AMENDMENT OF
AMERICAN EXPRESS COMPANY
1998 INCENTIVE COMPENSATION PLAN
MASTER AGREEMENT
DATED APRIL 27, 1998
RESOLVED, that pursuant to Section 12 of the American Express Company 1998
Incentive Compensation Plan (the "Plan"), the American Express Company 1998
Incentive Compensation Plan Master Agreement, dated April 27, 1998 (the
"Master Agreement"), is amended effective as of February 28, 2000 (the
"Effective Date"), as follows:
1. Section I, Subparagraph 3(c) is hereby amended, with respect to
Options granted on or after February 28, 2000, by adding the
following proviso to the last sentence thereof, to read as
follows:
;PROVIDED, HOWEVER, with respect to Options granted on or
after February 28, 2000, if within two years following a
Change in Control (utilizing the definition of a Change in
Control for Awards granted after February 28, 2000), a
Participant is terminated under circumstances that would
entitle the Participant to severance under an applicable
U.S. severance Plan (other than Constructive Termination, as
defined in the applicable plan), the Participant may, at any
time within ninety (90) days following such termination (but
in no event after the expiration of this Option under
Paragraph 2(a) above with respect to ten years from the Date
of Grant), exercise this Option with respect to the number
of shares as to which the Participant could have exercised
this Option on the date of such termination. For any other
Participant not covered by a U.S. severance plan, the 90 day
extension period shall apply if the Participant is
terminated within two years following a Change in Control
and the Participant would have been entitled to severance
under the applicable U.S. severance plan had the Participant
been a U.S. employee.
2. The introductory language to Subparagraph 1 of Section V is
deleted and is hereby replaced with the following new
introductory language:
1. Notwithstanding anything in this Agreement to the
contrary (but subject to those provisions in
Subparagraph 3 or 4 below which could reduce payments
hereunder as a result of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), upon a
Change in Control (as applicable to a particular
award), the awardholder shall immediately be:
3. Section V, Subparagraph 2(c), with respect to Awards granted
prior to February 28, 2000, is hereby deleted in its entirety and
replaced with a new Subparagraph 2(c) to read as follows:
(c) The consummation of a reorganization, merger or
consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 60%
of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting
Securities immediately prior to such reorganization, merger
or consolidation, in substantially the same proportions as
their ownership immediately prior to such reorganization,
merger or consolidation of such Outstanding Company Common
Shares and Outstanding Company Voting Shares, as the case
may be, (ii) no Person (excluding the Company, any employee
benefit plan (or related trust) of the Company, a Subsidiary
or such corporation resulting from such reorganization,
merger or consolidation or any parent or a subsidiary
thereof, and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation,
directly or indirectly, 25% or more of the Outstanding Comp-
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any Common Shares or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
(or any parent thereof) or the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation; or
4. Section V, Subparagraph 2(d), with respect to Awards granted
prior to February 28, 2000, is hereby deleted in its entirety and
replaced with a new Subparagraph 2(d) to read as follows:
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased,
exchanged or disposed of to a corporation with respect to
which following such sale, lease, exchange or other
disposition (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other
disposition of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, (B)
no Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or a Subsidiary of
such corpora-
3
tion or a subsidiary thereof and any Person beneficially
owning, immediately prior to such sale, lease, exchange or
other disposition, directly or indirectly, 25% or more of
the Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of such corporation
(or any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors and (C) at least a majority of the
members of the board of directors of such corporation (or
any parent thereof) were members of the Incumbent Board at
the time of the execution of the initial agreement or action
of the Board providing for such sale, lease, exchange or
other disposition of assets of the Company; or
5. Section V, Subparagraph 2(c), with respect to Awards granted on
or after February 28, 2000, is hereby deleted in its entirety and
replaced with a new Subparagraph 2(c) to read as follows:
(c) The consummation of a reorganization, merger or
consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 50%
of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, in
substantially the same proportions as their ownership
immediately prior to such reorganization, merger or
consolidation of such Outstanding Company Common Shares and
Outstanding Company Voting Shares, as the case may be, (ii)
no Person (excluding the Company, any employee benefit plan
4
(or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation
(or any parent thereof) were members of the Incumbent Board
at the time of the execution of the initial agreement or
action of the Board providing for such reorganization,
merger or consolidation; or
6. Section V, Subparagraph 2(d), with respect to Awards granted on
or after February 28, 2000, is hereby deleted in its entirety and
replaced with a new Subparagraph 2(d) to read as follows:
(d) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company, unless such assets have been sold, leased,
exchanged or disposed of to a corporation with respect to
which following such sale, lease, exchange or other
disposition (A) more than 50% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Shares and
Outstanding Company Voting Securities immediately prior to
such sale, lease, exchange or other disposition in
substantially
5
the same proportions as their ownership immediately prior to
such sale, lease, exchange or other disposition of such
Outstanding Company Common Shares and Outstanding Company
Voting Shares, as the case may be, (B) no Person (excluding
the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary of such corporation or a
subsidiary thereof and any Person beneficially owning,
immediately prior to such sale, lease, exchange or other
disposition, directly or indirectly, 25% or more of the
Outstanding Company Common Shares or Outstanding Company
Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of such corporation
(or any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or
any parent thereof) entitled to vote generally in the
election of directors and (C) at least a majority of the
members of the board of directors of such corporation (or
any parent thereof) were members of the Incumbent Board at
the time of the execution of the initial agreement or action
of the Board providing for such sale, lease, exchange or
other disposition of assets of the Company; or
7. Section V, Subparagraph 3 is hereby deleted in its entirety and
replaced with a new Subparagraph 3 to read as follows:
(3)(a) Paragraph 3 shall apply in the event of a Major
Transaction. A Major Transaction shall mean a transaction
described in either Section (1) or (2) below:
(1) The consummation of a reorganization, merger or
consolidation, in each case, if, following such
reorganization, merger or consolidation, more than 50%
but not more than 60% of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or
consolidation (or any parent thereof) and the combined
voting power of the then outstanding voting securities
of such corporation (or any parent thereof) entitled to
vote generally in the election of directors is then
beneficially owned, directly or
6
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially
the same proportions as their ownership immediately prior to
such reorganization, merger or consolidation of such
Outstanding Company Common Shares and Outstanding Company
Voting Shares, as the case may be, but only if:
(A) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company, a Subsidiary or such
corporation resulting from such reorganization, merger or
consolidation or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation (or any parent thereof) or the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation (or any parent
thereof) were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the
Board providing for such reorganization, merger or
consolidation.
(2) The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Company to a corporation with respect to which following
such sale, lease, exchange or other disposition more
than 50% but not more than 60% of, respectively, the then
outstanding shares of common stock of such corporation (or
any parent thereof) and
7
the combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange
or other disposition in substantially the same proportions
as their ownership immediately prior to such sale, lease,
exchange or other disposition of such Outstanding Company
Common Shares and Outstanding Company Voting Shares, as the
case may be, but only if:
(A) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or a
Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 25% or
more of, respectively, the then outstanding shares of common
stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting
securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors; and
(B) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were
members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing
for such sale, lease, exchange or other disposition of
assets of the Company.
(b) If all or any portion of the payments or benefits to which
the Participant will be entitled under the Plan, either
alone or together with other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or
8
entity that would be treated as a payor of parachute
payments as hereinafter defined, under any other plan,
agreement or arrangement, would constitute a "parachute
payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code") or any
successor provision thereto and regulations or other
guidance thereunder (except that "2.95" shall be used
instead of "3" under Section 280G(b)(2)(A)(ii) of the Code
or any successor provision thereto), such payment or
benefits provided to the Participant under this Plan, and
any other payments or benefits which the Participant
receives or is entitled to receive directly or indirectly
from the Company or any of its subsidiaries or any other
person or entity that would be treated as a payor of
parachute payments as hereinafter defined, under any other
plan, agreement or arrangement which would constitute a
parachute payment, shall be reduced (but not below zero) as
described below to the extent necessary so that no portion
thereof would constitute such a parachute payment as
previously defined (except that "2.95" shall be used instead
of "3" under Section 280G(b)(2)(A)(ii) of the Code or any
successor provision thereto). Whether payments or benefits
to the Participant would constitute a "parachute payment",
whether such payments or benefits are to be reduced pursuant
to the first sentence of this paragraph, and the extent to
which they are to be so reduced, will be determined by the
firm serving, immediately prior to the Major Transaction, as
the Company's independent auditors, or if that firm refuses
to serve, by another qualified firm, whether or not serving
as independent auditors, designated by the Administration
Committee under the American Express Senior Executive
Severance Plan (the "Firm"). The Firm will be paid
reasonable compensation by the Company for such services. If
the Firm concludes that its determination is inconsistent
with a final determination of a court or the Internal
Revenue Service, the Firm shall, based on such final
determination, redetermine whether the amount payable to the
Participant should have been reduced and, if applicable, the
amount of any such reduction. If the Firm determines that a
lesser payment should have been made to the Participant,
then an amount equal to the amount of the excess of the
earlier
9
payment over the redetermined amount (the "Excess Amount")
will be deemed for all purposes to be a loan to the
Participant made on the date of the Participant's receipt of
such Excess Amount, which the Participant will have an
obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section
1274(d) of the Code or any successor provision thereto),
compounded semi-annually (the "Section 1274 Rate") from the
date of the Participant's receipt of such Excess Amount
until the date of such repayment (or such lesser rate
(including zero) as may be designated by the Firm such that
the Excess Amount and such interest will not be treated as a
parachute payment as previously defined). If the Firm
determines that a greater payment should have been made to
the Participant, within five business days of such
determination, the Company will pay to the Participant the
amount of the deficiency, together with interest thereon
from the date such amount should have been paid to the date
of such payment, at the Section 1274 Rate (or such lesser
rate (including zero) as may be designated by the Firm such
that the amount of such deficiency and such interest will
not be treated as a parachute payment as previously
defined). If a reduction is to be made pursuant to this
paragraph, the Firm will have the right to determine which
payments and benefits will be reduced, either those under
this Plan alone or such other payments or benefits which the
Participant receives or is entitled to receive directly or
indirectly from the Company or any of its subsidiaries or
any other person or entity that would be treated as a payor
of parachute payments as previously defined, under any other
plan, agreement or arrangement.
8. Section V is hereby amended by adding the following new
Subparagraph 4 to read as follows:
4. (a) This Subparagraph 4 shall apply in the event of a Change
in Control (utilizing the definition of a Change in Control
as applicable to Awards granted on or after February 28,
2000, whether the Award giving rise to the payments or
10
benefits xxxxxxxxx was granted before, on or after February
28, 2000).
(b) In the event that any payment or benefit received or to
be received by a Participant hereunder in connection with a
Change in Control or termination of such Participant's
employment (such payments and benefits, excluding Gross-Up
Payment (as hereinafter defined), being hereinafter referred
to collectively as the "Payments"), will be subject to the
excise tax referred to in Section 4999 of the Code (the
"Excise Tax"), then (i) in the case of a Participant who is
classified in Band 70 (or its equivalent) or above
immediately prior to such Change in Control (a "Tier 1
Employee"), the Company shall pay to such Tier 1 Employee,
within five days after receipt by such Tier 1 Employee of
the written statement referred to in paragraph (e) below, an
additional amount (the "Gross-Up Payment") such that the net
amount retained by such Tier 1 Employee, after deduction of
any Excise Tax on the Payments and any federal, state and
local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Payments and (ii) in
the case of a Participant other than a Tier 1 Employee, the
Payments shall be reduced to the extent necessary so that no
portion of the Payments is subject to the Excise Tax but
only if (A) the net amount of all Total Payments (as
hereinafter defined), as so reduced (and after subtracting
the net amount of federal, state and local income and
employment taxes on such reduced Total Payments), is greater
than or equal to (B) the net amount of such Total Payments
without any such reduction (but after subtracting the net
amount of federal, state and local income and employment
taxes on such Total Payments and the amount of Excise Tax to
which the Participant would be subject in respect of such
unreduced Total Payments); provided, however, that the
Participant may elect in writing to have other components of
his or her Total Payments reduced prior to any reduction in
the Payments hereunder.
(c) For purposes of determining whether the Payments will be
subject to the Excise Tax, the amount of such Excise
11
Tax and whether any Payments are to be reduced hereunder:
(i) all payments and benefits received or to be received by
the Participant in connection with such Change in Control or
the termination of such Participant's employment, whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person (as
such term is defined in Subparagraph 2 above) whose actions
result in such Change in Control or any Person affiliated
with the Company or such Person (all such payments and
benefits, excluding the Gross-Up Payment and any similar
gross-up payment to which a Tier 1 Employee may be entitled
under any such other plan, arrangement or agreement, being
hereinafter referred to as the "Total Payments"), shall be
treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of
the Firm, such payments or benefits (in whole or in part) do
not constitute parachute payments, including by reason of
section 280G(b)(2)(A) or section 280G(b)(4)(A) of the Code;
(ii) no portion of the Total Payments the receipt or
enjoyment of which the Participant shall have waived at such
time and in such manner as not to constitute a "payment"
within the meaning of section 280G(b) of the Code shall be
taken into account; (iii) all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall
be treated as subject to the Excise Tax unless, in the
opinion of the Firm, such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax; and (iv) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Firm in accordance with the principles of
sections 280G(d)(3) and (4) of the Code and regulations or
other guidance thereunder. For purposes of determining the
amount of the Gross-Up Payment in respect of a Tier 1
Employee and whether any Payments in respect of a
Participant (other than a Tier 1 Employee) shall be reduced,
a Participant shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation (and
state and local income taxes at the highest mar-
12
ginal rate of taxation in the state and locality of such
Participant's residence, net of the maximum reduction in
federal income taxes which could be obtained from deduction
of such state and local taxes) in the calendar year in which
the Gross-Up Payment is to be made (in the case of a Tier 1
Employee) or in which the Payments are made (in the case of
a Participant other than a Tier 1 Employee). The Firm will
be paid reasonable compensation by the Company for its
services.
(d) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, then an amount equal to
the amount of the excess of the earlier payment over the
redetermined amount (the "Excess Amount") will be deemed for
all purposes to be a loan to the Tier 1 Employee made on the
date of the Tier 1 Employee's receipt of such Excess Amount,
which the Tier 1 Employee will have an obligation to repay
to the Company on the fifth business day after demand,
together with interest on such amount at the lowest
applicable Federal rate (as defined in Section 1274(d) of
the Code or any successor provision thereto), compounded
semi-annually (the "Section 1274 Rate") from the date of the
Tier 1 Employee's receipt of such Excess Amount until the
date of such repayment (or such lesser rate (including zero)
as may be designated by the Firm such that the Excess Amount
and such interest will not be treated as a parachute payment
as previously defined). In the event that the Excise Tax is
finally determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment),
within five business days of such determination, the Company
will pay to the Tier 1 Employee an additional amount,
together with interest thereon from the date such additional
amount should have been paid to the date of such payment, at
the Section 1274 Rate (or such lesser rate (including zero)
as may be designated by the Firm such that the amount of
such deficiency and such interest will not be
13
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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