AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 2004
REGISTRATION NO. 333-113768
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
POST-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------
AMERICAN EXPRESS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------
NEW YORK 13-4922250
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OR ORGANIZATION)
WORLD FINANCIAL CENTER, 200 VESEY STREET
NEW YORK, NEW YORK 10285
(212) 640-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------
LOUISE M. PARENT, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
200 VESEY STREET
NEW YORK, NEW YORK 10285
(212) 640-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------------
COPIES OF ALL COMMUNICATION TO:
DAVID S. CARROLL, ESQ. LESLIE N. SILVERMAN, ESQ.
GROUP COUNSEL CRAIG B. BROD, ESQ.
AMERICAN EXPRESS COMPANY CLEARY, GOTTLIEB, STEEN & HAMILTON
200 VESEY STREET ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10285 NEW YORK, NEW YORK 10006
(212) 640-2000 (212) 255-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement, as determined
in light of market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the U.S. Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
________________________________________________________________________________
EXPLANATORY NOTE
The Registrant is filing this Post-Effective Amendment No. 3 to the
Registration Statement to update the Selling Securityholders table beginning on
page 35 of the prospectus contained in this Registration Statement to reflect
information that it has received from securityholders subsequent to September 9,
2004.
THE INFORMATION IN THIS PROSPECTUS MAY CHANGE OR BE AMENDED. WE MAY NOT COMPLETE
THIS OFFER AND ISSUE THESE SECURITIES UNTIL THE POST-EFFECTIVE AMENDMENT TO THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION TO
WHICH THIS PROSPECTUS RELATES IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES,
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 8, 2004
PROSPECTUS
[AMERICAN EXPRESS LOGO]
$2,000,000,000
AMERICAN EXPRESS COMPANY
1.85% CONVERTIBLE SENIOR DEBENTURES DUE 2033
AND
COMMON STOCK ISSUABLE UPON CONVERSION OF THE DEBENTURES
-------------------
American Express Company issued the debentures in a private placement on
November 21, 2003. Selling securityholders may use this prospectus to resell
their debentures and the shares of our common stock issuable upon conversion of
the debentures.
We pay regular interest on the debentures at an annual rate equal to 1.85%.
We will pay regular interest semi-annually in arrears on June 1 and December 1
of each year, each an interest payment date, beginning June 1, 2004 until
December 1, 2006. After December 1, 2006 we will not pay regular interest on the
debentures prior to maturity, unless we elect to do so in connection with a
remarketing of the debentures. Instead, on December 1, 2033, the stated maturity
date of the debentures, you will receive the accreted principal amount, which
will be equal to the original principal amount of $1,000 per debenture increased
daily at a rate of 1.85% per annum, beginning on December 1, 2006 until a
remarketing reset event occurs. The debentures are unsecured and unsubordinated
obligations of American Express Company.
Unless a remarketing reset event occurs, you may convert your debentures in
the circumstances described herein into a number of shares of our common stock
determined as set forth in this prospectus, which we refer to as the conversion
rate. Upon conversion, we will have the right to deliver, in lieu of shares of
our common stock, cash or a combination of cash and shares of common stock in an
amount described herein. The conversion rate initially depends on the applicable
stock price at the time of conversion. However, on December 1, 2006, unless a
remarketing reset event occurs, the conversion rate will be fixed at the
conversion rate then in effect. If a remarketing reset event occurs, from and
after the date of such remarketing reset event, the debentures will no longer be
convertible.
Unless a remarketing reset event occurs, we will pay contingent interest on
the debentures in the amounts set forth in 'Description of the
Debentures -- Contingent Interest,' during any six-month period from and
including an interest payment date to but excluding the next interest payment
date, commencing with the six-month period beginning December 1, 2006, if the
debentures are immediately convertible and the average trading price of the
debentures for a five trading-day measurement period immediately preceding the
applicable six-month period equals 125% or more of the accreted principal amount
of the debentures. If the debentures are immediately convertible and the average
trading price of the debentures for a five trading-day measurement period
immediately preceding the applicable six-month period equals 200% or more of the
accreted principal amount of the debentures, we will pay additional contingent
interest for any applicable six-month period in an amount equal to .125% of the
average trading price of a debenture for such five trading-day measurement
period. Following the occurrence of a remarketing reset event, we will pay
contingent interest, in the form of contingent accretion, in the amounts and
under the circumstances set forth in 'Description of the
Debentures -- Contingent Interest -- Contingent Accretion.' Such contingent
accretion, if any, will not be paid until we repay the debentures in full,
whether at maturity, upon exercise of your repurchase right, upon acceleration
or otherwise. For United States federal income tax purposes, the debentures will
constitute contingent payment debt instruments. You should read the discussion
under 'Certain United States Federal Income Tax Considerations' beginning on
page 31.
If the average of the closing sale prices of our common stock over the 10
trading-day period ending on the trading day immediately preceding December 1 of
2006, 2008, 2013, 2018, 2023 or 2028, each a remarketing reset event date, is
less than the effective conversion price (initially $69.41), which we refer to
as a remarketing reset event, we will not pay contingent cash interest on the
debentures; the debentures will no longer be convertible into our common stock;
you will not have the right to require us to repurchase the debentures as
described in the next paragraph; and the yield on the debentures will be reset
on such remarketing reset event date and periodically thereafter on the dates
specified by us, each a remarketing reset date. We may also elect prior to any
remarketing that, following such remarketing, the debentures will bear cash
interest, in which case the principal amount of the debentures will cease to
accrete during the period to the next remarketing date. The yield on the
debentures on each remarketing reset date will be the yield to the next
remarketing reset date, or the cash interest rate, such that the proceeds from
the remarketing of the debentures, net of any remarketing fee, will be 100% of
their accreted principal amount; provided that the yield will not be less than
0% per annum. All outstanding debentures will be remarketed on any remarketing
reset date unless the holder thereof elects not to participate in such
remarketing. If a remarketing of the debentures is required on any remarketing
reset date but the remarketing is not successful, you will have the right to
require us to purchase for cash such debentures at 100% of the accreted
principal amount thereof, plus accrued and unpaid interest, if any, and accrued
contingent accretion, if any, to, but excluding, the date of purchase.
Upon a change in control, as defined in the indenture governing the
debentures, unless a remarketing reset event has occurred, you may require us to
purchase for cash all or a portion of such holder's debentures at 100% of the
accreted principal amount thereof, plus accrued and unpaid interest, if any, to,
but excluding, the date of purchase. In addition, unless a remarketing reset
event occurs, holders may require us to purchase for cash all or a portion of
their debentures on December 1, 2006, 2008, 2013, 2018, 2023 or 2028, at 100% of
the accreted principal amount thereof, plus accrued and unpaid interest, if any,
to, but excluding, the date of purchase, if the debentures are not immediately
convertible on such date.
Unless a remarketing reset event occurs, we may redeem for cash all or a
portion of the debentures at any time on or after December 1, 2006 at a price
equal to the accreted principal amount of the debentures being redeemed, plus
accrued and unpaid interest, if any, to, but excluding, the date of redemption.
The debentures are not listed on any securities exchange or automated
quotation system. Our common stock is listed on the New York Stock Exchange
under the symbol 'AXP.' On October 7, 2004, the last reported sale price of our
common stock was $52.87.
INVESTING IN THE DEBENTURES INVOLVES RISKS. SEE 'RISK FACTORS' SECTION
BEGINNING ON PAGE 8.
-------------------
We will not receive any of the proceeds from the sale of the debentures or
shares of common stock by any of the selling securityholders. The debentures and
the shares of common stock may be offered and sold from time to time directly by
the selling securityholders or alternatively through underwriters or
broker-dealers or agents. The debentures and the shares of common stock may be
sold in one or more transactions at fixed prices, at prevailing market prices at
the time of sale, at varying prices determined at the time of sale, or at
negotiated prices. See 'Plan of Distribution.'
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION NOR ANY OTHER UNITED STATES REGULATORY AUTHORITY HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is October , 2004
TABLE OF CONTENTS
PAGE
----
WHERE YOU CAN FIND MORE INFORMATION......................... ii
SUMMARY..................................................... 1
RISK FACTORS................................................ 8
RATIO OF EARNINGS TO FIXED CHARGES.......................... 10
USE OF PROCEEDS............................................. 11
DESCRIPTION OF DEBENTURES................................... 12
DESCRIPTION OF CAPITAL STOCK................................ 30
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..... 31
SELLING SECURITYHOLDERS..................................... 35
ERISA MATTERS............................................... 42
PLAN OF DISTRIBUTION........................................ 43
VALIDITY OF SECURITIES...................................... 45
EXPERTS..................................................... 45
WE ARE NOT, AND THE SELLING SECURITYHOLDERS ARE NOT, MAKING AN OFFER TO SELL
THESE DEBENTURES OR THE COMMON STOCK WHERE SUCH OFFER OR SALE IS NOT PERMITTED.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS
DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT.
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT
APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
i
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov.
The SEC allows us to 'incorporate by reference' the information we file with
the SEC, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered part of this prospectus.
Information that we file later with the SEC will automatically update and
supersede this information. This means that you must look at all of the SEC
filings that we incorporate by reference to determine if any of the statements
in this prospectus or in any documents previously incorporated by references
have been modified or superceded. We incorporate by reference into this
prospectus the following documents:
Annual Report on Form 10-K for the year ended December 31, 2003, or the
'2003 10-K Report.'
Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.
Our Current Report on Form 8-K filed May 19, 2004.
All documents filed by us under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, which we refer to as the 'Exchange Act,'
until this offering is completed.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address or number:
American Express Company
200 Vesey Street
New York, New York 10285
Attention: Secretary
(212) 640-2000
In this prospectus, 'American Express Company', 'we', 'us' and 'our' refer
to American Express Company and its subsidiaries, except where the context
otherwise requires or as otherwise indicated.
ii
SUMMARY
The following summary highlights information contained elsewhere in this
prospectus. You should read this summary in conjunction with the more detailed
information appearing elsewhere in this prospectus.
THE COMPANY
American Express Company was founded in 1850 as a joint stock association
and was incorporated under the laws of the State of New York in 1965. We are
primarily engaged in the business of providing travel related services,
financial advisory services and international banking services throughout the
world.
Our principal executive offices are located at the World Financial Center,
200 Vesey Street, New York, New York 10285 and our telephone number at that
address is (212) 640-2000. Our web site is located at www.americanexpress.com.
The information on our web site is not part of this prospectus.
THE SECURITIES
Debentures or Shares of Common Stock......... Up to $2,000,000,000 aggregate principal amount of
1.85% Convertible Senior Debentures due 2033 or
shares of common stock into which the debentures are
convertible, which may be sold by selling
securityholders.
Stated Maturity.............................. December 1, 2033.
Payment at Maturity.......................... On December 1, 2033, the stated maturity date of the
debentures, you will receive the accreted principal
amount per debenture, which will be equal to the
original principal amount of $1,000 per debenture
increased daily by a yield, which until November 30,
2006 will be equal to 0% per annum and, unless a
remarketing reset event occurs, beginning on
December 1, 2006 will be reset to 1.85% per annum,
until any remarketing reset event occurs. If a
remarketing reset event occurs, the principal amount
of the debentures will accrete daily at the reset
yield unless we elect in connection with a
remarketing that the debentures will bear cash
interest, as described under 'Description of
Debentures -- Remarketing Reset Event,' and we will
also pay at maturity any contingent accretion
required to be paid as described under 'Description
of the Debentures -- Contingent
Interest -- Contingent Accretion.'
Regular Interest............................. The debentures bear regular interest to but excluding
December 1, 2006 at an annual rate equal to 1.85%. We
will pay regular interest semi-annually in arrears on
June 1 and December 1 of each year, each an 'interest
payment date,' beginning June 1, 2004, until
December 1, 2006. After December 1, 2006, we will not
pay regular interest on the debentures prior to
maturity, unless we elect to remarket securities
bearing cash interest as described under 'Description
of the Debentures -- Remarketing Reset Event.'
Conversion Rate.............................. Prior to December 1, 2006, the conversion rate is:
if the applicable stock price is less than or
equal to the base conversion price, the base
conversion rate, or
1
if the applicable stock price is greater than the
base conversion price, determined in accordance with
the following formula:
(Application Stock Price - Base Conversion Price)
Base Conversion Rate + [ ------------------------------------------------ x Incremental Share Factor ]
Applicable Stock Price
Notwithstanding the foregoing, in no event will the
conversion rate exceed 22.7635, subject to the same
proportional adjustment as the base conversion rate,
which we refer to as the 'maximum conversion rate';
provided that the maximum conversion rate will not be
adjusted as a result of cash dividends on our common
stock.
From and after December 1, 2006, unless a remarketing
reset event occurs, the conversion rate will be fixed
at the conversion rate determined as set forth above
assuming a conversion date that is 13 trading days
prior to December 1, 2006, which we refer to as the
fixed conversion rate.
The 'base conversion rate' is 14.4073, subject to
adjustment as described under 'Description of
Debentures -- Conversion Rights -- Conversion Rate
Adjustments.'
The 'base conversion price' is a dollar amount
(initially $69.41) derived by dividing the accreted
principal amount (which is $1,000 until December 1,
2006) by the base conversion rate.
The 'incremental share factor' is 43.2219, subject to
the same proportional adjustment as the base
conversion rate.
The 'applicable stock price' is equal to the average
of the closing sale prices of our common stock over
the 10 trading-day period starting the third trading
day following the conversion date of the debentures.
Conversion Rights............................ You may convert your debentures into a number of
shares of our common stock equal to the conversion
rate under the following circumstances:
at any time prior to maturity if the closing sale
price of our common stock for at least 20 trading
days in a period of 30 consecutive trading days
ending on the last trading day of any calendar
quarter is more than 125% of the base conversion
price (initially 125% of $69.41, or $86.76);
after the earlier of (1) the date the debentures
are assigned a credit rating by Standard & Poor's
Rating Services, a division of The McGraw-Hill
Companies, Inc. and its successors, which we refer
to as 'S&P,' and Moody's Investors Service and its
successors, which we refer to as 'Moody's,' and
(2) five business days following the date of
original issuance of the debentures, during any
period in which the credit rating assigned to the
debentures by S&P is below BBB+ or the credit
rating assigned to the debentures by Moody's is
below Baa1, or no rating is assigned to the
debentures by either S&P or Moody's;
2
during the five business day period after any five
consecutive trading-day period in which the
trading price per debenture for each day of that
period was less than 96% of the product of the
closing sale price of our common stock and the
conversion rate on each such day; provided that if
the closing sale price of our common stock is
greater than the effective conversion price but
less than or equal to 125% of the base conversion
price, then you will receive upon conversion, in
lieu of common stock based on the conversion rate,
cash or common stock or a combination of cash and
common stock, at our option, with a value equal to
the accreted principal amount of your debentures
plus accrued and unpaid interest, if any,
including contingent interest, if any, as of the
conversion date;
if the debentures have been called for redemption;
or
upon the occurrence of certain corporate
transactions described under 'Description of
Debentures -- Conversion Rights -- Conversion
Rights Upon Occurrence of Certain Corporate
Transactions.'
Upon conversion, we will have the right to deliver,
in lieu of shares of our common stock, a combination
of cash and common stock. If we elect to pay holders
cash for their debentures, the payment will be based
on the applicable stock price.
If we have not given notice of redemption specifying
that we intend to deliver cash upon conversion
thereafter, we must give notice of our election to
deliver cash not more than two business days after
the conversion date.
On September 29, 2004, we gave notice to the trustee
and holders of the debentures of our election, upon
conversion of the debentures at any time after the
date of such notice, to deliver cash in an amount
at least equal to the accreted principal amount of
the debentures converted and to deliver only cash
in connection with any principal value conversion
pursuant to the trading price condition for
conversion of the debentures. We may not revoke
this election without the consent of holders of
at least a majority of the original principal
amount of the debentures.
If a remarketing reset event occurs, from and after
the date of such remarketing reset event, the
debentures will not be convertible. Otherwise, the
ability to surrender debentures for conversion will
expire at the close of business on the stated
maturity date of the debentures, unless they have
previously been redeemed or repurchased. See
'Description of Debentures -- Conversion Rights.'
Contingent Interest.......................... Unless and until a remarketing reset event occurs, we
will pay contingent interest to holders of the
debentures in an amount per debenture equal to $.20
multiplied by the fixed conversion rate during any
six-month period from and including an interest
payment date to but excluding the next interest
payment date, commencing with the six-month period
beginning December 1, 2006, if (1) the average
trading price of the debentures for a five
trading-day measurement period immediately preceding
the beginning of the applicable six-month period
equals 125% or more of the accreted principal amount
of the debentures and (2) the debentures are
immediately convertible by their terms on the first
day of such measurement period. If (1) the average
trading price of the debentures for the same five
trading-day measurement period equals 200% or more of
the accreted principal amount of the debentures and
(2) the debentures are immediately convertible by
their terms on the first day of such measurement
period, we will pay for any applicable six-month
3
period additional contingent interest in an amount
equal to .125% of the average trading price of a
debenture for such five trading-day measurement
period. Any contingent interest or additional
contingent interest will be payable on the interest
payment date at the end of the relevant six-month
period. See 'Description of the
Debentures -- Contingent Interest.'
Following the occurrence of a remarketing reset
event, we will be required to pay contingent
interest, which we refer to as contingent accretion,
in the amounts and under the circumstances set forth
under 'Description of the Debentures -- Contingent
Interest -- Contingent Accretion.' Such contingent
accretion, if any, will not be paid until we repay
the debentures in full, whether at maturity, upon
exercise of your repurchase right, upon acceleration
or otherwise.
Remarketing Reset Event...................... If the average of the closing sale prices of our
common stock over the 10 trading-day period ending on
the trading day immediately preceding December 1 of
2006, 2008, 2013, 2018, 2023 or 2028, each a
'remarketing reset event date,' is less than the
effective conversion price as of such trading day,
which we refer to as a 'remarketing reset event,' we
will thereafter not pay contingent cash interest on
the debentures; the debentures will no longer be
convertible into our common stock; and a holder of
debentures will not have the right to require us to
repurchase the debentures under certain
circumstances. If a remarketing reset event occurs,
the yield on the debentures will be reset on such
remarketing reset event date and the date at least
six months thereafter and prior to maturity, as
specified by us prior to the remarketing reset event
date or the date of any subsequent remarketing, each
a remarketing reset date; provided that if, prior to
any remarketing, we do not specify a date for the
next remarketing, such remarketing shall occur on the
first anniversary of the previous remarketing reset
date. We may also elect prior to any remarketing that
following such remarketing the debentures will bear
cash interest, in which case the principal amount of
the debentures will cease to accrete during the
period in which the debentures bear cash interest.
The yield on the debentures will be reset on each
remarketing reset date and will be the yield to the
next remarketing reset date (or the cash interest
rate) such that the proceeds from the remarketing of
the debentures, net of any remarketing fee, will be
100% of their accreted principal amount plus any
accrued and unpaid interest. All outstanding
debentures will be remarketed on any remarketing
reset date, unless the holder thereof elects not to
participate in such remarketing. The 'effective
conversion price' is, as of any date of
determination, a dollar amount (initially $69.41)
derived by dividing the accreted principal amount
(initially $1,000) by the conversion rate then in
effect (assuming a conversion date 13 trading days
prior to the date of determination).
If a remarketing of the debentures is required on any
remarketing reset date but the remarketing is not
successful, each holder of debentures has the right
to require us to purchase for cash all or
4
a portion of such holder's debentures at 100% of the
accreted principal amount thereof, plus accrued and
unpaid interest, if any, and contingent accretion, if
any, to, but excluding, the date of purchase. Holders
of debentures will be deemed to have exercised this
repurchase right unless they had elected not to
participate in the applicable remarketing. If less
than $50 million aggregate original principal amount
of the debentures is to be remarketed in any
remarketing or the debentures are not successfully
remarketed on any remarketing reset date, the yield
to maturity of the debentures will be reset to the
rate necessary, in the judgment of the remarketing
agent, for the debentures to trade at a price equal
to 100% of their accreted principal amount.
Redemption of Debentures at Our Option....... Unless a remarketing reset event occurs, we may
redeem for cash all or a portion of the debentures at
any time on or after December 1, 2006 at a price
equal to 100% of the accreted principal amount of the
debentures to be redeemed plus accrued and unpaid
interest to, but excluding, the redemption date.
Holders may convert their debentures after they are
called for redemption at any time prior to the close
of business on the business day immediately preceding
the redemption date. Our notice of redemption will
inform the holders of our election to deliver shares
of our common stock or to pay cash or a combination
of cash and common stock in the event that a holder
elects to convert debentures in connection with the
redemption. See 'Description of
Debentures -- Redemption of Debentures at Our
Option.'
Purchase of Debentures by Us at the Option of
Holder..................................... Unless a remarketing reset event occurs on such date,
or has previously occurred, you may require us to
purchase for cash all or a portion of your debentures
on December 1, 2006, 2008, 2013, 2018, 2023 or 2028,
at 100% of the accreted principal amount thereof,
plus accrued and unpaid interest, if any, to, but
excluding, the date of purchase, if the debentures
are not immediately convertible on such date. See
'Description of Debentures -- Purchase of Debentures
by Us at the Option of the Holder.'
Change in Control............................ Upon a change in control (as defined in the indenture
governing the debentures) of American Express Company
occurring at any time before December 1, 2033, unless
a remarketing reset event has occurred, you may
require us to purchase all or a portion of your
debentures for cash at a price equal to 100% of the
accreted principal amount of the debentures to be
purchased plus accrued and unpaid interest, if any,
to, but excluding, the date of purchase. See
'Description of Debentures -- Change in Control
Requires Us to Purchase Debentures at the Holder's
Option.'
Ranking...................................... The debentures are our unsecured and unsubordinated
obligations and rank equally in right of payment with
all of our existing and future unsecured and
unsubordinated indebtedness. The debentures are
structurally subordinated to the liabilities of our
subsidiaries, including deposits and trade payables.
Sinking Fund................................. None.
5
U.S. Federal Income Taxation................. For United States federal income tax purposes, the
debentures will be treated as indebtedness subject to
the special regulations governing contingent payment
debt instruments, which we refer to as the 'CPDI
regulations.' Pursuant to the CPDI regulations, a
U.S. Holder (as defined under 'Certain United States
Federal Income Tax Considerations -- U.S. Holders')
will generally be required to accrue interest income
on the debentures, subject to certain adjustments, at
a rate of 6.25%, compounded semiannually, regardless
of whether the holder uses the cash or accrual method
of tax accounting. Accordingly, U.S. Holders will
generally be required to include interest in taxable
income in each year in excess of any interest
payments (whether fixed or contingent) actually
received in that year. For this purpose, a conversion
of the debentures will be treated as the receipt of a
contingent payment with respect to the debentures,
which may produce an adjustment to a U.S. Holder's
interest accruals. Under the CPDI regulations, gain
recognized upon a sale, exchange, or redemption of a
debenture will generally be treated as ordinary
interest income; loss will be ordinary loss to the
extent of interest previously included in income, and
thereafter capital loss.
In addition, the conversion rate for the debentures
will be adjusted in certain circumstances, as
described under 'Description of
Debentures -- Conversion Rights -- Conversion Rate
Adjustments.' Such adjustments (or failures to make
adjustments) that have the effect of increasing your
proportionate interest in our assets or earnings may
in some circumstances result in a deemed distribution
to you, notwithstanding the fact that you do not
receive a cash payment. Any deemed distribution will
be taxable as a dividend, return of capital, or
capital gain in accordance with the tax rules
applicable to corporate distributions. Deemed
dividends received by U.S. Holders may not be
eligible for the reduced rates of tax applicable to
qualified dividend income, and deemed dividends
received by Non-U.S. Holders (as defined under
'Certain United States Federal Income Tax
Considerations -- Non-U.S. Holders') may be subject
to United States federal gross income and withholding
tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
See 'Certain United States Federal Income Tax
Considerations.'
DTC Eligibility.............................. The debentures were issued in book-entry form and are
represented by one or more permanent global
certificates deposited with a custodian for and
registered in the name of a nominee of The Depository
Trust Company, which we refer to as DTC, in New York,
New York. Beneficial interests in any such securities
are shown on, and transfers will be effected only
through, records maintained by DTC and its direct and
indirect participants. Any such interest may not be
exchanged for certificated securities, except in
limited circumstances. See 'Description of
Debentures -- Book-Entry System.'
NYSE Symbol for Our Common Stock............. 'AXP'
6
RISK FACTORS
You should carefully consider the information under 'Risk Factors' beginning
on page 10 before making an investment in the debentures or shares of common
stock issuable upon conversion of the debentures.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by any selling
securityholder of the debentures or the shares of common stock issuable upon
conversion of the debentures. See 'Use of Proceeds.'
7
RISK FACTORS
Your investment in the debentures and shares of common stock issuable upon
conversion of the debentures will involve certain risks. You should carefully
consider the following factors in addition to the other information included or
incorporated by reference in this prospectus before making an investment in the
debentures or shares of common stock issuable upon conversion of the debentures.
NO PUBLIC MARKET EXISTS FOR THE DEBENTURES, AND THERE ARE UNCERTAINTIES
REGARDING THE EXISTENCE OF ANY TRADING MARKET FOR THE DEBENTURES.
Prior to the private placement of the debentures, there was no trading
market for the debentures. Although the representatives of the initial
purchasers when the debentures were initially issued advised us that they
intended to make a market in the debentures, they are not obligated to do so and
may discontinue market-making activities at any time without notice. In
addition, their market-making activities will be subject to limits imposed by
the Securities Act of 1933 as amended, which we refer to as the 'Securities
Act,' and the Exchange Act, and may be limited during the pendency of the shelf
registration statement of which this prospectus is a part, which we refer to as
the 'shelf registration statement.' Although the debentures issued in the
private placement are eligible for trading on the PORTAL Market, debentures sold
using this prospectus will no longer be eligible for trading on the PORTAL
system. We have not listed, and do not intend to list, the debentures on any
securities exchange or automated quotation system. We cannot assure you that any
market for the debentures will develop or be sustained.
Moreover, even if you are able to sell your debentures, we cannot assure you
as to the price at which any sales will be made. Future trading prices of the
debentures will depend on many factors, including, among other things,
prevailing interest rates, our operating results, the price of our common stock
and the market for similar securities. Historically, the market for convertible
debt has been subject to disruptions that have caused volatility in prices. It
is possible that the market for the debentures will be subject to disruptions
which may have a negative effect on the holders of the debentures, regardless of
our prospects or financial performance.
THE PRICE OF OUR COMMON STOCK, AND THEREFORE OF THE DEBENTURES, MAY FLUCTUATE
SIGNIFICANTLY, WHICH MAY MAKE IT DIFFICULT FOR YOU TO RESELL THE DEBENTURES, OR
COMMON STOCK ISSUABLE UPON CONVERSION OF THE DEBENTURES, WHEN YOU WANT OR AT
PRICES YOU FIND ATTRACTIVE.
The price of our common stock on the New York Stock Exchange, the Chicago
Stock Exchange and the Pacific Stock Exchange constantly changes. We expect that
the market price of our common stock will continue to fluctuate. Because the
debentures are convertible into our common stock, volatility or depressed prices
for our common stock could have a similar effect on the trading price of the
debentures. Purchasers of, or holders who receive upon conversion, common stock
will also be subject to the risk of volatility and depressed prices.
Our stock price can fluctuate as a result of a variety of factors, many of
which are beyond our control. These factors include:
actual or anticipated variations in our quarterly operating results;
recommendations by securities analysts;
new technology used, or services offered, by our competitors;
significant acquisitions or business combinations, strategic partnerships,
joint ventures or capital commitments by or involving us or our
competitors;
failure to integrate our acquisitions or realize anticipated benefits from
our acquisitions;
operating and stock price performance of other companies that investors
deem comparable to us;
news reports relating to trends, concerns and other issues in the business
of travel related services, financial advisory services and international
banking services;
changes in government regulations; and
geopolitical conditions such as acts or threats of terrorism or military
conflicts.
General market fluctuations, industry factors and general economic and
political conditions and events, such as terrorist attacks, economic slowdowns
or recessions, interest rate changes, credit loss trends or currency
fluctuations, also could cause our stock price to decrease regardless of our
operating results.
8
In addition, the stock market in general has experienced extreme volatility
that has often been unrelated to the operating performance of a particular
company. These broad market fluctuations may adversely affect the market price
of our common stock.
THE YIELD ON THE DEBENTURES MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT
SECURITY OF COMPARABLE MATURITY.
The amount we pay you may be less than the return the you could earn on
other investments. The holder's yield may be less than the yield a holder would
earn if it bought a standard senior debt security of American Express Company
with the same stated maturity date. Your investment may not reflect the full
opportunity cost to you when you take into account factors that affect the time
value of money.
THE CONTINGENT CONVERSION FEATURES OF THE DEBENTURES COULD RESULT IN YOUR NOT
BEING ENTITLED TO CONVERT A DEBENTURE WHEN OUR COMMON STOCK IS TRADING AT A
PRICE ABOVE THE EFFECTIVE CONVERSION PRICE OF THE DEBENTURE.
The debentures are convertible into common stock only in the event of
specified contingencies. If the specific conditions for conversion are not met,
you will not be able to convert a debenture, even though our common stock may be
trading at a price above the effective conversion price of the debenture.
THE CONVERSION RATE OF THE DEBENTURES MAY NOT BE ADJUSTED FOR ALL DILUTIVE
EVENTS THAT MAY OCCUR.
The conversion rate of the debentures is subject to adjustment for certain
events including, but not limited to, the issuance of stock dividends on our
common shares, the issuance of certain rights or warrants, subdivisions or
combinations of our common shares, certain distributions of assets, debt
securities, capital stock or cash to holders of our common shares and certain
issuer tender or exchange offers as described under 'Description of
Debentures -- Conversion Rights -- Conversion Rate Adjustments.' The conversion
rate will not be adjusted for other events, such as an issuance of common shares
for cash or a third-party tender offer, that may adversely affect the trading
price of the debentures or the common shares. There can be no assurance that an
event that adversely affects the value of the debentures, but does not result in
an adjustment to the conversion rate, will not occur.
CONVERSION OF THE DEBENTURES WILL DILUTE THE OWNERSHIP INTEREST OF EXISTING
SHAREHOLDERS.
The conversion of some or all of the debentures will dilute the ownership
interests of existing shareholders. Any sales in the public market of the common
stock issuable upon such conversion could adversely affect prevailing market
prices of our common stock. In addition, the existence of the debentures may
encourage short selling by market participants because the conversion of the
debentures could depress the price of our common stock.
IF YOU HOLD DEBENTURES, YOU WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT TO
OUR COMMON STOCK, BUT YOU WILL BE SUBJECT TO ALL CHANGES MADE WITH RESPECT TO
OUR COMMON STOCK.
If you hold debentures, you will not be entitled to any rights with respect
to our common stock, including, without limitation, voting rights and rights to
receive any dividends or other distributions on our common stock, but you will
be subject to all changes affecting the common stock. You will have rights with
respect to our common stock only if and when we deliver shares of common stock
to you upon conversion of your debentures and, in limited cases, under the
conversion rate adjustments applicable to the debentures. For example, in the
event that an amendment is proposed to our articles of incorporation or bylaws
requiring stockholder approval and the record date for determining the
stockholders of record entitled to vote on the amendment occurs prior to
delivery of common stock to you, you will not be entitled to vote on the
amendment, although you will nevertheless be subject to any changes in the
powers, preferences or special rights of our common stock.
THE TRADING PRICES FOR THE DEBENTURES WILL BE DIRECTLY AFFECTED BY THE TRADING
PRICES FOR OUR COMMON STOCK, WHICH IS IMPOSSIBLE TO PREDICT.
The price of our common stock could be affected by possible sales of our
common stock by investors who view the debentures as a more attractive means of
equity participation in American Express Company and by hedging or arbitrage
trading activity that may develop involving the common stock. The arbitrage
could, in turn, affect the trading prices of the debentures.
9
THE DEBENTURES ARE STRUCTURALLY SUBORDINATED TO DEBT OF OUR SUBSIDIARIES.
The debentures are our obligations but our assets consist primarily of
equity in our subsidiaries and, as a result, our ability to make payments on the
debentures depends on our receipt of dividends, loan payments and other funds
from our subsidiaries.
The debentures are not obligations of our subsidiaries, and our subsidiaries
have no obligation to pay any amounts due on the debentures. All amounts due on
the debentures will be structurally subordinated to all obligations and
liabilities of our subsidiaries. The indenture relating to the debentures does
not limit our ability or the ability of our subsidiaries to issue or incur
additional debt or preferred stock.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE PURCHASE
OF THE DEBENTURES IF REQUIRED BY HOLDERS PURSUANT TO THE INDENTURE.
Upon the occurrence of certain specific kinds of change in control events,
unless a remarketing reset event has occurred, we will be required to offer to
purchase all outstanding debentures. In addition, certain important corporate
events, such as leveraged recapitalizations that would increase the level of our
indebtedness, would not constitute a 'change in control' under the debentures.
See 'Description of Debentures -- Change in Control Permits Purchase of
Debentures by Us at the Option of the Holder.' In addition, we will be required
to offer to repurchase all outstanding debentures if there is a failed
remarketing and, in certain circumstances, on December 1, 2006, 2008, 2013,
2018, 2023 and 2028. However, it is possible that we will not have sufficient
funds available at any such time to make the required repurchase of debentures
and restrictions in our other indebtedness outstanding in the future may not
allow any such repurchase.
YOU SHOULD CONSIDER THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING
THE DEBENTURES.
For United States federal income tax purposes, the debentures will be
treated as indebtedness subject to the special regulations governing contingent
payment debt instruments, which we refer to as the 'CPDI regulations.' Pursuant
to the CPDI regulations, a U.S. Holder (as defined under 'Certain United States
Federal Income Tax Considerations -- U.S. Holders') will generally be required
to accrue interest income on the debentures, subject to certain adjustments, at
a rate of 6.25%, compounded semi-annually, regardless of whether the holder uses
the cash or accrual method of tax accounting. Accordingly, U.S. Holders will
generally be required to include interest in taxable income in each year in
excess of any interest payments (whether fixed or contingent) actually received
in that year. For this purpose, a conversion of the debentures will be treated
as the receipt of a contingent payment with respect to the debentures, which may
produce an adjustment to a U.S. Holder's interest accruals. Under the CPDI
regulations, gain recognized upon a sale, exchange, or redemption of a debenture
will generally be treated as ordinary interest income; loss will be ordinary
loss to the extent of interest previously included in income, and thereafter
capital loss.
In addition, the conversion rate for the debentures will be adjusted in
certain circumstances, as described under 'Description of
Debentures -- Conversion Rights -- Conversion Rate Adjustments.' Such
adjustments (or failures to make adjustments) that have the effect of increasing
your proportionate interest in our assets or earnings may in some circumstances
result in a deemed distribution to you, notwithstanding the fact that you do not
receive a cash payment. Any deemed distribution will be taxable as a dividend,
return of capital, or capital gain in accordance with the tax rules applicable
to corporate distributions. Deemed dividends received by U.S. Holders may not be
eligible for the reduced rates of tax applicable to qualified dividend income,
and deemed dividends received by Non-U.S. Holders (as defined under 'Certain
United States Federal Income Tax Considerations -- Non-U.S. Holders') may be
subject to United States federal gross income and withholding tax at a 30% rate
or such lower rate as may be specified by an applicable income tax treaty. See
'Certain United States Federal Income Tax Considerations.'
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our historical ratios of earnings to fixed
charges for the periods indicated:
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------- --------------------------------
2004 2003 2002 2001 2000 1999
---- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges.......... 3.96 3.43 2.88 1.52 2.25 2.48
10
In computing the ratio of earnings to fixed charges, 'earnings' consist of
pretax income from continuing operations, interest expense and other
adjustments. Interest expense includes interest expense related to our
international banking operations and American Express Travel Related Services
Company, Inc.'s cardmember lending activities, which is netted against interest
and dividends and cardmember net finance charge revenue, respectively, in our
consolidated statement of income.
For purposes of the 'earnings' computation, other adjustments include adding
the amortization of capitalized interest, the net loss of affiliates accounted
for at equity whose debt is not guaranteed by us, the minority interest in the
earnings of majority-owned subsidiaries with fixed charges, and the interest
component of rental expense and subtracting undistributed net income of
affiliates accounted for at equity.
'Fixed charges' consist of interest expense and other adjustments. Other
adjustments include capitalized interest costs and the interest component of
rental expense.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by any selling
securityholder of the debentures or the shares of common stock issuable upon
conversion of the debentures.
11
DESCRIPTION OF DEBENTURES
We issued the debentures under a senior indenture, dated as of November 21,
2003, between us and U.S. Bank, National Association, as trustee.
The following summary does not purport to be complete, and is subject to,
and is qualified in its entirety by reference to, all of the provisions of the
debentures and the indenture. We urge you to read the indenture and the form of
the debentures, which you may obtain from us upon request, because they and not
this description define your rights in respect of the debentures. As used in
this description, all references to 'American Express Company,' 'American
Express,' 'we,' 'us' or 'our' mean American Express Company, excluding, unless
otherwise expressly stated or the context otherwise requires, any of its
subsidiaries.
GENERAL
The debentures are limited to $2,000,000,000 aggregate original principal
amount and were issued only in registered form without coupons in denominations
of $1,000 original principal amount and any integral multiple of $1,000 above
that amount. We use the term 'debenture' in this prospectus to refer to each
$1,000 original principal amount of debentures. The debentures will mature on
December 1, 2033. On the maturity date of the debentures, a holder will receive
the accreted principal amount of a debenture. The accreted principal amount will
equal the original principal amount of $1,000 per debenture increased daily by a
yield equal to 0% per annum until November 30, 2006 and, unless a remarketing
reset event occurs, beginning on December 1, 2006 equal to 1.85% per annum until
any remarketing reset event occurs. If a remarketing reset event occurs, the
yield used to calculate the accreted principal amount of the debentures will be
determined as described under ' -- Remarketing Reset Event.'
The debentures bear regular interest at an annual rate equal to 1.85% on the
original principal amount from November 21, 2003, or from the most recent date
to which regular interest has been paid or provided for, until December 1, 2006.
Regular interest is payable semi-annually in arrears on June 1 and December 1 of
each year, each an 'interest payment date,' beginning June 1, 2004, to the
person in whose name a debenture is registered at the close of business on the
May 15 or November 15, as the case may be, immediately preceding the relevant
interest payment date, each of which we refer to as a 'record date.' Each
payment of regular interest will include interest accrued from the immediately
preceding interest payment date (or, if none, the original issuance date of the
debentures) to but excluding the applicable interest payment date. Regular
interest on the debentures will be computed using a 360-day year composed of
twelve 30-day months. From and after December 1, 2006, we will not pay regular
interest prior to maturity, unless we elect in connection with any remarketing
that the remarketed debentures will bear cash interest, as described under
' -- Remarketing Reset Event.' Contingent interest and additional contingent
interest, if any, as described below under ' -- Contingent Interest,' will be
payable after December 1, 2006 in addition to the accreted principal.
If any interest payment date (other than an interest payment date coinciding
with the stated maturity date or earlier redemption date or purchase date) of a
debenture falls on a day that is not a business day, such interest payment date
will be postponed to the next succeeding business day. If the stated maturity
date, redemption date or purchase date of a debenture would fall on a day that
is not a business day, the required payment of interest, if any, and principal
will be made on the next succeeding business day and no interest on such payment
will accrue for the period from and after the stated maturity date, redemption
date or purchase date to such next succeeding business day. The term 'business
day' means, with respect to any debenture, any day other than a Saturday, a
Sunday or a day on which banking institutions in The City of New York are
authorized or required by law, regulation or executive order to close.
The debentures are redeemable prior to maturity only on or after December 1,
2006 (and only if a remarketing reset event has not occurred) and as described
below under ' -- Redemption of Debentures at Our Option,' and do not have the
benefit of a sinking fund. Principal of and interest on the debentures is
payable at the office of the paying agent, which initially is the trustee;
provided that in the case of global debentures, payments will be made to DTC in
immediately available funds by wire transfer. If certain conditions have been
satisfied, the debentures may be presented for conversion at the office of the
conversion agent, and for registration of transfer or exchange at the office of
the registrar, each such agent initially being the trustee. No service charge
will be made for any registration of transfer or exchange of debentures, but we
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Maturity, conversion, purchase by us at the option of a holder or redemption
of a debenture will cause interest to cease to accrue on such debenture. We may
not reissue a debenture that has matured or been
12
converted, purchased by us at the option of a holder, redeemed or otherwise
cancelled, except for registration of transfer, exchange or replacement of such
debenture.
RANKING OF DEBENTURES
The debentures are unsecured and unsubordinated obligations and rank equally
in right of payment with all of our existing and future unsecured and
unsubordinated indebtedness. The debentures are structurally subordinated to the
indebtedness and liabilities of our subsidiaries, including trade payables.
CONVERSION RIGHTS
Subject to certain conditions, you may convert your debentures into a number
of shares of our common stock, par value $.20 per share, equal to the conversion
rate. If a remarketing reset event occurs, from and after the date of such
remarketing reset event, the debentures will no longer be convertible into our
common stock. Otherwise, the ability to surrender debentures for conversion will
expire at the close of business on the maturity date of the debentures, unless
they have previously been redeemed or purchased.
Prior to December 1, 2006, the conversion rate will be (1) if the applicable
stock price is less than or equal to the base conversion price, the base
conversion rate or (2) if the applicable stock price is greater than the base
conversion price, determined in accordance with the following formula:
(Application Stock Price - Base Conversion Price)
Base Conversion Rate + [ ------------------------------------------------- x Incremental Share Factor ]
Applicable Stock Price
Notwithstanding the foregoing, in no event will the conversion rate exceed
22.7635, subject to the same proportional adjustment as the base conversion
rate, which we refer to as the 'maximum conversion rate.'
From and after December 1, 2006, unless a remarketing reset event occurs,
the conversion rate will be fixed for the remainder of the term of the
debentures at the conversion rate, determined as set forth above assuming a
conversion date that is 13 trading days prior to December 1, 2006, which we
refer to as the 'fixed conversion rate,' subject to the same adjustments as the
base conversion rate; provided that no adjustment will be made to the maximum
conversion rate as a result of any adjustment made to the base conversion rate
as described in clause (5) under 'Description of Debentures -- Conversion
Rights -- Conversion Rate Adjustments.'
The 'base conversion rate' is 14.4073, subject to adjustment as described
under ' -- Conversion Rate Adjustments.'
The 'base conversion price' is a dollar amount (initially $69.41) derived by
dividing the accreted principal amount (which will be $1,000 until December 1,
2006) by the base conversion rate.
The 'incremental share factor' is 43.2219, subject to the same proportional
adjustment as the base conversion rate.
The 'applicable stock price' is equal to the average of the closing sale
prices of our common stock over the 10 trading-day period starting the third
trading day following the conversion date of the debentures.
A holder of a debenture otherwise entitled to a fractional share will
receive cash in an amount equal to the value of such fractional share based on
the applicable stock price. Upon a conversion, we will have the right to deliver
cash or a combination of cash and shares of our common stock, as described
below.
You may surrender debentures for conversion into shares of our common stock
only if at least one of the conditions described below is satisfied. In
addition, a debenture for which a holder has delivered a change in control
purchase notice requiring us to purchase the debentures may be surrendered for
conversion only if such notice is withdrawn in accordance with the indenture.
Conversion Rights Based on Common Stock Price. You may surrender debentures
for conversion into shares of our common stock at any time prior to maturity if
the closing sale price of our common stock for at least 20 trading days in a
period of 30 consecutive trading days ending on the last trading day of any
calendar quarter is more than 125% of the base conversion price (initially 125%
of $69.41, or $86.76) as of the last day of such calendar quarter. We refer to
this as the 'conversion trigger price.'
'Trading day' means a day during which trading in securities generally
occurs on the New York Stock Exchange or, if our common stock is not listed on
the New York Stock Exchange, on the principal other national or regional
securities exchange on which our common stock is then listed or, if our common
stock is not listed on a national or regional securities exchange, on the Nasdaq
National Market ('Nasdaq') or, if our common stock is not quoted on the Nasdaq,
on the principal other market on which our common stock is then traded.
13
The 'closing sale price' of our common stock on any date means the closing
sale price per share (or if no closing sale price is reported, the average of
the closing bid and ask prices or, if more than one in either case, the average
of the average closing bid and the average closing ask prices) on such date as
reported on the principal United States securities exchange on which our common
stock is traded or, if our common stock is not listed on a United States
national or regional securities exchange, as reported by Nasdaq or by the
National Quotation Bureau Incorporated. In the absence of such a quotation, we
will determine the closing sale price on the basis we consider appropriate.
The accreted principal amount of a debenture will be equal to the original
principal amount of $1,000 per debenture increased daily by a yield, which until
December 1, 2006 is 0% per annum and, unless a remarketing reset event occurs,
commencing on December 1, 2006 will be reset to 1.85% per annum. The base
conversion price and the conversion trigger price of a debenture at any time are
dependent upon the accreted principal amount of the debenture, and increases as
the accreted principal amount of the debenture increases. The following table
indicates the base conversion price and corresponding conversion trigger price
as of September 30 of each year beginning 2006, which is the conversion trigger
price used to determine whether the debentures will be convertible in the fourth
calendar quarter of each such year.
CONVERSION TRIGGER PRICES*
BASE CONVERSION
AS OF CONVERSION TRIGGER
SEPTEMBER 30, PRICE PRICE
------------- ---------- -----
2006.................................................... $ 69.41 $ 86.76
2007.................................................... 70.48 88.10
2008.................................................... 71.79 89.74
2009.................................................... 73.13 91.41
2010.................................................... 74.49 93.11
2011.................................................... 75.87 94.84
2012.................................................... 77.28 96.60
2013.................................................... 78.72 98.40
2014.................................................... 80.18 100.23
2015.................................................... 81.67 102.09
2016.................................................... 83.19 103.99
2017.................................................... 84.73 105.92
2018.................................................... 86.31 107.89
2019.................................................... 87.91 109.89
2020.................................................... 89.55 111.93
2021.................................................... 91.21 114.01
2022.................................................... 92.91 116.13
2023.................................................... 94.63 118.29
2024.................................................... 96.39 120.49
2025.................................................... 98.18 122.73
2026.................................................... 100.01 125.01
2027.................................................... 101.87 127.33
2028.................................................... 103.76 129.70
2029.................................................... 105.69 132.11
2030.................................................... 107.65 134.57
2031.................................................... 109.65 137.07
2032.................................................... 111.69 139.62
2033.................................................... 113.77 142.21
---------
* This table assumes no events have occurred that would require an adjustment to
the conversion rate and no remarketing reset event occurs.
Conversion Rights Upon Credit Rating Events. After the earlier of (a) the
date the debentures are assigned a credit rating by both of Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. and its
successors, which we refer to as 'S&P,' and Moody's Investors Service and its
successors, which we refer to as 'Moody's,' and (b) five business days following
the date of original issuance of the debentures, during any period in which (1)
the credit rating assigned to the debentures by S&P is below BBB+, (2) the
credit rating assigned to the debentures by Moody's is below Baa1, or (3) no
credit rating is assigned to the
14
debentures by either S&P or Moody's, holders may also surrender debentures for
conversion into shares of our common stock.
Conversion Upon Satisfaction of Trading Price Condition. You may surrender
your debentures for conversion into our common stock prior to maturity during
the five business-day period after any five consecutive trading-day period in
which the 'trading price' per debenture, as determined following a request by a
holder of debentures in accordance with the procedures described below, for each
day of that period was less than 96% of the product of the closing sale price of
our common stock and the conversion rate (determined based on such closing sale
price rather than the applicable stock price), or 'trading price condition';
provided that if, on the day prior to any conversion pursuant to the trading
price condition, the closing sale price of our common stock is greater than the
effective conversion price but less than or equal to 125% of the base conversion
price, then you will receive, in lieu of common stock based on the conversion
rate, cash or common stock or a combination of cash and common stock, at our
option, with a value equal to the accreted principal amount of your debentures
plus accrued and unpaid interest, if any, including contingent interest, if any,
as of the conversion date, or the 'principal value conversion'. If you surrender
your debentures for conversion and it is a principal value conversion, we will
notify you by the second trading day following the date of conversion whether we
will pay you all or a portion of the accreted principal amount plus accrued and
unpaid interest, including contingent interest, if any, in cash, common stock or
a combination of cash and common stock, and in what percentage. Any common stock
delivered upon a principal value conversion will be valued at the greater of the
effective conversion price on the conversion date and the applicable stock price
as of the conversion date. We will pay you any portion of the accreted principal
amount plus accrued and unpaid interest to be paid in cash and deliver common
stock with respect to any portion of the principal amount plus accrued and
unpaid interest to be paid in common stock, no later than the third business day
following the determination of the applicable stock price. The 'effective
conversion price' is, as of any date of determination, a dollar amount
(initially $69.41) derived by dividing the accreted principal amount (initially
$1,000) by the conversion rate then in effect (assuming a conversion date 13
trading days prior to the date of determination); provided that from and after
December 1, 2006, the effective conversion price shall be the accreted principal
amount divided by the fixed conversion rate.
The 'trading price' of the debentures on any date of determination means the
average of the secondary market bid quotations obtained by the trustee for
$10,000,000 original principal amount of the debentures at approximately 3:30
p.m., New York City time, on such determination date from three independent
nationally recognized securities dealers we select; provided that if three such
bids cannot reasonably be obtained by the trustee, but two such bids are
obtained, then the average of the two bids shall be used, and if only one such
bid can reasonably be obtained by the trustee, that one bid shall be used. If
the trustee cannot reasonably obtain at least one bid for $10,000,000 original
principal amount of the debentures from a nationally recognized securities
dealer or in our reasonable judgment, the bid quotations are not indicative of
the secondary market value of the debentures, then the trading price per
debenture will be deemed to be less than 96% of the product of the 'closing sale
price' of our common stock and the number of shares issuable upon conversion of
such debenture.
In connection with any conversion upon satisfaction of the above trading
price condition, the trustee shall have no obligation to determine the trading
price of the debentures unless we have requested such determination; and we
shall have no obligation to make such request unless you provide us with
reasonable evidence that the trading price per debenture would be less than 96%
of the product of the closing sale price of our common stock and the number of
shares of common stock issuable upon conversion of such debenture. At such time,
we shall instruct the trustee to determine the trading price of the debentures
beginning on the next trading day and on each successive trading day until the
trading price per such debenture is greater than or equal to 96% of the product
of the closing sale price of our common stock and the number of shares issuable
upon conversion of such debenture.
Conversion Rights Upon Notice of Redemption. You may surrender debentures
called for redemption for conversion into shares of our common stock at any time
prior to the close of business on the business day immediately preceding the
redemption date, even if the debentures are not otherwise convertible at such
time.
Conversion Rights Upon Occurrence of Certain Corporate Transactions. If we
are party to a consolidation, merger or binding share exchange pursuant to which
shares of our common stock would be converted into cash, securities or other
property, you may surrender debentures for conversion into shares of our common
stock at any time from and after the date that is 15 days prior to the
anticipated effective date of the transaction until 15
15
days after the actual date of such transaction (or until the change in control
purchase date if such transaction constitutes a change in control) and, at the
effective time, the right to convert a debenture into shares of our common stock
will be changed into a right to convert such debenture into the kind and amount
of cash, securities or other property of American Express Company or another
person that you would have received if you had converted the holder's debenture
immediately prior to the transaction. If such transaction also constitutes a
change in control, you will be able to require us to purchase all or a portion
of such your debentures as described under ' -- Change in Control Requires Us to
Purchase of Debentures at the Holder's Option.'
If we elect to:
distribute to all holders of our common stock rights or warrants entitling
them to purchase, for a period expiring within 45 days of the record date
for such distribution, our common stock at less than the average closing
sale price for the 10 trading days preceding the declaration date for such
distribution; or
distribute to all holders of our common stock, cash, assets, debt
securities or rights to purchase our securities, which distribution has a
per share value exceeding 10% of the closing sale price of our common
stock on the trading day immediately preceding the declaration date for
such distribution;
we must notify you at least 20 days prior to the ex-dividend date for such
distribution. Once we have given such notice, you may surrender your debentures
for conversion at any time until the earlier of the close of business on the
business day immediately preceding the ex-dividend date or any announcement by
us that such distribution will not take place. No adjustment to your ability to
convert will be made if you will otherwise participate in the distribution
without conversion.
Upon determination that debenture holders are or will be entitled to convert
their debentures into shares of our common stock in accordance with the
foregoing provisions, we will issue a release through Reuters Economic Services
and Bloomberg Business News or other reasonable means of distribution and
publish such information on our web site on the World Wide Web.
Conversion Procedures
To convert your debenture into common stock you must do the following (or
comply with DTC procedures for doing so in respect of your beneficial interest
in debentures evidenced by a global debenture):
complete and manually sign the conversion notice on the back of the
debenture or facsimile of the conversion notice and deliver this notice to
the conversion agent;
surrender the debenture to the conversion agent;
if required, furnish appropriate endorsements and transfer documents;
if required, pay all transfer or similar taxes; and
if required, pay funds equal to interest payable on the next interest
payment date.
Pursuant to the indenture, the date on which all of the foregoing
requirements have been satisfied is the 'conversion date.'
Upon conversion of debentures, you will not receive any cash payment of
interest (unless such conversion occurs between a regular record date and the
interest payment date to which it relates). Our delivery to you of the full
number of shares of our common stock into which the debenture is convertible,
together with any cash payment for your fractional shares, or cash or a
combination of cash and shares of our common stock in lieu thereof, will be
deemed:
to satisfy our obligation to pay the accreted principal amount of the
debenture; and
to satisfy our obligation to pay accrued but unpaid interest, including
contingent interest, if any, attributable to the period from the most
recent interest payment date through the conversion date.
As a result, increases in the accreted principal amount and unpaid interest,
including contingent interest, if any, through the conversion date are deemed to
be paid in full rather than cancelled, extinguished or forfeited.
Notwithstanding the above, if debentures are converted after a record date
but prior to the next succeeding interest payment date, holders of such
debentures at the close of business on the record date will receive the interest
payable on such debentures on the corresponding interest payment date
notwithstanding the conversion.
16
Such debentures, upon surrender for conversion, must be accompanied by funds
equal to the amount of interest payable on the debentures so converted; provided
that no such payment need be made if (1) we have specified a redemption date
that is after a record date and on or prior to the next interest payment date,
(2) we have specified a purchase date following a change in control that is
during such period or (3) only to the extent of overdue interest or overdue
contingent interest, any overdue interest or overdue contingent interest, if
any, exists at the time of conversion with respect to such debenture.
In lieu of delivering shares of our common stock upon conversion of any
debentures, we may elect to pay holders surrendering debentures an amount in
cash per share of common stock otherwise deliverable (based on the conversion
rate in effect for the relevant conversion date) equal to the applicable stock
price in effect for the relevant conversion date. We will inform the holders
through the trustee no later than two business days following the conversion
date of our election to deliver shares of our common stock or to pay cash in
lieu of delivering the shares, unless we have already informed holders of our
election in connection with our optional redemption of the debentures as
described under ' -- Redemption of Debentures at Our Option,' or we have made
previously the election described in the succeeding sentence. At any time prior
to maturity, we may at our option elect, by notice to the trustee and the
holders of debentures, that upon conversion of debentures at any time following
the date of such notice, we shall be required to deliver cash in an amount at
least equal to the accreted principal amount of the debentures converted. On
September 29, 2004, we gave notice to the trustee and holders of the debentures
that we were making such election and that, as a result, we will also be
required to deliver only cash in connection with any principal value
conversion pursuant to the trading price condition. Shares of our common
stock and cash deliverable upon conversion will be delivered through the
conversion agent no later than the third business day following the
determination of the applicable stock price. If the accreted principal
amount of the debentures has been accelerated and such acceleration has
not been rescinded, we may not pay cash upon conversion of any debentures or
portion of the debentures (other than cash for fractional shares).
Conversion Rate Adjustments. The base conversion rate will be adjusted if
any of the following events occurs:
(1) We issue common stock as a dividend or distribution on our common stock.
(2) We issue to all holders of common stock certain rights or warrants to
purchase our common stock, for a period expiring within 45 days of the record
date for such issuance, at a price per share that is less than the closing sale
prices of our common stock for the 10 trading days preceding the declaration
date for such distribution.
(3) We subdivide or combine our common stock.
(4) We distribute to all holders of our common stock, shares of our capital
stock, evidences of indebtedness or assets, including securities but excluding
rights or warrants specified above, dividends or distributions specified above
and cash distributions, then the conversion rate will be adjusted by multiplying
the base conversion rate by a fraction,
the numerator of which is the current market price of our common stock and
the denominator of which is the current market price of our common stock
minus the fair market value, as determined by our board of directors, of
the portion of those assets, debt securities, shares of capital stock or
rights or warrants so distributed applicable to one share of common stock.
If we distribute capital stock of, or similar equity interests in, a subsidiary
or other business unit of ours, then the base conversion rate will be adjusted
based on the market value of the securities so distributed relative to the
market value of our common stock, in each case based on the average closing
sales price of those securities (where such closing sale prices are available)
for the 10 trading days commencing on and including the fifth trading day after
the date on which 'ex-dividend trading' commences for such distribution on the
New York Stock Exchange or such other national or regional exchange or market on
which the securities are then listed or quoted.
(5) We distribute cash, excluding any dividend or distribution in connection
with our liquidation, dissolution or winding up or any quarterly cash dividend
on our common stock to the extent that the aggregate cash dividend per share of
our common stock in any quarter does not exceed $0.10 (the 'dividend threshold
amount'); the dividend threshold amount is subject to adjustment on the same
basis as the conversion rate, provided that no adjustment will be made to the
dividend threshold amount for any adjustment made to the
17
conversion rate pursuant to this clause (5); in the event of a dividend or
distribution to which this clause (5) applies, the conversion rate will be
adjusted by multiplying the base conversion rate by a fraction,
the numerator of which will be the current market price of our common
stock and
the denominator of which will be the current market price of our common
stock minus the amount per share of such dividend or distribution (as
determined below).
If an adjustment is required to be made under this clause (5) as a result of a
distribution that is a quarterly dividend, the adjustment would be based upon
the amount by which the distribution exceeds the dividend threshold amount. If
an adjustment is required to be made under this clause as a result of a
distribution that is not a quarterly dividend, the adjustment would be based
upon the full amount of the distribution.
(6) We or one of our subsidiaries makes a payment in respect of a tender
offer or exchange offer for our common stock to the extent that the cash and
value of any other consideration included in the payment per share of common
stock exceeds the average of the closing sale price per share of our common
stock for each of the 10 consecutive trading days next succeeding the last date
on which tenders or exchanges may be made pursuant to such tender or exchange
offer, in which event the conversion rate will be adjusted by multiplying the
base conversion rate by a fraction,
the numerator of which will be the sum of (x) the fair market value, as
determined by our board of directors, of the aggregate consideration
payable for all shares of our common stock we purchase in such tender or
exchange offer and (y) the product of the number of shares of our common
stock outstanding less any such purchased shares and the average of the
closing sale price per share of our common stock for each of the 10
consecutive trading days next succeeding the expiration of the tender or
exchange offer and
the denominator of which will be the product of the number of shares of
our common stock outstanding, including any such purchased shares, and the
average of the closing sale price per share of our common stock for each
of the 10 consecutive trading days next succeeding the expiration of the
tender or exchange offer.
'Current market price' of our common stock on any day means the average of
the closing price per share of our common stock for each of the 10 consecutive
trading days ending on the earlier of the day in question and the day before the
'ex-date' with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, 'ex-date' means the first date on
which the shares of our common stock trade on the applicable exchange or in the
applicable market, regular way, without the right to receive such issuance or
distribution.
To the extent that we have a rights plan in effect upon conversion of the
debentures into common stock, you will receive, in addition to the common stock,
the rights under the rights plan, unless prior to any conversion, the rights
have separated from the common stock, in which case the conversion rate will be
adjusted at the time of separation as if we distributed to all holders of our
common stock, shares of our capital stock, evidences of indebtedness or assets
as described above, subject to readjustment in the event of the expiration,
termination or redemption of such rights.
In the event of:
any reclassification of our common stock;
a consolidation, merger or combination involving us; or
a sale or conveyance to another person or entity of all or substantially
all of our property and assets;
in which holders of our common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, upon
conversion of your debentures you will be entitled to receive the same type of
consideration that you would have been entitled to receive if you had converted
the debentures into our common stock immediately prior to any of these events.
We may, from time to time, increase the base conversion rate for a period of
at least 20 days if our board of directors has made a determination that this
increase would be in our best interests. Any such determination by our board
will be conclusive. In addition, we may increase the base conversion rate if our
board of directors deems it advisable to avoid or diminish any income tax to
holders of common stock resulting from any stock or rights distribution.
18
We will not be required to make an adjustment in the base conversion rate
unless the adjustment would require a change of at least 1% in the base
conversion rate; provided that we will carry forward any adjustments that are
less than 1% of the base conversion rate and make such carried forward
adjustments, regardless of whether the aggregate adjustment is less than 1%,
within one year of the first such adjustment carried forward. Except as
described above in this section, we will not adjust the base conversion rate for
any issuance of our common stock or convertible or exchangeable securities or
rights to purchase our common stock or convertible or exchangeable securities.
If any adjustment is made to the base conversion rate, the same proportional
adjustment will be made to the maximum conversion rate, the incremental share
factor and any fixed conversion rate; provided that no adjustment will be made
to the maximum conversion rate as a result of any adjustment to the base
conversion rate as described in clause (5) above.
CONTINGENT INTEREST
Unless a remarketing reset event occurs, we will pay contingent interest to
you during any six-month period from and including an interest-payment date to
but excluding the next interest payment date, commencing with the six-month
period beginning December 1, 2006, if (a) the average trading price of the
debentures for a five trading-day measurement period immediately preceding the
first day of the applicable six-month period equals 125% or more of the accreted
principal amount of the debentures as of the first day of such measurement
period and (b) the debentures are immediately convertible on the first day of
such measurement period. The amount of contingent interest payable in any
interest period will be equal to the fixed conversion rate in effect as of the
first day of such interest period multiplied by the payment factor for such
interest period. The payment factor for each interest period is $.20, subject to
adjustment for any stock dividends, subdivisions, combinations or certain
reclassifications of shares of our common stock occurring prior to the first day
of such interest period.
Unless a remarketing reset event occurs, if (a) the average trading price of
the debentures for a five trading-day measurement period immediately preceding
the first day of the applicable six-month period equals 200% or more of the
accreted principal amount of the debentures as of the first day of such
measurement period and (b) the debentures are immediately convertible on the
first day of such measurement period, we will pay additional contingent interest
for any applicable six-month period in an amount equal to .125% of the average
trading price of a debenture for the five trading-day measurement period.
Contingent interest and additional contingent interest, if any, will accrue
from the first day of any interest period and be payable on the interest payment
date at the end of the relevant six-month period to holders of the debentures as
of the record date relating to such interest payment date.
Upon determination that debenture holders will be entitled to receive
contingent interest during a relevant six-month period, we will issue a press
release and publish such information on our web site on the World Wide Web as
soon as practicable.
Contingent Accretion. Following the occurrence of a remarketing reset event,
we will be required to pay contingent interest, which we refer to as contingent
accretion, if, for four or more consecutive six-month interest periods the
debentures are rated below BBB- by S&P and below Baa3 by Moody's, or the
debentures are no longer rated by both S&P and Moody's, as of the last day of
each such six-month interest period. In such event, contingent accretion will
accrue in an amount equal to $5.00 per debenture for each such six-month
interest period. Additional contingent accretion will accrue in an amount equal
to $5.00 per debenture for each six-month interest period during such period of
four or more consecutive six-month interest periods in which the rating assigned
to the debentures by S&P is below BB and by Moody's is below Ba2, or the
debentures are no longer rated by both S&P and Moody's. Such contingent
accretion and additional contingent accretion, if any, shall be payable upon our
repayment of the debentures in full, whether at maturity, upon exercise of a
holder's repurchase right, upon acceleration or otherwise. Any contingent
accretion and additional contingent accretion will not bear any interest or
additional accretion from accrual until payment. If, following the accrual of
any contingent accretion and additional contingent accretion and prior to
repayment in full of the debentures, the rating assigned to the debentures by
S&P is BBB- or higher and by Moody's is Baa3 or higher, such contingent
accretion and additional contingent accretion shall no longer be payable.
19
REMARKETING RESET EVENT
If the average of the closing sale prices of our common stock over the 10
trading-day period ending on the trading day immediately preceding December 1 of
2006, 2008, 2013, 2018, 2023 or 2028, each a 'remarketing reset event date,' is
less than the effective conversion price as of such trading day, which we refer
to as a 'remarketing reset event,' then following such remarketing reset event
date, we will not thereafter pay contingent cash interest on the debentures; the
debentures will no longer be convertible into our common stock; and you will not
have the right to require us to repurchase the debentures under the
circumstances described under ' -- Purchase of Debentures by Us at the Option of
Holder' and ' -- Change in Control Requires Us to Purchase Debentures at the
Holder's Option.' Once a remarketing reset event has occurred, we will be
obligated to remarket the debentures at a reset interest rate sufficient to
achieve a par sales price for the remarketed debentures. The reset interest rate
will depend on the length of the remarketing period, which is determined by
market forces and may be as short as six months from the remarketing reset event
date and as long as the period from the remarketing reset event date until the
maturity of the debentures. If a remarketing reset event occurs, the debentures
will be remarketed on such remarketing reset event date and the date at least
six months thereafter and prior to maturity that is specified by us prior to the
remarketing reset event date or the date of any subsequent remarketing, each a
'remarketing reset date.' We may also elect prior to any remarketing that
following such remarketing the debentures will bear cash interest, in which case
the principal amount of the debentures will not accrete during the period in
which the debentures bear cash interest.
The yield on the debentures on each remarketing reset date will be the yield
to the next remarketing reset date, or the cash interest rate, such that the
proceeds from the remarketing of the debentures, net of any remarketing fee,
will be 100% of their accreted principal amount, plus any accrued and unpaid
interest; provided that the yield will not be reset to less than 0% per annum.
If a remarketing reset event occurs, from and after the applicable remarketing
reset event date, the principal amount of the debentures will accrete daily at
the reset yield until the next remarketing reset date, unless we elect that the
debentures will bear cash interest, in which case the daily accretion rate will
be 0%.
We will notify the holders of debentures, and we will request that DTC
notify its participants holding debentures, at least 21 business days prior to
each remarketing reset event date and each subsequent remarketing reset date of:
the potential remarketing, the next remarketing reset date, whether the
debentures will accrete or bear cash interest and if the debentures will bear
cash interest, the applicable interest payment dates and record dates, the right
of participants holding debentures to require us to purchase their debentures if
such remarketing is not successful, the procedures a holder must follow to elect
not to participate in the remarketing and the date by which such election must
be made; provided that if we do not provide such notice, the next remarketing
reset date shall be the first anniversary of the previous remarketing reset date
and the debentures will not bear cash interest. We also will issue a press
release through Reuters Economic Services and Bloomberg Business News or other
reasonable means of distribution and publish such information on our web site on
the World Wide Web.
All outstanding debentures will be tendered or deemed tendered to the
remarketing agent for remarketing on any remarketing reset date, unless the
holder thereof elects not to participate in such remarketing. Each holder of
debentures by purchasing such debentures agrees to have such debentures
remarketed on any remarketing reset date, unless such holder elects not to
participate in the remarketing, and authorizes the remarketing agent to take any
and all action on its behalf necessary to effect the remarketing. In order to
elect not to participate in a remarketing on any remarketing reset event date,
holders must notify the paying agent on or prior to the business day prior to
any remarketing reset event date of the number of debentures they wish to
withhold from a remarketing if a remarketing reset event occurs on the
remarketing reset event date. Following a remarketing reset event, a holder may
elect not to participate in any subsequent remarketing by notice to the paying
agent on or prior to the business day prior to the applicable remarketing reset
date.
We will appoint a remarketing agent and enter into a remarketing agreement
at least 30 calendar days prior to any remarketing reset date. We will covenant
in the indenture to use our reasonable best efforts to effect the remarketing of
the debentures as described in this prospectus. If in the judgment of our
counsel or counsel to the remarketing agent a registration statement is required
to effect the remarketing of the debentures, we will use reasonable best efforts
to ensure that a registration statement covering the full accreted principal
amount of debentures to be remarketed on any remarketing reset date will be
effective in a form that will enable the remarketing agent to rely on it in
connection with the remarketing process or we will effect such remarketing
20
pursuant to Rule 144A under the Securities Act or any other available exemption
from applicable registration requirements.
The remarketing agent will deduct its fee from the proceeds of any
remarketing and remit the remaining proceeds, which shall be at least 100% of
the accreted principal amount of the debentures remarketed, to the holders of
debentures participating in such remarketing as promptly as possible following
the applicable remarketing reset date.
If a remarketing of the debentures is required on any remarketing reset date
but the remarketing is not successful, each holder of debentures will have the
right to require us on such remarketing reset date to purchase for cash all or a
portion of such holder's debentures at 100% of the accreted principal amount
thereof, plus accrued and unpaid interest, if any, to, but excluding, the date
of purchase and any accrued contingent accretion or additional contingent
accretion. Holders of debentures will be deemed to have exercised this
repurchase right unless they had elected not to participate in the applicable
remarketing. Each holder of debentures who has elected not to participate in any
remarketing must notify the paying agent on or prior to the business day
immediately preceding the related remarketing reset event date of the number of
debentures it wants us to purchase on such remarketing reset date in the event
of a failed remarketing. We will deliver payment for such repurchase as promptly
as practicable following the applicable remarketing reset date.
If all holders elect not to participate in any remarketing or the debentures
are not successfully remarketed in any remarketing, the debentures will cease to
bear cash interest (if any) and the yield to the next remarketing reset date
will be reset to the rate necessary, in the judgment of the remarketing agent
based on bids from at least three independent nationally recognized securities
dealers selected by the remarketing agent, for the debentures to trade at a
price equal to 100% of their accreted principal amount. If the remarketing agent
is not able to obtain bids from at least three independent nationally recognized
securities dealers on a remarketing reset date, the yield to the next
remarketing reset date will be the reset rate in effect prior to such
remarketing, or if no reset rate has previously been determined, the regular
interest rate or yield in effect for the debentures immediately prior to the
applicable remarketing reset event date.
If less than $50 million aggregate original principal amount of debentures
is to be remarketed on any remarketing reset date because holders of all
remaining outstanding debentures have elected not to participate in such
remarketing, no remarketing will take place on such date, the debentures will
cease to bear cash interest (if any) and the yield to the next remarketing reset
date will be reset as described above. In addition, holders who did not opt out
of the remarketing, but only those holders, will have the right, which will be
deemed to be exercised, to require us to purchase such debentures at 100% of the
accreted principal amount thereof, plus accrued and unpaid interest, if any, and
accrued contingent accretion, if any, to, but excluding, the date of purchase.
REDEMPTION OF DEBENTURES AT OUR OPTION
Prior to December 1, 2006, the debentures will not be redeemable at our
option. Unless a remarketing reset event occurs, beginning on December 1, 2006,
and thereafter we may redeem the debentures for cash at any time as a whole, or
from time to time in part. If a remarketing reset event occurs, the debentures
will not thereafter be redeemable at our option. The redemption price of a
debenture will be the accreted principal amount of such debenture on the
redemption date, plus accrued and unpaid interest, if any, including contingent
interest, if any, to, but excluding, such date. We will give not less than 30
days nor more than 60 days notice of redemption by mail to holders of the
debentures. The notice of redemption will inform the holders of our election to
deliver shares of our common stock or to pay cash or a combination of cash and
common stock in the event that a holder elects to convert debentures in
connection with the redemption.
If we decide to redeem fewer than all of the outstanding debentures, the
trustee may select the debentures by lot, pro rata, or by another method the
trustee considers fair and appropriate. If the trustee selects a portion of your
debentures for partial redemption and you convert a portion of your debentures,
the converted portion will be deemed to be the portion selected for redemption.
We may not redeem the debentures in part if the accreted principal amount
has been accelerated and such acceleration has not been rescinded.
The accreted principal amount of a debenture will be equal to the original
principal amount of $1,000 per debenture increased daily by a yield, which until
December 1, 2006 will be 0% per annum and, unless a
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remarketing reset event occurs, commencing on December 1, 2006 will be reset to
1.85% per annum. The redemption price of a debenture at any time is dependent
upon the accreted principal amount of a debenture at that time and increases as
the accreted principal amount of the debenture increases. The following table
indicates what the redemption price would be on each date below, commencing
December 1, 2006.
REDEMPTION PRICES*
(1) (2) (3)
ORIGINAL REDEMPTION
PRINCIPAL PRICE
REDEMPTION DATES AMOUNT ACCRETION (1)+(2)
------------------------------------------------------------ ------ --------- -------
December 1, 2006............................................ $1,000.00 $ 0.00 $1,000.00
December 1, 2007............................................ 1,000.00 18.59 1,018.59
December 1, 2008............................................ 1,000.00 37.52 1,037.52
December 1, 2009............................................ 1,000.00 56.80 1,056.80
December 1, 2010............................................ 1,000.00 76.44 1,076.44
December 1, 2011............................................ 1,000.00 96.45 1,096.45
December 1, 2012............................................ 1,000.00 116.82 1,116.82
December 1, 2013............................................ 1,000.00 137.58 1,137.58
December 1, 2014............................................ 1,000.00 158.72 1,158.72
December 1, 2015............................................ 1,000.00 180.26 1,180.26
December 1, 2016............................................ 1,000.00 202.20 1,202.20
December 1, 2017............................................ 1,000.00 224.54 1,224.54
December 1, 2018............................................ 1,000.00 247.30 1,247.30
December 1, 2019............................................ 1,000.00 270.48 1,270.48
December 1, 2020............................................ 1,000.00 294.09 1,294.09
December 1, 2021............................................ 1,000.00 318.14 1,318.14
December 1, 2022............................................ 1,000.00 342.64 1,342.64
December 1, 2023............................................ 1,000.00 367.60 1,367.60
December 1, 2024............................................ 1,000.00 393.01 1,393.01
December 1, 2025............................................ 1,000.00 418.90 1,418.90
December 1, 2026............................................ 1,000.00 445.27 1,445.27
December 1, 2027............................................ 1,000.00 472.14 1,472.14
December 1, 2028............................................ 1,000.00 499.50 1,499.50
December 1, 2029............................................ 1,000.00 527.37 1,527.37
December 1, 2030............................................ 1,000.00 555.75 1,555.75
December 1, 2031............................................ 1,000.00 584.67 1,584.67
December 1, 2032............................................ 1,000.00 614.12 1,614.12
December 1, 2033............................................ 1,000.00 644.12 1,644.12
---------
* This table assumes that (i) the amount of accrued and unpaid interest is zero
and (ii) no remarketing reset event occurs.
PURCHASE OF DEBENTURES BY US AT THE OPTION OF HOLDER
Unless a remarketing reset event occurs, you have the right to require us to
purchase all or a portion of your debentures on December 1, 2006, 2008, 2013,
2018, 2023 or 2028 or if any such day is not a business day, on the immediately
succeeding business day, each such day a 'purchase date,' if the debentures are
not immediately convertible into our common stock on such date. We will be
required to purchase for cash, at a purchase price equal to 100% of the accreted
principal amount thereof on the applicable purchase date plus accrued and unpaid
interest, if any, but excluding, such purchase date, any outstanding debenture
for which a written purchase notice has been properly delivered by the holder to
the paying agent and not withdrawn, subject to certain additional conditions.
You may submit your debentures for purchase to the paying agent at any time from
the opening of business on the date that is 20 business days prior to the
purchase date until the close of business on the purchase date. Our ability to
satisfy our purchase obligations in cash may be affected by the
22
factors described in 'Risk Factors' under the heading 'We may not have the
ability to raise the funds necessary to finance the purchase of the debentures
if required by holders pursuant to the indenture.'
We will be required to give notice on a date not less than 20 business days
prior to each purchase date to all holders at their addresses shown in the
register of the registrar, and to beneficial owners as required by applicable
law, stating among other things, the procedures that holders must follow to
require us to purchase their debentures.
To exercise this right, you must deliver a written notice to the paying
agent prior to the close of business on the purchase date. Your purchase notice
electing to require us to purchase your debentures must state:
if certificated debentures have been issued, the debenture certificate
numbers, or if not, such information as may be required under applicable
DTC procedures;
the number of debentures to be purchased; and
that we are to purchase the debentures pursuant to the applicable
provisions of the debentures and the indenture.
You may withdraw any purchase notice by a written notice of withdrawal
delivered to the paying agent prior to the close of business on the purchase
date. The notice of withdrawal must state:
the number of withdrawn debentures;
if certificated debentures have been issued, the certificate numbers of
the withdrawn debentures, if not, such information as may be required
under applicable DTC procedures; and
the number, if any, of debentures that remain subject to your purchase
notice.
Payment of the purchase price for a debenture for which a purchase notice
has been delivered and not withdrawn is conditioned upon book-entry transfer or
delivery of the debenture, together with necessary endorsements, to the paying
agent at its corporate trust office in New York, New York or any other office of
the paying agent, at any time after delivery of the purchase notice. Payment of
the purchase price for the debenture will be made promptly following the later
of the purchase date and the time of book-entry transfer or delivery of the
debenture. If the paying agent holds money sufficient to pay the purchase price
of the debenture on the business day following the purchase date, then, on and
after such date:
the debenture will cease to be outstanding;
interest and principal accretion on the debenture will cease to accrue;
and
all other rights of the holder will terminate, other than the right to
receive the purchase price upon delivery of the debenture.
This will be the case whether or not book-entry transfer of the debenture
has been made or the debenture has been delivered to the paying agent.
In connection with any purchase of debentures at the holder's option, we
will, to the extent applicable:
comply with the provisions of Rule 13e-4 and any other tender offer rules
under the Exchange Act that may then be applicable; and
file Schedule TO or any other required schedule under the Exchange Act.
We may not purchase the debentures if the accreted principal amount has been
accelerated and such acceleration has not been rescinded. We may be unable to
purchase the debentures in the event you elect to require us to purchase your
debentures as set forth above. If you elect to require us to purchase your
debentures as set forth above, we may not have enough funds to pay the purchase
price for all tendered debentures. Any future credit agreements or other
agreements relating to our indebtedness may contain provisions prohibiting
purchase of the debentures under certain circumstances. If you elect to require
us to purchase your debentures as set forth above at a time when we are
prohibited from repurchasing debentures, we could seek the consent of our
lenders to purchase the debentures or attempt to refinance this debt. If we do
not obtain consent, we would not be permitted to purchase the debentures. Our
failure to purchase tendered debentures would constitute an event of default
under the indenture, which might constitute a default under the terms of our
other indebtedness.
23
CHANGE IN CONTROL REQUIRES US TO PURCHASE DEBENTURES AT THE HOLDER'S OPTION
If a change in control occurs before December 1, 2033, unless a remarketing
reset event has occurred, you will have the right, at your option, subject to
the terms and conditions of the indenture, to require us to purchase for cash
any or all of your debentures. We will purchase the debentures at a price equal
to 100% of the accreted principal amount of the debentures to be purchased plus
any accrued and unpaid interest, if any, including contingent interest, if any,
to, but excluding, the change in control purchase date, unless such change in
control purchase date falls after a record date and on or prior to the
corresponding interest payment date, in which case we will pay the full amount
of accrued and unpaid interest payable on such interest payment date to the
holder of record at the close of business on the corresponding record date. We
will be required to purchase the debentures as of the business day to be
specified by us that is not less than 20 nor more than 35 business days after
the occurrence of such change in control, which we refer to as a change in
control purchase date.
Under the indenture, a change in control of American Express Company is
deemed to have occurred at such time as:
any person, including its affiliates and associates, other than American
Express Company, its subsidiaries or their employee benefit plans, files a
Schedule 13D or 14D-1 (or any successor schedule, form or report under the
Exchange Act) disclosing that such person has become the beneficial owner
of 50% or more of the voting power of our common stock or other capital
stock into which the common stock is reclassified or changed, with certain
exceptions; or
there shall be consummated any consolidation or merger of American Express
Company pursuant to which our common stock would be converted into cash,
securities or other property, in each case other than a consolidation or
merger of American Express in which the holders of the shares of our
common stock immediately prior to the consolidation or merger have,
directly or indirectly, at least a majority of the total voting power in
the aggregate of all classes of capital stock of the continuing or
surviving corporation immediately after the consolidation or merger.
However, a change in control will not be deemed to have occurred if:
American Express Company, its subsidiaries or their employee benefit
plans, or persons holding our common stock pursuant to such an employee
benefit plan must file a report under Schedules 13D or 14D-1 (or any
successor schedule, form or report under the Exchange Act) disclosing
beneficial ownership of shares of our common stock, whether in excess of
50% or otherwise; or
the closing sale price per share of our common stock for any five trading
days within the period of 10 consecutive trading days ending immediately
after the later of the change in control or the public announcement of the
change in control, in the case of a change in control relating to an
acquisition of capital stock, or the period of 10 consecutive trading days
ending immediately before the change in control, in the case of a change
in control relating to a merger, consolidation or asset sale, equals or
exceeds 105% of the effective conversion price of the debentures in effect
on each of those trading days; or
all or substantially all (but in no event less than 90%) of the
consideration in the transaction or transactions (other than cash payments
for fractional shares and cash payments made in respect of dissenters'
appraisal rights) constituting a change in control consists of shares of
common stock, depository receipts or other certificates representing
common equity interests traded or to be traded immediately following a
change of control on a national securities exchange or the NASDAQ, and, as
a result of the transaction or transactions, the debentures become
convertible into that common stock, depository receipts or other
certificates representing common equity interests.
Within 15 business days after the occurrence of a change in control, we are
obligated to mail to the trustee and to all holders of debentures at their
addresses shown in the register of the registrar and to beneficial owners as
required by applicable law a notice regarding the change in control, stating,
among other things:
the events causing a change in control;
the date of such change in control;
the last date on which the purchase right may be exercised;
the change in control purchase price;
24
the change in control purchase date;
the name and address of the paying agent and the conversion agent;
the conversion rate and any adjustments to the conversion rate;
that debentures with respect to which a change in control purchase notice
is given by the holder may be converted only if the change in control
purchase notice has been withdrawn in accordance with the terms of the
debentures and the indenture; and
the procedures that holders must follow to exercise these rights.
To exercise this right, you must deliver a written notice to the paying
agent prior to the close of business on the change in control purchase date. The
required purchase notice upon a change in control must state:
if certificated debentures have been issued, the debenture certificate
numbers, or if not, such information as may be required under applicable
DTC procedures;
the number of debentures to be purchased; and
that we are to purchase such debentures pursuant to the applicable
provisions of the debentures and the indenture.
You may withdraw any change in control purchase notice by a written notice
of withdrawal delivered to the paying agent prior to the close of business on
the change in control purchase date. The notice of withdrawal must state:
the number of the withdrawn debentures;
if certificated debentures have been issued, the debenture certificate
numbers, or if not, such information as may be required under applicable
DTC procedures; and
the number, if any, of debentures that remain subject to your change in
control purchase notice.
You must either effect book-entry transfer or deliver the debentures to be
purchased, together with necessary endorsements, to the office of the paying
agent after delivery of the change in control purchase notice to receive payment
of the change in control purchase price. You will receive payment in cash
promptly following the later of the change in control purchase date or the time
of book-entry transfer or the delivery of the debentures. If the paying agent
holds money or securities sufficient to pay the change in control purchase price
of the debentures on the business day following the change in control purchase
date, then, immediately after the change in control purchase date:
the debentures will cease to be outstanding;
interest will cease to accrue; and
all other rights of the holder will terminate, other than the right to
receive the purchase price upon delivery of the debenture.
This will be the case whether or not book-entry transfer of the debentures
is made or whether or not the debentures are delivered to the paying agent.
The change in control purchase feature of the debentures may in certain
circumstances make more difficult or discourage a takeover of American Express
Company. The change in control purchase feature, however, is not the result of
our knowledge of any specific effort:
to accumulate shares of common stock;
to obtain control of American Express Company by means of a merger, tender
offer, solicitation or otherwise; or
by management to adopt a series of anti-takeover provisions.
Instead, the terms of the change in control purchase feature resulted from
negotiations between the initial purchasers and us.
We could, in the future, enter into certain transactions, including certain
recapitalizations, that would not constitute a change in control with respect to
the change in control purchase feature of the debentures but that would increase
the amount of our (or our subsidiaries') outstanding indebtedness.
25
We may not purchase the debentures following a change in control if the
accreted principal amount has been accelerated and such acceleration has not
been rescinded. We may be unable to purchase the debentures in the event of a
change in control. If a change in control were to occur, we may not have enough
funds to pay the purchase price for all tendered debentures. Any future credit
agreements or other agreements relating to our indebtedness may contain
provisions prohibiting purchase of the debentures under certain circumstances,
or expressly prohibit our purchase of the debentures upon a change in control or
may provide that a change in control constitutes an event of default under that
agreement. If a change in control occurs at a time when we are prohibited from
purchasing debentures, we could seek the consent of our lenders to purchase the
debentures or attempt to refinance this debt. If we do not obtain consent, we
would not be permitted to purchase the debentures. Our failure to purchase
tendered debentures would constitute an event of default under the indenture,
which might constitute a default under the terms of our other indebtedness.
COVENANTS
We will covenant in the indenture that we will not at any time directly or
indirectly create, or allow to exist or be created, any mortgage, pledge,
encumbrance or lien of any kind upon:
any shares of capital stock owned by American Express Company of any of
American Express Travel Related Services Company, Inc., American Express
Bank Ltd. or American Express Financial Corporation (other than director's
qualifying shares), so long as they continue to be our subsidiaries, which
we refer to collectively as the 'principal subsidiaries'; or
any shares of capital stock owned by American Express Company of a
subsidiary that owns, directly or indirectly, capital stock of any of the
principal subsidiaries.
Such liens are permitted if we provide that the debentures will be secured
by such lien equally and ratably with any and all other obligations also
secured, for as long as any such other obligations are so secured.
However, we may incur or allow to exist upon the stock of the principal
subsidiaries liens for taxes, assessments or other governmental charges or
levies which are not yet due or are payable without penalty or which we are
contesting in good faith, or liens of judgments that are on appeal or are
discharged within 60 days.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
We may not consolidate with or merge into any other person or convey or
transfer our properties and assets substantially as an entirety to any person,
unless:
we are the surviving corporation or the successor is a corporation
organized under the laws of the United States of America or any state
thereof or the District of Columbia, and expressly assumes our obligations
on the debentures and under the indenture,
immediately after giving effect to the transaction, no default or event of
default shall have occurred and be continuing, and
we have delivered to the trustee an officers' certificate and an opinion
of counsel each stating that such transaction complies with these
requirements.
When such a person assumes our obligations in such circumstances, subject to
certain exceptions, we shall be discharged from all obligations under the
debentures and the indenture.
EVENTS OF DEFAULT; WAIVER AND NOTICE
The indenture defines an event of default as one or more of the following:
(1) default in payment of the accreted principal amount, redemption
price, purchase price or change in control purchase price (in each case
including any accrued contingent accretion) with respect to any debenture
when such payment becomes due and payable;
(2) default for 30 days in payment of any interest (including contingent
interest and liquidated damages, if any) on the debentures;
(3) failure by American Express Company to comply with any of its other
agreements in the debentures or the indenture upon receipt by American
Express Company of written notice of such default
26
by the trustee or by holders of not less than 25% in aggregate original
principal amount of the debentures then outstanding and American Express
Company's failure to cure (or obtain a waiver of) such default within 90
days after receipt by American Express of such notice;
(4) an event of default under any other indebtedness of American Express
Company for borrowed money in excess of $50,000,000 which results in an
aggregate principal amount of at least $50,000,000 of such other series of
debt securities or such other indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise become due and
payable and such acceleration has not been rescinded or annulled within 10
days after notice of default is given;
(5) certain events of bankruptcy, insolvency or reorganization of
American Express Company.
If an event of default shall have occurred and be continuing, either the
trustee or the holders of not less than 25% in aggregate original principal
amount of the debentures then outstanding may declare the accreted principal
amount of the debentures as of the date of such declaration plus accrued
interest (including contingent interest, if any) and any accrued contingent
accretion through the date of such declaration to be immediately due and
payable. After acceleration, the holders of a majority in aggregate original
principal amount of the debentures may, under certain circumstances, rescind and
annul such acceleration if all events of default, other than the non-payment of
accelerated principal or other specified amount, have been cured or waived.
Prior to the declaration of the acceleration of the debentures, the holders
of a majority in aggregate original principal amount of the debentures may
waive, on behalf of all of the holders of the debentures, any default and its
consequences, except an event of default described in paragraphs (1) or (2)
above, a default in respect of a provision that cannot be amended without the
consent of all of the holders of the debentures or a default that constitutes a
failure to convert any debentures into shares of common stock. Other than the
duty to act with the required care during an event of default, the trustee will
not be obligated to exercise any of its rights or powers at the request of the
holders unless the holders shall have offered to the trustee reasonable
indemnity. Generally, the holders of a majority in aggregate original principal
amount of the debentures will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred on the trustee.
A holder will not have any right to institute any proceeding under the
indenture, or for the appointment of a receiver or a trustee, or for any other
remedy under the indenture, unless:
(1) the holder has previously given to the trustee written notice of a
continuing event of default with respect to the debentures;
(2) the holders of a least 25% in aggregate original principal amount of
the debentures have made a written request and have offered reasonable
indemnity to the trustee to institute the proceeding;
(3) such holder or holders offer to the trustee security or indemnity
satisfactory to the trustee against any loss, liability or expense; and
(4) the trustee has failed to institute the proceeding and has not
received direction inconsistent with the original request from the holders
of a majority in aggregate original principal amount of the debentures
within 60 days after the original request.
Holders may, however, sue to enforce the payment of the accreted principal
amount, accrued and unpaid interest (including contingent interest, if any),
redemption price, purchase price or change in control purchase price with
respect to any debenture on or after the due date or to enforce the right, if
any, to convert any debenture without following the procedures listed in
(1) through (3) above.
We will furnish the trustee an annual statement by our officers as to
whether or not we are in default in the performance of the indenture and, if so,
specifying all known defaults.
MODIFICATION OF THE INDENTURE
We and the trustee may, without the consent of the holders of the
debentures, enter into supplemental indentures for, among others, one or more of
the following purposes:
to evidence the succession of another corporation to our company, and the
assumption by such successor of our obligations under the indenture and
the debentures;
27
to add to our covenants, or surrender any of our rights, or add any rights
for the benefit of the holders of debentures;
to cure any ambiguity, omission, defect or inconsistency in the indenture,
to correct or supplement any provision in the indenture, or to make any
other provisions with respect to matters or questions arising under the
indenture, so long as the interests of holders of debentures are not
adversely affected in any material respect under the indenture;
to evidence and provide for the acceptance of any successor trustee with
respect to the debentures or to facilitate the administration of the trust
thereunder by the trustee in accordance with such indenture; and
to provide any additional events of default;
provided that any amendment described in the third bullet point above made
solely to conform the provisions of the indenture to the description of the
debentures contained in this prospectus will not be deemed to adversely affect
the interests of holders of the debentures.
With certain exceptions, the indenture or the rights of the holders of the
debentures may be modified by us and the trustee with the consent of the holders
of a majority in aggregate original principal amount of the debentures then
outstanding, but no such modification may be made without the consent of the
holder of each outstanding debenture affected thereby that would:
change the maturity of any payment of principal (including any accrued
contingent accretion) of or any installment of interest on any debenture
(including the payment of contingent interest, if any), or
reduce the original principal amount or accreted principal amount thereof,
or
alter the manner or rate of accretion of principal or the manner or rate
of accrual of interest (including contingent interest and liquidated
damages) or contingent accretion, or
change any place of payment where, or the coin or currency in which, any
debenture or interest (including the payment of contingent interest or
liquidated damages, if any) thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the maturity thereof (or, in the case of redemption or
repurchase, on or after the redemption date or the purchase date, as the
case may be), or
adversely affect the conversion, remarketing or repurchase provisions in
the indenture, or
reduce the quorum or voting requirements under the indenture, or
reduce the percentage in original principal amount of the outstanding
debentures, the consent of whose holders is required for any such
modification, or the consent of whose holders is required for any waiver
of compliance with certain provisions of the indenture or certain defaults
thereunder and their consequences provided for in the indenture; or
modify any of the provisions of certain sections of the indenture,
including the provisions summarized in this paragraph, except to increase
any such percentage or to provide that certain other provisions of the
indenture cannot be modified or waived without the consent of the holder
of each outstanding debenture affected thereby.
DISCHARGE OF THE INDENTURE
We may satisfy and discharge our obligations under the indenture by
delivering to the trustee for cancellation all outstanding debentures or by
depositing with the trustee, the paying agent or the conversion agent, if
applicable, after the debentures have become due and payable, whether at stated
maturity, or any redemption date, or upon conversion or otherwise, cash or
common stock (as applicable under the terms of the indenture) sufficient to pay
all of the outstanding debentures and paying all other sums payable by us under
the indenture.
GOVERNING LAW
The indenture and the debentures are governed by and construed in accordance
with the laws of the State of New York.
28
BOOK-ENTRY SYSTEM
The debentures are represented by one or more global securities deposited on
behalf of DTC and registered in the name of Cede & Co., as nominee of DTC. Upon
resale of the debentures in accordance with the shelf registration statement,
beneficial interests in the global securities will be transferred from one or
more restricted global securities to one or more unrestricted global securities.
Except under circumstances described below, the debentures will not be issued in
definitive form. Ownership of beneficial interests in a global security is
limited to persons that have accounts with DTC or its nominee, which we refer to
as 'participants', or persons that may hold interests through participants.
Owners of beneficial interests in the debentures represented by the global
securities will hold their interests pursuant to the procedures and practices of
DTC. Ownership of beneficial interests in a global security is shown on, and the
transfer of that ownership is effected only through, records maintained by DTC
or its nominee (with respect to interests of persons other than participants).
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a global
security.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, are considered the sole owner or holder
of the debentures represented by that global security for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
security are not entitled to have debentures represented by that global security
registered in their names, will not receive or be entitled to receive physical
delivery of debentures in definitive form and are not considered the owners or
holders thereof under the indenture. Beneficial owners are not holders and are
not entitled to any rights provided to the holders of debentures under the
global securities or the indenture. Principal and interest payments, if any, on
debentures registered in the name of DTC or its nominee will be made to DTC or
its nominee, as the case may be, as the registered owner of the relevant global
security. Neither we, the trustee, any paying agent or the registrar for the
debentures have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial interests in a global
security or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest, if any, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the relevant global security as shown on the records of
DTC or its nominee. We also expect that payments by participants to owners of
beneficial interests in a global security held through such participants will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
'street name,' and will be the responsibility of such participants.
If we redeem less than all of the global security, we have been advised that
it is DTC's practice to determine by lot the amount of the interest of each
participant in the global security to be redeemed.
If DTC is at any time unwilling or unable to continue as a depositary and a
successor depositary is not appointed by us within 90 days or if an event of
default shall occur and be continuing under the indenture, we will issue
debentures in definitive form in exchange for the entire global security for the
debentures. In addition, we may at any time and in our sole discretion determine
not to have debentures represented by a global security and, in such event, will
issue debentures in definitive form in exchange for the entire global security
relating to such debentures. In any such instance, an owner of a beneficial
interest in a global security will be entitled to physical delivery in
definitive form of debentures represented by such global security equal in
principal amount to such beneficial interest and to have such debentures
registered in its name. Debentures so issued in definitive form will be issued
as registered debentures in denominations of $1,000 original principal amount
and integral multiples thereof, unless otherwise specified by us.
29
DESCRIPTION OF CAPITAL STOCK
The following is a summary of information concerning our capital stock. The
summaries and descriptions below do not purport to be complete statements of the
relevant provisions of our restated certificate of incorporation, as amended,
and our bylaws, and are entirely qualified by these documents, which you must
read for complete information on our capital stock, and which are incorporated
by reference as exhibits to the shelf registration statement.
COMMON SHARES
Shares Outstanding. We are authorized to issue up to 3,600,000,000 common
shares. At July 23, 2004 we had 1,267,801,735 common shares issued and
outstanding.
Dividends. Subject to prior dividend rights of the holders of any preferred
shares, holders of common shares are entitled to receive dividends when, as and
if declared by our Board of Directors out of funds legally available for that
purpose.
Voting Rights. Each common share is entitled to one vote on all matters
submitted to a vote of shareholders. Holders of the common shares do not have
cumulative voting rights. This means a holder of a single share of common stock
cannot cast more than one vote for each position to be filled on our board of
directors. It also means the holders of a majority of the shares of common stock
entitled to vote in the election of directors can elect all directors standing
for election and the holders of the remaining shares will not be able to elect
any directors.
Other Rights. In the event of any liquidation, dissolution or winding up of
the Company, after the satisfaction in full of the liquidation preferences of
holders of any preferred shares, holders of common shares are entitled to
ratable distribution of the remaining assets available for distribution to
shareholders. The common shares are not subject to redemption by operation of a
sinking fund or otherwise. Holders of common shares are not currently entitled
to pre-emptive rights.
Listing. Our outstanding shares of common stock are listed on the New York
Stock Exchange, Chicago Stock Exchange and Pacific Stock Exchange under the
symbol 'AXP.'
Fully Paid. The issued and outstanding common shares are fully paid and
nonassessable. This means the full purchase price for the outstanding shares of
common stock has been paid and the holders of such shares will not be assessed
any additional amounts for such shares. Any additional common shares that we may
issue in the future upon the conversion of the debentures will also be fully
paid and nonassessable.
PREFERRED SHARES
We are authorized to issue up to 20,000,000 preferred shares. At July 23,
2004 we had no preferred shares issued and outstanding.
RESTRICTIONS ON PAYMENT OF DIVIDENDS
We are incorporated in New York and are governed by New York law. New York
law allows a corporation to pay dividends only out of surplus, as determined
under New York law.
30
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
This is a summary of certain United States federal income tax considerations
relevant to a holder of the debentures and, where noted, the common stock
issuable upon a conversion of the debentures. All references to 'holders'
(including U.S. Holders and Non-U.S. Holders, as defined below) are to
beneficial owners of the debentures. The discussion below deals only with
debentures held as capital assets and does not purport to deal with persons in
special tax situations, including, for example, financial institutions,
insurance companies, regulated investment companies, dealers in securities or
currencies, traders in securities that elect to use a mark-to-market method of
accounting for securities holdings, tax exempt entities, persons holding
debentures in a tax-deferred or tax-advantaged account, or persons holding
debentures as a hedge against currency risk, as a position in a 'straddle', or
as part of a 'hedging' or 'conversion' transaction for tax purposes. Special
considerations apply to holders who purchase debentures in the secondary market
at a price other than their adjusted issue price, as described below.
This summary does not address all of the tax considerations that may be
relevant to a holder. In particular, we do not address:
the United States federal income tax consequences to shareholders in, or
partners or beneficiaries of, an entity that is a holder of debentures;
the United States federal estate, gift, or alternative minimum tax
consequences of the purchase, ownership, or disposition of debentures;
the tax considerations relevant to U.S. Holders whose functional currency
is not the United States dollar;
any state, local, or foreign tax consequences of the purchase, ownership,
or disposition of debentures; or
any tax consequences to U.S. Holders of owning or disposing of the common
stock.
This summary is based upon laws, regulations, rulings, interpretations, and
decisions now in effect, all of which are subject to change, possibly on a
retroactive basis. No rulings have been sought or are expected to be sought from
the Internal Revenue Service (which we refer to as the IRS) with respect to any
of the tax considerations discussed below. As a result, there is a possibility
that the IRS will disagree with the tax characterizations and tax consequences
described below.
PERSONS CONSIDERING THE PURCHASE OF THE DEBENTURES SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP, AND DISPOSITION OF THE DEBENTURES AND THE COMMON STOCK ISSUABLE UPON
A CONVERSION OF THE DEBENTURES IN THE LIGHT OF THEIR OWN PARTICULAR
CIRCUMSTANCES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF ANY CHANGES IN APPLICABLE TAX LAWS.
CLASSIFICATION OF THE DEBENTURES
We have been advised by our counsel, Cleary, Gottlieb, Steen & Hamilton,
that the debentures will be treated as indebtedness for United States federal
income tax purposes and that the debentures will be subject to the special
regulations governing contingent payment debt instruments (which we refer to as
the CPDI regulations), as described below. Moreover, pursuant to the terms of
the indenture, we and each holder of the debentures agree, for United States
federal income tax purposes, to treat the debentures as debt instruments that
are subject to the CPDI regulations with a 'comparable yield' calculated in the
manner described below.
U.S. HOLDERS
The following discussion is a summary of certain United Stated federal
income tax consequences that will apply to you if you are a citizen or resident
of the United States, a U.S. domestic corporation, or a person who is otherwise
subject to United States federal income tax on a net income basis in respect of
the debentures (a 'U.S. Holder').
Accrual of Interest on the Debentures. Pursuant to the CPDI regulations, a
U.S. Holder will be required to accrue interest income on the debentures, in the
amounts described below, regardless of whether the U.S. Holder uses the cash or
accrual method of tax accounting. Accordingly, U.S. Holders may be required to
include interest in taxable income in each year in excess of any interest
payments (whether fixed or contingent) actually received in that year.
31
The CPDI regulations provide that a U.S. Holder must accrue an amount of
ordinary interest income, as original issue discount for United States federal
income tax purposes, for each accrual period prior to and including the maturity
date of the debentures that equals:
the adjusted issue price (as defined below) of the debentures as of the
beginning of the accrual period;
multiplied by:
the comparable yield to maturity (as defined below) of the debentures,
adjusted for the length of the accrual period;
multiplied by:
the number of days during the accrual period that the U.S. Holder held the
debentures;
divided by:
the number of days in the accrual period.
The issue price of the debentures is the first price at which a substantial
amount of the debentures was sold to the public, excluding sales to bond houses,
brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers. The adjusted issue price of a
debenture is its issue price increased by any interest income previously
accrued, determined without regard to any adjustments to interest accruals
described below, and decreased by the projected amount of any payments
previously made with respect to the debenture.
The term 'comparable yield' means the annual yield we would have paid, as of
the initial issue date, on a fixed-rate nonconvertible debt security with no
contingent payments, but with terms and conditions otherwise comparable to those
of the debentures. We have determined that the comparable yield for the
debentures is an annual rate of 6.25%, compounded semi-annually.
The CPDI regulations require that we provide to U.S. Holders, solely for
United States federal income tax purposes, a schedule of the projected amounts
of payments on the debentures. These payments set forth on the schedule must
produce a total return on the debentures equal to the comparable yield. The
projected payment schedule includes both fixed coupon payments and estimated
payments of contingent interest, as well as an estimate for a payment at
maturity taking into account the fair market value of the common stock that
might be paid upon a conversion of the debentures.
Pursuant to the terms of the indenture, each holder of the debentures agrees
to use the comparable yield and the schedule of projected payments described
above in determining its interest accruals in respect of the debentures, and in
determining the adjustments thereto described below. The comparable yield and
the schedule of projected payments are set forth in the indenture. You may also
obtain the projected payment schedule by submitting a written request for such
information to the address set forth under 'Documents Incorporated by
Reference.'
THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE PROVIDED
SOLELY FOR THE CALCULATION OF A U.S. HOLDER'S INTEREST ACCRUALS AND ADJUSTMENTS
IN RESPECT OF THE DEBENTURES FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AND
DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION REGARDING THE ACTUAL AMOUNTS
THAT WILL BE PAYABLE ON THE DEBENTURES.
Amounts treated as interest under the CPDI regulations are treated as
original issue discount for United States federal income tax purposes.
Adjustments to Interest Accruals on the Debentures. If, during any taxable
year, a U.S. Holder receives actual payments with respect to the debentures that
in the aggregate exceed the total amount of projected payments for that taxable
year, the U.S. Holder will incur a 'net positive adjustment' under the CPDI
regulations equal to the amount of such excess. The U.S. Holder will treat a
'net positive adjustment' as additional interest income. For this purpose,
payments in a taxable year include the fair market value of common stock
received in that year pursuant to a conversion of the debentures.
If a U.S. Holder receives in a taxable year actual payments with respect to
the debentures that in the aggregate are less than the amount of projected
payments for that taxable year, the U.S. Holder will incur a 'net negative
adjustment' under the CPDI regulations equal to the amount of such deficit. This
adjustment will (i) reduce the U.S. Holder's interest income on the debentures
for that taxable year; and (ii) to the extent of any excess after the
application of (i), give rise to an ordinary loss to the extent of the U.S.
Holder's interest income on the debentures during prior taxable years that has
not been offset by prior net negative adjustments. Any
32
negative adjustment in excess of the amounts described in (i) and (ii) will be
carried forward, as a negative adjustment to offset future interest income in
respect of the debentures or to reduce the amount realized on a sale, exchange,
conversion, or retirement of the debentures.
Sale, Exchange, Conversion, or Redemption. Upon a sale, exchange, or
redemption of a debenture, a U.S. Holder generally will recognize gain or loss.
As described above, our calculation of the comparable yield and the schedule of
projected payments for the debentures includes the receipt of common stock upon
conversion as a contingent payment with respect to the debentures. Accordingly,
we intend to treat the receipt of common stock by a U.S. Holder upon the
conversion of a debenture as a payment under the CPDI regulations, which may
result in a net positive or negative adjustment as described above.
The amount of gain or loss recognized on a taxable sale, exchange, or
redemption will be equal to the difference between (i) the amount of cash plus
the fair market value of other property received by the U.S. Holder; and (ii)
the U.S. Holder's adjusted tax basis in the debenture. A U.S. Holder's adjusted
tax basis in a debenture will generally be equal to the U.S. Holder's original
purchase price for the debenture, increased by any interest income previously
accrued by the U.S. Holder (determined without regard to any adjustments to
interest accruals described above), and decreased by the amount of any projected
payments that have been previously scheduled to be made in respect of the
debenture (without regard to the actual amount paid). Gain recognized upon a
sale, exchange, or redemption of a debenture will generally be treated as
ordinary interest income; loss will be ordinary loss to the extent of interest
previously included in income, and thereafter capital loss (which will be
long-term capital loss if the debenture was held for more than one year). The
deductibility of net capital losses is subject to limitations.
A U.S. Holder's tax basis in our common stock received upon a conversion of
a debenture will equal the then current fair market value of such common stock.
The U.S. Holder's holding period for the common stock received will commence on
the day immediately following the date of conversion.
Constructive Dividends. The conversion rate for the debentures will be
adjusted in certain circumstances, including in the event of an increase to our
quarterly dividend rate, as described under 'Description of
Debentures -- Conversion Rights -- Conversion Rate Adjustments.' Such
adjustments (or failures to make adjustments) to the conversion rate that have
the effect of increasing your proportionate interest in our assets or earnings
may in some circumstances result in a deemed distribution to you,
notwithstanding the fact that you do not receive a cash payment. Any deemed
distribution will be taxable as a dividend, return of capital, or capital gain
in accordance with the tax rules applicable to corporate distributions, but may
not be eligible for the reduced rates of tax applicable to qualified dividend
income.
Purchase of Debentures at a Price Other than the Adjusted Issue Price. If a
U.S. Holder purchases a debenture in the secondary market for an amount that
differs from the adjusted issue price of the debentures at the time of purchase,
the regular rules for accruing premium and discount will not apply. Instead, the
U.S. Holder will be required to apply special accrual rules under the CPDI
regulations, pursuant to which the difference will be taken into account as a
series of positive or negative adjustments, at times that will vary based on
whether the difference is attributable to changed expectations regarding
projected payments in respect of the debentures or a change in market interest
rates. The rules for accounting for a difference between purchase price and
adjusted issue price are complex, and U.S. Holders who purchase debentures in
the secondary market for an amount that differs from the adjusted issue price
should consult their own tax advisors regarding the application of these rules
in their particular circumstances.
Backup Withholding Tax and Information Reporting. Payments of principal,
premium, if any, and interest (including original issue discount) on, and the
proceeds of dispositions of, the debentures may be subject to information
reporting and United States federal backup withholding tax if the U.S. Holder
thereof fails to supply an accurate taxpayer identification number or otherwise
fails to comply with applicable United States information reporting or
certification requirements. Any amounts so withheld will be allowed as a credit
against such U.S. Holder's United States federal income tax liability.
NON-U.S. HOLDERS
The following discussion is a summary of certain United States federal
income tax consequences that will apply to you if you are a Non-U.S. Holder of
the debentures or the common stock issuable upon a conversion of the debentures.
The term 'Non-U.S. Holder' means a beneficial owner of a debenture or share of
common stock that is not a U.S. Holder.
33
Payments with Respect to the Debentures. Payments on the debentures made to
a Non-U.S. Holder, including payments of stated and contingent interest and
payments in common stock pursuant to a conversion, and any gain realized on a
sale, exchange, or redemption of the debentures, will be exempt from United
States federal income or withholding tax, provided that:
such Non-U.S. Holder does not own, actually or constructively, 10% or more
of the total combined voting power of all classes of our stock entitled to
vote, and is not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership;
such Non-U.S. Holder certifies on IRS Form W-8BEN (or successor form),
under penalties of perjury, that it is not a United States person and
provides its name and address or otherwise satisfies applicable
documentation requirements;
such payments and gain are not effectively connected with the conduct by
such Non-U.S. Holder of a trade or business in the United States (or,
where a tax treaty applies, are attributable to a United States permanent
establishment); and
the debentures and common stock are actively traded within the meaning of
section 871(h)(4)(C)(v)(l) of the Code (which, for these purposes and
subject to certain exceptions, includes trading on the New York Stock
Exchange, or the 'NYSE').
If a Non-U.S. Holder of the debentures is engaged in a trade or business in
the United States, and if interest on the debentures is effectively connected
with the conduct of such trade or business, the Non-U.S. Holder, although exempt
from the withholding tax discussed in the preceding paragraph, will generally be
subject to regular United States federal income tax on interest and on any gain
realized on a sale, exchange, or redemption of the debentures in the same manner
as if it were a U.S. Holder. In lieu of the certificate described in the second
bullet point above, such a Non-U.S. Holder will be required to provide to the
withholding agent a properly executed IRS Form W-8ECI (or successor form) in
order to claim an exemption from withholding tax. In addition, if such a
Non-U.S. Holder is a foreign corporation, such holder may be subject to a branch
profits tax equal to 30% (or such lower rate provided by an applicable treaty)
of its effectively connected earnings and profits for the taxable year, subject
to certain adjustments.
Payments on Common Stock and Constructive Dividends. Any dividends paid to a
Non-U.S. Holder with respect to the common stock issuable upon a conversion of
the debentures (and any deemed dividends resulting from certain adjustments, or
failures to make adjustments, to the conversion rate as described under
' -- Constructive Dividends' above) will be subject to United States federal
gross income and withholding tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. However, dividends that are
effectively connected with the conduct of a trade or business within the United
States and, where a tax treaty applies, are attributable to a United States
permanent establishment, are not subject to the gross income and withholding
tax, but instead are subject to United States federal income tax on a net income
basis at applicable graduated individual or corporate rates. Such a Non-U.S.
Holder will be required to provide to the withholding agent a properly executed
IRS Form W-8ECI (or successor form) in order for effectively connected income to
be exempt from withholding tax. In addition, if such a Non-U.S. Holder is a
foreign corporation, it may be subject to the branch profits tax described in
the preceding paragraph.
Sale, Exchange, or Redemption of Common Stock. Any gain realized by a
Non-U.S. Holder upon a sale, exchange, or redemption of the common stock
issuable upon conversion of the debentures generally will not be subject to
United States federal income tax, unless:
the gain is effectively connected with the conduct of a trade or business
in the United States by the Non-U.S. Holder; or
the Non-U.S. Holder is an individual who is present in the United States
for 183 days or more in the taxable year of the disposition and certain
other conditions are met.
Backup Withholding Tax and Information Reporting. In general, a Non-U.S.
Holder will not be subject to backup withholding and information reporting with
respect to payments made by us on the debentures or the common stock issuable
upon a conversion of the debentures if the Non-U.S. Holder has provided us with
an IRS Form W-8BEN (or successor form) with respect to such payments. In
addition, no backup withholding will generally be required with respect to the
proceeds of a sale of debentures or common stock made within the United States
or conducted through certain United States financial intermediaries if the payor
receives such a form or the Non-U.S. Holder otherwise establishes an exemption.
34
SELLING SECURITYHOLDERS
The debentures were originally issued by us and sold to J.P. Morgan
Securities Inc., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Banc of America Securities LLC, Citigroup Global Markets Inc., BNP
Paribas Securities Corp., Tokyo-Mitsubishi International plc, Blaylock &
Partners, L.P. and Loop Capital Markets, LLC, which we refer to as the 'initial
purchasers,' and resold by the initial purchasers in transactions exempt from
the registration requirements of the Securities Act to persons reasonably
believed by the Initial Purchasers to be 'qualified institutional buyers' as
defined by Rule 144A under the Securities Act. The selling securityholders,
including their transferees, pledgees, donees, assignees or successors, may from
time to time offer and sell pursuant to this prospectus any or all of the
debentures listed below and the shares of common stock issued upon conversion of
the debentures.
Selling securityholders may be deemed to be 'underwriters' as defined in the
Securities Act. Any profits realized by the selling securityholders may be
deemed to be underwriting commissions.
The table below sets forth the name of each selling securityholder, the
principal amount of debentures that each selling securityholder owns and may
offer pursuant to this prospectus and the number of shares of common stock into
which those debentures are convertible. Unless set forth below, to the best of
our knowledge, none of the selling securityholders has, or within the past three
years has had, any material relationship with us or any of our predecessors or
affiliates or beneficially owns in excess of 1% of our outstanding common stock.
We have prepared the table below based on information received from the
selling securityholders on or prior to October 7, 2004. However, any or all of
the debentures or shares of common stock listed below may be offered for sale
pursuant to this prospectus by the selling securityholders from time to time.
Accordingly, no estimate can be given as to the amounts of debentures or shares
of common stock that will be held by the selling securityholders upon
consummation of any sales. In addition, the selling securityholders listed in
the table below may have acquired, sold or transferred, in transactions exempt
from the registration requirements of the Securities Act, some or all of their
debentures since the date as of which the information in the table is presented.
Information about the selling securityholders may change over time. Any
information about selling securityholders not included in the table below will
be set forth in post-effective amendments to the shelf registration statement.
From time to time, additional information concerning ownership of the debentures
and shares of common stock may rest with certain holders of the debentures not
named in the table below and of whom we are unaware.
AGGREGATE NUMBER OF
PRINCIPAL AMOUNT SHARES OF
OF DEBENTURES THAT PERCENTAGE COMMON STOCK PERCENTAGE OF
ARE OWNED AND OF DEBENTURES THAT MAY BE COMMON STOCK
NAME MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ----------- ----------- ------- --------------
1976 Distribution Trust FBO A.R.
Lauder/Zinterhofer................. 9,000 * 205 *
2000 Revocable Trust FBO A.R.
Lauder............................. 8,000 * 182 *
ACIG Insurance Company............... 800,000 * 18,211 *
Acuity Master Fund, Ltd.............. 6,050,000 * 137,719 *
Akela Capital Master Fund Ltd........ 15,000,000 * 341,453 *
Alcon 401 (K) Retirement Plan........ 1,200,000 * 27,316 *
Alcon Laboratories................... 465,000 * 10,585 *
Allstate Insurance Company (4)....... 1,000,000 * 22,764 *
Allstate Life Insurance Company
(4)................................ 3,500,000 * 79,672 *
AM Investment D Fund (QP) LP......... 2,400,000 * 54,632 *
AM Investment E Fund Ltd............. 12,800,000 * 291,373 *
AM Master Fund I LP.................. 11,400,000 * 259,504 *
American Long Term Care Reinsurance
Group c/o Income Research and
Management......................... 2,205,000 * 50,194 *
Amerisure............................ 550,000 * 12,520 *
Anspicis LTD......................... 150,000 * 3,415 *
Arapahoe County Colorado............. 58,000 * 1,320 *
(table continued on next page)
35
(table continued from previous page)
AGGREGATE NUMBER OF
PRINCIPAL AMOUNT SHARES OF
OF DEBENTURES THAT PERCENTAGE COMMON STOCK PERCENTAGE OF
ARE OWNED AND OF DEBENTURES THAT MAY BE COMMON STOCK
NAME MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ----------- ----------- ------- --------------
Argonaut Insurance................... 400,000 * 91,05 *
Arlington County Employees Retirement
System............................. 808,000 * 18,393 *
Asante Health Systems................ 120,000 * 2,732 *
Associated Electric & Gas Insurance
Services Limited................... 600,000 * 13,658 *
Attorney's Liability Assurance
Society c/o Income Research and
Management......................... 500,000 * 11,382 *
Aviva Life Insurance Co.............. 3,200,000 * 72,843 *
Banc of America Securities LLC (3)... 9,780,000 * 222,627 *
Barclay's Global Investors
Diversified Alpha Plus Funds....... 470,000 * 10,699 *
BCS Life Insurance Company........... 550,000 * 12,520 *
Beamtenversicherungskasse des Kantons
Zurich............................. 4,450,000 * 101,298 *
Bear Stearns International Limited
(4)................................ 7,500,000 * 170,726 *
Bear, Stearns & Co. Inc. (3)......... 22,500,000 1.13% 512,179 *
Bernische Lehrerversicherungskasse... 900,000 * 20,487 *
Black Diamond Convertible Offshore
LDC................................ 5,593,000 * 127,316 *
Black Diamond Offshore Ltd........... 3,500,000 * 79,672 *
Blue Cross Blue Shield of
Louisiana.......................... 600,000 * 13,658 *
British Virgin Islands Social
Security Board..................... 105,000 * 2,390 *
CGNU Life Fund....................... 2,600,000 * 59,185 *
CIBC World Markets(3)................ 785,000 * 17,869 *
Citadel Equity Fund Ltd.(4).......... 35,000,000 1.75% 796,723 *
Citadel Jackson Investment Fund
Ltd.(4)............................ 5,000,000 * 113,818 *
Citigroup Global Markets(3).......... 3,000,000 * 68,291 *
City and County of San Francisco
Retirement System.................. 1,782,000 * 40,565 *
City of New Orleans.................. 245,000 * 5,577 *
City of Southfield Fire and Political
Retirement System c/o Income
Research and Management............ 305,000 * 6,943 *
City University of New York.......... 181,000 * 4,120 *
CNH CA Master Account, L.P........... 1,000,000 * 22,764 *
Commercial Union Life Fund........... 3,100,000 * 70,567 *
Commonwealth Professional Assurance
Co. c/o Income Research and
Management......................... 875,000 * 19,918 *
Concord Hospital Employees Pension
Fund c/o Income Research and
Management......................... 225,000 * 5,122 *
Concord Hospital Non Pension Fund c/o
Income Research and Management..... 410,000 * 9,333 *
Conseco Insurance Company
Multi-Basket Annuity Convertible
Bond Fund (4)...................... 4,000,000 * 91,054 *
Context Convertible Arbitrage Fund
L.P................................ 3,900,000 * 88,778 *
Context Convertible Arbitrage
Offshore, LTD...................... 7,650,000 * 174,141 *
Continental Assurance Co. on behalf
of its separate account (4)........ 2,100,000 * 47,803 *
Continental Causualty Company (4).... 17,900,000 * 407,467 *
(table continued on next page)
36
(table continued from previous page)
AGGREGATE NUMBER OF
PRINCIPAL AMOUNT SHARES OF
OF DEBENTURES THAT PERCENTAGE COMMON STOCK PERCENTAGE OF
ARE OWNED AND OF DEBENTURES THAT MAY BE COMMON STOCK
NAME MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ----------- ----------- ------- --------------
Convertible Securities Fund.......... 15,000 * 341 *
CQS Convertible and Quantitative
Strategies Master Fund Ltd......... 20,000,000 1.00% 455,270 *
Credit Industriel D'Alsace et de
Lorraine........................... 15,000,000 * 341,453 *
Credit Lyonnais Securities (3)....... 18,500,000 * 421,125 *
Credit Suisse First Boston (3)....... 37,040,000 1.85% 843,160 *
Davidson Kempner Partners............ 1,390,400 * 31,650 *
Davidson Kempner Institutional
Partners........................... 2,354,600 * 53,599 *
Davidson Kempner International
Limited............................ 3,134,200 * 71,345 *
DBAG London (3)...................... 81,125,000 4.06% 1,846,689 *
Deephaven Domestic Convertible
Trading Limited (4)................ 39,360,000 1.97% 895,971 *
Delaware Public Employees Retirement
System............................. 1,871,000 * 42,591 *
Diaco Investments LP................. 2,800,000 * 63,738 *
Double Black Diamond Offshore LDC.... 17,816,000 * 405,555 *
Dylan IMA LTD........................ 10,000,000 * 227,635 *
Excellus Health Plan................. 4,450,000 * 101,298 *
Excellus Health Plan c/o Income
Research and Management............ 8,295,000 * 188,823 *
Excelsior Master Fund L.P............ 450,000 * 10,244 *
Family Service Life Insurance Co. (4) 200,000 * 4,553 *
Fidelity Financial Trust: Fidelity
Convertible Securities Fund (4).... 36,500,000 1.83% 830,868 *
Fidelity Financial Trust: Fidelity
Strategic Dividend and Income Fund
(4)................................ 1,800,000 * 40,974 *
Forest Multi-Strategy Master Fund
SPC................................ 1,161,000 * 26,428 *
FrontPoint Convertible Arbitrage
Fund, L.P.......................... 5,000,000 * 113,818 *
Gemene Sammelstiftung zur Forderung
der Personalvorsorge............... 220,000 * 5,008 *
Georgia Municipal Employees.......... 1,400,000 * 31,869 *
Global Bermuda Limited Partnership... 6,000,000 * 136,581 *
Goldman, Sachs & Co. (3)............. 95,500,000 4.78% 2,532,296 *
Government of Signapore Investment
Corporation Pte Ltd................ 3,000,000 * 68,291 *
Grable Foundation.................... 99,000 * 2,254 *
Grady Hospital Foundation............ 160,000 * 3,642 *
Growing Oak L.P...................... 550,000 * 12,520 *
Guardian Life Insurance Co. (4)...... 10,330,000 * 235,147 *
Guardian Life Insurance Co. (4)...... 1,830,000 * 41,657 *
Guardian Pension Trust (4)........... 700,000 * 15,934 *
Guggenheim Portfolio Co. XV, LLC..... 4,000,000 * 91,054 *
Hannover Life Reassurance Company of
America............................ 1,400,000 * 31,869 *
HBK Master Fund L.P. (4)............. 6,000,000 * 136,581 *
HFR CA Global Opportunity Master
Trust.............................. 125,000 * 2,845 *
HFR RVA Select Performance Master
Trust.............................. 173,000 * 3,938 *
Independence Blue Cross.............. 552,000 * 12,565 *
Inner Harbor Corporation............. 750,000 * 17,073 *
Innovest Finanzdienstle.............. 2,000,000 * 45,527 *
(table continued on next page)
37
(table continued from previous page)
AGGREGATE NUMBER OF
PRINCIPAL AMOUNT SHARES OF
OF DEBENTURES THAT PERCENTAGE COMMON STOCK PERCENTAGE OF
ARE OWNED AND OF DEBENTURES THAT MAY BE COMMON STOCK
NAME MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ----------- ----------- ------- --------------
Institutional Benchmark Management
Fund C/o Quattro Fund.............. 550,000 * 12,520 *
Jeffries Umbrella Fund Global
Convertible Bonds.................. 1,700,000 * 38,698 *
JP Morgan Securities Inc. (3) (4).... 9,285,000 * 211,359 *
KBC Financial Products USA Inc (3)... 2,500,000 * 56,909 *
KESA................................. 280,000 * 6,374 *
Lakeshore International, Ltd......... 24,000,000 1.20% 546,324 *
Lehman Brothers Inc. (3)............. 7,000,000 * 159,345 *
LLT Limited.......................... 298,000 * 6,784 *
Lydian Global Opportunities Master
Fund Ltd........................... 15,000,000 * 341,453 *
Lydian Overseas Partners Master Fund
LTD................................ 150,000,000 7.50% 3,414,525 *
Lyxor/AM Investment Fund Ltd......... 2,800,000 * 63,738 *
Lyxor/Context Fund Ltd (4)........... 3,400,000 * 77,396 *
Lyxor/Forest Fund Ltd................ 1,553,000 * 35,352 *
McMahan Securities Co. L.P. (3)...... 500,000 * 11,382 *
Med America Insurance Company........ 2,150,000 * 48,942 *
Med America Insurance of NY.......... 425,000 * 9,674 *
MedAmerica Insurance c/o Income
Research and Management............ 1,620,000 * 36,877 *
MedAmerica Insurance Co. Hartford
Trust c/o Income Research and
Management......................... 665,000 * 15,138 *
MedAmerica New York Insurance c/o
Income Research and Management..... 2,150,000 * 48,942 *
Medmarc Insurance.................... 550,000 * 12,520 *
Mellon HBV Master Convertible
Arbitrage Fund LP (4).............. 2,000,000 * 45,527 *
Mellon HBV Master Convertible
Fund LP (4)........................ 3,000,000 * 68,291 *
Mellon HBV Master Leveraged Multi-
Strategy Fund LP (4)............... 412,000 * 9,379 *
Mellon HBV Master Multi Strategy
Fund LP (4)........................ 1,883,000 * 42,864 *
Merrill Lynch, Pierce, Fenner &
Smith (3).......................... 41,678,000 2.08% 948,737 *
Merrill Lynch Insurance Group........ 383,000 * 8,718 *
Mint Master Fund LP.................. 500,000 * 11,382 *
Mint Master Fund Ltd................. 700,000 * 15,934 *
Morgan Stanley Convertible Securities
Trust (4).......................... 3,200,000 * 72,843 *
Municipal Employees.................. 310,000 * 7,057 *
Mutual Protective Insurance
Company............................ 800,000 * 18,211 *
National Bank of Canada c/o Putnam
Lovell NBE Securities Inc.(3)...... 5,000,000 * 113,818 *
National Bank of Canada (4).......... 1,500,000 * 34,145 *
Nations Convertible Securities
Fund............................... 14,385,000 * 327,453 *
New Orleans Firefighters
Pension/Relief Fund................ 149,000 * 3,392 *
Nicholas Applegate Capital Management
Investment Grade Convertible Mutual
Fund............................... 20,000 * 455 *
Nomura Securities International Inc.
(3)................................ 40,000,000 2.00% 910,540 *
(table continued on next page)
38
(table continued from previous page)
AGGREGATE NUMBER OF
PRINCIPAL AMOUNT SHARES OF
OF DEBENTURES THAT PERCENTAGE COMMON STOCK PERCENTAGE OF
ARE OWNED AND OF DEBENTURES THAT MAY BE COMMON STOCK
NAME MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ----------- ----------- ------- --------------
Norwich Union Life Pensions.......... 4,500,000 * 102,436 *
Oak Hill Contingent Capital Fund
Ltd................................ 10,500,000 * 239,017 *
Occidental Petroleum Corporation..... 328,000 * 7,466 *
Ohio Bureau of Workers
Compensation....................... 175,000 * 3,984 *
Oklahoma Attorneys Mutual Insurance
Co................................. 70,000 * 1,593 *
Oppenheimer Convertible Securities
Fund (4)........................... 5,500,000 * 125,199 *
Pacific Life Insurance Company....... 1,000,000 * 22,764 *
Park Avenue Life Insurance Co........ 100,000 * 2,276 *
Pennington Biomedical Research
Foundation......................... 70,000 * 1,593 *
Pensionskasse der Antalis AG......... 60,000 * 1,366 *
Pensionskasse der EMS-Chemie AG...... 80,000 * 1,821 *
Pensionskasse der EMS-Dottikon AG.... 110,000 * 2,504 *
Pensionskasse der Lonza AG........... 150,000 * 3,415 *
Pensionskasse der Rockwell
Automation AG...................... 80,000 * 1,821 *
Pensionskasse Pluss-Staufer AG....... 60,000 * 1,366 *
Pensionskasse Vantico................ 120,000 * 2,732 *
Personalfursorgestiftung der
Gebaudeversicherung des Kantons
Bern............................... 220,000 * 5,008 *
Personalvorsorge der PV Promea....... 200,000 * 4,553 *
Plexus Fund Limited.................. 55,000,000 2.75% 1,251,993 *
Policeman and Firemen Retirement
System of the City of Detroit...... 400,000 * 9,105 *
Polygon Global Opportunities Master
Fund............................... 20,000,000 1.00% 455,270 *
President and Fellows of Harvard
College............................ 30,000,000 1.50% 682,905 *
Privilege Portfolio SICAV............ 3,300,000 * 75,120 *
Pro-Mutual........................... 1,055,000 * 24,015 *
Public Employees' Retirement
Association of Colorado............ 1,000,000 * 22,764 *
Quattro Fund Ltd..................... 12,323,000 * 280,515 *
Quattro Multistrategy Masterfund
LP................................. 822,000 * 18,712 *
R2 Investments, LDC (4).............. 2,000,000 * 45,527 *
Ramius Capital Group (4)............. 1,000,000 * 22,764 *
Ramius Master Fund, Ltd. (4)......... 10,000,000 * 227,635 *
Ramius Partners II, LP (4)........... 300,000 * 6,829 *
Ramius, LP (4)....................... 250,000 * 5,691 *
RCG Baldwin, LP (4).................. 1,000,000 * 22,764 *
RCG Latitude Master Fund, Ltd. (4)... 17,950,000 * 408,605 *
RCG Multi-Strategy Master Fund,
Ltd. (4)........................... 5,000,000 * 113,818 *
Relay 11 Holdings Co................. 202,000 * 4,598 *
Royal Bank of Canada (Norshield)
(4)................................ 1,150,000 * 26,178 *
S.A.C. Capital Associates, LLC....... 25,000,000 1.25% 569,088 *
San Francisco Employee's Retirement
System............................. 2,500,000 * 56,909 *
Satellite Convertible Arbitrage
Master Fund, LLC................... 11,000,000 * 250,399 *
Scor Life Re......................... 670,000 * 15,252 *
Serena Limited....................... 120,800 * 2,750 *
Sphinx Convertible Arbitrage Fund
SPC................................ 640,000 * 14,569 *
(table continued on next page)
39
(table continued from previous page)
AGGREGATE NUMBER OF
PRINCIPAL AMOUNT SHARES OF
OF DEBENTURES THAT PERCENTAGE COMMON STOCK PERCENTAGE OF
ARE OWNED AND OF DEBENTURES THAT MAY BE COMMON STOCK
NAME MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ----------- ----------- ------- --------------
Sphinx Convertible Arbitrage SPC..... 202,000 * 4,598 *
State of Georgia c/o Income Research
and Management..................... 985,000 * 22,422 *
State of Maryland Retirement
Agency............................. 3,864,000 * 87,958 *
State of Mississippi Health Care
Trust Fund......................... 600,000 * 13,658 *
Swiss Re Financial Products
Corporation........................ 45,000,000 2.25% 1,024,358 *
Teachers Insurance and Annuity Ass
ociation of America................ 22,500,000 1.13% 512,179 *
The Dotor's Company.................. 2,200,000 * 50,080 *
Thrivent Financial for Lutherans
(4)................................ 9,000,000 * 204,872 *
TQA Master Plus Fund, Ltd............ 250,000 * 5,691 *
Transamerica Life Insurance and
Annuities Corp (4)................. 20,000,000 1.00% 455,270 *
Tribeca Investments, Ltd............. 20,000,000 1.00% 4,552,70 *
Trustmark Insurance.................. 300,000 * 6,829 *
Tufts Associated Health Plan c/o
Income Research and Management..... 2,490,000 * 56,681 *
UBS AG London Branch F/B/O Credit
Derivatives (4).................... 285,000,000 14.25% 6,487,598 *
Umass Memorial Health Care c/o Income
Research and Management............ 410,000 * 9,333 *
Umass Memorial Investment Partnership
c/o Income Research and
Management......................... 435,000 * 9,902 *
Universal Investment Gesellschaft
MBH, Ref Aventis................... 1,000,000 * 22,764 *
University of Massachussetts c/o
Income Research and Management..... 300,000 * 6,829 *
Univest Convertible Arbitrage Fund II
Ltd (Norshield).................... 650,000 * 14,796 *
Wachovia Capital Markets LLC (3)..... 2,950,000 * 67,152 *
Wachovia Capital Markets LLC (3)..... 500,000 * 11,382 *
Wachovia Securities International
LTD (4)............................ 5,000,000 * 113,818 *
Waterstone Market Neutral Fund, LP... 1,173,000 * 26,702 *
Waterstone Market Neutral MAC 51,
Ltd................................ 1,433,000 * 32,620 *
Waterstone Market Neutral Offshore
Fund, Ltd.......................... 5,894,000 * 134,168 *
White River Securities LLC (3)....... 22,500,000 1.13% 512,179 *
Windmill Master Fund, LP............. 15,000,000 * 341,453 *
Worldwide Transactions Ltd........... 591,000 * 13,453 *
Xavex Convertible Arbitrage 4 Fund... 163,000 * 3,710 *
Xavex Convertible Arbitrage 5 Fund... 1,500,000 * 34,145 *
Zurich Institutional Benchmarks
Master Fund Ltd.................... 653,000 * 14,865 *
All other holders of debentures or
future transferees, pledges,
donees, assignees or successors of
any such holders (5)(6)............ 306,825,000 15.34% 6,626,029 0.52%
Total................................ 2,000,000,000 100% 45,527,000 3.47%
---------
* Less than 1%.
(1) Assumes conversion of all of the holder's debentures at the maximum
conversion rate of 22.7635 shares of common stock per $1,000 principal
amount of debentures. This conversion rate is subject to adjustment,
(footnotes continued on next page)
40
(footnotes continued from previous page)
however, as described under 'Description of the Debentures -- Conversion
Rights -- Conversion Rate Adjustments.' As a result, the number of shares of
common stock issuable upon conversion of the debentures may increase or
decrease in the future.
(2) Calculated based on Rule 13d-3(d)(1)(i) of the Exchange Act, using
1,267,801,735 shares of common stock outstanding as of July 23, 2004. In
calculating this amount for each holder, we treated as outstanding the
number of shares of common stock issuable upon conversion of all of that
holder's debentures, but we did not assume conversion of any other holder's
debentures.
(3) This selling securityholder has identified itself as a registered
broker-dealer. Please see 'Plan of Distribution' for disclosure regarding
this selling securityholder.
(4) This selling securityholder is an affiliate of a broker-dealer.
(5) Information about other selling securityholders will be set forth in
post-effective amendments to the shelf registration statement.
(6) Assumes that any other holders of debentures, or any future pledgees,
donees, assignees, transferees or successors of or from any other holders of
debentures, do not beneficially own any shares of common stock other than
the common stock issuable upon conversion of the debentures at the maximum
conversion rate. Only holders who acquired their debentures pursuant to our
November 21, 2003 private placement, and their transferees, pledgees, donees
or successors, may sell debentures or the common shares issuable upon
conversion pursuant to this shelf registration statement.
41
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended, which we
refer to as 'ERISA,' imposes certain fiduciary requirements with respect to
'employee benefit plans' (as defined in Section 3(3) of ERISA) that are subject
to the fiduciary responsibility provisions of ERISA. Other provisions of ERISA
and Section 4975 of the Internal Revenue Code prohibit certain transactions
involving the assets of an employee benefit plan or a plan described in Section
4975(e)(1) of the Internal Revenue Code (including individual retirement
accounts, individual retirement annuities and Keogh plans) that are subject to
Section 4975 of the Internal Revenue Code, which we refer to as 'plans,' and
persons who have certain specified relationships to the plan ('parties in
interest' within the meaning of ERISA or 'disqualified persons' within the
meaning of Section 4975 of the Internal Revenue Code). Governmental plans and
certain church plans (each as defined under ERISA), while not subject to the
fiduciary responsibility provisions of ERISA or the provisions of Section 4975
of the Internal Revenue Code, may nevertheless be subject to local, state or
other federal laws that are substantially similar to the foregoing provisions of
ERISA and the Internal Revenue Code.
We, directly or through our affiliates, may be considered a party in
interest or a disqualified person with respect to plans. The purchase and
holding of the debentures, or the shares of common stock into which the
debentures are convertible, and any conversion of the debentures, by a plan (or
any other entity whose assets include plan assets that is subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of Section 4975 of the Internal Revenue Code) and with respect to
which we or any of our affiliates are a service provider (or otherwise is a
party in interest or a disqualified person) may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Internal Revenue Code,
unless the debentures or the shares of common stock are acquired and held and
the debentures are converted pursuant to and in accordance with an applicable
exemption. Certain exemptions from the prohibited transaction provisions of
Section 406 of ERISA and Section 4975 of the Internal Revenue Code may be
applicable, depending in part on the type of plan fiduciary making the decision
to acquire the debentures and the circumstances under which such decision is
made. Included among these exemptions are Prohibited Transaction Class Exemption
('PTCE') 84-14 (for certain transactions engaged in by an independent qualified
professional asset manager), PTCE 91-38 (for certain transactions involving bank
collective investment funds), PTCE 90-1 (for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (for certain
transactions involving insurance company general accounts) and PTCE 96-23 (for
certain transactions engaged in by an in-house asset manager).
By its purchase of the debentures or the shares of common stock into which
the debentures are convertible, each holder will be deemed to have represented
and warranted on each day from and including the date of its purchase of the
debentures or the shares of common stock through and including the date of
disposition of such debentures or common stock either (i) that is not a plan, a
governmental plan, church plan or an entity the assets of which are deemed to be
'plan assets' under ERISA regulations, or (ii) that the acquisition, holding and
disposition of the debentures or shares of common stock on conversion of the
debentures by such holder does not and will not constitute a prohibited
transaction under ERISA or Section 4975 of the Internal Revenue Code (or, in the
case of a governmental plan or church plan, any substantially similar law)
unless an exemption is available with respect to such transactions and the
conditions of such exemption have been satisfied.
The discussion herein of ERISA is general in nature and is not intended to
be all-inclusive. Any plans, governmental plans, church plans or other entities
whose assets include plan assets subject to ERISA, Section 4975 of the Internal
Revenue Code or substantially similar federal state or local law should consult
with their advisors and/or counsel regarding the consequences of an investment
in the debentures or the shares of common stock. Purchasers of the debentures or
the shares of common stock are solely responsible for ensuring that their
purchase, holding and transfer or disposition of the debentures or the shares of
common stock does not involve a prohibited transaction, improper delegation of
fiduciary responsibility or any similar breach of rules or terms applicable to
the purchaser.
42
PLAN OF DISTRIBUTION
We are registering the debentures and shares of common stock covered by this
prospectus to permit holders to conduct public secondary trading of these
securities from time to time after the date of this prospectus. We have agreed,
among other things, to bear all expenses, other than underwriting discounts and
selling commissions, in connection with the registration and sale of the
debentures and the shares of common stock covered by this prospectus. We
estimate these expenses to be approximately $453,400.
We will not receive any of the proceeds from the offering of debentures or
the shares of common stock by the selling securityholders. The debentures and
the shares of our common stock issuable upon conversion of the debentures may be
offered and sold from time to time by the selling securityholders. The term
'selling securityholders' includes transferees, pledgees, donees or other
successors selling debentures and shares of our common stock issuable upon
conversion of the debentures received after the date of this prospectus from a
selling securityholder as a gift, pledge or partnership distribution. The
selling securityholders will act independently of us in making decisions with
respect to the timing, manner and size of each sale. If the debentures and the
shares of our common stock issuable upon conversion of the debentures are sold
through underwriters, broker-dealers or agents, the selling securityholders will
be responsible for underwriting discounts or commissions or agent's commissions.
The debentures and the common stock may be sold from time to time in one or
more transactions at:
fixed prices;
prevailing market prices at the time of sale;
varying prices determined at the time of sale; or
negotiated prices.
These prices will be determined by the holders of the securities or by
agreement between these holders and underwriters or dealers who may receive
fees, concessions or commissions in connection with the sale. The aggregate
proceeds to the selling securityholders from the sale of the debentures or
shares of common stock offered by them hereby will be the purchase price of the
debentures or shares of common stock less discounts and commissions, if any.
The sales described in the preceding paragraph may be effected in
transactions:
on any national securities exchange or quotation service on which the
debentures and common stock may be listed or quoted at the time of sale,
including the NYSE in the case of the common stock;
in the over-the-counter market;
in transactions otherwise than on those exchanges or services or in the
over-the-counter market; or
through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
The selling securityholders may pledge the debentures and the shares of our
common stock issuable upon conversion of the debentures to a broker-dealer or
other financial institution, and, upon a default, such broker-dealer or other
financial institution may effect sales of the pledged debentures and the shares
of our common stock issuable upon conversion of the debentures pursuant to this
prospectus, as supplemented or amended.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the debentures and the shares of
common stock by the selling securityholders. Selling securityholders may decide
not to sell any of the debentures and the shares of common stock issuable upon
conversion of the debentures offered by them pursuant to this prospectus. In
addition, a selling securityholder may transfer, devise or gift the debentures
and the shares of common stock issuable upon conversion of the debentures by
other means not described in this prospectus, in which case the transferees,
pledgees or other successors in interest will be the selling securityholders for
purposes of this prospectus. In addition, any securities covered by this
prospectus that qualify for sale pursuant to Rule 144 or Rule 144A under the
Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to
this prospectus.
The outstanding shares of common stock are listed for trading on the NYSE
under the symbol 'AXP.'
43
The selling securityholders and any underwriters, broker-dealers or agents
that participate with the selling securityholders in the distribution of the
debentures or the shares of common stock may be deemed to be 'underwriters'
within the meaning of the Securities Act. In this case, any discounts,
concessions, commissions or agent's commissions received by these
broker-dealers, agents or underwriters and any profit on the resale of the
debentures or the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. In addition, any
profits realized by the selling securityholders may be deemed to be underwriting
commissions. Underwriters are subject to certain statutory liabilities,
including, but not limited to, Sections 11, 12 and 17 of the Securities Act and
Rule 10b-5 under the Exchange Act.
Several of the selling securityholders are identified as registered
broker-dealers in the selling securityholder table under the 'Selling
Securityholders' section and, as a result, may be deemed to be underwriters in
connection with the sale of the debentures or the underlying common stock.
If the debentures and the underlying common stock are sold through
underwriters, broker-dealers or agents, the selling securityholders will be
responsible for underwriting discounts or commissions or agent's commissions.
Each of the selling securityholders that is a registered broker-dealer or an
affiliate of a registered broker-dealer has represented to us, and by its use of
this prospectus repeats such representation to you, that it purchased its
debentures in the ordinary course of business and at the time of such purchase
had no direct or indirect agreements or understandings with any person to
distribute such debentures or common shares issuable upon conversion of such
debentures.
The debentures were issued and sold in November 2003 in transactions exempt
from the registration requirements of the Securities Act to persons reasonably
believed by the Initial Purchasers to be 'qualified institutional buyers,' as
defined by Rule 144A under the Securities Act. We have agreed to indemnify each
selling securityholder, including the initial purchasers, and each selling
securityholder's directors, officers, employees, affiliates, agents and each
person, if any, who controls that selling securityholder within the meaning of
either the Securities Act or the Exchange Act against, or contribute to payments
that may be required because of, specified liabilities arising under the
Securities Act, the Exchange Act or other applicable law. Each selling
securityholder including the initial purchasers has agreed to indemnify us, our
directors, each of our officers who has signed this registration statement and
each person, if any, who controls us within the meaning of either the Securities
Act or the Exchange Act, against, or contribute to payments that may be required
because of, specified liabilities arising under the Securities Act, the Exchange
Act or other applicable law.
The selling securityholders and any other person participating in a
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the debentures and the underlying shares of common
stock by the selling securityholders and any such other person. In addition,
Regulation M under the Exchange Act may restrict the ability of any person
engaged in the distribution of the debentures and the underlying shares of
common stock to engage in market-making activities with respect to the
debentures and the underlying shares of common stock being distributed for a
period of up to five business days prior to the commencement of the
distribution. This may adversely affect the market for the debentures and the
underlying shares of common stock.
We will use our reasonable efforts to keep the shelf registration statement
effective until the earlier of:
the sale pursuant to Rule 144 under the Securities Act or the shelf
registration statement of all the securities registered thereunder; and
the expiration of the holding period applicable to such securities held by
persons that are not affiliates of ours under Rule 144(k) under the
Securities Act or any successor provision (assuming such securities were
never acquired by us or any of our affiliates and resold subsequent to the
date of original issuance of the debentures).
We will be permitted to suspend the availability of the shelf registration
statement and this prospectus during specified periods (not to exceed 120 days
in the aggregate in any 12 month period) in specified circumstances, including
circumstances relating to pending corporate developments, in our discretion. In
these cases, we may prohibit offers and sales of debentures and shares of common
stock pursuant to the shelf registration statement.
44
Prior to the private placement of the debentures, there was no trading
market for the debentures. Although the initial purchasers when the debentures
were initially issued advised us that they intended to make a market in the
debentures, they are not obligated to do so and may discontinue market-making
activities at any time without notice. In addition, their market-making
activities will be subject to limits imposed by the Securities Act and the
Exchange Act and may be limited during the pendency of the shelf registration
statement. Although the debentures issued in the private placement are eligible
for trading on the PORTAL Market, debentures sold using this prospectus will no
longer be eligible for trading in the PORTAL Market. We have not listed, and do
not intend to list, the debentures on any securities exchange or automated
quotation system. We cannot assure you that any market for the debentures will
develop or be sustained. If an active market is not developed or sustained, the
market price and liquidity of the debentures may be adversely affected.
VALIDITY OF SECURITIES
The validity of the debentures offered hereby and the shares of common stock
issuable upon conversion of the debentures has been passed upon for us by Louise
M. Parent, Esq., our Executive Vice President and General Counsel.
EXPERTS
The consolidated financial statements of American Express Company
incorporated by reference in the American Express Company 2003 10-K Report, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein, and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
45
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We are paying all of the selling securityholders' expenses related to this
offering, except that the selling securityholders will pay any applicable
underwriting and broker's commissions and expenses. The following table sets
forth the approximate amount of fees and expenses payable by us in connection
with this registration statement and the distribution of the debentures and
shares of common stock registered hereby. All of the amounts shown are estimates
except the SEC registration fee.
SEC registration fee........................................ $253,400
Accountant's Fees and Expenses.............................. 50,000
Attorneys' Fees and Expenses................................ 50,000
Printing and engraving expenses............................. 50,000
Miscellaneous............................................... 50,000
--------
Total................................................... $453,400
--------
--------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VI of the Registrant's By-laws, as amended, provides as follows:
SECTION 6.1 -- The corporation shall, to the fullest extent permitted by
applicable law as the same exists or may hereafter be in effect, indemnify any
person who is or was or has agreed to become a director or officer of the
corporation and who is or was made or threatened to be made a party to, and may,
in its discretion, indemnify, any person who is or was or has agreed to become a
director or officer and is otherwise involved in, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
legislative or investigative, including an action by or in the right of the
corporation to procure a judgment in its favor and an action by or in the right
of any other corporation of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
which such person is serving or has served or has agreed to serve in any
capacity at the request of the corporation, by reason of the fact that he is or
was or has agreed to become a director or officer of the corporation, or is or
was serving or has agreed to serve such other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid or to be paid in settlement, penalties,
costs, charges and expenses, including attorneys' fees, incurred in connection
with such action or proceeding or any appeal thereof; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes (i) that his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled. The benefits of this Section 6.1
shall extend to the heirs, executors, administrators and legal representatives
of any person entitled to indemnification under this Section.
SECTION 6.2 -- The Board in its discretion may authorize the corporation to
indemnify any person, other than a director or officer, for expenses incurred or
other amounts paid in any civil or criminal action, suit or proceeding, to which
such person was, or was threatened to be made a party by reason of the fact that
he, his testator or intestate is or was an employee of the corporation.
SECTION 6.3 -- The corporation may indemnify any person to whom the
corporation is permitted by applicable law or these by-laws to provide
indemnification or the advancement of expenses, whether pursuant to the rights
granted pursuant to, or provided by, the New York Business Corporation Law or
any other law or these by-laws or other rights created by (i) a resolution of
shareholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these by-laws
authorize the creation of other rights in any such manner. The right to be
indemnified and to the reimbursement or advancement of expenses incurred in
defending a proceeding in advance of its final disposition authorized by the
Section 6.3, shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of the certificate of
incorporation, by-laws, agreement, vote of shareholders or disinterested
directors or otherwise.
II-1
SECTION 6.4 -- The right to indemnification conferred by Section 6.1, and
any indemnification extended under Section 6.3, (i) is a contract right pursuant
to which the person entitled thereto may bring suit as if the provisions thereof
were set forth in a separate written contract between the corporation and such
person, (ii) is intended to be retroactive to events occurring prior to the
adoption of this Article VI, to the fullest extent permitted by applicable law;
and (iii) shall continue to exist after the rescission or restrictive
modification thereof with respect to events occurring prior thereto.
With certain limitations, a director or officer of a corporation organized
under the New York Business Corporation Law is entitled to indemnification by
the corporation against reasonable expenses, including attorneys fees, incurred
by him in connection with the defense of a civil or criminal proceeding to which
he has been made, or has threatened to be made, a party by reason of the fact
that he was such director or officer. In certain circumstances, indemnity is
provided against judgments, fines and amounts to be paid in settlement. Specific
court approval is required in some cases. The foregoing is subject to the
detailed provisions of the New York Business Corporation Law.
In addition, the Registrant has purchased insurance policies which provide
coverage for its directors and officers in certain situations where the
Registrant cannot directly indemnify such directors or officers.
Reference is made to Section 6 of the Registration Rights Agreement filed as
Exhibit 4(d) to this registration statement, pursuant to which the selling
securityholders have agreed to indemnify officers and directors of the
Registrant against specified liabilities arising under the Securities Act, the
Exchange Act, or other applicable law.
For the undertaking with respect to indemnification, see Item 17 below.
ITEM 16. EXHIBITS.
The 'Exhibit Index' on page II-6 is hereby incorporated by reference.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the 'Calculation of Registration Fee' table
in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to the information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered in this
prospectus, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering thereof.
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(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 15 above
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this post-effective
amendment number three to the Registration Statement on Form S-3 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the eighth day of October, 2004.
AMERICAN EXPRESS COMPANY
By /s/ GARY CRITTENDEN
............................
GARY CRITTENDEN
(AS ATTORNEY-IN-FACT)
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment number one to the registration statement has been
signed by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman, Chief Executive Officer October 8, 2004
......................................... and Director
KENNETH I. CHENAULT
* Executive Vice President and Chief October 8, 2004
......................................... Financial Officer
GARY CRITTENDEN
* Senior Vice President and October 8, 2004
......................................... Comptroller (Chief Accounting
JOAN LORDI AMBLE Officer)
* Director October 8, 2004
.........................................
DANIEL F. AKERSON
Director October 8, 2004
.........................................
CHARLENE BARSHEFSKY
* Director October 8, 2004
.........................................
WILLIAM G. BOWEN
Director October 8, 2004
.........................................
URSULA M. BURNS
* Director October 8, 2004
.........................................
PETER R. DOLAN
* Director October 8, 2004
.........................................
VERNON E. JORDAN, JR.
* Director October 8, 2004
.........................................
JAN LESCHLY
* Director October 8, 2004
.........................................
RICHARD MCGINN
* Director October 8, 2004
.........................................
EDWARD D. MILLER
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SIGNATURE TITLE DATE
--------- ----- ----
* Director October 8, 2004
.........................................
FRANK P. POPOFF
* Director October 8, 2004
.........................................
ROBERT D. WALTER
*By /s/ GARY CRITTENDEN October 8, 2004
.........................................
*GARY CRITTENDEN
(AS ATTORNEY-IN-FACT)
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3(a) --Registrant's Restated Certificate of Incorporation, dated
May 29, 1997, as amended to date (incorporated by reference
to Exhibit 4.1 of the Registrant's Registration Statement on
Form S-3 (File No. 333-32525), filed with the Commission on
July 31, 1997)
3(b) --Registrant's Certificate of Amendment of the Certificate of
Incorporation (incorporated by reference to Exhibit 3.1 of
the Registrant's Quarterly Report on Form 10-Q (Commission
File No. 1-7657) for the quarter ended March 31, 2000
3(c) --Registrant's By-laws, as amended (incorporated by reference
to Exhibit 99.2B of the Registrant's Current Report on
Form 8-K (Commission File No. 1-7657) dated November 26,
2001.
4(a)*--Indenture, dated as of November 21, 2003, between the
Registrant and U.S. Bank National Association, as trustee,
pursuant to which the Debentures are being issued
4(b)*--Form of 1.85% Convertible Senior Debentures due 2033
(included in Exhibit 4(a))
4(c) --Form of Common Share Certificate (incorporated by reference
to Exhibit 4.2 to the Registrant's Registration Statement on
Form 8-K/A Amendment No. 1 (Commission File No. 1-7657))
4(d)*--Registration Rights Agreement, dated as of November 21, 2003
between the Registrant and J.P. Morgan Securities Inc.,
Lehman Brothers, Inc. and Merrill Lynch, Pierce, Fenner &
Smith, Incorporated, as representative of the initial
purchasers named therein
5* --Opinion of Louise M. Parent, Esq
8* --Opinion of Cleary, Gottlieb, Steen & Hamilton as to certain
U.S. federal income tax matters
12 --Computation in support of ratios of earnings to fixed
charges with respect to the years ended December 31, 1999
through 2003 (incorporated by reference to Exhibit 12 to the
Registrant's annual report on From 10-K for the fiscal year
ended December 31, 2003)
15* --Consent of Ernst & Young, LLP incorporated by reference to
Exhibit 15 of the Registrant's Quarterly Report on Form 10-Q
(Commission File No. 1-7657) for the quarter ended
March 31, 2004.
23(a)*--Consent of Ernst & Young, LLP
23(b)*--Consent of Counsel (included in Exhibit 5)
23(c)*--Consent of Cleary, Gottlieb, Steen & Hamilton (included in
Exhibit 8)
24* --Power of Attorney
25* --Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of U.S. Bank National
Association
---------
* Previously filed.
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