AMENDMENT TO THE
AMERICAN EXPRESS
PAY FOR PERFORMANCE DEFERRAL PROGRAMS
RESOLVED, that American Express Company's (the "Company") Pay for
Performance Deferral Programs for 1994 - 1999 (the "Programs"), are hereby
amended, effective as of February 28, 2000, as follows:
The following new paragraphs are added to the Programs:
1. Definition of Change in Control
-------------------------------
A Change in Control shall have a meaning as set forth below:
(a) Any individual, entity or group (a "Person") (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 as amended (the "Exchange Act") becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of either (i) the then outstanding common
shares of the Company (the "Outstanding Company Common Shares")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that such beneficial ownership
shall not constitute a Change in Control if it occurs as a result
of any of the following acquisitions of securities: (i) any
acquisition directly from the Company, (ii) any acquisition by
the Company or any corporation, partnership, trust or other
entity controlled by the Company (a "Subsidiary"), (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary or (iv)
any acquisition by any corporation pursuant to a reorganization,
merger or consolidation if, following such reorganization, merger
or consolidation, the conditions described in clauses (i), (ii)
and (iii) of subsection (c) of this Change in Control Section are
satisfied. Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") became the beneficial owner of 25% or more of
the Outstanding
Company Common Shares or Outstanding Company Voting Securities as
a result of the acquisition of Outstanding Company Common Shares
or Outstanding Company Voting Securities by the Company which, by
reducing the number of Outstanding Company Common Shares or
Outstanding Company Voting Securities, increases the proportional
number of shares beneficially owned by the Subject Person;
provided, that if a Change in Control would be deemed to have
occurred (but for the operation of this sentence) as a result of
the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes
the beneficial owner of any additional Outstanding Company Common
Shares or Outstanding Company Voting Securities which increases
the percentage of the Outstanding Company Common Shares or
Outstanding Company Voting Securities beneficially owned by the
Subject Person, then a Change in Control shall then be deemed to
have occurred; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board, including by reason of agreement intended to avoid or
settle any such actual or threatened contest or solicitation; or
(c) 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
2
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 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
(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 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
3
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
(e) Approval by the shareholder of the Company of a complete
liquidation or dissolution of the Company.
2. Additional Interest and Payout upon A Change in Control
-------------------------------------------------------
Notwithstanding anything to the contrary contained in the
Programs, upon the occurrence of a Change in Control, the amounts
credited to your participant's Deferral Bookkeeping Account as of
the date of such Change in Control (including any earnings
equivalents accrued thereon, plus interest equivalents for an
additional period of 24 months, based on the deferral rate in
effect for the Program year prior to the date of the Change in
Control, assuming all balances have been deferred for at least
five years) shall be paid to you within five days following the
date of such Change in Control.
4
3. Major Transaction
-----------------
(a) This paragraph (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 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
5
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 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
6
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 Program, 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
7
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 (the "Firm"). The Firm will be paid reasonable
compensation by the Company for such services. If the Firm
concludes that its determination is inconsistent with a
final determination of a court or the Internal Revenue
Service, the Firm shall, based on such final determination,
redetermine whether the amount payable to the Participant
should have been reduced and, if applicable, the amount of
any such reduction. If the Firm determines that a lesser
payment should have been made to the Participant, then an
amount equal to the amount of the excess of the earlier
payment over the redetermined amount (the "Excess Amount")
will be deemed for all purposes to be a loan to the
Participant made on the date of the Participant's receipt of
such Excess Amount, which the Participant will have an
obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section
1274(d) of the Code or any successor provision thereto),
compounded semi-
8
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.
(5) Change in Control Payments
(a) This Paragraph 5 shall apply in the event in a Change in
Control, as defined in paragraph 1 above.
(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 (the "Excise Tax") referred to in Section 4999 of
the Code,
9
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 (d) 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
Tier 1 Employee (in the event clause (i) above does not
apply) and in the case of any other Participant, 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 a 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 Tax and
whether any Payments are to be reduced hereunder: (i) all
payments and benefits received or to be received by a
Participant in connection with such Change in Control or the
termination of such Participant's employment, whether
pursuant to the terms of this Plan or any other plan,
arrangement or agreement with the Company, any
10
Person (as such term is defined in Section 1.6) 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 accounting firm which was, immediately
prior to the Change in Control, the Company's independent
auditor, or if that firm refuses to serve, by another
qualified firm, whether or not serving as independent
auditors, designated by the Administration Committee (the
"Auditor"), 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 Auditor, 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 Auditor 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
11
whether any Payments in respect of a Participant (other than
a Tier 1 Employee) shall be reduced, the 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 Auditor 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 Auditor 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
12
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
Auditor 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).
13
AMERICAN EXPRESS
PAY FOR PERFORMANCE DEFERRAL PROGRAMS
RESOLVED, that American Express Company's (the "Company") Pay for
Performance Deferral Programs for 1994 - 1999 (the "Programs"), are hereby
amended, effective as of February 28, 2000, as follows:
The following new paragraphs are added to the Programs:
1. Definition of Change in Control
-------------------------------
A Change in Control shall have a meaning as set forth below:
(a) Any individual, entity or group (a "Person") (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 as amended (the "Exchange Act") becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of either (i) the then outstanding common
shares of the Company (the "Outstanding Company Common Shares")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that such beneficial ownership
shall not constitute a Change in Control if it occurs as a result
of any of the following acquisitions of securities: (i) any
acquisition directly from the Company, (ii) any acquisition by
the Company or any corporation, partnership, trust or other
entity controlled by the Company (a "Subsidiary"), (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary or (iv)
any acquisition by any corporation pursuant to a reorganization,
merger or consolidation if, following such reorganization, merger
or consolidation, the conditions described in clauses (i), (ii)
and (iii) of subsection (c) of this Change in Control Section are
satisfied. Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") became the beneficial owner of 25% or more of
the Outstanding
Company Common Shares or Outstanding Company Voting Securities as
a result of the acquisition of Outstanding Company Common Shares
or Outstanding Company Voting Securities by the Company which, by
reducing the number of Outstanding Company Common Shares or
Outstanding Company Voting Securities, increases the proportional
number of shares beneficially owned by the Subject Person;
provided, that if a Change in Control would be deemed to have
occurred (but for the operation of this sentence) as a result of
the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes
the beneficial owner of any additional Outstanding Company Common
Shares or Outstanding Company Voting Securities which increases
the percentage of the Outstanding Company Common Shares or
Outstanding Company Voting Securities beneficially owned by the
Subject Person, then a Change in Control shall then be deemed to
have occurred; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board, including by reason of agreement intended to avoid or
settle any such actual or threatened contest or solicitation; or
(c) 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
2
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 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
(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 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
3
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
(e) Approval by the shareholder of the Company of a complete
liquidation or dissolution of the Company.
2. Additional Interest and Payout upon A Change in Control
-------------------------------------------------------
Notwithstanding anything to the contrary contained in the
Programs, upon the occurrence of a Change in Control, the amounts
credited to your participant's Deferral Bookkeeping Account as of
the date of such Change in Control (including any earnings
equivalents accrued thereon, plus interest equivalents for an
additional period of 24 months, based on the deferral rate in
effect for the Program year prior to the date of the Change in
Control, assuming all balances have been deferred for at least
five years) shall be paid to you within five days following the
date of such Change in Control.
4
3. Major Transaction
-----------------
(a) This paragraph (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 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
5
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 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
6
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 Program, 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
7
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 (the "Firm"). The Firm will be paid reasonable
compensation by the Company for such services. If the Firm
concludes that its determination is inconsistent with a
final determination of a court or the Internal Revenue
Service, the Firm shall, based on such final determination,
redetermine whether the amount payable to the Participant
should have been reduced and, if applicable, the amount of
any such reduction. If the Firm determines that a lesser
payment should have been made to the Participant, then an
amount equal to the amount of the excess of the earlier
payment over the redetermined amount (the "Excess Amount")
will be deemed for all purposes to be a loan to the
Participant made on the date of the Participant's receipt of
such Excess Amount, which the Participant will have an
obligation to repay to the Company on the fifth business day
after demand, together with interest on such amount at the
lowest applicable Federal rate (as defined in Section
1274(d) of the Code or any successor provision thereto),
compounded semi-
8
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.
(5) Change in Control Payments
(a) This Paragraph 5 shall apply in the event in a Change in
Control, as defined in paragraph 1 above.
(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 (the "Excise Tax") referred to in Section 4999 of
the Code,
9
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 (d) 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
Tier 1 Employee (in the event clause (i) above does not
apply) and in the case of any other Participant, 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 a 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 Tax and
whether any Payments are to be reduced hereunder: (i) all
payments and benefits received or to be received by a
Participant in connection with such Change in Control or the
termination of such Participant's employment, whether
pursuant to the terms of this Plan or any other plan,
arrangement or agreement with the Company, any
10
Person (as such term is defined in Section 1.6) 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 accounting firm which was, immediately
prior to the Change in Control, the Company's independent
auditor, or if that firm refuses to serve, by another
qualified firm, whether or not serving as independent
auditors, designated by the Administration Committee (the
"Auditor"), 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 Auditor, 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 Auditor 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
11
whether any Payments in respect of a Participant (other than
a Tier 1 Employee) shall be reduced, the 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 Auditor 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 Auditor 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
12
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
Auditor 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).
13