AMENDMENT OF
AMERICAN EXPRESS COMPANY
1989 LONG-TERM INCENTIVE COMPENSATION PLAN
MASTER AGREEMENT
DATED FEBRUARY 27, 1995
RESOLVED, that pursuant to Section 11 of the American Express Company 1989
Incentive Compensation Plan (the "Plan"), the American Express Company 1989
Incentive Compensation Plan Master Agreement, dated February 27, 1995 (the
"Master Agreement"), is amended effective as of February 28, 2000 (the
"Effective Date"), as follows:
1. The introductory language to Subparagraph 1 of Section V is
deleted and is hereby replaced with the following new
introductory language:
1. Notwithstanding anything in this Agreement to the contrary,
(but subject to those provisions in Subparagraph 3 or 4
below which could reduce payments hereunder as a result of
Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code")), upon a Change in Control, the
awardholder shall immediately be:
2. Section V, Subparagraph 2(c) is hereby deleted in its entirety
and replaced with a new Subparagraph 2(c) to read as follows:
(c) The consummation of a reorganization, merger or
consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 60%
of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the
Outstanding Company Common Shares and Outstanding Company
Voting Securities immediately prior to such reorganization,
merger or consolidation, in substantially the same
proportions as their ownership immediately prior to such
reorganization, merger or consolidation of such Outstanding
Company Common Shares and Outstanding Company Voting Shares,
as the case may be, (ii) no Person (excluding the Company,
any employee benefit plan (or related trust) of the Company,
a Subsidiary or such corporation resulting from such
reorganization, merger or consolidation or any parent or a
subsidiary thereof, and any Person beneficially owning,
immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of the
Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
(or any parent thereof) or the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors and (iii) at least a majority of the
members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation
(or any parent thereof) were members of the Incumbent Board
at the time of the execution of the initial agreement or
action of the Board providing for such reorganization,
merger or consolidation; or
3. Section V, Subparagraph 2(d) is hereby deleted in its entirety
and replaced with a new Subparagraph 2(d) to read as follows:
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased,
exchanged or disposed of to a corporation with respect to
which following such sale, lease, exchange or other
disposition (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securi-
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ties of such corporation (or any parent thereof) entitled to
vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange
or other disposition in substantially the same proportions
as their ownership immediately prior to such sale, lease,
exchange or other disposition of such Outstanding Company
Common Shares and Outstanding Company Voting Shares, as the
case may be, (B) no Person (excluding the Company and any
employee benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors and
(C) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for such sale, lease, exchange or other disposition of
assets of the Company; or
4. Section V, Subparagraph 3 is hereby deleted in its entirety and
replaced with a new Subparagraph 3 to read as follows:
(3)(a) Subparagraph 3 shall apply in the event of a Major
Transaction (as defined below). A Major Transaction shall
mean a transaction described in either (1) or (2) below:
(1) The consummation of a reorganization, merger or
consolidation, in each case, if, following such
reorganization, merger or
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consolidation, more than 50% but not more than 60% of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger
or consolidation (or any parent thereof) and the combined
voting power of the then outstanding voting securities of
such corporation (or any parent thereof) entitled to vote
generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Shares and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation, in
substantially the same proportions as their ownership
immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but
only if:
(A) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation.
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(2) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company to a corporation with respect to which following
such sale, lease, exchange or other disposition more
than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other
disposition of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, but
only if:
(A) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for
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such sale, lease, exchange or other disposition of assets of
the Company
(b) If all or any portion of the payments or benefits to
which the Participant will be entitled under the Plan,
either alone or together with other payments or benefits
which the Participant receives or is entitled to receive
directly or indirectly from the Company or any of its
subsidiaries or any other person or entity that would be
treated as a payor of parachute payments as hereinafter
defined, under any other plan, agreement or arrangement,
would constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") or any successor provision thereto and
regulations or other guidance thereunder (except that "2.95"
shall be used instead of "3" under Section 280G(b)(2)(A)(ii)
of the Code or any successor provision thereto), such
payment or benefits provided to the Participant under this
Plan, and any other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as hereinafter defined, under any
other plan, agreement or arrangement which would constitute
a parachute payment, shall be reduced (but not below zero)
as described below to the extent necessary so that no
portion thereof would constitute such a parachute payment as
previously defined (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto). Whether payments or benefits
to the Participant would constitute a "parachute payment",
whether such payments or benefits are to be reduced pursuant
to the first sentence of this paragraph, and the extent to
which they are to be so reduced, will be determined by the
firm serving, immediately prior to the Major Transaction, as
the Company's independent auditors, or if that firm refuses
to serve, by another qualified firm, whether or not serving
as independent auditors, designated by the Administration
Committee under the American Express Senior Executive
Severance Plan (the "Firm"). The Firm will be paid
reasonable compensation by the Com-
6
pany for such services. If the Firm concludes that its
determination is inconsistent with a final determination of
a court or the Internal Revenue Service, the Firm shall,
based on such final determination, redetermine whether the
amount payable to the Participant should have been reduced
and, if applicable, the amount of any such reduction. If the
Firm determines that a lesser payment should have been made
to the Participant, then an amount equal to the amount of
the excess of the earlier payment over the redetermined
amount (the "Excess Amount") will be deemed for all purposes
to be a loan to the Participant made on the date of the
Participant's receipt of such Excess Amount, which the
Participant will have an obligation to repay to the Company
on the fifth business day after demand, together with
interest on such amount at the lowest applicable Federal
rate (as defined in Section 1274(d) of the Code or any
successor provision thereto), compounded semi-annually (the
"Section 1274 Rate") from the date of the Participant's
receipt of such Excess Amount until the date of such
repayment (or such lesser rate (including zero) as may be
designated by the Firm such that the Excess Amount and such
interest will not be treated as a parachute payment as
previously defined). If the Firm determines that a greater
payment should have been made to the Participant, within
five business days of such determination, the Company will
pay to the Participant the amount of the deficiency,
together with interest thereon from the date such amount
should have been paid to the date of such payment, at the
Section 1274 Rate (or such lesser rate (including zero) as
may be designated by the Firm such that the amount of such
deficiency and such interest will not be treated as a
parachute payment as previously defined). If a reduction is
to be made pursuant to this paragraph, the Firm will have
the right to determine which payments and benefits will be
reduced, either those under this Plan alone or such other
payments or benefits which the Participant receives or is
entitled to receive directly or indirectly from the Company
or any of its subsidiaries or any other person or entity
that would be treated as a payor of parachute payments as
previously defined, under any other plan, agreement or
arrangement.
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5. Section V is hereby amended by (i) adding a new Subparagraph 4 to
read as follows and (ii) renumbering the subsequent Sections
accordingly:
(4)(a) This Subparagraph 4 shall apply in the event of a
transaction that falls within the definition of Change in
Control (but only if such transaction does not constitute a
Major Transaction, as defined in Subparagraph 3 hereof).
(b) In the event that any payment or benefit received or to
be received by a Participant hereunder in connection with a
Change in Control or termination of such Participant's
employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred
to collectively as the "Payments"), will be subject to the
excise tax referred to in Section 4999 of the Code (the
"Excise Tax"), then (i) in the case of a Participant who is
classified in Band 70 (or its equivalent) or above
immediately prior to such Change in Control (a "Tier 1
Employee"), the Company shall pay to such Tier 1 Employee,
within five days after receipt by such Tier 1 Employee of
the written statement referred to in paragraph (e) below, an
additional amount (the "Gross-Up Payment") such that the net
amount retained by such Tier 1 Employee, after deduction of
any Excise Tax on the Payments and any federal, state and
local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Payments and (ii) in
the case of a Participant other than a Tier 1 Employee, the
Payments shall be reduced to the extent necessary so that no
portion of the Payments is subject to the Excise Tax but
only if (A) the net amount of all Total Payments (as
hereinafter defined), as so reduced (and after subtracting
the net amount of federal, state and local income and
employment taxes on such reduced Total Payments), is greater
than or equal to (B) the net amount of such Total Payments
without any such reduction (but after subtracting the net
amount of federal, state and local income and employment
taxes on such Total Payments and the amount of Excise Tax to
which the Participant would be subject in respect of such
unreduced Total Payments); PROVIDED, HOWEVER, that the Par-
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ticipant may elect in writing to have other components of
his or her Total Payments reduced prior to any reduction in
the Payments hereunder.
(c) For purposes of determining whether the Payments will be
subject to the Excise Tax, the amount of such Excise Tax and
whether any Payments are to be reduced hereunder: (i) all
payments and benefits received or to be received by the
Participant in connection with such Change in Control or the
termination of such Participant's employment, whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person (as
such term is defined in Subparagraph 2 above) whose actions
result in such Change in Control or any Person affiliated
with the Company or such Person (all such payments and
benefits, excluding the Gross-Up Payment and any similar
gross-up payment to which a Tier 1 Employee may be entitled
under any such other plan, arrangement or agreement, being
hereinafter referred to as the "Total Payments"), shall be
treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of
the Firm, such payments or benefits (in whole or in part) do
not constitute parachute payments, including by reason of
section 280G(b)(2)(A) or section 280G(b)(4)(A) of the Code;
(ii) no portion of the Total Payments the receipt or
enjoyment of which the Participant shall have waived at such
time and in such manner as not to constitute a "payment"
within the meaning of section 280G(b) of the Code shall be
taken into account; (iii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall
be treated as subject to the Excise Tax unless, in the
opinion of the Firm, such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax; and (iv) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Firm in accordance with the principles of
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sections 280G(d)(3) and (4) of the Code and regulations or
other guidance thereunder. For purposes of determining the
amount of the Gross-Up Payment in respect of a Tier 1
Employee and whether any Payments in respect of a
Participant (other than a Tier 1 Employee) shall be reduced,
a Participant shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation (and
state and local income taxes at the highest marginal rate of
taxation in the state and locality of such Participant's
residence, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state
and local taxes) in the calendar year in which the Gross-Up
Payment is to be made (in the case of a Tier 1 Employee) or
in which the Payments are made (in the case of a Participant
other than a Tier 1 Employee). The Firm will be paid
reasonable compensation by the Company for its services.
(d) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, then an amount equal to
the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for
all purposes to be a loan to the Tier 1 Employee made on the
date of the Tier 1 Employee's receipt of such Excess Amount,
which the Tier 1 Employee will have an obligation to repay
to the Company on the fifth business day after demand,
together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the
Tier 1 Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero)
as may be designated by the Firm such that the Excess Amount
and such interest will not be treated as a parachute payment
as previously defined). In the event that the Excise Tax is
finally determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment),
within five business days of such
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determination, the Company will pay to the Tier 1 Employee
an additional amount, together with interest thereon from
the date such additional amount should have been paid to the
date of such payment, at the Section 1274 Rate (or such
lesser rate (including zero) as may be designated by the
Firm such that the amount of such deficiency and such
interest will not be treated as a parachute payment as
previously defined). The Tier 1 Employee and the Company
shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning
the amount of any Gross-Up Payment.
(e) As soon as practicable following a Change in Control,
the Company shall provide to each Tier 1 Employee and to
each other Participant with respect to whom it is proposed
that Payments be reduced, a written statement setting forth
the manner in which the Total Payments in respect of such
Tier 1 Employee or other Participant were calculated and the
basis for such calculations, including, without limitation,
any opinions or other advice the Company has received from
the Firm or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to
the statement).
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