, should be having cumulative voting and ending
stagger systems of electing directors.
42
"Whenstaggered boards.
When Alaska became a state it took away cumulative voting over our
objections. The Valdez oil spill might have been prevented if environmental
directors were elected through cumulative voting. Also, theThe huge derivative losses
might have also been prevented with cumulative voting.
"ManyMany successful corporations have cumulative voting. For example,Example, Pennzoil having cumulative voting
defeated Texaco in that famous case. Another
example is Ingersoll-Rand which hasalso having cumulative
voting and won two awards. In
FORTUNE magazine ranked it was ranked second in its industry as
`America's"America's Most Admired Corporations'Corporations" and the WALL STREET TRANSCRIPT noted `on"on
almost any criteria used to evaluate management, Ingersoll-Rand excels.' Also, in" In 1994
and 1995 they raised their dividend.
In the recent Lockheed-Martin, merger they put inas well as VWR Corporation now have a provision that if
any oneanyone has 40% of the shares, cumulative voting would apply. We believe thatapplies, which does in the
latter company.
In 1995 American Express should follow these examples.
"IfPremier adopted cumulative voting. Alleghany Power System
tried to take away cumulative voting, as well as put in a stagger system, and
stockholders defeated it, showing stockholders are interested in their rights.
If you agree, please mark your proxy FOR; iffor this resolution; otherwise it is
automatically cast against it, unless you disagree mark AGAINST.
NOTE: PROXY OR PROXIES NOT MARKED WILL BE VOTED AGAINST THIS RESOLUTION."have marked to abstain".
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE
FOLLOWING REASONS:
Similar proposals with respect to cumulative voting have been presented by
the proponent at many of the Company's previous Annual Meetings and have been
rejected by the shareholders each time. Your management remains committed to the
view that the present system of voting for directors provides the best assurance
that the decisions of the directors will be in the interests of all
shareholders, as opposed to the interests of special interest groups.
Cumulative voting makesis one of those issues that has the appearance of
fairness, but in reality would serve the interests of special interest groups.
It would make it possible for such a special interest group to elect one or more directors
beholden to the group's narrow interests, thereby
introducinginterests. This would introduce the likelihood of
factionalism and discord within the Board thatand may undermine its ability to work
effectively on behalf of the interests of all of the shareholders. The present
system of voting utilized by the Company and by most leading corporations
prevents the `stacking' of votes behind potentially partisan directors. The
present system thus promotes the election of a more effective Board in which
each director represents the shareholders as a whole.
35
Avoidance of the destructive potential of cumulative voting is key to the
Company's goal of promoting shareholder value. The size and diversity of the
Company require a cohesive group of directors able to work together effectively
for the benefit of all shareholders.
ACCORDINGLY,SHAREHOLDER PROPOSAL 2
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.
W., Suite 215, Washington, D.C. 20037, record owner of 148 common shares, had
advised the Company that she plans to introduce the following resolution:
RESOLVED: "That the shareholders recommend that the Board take the
necessary step that American Express specifically identify by name and corporate
title in all future proxy statements those executive officers, not otherwise so
identified, who are contractually entitled to receive in excess of $250,000
annually as a base salary, together with whatever other additional compensation
bonuses and other cash payments were due them."
REASONS: "In support of such proposed Resolution it is clear that the
shareholders have a right to comprehensively evaluate the management in the
manner in which the Corporation is being operated and its resources utilized."
"At present only a few of the most senior executive officers are so identified,
and not the many other senior executive officers who should contribute to the
ultimate success of the Corporation." "Through such additional identification
the shareholders will then be provided an opportunity to better evaluate the
soundness and efficacy of the overall management."
"If you AGREE, please mark your proxy FOR this proposal".
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.PROPOSAL FOR THE
FOLLOWING REASONS:
The Company believes that the foregoing proposal serves no useful purpose.
It is not the Company's practice to grant employment contracts to its executive
officers. No current executive officer has an employment contract and the
Company has no present intention to grant them in the future. This is because
the Company believes that the jobs of executive officers should be dependent
upon performance and not secured by employment contracts.
Moreover, the Company believes that the compensation disclosure
requirements of the Securities and Exchange Commission ("SEC") are sufficiently
comprehensive and detailed to provide shareholders with the information they
need to make informed investment and voting decisions. Going forward, the
Company will look to the SEC rather than to the proponent for guidance on what
is meaningful disclosure in the area of executive compensation.
SHAREHOLDER PROPOSAL 3
The Ministers and Missionaries Benefit board of the American Baptist
Churches, the American Baptist Foreign Mission Society and the American Baptist
Home Mission Society, located at P.O. Box 851, Valley Forge, PA 19482, together
holding 57,800 shares, have advised the Company that they plan to introduce the
following proposal: WHEREAS WE BELIEVE:
Responsible implementation of a sound, credible environmental policy
increases long-term shareholder value by raising efficiency, decreasing clean-up
costs, reducing litigation, and enhancing public image and product
attractiveness;
36
Adherence to public standards for environmental performance gives a
company greater public credibility than standards created by industry alone. For
maximum credibility and usefulness, such standards should specifically meet the
concerns of investors and other stakeholders;
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. Standardized
environmental reports enable investors to compare performance over time. They
also attract investment from investors seeking companies which are
environmentally responsible and which minimize risk of environmental liability.
WHEREAS:
The Coalition for Environmentally Responsible Economies (CERES) - which
includes shareholders of this Company; public interest representatives, and
environmental experts - consulted with corporations to produce the CERES
Principles as comprehensive public standards for both environmental performance
and reporting. Fifty-four companies, including Sun [Sunoco], General Motors,
H.B. Fuller, Polaroid, and Bethlehem Steel, have endorsed these principles to
demonstrate their commitments to public environmental accountability.
Fortune-500 endorsers say that benefits of working with CERES are public
credibility; `value-added' for the company's environmental initiatives;
In endorsing the CERES Principles, a company commits to work toward:
1. Protection of the biosphere 6. Safe products and services
2. Sustainable natural resource use 7. Environmental restoration
3. Waste reduction and disposal 8. Informing the public
4. Energy Conservation 9. Management commitment
5. Risk reduction 10. Audits and reports
[Full text of the CERES Principles, and accompanying CERES Report Form
obtainable from CERES, 711 Atlantic Avenue, Boston, MA 02110, tel; (617)
451-0927]
CERES is distinguished from other initiatives for corporate environmental
responsibility, in being (1) a successful model of shareholder relations; (2) a
leader in public accountability through standardized environmental reporting;
and (3) a catalyst for significant and measurable environmental improvement
within firms.
RESOLVED: Shareholders request the Company to endorse the CERES Principles
as a part of its commitment to be publicly accountable for its environmental
impact.
SUPPORTING STATEMENT
Many investors support this resolution. Those sponsoring similar
resolutions at various companies have portfolios totaling $75 billion. The
number of public pension funds and foundations supporting this resolution
increases every year. The objectives are: standards for environmental
performance and disclosure; methods for measuring progress toward these goals;
and a format for public reporting of progress. We believe this is comparable to
the European Community regulation for voluntary participation in verified and
publicly-reported eco-management and auditing, and fully compatible with ISO
14000 certification.
37
Your vote FOR this resolution will encourage scrutiny of our Company's
environmental policies and reports and adherence to standards upheld by
management and stakeholders alike.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE
FOLLOWING REASONS:
Management has had several meetings with representatives of CERES. These
meetings were constructive and informative, and management agrees with the
sentiments underlying the proponents' proposal, that is, that corporations
should conduct their businesses as responsible stewards of the environment.
However, management recommends a vote against the proposal because it believes
that the environmental practices and principles followed by the Company
adequately address the environmental issues raised by the CERES Principles and
effectively demonstrate the Company's commitment to sound environmental
practices. The Company's policies relating to management of corporate facilities
and the operation of the Company's businesses mandate a number of the same
safeguards, recycling programs, emission controls, energy conservation,
hazardous materials reduction and other steps contemplated by CERES. In
addition, there are fees and expenses involved in joining the CERES
organization. Accordingly, the Company feels that endorsement of the CERES
Principles would be largely redundant and not add value to the Company's
shareholders.
SHAREHOLDER PROPOSAL 4
Mr. Thomas Strobhar of 4165 Meadowcroft Road, Dayton, Ohio 45429, owner of
100 shares, intends to present the following resolution:
"WHEREAS, corporate charitable contributions should serve to enhance
shareholder value.
WHEREAS, the company makes contributions to groups that engage in
controversial activities.
WHEREAS, support of these groups has resulted in consumer boycotts of the
company's products and services. These boycotts have possibly negatively
impacted sales, earnings, and ultimately shareholder value.
THEREFORE, be it resolved that the Shareholders request the Board of
Directors of the corporation to refrain from making any charitable
contributions. Money normally allocated for such purposes could be distributed
in a special "charitable" dividend payable to the individual owners of the
company. It could be suggested they give it to the charity of their choice."
SUPPORTING STATEMENT
Charitable giving is most beneficial to society when it is done by
individuals and not by corporate entities or the federal government.
Shareholders entrust their money to American Express to get a good return, not
to see it given to someone else's favorite charity. Gifts to the
abortion-performing group, Planned Parenthood, or groups promoting same sex
marriages can produce large amounts of bad will toward the company. Let's hear
it for choice - the choice of individual shareholders to decide where their
money should be given.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE
FOLLOWING REASONS:
Management disagrees with the proponent's assertion that corporate
entities should not make charitable grants. Management believes that corporate
support of deserving charitable causes is not only a worthwhile end in itself
but is a means of furthering the Company's business interests. In recent years,
the Company has conducted several successful marketing programs related to
charitable causes, such as the recent "Share our Strength" campaign. These
programs have directly
38
benefited the Company through increased use of the American Express Card and by
promoting the economic and social stability of the communities in which we
conduct business.
In addition to depriving the Company of the bottom-line benefits of
charitable contributions, the proposal is also impractical to implement. In
1996, the Company distributed $22 million worldwide, approximately 1.3% of the
Company's net after-tax income of $1.7 billion. If a $22 million dividend were
declared on the Company's approximately 473 million outstanding shares, the
special charitable dividend would come to approximately 21.5(cent) per share, an
impracticably small amount for most individuals to redistribute effectively to
charities of their choice.
* * * *
NOMINATIONS, OTHER BUSINESS AND DEADLINE FOR SHAREHOLDER PROPOSALS
Under an amendment to the Company's By-Laws adopted in July 1994,
nominations for director may be made only by the Board or a Board committee or
by a shareholder entitled to vote in accordance with the following procedures. A
shareholder may nominate a candidate for election as a director at an annual
meeting of shareholders only by delivering notice to the Company not less than
90 nor more than 120 days prior to the first anniversary of the preceding year's
annual meeting, except that if the annual meeting is advanced or delayed by more
thancalled for a date that is
not within 30 days frombefore or after such anniversary date, notice must be
received not later than 43
the tenth day following the earlier of the date the
Company's notice of the meeting is first given or announced publicly. With
respect to a special meeting called to elect directors because the election of
directors is not held on the date fixed for the annual meeting, a shareholder
must deliver notice not later than the tenth day following the earlier of the
date that the Company's notice of the meeting is first given or announced
publicly. Any shareholder delivering notice of nomination must include certain
information about the shareholder and the nominee, as well as a written consent
of the proposed nominee to serve if elected.
The By-Laws also provide that no business may be brought before an annual
meeting except as specified in the notice of the meeting (which includes
shareholder proposals that the Company is required to set forth in its proxy
statement under SEC Rule 14a-8) or as otherwise brought before the meeting by or
at the direction of the Board or by a shareholder entitled to vote in accordance
with the following procedures. A shareholder may bring business before an annual
meeting only by delivering notice to the Company within the time limits
described above for delivering notice of a nomination for the election of a
director at an annual meeting. Such notice must include a description of and the
reasons for bringing the proposed business before the meeting, any material
interest of the shareholder in such business and certain other information about
the shareholder. These requirements are separate and apart from and in addition
to the SEC's requirements that a shareholder must meet in order to have a
shareholder proposal included in the Company's proxy statement under SEC Rule
14a-8.
A copy of the full text of the By-Law provisions discussed above may be
obtained by writing to the Secretary of the Company. The Company's 19971998 Annual
Meeting of Shareholders will be held on April 28, 1997.27, 1998. Shareholders who intend
to present a proposal for action at that meeting to be included in the Company's
proxy statement must submit their proposals to the Secretary of the Company on
or before November 12, 1996.
CERTAIN FILINGS
Under SEC rules relating to the reporting of changes of beneficial
ownership of Company securities, reports relating to the following transactions
were not timely filed due to inadvertence: three reports pertaining to six share
transactions by the wife of Michael P. Monaco, an executive officer, under the
Company's employee benefit plans; and one report pertaining to shares acquired
in December 1990 by Mr. Bowen. Upon discovery of these oversights all of these
share transactions were correctly reported.1997.
39
DIRECTORS AND OFFICERS LIABILITY INSURANCE
The Company has purchased a directors and officers liability insurance
policy from Aetna Casualty and Surety Company which provides coverage for
directors and elected and appointed officers of the Company and its subsidiaries
in certain situations in which the Company or its subsidiaries are not permitted
to indemnify directors or officers under applicable law. For situations where
the Company or its subsidiaries are permitted to indemnify directors or
officers, the Company has purchased an insurance policy from Amexco Insurance
Company, a wholly-owned subsidiary of the Company. The Company has also
44
purchased excess coverage from Lloyds,Lloyd's, Aetna Casualty and Surety Company,
Reliance Insurance Company, CNA Insurance Company, Zurich Insurance Company,
ChubbFederal Insurance Company and A.C.E. Insurance Company (Bermuda) Ltd. The
inception date of these policies is March 31, 1995.1996. These policies insure the
Company and its subsidiaries for amounts they are permitted to pay as
indemnification to directors or officers for legal fees or judgments, and also
insure the officers and directors for situations in which the Company is not
permitted to provide indemnification. The annualized premiums for these policies
were approximately $2.3$1.7 million in 1995.1996. Each major subsidiary pays its
proportionate share of the premium. The current policies are due to expire on
March 31, 1996,1997, and similar coverage is expected to be renewed.
The Company has also obtained an insurance policy, dated March 31, 1995,1996,
from National Union Fire Insurance Company of Pittsburgh which provides coverage
for directors and employees who are fiduciaries of the Company's employee
benefit plans against expenses and defense costs incurred as a result of alleged
breaches of fiduciary duty as defined in the Employee Retirement Income Security
Act of 1974, as amended. The Company has also purchased excess coverage from
Zurich Insurance Company. This policy is also dated March 31, 1995.1996. The
annualized premium for these policies in 19951996 was approximately $260,000.$151,200.
In accordance with the indemnification provisions of the Company's
By-Laws, in 19951996 and early 19961997 the Company advanced approximately $18,000$50,000 in
legal fees and expenses on behalf of the Company's current and former directors
and officers in connection with the derivative actions described on pagepages 32 and
33 of this proxy statement.
* * * *
Management does not know of any business to be transacted at the meeting
other than as indicated herein. However, certain shareholders may present topics
for discussion from the floor. Should any matter other than as indicated herein
properly come before the meeting for a vote, the persons designated as proxies
will vote thereon in accordance with their best judgment.
You are urged to sign, date and return the enclosed proxy in the prepaid
envelope provided for such purpose. Prompt return of your proxy may save your
Company the expense of a second mailing.
We encourage all shareholders to attend the Annual Meeting of Shareholders
on April 22, 1996.28, 1997. If you will need special assistance at the meeting because of
a disability or if you desire this document in an alternative accessible format,
please contact Stephen P. Norman, Secretary, American Express Company, 200 Vesey
Street, New York, New York 10285-5005. Because space may be limited, we hope
that registered shareholders will give us advance notice of their plans by
marking the box provided on the proxy card.
HARVEY GOLUB
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
45Chairman and Chief Executive Officer
40
EXHIBIT A
PROPOSED
RESTATED CERTIFICATE OF INCORPORATION
OF
AMERICAN EXPRESS COMPANY
1989 LONG-TERM INCENTIVE PLAN
[Sentences or paragraphs containing proposed amendments
appear in bold-face type.]--------------------
SECTION 1. PURPOSE.NAME
The purposename of the 1989 Long-Term Incentive Plan (the "Plan")corporation is "AMERICAN EXPRESS COMPANY."
SECTION 2. PURPOSES
The purposes for which the corporation is formed are:
1. To continue to conduct and carry on the business heretofore conducted
and carried on by American Express Company.
2. To engage in any lawful act or activity for which corporations may be
organized under New York Business Corporation Law, and in furtherance of the
foregoing purposes to exercise all powers now or hereafter granted or permitted
by law, including, without limitation, the powers specified in the New York
Business Corporation Law.
Notwithstanding the foregoing, the corporation will not engage in any acts
or activities requiring the consent or approval of any state official,
department, board, agency or other body without such consent or approval first
being obtained.
SECTION 3. OFFICE
The office of the corporation within the State of New York is to advancebe
located in the interestsCity and County of American Express Company (the "Company") and its
shareholders by providing incentivesNew York.
SECTION 4. AUTHORIZED SHARES
1. The aggregate number of shares of all classes which the corporation
shall have the authority to certain key employeesissue is 1,220,000,000 shares, consisting of
20,000,000 preferred shares of the Companypar value of $1.66 2/3 each and its affiliates and to certain other key individuals who perform services for
these entities, including those who contribute significantly to the strategic
and long-term performance objectives and growth1,200,000,000
common shares of the Company and its
affiliates.par value of $.60 each.
2. ADMINISTRATION. The PlanNo holder of common shares or of preferred shares of any series shall
be administered solely byhave any preemptive or preferential right to purchase or subscribe to any shares
of any class or series of the Compensation and Benefits Committee (the "Committee")corporation, whether now or hereafter authorized,
or to any obligations or other securities convertible into or exchangeable for
shares of the corporation or carrying options or rights to purchase shares of
any class or series whatsoever, nor any right of subscription to any thereof,
other than such, if any, as the Board of Directors (the "Board") of the Company, as such Committee isin its discretion may, from
time to time, constituted,determine or any successor committee the Board may designate to administer
the Plan. If at any time Rule 16b-3 or any successor rule ("Rule 16b-3") under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), so permits
without adversely affecting the ability of the Plan to comply with the
conditions for exemption from Section 16 of the Exchange Act (or any successor
provision) provided by Rule 16b-3, the Committee may delegate the administration
of the Plan in whole or in part, on such terms and conditions, and to such
person or persons as it may determine in its discretion, as it relates to
persons not subject to Section 16 of the Exchange Act (or any successor
provision). THE MEMBERSHIP OF THE COMMITTEE OR SUCH SUCCESSOR COMMITTEE SHALL BE
CONSTITUTED, AND THE COMMITTEE'S DELEGATION OF ADMINISTRATION SHALL BE LIMITED,
SO AS TO COMPLY AT ALL TIMES WITH THE APPLICABLE REQUIREMENTS OF RULE 16B-3 AND
TO PERMIT THE AWARD OF "PERFORMANCE-BASED COMPENSATION" UNDER SECTION 162(M) OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE REGULATIONS THEREUNDER
("SECTION 162(M)"). No member of the Committee shall be eligible or have been
eligible within one year prior to his appointment to receive awards under the
Plan ("Awards") or to receive awards under any other plan, program or
arrangement of the Company or any of its affiliates if such eligibility would
cause such member to cease to be a "disinterested person" under Rule 16b-3;
provided that if at any time Rule 16b-3 so permits without adversely affecting
the ability of the Plan to comply with the conditions for exemption from Section
16 of the Exchange Act (or any successor provision) provided by Rule 16b-3, one
or more members of the Committee may cease to be "disinterested persons."
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The Committee has all the powers vested in it by the terms of the Plan set
forth herein, such powers to include exclusive authority (except as may be delegatedspecified in any certificate of amendment
of this certificate of incorporation, and at such price or prices and at such
rate or rates as permitted herein)the Board of Directors may from time to select the key employees and other key
individuals to be granted Awards under the Plan, to determine the type, size and
terms of the Award to be made to each individual selected, to modify the terms
of any Award that has been granted, to determine the time when Awards will be
granted, to establish performance objectives, to make any adjustments necessary
or desirable as a result of the granting of Awards to eligible individuals
located outside the United States and to prescribe the form of the instruments
embodying Awards made under the Plan. The Committee is authorized to interpret
the Plan and the Awards granted under the Plan, to establish, amend and rescind
any rules and regulations relatingfix pursuant to
the Plan,authority conferred by the provisions of this Section 4; and any shares or
obligations or other securities which the Board of Directors may determine to
make any other
determinations which it deems necessary or desirableoffer for the administration of
the Plan. The Committee (or its delegate as permitted herein) may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Award in the manner andsubscription to the extentholders of shares may, as the Committee deems necessaryBoard shall
determine, be offered exclusively either to the holders
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of preferred shares or
desirable to carry it into effect. Any decision of the Committee (or its
delegate as permitted herein) in the interpretation and administration of the
Plan, as described herein, shall lie within its sole and absolute discretion and
shall be final, conclusive and binding on all parties concerned. The Committee
may act only by a majority of its members in office, except that the members
thereof may authorize any one or more series thereof or to the holders of
their memberscommon shares, or partly to the holders of preferred shares or any officer of the
Company to execute and deliver documents or to take any other ministerial action
on behalf of the Committee with respect to Awards made or to be made to Plan
participants. No member of the Committee and no officer of the Company shall be
liable for anything done or omitted to be done by him, by any other member of
the Committee or by any officer of the Company in connection with the
performance of duties under the Plan, except for his own willful misconduct or
as expressly provided by statute. Determinations to be made by the Committee
under the Plan may be made by its delegates.
3. PARTICIPATION. (a) AFFILIATES. If an Affiliate (as hereinafter defined)
of the Company wishes to participate in the Plan and its participation shall
have been approved by the Board upon the recommendation of the Committee, the
board of directors or other governing body of the Affiliate shall adopt a
resolution in form and substance satisfactory to the Committee authorizing
participation by the Affiliate in the Plan with respect to its key employees or
other key individuals performing services for it. As used herein, the term
"Affiliate" means any entity in which the Company has a substantial direct or
indirect equity interest, as determined by the Committee in its discretion.
An Affiliate participating in the Plan may cease to be a participating
company at any time by action of the Board or by action of the board of
directors or other governing body of such Affiliate, which latter action shall
be effective not earlier than the date of delivery to the Secretary of the
Company of a certified copy of a resolution of the Affiliate's board of
directors or other governing body taking such action. If the participation in
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the Plan of an Affiliate shall terminate, such termination shall not relieve it
of any obligations theretofore incurred by it under the Plan, except as may be
approved by the Committee.
(b) PARTICIPANTS. Consistent with the purposes of the Plan, the Committee
shall have exclusive power (except as may be delegated as permitted herein) to
select the key employees and other key individuals performing services for the
Company and its Affiliates who may participate in the Plan and be granted Awards
under the Plan. Eligible individuals may be selected individually or by groups
or categories, as determined by the Committee in its discretion. No non-employee
director of the Company or any of its Affiliates shall be eligible to receive an
Award under the Plan.
4. AWARDS UNDER THE PLAN. (a) TYPES OF AWARDS. Awards under the Plan may
include, but need not be limited to, one or more
of the following types, either
alone or in any combination thereof: (i) "Stock Options," (ii) "Stock
Appreciation Rights," (iii) "Restricted Stock," (iv) "Performance Grants" and
(v) any other type of Award deemed by the Committee in its discretion to be
consistent with the purposes of the Plan (including, but not limited to, Awards
of or options or similar rights granted with respect to unbundled stock units or
componentsseries thereof and Awards to be made to participants who are foreign
nationals or are employed or performing services outside the United States).
Stock Options, which include "Nonqualified Stock Options" and "Incentive Stock
Options" or combinations thereof, are rights to purchase common shares of the
Company having a par value of $.60 per share and stock of any other class into
which such shares may thereafter be changed (the "Common Shares"). Nonqualified
Stock Options and Incentive Stock Options are subjectpartly to the terms, conditions
and restrictions specified in Paragraph 5. Stock Appreciation Rights are rights
to receive (without payment to the Company) cash, Common Shares, other Company
securities (which may include, but need not be limited to, unbundled stock units
or components thereof, debentures, preferred stock, warrants, securities
convertible into Common Shares or other property, and other typesholders of securities
including, but not limited to, those of the Company or an Affiliate, or any
combination thereof ("Other Company Securities")) or property, or other forms of
payment, or any combination thereof, as determined by the Committee, based on
the increase in the value of the number of Common Shares specified in the Stock
Appreciation Right. Stock Appreciation Rights are subject to the terms,
conditions and restrictions specified in Paragraph 6. Shares of Restricted Stock
are Common Shares which are issued subject to certain restrictions pursuant to
Paragraph 7. Performance Grants are contingent awards subject to the terms,
conditions and restrictions described in Paragraph 8, pursuant to which the
participant may become entitled to receive cash, Common Shares, Other Company
Securities or property, or other forms of payment, or any combination thereof,
as determined by the Committee.
(B) MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED. THERE MAY BE ISSUED UNDER
THE PLAN (AS RESTRICTED STOCK, IN PAYMENT OF PERFORMANCE GRANTS, PURSUANT TO THE
EXERCISE OF STOCK OPTIONS OR STOCK APPRECIATION RIGHTS, OR IN PAYMENT OF OR
A-3
PURSUANT TO THE EXERCISE OF SUCH OTHER AWARDS AS THE COMMITTEE, IN ITS
DISCRETION, MAY DETERMINE) AN AGGREGATE OF NOT MORE THAN 81,300,358* COMMON
SHARES AND OTHER COMPANY SECURITIES, SUBJECT TO ADJUSTMENT AS PROVIDED IN
PARAGRAPH 15. For purposes of this Paragraph 4(b), Other Company Securities
shall be counted against the maximum number of Common Shares as required by Rule
16b-3. Common Shares and, to the extent they constitute equity securities, Other
Company Securities issued pursuant to the Plan may be either authorized but
unissuedcommon shares, treasury shares, reacquired shares or any combination thereof.
Unless prohibited by Rule 16b-3, any Common Shares or Other Company Securities
subject to repurchase or forfeiture rights that are reacquired by the Company
pursuant to such rights or any Common Shares or Other Company Securities
previously counted against the maximum number of shares set forth above in
respect of any Award that is cancelled, terminated or expires unexercised in
whole or in part will be available for issuance under new Awards. In addition,
to the extent not prohibited by Rule 16b-3, any Common Shares or Other Company
Securities withheld by or tendered to the Company in connection with the payment
of the exercise price of an Award or the satisfaction of the tax withholding
obligations upon the exercise or vesting of an Award will be available for
issuance under new Awards.
(c) RIGHTS WITH RESPECT TO COMMON SHARES AND OTHER SECURITIES.
(i) Unless otherwise determined by the Committee in its discretion,
a participant to whom an Award of Restricted Stock has been made (and any
person succeeding to such a participant's rights pursuant to the Plan)
shall have, after issuance of a certificate or the entry on behalf of a
participant of an uncertificated book position on the records of the
Company's transfer agent and registrar for the number of Common Shares
awarded and prior to the expiration of the Restricted Period or the
earlier repurchase of such Common Shares as herein provided, ownership of
such Common Shares, including the right to vote the same and to receive
dividends or other distributions made or paid with respect to such Common
Shares (provided that such Common Shares, and any new, additional or
different shares, or Other Company Securities or property, or other forms
of consideration which the participant may be entitled to receive with
respect to such Common Shares as a result of a stock split, stock
dividend or any other change in the corporate or capital structure of the
Company, shall be subject to the restrictions hereinafter described as
determined by the Committee in its discretion), subject, however, to the
options, restrictions and limitations imposed thereon pursuant to the
Plan. Notwithstanding the foregoing, a participant with whom an Award
agreement is made to issue Common Shares in the future shall have no
rights as a shareholder with respect to Common Shares related to such
agreement until issuance of a certificate to him.
- -------------
* Of this number, as of the date of this Proxy Statement approximately
49.76 million shares have been utilized, and approximately 31.54 million shares
are available for future grants pursuant to the Plan assuming shareholder
approval of the proposed Plan amendments on April 22, 1996.
A-4
(ii) Unless otherwise determined by the Committee in its discretion,
a participant to whom a grant of Stock Options, Stock Appreciation
Rights, Performance Grants or any other Award is made (and any person
succeeding to such a participant's rights pursuant to the Plan) shall
have no rights as a shareholder with respect to any Common Shares or as a
holder with respect to other securities, if any, issuable pursuant to any
such Award until the date of the issuance of a stock certificate to him
or the entry on his behalf of an uncertificated book position on the
records of the Company's transfer agent and registrar for such Common
Shares or other instrument of ownership, if any. Except as provided in
Paragraph 15, no adjustment shall be made for dividends, distributions or
other rights (whether ordinary or extraordinary, and whether in cash,
securities, other property or other forms of consideration, or any
combination thereof) for which the record date is prior to the date such
stock certificate or other instrument of ownership, if any, is issued.
5. STOCK OPTIONS. The Committee may grant Stock Options either alone, or
in conjunction with Stock Appreciation Rights, Performance Grants or other
Awards, either at the time of grant or by amendment thereafter; provided that an
Incentive Stock Option may be granted only to an eligible employee of the
Company or its parent or subsidiary corporation. Each Stock Option (referred to
herein as an "Option") granted under the Plan shall be evidenced by an
instrument in such form as the Committee shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
conditions, and with such other terms and conditions, including, but not limited
to, restrictions upon the Option or the Common Shares issuable upon exercise
thereof, as the Committee, in its discretion, shall establish:
(a) The option price may be equal to or greater than the fair market value
of the Common Shares subject to such Option at the time the Option is granted,
as determined by the Committee; provided, however, that in the case of an
Incentive Stock Option granted to such an employee who owns stock representing
more than ten percent of the voting power of all classes of stock of the Company
or of its parent or subsidiary (a "Ten Percent Employee"), such option price
shall not be less than 110% of such fair market value at the time the Option is
granted; but in no event will such option price be less than the par value of
such Common Shares.
(b) The Committee shall determine the number of Common Shares to be
subject to each Option. The number of Common Shares subject to an outstanding
Option may be reduced on a share-for-share or other appropriate basis, as
determined by the Committee, to the extent that Common Shares under such Option
are used to calculate the cash, Common Shares, Other Company Securities or
property, or other forms of payment, or any combination thereof, received
pursuant to exercise of a Stock Appreciation Right attached to such Option, or
to the extent that any other Award granted in conjunction with such Option is
paid.
A-5
(c) The Option may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws of descent and
distribution, and shall be exercisable during the grantee's lifetime only by
him. Unless the Committee determines otherwise, the Option shall not be
exercisable for at least six months after the date of grant, unless the grantee
ceases employment or performance of services before the expiration of such
six-month period by reason of his disability as defined in Paragraph 12 or his
death.
(d) The Option shall not be exercisable:
(i) in the case of any Incentive Stock Option granted to a Ten
Percent Employee, after the expiration of five years from the date it is
granted, and, in the case of any other Option, after the expiration of ten
years from the date it is granted. Any Option may be exercised during such
period only at such time or times and in such installmentscase in
such proportions as between such classes and series as the Committee may establish;
(ii) unless payment in full is made for the shares being acquired
thereunder at the timeBoard of exercise; such payment shall be made in such
form (including, but not limited to, cash, Common Shares, or any
combination thereof) as the Committee may determine in its discretion; and
(iii) unless the person exercising the Option has been, at all times
during the period beginning with the date of the grant of the Option and
ending on the date of such exercise, employed by or otherwise performing
services for the Company or an Affiliate, or a corporation, or a parent or
subsidiary of a corporation, substituting or assuming the Option in a
transaction to which Section 425(a) of the Internal Revenue Code of 1986,
as amended or any successor statutory provision thereto (the "Code"), is
applicable, except that
(A) in the case of any Nonqualified Stock Option, if such person shall
cease to be employed by or otherwise performing services for the Company or an
Affiliate solely by reason of a period of Related Employment as defined in
Paragraph 14, he may, during such period of Related Employment, exercise the
Nonqualified Stock Option as if he continued such employment or performance of
service; or
(B) if such person shall cease such employment or performance of services
by reason of his disability as defined in Paragraph 12 or early, normal or
deferred retirement under an approved retirement program of the Company or an
Affiliate (or such other plan or arrangement as may be approved by the
Committee, in its discretion, for this purpose) while holding an Option which
has not expired and has not been fully exercised, such person, at any time
within three years (or such other period determined by the Committee) after the
date he ceased such employment or performance of services (but in no event after
the Option has expired), may exercise the Option with respect to any shares as
to which he could have exercised the Option on the date he ceased such
A-6
employment or performance of services, or with respect to such greater number of
shares as determined by the Committee; or
(C) if any person to whom an Option has been granted shall die holding an
Option which has not expired and has not been fully exercised, his executors,
administrators, heirs or distributees, as the case may be, may, at any time
within one year (or such other period determined by the Committee) after the
date of death (but in no event after the Option has expired), exercise the
Option with respect to any shares as to which the decedent could have exercised
the Option at the time of his death, or with respect to such greater number of
shares as determined by the Committee.
(e) In the case of an Incentive Stock Option, the amount of aggregate fair
market value of Common Shares (determined at the time of grant of the Option
pursuant to subparagraph 5(a) of the Plan) with respect to which incentive stock
options are exercisable for the first time by an employee during any calendar
year (under all such plans of his employer corporation and its parent and
subsidiary corporations) shall not exceed $100,000.
(f) It is the intent of the Company that Nonqualified Stock Options
granted under the Plan not be classified as Incentive Stock Options, that the
Incentive Stock Options granted under the Plan be consistent with and contain or
be deemed to contain all provisions required under Section 422A and the other
appropriate provisions of the Code and any implementing regulations (and any
successor provisions thereof), and that any ambiguities in construction shall be
interpreted in order to effectuate such intent.
6. STOCK APPRECIATION RIGHTS. The Committee may grant Stock Appreciation
Rights either alone, or in conjunction with Stock Options, Performance Grants or
other Awards, either at the time of grant or by amendment thereafter. Each Award
of Stock Appreciation Rights granted under the Plan shall be evidenced by an
instrument in such form as the Committee shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
conditions, and with such other terms and conditions, including, but not limited
to, restrictions upon the Award of Stock Appreciation Rights or the Common
Shares issuable upon exercise thereof, as the Committee, in its discretion,
shall establish:
(a) The Committee shall determine the number of Common Shares to be
subject to each Award of Stock Appreciation Rights. The number of Common Shares
subject to an outstanding Award of Stock Appreciation Rights may be reduced on a
share-for-share or other appropriate basis, as determined by the Committee, to
the extent that Common Shares under such Award of Stock Appreciation Rights are
used to calculate the cash, Common Shares, Other Company Securities or property
or other forms of payment, or any combination thereof, received pursuant to
exercise of an Option attached to such Award of Stock Appreciation Rights, or to
the extent that any other Award granted in conjunction with such Award of Stock
Appreciation Rights is paid.
A-7
(b) The Award of Stock Appreciation Rights may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by will or
the laws of descent and distribution, and shall be exercisable during the
grantee's lifetime only by him. Unless the Committee determines otherwise, the
Award of Stock Appreciation Rights shall not be exercisable for at least six
months after the date of grant, unless the grantee ceases employment or
performance of services before the expiration of such six-month period by reason
of his disability as defined in Paragraph 12 or his death.
(c) The Award of Stock Appreciation Rights shall not be exercisable:
(i) in the case of any Award of Stock Appreciation Rights that are
attached to an Incentive Stock Option granted to a Ten Percent Employee,
after the expiration of five years from the date it is granted, and, in
the case of any other Award of Stock Appreciation Rights, after the
expiration of ten years from the date it is granted. Any Award of Stock
Appreciation Rights may be exercised during such period only at such time
or times and in such installments as the Committee may establish;
(ii) unless the Option or other Award to which the Award of Stock
Appreciation Rights is attached is at the time exercisable; and
(iii) unless the person exercising the Award of Stock Appreciation
Rights has been at all times during the period beginning with the date of
the grant thereof and ending on the date of such exercise, employed by or
otherwise performing services for the Company or an Affiliate, except that
(A) in the case of any Award of Stock Appreciation Rights (other than
those attached to an Incentive Stock Option), if such person shall cease to be
employed by or otherwise performing services for the Company or an Affiliate
solely by reason of a period of Related Employment as defined in Paragraph 14,
he may, during such period of Related Employment, exercise the Award of Stock
Appreciation Rights as if he continued such employment or performance of
services; or
(B) if such person shall cease such employment or performance of services
by reason of his disability as defined in Paragraph 12 or early, normal or
deferred retirement under an approved retirement program of the Company or an
Affiliate (or such other plan or arrangement as may be approved by the
Committee, in its discretion, for this purpose), while holding an Award of Stock
Appreciation Rights which has not expired and has not been fully exercised, such
person may, at any time within three years (or such other period determined by
the Committee) after the date he ceased such employment or performance of
services (but in no event after the Award of Stock Appreciation Rights has
expired), exercise the Award of Stock Appreciation Rights with respect to any
shares as to which he could have exercised the Award of Stock Appreciation
Rights on the date he ceased such employment or performance of services, or with
respect to such greater number of shares as determined by the Committee; or
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(C) if any person to whom an Award of Stock Appreciation Rights has been
granted shall die holding an Award of Stock Appreciation Rights which has not
expired and has not been fully exercised, his executors, administrators, heirs
or distributees, as the case may be, may, at any time within one year (or such
other period determined by the Committee) after the date of death (but in no
event after the Award of Stock Appreciation Rights has expired), exercise the
Award of Stock Appreciation Rights with respect to any shares as to which the
decedent could have exercised the Award of Stock Appreciation Rights at the time
of his death, or with respect to such greater number of shares as determined by
the Committee.
(d) An Award of Stock Appreciation Rights shall entitle the holder (or any
person entitled to act under the provisions of subparagraph 6(c)(iii)(C) hereof)
to exercise such Award or to surrender unexercised the Option (or other Award)
to which the Stock Appreciation Right is attached (or any portion of such Option
or other Award) to the Company and to receive from the Company in exchange
therefor, without payment to the Company, that number of Common Shares having an
aggregate value equal to (or, in the discretion of the Committee, less than) the
excess of the fair market value of one share, at the time of such exercise, over
the exercise price (or Option Price, as the case may be) per share, times the
number of shares subject to the Award or the Option (or other Award), or portion
thereof, which is so exercised or surrendered, as the case may be. The Committee
shall be entitled in its discretion to elect to settle the obligation arising
out of the exercise of a Stock Appreciation Right by the payment of cash or
Other Company Securities or property, or other forms of payment, or any
combination thereof, as determined by the Committee, equal to the aggregate
value of the Common Shares it would otherwise be obligated to deliver. Any such
election by the Committee shall be made as soon as practicable after the receipt
by the Committee of written notice of the exercise of the Stock Appreciation
Right. The value of a Common Share, Other Company Securities or property, or
other forms of payment determined by the Committee for this purpose shall be the
fair market value thereof on the last business day next preceding the date of
the election to exercise the Stock Appreciation Right, unless the Committee, in
its discretion, determines otherwise.
(e) A Stock Appreciation Right may provide that it shall be deemed to have
been exercised at the close of business on the business day preceding the
expiration date of the Stock Appreciation Right or of the related Option (or
other Award), or such other date as specified by the Committee, if at such time
such Stock Appreciation Right has a positive value. Such deemed exercise shall
be settled or paid in the same manner as a regular exercise thereof as provided
in subparagraph 6(d) hereof.
(f) No fractional shares may be delivered under this Paragraph 6, but in
lieu thereof a cash or other adjustment shall be made as determined by the
Committee in its discretion.
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7. RESTRICTED STOCK. Each Award of Restricted Stock under the Plan shall
be evidenced by an instrument in such form as the Committee shall prescribe from
time to time in accordance with the Plan and shall comply with the following
terms and conditions, and with such other terms and conditions as the Committee,
in its discretion, shall establish:
(a) The Committee shall determine the number of Common Shares to be issued
to a participant pursuant to the Award, and the extent, if any, to which they
shall be issued in exchange for cash, other consideration, or both.
(b) Common Shares issued to a participant in accordance with the Award may
not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed
of, except by will or the laws of descent and distribution, or as otherwise
determined by the Committee, for such period as the Committee shall determine,
from the date on which the Award is granted (the "Restricted Period"). The
Company will have the option to repurchase the shares subject to the Award at
such price as the Committee shall have fixed, in its discretion, when the Award
was made or amended thereafter, which option will be exercisable (i) if the
participant's continuous employment or performance of services for the Company
and its Affiliates shall terminate for any reason, except solely by reason of a
period of Related Employment as defined in Paragraph 14, or except as otherwise
provided in subparagraph 7(c), prior to the expiration of the Restricted Period,
(ii) if, on or prior to the expiration of the Restricted Period or the earlier
lapse of such repurchase option, the participant has not paid to the Company an
amount equal to any federal, state, local or foreign income or other taxes which
the Company determines is required to be withheld in respect of such shares, or
(iii) under such other circumstances as determined by the Committee in its
discretion. Such repurchase option shall be exercisable on such terms, in such
manner and during such period as shall be determined by the Committee when the
Award is made or as amended thereafter. Each certificate for Common Shares
issued pursuant to a Restricted Stock Award shall bear an appropriate legend
referring to the foregoing repurchase option and other restrictions and to the
fact that the shares are partly paid, shall be deposited by the awardholder with
the Company, together with a stock power endorsed in blank, or shall be
evidenced in such other manner permitted by applicable law as determined by the
Committee in its discretion. Any attempt to dispose of any such Common Shares in
contravention of the foregoing repurchase option and other restrictions shall be
null and void and without effect. If Common Shares issued pursuant to a
Restricted Stock Award shall be repurchased pursuant to the repurchase option
described above, the participant, or in the event of his death, his personal
representative, shall forthwith deliver to the Secretary of the Company the
certificates for the Common Shares awarded to the participant, accompanied by
such instrument of transfer, if any, as may reasonably be required by the
Secretary of the Company. If the repurchase option described above is not
exercised by the Company, such option and the restrictions imposed pursuant to
the first sentence of this subparagraph 7(b) shall terminate and be of no
further force and effect.
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(c) If a participant who has been in continuous employment or performance
of services for the Company or an Affiliate since the date on which a Restricted
Stock Award was granted to him shall, while in such employment or performance of
services, die, or terminate such employment or performance of services by reason
of disability as defined in Paragraph 12 or by reason of early, normal or
deferred retirement under an approved retirement program of the Company or an
Affiliate (or such other plan or arrangement as may be approved by the Committee
in its discretion, for this purpose) and any of such events shall occur after
the date on which the Award was granted to him and prior to the end of the
Restricted Period of such Award, the Committee may determine to cancel the
repurchase option (and any and all other restrictions) on any or all of the
Common Shares subject to such Award; and the repurchase option shall become
exercisable at such time as to the remaining shares, if any.
8. PERFORMANCE GRANTS. The Award of a Performance Grant ("Performance
Grant") to a participant will entitle him to receive a specified amount
determined by the Committee (the "Actual Value"), if the terms and conditions
specified herein and in the Awards are satisfied. Each Award of a Performance
Grant shall be subject to the following terms and conditions, and to such other
terms and conditions, including but not limited to, restrictions upon any cash,
Common Shares, Other Company Securities or property, or other forms of payment,
or any combination thereof, issued in respect of the Performance Grant, as the
Committee, in its discretion, shall establish, and shall be embodied in an
instrument in such form and substance as is determined by the Committee:
(a) The Committee shall determine the value or range of values of a
Performance Grant to be awarded to each participant selected for an Award and
whether or not such a Performance Grant is granted in conjunction with an Award
of Options, Stock Appreciation Rights, Restricted Stock or other Award, or any
combination thereof, under the Plan (which may include, but need not be limited
to, deferred Awards) concurrently or subsequently granted to the participant
(the "Associated Award"). As determined by the Committee, the maximum value of
each Performance Grant (the "Maximum Value") shall be: (i) an amount fixed by
the Committee at the time the Award is made or amended thereafter, (ii) an
amount which varies from time to time based in whole or in part on the then
current value of a Common Share, Other Company Securities or property, or other
securities or property, or any combination thereof or (iii) an amount that is
determinable from criteria specified by the Committee. Performance Grants may be
issued in different classes or series having different names, terms and
conditions. In the case of a Performance Grant awarded in conjunction with an
Associated Award, the Performance Grant may be reduced on an appropriate basis
to the extent that the Associated Award has been exercised, paid to or otherwise
received by the participant, as determined by the Committee.
(b) The award period ("Award Period") in respect of any Performance Grant
shall be a period determined by the Committee. At the time each Award is made,
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the Committee shall establish performance objectives to be attained within the
Award Period as the means of determining the Actual Value of such a Performance
Grant. The performance objectives shall be based on such measure or measures of
performance, which may include, but need not be limited to, the performance of
the participant, the Company, one or more of its subsidiaries or one or more of
their divisions or units, or any combination of the foregoing, as the Committee
shall determine, and may be applied on an absolute basis or be relative to
industry or other indices, or any combination thereof. The Actual Value of a
Performance Grant shall be equal to its Maximum Value only if the performance
objectives are attained in full, but the Committee shall specify the manner in
which the Actual Value of Performance Grants shall be determined if the
performance objectives are met in part. Such performance measures, the Actual
Value or the Maximum Value, or any combination thereof, may be adjusted in any
manner by the Committee in its discretion at any time and from time to time
during or as soon as practicable after the Award Period, if it determines that
such performance measures the Actual Value or the Maximum Value, or any
combination thereof, are not appropriate under the circumstances.
(c) The rights of a participant in Performance Grants awarded to him shall
be provisional and may be cancelled or paid in whole or in part, all as
determined by the Committee, if the participant's continuous employment or
performance of services for the Company and its Affiliates shall terminate for
any reason prior to the end of the Award Period, except solely by reason of a
period of Related Employment as defined in Paragraph 14.
(d) The Committee shall determine whether the conditions of subparagraph
8(b) or 8(c) hereof have been met and, if so, shall ascertain the Actual Value
of the Performance Grants. If the Performance Grants have no Actual Value, the
Award and such Performance Grants shall be deemed to have been cancelled and the
Associated Award, if any, may be cancelled or permitted to continue in effect in
accordance with its terms. If the Performance Grants have an Actual Value and:
(i) were not awarded in conjunction with an Associated Award, the
Committee shall cause an amount equal to the Actual Value of the
Performance Grants earned by the participant to be paid to him or his
beneficiary as provided below; or
(ii) were awarded in conjunction with an Associated Award, the
Committee shall determine, in accordance with criteria specified by the
Committee (A) to cancel the Performance Grants, in which event no amount
in respect thereof shall be paid to the participant or his beneficiary,
and the Associated Award may be permitted to continue in effect in
accordance with its terms, (B) to pay the Actual Value of the Performance
Grants to the participant or his beneficiary as provided below, in which
event the Associated Award may be cancelled or (C) to pay to the
participant or his beneficiary as provided below, the Actual Value of only
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a portion of the Performance Grants, in which event all or a portion of
the Associated Award may be permitted to continue in effect in accordance
with its terms or be cancelled, as determined by the Committee.
Such determination by the Committee shall be made as promptly as
practicable following the end of the Award Period or upon the earlier
termination of employment or performance of services, or at such other time or
times as the Committee shall determine, and shall be made pursuant to criteria
specified by the Committee.
Payment of any amount in respect of the Performance Grants which the
Committee determines to pay as provided above shall be made by the Company, as
promptly as practicable after the end of the Award Period or at such other time
or times as the Committee shall determine, and may be made in cash, Common
Shares, Other Company Securities or property, or other forms of payment, or any
combination thereof or in such other manner, as determined by the Committee in
its discretion. Notwithstanding anything in this Paragraph 8 to the contrary,
the Committee may, in its discretion, determine and pay out the Actual Value of
the Performance Grants at any time during the Award Period.
9. DEFERRAL OF COMPENSATION. The Committee shall determine whether or not
an Award shall be made in conjunction with deferral of the participant's salary,
bonus or other compensation, or any combination thereof, and whether or not such
deferred amounts may be
(i) forfeited to the Company or to other participants, or any
combination thereof, under certain circumstances (which may include, but
need not be limited to, certain types of termination of employment or
performance of services for the Company and its Affiliates),
(ii) subject to increase or decrease in value based upon the
attainment of or failure to attain, respectively, certain performance
measures and/or
(iii) credited with income equivalents (which may include, but need
not be limited to, interest, dividends or other rates of return) until the
date or dates of payment of the Award, if any.
9A. QUALIFYING AWARDS. THE COMMITTEE MAY, IN ITS SOLE DISCRETION, GRANT AN
AWARD TO ANY PARTICIPANT WITH THE INTENT THAT SUCH AWARD QUALIFIES AS
"PERFORMANCE-BASED COMPENSATION" UNDER SECTION 162(M) (A "QUALIFYING AWARD").
THE PROVISIONS OF THIS PARAGRAPH 9A AS WELL AS ALL OTHER APPLICABLE PROVISIONS
OF THE PLAN NOT INCONSISTENT WITH THIS PARAGRAPH 9A SHALL APPLY TO ALL
QUALIFYING AWARDS ISSUED UNDER THE PLAN. QUALIFYING AWARDS SHALL BE OF THE TYPE
SET FORTH IN SUBPARAGRAPH (A) OR (B) BELOW.
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(A) QUALIFYING AWARDS MAY BE ISSUED AS STOCK OPTIONS AND STOCK
APPRECIATION RIGHTS. COMMENCING WITH CALENDAR YEAR 1996, THE NUMBER OF COMMON
SHARES UNDERLYING ALL OPTIONS AND STOCK APPRECIATION RIGHTS THAT MAY BE GRANTED
TO ANY PARTICIPANT WITHIN ANY CALENDAR YEAR SHALL BE LIMITED TO 500,000, SUBJECT
TO ADJUSTMENT AS PROVIDED IN PARAGRAPH 15. THE FOREGOING LIMITATION SHALL BE
SUBJECT TO THE LIMITATION SET FORTH IN PARAGRAPH 4(B).
(B)(I) QUALIFYING AWARDS (OTHER THAN STOCK OPTIONS AND STOCK APPRECIATION
RIGHTS) MAY BE ISSUED AS PERFORMANCE GRANTS AND ANY OTHER AWARD WHOSE PAYMENT IS
CONDITIONED UPON THE ACHIEVEMENT OF THE PERFORMANCE OBJECTIVES DESCRIBED IN THIS
SUBPARAGRAPH. AMOUNTS EARNED UNDER SUCH AWARDS SHALL BE BASED UPON THE
ATTAINMENT OF PERFORMANCE OBJECTIVES ESTABLISHED BY THE COMMITTEE IN ACCORDANCE
WITH SECTION 162(M). SUCH PERFORMANCE OBJECTIVES MAY VARY BY PARTICIPANT AND BY
AWARD AND SHALL BE BASED UPON THE ATTAINMENT OF SPECIFIC AMOUNTS OF, OR CHANGES
IN ONE OR MORE OF THE FOLLOWING: REVENUES, EARNINGS, SHAREHOLDERS' EQUITY,
RETURN ON EQUITY, ASSETS, RETURN ON ASSETS, CAPITAL, RETURN ON CAPITAL, BOOK
VALUE, ECONOMIC VALUE ADDED, OPERATING MARGINS, CASH FLOW, SHAREHOLDER RETURN,
EXPENSES OR MARKET SHARE. THE FOREGOING OBJECTIVES MAY BE APPLICABLE TO THE
COMPANY AS A WHOLE, ONE OR MORE OF ITS SUBSIDIARIES, DIVISIONS, BUSINESS UNITS
OR BUSINESS LINES, OR ANY COMBINATION OF THE FOREGOING, AND MAY BE APPLIED ON AN
ABSOLUTE BASIS OR BE RELATIVE TO OTHER COMPANIES, INDUSTRIES OR INDICES OR BE
BASED UPON ANY COMBINATION OF THE FOREGOING. IN ADDITION TO THE PERFORMANCE
OBJECTIVES THE COMMITTEE MAY ALSO CONDITION PAYMENT OF ANY SUCH AWARD UPON THE
ATTAINMENT OF CONDITIONS, SUCH AS COMPLETION OF A PERIOD OF SERVICE,
NOTWITHSTANDING THAT THE PERFORMANCE OBJECTIVE OR OBJECTIVES SPECIFIED IN THE
AWARD ARE SATISFIED. THE COMMITTEE SHALL HAVE THE DISCRETION, BY PARTICIPANT AND
BY AWARD, TO REDUCE (BUT NOT TO INCREASE) SOME OR ALL OF THE AMOUNT THAT WOULD
OTHERWISE BE PAYABLE UNDER THE AWARD BY REASON OF THE SATISFACTION OF THE
PERFORMANCE OBJECTIVES SET FORTH IN THE AWARD. IN MAKING ANY SUCH DETERMINATION,
THE COMMITTEE IS AUTHORIZED TO TAKE INTO ACCOUNT ANY SUCH FACTOR OR FACTORS IT
DETERMINES ARE APPROPRIATE, INCLUDING BUT NOT LIMITED TO COMPANY, BUSINESS UNIT
AND INDIVIDUAL PERFORMANCE.
(II) UNDER ALL AWARDS GRANTED PURSUANT TO THIS SUBPARAGRAPH (B), IN ANY
ONE CALENDAR YEAR: (A) NO PARTICIPANT MAY BE PAID CASH, COMMON SHARES, OTHER
COMPANY SECURITIES OR OTHER PROPERTY (OTHER THAN SHARES OF RESTRICTED STOCK) OR
ANY COMBINATION OF THE FOREGOING WITH A VALUE (AS DETERMINED BY THE COMMITTEE)
IN EXCESS OF $6.5 MILLION AND (B) NO PARTICIPANT MAY RECEIVE MORE THAN 100,000
SHARES OF RESTRICTED STOCK, SUBJECT TO ADJUSTMENT TO THE EXTENT PROVIDED IN
PARAGRAPH 15. FOR PURPOSES OF THE FOREGOING, THE AMOUNT PAID OR RECEIVED IN ANY
CALENDAR YEAR UNDER A QUALIFYING AWARD DESCRIBED IN THIS SUBPARAGRAPH (B) SHALL
BE DEEMED TO BE THE VALUE EARNED UNDER SUCH AWARD BASED UPON THE ATTAINMENT OF
PERFORMANCE OBJECTIVES AND ANY DOWNWARD ADJUSTMENTS, AS DETERMINED BY THE
A-14
COMMITTEE, AS OF THE DATE OF THE DETERMINATION. THE LIMITATIONS CONTAINED IN
THIS SUBPARAGRAPH (B)(II) SHALL APPLY ONLY TO QUALIFYING AWARDS GRANTED ON AND
AFTER APRIL 22, 1996. AMOUNTS PAID PURSUANT TO AWARDS GRANTED UNDER THE PLAN
PRIOR TO APRIL 22, 1996 SHALL NOT BE COUNTED TOWARD OR SUBJECT TO SUCH LIMITS.
10. DEFERRED PAYMENT OF AWARDS. The Committee may specify that the payment
of all or any portion of cash, Common Shares, Other Company Securities or
property, or any other form of payment, or any combination thereof, under an
Award shall be deferred until a later date. Deferrals shall be for such periods
or until the occurrence of such events, and upon such terms, as the Committee
shall determine in its discretion. Deferred payments of Awards may be made by
undertaking to make payment in the future based upon the performance of certain
investment equivalents (which may include, but need not be limited to,
government securities, Common Shares, other securities, property, or
consideration, or any combination thereof), together with such additional
amounts of income equivalents (which may be compounded and may include, but need
not be limited to, interest, dividends or other rates of return, or any
combination thereof) as may accrue thereon until the date or dates of payment,
such investment equivalents and such additional amounts of income equivalents to
be determined by the Committee in its discretion.
11. AMENDMENT OF AWARDS UNDER THE PLAN. The terms of any outstanding Award
under the Plan may be amended from time to time by the Committee in its
discretion in any manner that it deems appropriate (including, but not limited
to, acceleration of the date of exercise of any Award and/or payments
thereunder); provided that no such amendment shall adversely affect in a
material manner any right of a participant under the Award without his written
consent, unless the Committee determines in its discretion that there have
occurred or are about to occur significant changes in the participant's
position, duties or responsibilities, or significant changes in economic,
legislative, regulatory, tax, accounting or cost/benefit conditions which are
determined by the Committee in its discretion to have or to be expected to have
a substantial effect on the performance of the Company, or any subsidiary,
affiliate, division or department thereof, on the Plan or on any Award under the
Plan.
12. DISABILITY. For the purposes of this Plan, a participant shall be
deemed to have terminated his employment or performance of services for the
Company and its Affiliates by reason of disability, if the Committee shall
determine that the physical or mental condition of the participant by reason of
which such employment or performance of services terminated was such at that
time as would entitle him to payment of monthly disability benefits under the
Company's Long Term Disability Benefit Plan, or, if the participant is not
eligible for benefits under such plan, under any similar disability plan of the
Company or an Affiliate in which he is a participant. If the participant is not
eligible for benefits under any disability plan of the Company or an Affiliate,
A-15
he shall be deemed to have terminated such employment or performance of services
by reason of disability if the Committee shall determine that his physical or
mental condition would entitle him to benefits under the Company's Long Term
Disability Benefit Plan if he were eligible therefor.
13. TERMINATION OF A PARTICIPANT. For all purposes under the Plan, the
Committee shall determine whether a participant has terminated employment by or
the performance of services for the Company and its Affiliates; provided,
however, that transfers between the Company and an Affiliate or between
Affiliates, and approved leaves of absence shall not be deemed such a
termination.
14. RELATED EMPLOYMENT. For the purposes of this Plan, Related Employment
shall mean the employment or performance of services by an individual for an
employer that is neither the Company nor an Affiliate, provided that (i) such
employment or performance of services is undertaken by the individual at the
request of the Company or an Affiliate, (ii) immediately prior to undertaking
such employment or performance of services, the individual was employed by or
performing services for the Company or an Affiliate or was engaged in Related
Employment as herein defined and (iii) such employment or performance of
services is in the best interests of the Company and is recognized by the
Committee, in its discretion, as Related Employment for purposes of this
Paragraph 14. The death or disability of an individual during a period of
Related Employment as herein defined shall be treated, for purposes of this
Plan, as if the death or onset of disability had occurred while the individual
was employed by or performing services for the Company or an Affiliate.
15. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding Common Shares of the Company by reason of any stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by the Company of all or part of its assets, any distribution to
shareholders other than a normal cash dividend, or other extraordinary or
unusual event, if the Committee shall determine, in its discretion, that such
change equitably requires an adjustment in the terms of any Award or the number
of Common Shares available for Awards, such adjustment may be made by the
Committee and shall be final, conclusive and binding for all purposes of the
Plan.
16. DESIGNATION OF BENEFICIARY BY PARTICIPANT. A participant may name a
beneficiary to receive any payment in which he may be entitled in respect of any
Award under the Plan in the event of his death, on a written form to be provided
by and filed with the Committee, and in a matter determined by the Committee in
its discretion. The Committee reserves the right to review and approve
beneficiary designations. A participant may change his beneficiary from time to
time in the same manner, unless such participant has made an irrevocable
designation. Any designation of beneficiary under the Plan (to the extent it is
valid and enforceable under the applicable law) shall be controlling over any
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other disposition, testamentary, or otherwise, as determined by the Committee in
its discretion. If no designated beneficiary survives the participant and is
living on the date on which any amount becomes payable to such participant's
beneficiary, such payment will be made to the legal representatives of the
participant's estate, and the term "beneficiary" as used in the Plan shall be
deemed to include such person or persons. If there is any question as to the
legal right of any beneficiary to receive a distribution under the Plan, the
CommitteeDirectors in
its discretion may determine that the amount in question be paiddetermine.
3. Subject to the legal representativesforegoing, the designations and the relative rights,
preferences and limitations of the estateshares of each class, and the authority
hereby vested in the Board of Directors of the participant, in which eventcorporation to establish and to
fix the Company, the Boardnumbers, designations and the Committeerelative rights, preferences and the members thereof will have no
further liability to anyone with respect to such amount.
17. FINANCIAL ASSISTANCE. If the Committee determines that such action is
advisable, the Company may assist any person to whom an Award has been granted
in obtaining financing from the Company under the American Express 1983 Stock
Purchase Assistance Plan (or other programlimitations
of the Company, or oneseries of its
Affiliates approved pursuant to applicable law), or from a bank or other third
party, on such termspreferred shares, are as are determined by the Committee, and in such amount as
is required to accomplish the purposes of the Plan, including, but not limited
to, to permit the exercise of an Award, the participation therein, and/or the
payment of any taxes in respect thereof. Such assistance may take any form that
the Committee deems appropriate, including, but not limited to, a direct loan
from the Company or an Affiliate, a guarantee of the obligation by the Company
or an Affiliate, or the maintenance by the Company or an Affiliate of deposits
with such bank or third party.
18. MISCELLANEOUS PROVISIONS.
(a) No employee or other person shall have any claim or right to be
granted an Award under the Plan. Determinations made by the Committee under the
Plan need not be uniform andfollows:
a. The preferred shares may be made selectively among eligible individuals
under the Plan, whether or not such eligible individuals are similarly situated.
Neither the Plan nor any action taken hereunder shall be construed as giving any
employee or other person any right to continue to be employed by or perform
services for the Company or any Affiliate, and the right to terminate the
employment of or performance of services by any participant at any time and for
any reason is specifically reserved.
(b) No participant or other person shall have any right with respect to
the Plan, the Common Shares reserved for issuance under the Plan or in any
Award, contingent or otherwise, until written evidence of the Award shall have
been delivered to the recipient and all the terms, conditions and provisions of
the Plan and the Award applicable to such recipient (and each person claiming
under or through him) have been met.
(c) Except as may be approved by the Committee where such approval shall
not adversely affect compliance of the Plan with Rule 16b-3 under the Exchange
Act, a participant's rights and interest under the Plan may not be assigned or
A-17
transferred, hypothecated or encumbered in whole or in part either directly or
by operation of law or otherwise (except in the event of a participant's death)
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner; provided, however, that
any Option or similar right (including, but not limited to, a Stock Appreciation
Right) offered pursuant to the Plan shall not be transferable other than by will
or the laws of descent and distribution and shall be exercisable during the
participant's lifetime only by him.
(d) No Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment shall be issued hereunder with
respect to any Award unless counsel for the Company, shall be satisfied that
such issuance will be in compliance with applicable federal, state, local and
foreign legal, securities exchange and other applicable requirements.
(e) It is the intent of the Company that the Plan comply in all respects
with Rule 16b-3 under the Exchange Act, that any ambiguities or inconsistencies
in construction of the Plan be interpreted to give effect to such intention and
that if any provision of the Plan is found not to be in compliance with Rule
16b-3, such provision shall be deemed null and void to the extent required to
permit the Plan to comply with Rule 16b-3.
(f) The Company and its Affiliates shall have the right to deduct from any
payment made under the Plan any federal, state, local or foreign income or other
taxes required by law to be withheld with respect to such payment. It shall be a
condition to the obligation of the Company to issue Common Shares, Other Company
Securities or property, other securities or property, or other forms of payment,
or any combination thereof, upon exercise, settlement or payment of any Award
under the Plan, that the participant (or any beneficiary or person entitled to
act) pay to the Company, upon its demand, such amount as may be requested by the
Company for the purpose of satisfying any liability to withhold federal, state,
local or foreign income or other taxes. If the amount requested is not paid, the
Company may refuse to issue Common Shares, Other Company Securities or property,
other securities or property, or other forms of payment, or any combination
thereof. Notwithstanding anything in the Plan to the contrary, the Committee
may, in its discretion, permit an eligible participant (or any beneficiary or
person entitled to act) to elect to pay a portion or all of the amount requested
by the Company for such taxes with respect to such Award, at such time and in
such manner as the Committee shall deem to be appropriate (including, but not
limited to, by authorizing the Company to withhold, or agreeing to surrender to
the Company on or about the date such tax liability is determinable, Common
Shares, Other Company Securities or property, other securities or property, or
other forms of payment, that would otherwise be distributed, or have been
distributed, as the case may be, pursuant to such Award to such person, having a
fair market value equal to the amount of such taxes).
A-18
(g) The expenses of the Plan shall be borne by the Company. However,
if an Award is made to an individual employed by or
performing services for an Affiliate,
(i) if such Award results in payment of cash to the participant, such
Affiliate shall pay to the Company an amount equal to such cash payment;
and
(ii) if the Award results in the issuance by the Company to the
participant of Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment, or any combination
thereof, such Affiliate shall pay to the Company an amount equal to the
fair market value thereof, as determined by the Committee, on the date
such shares, Other Company Securities or property, other securities or
property, or other forms of payment, or any combination thereof, are
issued (or, in the case of the issuance of Restricted Stock or of Common
Shares, Other Company Securities or property, or other securities or
property, or other forms of payment subject to transfer and forfeiture
conditions, equal to the fair market value thereof on the date on which
they are no longer subject to applicable restrictions), minus the amount,
if any, received by the Company in respect of the purchase of such Common
Shares, Other Company Securities or property, other securities or property
or other forms of payment, or any combination thereof.
(h) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Award under the Plan, and the rights to the
payment of Awards shall be no greater than the rights of the Company's general
creditors.
(i) By accepting any Award or other benefit under the Plan, each
participant and each person claiming under or through him shall be conclusively
deemed to have indicated his acceptance and ratification of, and consent to, any
action taken under the Plan by the Company, the Board or the Committee or its
delegates.
(j) Fair market value in relation to Common Shares, Other Company
Securities or property, other securities or property or other forms of payment
of Awards under the Plan, or any combination thereof, as of any specific time
shall mean such value as determined by the Committee in accordance with
applicable law.
(k) The masculine pronoun includes the feminine and the singular includes
the plural wherever appropriate.
(l) The appropriate officers of the Company shall cause to be filed any
reports, returns or other information regarding Awards hereunder or any Common
Shares issued pursuant hereto as may be required by Section 13 or 15(d) of the
Exchange Act (or any successor provision) or any other applicable statute, rule
or regulation.
A-19
(m) The validity, construction, interpretation, administration and effect
of the Plan, and of its rules and regulations, and rights relating to the Plan
and to Awards granted under the Plan, shall be governed by the substantive laws,
but not the choice of law rules, of the State of New York.
19. PLAN AMENDMENT OR SUSPENSION. The Plan may be amended or suspended in
whole or in part at any time and from time to time by the Board of
Directors in one or more series and, subject only to the provisions of
this Section 4 and the limitations prescribed by law, the Board of
Directors is expressly authorized, prior to issuance, in the resolution
or resolutions providing for the issue of, or providing for a change in
the number of, shares of any particular series, and by filing a
certificate of amendment pursuant to the Business Corporation Law of
the State of New York, to establish or change the number of shares to
be included in each such series and to fix the designation and relative
rights, preferences and limitations of the shares of each such series.
The authority of the Board of Directors with respect to each series
shall include, but nonot be limited to, determination of the following:
(1) the distinctive serial designation of such series and the number
of shares constituting such series (provided that the aggregate
number of shares constituting all series of preferred shares
shall not exceed the aggregate number of preferred shares
authorized above);
(2) the times at which and the conditions under which dividends
shall be payable on shares of such series, the annual dividend
rate thereon, whether dividends shall be cumulative and, if so,
from which date or dates, and the status of such dividends as
participating or non-participating;
(3) whether the shares of such series shall be redeemable and, if
so, the terms and conditions of such redemption, including the
date or dates upon and after which such shares shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(4) the obligation, if any, of the corporation to retire shares of
such series pursuant to a sinking fund or redemption or purchase
account;
(5) whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or shares
of any series of any class, and, if so, the terms and conditions
of such conversion or exchange, including the price or prices or
the rate or rates of conversion or exchange and the terms of
adjustment thereof, if any;
A-2
(6) whether the shares of such series shall have voting rights, in
addition to the voting rights otherwise provided in this
certificate of incorporation or by law, and, if so, the terms of
such voting rights;
(7) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the corporation; and
(8) any other relative rights, preferences and limitations of such
series.
b. All preferred shares shall be of equal rank with each other regardless
of series. In case the stated dividends and the amounts payable on
liquidation are not paid in full, the preferred shares of all series
shall share ratably in the payment of dividends including
accumulations, if any, in accordance with the sums which would be
payable on such shares if all dividends were declared and paid in full,
and in any distribution of assets other than by the way of dividends in
accordance with the sums which would be payable in such distribution if
all sums payable were discharged in full.
The preferred shares of any one series shall be identical with each other
in all respects except as to the dates from which cumulative dividends, if any,
thereon shall be cumulative.
c. Subject to the rights of the preferred shares, dividends may be paid
upon the common shares as and when declared by the Board of Directors
out of any funds legally available therefor.
d. Upon any liquidation, dissolution or winding up of the affairs of the
corporation (which shall not be deemed to include a consolidation or
merger of the corporation, or the sale of all or substantially all of
the corporation's assets, into, with or to any other corporation or
corporations), whether voluntary or involuntary, and after the holders
of the preferred shares shall have been paid in full the amounts, if
any, to which they respectively shall be entitled or provision for such
payment shall have been made, the remaining net assets of the
corporation shall be distributed pro rata to the holders of the common
shares.
e. So long as any preferred shares of any series are outstanding,
(1) Whenever dividends payable on the preferred shares of any series
shall be in arrears in an aggregate amount at least equal to six
full quarterly dividends (which need not be consecutive) on such
series, the holders of the outstanding preferred shares of all
series shall have the special right, voting separately as a
single class, to elect two directors of the corporation, at the
next succeeding annual meeting of shareholders (and at each
succeeding annual meeting of shareholders thereafter until such
right shall terminate as hereinafter provided), and, subject to
the terms of any outstanding series of preferred shares, the
holders of the common shares and the hold-
A-3
ers of one or more series of preferred shares then entitled to
vote shall have the right, voting as a single class, to elect the
remaining authorized number of directors.
At each meeting of shareholders at which the holders of the preferred
shares of all series shall have the special right, voting separately as a
single class, to elect directors as provided in this paragraph e, the
presence in person or by proxy of the holders of record of one-third of
the total number of the preferred shares of all series then issued and
outstanding shall be necessary and sufficient to constitute a quorum of
such class for such election by such shareholders.
Each director elected by the holders of the preferred shares of all
series shall hold office until the annual meeting of shareholders next
succeeding his election and until his successor, if any, is elected by
such holders and qualified or until his death, resignation or removal in
the manner provided in the by-laws of the corporation; provided, however,
that notwithstanding any provision in the by-laws, a director elected by
the holders of the preferred shares of all series may be removed only by
such holders if such removal is without cause.
In case any vacancy shall occur among the directors elected by the
holders of the preferred shares of all series such vacancy may be filled
for the unexpired portion of the term by vote of the single remaining
director theretofore elected by such shareholders, or his successor in
office, or, if such vacancy shall occur more than 90 days prior to the
first anniversary of the next preceding annual meeting of shareholders, by
the vote of such shareholders given at a special meeting of such
shareholders called for the purpose.
Whenever all arrears of dividends on the preferred shares of all
series shall have been paid and dividends thereon for the current
quarterly period shall have been paid or declared and provided for, the
right of the holders of the preferred shares of all series to elect two
directors as provided in this paragraph e shall terminate at the next
succeeding annual meeting of shareholders, but subject always to the same
provisions for the vesting of such special right, voting separately as a
single class, to elect two directors in the case of any future arrearages
of the kind and amount described in this paragraph e.
(2) The consent of the holders of at least two-thirds of the
outstanding preferred shares, given in person or by proxy, at a
special or annual meeting of shareholders called for the
purpose, at which the holders of the preferred shares of all
series shall vote separately as a single class, shall be
necessary for effecting the authorization of any class of shares
ranking prior to the preferred shares as to dividends or upon
liquidation, dissolution or winding up, or an increase in the
authorized amount of any class of shares so ranking prior to the
preferred shares, or the authorization of any amendment of the
certificate of incorporation or the by-laws of the corporation
so as to affect adversely the relative rights, preferences or
limitations of the preferred shares; provided, however, that, if
any such amendment shall affect adversely the relative rights,
preferences or limi-
A-4
tations of one or more, but not all, of the series of preferred
shares then outstanding, the consent of the holders of at least
two-thirds of the outstanding preferred shares of the several
series so affected shall be effective unlessrequired in lieu of the consent of
the holders of at least two-thirds of the outstanding preferred
shares of all series.
(3) In any case in which the holders of the preferred shares shall
be entitled to vote separately as a single class pursuant to the
provisions hereof or pursuant to law, each holder of preferred
shares of any series shall be entitled to one vote for each such
share held.
SECTION 5. AGENT FOR PROCESS
The secretary of state is designated as agent of the corporation upon whom
process against it may be served, and until the samepost office address to which the
secretary of state shall mail a copy of any process against the corporation
served upon him is, approvedAmerican Express Company, 200 Vesey Street, New York, New
York 10285.
SECTION 6. SHAREHOLDER VOTE
Every holder of common shares of record shall be entitled at every meeting
of shareholders to one vote for each common share standing in his name on the
record of shareholders. Holders of each series of preferred shares shall be
entitled to vote in accordance with the provisions of this certificate relating
to such series.
SECTION 7. AMENDMENTS
The corporation reserves the right to amend, alter, change or repeal any
provision herein contained in the manner now or hereafter prescribed by
applicable law, and all rights conferred hereunder upon shareholders of the
Company, wherecorporation are granted subject to this reservation.
SECTION 8. LIABILITY OF DIRECTORS
No director shall be personally liable to the failurecorporation or any
shareholder for damages for any breach of duty as a director, except for (a) the
liability of any director if a judgment or other final adjudication adverse to
obtain such approval would
adversely affect the compliancehim establishes that (i) his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or (ii) he personally
gained in fact a financial profit or other advantage to which he was not legally
entitled or (iii) his acts violated Section 719 of the Plan with Rule 16b-3 underNew York Business
Corporation Law, or (b) the Exchange
Act and with other applicable law. No amendment of the Plan shall adversely
affect in a material manner any rightliability of any participant with respectdirector for any act or omission
prior to any
Award theretofore granted without such participant's written consent, except as
permitted under Paragraph 11.
20. PLAN TERMINATION. This Plan shall terminate upon the earlier of the
following dates or events to occur:
(a)upon the adoption of a resolutionthis Section 8. Any repeal or modification of the Board terminating the Plan; or
(b) ten years from the date the Plan is initially approved and adoptedthis
Section 8 by the shareholders of the Company in accordancecorporation shall not, unless otherwise
required by law, adversely affect any right or protection of a director existing
at the time of such repeal or modification with Paragraph 21 hereof,
provided, however, that the Board may,respect to acts or omissions
occurring prior to such repeal or modification. If the expiration of such ten-year
period, extend the term of the Plan for an additional period of up to five years
for the grant of Awards other than Incentive Stock Options. No termination of
the Plan shall materially alter or impair any of the rights or obligations of
any person, without his consent, under any Award theretofore granted under the
Plan, except that subsequent to termination of the Plan, the Committee may make
amendments permitted under Paragraph 11.
21. SHAREHOLDER ADOPTION. The Plan shall be submitted toNew York Business
Corporation Law is amended after approval by the shareholders of this Section 8
to authorize corporate action further eliminating or limiting the Company for their approval and adoption atpersonal
liability of directors, then the liability of a meeting to be held on or
before June 30, 1989, or at any adjournment thereof. The Plan shall not be
effective and no Awarddirector of the corporation
shall be made hereunder unless and untileliminated or limited to the Plan has
been so approved and adopted. The shareholders shall be deemed to have approved
and adopted the Plan only if it is approved and adopted at a meeting of the
shareholders duly held by vote taken in the manner requiredfullest extent permitted by the laws of the
State of New York.
A-20York
Business Corporation Law, as amended from time to time.
A-5
DIRECTIONS TO THE 19961997 AMERICAN EXPRESS COMPANY
ANNUAL MEETING OF SHAREHOLDERS
American Express Company's world headquarters, site of the Company's 19961997
Annual Meeting of Shareholders, are located at 200 Vesey Street on the west side
of lower Manhattan in the office complex known as the World Financial Center.
The World Financial Center is a part of Battery Park City, a 10-acre development
of office buildings, residences and parks created in the 1970's and 1980's by
land fill amongst former Hudson River pierslocated on the southwestern tip of
Manhattan. It is connected to the World Trade Center by two pedestrian
overpasses and is also accessible at street level by vehicular traffic.automobile.
BY SUBWAY
Take any of the several subway lines (A, C, E, N, R or the 1, 2, 3, 4, 5
or 9 trains) that stop at or near the World Trade Center. Walk from the World
Trade Center across the Westside Highway (also known as West Street) via one of
the two pedestrian overpasses. The American Express building is on the north
side of the Winter Garden in the World Financial Center.
BY AUTOMOBILE OR TAXICAB
Proceed southerly on the Westside Highway in lower Manhattan, orienting
toward the twin towers of the World Trade Center. Enter the World Financial
Center, which is directly across the Westside Highway from the towers, by
turning west on either Murray Street or Vesey Street. Proceed to the main
entrance of the American Express building, located onat the south sidecorner of Vesey Street
slightlyand the Westside Highway.
AMERICAN EXPRESS COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING ON APRIL 28, 1997
The undersigned hereby appoints Richard K. Goeltz, Louise M. Parent and Stephen
P. Norman, or any of them, proxies or proxy, with full power of substitution, to
vote all common shares of American Express Company which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held at the
executive offices of the Company, 200 Vesey Street, 26th Floor, New York, New
York 10285, on April 28, 1997 at 10:00 A.M., local time, and at any adjournment
thereof, as directed below with respect to the westproposals set forth in the Proxy
Statement and in their discretion upon any matter that may properly come before
the meeting or any adjournment thereof.
(COMMENTS/ADDRESS CHANGE)
----------------------
----------------------
----------------------
----------------------
Election of Directors. Nominees:
D.F. Akerson, A.L. Armstrong, E.L. Artzt,
W.G. Bowen, K.I. Chenault, C.W. Duncan, Jr.,
H. Golub, B. Sills Greenough, F.R. Johnson,
V.E. Jordan, Jr., J. Leschly, D. Lewis, A. Papone,
F.P. Popoff.
(If you have written in the above space, please mark
the corresponding box on the reverse side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. YOUR SHARES CANNOT BE VOTED UNLESS
YOU SIGN THIS CARD. THE SIGNER HEREBY REVOKES ALL PROXIES HERETOFORE GIVEN BY
THE SIGNER TO VOTE AT SAID MEETING OR ANY ADJOURNMENT THEREOF.
(CONTINUED AND TO BE DATED AND SIGNED ON OTHER SIDE)
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FOLD AND DETACH HERE.
NOTICE TO EMPLOYEES PARTICIPATING IN THE AMERICAN EXPRESS INCENTIVE SAVINGS
PLAN:
This proxy card indicates the number of whole shares credited to your account in
the American Express Incentive Savings Plan (ISP) as of February 21, 1997. The
shares credited to your account in ISP will be voted according to your voting
instructions indicated on this card if American Express Trust Company, the
Trustee of the Westside
Highway.ISP, receives such instructions in a timely manner.
To be received in a timely manner, ChaseMellon Shareholder Services, L.L.C.,
which is acting on behalf of and at the direction of the Trustee, must receive
your proxy card for tabulation by April 11, 1997.
If the Trustee does not receive your voting instructions in a timely manner,
your shares held in the ISP will be voted by the Trustee, in the same proportion
as the Trustee has received timely voting instructions on other shares held in
ISP.
This proxy, when properly executed, will be voted in the manner
directed hereon by the undersigned shareholder. If no direction is
given, this proxy will be voted FOR proposals 1, 2 and 3 and AGAINST
proposals 4, 5, 6 and 7.
Please mark your votes as indicated in
this example. /x/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
Item 1 - Election of Directors.
/ /FOR ALL NOMINEES / /WITHHOLD FROM ALL NOMINEES
FOR the slate, except vote WITHHELD from the following nominee(s):
Item 2 - Selection of Ernst & Young LLP as Independent Auditors.
/ /FOR / /AGAINST / /ABSTAIN
Item 3 - Amendment and Restatement of the Company's Certificate of
Incorporation.
/ /FOR / /AGAINST / /ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 4, 5, 6 AND 7.
Item 4 - Shareholder proposal #1 relating to cumulative voting.
/ /FOR / /AGAINST / /ABSTAIN
Item 5 - Shareholder proposal #2 relating to executive compensation
/ /FOR / /AGAINST / /ABSTAIN
Item 6 - Shareholder proposal #3 relating to CERES principles.
/ /FOR / /AGAINST / /ABSTAIN
Item 7 - Shareholder proposal #4 relating to charitable contributions.
/ /FOR / /AGAINST / /ABSTAIN
I plan to attend meeting. / /
COMMENTS/ADDRESS CHANGE
(Please mark this box if you have written comments/address change on the reverse
side.) / /
SIGNATURE(S) DATE
---------------------------------------- ------
NOTE: Please date and sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, corporate officer,
trustee or guardian, please give full title as such.
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FOLD AND DETACH HERE.