What is the primary purpose of the 2006 Pay-for-Performance Deferral Program?

The primary purpose is to allow eligible senior-level employees to defer a portion of their 2006 compensation, including base salary and bonuses, as a performance-incentive measure. The deferred amounts' growth is tied to the company's financial performance, specifically its Return on Equity (ROE).

How is the growth of deferred amounts determined under the program?

Deferred amounts accrue interest equivalents annually, based on American Express's reported annual Return on Equity (ROE). The rate ranges from 0% (if ROE is between 10% and 14%) up to a maximum of 14% (if ROE is 35% or more). If ROE is 10% or less, the value of the deferred account is reduced by the ROE less 11%.

What are the conditions for payout of deferred amounts?

Generally, deferred amounts must be held for at least five years. Payouts occur at the end of the deferral period, or earlier upon retirement, disability, or death. In cases of termination (other than retirement, disability, or death) before the five-year mark, the payout is a lump sum based on the lesser of the ROE-based rate or the rate of return on a five-year U.S. Treasury note. Payouts may also be accelerated upon a change in control of the company. A six-month delay is required for payments following termination or retirement due to the AJCA.

Are there any limits on how much an employee can defer?

Yes, generally, the maximum total amount that a participant may defer from all eligible sources under the 2006 Deferral Program is limited to one times their base salary for the 2006 performance year.

AXP 8-K: Material Agreements

Summary

This 8-K filing from American Express Company (AXP) on November 23, 2005, details the approval of the 2006 Pay-for-Performance Deferral Program by the Compensation and Benefits Committee. This program allows eligible senior employees to defer a portion of their 2006 base salary, bonuses, or Portfolio Grant-XV awards. The deferral amounts are subject to a maximum of one times base salary and are linked to the company's annual Return on Equity (ROE) for interest crediting, with a range from 0% to 14% depending on ROE performance. Provisions are in place for forfeiture and payout in specific scenarios, including termination of employment and change in control.

Key Highlights

1American Express Company has established a 2006 Pay-for-Performance Deferral Program for eligible senior employees.
2The program allows deferral of 2006 base salary, cash bonus, or Portfolio Grant-XV award payouts.
3A maximum of one times base salary can be deferred by participants.
4Deferred amounts earn interest equivalents based on American Express's annual Return on Equity (ROE), ranging from 0% to 14%.
5A minimum deferral period of five years is generally required, with specific payout conditions for termination, retirement, disability, and death.
6Payouts may be accelerated upon a change in control of the company.
7The program is administered in compliance with the American Jobs Creation Act of 2004 (AJCA) and Section 162(m) of the U.S. Internal Revenue Code.

AMERICAN EXPRESS CO 8-K Report, Material Agreement (Nov 23, 2005)

Summary

Key Highlights

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