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AMP_2005_10K AMP_2005_10K Document Transcript

  • UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2005 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission file number 1-32525 AMERIPRISE FINANCIAL, INC. (Exact name of registrant as specified in its charter) Delaware 13-3180631 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 55 Ameriprise Financial Center Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (612) 671-3131 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $.01 per share The New York Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value, as of February 28, 2006, of voting shares held by non-affiliates of the registrant was approximately $11.4 billion. (The registrant’s shares were not publicly traded on June 30, 2005, the last business day of the registrant’s most recently completed second fiscal quarter.) Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Class Outstanding at February 28, 2006 Common Stock, par value $.01 per share 250,648,428 shares DOCUMENTS INCORPORATED BY REFERENCE Parts I, II and IV: Portions of the registrant’s 2005 Annual Report to Shareholders (“2005 Annual Report to Shareholders”).
  • Part III: Portions of the registrant’s Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on April 26, 2006, which will be filed not later than April 30, 2006 (i.e., within 120 days after the close of the registrant’s last fiscal year, pursuant to Regulation 14A) (“Proxy Statement”).
  • AMERIPRISE FINANCIAL, INC. FORM 10-K INDEX Page No. Part I. Item 1. Business 1 Item 1A. Risk Factors 31 Item 1B. Unresolved Staff Comments 42 Item 2. Properties 42 Item 3. Legal Proceedings 43 Item 4. Submission of Matters to a Vote of Security Holders 45 Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 45 Item 6. Selected Financial Data 45 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 45 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 45 Item 8. Financial Statements and Supplementary Data 45 Consolidated Statements of Income – Years ended December 31, 2005, 2004 and 2003 Consolidated Balance Sheets – December 31, 2005 and 2004 Consolidated Statements of Cash Flows – Years ended December 31, 2005, 2004 and 2003 Consolidated Statements of Shareholders’ Equity – Years ended December 31, 2005, 2004 and 2003 Notes to Consolidated Financial Statements Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 45 Item 9A. Controls and Procedures 45 Item 9B. Other Information 46 Part III. Item 10. Directors and Executive Officers of the Registrant 46 Item 11. Executive Compensation 47 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 47 Item 13. Certain Relationships and Related Transactions 48 Item 14. Principal Accountant Fees and Services 48 Part IV. Item 15. Exhibits and Financial Statement Schedules 48 Signatures 49 Index to Financial Statements F-1 Exhibit Index E-1 View slide
  • PART I. Item 1. Business. Overview We are engaged in providing financial planning, products and services that are designed to offer solutions for our clients’ asset accumulation, income and protection needs. As of December 31, 2005, we had 2.8 million individual, business and institutional clients and a network of over 12,000 financial advisors and registered representatives (“financial advisors”), including those affiliated with our Securities America Financial Corporation subsidiary (“SAFC”) through its brokerage and advisory subsidiary Securities America, Inc. (“SAI”), who provide personalized financial planning, advisory, brokerage and other services. As a holding company, we primarily engage in business through our subsidiaries. Accordingly, references below to “we,” “us,” and “our” may refer to Ameriprise Financial, Inc., exclusively, to our entire family of companies or to one or more of our subsidiaries. We strive to deliver financial solutions to our clients through a tailored approach focused on building a long-term personal relationship through, when appropriate, financial planning and advice that is responsive to our clients’ evolving needs. The financial solutions we offer include both our own products and services and products of other companies. Our financial planning and advisory process is designed to provide comprehensive advice for our clients’ asset accumulation, income management and protection needs. We believe that our focus on personal relationships, together with our strengths in financial planning and product development, allows us to better address our clients’ financial needs, including the financial needs of our target market segment, the mass affluent, which we define as households with income above $50,000 and investable assets between $100,000 and $1,000,000. This focus also puts us in a strong position to capitalize on significant demographic and market trends, which we believe will continue to drive increased demand for financial planning and the other financial services we provide, particularly among the mass affluent. Our nationwide network of financial advisors is the means by which we develop personal relationships with our clients. We refer to the financial advisors who use our brand name (who numbered over 10,500 at December 31, 2005) as our branded advisors. Our branded advisor network is also the primary distribution channel through which we offer our asset accumulation and income products and services, as well as a range of insurance protection products. We offer our branded advisors training, tools, leadership, marketing programs and other centralized support to assist them in delivering tailored solutions to our clients, including products and services designed to meet our clients’ needs. We believe that the integration of our financial advisors and the financial solutions we offer through our financial planning model not only improves the products and services we provide to our clients, but also allows us to reinvest in enhanced services for our clients and support available to our financial advisors. This integrated model also affords us a better understanding of our client base, which allows us to better manage the risk profile of our businesses. We believe our focus on meeting our clients’ needs through financial planning results in more satisfied clients with deeper, longer lasting relationships with our company and strong retention of experienced financial advisors. We have two main operating segments aligned with the financial solutions we offer to address our clients’ needs: • Asset Accumulation and Income, and • Protection. Our Asset Accumulation and Income segment offers our own and other companies’ mutual funds, as well as our own annuities and other asset accumulation and income management products and services to retail clients through our financial advisor network. We also offer our annuity products and, to a limited extent, our investment management products, through outside distribution channels. This operating segment also serves institutional clients in the separately managed account, sub-advisory and 401(k) markets, among others. We earn revenues in our Asset Accumulation and Income segment primarily through fees we receive based on managed and administered assets and on separate accounts, the net investment income we earn on assets on our balance sheet related to this segment and distribution fees we earn on sales of mutual funds and other products. Our Protection segment offers various life insurance, disability income and brokered insurance products through our financial advisor network. We also offer personal auto and home insurance products on a direct basis to retail clients principally through our strategic marketing alliances. We earn revenues in this operating segment primarily through premiums and fees that we receive to assume insurance-related risk, fees we receive on the funds underlying our variable products and net investment income we earn on assets on our balance sheet related to this segment. 1 View slide
  • We also have a “Corporate and Other” segment, which consists of income derived from corporate level assets and unallocated corporate expenses, primarily costs from the separation of our company from American Express Company, as well as the results of our subsidiary SAFC, which operates its own independent separately branded distribution network. SAFC’s principal operating subsidiary, SAI, distributes mutual funds, annuities and insurance products and provides securities brokerage, investment advisory and support services to its clients through its brokerage subsidiaries. SAI does not operate under the Ameriprise Financial brand. We consider its over 1,700 financial advisors (at December 31, 2005) as part of our network of over 12,000 financial advisors. In 2005, we generated $7,484 million in total revenues, $745 million in income before income tax provision, discontinued operations and accounting change and $574 million in net income. As of December 31, 2005, we had over $428 billion in assets owned, managed and administered worldwide. We were formerly a wholly-owned subsidiary of American Express Company. On February 1, 2005, American Express Company announced its intention to pursue the disposition of 100% of its shareholdings in us through a tax-free distribution to American Express Company’s shareholders. Effective as of the close of business on September 30, 2005, American Express Company completed the distribution of our common shares to American Express Company’s shareholders (the “Distribution”). The Distribution was effectuated through a pro-rata dividend to American Express Company’s shareholders consisting of one share of our common stock for every 5 shares of American Express Company common stock owned by American Express Company’s shareholders on September 19, 2005, the record date for the Distribution. In connection with the separation from American Express Company, we agreed to sell our subsidiary AMEX Assurance Company (“AMEX Assurance”) to American Express Company as described further below under the caption “Our Relationship with American Express Company – Reinsurance and Purchase Agreements” and, effective August 1, 2005 we transferred to American Express Company our 50% ownership interest in American Express International Deposit Company (a joint venture with another subsidiary of American Express Company). Prior to August 1, 2005, we were referred to as American Express Financial Corporation (“AEFC”). We are incorporated in Delaware and our headquarters are located at 55 Ameriprise Financial Center, Minneapolis, Minnesota 55474. We also maintain executive offices in New York, New York. Our Strengths We believe our company is positioned to be the provider of choice to a growing base of mass affluent consumers, particularly as many of them reach their retirement phase of life. These strengths include our: • Strong heritage with established position in the financial services industry. Over our more than 110-year history, we have established ourselves as a leading provider of solutions designed to help clients plan for and achieve their financial objectives, built on a foundation of personal relationships and a tailored approach. We further reinforced these traits during our 21-year tenure as a subsidiary of American Express Company. We are investing in and building on our heritage as we have re-established ourselves as an independent company with a new brand identity. As of December 31, 2005, we had over $428 billion in owned, managed and administered assets and a sales force of over 12,000 financial advisors, and our variable annuity products ranked 11th in new sales of variable annuities (according to VARDS®). For the year ended December 31, 2005, our variable universal life insurance ranked first in sales based on total premiums (according to Tillinghast-Towers Perrin Value™ survey), and for the nine months ended September 30, 2005 our individual disability income insurance ranked eighth in sales based on total premiums (according to LIMRA International®). • Longstanding and deep client relationships. We believe that our financial planning approach helps to meet our clients’ financial needs and fosters deep and long-term client relationships. We estimate that, of our clients with a financial plan, over 75% of those clients have been with us for three or more years, with an attrition rate of less than 2% per year. Our clients with more than $100,000 in assets with our company have been with us, on average, more than 12 years. More than 60% of these longstanding clients have a financial plan and these clients hold an average of at least four products. • Personal financial planning, investment advisory and brokerage relationships targeted to fast-growing mass affluent market segment. We offer our clients personalized financial planning and other advisory services as well as brokerage services through our financial advisor network. Our branded advisor network included the largest number of CERTIFIED FINANCIAL PLANNER™ practitioners of any retail advisory force in 2004 (according to the Certified Financial Planner Board of Standards, Inc.). We believe our focus on financial planning positions us well to capitalize on the demographic trends in our target mass affluent market segment, 2
  • particularly as they prepare for retirement. The mass affluent market segment accounts for about half of the $17 trillion of U.S. investable assets (according to the MacroMonitor 2004-2005 consumer survey prepared by SRI Consulting Business Intelligence). We have found that more than half of consumers in our target segment are willing to pay a knowledgeable advisor for financial advice to address their immediate and long-term needs in the context of their entire financial situation (MacroMonitor 2004-2005 survey prepared by SRI Consulting Business Intelligence). We believe the planning process not only helps us develop a better understanding of the demographics and trends among our clients, but also helps us to develop more tailored solutions designed to address our clients’ financial needs. We believe our approach results in increased client satisfaction, longer-term relationships with our clients and better risk profiles in our Protection segment. Our experience has shown that by helping our clients meet their needs through our financial planning approach, clients with an implemented personalized financial planning relationship hold approximately three times more invested assets with our company than clients without a financial plan. • Large, well-trained sales force with a nationwide presence. At December 31, 2005, we had a nationwide network that included over 10,500 branded advisors and over 1,700 financial advisors of SAI. According to the 2005-2006 Securities Industry Association Yearbook, we had the fourth largest sales force in 2005 among Securities Industry Association members (based on the number of our branded advisors). Most of our branded advisors started their careers as financial planners with our company. They begin as employee financial advisors and go through training designed to instill the financial knowledge, personalized client focus and tools necessary to help deliver a consistent, disciplined financial planning experience to clients as well as our varied product and service offerings. We believe that the grounding of our branded advisors in our financial planning model, as well as the resources that our integrated business model provides them, enhances our ability to hire and retain financial advisors. As of December 31, 2005, over 60% of our branded advisors had been with our company for more than four years and within that group, they have an average tenure of slightly more than 12 years. • Broad product development capability and diversified range of products and services. We develop and manage a broad range of asset accumulation, income management and insurance protection products. In addition to our RiverSourceSM and ThreadneedleSM families of mutual funds, we are a leading producer of variable annuity and variable life products and also develop fixed annuities, face-amount certificates and banking products and a host of insurance protection products such as life, disability income and personal auto and home insurance. Complementing our product offerings, we also provide access to a wide range of other companies’ products and securities, and offer a number of services to help our clients achieve their financial goals. The diversity among our product and service offerings not only assists our financial advisor network in addressing the varied needs of our clients, but also provides our company with diversification among its sources of revenues and earnings. • Strong balance sheet and ratings and comprehensive risk management process. We believe our size, ratings and capital strength provide us with a sound basis for competing in the marketplace. Our strong balance sheet, sound risk management and financial discipline have helped us maintain strong ratings, as well as client and financial advisor confidence in our business. We have a high quality investment portfolio, with approximately 7% rated below investment grade as of December 31, 2005. In addition, we apply risk management tools to prudently manage the risk profile of our company. • Experienced management team with sound business and decision-making capabilities. Our senior management team has an average of over 21 years of experience in the financial services industry. We have instilled a performance- and execution-oriented corporate culture. We utilize a consistent decision-making framework to evaluate our existing products and businesses, as well as to prioritize growth opportunities and the associated trade-offs for our company. This framework takes into account four key elements: client needs and behavior, competitor positioning and strategies, our capabilities, and risk-return financial metrics. Our Strategy As a financial planning and financial services company with a nationwide presence, a diverse set of asset accumulation, income and insurance protection products and services and an industry leading reputation for financial planning, we believe we are well positioned to further strengthen our offerings to existing and new clients and deliver profitable growth to our shareholders. Our five strategic objectives include: 3
  • • Growing our mass affluent client base. We intend to grow our mass affluent client base by building our brand awareness, deepening existing client relationships and developing new client relationships. • Building brand awareness. We are investing substantial resources to develop and build awareness of our new brands, based on our position as a financial planning and financial services company with a more than 110-year history of personal client relationships and a strong nationwide presence. We continue to utilize our relationship with American Express Company, and our other alliance arrangements, to expand awareness of our new brands, support financial advisor recruitment and client acquisition efforts and define our advantages for prospective new clients and distribution partners. For more information on our alliances, see “Our Relationship with American Express Company,” “Asset Accumulation and Income—U.S. Retail Products and Solutions—Strategic Alliances and Other Marketing Channels—Strategic Alliances and Other Marketing Arrangements” and “Protection— Distribution and Marketing Channels.” We believe having strong brand recognition, built on a consistent message of shaping financial solutions for a lifetime through tailored financial advice, will help us grow as an independent company. In addition, we intend to continue focusing a large portion of our marketing and advertising efforts on our ability to address the retirement needs of our core market. • Deepening existing client relationships. To address the changing needs of our clients, we continue to develop methods for our branded advisors to introduce, when appropriate, non-financial plan clients to the financial planning process and to assist financial planning clients to more fully implement plans they have in place. We have also created segmented service offerings, such as our Ameriprise Gold Financial ServicesSM and Ameriprise Platinum Financial ServicesSM offerings, to provide recognition, added special benefits and higher levels of service to our highest value clients. In addition, through the centralized support we provide our branded advisor network, such as market research about our existing client base, we identify opportunities for our financial advisors to build deeper relationships with clients by addressing potentially underserved needs. We believe that deeper, longer-term relationships with our clients foster, among other things, increased satisfaction among our clients and financial advisors and greater owned, managed and administered assets. • Developing new client relationships. We intend to continue to grow our client base, with particular focus on the large and growing mass affluent market segment. With our tailored approach and diverse range of financial solutions, we believe we are well positioned to address the needs of the mass affluent—particularly as they approach retirement, typically a time with heightened needs for comprehensive financial planning. We provide support for a wide range of corporate and locally defined client acquisition programs. In addition, according to the U.S. census bureau, between 2000 and 2020, the 45-64 age group—typically the prime financial and asset accumulation years for retirement— is projected to grow by 34%, with most of that growth occurring by 2010. • Strengthening our lead in financial planning and advice. We have a range of strategies including introducing new retirement focused planning and advice approaches to increase client engagement, such as our recently launched Dream BookSM, a powerful new guide designed to help individuals envision and define their dreams. We plan to encourage even greater levels of financial advisor engagement, through increasing linkages between planning and financial advisor compensation. Finally, we will continue to strengthen our tools and processes that support our financial advisors in financial planning and advice. • Delivering profitable growth and improved productivity in our financial advisor network. We intend to continue to enhance the productivity and growth of our branded advisor network by providing financial advisors with strong centralized support to help them build their practices, and by seeking to engage or hire quality individuals, offering a choice of affiliation (employee or franchisee). Our intention is to continue to enhance the centralized support available to our branded advisors in areas such as leadership, technology, training, marketing support, financial planning support, and products/services. We believe this centralized support helps our branded advisors acquire more mass affluent clients and deliver a more consistent experience with a wider range of products and services. We are continuing our targeted recruitment efforts through our traditional channel of recruiting individuals who are new to the industry, as well as enhancing recruitment of experienced financial advisors. Our branded advisor network model provides flexibility to our branded advisors in building 4
  • and managing their individual practices, which we believe leads to better hiring, franchise offers and retention. We continuously evaluate ways in which to improve our branded advisor network model and believe a larger branded advisor force will assist in growing our client base. We designed our compensation plans, including our recently implemented equity compensation plans for employee and franchisee financial advisors, to foster, among other things, greater levels of financial advisor productivity and retention. • Growing assets by continuing to enhance our mix of products and solutions, and by extending our distribution reach with alternative channels. We have a range of strategies to achieve this objective, including: Expanding our product and service solutions. We plan to continue developing and deploying new products and services designed to address the financial and retirement needs of mass affluent clients while delivering growth and margin improvement for our company. Examples of recent product and service launches include our RiverSourceSM Portfolio Builder Series and RiverSourceSM Income Builder Series as well as our Portfolio Navigator asset allocation program under our variable annuities, which permits clients to balance their risk-return profiles with simple, pre-defined solution sets. Through Threadneedle Asset Management Holdings Ltd., our U.K.-based investment management group (“Threadneedle Investments” or “Threadneedle”), we have strengthened our international investment product and service offerings and will continue to expand our international offerings. Improving our investment performance. Our strategy for improving investment performance includes better leveraging our top talent and selectively growing our investment management talent pool. We intend to grow our talent pool by organic means (through strengthening of our investment management teams), by external means (through continuing to recruit individual and teams of investment professionals with strong track records, and potentially making opportunistic acquisitions of well-performing boutique investment management firms) and through the addition of sub-advisors as appropriate. We intend to continue investing in tools and resources to assist both our fixed income and equity investment management teams to improve performance while managing risk effectively through the consistent application of risk management processes. We have implemented BlackRock Solutions®, a leading portfolio management, trading and risk management tool, to assist our fixed- income investment management teams in better analyzing, and isolating, the effects of specific factors affecting performance of fixed income portfolios. In equities, we have implemented a boutique approach using small, highly-accountable investment management teams with dedicated analytical and equity trading resources. Each team focuses on particular investment strategies that are accessible through multiple distribution channels. In equities, we are also in the process of implementing the Charles River equity trading and compliance system, a leading tool that will enable us to further enhance our equity trading and compliance monitoring capabilities. We believe that improving and maintaining consistent investment performance will positively impact our managed assets. Extending our distribution reach. Our marketing and sales efforts focus on enhancing our existing wholesaling capabilities and local client referral-based programs for our branded advisors, as well as forging new alliances, expanding our work-site program and exploring additional distribution channels for our products and services. We have successfully formed marketing alliances with major companies, such as Costco Wholesale Corporation (“Costco”), Delta Loyalty Management Services, Inc. (“Delta”) and Ford Motor Credit Company (“Ford”) to create programs to acquire and serve new clients and distribute our own products. In addition, we recently entered into an alliance arrangement with American Express Company to cross-sell our products and services to its cardmembers. Through our work-site program, Financial Education and Planning Services, we will continue to provide corporate clients with personal financial planning services for their employees. For more information about these alliances, see “Asset Accumulation and Income—U.S. Retail Products and Solutions— Strategic Alliances and Other Marketing Channels—Strategic Alliances and Other Marketing Arrangements” and “Protection—Distribution and Marketing Channels.” We intend to further expand distribution of our products and services through institutional and third party retail channels, including continuing to expand distribution of Threadneedle products and services through both our own channels in the United States and third party retail and institutional channels elsewhere. Through these efforts, we believe we can grow our client base and increase the volume of products and services that we provide. • Ensuring an increasingly strong and efficient operating platform. This includes enhancing the requisite technology infrastructure, seeking to ensure compliant business practices, fostering organizational effectiveness 5
  • and employee satisfaction, focusing our use of capital and expanding operating margins. In these last two, our strategies include: • Focusing use of capital. We continually seek opportunities to deploy capital more efficiently to support our business, while maintaining our ratings and capital position. Using our risk management decision- making framework, we regularly review our product pricing and overall risk positioning to properly account for capital requirements and make strategic adjustments to our product mix, pricing and features. All decisions about capital allocation and new product development include an evaluation of efficiency, growth prospects and margin improvement. • Expanding operating margins through reengineering. During the period when we were part of American Express Company, we had a history of producing cost savings in our businesses through a three-pronged re-engineering process focused on process improvements, identifying untapped operating synergies and continually reviewing third party costs, including consolidating or outsourcing some operations. This experience has assisted us in managing the increased operating costs incurred as a result of our separation from American Express Company. We continue to seek opportunities to re-engineer our processes and strive to improve distribution effectiveness and operating efficiency. We believe that improved efficiencies resulting from cost savings will enable us to expand operating margins and free up capital to invest in new growth opportunities. History and Development Our company has more than 110 years of history of providing financial solutions designed to help our clients plan for and achieve their financial objectives. Our earliest predecessor company, Investors Syndicate, was founded in 1894 to provide face- amount certificates to consumers with a need for conservative investments. By 1937, Investors Syndicate had expanded its product offerings through Federal Housing Authority mortgages, and later, mutual funds, by establishing Investors Mutual, one of the pioneers in the mutual fund industry. In 1949, Investors Syndicate was renamed Investors Diversified Services, Inc., or IDS. In 1957, IDS added life insurance products, and later, annuity products, through IDS Life Insurance Company (“IDS Life”). In the 1970s, IDS Life introduced its comprehensive financial planning process to clients, integrating the identification of client needs with the products and services to address those needs, and introduced its fee-based planning service in the 1980s. In 1972, IDS began to expand its distribution network by delivering investment products directly to clients of financial institutions. In 1979, IDS became a wholly-owned subsidiary of Alleghany Corporation pursuant to a merger. In 1983, our company was formed as a Delaware corporation in connection with American Express Company’s 1984 acquisition of IDS Financial Services from Alleghany Corporation. We changed our name to “American Express Financial Corporation” and began selling our products and services under the American Express brand in 1994. To provide retail clients with a more comprehensive set of solutions, in the late 1990s we began significantly expanding our offering of mutual funds of other companies. We continued to expand our investment product offerings in 2002 with the acquisition of our Cambridge, Massachusetts-based quantitative investment management office and the establishment of our Boston equity investment management office. In 2003 we acquired Threadneedle Investments. On September 30, 2005 the Distribution was consummated and we became an independent publicly-traded company, with the shares of our common stock no longer owned by American Express Company. Our Relationship with American Express Company In connection with the separation from American Express Company, we entered into certain agreements with American Express Company. The key terms of the principal agreements that continue to be operative are summarized below. Separation and Distribution Agreement. We entered into a separation and distribution agreement that generally requires us and American Express Company to indemnify each other and each other’s representatives and affiliates against certain liabilities. The separation and distribution agreement also contains certain covenants regarding cooperation to effect the transactions contemplated by the Distribution. The agreement also governs rights both we and American Express Company have to access certain of each other’s information following the Distribution. We also entered into an employee benefits agreement relating to certain compensation and employee benefit obligations with respect to our current and former employees. Tax Allocation Agreement. In connection with the Distribution, we entered into a tax allocation agreement with American Express Company. This agreement governs the allocation of consolidated U.S. federal and applicable combined or 6
  • unitary state and local income tax liability as between American Express Company and us, and provides for certain restrictions and indemnities in connection with the tax treatment of the Distribution and addresses other tax-related matters. To avoid the Distribution being taxable to American Express Company and its shareholders, we are prohibited, except under certain circumstances, for a period of two years following the Distribution, from (i) consenting to certain acquisitions of significant amounts of our stock; (ii) transferring significant amounts of our assets; (iii) merging or consolidating with any other person; (iv) liquidating or partially liquidating; (v) reacquiring our stock; (vi) taking any action affecting the relative voting rights of any separate classes of our stock; or (vii) taking any other action that would be reasonably likely to jeopardize the tax free status of the Distribution. We currently do not believe these prohibitions impose a significant constraint on our ability to execute against a two million share repurchase authorization that we announced in January 2006. In addition, we have undertaken to maintain our fund management business as an active business for a period of two years following the Distribution. We have an obligation to indemnify American Express Company for corporate level taxes and related losses suffered by both American Express Company and its shareholders if, due to any of our representations or undertakings being incorrect or violated, the Distribution is determined to be taxable for other reasons. We currently estimate that the indemnification obligation to American Express Company for taxes due in the event of a 50% or greater change in our stock ownership could exceed $1.5 billion. This estimate, which does not take into account related losses such as interest, penalties, and other additions to tax, depends upon several factors that are beyond our control. As a consequence, the indemnity to American Express Company could vary substantially from the estimate. Furthermore, the estimate does not address the potential indemnification obligation to both American Express Company and its shareholders in the event that, due to our representations or undertakings being incorrect or violated, the Distribution is determined to be taxable for other reasons. In that event, the total indemnification obligation would likely be much greater. Transition Services Agreement. We entered into a transition services agreement with American Express Company under which we and American Express Company will provide certain specified services to each other on an interim basis, including finance and financial operations services, human resources services, information technology services and service delivery network services, including call center services. Marketing and Branding Agreement. We entered into a marketing and branding agreement with American Express Company under which we have the right to use the “American Express” brand name and logo in a limited capacity for up to two years from the Distribution date in conjunction with our brand name and logo and, for a transitional period, in the names of certain of our products, services and subsidiaries. We also continue to have access to American Express Company partners, cardmembers and users of the americanexpress.com website for the purpose of marketing our products and services that is similar to the access that we had prior to the Distribution. In addition, the American Express Card continues to be the exclusive charge card that we offer to clients of our Ameriprise Gold Financial Services, Ameriprise Platinum Financial Services and Ameriprise ONESM Financial Account during the term of the agreement. We also entered into an intellectual property license and transfer agreement with American Express Company and certain of its subsidiaries. Under the agreement, the parties assigned to one another a limited number of patents, trademarks, copyrights and other intellectual property. Reinsurance and Purchase Agreements. In connection with the separation from American Express Company, AMEX Assurance relinquished all risks and rewards of the travel and other card insurance business of American Express Travel Related Services Company through a reinsurance agreement with Amexco Insurance Company (“Amexco”), a captive insurance company subsidiary of American Express Company. The reinsurance agreement is a quota share reinsurance agreement. Quota share reinsurance is a type of pro rata reinsurance in which the ceding company cedes a proportional part (a percentage) of risks to the reinsurer, and in turn, will recover from the reinsurer the same percentage of all losses on those risks. Under the agreement, AMEX Assurance ceded 100% of the travel insurance and card related business to Amexco in return for arm’s length ceding, and Amexco acquired the deferred acquisition costs related to the ceded business for cash. As of September 30, 2005, we entered into an agreement to sell the AMEX Assurance legal entity to a subsidiary of American Express Company within two years after the Distribution for a fixed price equal to the net book value of AMEX Assurance as of the Distribution date, which approximates $115 million. The closing of the sale of AMEX Assurance was deferred primarily in order for us to secure regulatory filings and other approvals in the interim. Accordingly, we deconsolidated AMEX Assurance as of September 30, 2005 for purposes of U.S. generally accepted accounting principles although it continues to appear in our statutory reporting and will do so until the closing of the sale. For further information, see Note 4 to our consolidated financial statements included in our 2005 Annual Report to Shareholders. 7
  • Our New Brands In 2005, in connection with the separation from American Express Company, we launched two new brand names for our businesses. We believe this dual brand strategy will provide greater flexibility in achieving our growth-related goals, in particular, our strategic objective of extending our distribution reach in alternative channels. We are using Ameriprise Financial as our holding company brand, as well as the name of our branded distribution network and certain of our retail products and services. Our branded advisors began doing business as the Personal Advisors of Ameriprise Financial in early August 2005. In addition, we associate our Ameriprise Financial brand with products that we market directly to clients, including our personal auto and home insurance protection products, 401(k) products and services, wrap accounts and retail brokerage services, as well as our face-amount certificates. We expect that the transition of our banking products and services to the Ameriprise Financial brand will be completed in the first half of 2006, when our new banking subsidiary is expected to have received all necessary regulatory approvals. See “Asset Accumulation and Income—Banking Products” below for additional information on our plans to establish a banking subsidiary. We began marketing our mutual funds, institutional asset management products, annuities and insurance protection products (other than personal auto and home) under the RiverSource brand in October 2005. We believe that using a separate brand for these products, including our retail mutual funds, will permit more effective differentiation from our branded advisor network. The transition of our institutional and retail asset management products to the RiverSource brand occurred in the fourth quarter of 2005. We expect the transition of our annuity and insurance protection products to the RiverSource brand to be completed by the end of 2006. As part of our re-branding to RiverSource, we will streamline the organizational structure of our insurance business by consolidating certain of our insurance subsidiaries. This reorganization will incorporate the new branding strategy into the names of our insurance subsidiaries that issue our annuity and insurance protection products and is expected to result in certain expense and capital-deployment efficiencies. It is expected that the formal legal entity consolidation and legal entity name changes with respect to our annuity and insurance protection products will not be complete until year-end 2006 due to the time required to obtain all necessary state regulatory approvals. In addition, corporate and legal entity name changes of our mutual funds have been approved by mutual fund shareholders and are expected to become effective during the second quarter of 2006. Our Financial Advisor Platform We provide our clients financial planning and brokerage services through our nationwide network of over 12,000 financial advisors. Our network currently includes over 10,500 financial advisors who operate under our brand name, of which over 3,000 are employees of our company. Our network also includes over 1,700 non-employee financial advisors of SAI. According to the 2005- 2006 Securities Industry Association Yearbook, we had the fourth largest sales force in 2005 among Securities Industry Association members (based on the number of our branded advisors). Advisors who use our brand name can affiliate with our company in two different ways. Each affiliation offers different levels of support and compensation from our company, with the rate of commission we pay to each financial advisor determined by a schedule that takes into account the type of service or product provided, the type of financial advisor affiliation and other criteria. The affiliation options are: • Employee Advisors. Under this affiliation, a financial advisor is an employee of our company, and we pay compensation as a draw against commissions and other fees. We also provide our employee advisors a high level of support in exchange for a lower commission payout rate than our branded franchisee advisors. • Branded Franchisee Advisors. Under this affiliation, a financial advisor is an independent contractor who affiliates with our company and has the right to use our brand name. We offer our branded franchisee advisors centralized support, including leadership tools and technology platforms, training, national advertising and marketing campaigns and local marketing referral programs. We pay our branded franchisee advisors a higher payout rate than employee advisors, but they are responsible for paying their own business expenses, such as overhead and any compensation of staff they may employ. In addition, our branded franchisee advisors pay us a franchise association fee and other fees in exchange for some of the centralized support described above and the right to associate with our brand name. Most of our branded advisors started their careers with our company as employee advisors. We continue to benefit from strong financial advisor retention. As of December 31, 2005, over 60% of our total branded advisors had been with our 8
  • company for more than four years, with an average tenure among these branded advisors of slightly more than 12 years. Among branded advisors who have been with our company for more than four years, we have an over 90% retention rate. We believe this success is driven by the choice we offer branded advisors about how to affiliate with our company, together with our competitive payout schemes and centralized support that helps them build their practices. As financial advisors of our branded retail brokerage subsidiary or of SAI, our financial advisors provide our clients access to our diversified set of asset accumulation, income management and insurance protection products and services, as well as a selection of products of other companies. The asset accumulation and income management products we offer are described in more detail under “Asset Accumulation and Income” below, and the insurance protection products we offer are described in more detail under “Protection” below. The compensation we pay our financial advisors consists of, among others, a significant portion of the revenues received in the form of financial planning fees, wrap account fees, commissions, sales charges and 12b-1 distribution and servicing-related fees. Asset Accumulation and Income We offer a broad array of asset and income management products and services to help retail and institutional clients address their identified financial objectives. We also offer a wide range of investment management products and services to retail and institutional clients outside the United States through Threadneedle Investments, as well as a variety of services to 401(k) and other qualified and non-qualified employee retirement plans, and to individuals and small- and mid-sized businesses. In 2005, approximately 67% of our revenues and 87% of our income before income tax provision, discontinued operations and accounting change after separation costs (62% before separation costs) were attributable to our Asset Accumulation and Income business. Our Asset Accumulation and Income segment primarily derives revenues from the fees we receive from asset management, financial planning and product distribution, as well as mortality and expense risk fees and other fees generally paid for supplemental benefits to our variable annuities (including optional living and death benefits, such as guaranteed minimum income benefit and guaranteed minimum death benefit provisions) and marketing support payments made by outside fund companies. We also derive revenues from the net investment and interest income earned on assets supporting our fixed annuities (and the fixed accounts within variable annuities) and certificates. Because most fees that we receive for asset management and related services are based on managed assets, market appreciation will generally result in increased revenues, and inversely, market depreciation will generally depress revenues. Revenues will also fluctuate due to net inflows or outflows of assets. At December 31, 2005, we had $428.2 billion in owned, managed and administered assets worldwide compared to approximately $408.2 billion as of December 31, 2004 as follows: As of December 31, Asset Category 2005 2004 (in billions) Owned $ 86.9 $ 81.2 Managed 264.0 257.0 Administered 77.3 70.0 Total $ 428.2 $ 408.2 Owned assets include certain assets on our balance sheet, such as investments in the general accounts and the separate accounts of our life insurance subsidiaries, as well as cash and cash equivalents, restricted and segregated cash and receivables. Managed assets include client assets for which we provide investment management and other services, such as the assets of the RiverSource family of mutual funds, assets of institutional clients and assets held in our wrap accounts (retail accounts for which we receive a fee based on assets held in the account). Managed assets also include assets managed by sub-advisors selected by us. Administered assets include assets for which we provide administrative services, such as assets of our clients invested in other companies’ products that we offer outside of our wrap accounts. Our in-house investment management teams manage over 62% of our owned, managed and administered assets. For additional details regarding our owned, managed and administered assets, see “Management’s Discussion and Analysis” contained in our 2005 Annual Report to Shareholders. Our Investment Management Capabilities Our asset management subsidiaries’ investment management teams manage the majority of assets in our RiverSource and Threadneedle families of mutual funds, as well as the assets we manage for institutional clients in separately 9
  • managed accounts, the general and separate accounts of insurance companies (including our insurance subsidiaries) and the assets of our face-amount certificate company. These investment management teams also manage assets under sub-advisory arrangements. We believe that improving and maintaining consistent and strong investment performance will positively impact our assets under management by increasing the competitiveness and attractiveness of many of our asset accumulation and income management products. We strive to improve investment performance, both through continuing to grow our fixed income and equity management teams and through continuing to invest in the tools and resources to assist them in their investment management activities. We have implemented different approaches to investment management depending on whether the investments in our portfolio are fixed income or equity. • Fixed Income. In the United States, our fixed-income investment management teams are primarily centralized in Minneapolis. The teams within fixed income are organized by sector. They utilize valuation models with both quantitative and qualitative inputs to drive duration, yield curve and credit decisioning. This sector-based approach creates focused teams organized by expertise and accountable for performance. Portfolio performance is measured in such a way that client interests are optimized and asset managers are incentivized to collaborate, employ best practices, identify and execute opportunistically. • Equity. We have implemented a boutique approach to equity asset management using individual, highly accountable investment management teams with dedicated analytical and equity trading resources. Each team focuses on particular investment strategies and product sets. We have investment management teams located in Boston, Cambridge and Minneapolis as well as at our affiliates Kenwood Capital Management LLC (“Kenwood”) and Threadneedle Investments. Kenwood is an investment management joint venture we established in 1998. Our wholly-owned asset management subsidiary owns 47.7% of Kenwood and Kenwood’s investment management principals own 47.5% of the firm, with the remainder held by associate portfolio managers employed by Kenwood. Kenwood investment management services are focused on the small- and mid-cap segments of the U.S. equity market. Since 2001, we have taken some major steps to improve investment performance by enhancing investment management leadership, talent and infrastructure. • In September 2001, we hired our current Chief Investment Officer, who has 23 years of experience in the financial services industry. • In the first quarter of 2002, we formed our Boston investment management team through the strategic hiring of analysts and portfolio managers with substantial experience in the financial services and asset management industries. This investment team is focused on management of twelve of our own large-cap and sector mutual funds using fundamental research as a money management technique, and assumed management of eight of these funds in 2002. • In the third quarter of 2002, we hired a new head of our fixed income investment management team who has 20 years of experience in the asset management industry. • In August 2002, we formed our Cambridge investment team following the acquisition of the assets of Dynamic Ideas LLC. Our Cambridge team uses proprietary investment management and asset allocation models to manage money and proprietary optimization techniques to control risk, lower turnover and control costs. Our Cambridge team also developed our proprietary financial planning tool Lifetime Optimizer with our financial advice services personnel, which is included in the customized Morningstar® workstations used by our branded advisors. Our Cambridge team manages two retail mutual funds, portions of three other equity funds and co-manages three funds-of-funds. • In the first quarter of 2003, we reorganized our fixed income investment management team around the sector-based approach described above. • In September 2003, we acquired Threadneedle Investments, one of the U.K.’s leading investment management groups. Threadneedle Investments currently has over 100 investment professionals based in London. We restructured our international investment management teams located in London, Singapore and Tokyo and transferred management of our RiverSource global and international equity portfolios to Threadneedle 10
  • Investments through a sub-advisory arrangement. Threadneedle Investments has performed strongly since our September 2003 acquisition and has increased its managed assets over the period from approximately $81.1 billion at September 30, 2003 to over $113.6 billion at December 31, 2005. • In 2003, we reorganized our Minneapolis-based resources to provide better support to our deep value equity investment team. • In 2004, we implemented BlackRock Solutions, a leading fixed income portfolio management platform. The platform provides assistance in both pre-and post-trade compliance, as well as scenario analytics, and allows our U.S.-based fixed income management teams to better analyze the effects of specific factors affecting performance. The platform also helps our fixed income portfolio managers identify and manage risk according to a multitude of factors on a real-time basis. • In 2005, we expanded the role of our head of fixed income to include a broad set of our Minneapolis investment teams, including both equity and fixed income. We also closed our San Diego Growth platform, allowing us to leverage resources and talent more effectively by focusing our U.S. equity portfolio management and research efforts on our three other U.S. equity platforms. We have seen improvements in our overall fixed income performance beginning in 2003, most notably in taxable portfolios. In equities, we have seen improved investment performance for many funds, including strong overall equity results in 2005. In addition to our existing products, we are seeking to take advantage of the improvements in our investment performance by creating new retail and institutional investment products, including 18 new mutual funds currently targeted for launch in 2006. We have begun to provide seed money to certain of our investment management teams to develop new products for our institutional clients, which we expect to market in the future. In addition, Threadneedle Investments is leading our efforts to develop investment strategies in emerging markets. U.S. Retail Products and Solutions We offer our retail clients financial planning and other financial services through our nationwide network of financial advisors. We also offer individual clients solutions designed to address their identified cash management, fixed income and equity needs. These products include mutual funds, variable and fixed annuities, investment advisory wrap accounts and face-amount certificates and brokerage and other services, as well as banking products and personal trust services. In addition to marketing our own products and services to retail clients through our nationwide network of financial advisors, we also market our own products and services to retail clients through strategic marketing alliances and local marketing programs for our branded advisors, and to employees of our corporate clients in on-site workshops through our Financial Education and Planning Services. Financial Planning and Advice Services We strive to deliver financial solutions to our clients through a tailored approach focused on building long-term personal relationships through financial planning that is responsive to our clients’ evolving needs. The financial solutions we offer to help our clients implement their financial plans include both our own products and services as well as products and services of other companies. In our client relationships involving financial plans, we utilize the Certified Financial Planner Board of Standards, Inc.’s defined financial planning process. This process involves gathering relevant financial information, setting life goals, examining our clients’ current financial status and determining a strategy or plan for helping our clients meet their goals given their current situation and future plans. Once we have identified a financial planning client’s objectives in asset accumulation, income management and protection, we then recommend a comprehensive personalized solution set intended to address those needs. Our experience has shown that personalized financial planning relationships with our clients are characterized by an ability to better understand clients’ specific needs leading to being able to better help our clients meet those needs, higher overall client satisfaction, more products held and higher assets under management. Our financial planning clients pay a flat fee, an hourly rate or a combination of the two for the receipt of financial planning services. This fee is not based on, or related to, performance. If clients elect to implement their financial plan with our company, we and our financial advisors generally receive a sales commission and/or sales load and other revenues for the products that clients purchase. These commissions, sales loads and other revenues are separate from and in addition to financial planning fees the financial advisors may receive. We achieved record financial planning sales and fee revenue in 2005 of $171 million, a 23% increase over 2004. In addition, sales of financial plans increased in 2005, and now 11
  • approximately 44% of our retail clients have received a financial plan or have entered into an agreement to receive and have paid for a financial plan, up from approximately 42% in 2004. Product sales to clients with a financial plan accounted for a majority of total financial advisor sales in 2005. Mutual Funds We offer our retail clients both our own mutual funds and retail mutual funds of other companies. RiverSource Family of Mutual Funds Our RiverSource family of mutual funds consist of two groups of funds: (1) the RiverSource Funds, a group of retail mutual funds, and (2) the RiverSource Variable Portfolio Funds (“VP Funds”), a series of variable product portfolios. We offer the RiverSource Funds primarily through our financial advisor network and as part of our institutional 401(k) plans. The VP Funds are generally available only as underlying investment options in our own variable annuity and variable life products. Both the RiverSource Funds and the VP Funds include domestic and international equity, fixed income, cash management and balanced funds with a variety of investment objectives. We refer to the RiverSource Funds and the VP Funds, together, as the RiverSource family of mutual funds. At December 31, 2005, the RiverSource family of mutual funds consisted of 90 funds with $76.6 billion in managed assets compared to 89 funds with $83.5 billion at December 31, 2004. The RiverSource Funds had total managed assets at December 31, 2005 of $58.1 billion in 66 funds compared to $65.3 billion at December 31, 2004 in 66 funds. The VP Funds had total managed assets at December 31, 2005 of $18.6 billion in 24 funds compared to $18.2 billion at December 31, 2004 in 23 funds. We launched one new RiverSource Fund in 2005, RiverSourceSM Variable Portfolio – Mid Cap Value Fund (“VP-Mid Cap Value”). VP-Mid Cap Value is an equity fund that seeks to provide shareholders with long-term growth of capital by investing at least 80% of its net assets in equity securities of medium-sized companies. Ameriprise Financial Services, Inc., our primary retail brokerage subsidiary (“AMPF”), acts as the principal underwriter (distributor of shares) for the RiverSource family of mutual funds. In addition, RiverSource Investments, LLC (“RiverSource Investments”), one of our wholly-owned subsidiaries, acts as investment manager, and several of our subsidiaries perform various services for the funds, including accounting, administrative, transfer agency and custodial services. RiverSource Investments performs investment management services pursuant to contracts with the mutual funds that are subject to renewal by the mutual fund boards within two years after initial implementation, and thereafter, on an annual basis. RiverSource Investments earns management fees for managing the assets of the RiverSource family of mutual funds based on the underlying asset values. We also earn fees by providing other services to the RiverSource family of mutual funds. RiverSource Funds that are equity or balanced funds have a performance incentive adjustment that adjusts the level of management fees received, upward or downward, based on the fund’s performance as measured against a designated external index of peers. This has a corresponding impact on management fee revenue. In 2005, revenues were adjusted downward by approximately $7 million due to performance incentive adjustments. A few large RiverSource equity funds, including RiverSourceSM New Dimensions® Fund, have experienced relatively poor investment performance over the last few years. We earn commissions for distributing the RiverSource Funds through sales charges (front-end or back-end loads) on certain classes of shares and distribution and servicing-related (12b-1) fees based on a percentage of fund assets, and receive intercompany allocation payments. This revenue is impacted by our overall asset levels, and overall the RiverSource Funds have experienced significant net asset outflows since 2000. The RiverSource family of mutual funds have increased their use of sub-advisors over the last few years to diversify and enhance investment management expertise. Since the end of 2003, Threadneedle personnel have provided investment management services to the global and international equity funds within the RiverSource family of mutual funds. Kenwood, another of our affiliates, also provides subadvisory services to one small-cap RiverSource Fund and one small-cap VP Fund. In addition to Threadneedle Investments and Kenwood, 16 unaffiliated subadvisors provide investment management services to certain RiverSource Funds. Non-Proprietary Mutual Funds We offer more than 2,000 mutual funds from more than 200 other mutual fund families on a stand-alone basis and as part of our wrap accounts (which are described below) and 401(k) plans to provide our clients a broad choice of investment 12
  • products. In 2005, our retail sales of other companies’ mutual funds accounted for a substantial portion of our total retail mutual fund sales. Client assets held in mutual funds of other companies on a stand-alone basis generally produce lower revenues than client assets held in our own mutual funds. Mutual fund families of other companies generally pay us by sharing a portion of the revenue generated from the sales of those funds and from the ongoing management of fund assets attributable to our clients’ ownership of shares of those funds. In exchange for these payments, the mutual fund families of other companies are generally made available through our financial advisors and through our online brokerage platform. See Item 3 of this Annual Report on Form 10-K—“Legal Proceedings” for information on certain regulatory matters concerning revenue sharing practices. We also receive administrative services fees from most mutual funds sold through our distribution network. Fee-based Investment Advisory Accounts In addition to purchases of proprietary and non-proprietary mutual funds and other securities on a stand-alone basis, clients may purchase mutual funds, among other securities, in connection with investment advisory fee-based “wrap account” programs or services, and pay fees based on a percentage of their assets. We currently offer both discretionary and non-discretionary investment advisory wrap accounts. In a discretionary wrap account, an unaffiliated investment advisor, we or one of our subsidiaries chooses the underlying investments in the portfolio on behalf of the client, whereas in a non-discretionary wrap account, the client chooses the underlying investments in the portfolio based, to the extent the client elects, on the recommendations of their financial advisor. Investors in discretionary and non-discretionary wrap accounts generally pay an asset-based fee that is based on the assets held in their wrap accounts as well as any related fees or costs included in the underlying securities held in that account (e.g., underlying mutual fund operating expenses, Rule 12b-1 fees, etc.). In 2005, a portion of our proprietary mutual fund sales were made through wrap accounts. Client assets held in mutual funds in a non-discretionary or other wrap account generally produce higher revenues than client assets held in mutual funds on a stand-alone basis because, as noted above, we receive a fee based on the asset values of the assets held in a wrap account in addition to revenues we normally receive for sales of the funds included in the account. We provide the above-referenced discretionary and non-discretionary wrap accounts as part of the AmeripriseSM Premier Portfolio Services, which is a service that allows customers to receive consolidated reporting and information on one or more of their fee-based investment advisory accounts. The largest wrap program we sponsor within the Ameriprise Premier Portfolio Services service is AmeripriseSM Strategic Portfolio Service Advantage, a non-discretionary wrap account. The Strategic Portfolio Service Advantage wrap program had total client assets valued at $47.6 billion at December 31, 2005 compared to $35.3 billion at December 31, 2004. We also provide other fee-based investment advisory services as part of the Ameriprise Premier Portfolio Services, including a fund of hedge funds investment advisory account service and the Separately Managed Account program, a discretionary wrap account service. The Premier Portfolio Services Separately Managed Account program had total client managed assets of approximately $2.1 billion at December 31, 2005 compared to $1.9 billion at December 31, 2004. Brokerage and Other Products and Services We also offer our retail clients a variety of brokerage and other products and services. We provide securities execution and clearing services for our retail and institutional clients through our registered broker-dealer subsidiaries. As of December 31, 2005, we administered $77.3 billion in assets for clients, an increase of $7.3 billion from December 31, 2004. Our online brokerage service allows clients to purchase and sell securities online, obtain independent research and information about a wide variety of securities, use self-directed asset allocation and other financial planning tools, contact a financial advisor, as well as have access to mutual funds, among other services. Our Ameriprise ONE Financial Account is a single integrated financial management account that combines a client’s investment, banking and lending relationships. The Ameriprise ONE Financial Account enables clients to access a single cash account to fund a variety of financial transactions, including investments in mutual funds, individual securities, cash products and margin lending. Additional features of the Ameriprise ONE Financial Account include unlimited check writing with overdraft protection, an American Express® Gold or Platinum Card (subject to certain eligibility requirements), online bill payments, ATM access and a savings account. We also offer a My Financial Accounts data aggregation service, which is an online capability that enables clients to view and manage their entire Ameriprise Financial relationship (i.e., brokerage, 401(k), banking and financial advisor credit cards) in one place via the Internet. Our My Financial Accounts data aggregation service also allows clients to add third party account information, providing a consolidated view of their financial services account relationships. 13
  • In May 2004, we began the nationwide rollout of Ameriprise Gold Financial Services to offer special benefits to recognize and reward our clients with more than $100,000 invested with our company or, starting in 2005, with at least a $1 million face-amount estate series life insurance policy. Clients with over $500,000 invested with our company or a $5 million face-amount estate series life insurance policy may qualify for Ameriprise Platinum Financial Services. Clients must meet detailed eligibility and maintenance rules to qualify for and retain Gold or Platinum status. Special benefits may include items such as annual fee waivers on IRA rollovers, quarterly fee waivers on the Ameriprise ONE Financial Account or a fee-waived American Express® Preferred Rewards Gold or Platinum Card, as applicable. Financial planning services are available for a separate fee as described above under “— Financial Planning and Advice Services.” We have plans to rebrand and refresh our client recognition and loyalty programs in 2006 to enhance client recognition and foster greater participation among clients in the benefits available to them when they achieve the required criteria. We also offer shares in public, non-exchange traded Real Estate Investment Trusts (“REITs”) issued by other companies. We believe that we are one of the largest distributors of public non-exchange traded REITs in the United States. In addition, we service, but do not sell, managed futures limited partnerships engaged in the trading of commodity interests, including futures contracts, in which one of our subsidiaries is a co-general partner. These products subject us to regulation by the Commodity Futures Trading Commission (“CFTC”). Face-Amount Certificates We issue five different types of face-amount certificates, a type of investment product, through Ameriprise Certificate Company, a wholly-owned subsidiary that is registered as an investment company under the Investment Company Act of 1940. Owners of our certificates invest funds and are entitled to receive, at maturity or the end of a stated term, a determinable amount of money equal to their aggregate investments in the certificate plus interest at rates we declare from time to time, less any withdrawals and early withdrawal penalties. For two types of certificate products, the rate of interest is calculated in whole or in part based on any upward movement in a broad-based stock market index up to a maximum return, where the maximum is a fixed rate for a given term, but can be changed at our discretion for prospective terms. At December 31, 2005, we had approximately $5.6 billion in total certificate reserves underlying our certificate products. Our earnings are based upon the spread between the interest rates credited to certificate holders and the interest earned on the certificate assets invested. A portion of these earnings is used to compensate the various affiliated and unaffiliated entities that provide management, administrative and other services to our company for these products. The certificates compete with many other investments offered by banks, savings and loan associations, credit unions, mutual funds, insurance companies and similar financial institutions, which may be viewed by potential customers as offering a comparable or superior combination of safety and return on investment. In times of weak performance in the equity markets, certificate sales are generally stronger. Annuities We offer both variable and fixed annuity products issued almost exclusively through IDS Life and its insurance subsidiaries. We refer to IDS Life and its insurance subsidiaries as the “IDS Life companies.” Our products include deferred variable and fixed annuities, in which assets accumulate until the contract is surrendered, the contractholder (or in some contracts, annuitant) dies or the contractholder or annuitant begins receiving benefits under an annuity payout option. We also offer immediate variable and fixed annuities, in which payments begin within one year of issue and continue for life or for a fixed period of time. In addition to the revenues we generate on these products, which are described below, we also receive fees charged on assets allocated to our separate accounts to cover administrative costs, and a portion of the management fees from the underlying investment accounts in which assets are invested, as discussed below under “ —Variable Annuities.” Investment management performance is critical to the profitability of our annuity business. Our branded advisors do not offer annuity products of our competitors, except for annuities specifically designed for use in the small employer 401(k) market that are issued by two unaffiliated insurance companies. IDS Life serves as the distributor for variable annuities that it issues, while another of our subsidiaries serves as the distributor of variable annuities issued by IDS Life’s subsidiaries. We also distribute annuities through third party channels such as banks and broker-dealer networks. IDS Life is one of the largest issuers of annuities in the United States. For the year ended December 31, 2005, on a consolidated basis, our variable annuity products ranked 11th in new sales of variable annuities according to VARDS. We continue to expand distribution by delivering annuity products issued by the IDS Life companies through non-affiliated representatives and agents of third party distributors. 14
  • We had fixed and variable annuity cash sales in 2005 of $7.6 billion, up from 2004 as a result of a 41% increase in variable annuities, partially offset by a decrease in fixed annuities. The relative proportion between fixed and variable annuity sales is generally driven by the relative performance of the equity and fixed income markets. In times of lackluster performance in equity markets, fixed sales are generally stronger. In times of superior performance in equity markets, variable sales are generally stronger. The relative proportion between fixed and variable annuity sales is also influenced by product design and other factors. Variable Annuities A variable annuity provides a contract owner with investment returns linked to underlying investment accounts of the contract owner’s choice. These underlying investment options may include the VP Funds discussed above as well as mutual funds of other companies. Most variable annuity products in-force offer a fixed account investment option with guaranteed minimum interest crediting rates ranging up to 4% at December 31, 2005. Our Portfolio Navigator asset allocation program is available under our variable annuities. The Portfolio Navigator program is designed to help a contract purchaser select an asset allocation model portfolio from the choices available under the program, based on the purchaser’s stated investment time horizon, risk tolerance and investment goals. We believe the benefits of the Portfolio Navigator asset allocation program may include a well-diversified annuity portfolio, disciplined, professionally created asset allocation models, simplicity and ease of use, access to multiple well-known money managers within each model portfolio and automatic rebalancing of the client’s contract value on a quarterly basis. The model portfolios under the Portfolio Navigator asset allocation program are designed and periodically updated by our investment management subsidiary RiverSource Investments, based on recommendations from Morningstar Associates, LLC. Contract purchasers can choose to add various optional benefit provisions to their contracts to meet their needs. These include enhanced guaranteed minimum death benefit provisions, guaranteed minimum withdrawal benefit provisions, guaranteed minimum accumulation benefit provisions and guaranteed minimum income benefit provisions. In general, these features can help protect contract owners and beneficiaries from a shortfall in death or living benefits due to a decline in the value of their underlying investment accounts. The general account assets of each IDS Life company support the contractual obligations under the guaranteed benefit provisions the company issues (see “—Institutional Products and Services—Insurance Company General and Separate Accounts” section below). As a result, IDS Life bears the risk that protracted under-performance of the financial markets could result in guaranteed benefit payments being higher than what current account values would support. IDS Life’s exposure to risk from guaranteed benefits generally will increase when equity markets decline. Variable annuities provide us with fee-based revenue in the form of mortality and expense risk charges and fees charged for optional features elected by the contract owner and other contract charges. We and our affiliates receive asset management fees for managing the VP Funds underlying our variable annuity products as well as 12b-1 distribution and servicing-related fees from the VP Funds and the underlying funds of other companies. In addition, we also receive marketing support payments from the affiliates of other companies’ funds included as investment options in our variable annuity products. Fixed Annuities Our fixed annuity products provide a contract owner with cash value that increases by a fixed or indexed interest rate. Fixed rates are periodically reset at our discretion subject to certain policy terms establishing minimum guaranteed interest crediting rates. Our earnings from fixed annuities are based upon the spread between rates earned on assets purchased with fixed annuity deposits and the rates at which interest is credited to our fixed annuity contracts. Our fixed annuity contracts in-force provide guaranteed minimum interest crediting rates ranging from 1.5% to 5% at December 31, 2005. In 2003, and in response to a declining interest rate environment, several states adopted an interim regulation allowing for a guaranteed minimum interest-crediting rate of 1.5% and/or a model regulation providing for a guaranteed indexed rate and have now adopted regulations that mirror the National Association of Insurance Commissioners (“NAIC”) model regulation for a guaranteed indexed rate. In response, we filed a number of contract changes in recent years to implement lower minimum guarantees. We will continue to implement contract changes as states adopt the new model regulation or as the interim regulation expires according to its terms. 15
  • Liabilities and Reserves for Annuities We must maintain adequate financial reserves to cover the risks associated with guaranteed benefit provisions added to variable annuity contracts in addition to liabilities arising from fixed and variable annuity base contracts. You can find a discussion of liabilities and reserves related to our annuity products in Note 2 to our consolidated financial statements included in our 2005 Annual Report to Shareholders. Banking Products We provide consumer lending and Federal Deposit Insurance Corporation (“FDIC”) insured deposit products to our retail clients through an arm’s length service arrangement with American Express Bank, Federal Savings Bank (“FSB”), a subsidiary of American Express Company, that will continue until we are able to establish our own banking subsidiary. For more information regarding this transition arrangement see “Our Relationship with American Express Company.” Our consumer lending products include first mortgages, home equity loans, home equity lines of credit, investment secured loans and lines of credit and unsecured loans and lines of credit. Our deposit products include the AmeripriseSM Insured Money Market Account and the ONE High-Yield Savings Account, both of which are offered in connection with the Ameriprise ONE Financial Account described below. We also offer stand-alone checking, savings and money market accounts and certificates of deposit. Our mortgage and home equity installment loan products are originated through American Express Bank, FSB and sold to third parties shortly after origination. All other lending products are originated and held on the balance sheet of American Express Bank, FSB. As of December 31, 2005, there were $501 million in home equity line of credit balances, $42 million in investment- secured loan and line of credit balances and $82 million in unsecured balances extended to our clients. The majority of our clients’ deposit balances are in the Ameriprise Insured Money Market Account and the ONE High-Yield Savings Account. These products held $4.0 billion and $0.9 billion in total deposits, respectively, as of December 31, 2005. We believe these products play a key role in our Asset Accumulation and Income business by offering our clients an FDIC-insured alternative to other cash products. They also provide pricing flexibility generally not available through money market funds. We distribute our banking products through branded advisor referrals and direct mail to our retail clients and external prospects. We believe that the availability of these products is a competitive advantage and supports our financial advisors in their ability to meet the financial needs of our clients. We have received approval from the Office of Thrift Supervision (“OTS”) to obtain a new FSB charter for a wholly-owned subsidiary named Ameriprise Bank, FSB. Issuance of the charter is subject to approval by the FDIC. We expect that our subsidiary will operate as an FSB and that it will replace American Express Bank, FSB, as the provider of the banking products described above once all necessary legal and regulatory approvals are obtained. We also expect that our banking subsidiary will eventually provide the personal trust services described above under “—Brokerage and Other Products and Services,” which are also currently provided by American Express Bank, FSB. We currently anticipate that we will be able to obtain required regulatory approvals and transfer client accounts to our new FSB in the first half of 2006. It is expected that these accounts will be transferred at fair value at the time the purchase is completed. We continue to provide distribution services for Personal Trust Services, a division of American Express Bank, FSB. Personal Trust Services provides personal trust, custodial, agency and investment management services to individual and corporate clients of our branded advisors. Personal Trust Services also uses some of our investment products in connection with its services. We expect to continue providing these distribution services until our new banking subsidiary is operating, at which point we intend to provide distribution services for the Personal Trust Services division of our new banking subsidiary. Strategic Alliances and Other Marketing Channels We use strategic marketing alliances, local marketing programs for our branded advisors and on-site workshops through our Financial Education and Planning Services group in order to generate new clients for our financial planning and other financial services. In addition, we use third party distribution channels for our own annuity products. 16
  • Strategic Alliances and Other Marketing Arrangements An important aspect of our strategy is to leverage the client relationships of our other businesses by working with major companies to create alliances that help generate new financial services clients for us. We currently have relationships with Costco, Delta, Ford, American Century Services Corporation (“American Century”), Marriott Ownership Resorts, Inc., and eWomenNetwork, Inc. In addition to these relationships, we also continue to market annuity products directly to consumers holding an American Express Card under our transition arrangement with American Express Company. • Costco. Since 2002, we have had a relationship with Costco involving AMPF and our property casualty subsidiary. AMPF signed a 1-year extension in January 2006, and our property casualty subsidiary recently signed a 5-year extension. The relationship with AMPF offers its financial advisors an opportunity to market our financial planning and advice services to Costco members through various marketing channels. We also market our property casualty products through our alliance with Costco. See “Protection—Distribution and Marketing Channels.” • Delta. Our marketing alliance with Delta, which began in 2003, provides us with the opportunity to market financial planning and advice services to consumers who have a relationship with Delta Air Lines through its Delta SkyMiles program. • Ford. We recently entered into an alliance providing us the opportunity to offer personal auto, home and liability insurance products to customers of Ford Motor Credit Company. • American Century. In April 2004, we began a cooperative marketing alliance with American Century. This alliance provides us with the opportunity to market our financial planning and advice services to direct shareholders of American Century’s own mutual fund family. • Marriott Vacation Club International (“MVCI”). Under our agreement with MVCI, which was entered into in November 2004, our financial advisors conduct financial education sessions at vacation ownership properties marketed by Marriott Ownership Resorts, Inc., under its MVCI label. • eWomenNetwork, Inc. In September 2005, we entered into a marketing agreement with eWomenNetwork, Inc., to offer financial planning and advice services to their membership base. The agreement allows us to use multi-channel touch points, from online to seminars and events, to reach members for financial advisor client acquisition opportunities. Our alliance arrangements are generally for a limited duration of one to five years with an option to renew. Additionally, these types of marketing arrangements typically provide that either party may terminate the agreements on short notice, within 60 days. We compensate our alliance partners for providing opportunities to market to their clients. In addition to our alliance arrangements, we have developed a number of local marketing programs for our branded advisors to use in building a client base in their local communities. These include pre-approved seminars, seminar- and event-training and referral tools and training, which are designed to encourage both prospective and existing clients to refer or bring their friends to an event. Third Party Distribution Channels We also offer our annuity products to retail clients through third party banks and broker-dealers, such as Wachovia Securities, Inc., SunTrust Securities, Inc., Wells Fargo Securities, Inc., and Dreyfus Service Corporation. As of December 31, 2005 we had distribution agreements for our annuity products in place with approximately 40 banks and over 40 broker-dealers, with annual sales of approximately $1 billion in 2005. Financial Education and Planning Services We provide workplace financial education and advisory services programs to major corporations and small businesses through our Financial Education and Planning Services group, including some of our 401(k) plan sponsor clients. Our Financial Education and Planning Services group focuses on helping the individual employees of client companies plan for and achieve their long-term financial objectives. It makes available educational materials, tools and programs as well as trains and supports financial advisors working on-site at company locations to present educational seminars, conduct one-on- 17
  • one meetings and participate in client educational events. In 2005, we increased sales of financial education relationships to companies and small businesses that do not have a 401(k) relationship with our retirement services business, and we also expanded our educational programs and on-site activities with 401(k) clients. We also provide financial advice service offerings, such as Financial Planning and Executive Financial Services, tailored to discrete employee segments. We believe that demand for employee financial education is expected to remain high, particularly given the continuing trend toward increased employee responsibility for selecting retirement investments, selecting benefit options, and for their overall personal retirement readiness. Financial Services Center In 2004, we established the Financial Services Center, a special call center for remote-based sales and service. The Financial Services Center provides support for those retail customers who do not have access to or do not desire a face-to-face relationship with a financial advisor. Financial consultants in the Financial Services Center provide personal service and guidance through phone-based interactions and may provide product choices in the context of the client’s needs and objectives. Institutional Products and Services Through our asset management subsidiaries, we offer separately managed account services to a variety of institutional clients, including pension plans, employee savings plans, foundations, endowments, corporations, banks, trusts, governmental entities, high- net-worth individuals and not-for-profit organizations. These asset management subsidiaries also provide investment management services for the general and separate accounts of insurance companies, including for our insurance subsidiaries, as well as hedge fund management and other alternative investment products. These alternative investment products include collateralized debt obligations (“CDOs”) available through our syndicated loan management group to our institutional clients. We also offer a variety of retirement services to clients. We are working to further develop our institutional capabilities, including through funding institutional product development by our investment management teams and through the recent expansion of our institutional and sub-advisory sales teams. At December 31, 2005, approximately $130.1 billion, or 30.4%, of our total owned, managed and administered assets (other than assets held in the general and separate accounts of our IDS Life companies described below) were managed for institutional clients, including assets managed by Threadneedle Investments. Institutional Separately Managed Accounts We provide investment management services to pension, profit-sharing, employee savings and endowment funds, the accounts of large- and medium-sized businesses and governmental clients, as well as the accounts of high-net-worth individuals and smaller institutional clients, including tax-exempt and not-for-profit organizations, through our asset management subsidiaries. The management services we offer include investment of funds on a discretionary or non-discretionary basis, and related services including trading, cash management and reporting. We offer various fixed income and equity investment strategies for our institutional separately managed accounts clients. Through an arrangement with Threadneedle Investments and our affiliate Kenwood, we also offer certain international and U.S. equity strategies to U.S. clients. For our investment management services, we generally receive fees based on the market value of managed assets pursuant to contracts that can typically be terminated by the client on short notice. Clients may also pay fees to our company based on the performance of their portfolio. At December 31, 2005, we managed a total of $19.2 billion in assets under this range of services. Insurance Company General and Separate Accounts We provide investment management services for assets held in the general and separate accounts of our IDS Life companies. Our fixed-income team manages the general account assets according to a strategy designed to provide for a consolidated and targeted rate of return on investments while controlling risk. Separate account assets are managed by both our fixed-income and equity teams. At December 31, 2005, on behalf of IDS Life and its subsidiaries, we managed general account assets of $31.2 billion and separate account assets of $18.6 billion, compared to $32.6 billion and $18.2 billion, respectively, at December 31, 2004. 18
  • In accordance with regulatory investment guidelines, the IDS Life companies, through their respective boards of directors, boards of directors’ investment committees or staff functions, review models projecting different interest rate scenarios, risk/return measures and their effect on profitability in order to guide us in our management of the general account assets. They also review the distribution of assets in the portfolio by type and credit risk sector. The objective is to structure the investment securities portfolio in the general accounts to meet contractual obligations under our insurance and annuity products and achieve targeted levels of profitability within defined risk parameters. Threadneedle Investments provides investment management services for accounts of The Zurich Group totaling approximately $84.1 billion in separately managed assets as of December 31, 2005, compared to $84.9 billion as of December 31, 2004. See “—International Products and Services—Threadneedle—Strategic Alliances” below. Management of Collateralized Debt Obligations We provide collateral management services to special purpose vehicles that issue CDOs through a dedicated team of investment professionals located in Los Angeles, California. CDOs are securities collateralized by a pool of assets, usually primarily syndicated bank loans and, to a lesser extent, high yield bonds. Multiple tranches of securities are issued by a CDO, offering investors various maturity and credit risk characteristics. Scheduled payments to investors are based on the performance of the CDO’s collateral pool. For collateral management of CDOs, we earn fees based on managed assets and, in certain instances, may also receive performance-based fees. At December 31, 2005, we managed approximately $6.0 billion of assets related to CDOs. Sub-Advisory Services We serve as sub-advisors to certain offshore mutual funds sponsored by American Express Bank Ltd., a subsidiary of American Express Company. These funds are organized under the laws of Luxembourg and are advised by American Express Asset Management Company (Luxembourg) Ltd., a subsidiary of American Express Company. We are pursuing opportunities to sub-advise additional investment company assets in the U.S. and overseas. As of December 31, 2005, we had over $1.2 billion in sub-advised assets. Our affiliates Kenwood and Threadneedle Investments also serve as sub-advisors to investment companies and other assets. Hedge Funds We provide investment advice and related services through our asset management subsidiaries to private, pooled investment vehicles organized as limited partnerships, limited liability corporations or foreign (non-U.S.) entities. These funds are currently exempt from registration under the Investment Company Act of 1940 and are organized as domestic and foreign funds. For investment management services, we generally receive fees based on the market value of assets under management, as well as performance-based fees. During the fourth quarter of 2005, we experienced outflow in institutional assets in connection with the transfer of our fund of hedge funds to American Express Company and the liquidation of certain hedge funds. Retirement Services We provide a variety of services for our institutional clients who sponsor retirement plans. These services are provided through our Ameriprise Retirement Services business unit which is a service group of our trust company subsidiary and one of our broker-dealer subsidiaries. As of December 31, 2005, approximately $11.1 billion, or 2.6%, of our total owned, managed and administered assets as of such date, were managed for retirement services clients, compared to $12.0 billion at December 31, 2004. This amount does not include the RiverSource family of mutual funds held in other retirement plans, because these assets are included under assets managed for institutional and retail clients and within the “Mutual Funds” section above. Also, this amount does not include other companies’ mutual funds because these assets are included in administered assets. At December 31, 2005, our trust company acted as directed trustee or custodian for over 225 retirement plans, which represented approximately $29.8 billion in assets managed or administered and approximately 820,000 participants. At December 31, 2004, our trust company acted as directed trustee or custodian for over 260 retirement plans, which represented approximately $31.4 billion in assets managed or administered, and approximately 900,000 participants. 19
  • We provide investment management services through collective investment funds provided by our trust company subsidiary. Collective funds are investment funds that are exempt from registration with the Securities and Exchange Commission (“SEC”) and offered primarily through banks and other financial institutions to institutional clients such as retirement, pension and profit-sharing plans. We currently serve as investment manager to 47 collective funds covering a broad spectrum of investment strategies. We receive fees for investment management services that are generally based upon a percentage of assets under management rather than performance-based fees. We generally consider the assets managed in connection with our retirement services as managed assets on behalf of individuals because the underlying assets are typically owned by individuals. In addition to RiverSource Funds and RiverSource Trust Collective Funds, we offer separately managed accounts to our retirement plan clients. Our retirement services investment platform offers a wide range of non-proprietary mutual fund offerings. We receive revenue from these mutual funds and their affiliates for services we provide to our retirement services clients. The primary market for our retirement services is retirement plans with at least $10 million in assets, which are generally sponsored by mid- and large-size private employers, governmental entities and labor unions. In addition to the investments described above, we offer additional services to employer-sponsored retirement plans, including participant record keeping and employee education offerings and both telephone and Internet-based plan servicing. Our trust company subsidiary also provides custodial and non-discretionary administrative services to qualified employer stock funds offered under plans sponsored by our retirement services clients. In addition to the services described above, our trust company also acts as custodian, and one of our brokerage subsidiaries acts as broker, for individual retirement accounts, tax-sheltered custodial accounts and other retirement plans for individuals and small- and mid-sized businesses. At December 31, 2005, these tax-qualified assets totaled $76.2 billion, approximately 17.8% of our total assets owned, managed and administered. Our trust company subsidiary also provides institutional asset custodial services to our affiliates providing mutual funds, face-amount certificates, asset management and life insurance. At December 31, 2005, our institutional assets under custody were approximately $106.4 billion. We receive fees for our custody services that are generally based upon assets under custody as well as transaction-related fees for our institutional custody services. International Products and Services—Threadneedle Outside the United States, we offer investment management products and services through Threadneedle Investments. Threadneedle Investments is headquartered in London, and had 749 employees as of January 1, 2006. The Threadneedle group of companies provides investment management products and services independently from our other affiliates. Threadneedle Investments offers a wide range of asset management products and services, including segregated asset management, mutual funds and hedge funds, to institutional clients as well as to retail clients through intermediaries, banks and fund platforms in Europe. These services comprise most asset classes, including equities, fixed income, cash and real estate. Threadneedle Investments also offers investment management products and services to U.S. investment companies, other U.S. institutional clients, including certain RiverSource Funds and VP Funds, as well as non-U.S. institutional clients. In addition, Threadneedle Investments provides sub-advisory services to the Luxembourg-based fund family of American Express Bank Ltd., a subsidiary of American Express Company. Our September 2003 acquisition of Threadneedle Investments helped facilitate consolidation of our international asset management activities in the United Kingdom. Threadneedle has benefited from growth in assets under management both through new client business and organic market growth of existing funds. At December 31, 2005, the Threadneedle group of companies managed over $113.6 billion, or approximately 27%, of our total owned, managed and administered assets for both retail and institutional clients compared to $112.8 billion at December 31, 2004. Threadneedle’s distribution is organized along three lines: retail, institutional and strategic alliances. Retail. The retail business line includes Threadneedle’s U.K. mutual fund family, which ranked as the third largest retail fund business in the United Kingdom in terms of assets under management at December 31, 2005 according to the Investment Management Association, a trade association for the U.K. investment management industry. Threadneedle sells mutual funds mostly in Europe (primarily the U.K. and Germany) through financial intermediaries and institutions. The 20
  • retail business unit also includes Threadneedle’s hedge funds comprising four long/short equity funds, a fund of funds and one fixed income fund. The hedge funds are sold primarily to banks and other managers of funds of hedge funds. Institutional. Threadneedle’s institutional business offers separately managed accounts to U.K. and international pension funds and other institutions as well as offering insurance funds. Threadneedle Investments is expanding distribution of its institutional products in Scandinavia, Switzerland, the Middle East and Asia. At December 31, 2005, Threadneedle Investments had $102.9 billion in owned assets and managed assets in separately managed accounts (including “Strategic Alliance” assets, as described below) compared to $103.6 billion at December 31, 2004. Strategic Alliances. Threadneedle’s strategic alliances business comprises the asset management activities undertaken by Threadneedle Investments for The Zurich Group, its former parent, the American Express Bank Ltd. entities (which are subsidiaries of American Express Company) and affiliates of our company. The Zurich Group is Threadneedle’s single largest client and represented over 70% of Threadneedle’s assets under management at December 31, 2005. Threadneedle provides investment management products and services to Zurich for assets generated by The Zurich Group through the sale of its life insurance products, variable annuity, pension and general insurance products, as well as other assets on the balance sheet of The Zurich Group. Threadneedle entered into an agreement with The Zurich Group when we acquired Threadneedle Investments in 2003 for Threadneedle to continue to manage certain assets of Zurich Financial Services. For investment management of the assets underlying Zurich’s life insurance products (which represent a significant majority of the assets managed for Zurich), the initial term of the agreement is through October 2011. For investment management of Zurich’s other assets, the initial term is through October 2006. In both cases the term is subject to Threadneedle meeting performance criteria. The agreement also provides for a fee review in March 2007 for management of certain assets on the balance sheet of The Zurich Group. Threadneedle Investments also offers its funds directly or within a multi-manager wrap through an independent UK distribution platform operated by Openwork Limited. Threadneedle Investments provides sales and marketing support for these distribution channels. Threadneedle Investments sold its controlling interest in an institutional multi-manager business, MM Asset Management Ltd., to Investment Manager Selection (Holdings) Limited (“IMSHL”) in exchange for shares in IMSHL on October 31, 2005. Threadneedle Investments expects to develop additional hedge funds and other products for both the retail and institutional markets as well as to continue its efforts to attract new retail and institutional clients. Protection We offer a variety of protection products, including life, disability income and other brokered life and health insurance products and personal auto and home insurance to address the identified protection and risk management needs of our retail clients. We offer these insurance protection products primarily to our clients with financial plans and, other than personal auto and home insurance, we offer these products exclusively through our financial advisor network. We offer our personal auto and home insurance protection products primarily on a direct basis through co-marketing alliances. We issue insurance policies through our insurance subsidiaries, the IDS Life companies and the Property Casualty companies (as defined below under “—IDS Property Casualty”). The IDS Life companies are also the issuers of the annuity products described above under “Asset Accumulation and Income—U.S. Retail Products and Solutions—Annuities.” In 2005, approximately 26% of our revenues and 56% of our income before income tax provision, discontinued operations and accounting change after separation costs (40% before separation costs) were attributable to our Protection business. Our Protection business generates income from premiums and cost of insurance charges, the spread between our earnings on the investment of general account assets of our IDS Life subsidiaries and the interest credited to contract owners’ fixed accounts, and mortality and expense risk fees as well as marketing, administrative, servicing and distribution support fees related to the funds underlying our variable life products. IDS Life Companies The IDS Life companies are the issuers of both variable and fixed universal life insurance, traditional life insurance including whole life and term life, and disability income insurance (IDS Life discontinued underwriting new long-term care policies as of December 31, 2002). Universal life insurance is a form of permanent life insurance characterized by its flexible premiums, its flexible death benefit amounts and its unbundling of the pricing factors (i.e., mortality, interest and expenses). Traditional life insurance refers to whole and term life insurance policies that pay a specified sum to a beneficiary upon death of the insured for a fixed premium. Variable universal life insurance combines the premium and death benefit flexibility of universal life with significant underlying fund investment flexibility and the risks associated therewith. 21
  • IDS Life’s sales of individual life insurance in 2005, as measured by scheduled annual premiums, excluding lump sum and excess premiums, consisted of 89% variable universal life, 2% fixed universal life and 9% traditional life. Our IDS Life companies issue only non-participating policies, which do not pay dividends to policyholders from the insurer’s earnings. Assets supporting policy values associated with fixed account life insurance and annuity products, as well as those assets associated with fixed account investment options under variable insurance and annuity products (collectively referred to as the “fixed accounts”), are part of the IDS Life companies’ general accounts. Under fixed accounts each IDS Life company bears the investment risk. More information on the IDS Life companies general accounts is found under “Asset Accumulation and Income—Institutional Products and Services—Insurance Company General and Separate Accounts” above. Variable Universal Life Insurance Our best-selling life insurance products are variable universal life insurance policies. Variable universal life provides life insurance coverage along with investment returns linked to underlying investment accounts of the policyholder’s choice, options that may include our VP Funds discussed above as well as funds of other companies. These products in-force offer a fixed account investment option with guaranteed minimum interest crediting rates ranging from 3.0% to 4.5% at December 31, 2005. For the year ended December 31, 2005, IDS Life ranked first in sales of variable universal life based on total premiums (according to Tillinghast- Towers Perrin Value survey). Fixed Universal Life Insurance and Traditional Whole Life Insurance Fixed universal life and traditional whole life insurance policies do not subject the policyholder to the investment risks associated with variable universal life insurance. Our fixed universal life insurance products provide life insurance coverage and cash value that increases by a fixed interest rate. The rate is periodically reset at the discretion of the issuing company subject to certain policy terms relative to minimum interest crediting rates. Our fixed universal life insurance policies in-force provided guaranteed minimum interest crediting rates ranging from 4.0% to 5.0% at December 31, 2005. The IDS Life companies also offer traditional whole life insurance, which combines a death benefit with a cash value that generally increases gradually in amount over a period of years and does not pay a dividend (non- participating). The IDS Life Companies have sold very little traditional whole life insurance in recent years. Term Life Insurance The IDS Life Companies also offer term life insurance. Term life insurance only provides a death benefit, does not build up cash value and does not pay a dividend. The policyholder chooses the term of coverage with guaranteed premiums at the time of issue. During the chosen term, we could not raise premium rates even if claims experience were to deteriorate. At the end of the chosen term, coverage may continue with higher premiums until the maximum age is attained, at which point the policy expires with no value. Disability Income Insurance The IDS Life Companies also issue disability income insurance. For the nine months ended September 30, 2005, we were ranked as the eighth largest provider of individual disability income insurance based on premiums (according to LIMRA International). Disability income insurance provides monthly benefits to individuals who are unable to earn income at either their occupation at time of disability (“own occupation”) or at any suitable occupation (“any occupation”). Depending upon occupational and medical underwriting criteria, applicants for disability income insurance can choose “own occupation” and “any occupation” coverage for varying benefit periods up to age 65. In some states, applicants may also choose various benefit provisions to help them integrate individual disability income insurance benefits with social security or similar benefit plans and to help them protect their disability income insurance benefits from the risk of inflation. Long-Term Care Insurance As of December 31, 2002, we discontinued underwriting long-term care insurance. Our financial advisors now sell only long-term care insurance of other companies, primarily products offered by General Electric Capital Assurance 22
  • Company (“GECA”), one of the Genworth Financial insurance companies. In addition, in May 2003, we began outsourcing claims administration on our existing block of long-term care policies to GECA. Beginning in 2004, IDS Life filed for approval to implement rate increases on its existing block of nursing home-only indemnity long-term care insurance policies. Implementation of these rate increases began in early 2005, and we have so far received approval in 45 states, covering over 83% of the eligible premiums, with an average approved rate increase of 32.1%. Implementation is expected to continue through 2006. IDS Property Casualty We offer personal auto, homeowner, excess personal liability and American Express Card-related insurance products through our wholly-owned subsidiary, IDS Property Casualty Insurance Company (“IDS Property Casualty”), and its wholly-owned subsidiary, AMEX Assurance Company. IDS Property Casualty is a stock insurance company organized under the laws of Wisconsin, and AMEX Assurance is a stock insurance company organized under the laws of Illinois. We refer to IDS Property Casualty and its subsidiaries as the Property Casualty companies. Our Property Casualty companies provide personal auto, homeowner’s and liability coverage to clients in 37 states and the District of Columbia. AMEX Assurance also provides certain American Express Card-related insurance products such as travel accident insurance, as well as currently providing errors and omissions insurance to our company and our financial advisors. AMEX Assurance, which currently issues most of the personal auto, homeowner’s, liability and errors and omissions coverage, cedes 100% of these risks to IDS Property Casualty pursuant to a reinsurance agreement. Effective July 1, 2005, AMEX Assurance ceded 100% of the travel insurance and card related business of American Express Travel Related Services Company, Inc., a subsidiary of American Express Company, to Amexco pursuant to a reinsurance agreement. In connection with the separation from American Express Company, we entered into an agreement to sell AMEX Assurance to American Express Travel Related Services Company, Inc., within two years after the Distribution. For additional information relating to this agreement and future sale, see “Our Relationship with American Express Company.” Distribution and Marketing Channels We offer the insurance protection products of our IDS Life companies almost exclusively through our network of financial advisors. Our branded advisors offer insurance protection products issued almost exclusively by the IDS Life companies. In limited circumstances in which we do not offer comparable products or based on risk rating or policy size, our branded advisors may offer insurance protection products of other unaffiliated carriers. We also sell IDS Life insurance protection products through our Financial Services Center. Our Property Casualty companies do not have field agents; rather, we use co-branded direct marketing to sell our personal auto and home insurance protection products through alliances with commercial institutions, through affinity groups and directly to our clients, American Express Cardmembers and the general public. We also receive referrals through our financial advisor network. Our Property Casualty companies have a major distribution agreement with Costco Insurance Agency, Inc., Costco’s affiliated insurance agency. Costco members represented approximately 70% of all new policy sales of our Property Casualty companies in 2005. Through another alliance, we market our property casualty products to certain consumers who have a relationship with Delta Air Lines. For more information regarding our alliances with Costco and Delta, see “Asset Accumulation and Income—Strategic Alliances and Other Marketing Channels—Strategic Alliances and Other Marketing Arrangements” above. Liabilities and Reserves Our IDS Life and Property Casualty companies must maintain adequate financial reserves to cover the insurance risks associated with the insurance products they issue. Generally, reserves represent estimates of the invested assets that our IDS Life and Property Casualty companies need to hold now to provide adequately for future benefits and expenses. You can find a discussion of liabilities and reserves related to our insurance products in Note 2 to our consolidated financial statements included in our 2005 Annual Report to Shareholders. Reinsurance We reinsure a portion of the insurance risks associated with our life and long-term care insurance products through reinsurance agreements with unaffiliated reinsurance companies. We use reinsurance in order to limit losses, reduce exposure to large risks, provide additional capacity for future growth and deploy capital efficiently. To manage exposure to losses from reinsurer insolvencies, we evaluate the financial condition of reinsurers prior to entering into new reinsurance treaties. 23
  • Our insurance companies remain primarily liable as the direct insurers on all risks reinsured. They also retain all risk for claims on disability income contracts. We currently manage risk by limiting the amount of disability income insurance written on any one individual. Our insurance companies also retain all risk on accidental death benefit claims and risk associated with waiver of premium provisions. Generally, we reinsure 90% of the death benefit liability related to individual variable universal, fixed universal and traditional life insurance products. As a result, the IDS Life Companies typically retain, and are at risk for, at most, 10% of each policy’s death benefit from the first dollar of coverage for new sales of these policies, subject to the reinsurer actually paying. IDS Life began reinsuring risks at this level during 2001 for term life insurance and 2002 for variable universal and fixed universal life insurance. Our IDS Life of New York subsidiary began reinsuring risks at this level during 2002 for term life insurance and 2003 for variable universal and fixed universal life insurance. Policies issued prior to these dates are not subject to these same reinsurance levels. Generally, the maximum amount of life insurance risk retained by IDS Life and IDS Life of New York is $750,000 on any policy insuring a single life and $1.5 million on any flexible premium survivorship variable life policy. For existing long-term care policies, IDS Life (and IDS Life of New York for 1996 and later issues) retained 50% of the risk and ceded the remaining 50% of the risk to GECA. Risk on variable universal life and fixed universal life policies is reinsured on a yearly renewable term basis. Risk on recent term life and long-term care policies is reinsured on a coinsurance basis, a type of reinsurance in which the reinsurer participates proportionately in all material risks and premiums associated with a policy. We also reinsure a portion of the risks associated with our personal auto and home insurance products through two types of reinsurance agreements with unaffiliated reinsurance companies. We purchase reinsurance with a limit of $3.15 million per loss and we retain $350,000 per loss. We purchase catastrophe reinsurance and retain $4 million of loss per event with loss recovery up to $55 million per event. Financial Strength Ratings Our insurance subsidiaries receive ratings from independent rating agencies. Ratings are important to maintaining public confidence in our insurance subsidiaries and our protection and annuity products. Lowering of our insurance subsidiaries’ ratings could have a material adverse effect on our ability to market our protection and annuity products and could lead to increased surrenders of these products. Rating agencies continually evaluate the financial soundness and claims-paying ability of insurance companies based on a number of different factors. More specifically, the ratings assigned are developed from an evaluation of a company’s balance sheet strength, operating performance and business profile. Balance sheet strength reflects a company’s ability to meet its current and ongoing obligations to its policyholders and includes analysis of a company’s capital adequacy. The evaluation of operating performance centers on the stability and sustainability of a company’s sources of earnings. The analysis of business profile reviews a company’s mix of business, market position and depth and experience of management. Generally, IDS Life’s four insurance subsidiaries do not receive an individual rating, but receive the same rating as IDS Life. IDS Life is currently rated as A+” (Superior) by A.M. Best Company, Inc. and its claims-paying ability/financial strength was rated “Aa3” (Excellent) by Moody’s Investors Service, Inc., “AA-” (Very Strong) by Fitch and “AA-” (Very Strong) by Standard & Poor’s. Our Property Casualty companies receive two ratings from A.M. Best, one related to AMEX Assurance as a separate company and one for the combined Property Casualty companies. Both AMEX Assurance and the combined Property Casualty companies recently received “A” ratings (Excellent) by A.M. Best with a negative outlook. Risk-Based Capital The NAIC defines risk-based capital (“RBC”) requirements for insurance companies. The RBC requirements are used by the NAIC and state insurance regulators to identify companies that merit regulatory actions designed to protect policyholders. The NAIC RBC report is completed as of December 31 and filed annually, along with the statutory financial statements. Our IDS Life and Property Casualty companies would be subject to various levels of regulatory intervention should their total adjusted statutory capital fall below the RBC requirement. At the “company action level,” defined as total adjusted capital level between 100% and 75% of the RBC requirement, an insurer must submit a plan for corrective action with its primary state regulator. The “regulatory action level,” which is between 75% and 50% of the RBC requirement, subjects an 24
  • insurer to examination, analysis and specific corrective action prescribed by the primary state regulator. If a company’s total adjusted capital falls between 50% and 35% of its RBC requirement, referred to as “authorized control level,” the insurer’s primary state regulator may place the insurer under regulatory control. Insurers with total adjusted capital below 35% of the requirement will be placed under regulatory control. For IDS Life, the company action level RBC was $751 million as of December 31, 2005, and the corresponding total adjusted capital was approximately $3.3 billion, which represents 435% of company action level RBC. As of December 31, 2005, the company action level RBC was $72.6 million for IDS Property Casualty and $22.8 million for AMEX Assurance. As of December 31, 2005, IDS Property Casualty had $464 million of total adjusted capital, or 639% of the company action level RBC, and AMEX Assurance had $115 million of total adjusted capital, or 505% of the company action level RBC. As described above, the IDS Life, IDS Property Casualty, and AMEX Assurance companies maintain capital well in excess of the company action level required by their state insurance regulators. Competition We operate in a highly competitive industry. Because of our integrated business model, we compete directly with a variety of financial institutions such as banks, securities brokers, asset managers and insurance companies depending on the type of product and service we are offering. We compete directly with these entities for the provision of products and services to clients, as well as for our financial advisors and investment management personnel. Our products and services also compete indirectly in the marketplace with the products and services of our competitors. Our financial advisor force competes for clients with a range of other advisors, broker-dealers and direct channels, including wirehouses, regional broker-dealers, independent broker-dealers, insurers, banks, asset managers, registered investment advisers and direct distributors. To acquire and maintain owned, managed and administered assets, we compete against a substantial number of firms, including those of the categories listed above. Our own RiverSource family of mutual funds, like other mutual funds, faces competition from other mutual fund families and alternative investment products, such as exchange traded funds. Additionally, for mutual funds, high ratings from rating services, such as Morningstar or Lipper, as well as favorable mention in financial publications, may influence sales and lead to increases in managed assets. As a mutual fund’s assets increase, management fee revenue increases and the fund may achieve economies of scale that make it more attractive to investors because of potential resulting reductions in the fund’s expense ratio. Conversely, low ratings and negative mention in financial publications can lead to outflows, which reduce management fee revenues and can impede achieving the benefits of economies of scale. Additionally, reputation and brand integrity are becoming increasingly more important as the mutual fund industry generally and certain firms in particular have come under regulatory and media scrutiny. Our mutual fund products compete against products of firms like Fidelity, American Funds and Oppenheimer. Our annuity products compete with products from numerous other companies, such as Hartford, MetLife, Lincoln National and Nationwide. Our brokerage subsidiaries compete with securities broker-dealers, independent broker-dealers, financial planning firms, insurance companies and other financial institutions in attracting and retaining members of the field force. Competitive factors in the brokerage services business include price, service and execution. Our retirement services business competes with a substantial number of larger firms in seeking to acquire and maintain managed assets. Competitive factors in this business include scale, corporate relationships, fees, record keeping and technological capabilities, investment performance and client service. Competitors of our IDS Life and Property Casualty companies consist of both stock and mutual insurance companies, as well as other financial intermediaries marketing insurance products such as Hartford, MetLife, Lincoln National and Nationwide. Competitive factors affecting the sale of life and disability income insurance products include the cost of insurance and other contract charges, the level of premium rates and financial strength ratings from rating agencies such as A.M. Best. Competitive factors affecting the sale of property casualty insurance products include brand recognition, distribution capabilities and product pricing. Technology We have an integrated customer management system, built in the early 1980s, which serves as the hub of our technology platform. In addition, we have specialized record keeping engines that manage individual brokerage, mutual 25
  • fund, insurance and banking client accounts. Over the years we have updated this basic platform to include new product lines such as brokerage, deposit, credit and products of other companies, wrap accounts and e-commerce capabilities for our financial advisors and clients. We also use a proprietary suite of tools for our financial planning services. Most of our applications run on a technology infrastructure that we outsourced to IBM in 2002. Under this arrangement, IBM is responsible for all mainframe, midrange, Web hosting, end-user computing and help desk operations. Also, we outsource voice network operations to AT&T. In addition to these two arrangements, we have outsourced our production support and a portion of our development and maintenance of our computer applications to offshore firms. We are updating our technological capabilities to create a more adaptive platform design that will allow a faster, lower cost response to emerging business opportunities, compliance requirements and marketplace trends. Since 2002, we have upgraded our investment accounting platform for our owned assets, completed the conversion of our 401(k) record keeping system and transitioned our wrap account system. We believe these upgrades have enhanced our flexibility by bringing our systems in line with industry standards. Additionally, in 2004, we transitioned our fixed income trading systems to BlackRock Solutions, a leading industry platform. This change has helped improve our risk management, as well as our ability to analyze the extent to which our fixed income performance can be attributed to various identified factors, such as interest rate movements. In 2004, in partnership with Acxiom, we also completed a customer analytics and business intelligence capability to enable targeted marketing and identify product sales opportunities. In 2005 we completed the upgrade of our mutual fund transfer agent platform, which will help improve compliance, enhance functionality and enable eventual third party distribution of our own mutual funds. We are currently investing in our technology manufacturing processes with an objective of increasing our Capability Maturity Model for Integration (CMMI). The primary purposes of this investment are to improve the quality of our systems delivered, improve efficiency of our employee and outsource workforce, and enhance our ability to meet business service levels. In the next phase of our technology upgrade, we intend to update our account opening, order management and servicing platforms for individual and corporate clients. We also plan to transition to a more modern equity trading platform, which should improve trading of our equity portfolios as well as compliance and may help us to reduce costs. In addition to general updating of our technological capabilities, as part of the separation from American Express Company, we are installing and implementing information technology infrastructure to support our enterprise business functions, including accounting and reporting, customer service and distribution. This separation from American Express Company’s technology infrastructure includes hardware, applications, network, telephony, databases, backup and recovery solutions. We have developed a comprehensive business continuity plan that covers business disruptions of varying severity and scope and addresses the loss of a geographic area, building, staff, data, systems and/or our telecommunications. We subject our business continuity plan to review and testing on an ongoing basis and update it as necessary. Under our business continuity plan, we expect to continue to be able to do business and resume operations with minimal service impacts. However, under certain scenarios, the time that it would take for us to recover and to resume operations may significantly increase depending on the extent of the disruption and the number of personnel affected. Geographic Presence For years ended December 31, 2005, 2004 and 2003, over 90% of our long-lived assets were located in the United States, and over 90% of our revenues were generated in the United States. Employees At December 31, 2005, we had approximately 11,900 employees, including 3,225 employee financial advisors (which does not include our branded franchisee advisors/registered representatives nor those of SAI, neither of whom are employees of our company). None of our employees are subject to collective bargaining agreements governing their employment with our company. We believe that our employee relations are good. Regulation Most aspects of our business are subject to extensive regulation by U.S. federal and state regulatory agencies and securities exchanges and by non-U.S. government agencies or regulatory bodies and securities exchanges. Our public disclosure, internal control environment and corporate governance principles are subject to the Sarbanes-Oxley Act of 2002, related regulations and rules of the SEC and the listing requirements of The New York Stock Exchange, Inc. 26
  • We have implemented franchise and compliance standards, and strive for a consistently high level of client service. For several years, we have used standards developed by the Certified Financial Planner Board of Standards, Inc., in our financial planning process. We also participated in developing the International Organization for Standardization (“ISO”) 22222 Personal Financial Planning Standard published in December 2005 by the ISO. We put in place franchise standards and requirements regardless of location. We have made significant investments in our compliance processes, enhancing policies and procedures to monitor our compliance with the numerous and varied legal and regulatory requirements applicable to our business. These requirements are discussed below. We expect to continue to make significant investments in our compliance efforts. Asset Accumulation and Income Our Asset Accumulation and Income business is regulated by the SEC, the National Association of Securities Dealers, commonly referred to as the NASD, the CFTC, the National Futures Association, state securities regulators and state insurance regulators and the U.K. Financial Services Authority (“FSA”). Our European fund distribution activities are also subject to local country regulations. Additionally, the U.S. Departments of Labor and Treasury regulate certain aspects of our retirement services business. As has the rest of the financial services industry, we have experienced, and believe we will continue to be subject to, increased regulatory oversight of the securities, insurance and commodities industries at all levels. As an example, under the European Union (“EU”) directive on the supplementary supervision of financial conglomerates (“EU Financial Conglomerates Directive”), we are required to have a “coordinating” or “consolidating” regulator to monitor the organization as a whole and coordinate information with other regulators (primarily the FSA, the supervisor of Threadneedle Investments) that have jurisdiction over discrete aspects of our operations. For more information on these requirements, see “General” below. Beginning in October 2004, investment companies and investment advisers are required by the SEC to adopt and implement written policies and procedures designed to prevent violation of the federal securities laws and to designate a chief compliance officer responsible for administering these policies and procedures. The SEC and NASD have also heightened requirements for, and continued scrutiny of, the effectiveness of supervisory procedures and compliance programs of broker-dealers, including certification by senior officers regarding the effectiveness of these procedures and programs. Regulators have recently adopted or are considering regulatory requirements regarding directed brokerage, market timing, increased disclosures in mutual fund prospectuses and other applicable materials and an investment adviser code of ethics. AMPF is registered as a broker-dealer and investment adviser with the SEC, is a member of the NASD and does business as a broker-dealer and investment adviser in all 50 states and the District of Columbia. The SEC and the NASD have stringent rules with respect to the net capital requirements and activities of broker-dealers. Our financial advisors and other personnel must obtain all required state and NASD licenses and registrations. SEC regulations also impose notice and capital limitations on the payment of dividends by a broker-dealer to a parent. Our subsidiary, American Enterprise Investment Services, Inc., is also registered as a broker- dealer with the SEC and appropriate states and is a member of the NASD and the Boston Stock Exchange and a stockholder in the Chicago Stock Exchange. A subsidiary of our independent financial advisor platform, Securities America, Inc., and our subsidiary IDS Life are also registered as broker-dealers and are members of the NASD. Certain of our subsidiaries also do business as registered investment advisers and are regulated by the SEC and state securities regulators where required. The IDS Life companies are subject to regulation by state insurance regulators as described under “—Protection” below. Our trust company is primarily regulated by the Minnesota Department of Commerce (Banking Division) and is subject to capital adequacy requirements under Minnesota law. It may not accept deposits or make personal or commercial loans. As a provider of products and services to tax-qualified retirement plans and IRAs, certain aspects of our business, including the activities of our trust company, fall within the compliance oversight of the U.S. Departments of Labor and Treasury, particularly the Employee Retirement Income Security Act of 1974, commonly referred to as ERISA, and the tax reporting requirements applicable to such accounts. Our face-amount certificate company is regulated as an investment company. The payment of dividends to our company by our face-amount certificate company is subject to capital requirements under applicable law and understandings with the SEC and the Minnesota Department of Commerce. As discussed above under “Asset Accumulation and Income—U.S. Retail Products and Solutions—Banking Products,” we have received approval from the OTS to obtain a new FSB charter. After we obtain the required regulatory approvals and our banking subsidiary is established, our FSB will be subject to regulation by the OTS, which is the primary regulator of federal savings banks, and by the FDIC in its role as insurer of our FSB’s deposits. As its controlling company, 27
  • we will become a savings and loan holding company and also be subject to regulation by the OTS. Furthermore, our ownership of Threadneedle Investments subjects us to the EU Financial Conglomerates Directive to designate a global consolidated supervisory regulator, and we have designated the OTS for this purpose (subject to approval by the FSA). Because of our status as a savings and loan holding company, our activities will be limited to those that are financial in nature, and OTS will have authority to regulate our capital and debt, although there are not specific holding company capital requirements. Our FSB will be subject to specific capital rules and if its capital falls below certain levels, OTS will be required to take certain remedial actions and may take other actions, including the imposition of limits on dividends or activities, and OTS could direct us to divest the subsidiary. Our FSB also will be subject to limits on capital distributions, including payment of dividends to us and on transactions with affiliates. In addition, an array of community reinvestment, fair lending, and other consumer protection laws and regulations will apply to our FSB. Either of the OTS or the FDIC may bring administrative enforcement actions against the FSB or its officers, directors or employees if any of them violate a law or engage in an unsafe or unsound practice. Compliance with these and other regulatory requirements adds to the cost and complexity of operating our business. In addition, the SEC, OTS, U.S. Departments of Labor and Treasury, NASD, other self-regulatory organizations and state securities, banking and insurance regulators may conduct periodic examinations. Periodic examinations may result in administrative proceedings, which, in turn, may result in, among other things, censure, fine, the issuance of cease-and-desist orders or suspension or expulsion of a broker-dealer or an investment adviser and its officers or employees. Individual investors also can bring complaints against our company. Because we are structured as a franchise system, we are also subject to Federal Trade Commission and state franchise requirements. Protection The Minnesota Department of Commerce (Insurance Division), the Indiana Department of Insurance, the Arizona Department of Insurance, the Wisconsin Office of the Commissioner of Insurance and the Illinois Insurance Department (collectively, and with the New York State Insurance Department, the “Domiciliary Regulators”) regulate certain of the IDS Life companies, IDS Property Casualty and AMEX Assurance, depending on the companies’ state of domicile. The New York State Insurance Department regulates our IDS Life of New York subsidiary and another IDS Life company that is domiciled in New York. In addition to being regulated by their Domiciliary Regulators, our IDS Life companies and Property Casualty companies are regulated by each of the insurance regulators in the states where each is authorized to transact the business of insurance. The other states also regulate such matters as the licensing of sales personnel and, in some cases the marketing and contents of insurance policies and annuity contracts. The primary purpose of such regulation and supervision is to protect the interests of contractholders and policyholders. Financial regulation of our IDS Life companies and Property Casualty companies is extensive, and their financial and intercompany transactions (such as intercompany dividends, capital contributions and investment activity) are often subject to pre-notification and continuing evaluation by the Domiciliary Regulators. Virtually all states require participation in insurance guaranty associations which assess fees to insurance companies in order to fund claims of policyholders and contractholders of insolvent insurance companies. At the federal level, there is periodic interest in enacting new regulations relating to various aspects of the insurance industry, including taxation of annuities and life insurance policies, accounting procedures, and the treatment of persons differently because of gender, with respect to terms, conditions, rates or benefits of an insurance policy. Adoption of any new federal regulation in any of these areas could potentially have an adverse effect upon our IDS Life companies. Also, recent federal legislative proposals aimed at the promotion of tax-advantaged savings through Lifetime Savings Accounts and Retirement Savings Accounts may adversely impact our IDS Life companies’ sales of annuity and life insurance products if enacted. Client Information Many aspects of our business are subject to increasingly comprehensive legal requirements by a multitude of different functional regulators concerning the use and protection of personal information, particularly that of clients, including those adopted pursuant to the Gramm-Leach-Bliley Act , the Fair and Accurate Credit Transactions Act and an ever increasing number of state laws. Ameriprise has implemented policies and procedures in response to such requirements. We continue our efforts to safeguard the data entrusted to us in accordance with applicable law and our internal data protection policies, including taking steps to reduce the potential for identity theft or other improper use or disclosure of personal information, while seeking to collect and use data to properly achieve our business objectives and to best serve our clients. 28
  • General The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, commonly referred to as the Patriot Act, was enacted in October 2001 in the wake of the September 11th terrorist attacks. The Patriot Act substantially broadened existing anti-money laundering legislation and the extraterritorial jurisdiction of the United States. In response, we have enhanced our existing anti-money laundering programs and developed new procedures and programs. For example, we have implemented a customer identification program applicable to many of our businesses, and have enhanced our “know your customer” and “enhanced due diligence” programs in others. We intend to take steps to comply with any additional regulations that are adopted. In addition, we will take steps to comply with anti-money laundering initiatives adopted in other jurisdictions in which we conduct business. We have operations in the EU through Threadneedle Investments and certain of our other subsidiaries. We monitor developments in EU legislation, as well as in the other markets in which we operate, to ensure that we comply with all applicable legal requirements, including EU directives applicable to financial institutions. Because of the mix of Asset Accumulation and Income and Protection activities we conduct, we will be addressing the EU Financial Conglomerates Directive, which contemplates that certain financial conglomerates involved in banking, insurance and investment activities will be subject to a system of supplementary supervision at the level of the holding company constituting the financial conglomerate. The directive requires financial conglomerates to, among other things, implement measures to prevent excessive leverage and multiple leveraging of capital, and to maintain internal control processes to address risk concentrations as well as risks arising from significant intragroup transactions. We have designated the OTS as our global consolidated supervisory regulator under the EU Financial Conglomerates Directive (subject to approval by the FSA). SECURITIES EXCHANGE ACT REPORTS AND ADDITIONAL INFORMATION We maintain an Investor Relations website on the Internet at http://ir.ameriprise.com. We make available free of charge, on or through this website, our annual, quarterly and current reports and any amendments to those reports as soon as reasonably practicable following the time they are electronically filed with or furnished to the SEC. To access these, just click on the “SEC Filings” link found on our Investor Relations homepage. You can also access our Investor Relations website through our main website at www.ameriprise.com by clicking on the “Investor Relations” link, which is located at the top of our homepage. Information contained on our website is not incorporated by reference into this report or any other report filed with the SEC. SEGMENT INFORMATION AND CLASSES OF SIMILAR SERVICES You can find information regarding our operating segments, geographic operations and classes of similar services in Note 20 to our consolidated financial statements included in our 2005 Annual Report to Shareholders and incorporated herein by reference. EXECUTIVE OFFICERS OF OUR COMPANY Set forth below is a list of all our executive officers and our principal accounting officer as of March 1, 2006. None of such officers has any family relationship with any other executive officer or our principal accounting officer, and none of such officers became an officer pursuant to any arrangement or understanding with any other person. Each such officer has been elected to serve until the next annual election of officers or until his or her successor is elected and qualified. Each officer’s age is indicated by the number in parentheses next to his or her name. James M. Cracchiolo – Chairman and Chief Executive Officer Mr. Cracchiolo (47) has been our Chairman and Chief Executive Officer since the Distribution in September 2005. Prior to the Distribution, Mr. Cracchiolo was Chairman and Chief Executive Officer of AEFC since March 2001; President and Chief Executive Officer of AEFC since November 2000; and Group President, Global Financial Services of American Express Company since June 2000. He served as Chairman of American Express Bank Ltd. from September 2000 until April 2005 and served as President and Chief Executive Officer of Travel Related Services International from May 1998 through July 2003. Mr. Cracchiolo joined American Express Company in 1982. Mr. Cracchiolo also currently serves on the board of directors of Tech Data Corporation. He is also currently on the board of advisors of the March of Dimes. 29
  • Brian M. Heath – President—U.S. Advisor Group Mr. Heath (45) has been our President—U.S. Advisor Group since September 2005. Prior to the Distribution, Mr. Heath served as Senior Vice President and General Sales Manager, U.S. Advisor Group of AEFC since June 1999. Mr. Heath joined American Express Company in 1984. Mark Schwarzmann - President—Insurance, Annuities and Product Distribution Mr. Schwarzmann (44) has been our President—Insurance, Annuities and Product Distribution since September 2005. Prior to the Distribution, Mr. Schwarzmann served as Senior Vice President, Insurance, Annuities and Product Distribution of AEFC since February 2005, and Chairman and Chief Executive Officer, IDS Life Insurance Company, and Chairman and Chief Executive Officer, American Enterprise Life Insurance Company since December 2003. Prior thereto, he served as Senior Vice President of Insurance and Annuities of AEFC from December 2003, when he joined American Express Company. Mr. Schwarzmann also currently serves on the American Council of Life Insurers’ Board of Directors, a position he has held since June 2004. Prior to joining American Express Company, he was Chief Executive Officer, Allfinanz, Inc., and had previously held a variety of senior leadership positions at GE, GE Capital, and GE Financial Assurance. Joseph E. Sweeney - President—Financial Planning, Products and Services Mr. Sweeney (44) has been our President—Financial Planning, Products and Services since September 2005. Prior to the Distribution, Mr. Sweeney served as Senior Vice President and General Manager of Banking, Brokerage and Managed Products of AEFC since April 2002. Prior thereto, he served as Senior Vice President and Head, Business Transformation, Global Financial Services of American Express Company from March 2001 until April 2002. Mr. Sweeney joined American Express Company in 1983. Mr. Sweeney also currently serves on the board of directors of the Securities Industry Association. William F. Truscott - President—U.S. Asset Management and Chief Investment Officer Mr. Truscott (45) has been our President—U.S. Asset Management and Chief Investment Officer since September 2005. Prior to the Distribution, Mr. Truscott served as Senior Vice President and Chief Investment Officer of AEFC, a position he held since he joined the company in September 2001. Prior thereto, Mr. Truscott had served as Chief Investment Officer with Zurich Scudder Investments, Americas, from October 2000 through August 2001 and Managing Director of Zurich Scudder Investments from January 1996 through October 2000. Walter S. Berman - Executive Vice President and Chief Financial Officer Mr. Berman (63) has been our Executive Vice President and Chief Financial Officer since September 2005. Prior to the Distribution, Mr. Berman served as Executive Vice President and Chief Financial Officer of AEFC, a position he held since January 2003. From April 2001 to January 2004, Mr. Berman served as Corporate Treasurer of American Express Company. Prior thereto, Mr. Berman served as Treasurer of International Business Machines Corporation from February 1999 through February 2000. Mr. Berman first joined American Express Company in 1965 and served until 1998 in various positions. Mr. Berman returned to American Express Company in April 2001. Kelli A. Hunter - Executive Vice President of Human Resources Ms. Hunter (44) has been our Executive Vice President of Human Resources since September 2005. Prior to the Distribution, Ms. Hunter served as Executive Vice President of Human Resources of AEFC since joining our company in June 2005. Prior to joining AEFC, Ms. Hunter was Senior Vice President—Global Human Capital for Crown Castle International Corporation in Houston, Texas. Prior to that, she held a variety of senior level positions in human resources for Software Spectrum, Inc., Mary Kay, Inc., as well as Morgan Stanley Inc. and Bankers Trust New York Corporation. John C. Junek - Executive Vice President and General Counsel Mr. Junek (56) has been our Executive Vice President and General Counsel since September 2005. Prior to the Distribution, Mr. Junek served as Senior Vice President and General Counsel of AEFC since June 2000. Prior thereto, he served as the Deputy General Counsel of American Express Travel Related Services Company, a position he held from 1990 until June 2000. Mr. Junek joined American Express Company in 1978. 30
  • Glen Salow - Executive Vice President—Technology and Operations Mr. Salow (49) has been our Executive Vice President—Technology and Operations since September 2005. Prior to the Distribution, Mr. Salow was Executive Vice President of Technologies and Operations of AEFC since May 2005 and was Executive Vice President and Chief Information Officer of American Express Company from March 2000 to May 2005. Mr. Salow joined American Express Company in 1997. Kim M. Sharan - Executive Vice President and Chief Marketing Officer Ms. Sharan (48) has been our Executive Vice President and Chief Marketing Officer since September 2005. Prior to the Distribution, Ms. Sharan served as Senior Vice President and Chief Marketing Officer of AEFC since July 2004. Prior thereto, she served as Senior Vice President and Head of Strategic Planning of the Global Financial Services Division of American Express Company from October 2002, when she joined American Express Company, until July 2004. Prior to joining American Express Company, Ms. Sharan was Managing Director at Merrill Lynch in Tokyo, Japan from February 2000 until September 2002. Andrew J. MacMillan - Senior Vice President, Corporate Communications & Government Affairs Mr. MacMillan (58) has been our Senior Vice President, Corporate Communications & Government Affairs since November 2005. Prior to joining our company, he was Head of Corporate Communications and Global Marketing at Americas for Barclays Capital from November 2002 to January 2005. Prior to that, he was Senior Vice President of Communications for Nasdaq, working for Nasdaq Chairman Frank Zarb, and he also spent more than 12 years at Credit Suisse First Boston in communications as well as public finance. Earlier in his career, Mr. MacMillan held roles in strategic planning, mergers and acquisitions and consulting. John R. Woerner - Senior Vice President—Strategic Planning and Business Development Mr. Woerner (37) has been our Senior Vice President—Strategic Planning and Business Development since September 2005. Prior to the Distribution, Mr. Woerner served as Senior Vice President—Strategic Planning and Business Development of AEFC since March 2005. Prior to joining our company Mr. Woerner was a Principal at McKinsey & Co., where he spent a decade serving leading U.S. and European financial services firms, and co-led their U.S. Asset Management Practice. David K. Stewart - Senior Vice President and Controller (Principal Accounting Officer) Mr. Stewart (52) has been our Senior Vice President and Controller since September 2005. Prior to the Distribution, Mr. Stewart had served as Vice President and Controller of AEFC and its subsidiaries since June 2002, when he joined American Express Company. Prior thereto, Mr. Stewart held various management positions in accounting, financial reporting and treasury operations at Lutheran Brotherhood, now part of Thrivent Financial for Lutherans, where he was Vice President—Treasurer from 1997 until 2001. Item 1A. Risk Factors. If any of the following risks and uncertainties develops into actual events, these events could have a material adverse effect on our business, financial condition or results of operations. In such case, the trading price of our common stock could decline. Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting our company in each of these categories of risk. However, the risks and uncertainties our company faces are not limited to those described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Risks Relating to Our Business Our financial condition and results of operations may be adversely affected by market fluctuations and by economic and other factors. Our financial condition and results of operations may be materially affected by market fluctuations and by economic and other factors. Many such factors of a global or localized nature include: political, economic and market conditions; the 31
  • availability and cost of capital; the level and volatility of equity prices, commodity prices and interest rates; currency values and other market indices; technological changes and events; the availability and cost of credit; inflation; investor sentiment and confidence in the financial markets; terrorism events and armed conflicts; and natural disasters such as weather catastrophes and widespread health emergencies. Furthermore, changes in consumer economic variables, such as the number and size of personal bankruptcy filings, the rate of unemployment, and the level of consumer confidence and consumer debt, may substantially affect consumer loan levels and credit quality, which, in turn, could impact the results of our banking business. These factors also may have an impact on our ability to achieve our strategic objectives. Our insurance products and certain of our investment products are sensitive to interest rate fluctuations, and our future costs associated with such variations may differ from our historical costs. In addition, interest rate fluctuations could result in fluctuations in the valuation of certain minimum guaranteed benefits contained in some of our variable annuity products. During periods of increasing market interest rates, we must offer higher crediting rates on interest-sensitive products, such as fixed universal life insurance, fixed annuities and face-amount certificates, and we must increase crediting rates on in-force products to keep these products competitive. Because returns on invested assets may not increase as quickly as current interest rates, we may have to accept a lower spread and thus lower profitability or face a decline in sales and greater loss of existing contracts and related assets. In addition, increases in market interest rates may cause increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for policy loans, as policyholders and contractholders seek to shift assets to products with perceived higher returns. This process may lead to an earlier than expected flow of cash out of our business. Also, increases in market interest rates may result in extension of certain cash flows from structured mortgage assets. These policyholder withdrawals and surrenders may require investment assets to be sold at a time when the prices of those assets are lower because of the increase in market interest rates, which may result in realized investment losses. Increases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on our financial condition and results of operations. An increase in policy surrenders and withdrawals also may require us to accelerate amortization of deferred acquisition costs or other intangibles or cause an impairment of goodwill, which would increase our expenses and reduce our net earnings. During periods of falling interest rates, our “spread,” or the difference between the returns we earn on the investments that support our obligations under these products and the amounts that we must pay policyholders and contractholders, may be reduced. Because we may adjust the interest rates we credit on most of these products downward only at limited, pre-established intervals, and because some of them have guaranteed minimum crediting rates, our spreads could decrease and potentially become negative. Interest rate fluctuations also could have an adverse effect on the results of our investment portfolio. During periods of declining market interest rates, the interest we receive on variable interest rate investments decreases. In addition, during those periods, we are forced to reinvest the cash we receive as interest or return of principal on our investments in lower-yielding high-grade instruments or in lower-credit instruments to maintain comparable returns. Issuers of certain callable fixed income securities also may decide to prepay their obligations in order to borrow at lower market rates, which exacerbates the risk that we may have to invest the cash proceeds of these securities in lower-yielding or lower-credit instruments. Significant downturns and volatility in equity markets could have an adverse effect on our financial condition and results of operations. Market downturns and volatility may cause potential new purchasers of our products to refrain from purchasing products, such as mutual funds, variable annuities and variable universal life insurance, that have returns linked to the performance of the equity markets. Downturns may also cause current shareholders in our mutual funds and contractholders in our annuity and protection products to withdraw cash values from those products. Additionally, downturns and volatility in equity markets can have an adverse effect on the revenues and returns from our asset management services, wrap accounts, and variable annuity contracts. Because the profitability of these products and services depends on fees related primarily to the value of assets under management, declines in the equity markets will reduce our revenues because the value of the investment assets we manage will be reduced. In addition, some of our variable annuity products contain guaranteed minimum death benefits and guaranteed minimum income, withdrawal and accumulation benefits. A significant equity market decline could result in guaranteed minimum benefits being higher than what current account values would support, thus producing a loss as we pay the benefits, having an adverse effect on our financial condition and results of operations. We have hedged a portion of the guarantees for the variable annuity contracts in order to somewhat mitigate the financial loss of an equity markets decline. We believe that investment performance is an important factor in the growth of our Asset Accumulation and Income business. Poor investment performance could impair our revenues and earnings, as well as our prospects for growth. A significant portion of our revenue is derived from investment management agreements with our own RiverSource family of 32
  • mutual funds that are terminable on 60 days’ notice. In addition, although some contracts governing investment management services are subject to termination for failure to meet performance benchmarks, institutional and individual clients can generally terminate their relationships with us or our financial advisors at will or on relatively short notice. Our clients can also reduce the aggregate amount of managed assets or shift their funds to other types of accounts with different rate structures, for any number of reasons, including investment performance, changes in prevailing interest rates, changes in investment preferences, changes in our (or our financial advisors’) reputation in the marketplace, changes in client management or ownership, loss of key investment management personnel and financial market performance. A reduction in managed assets, and the associated decrease in revenues and earnings, could have a material adverse effect on our business. In addition, during periods of unfavorable market or economic conditions, the level of individual investor participation in the global markets may also decrease, which would negatively impact the results of our retail businesses. Moreover, fluctuations in global market activity could impact the flow of investment capital into or from assets under management and the way customers allocate capital among money market, equity, fixed income or other investment alternatives, which could negatively impact our Asset Accumulation and Income business. Defaults in our fixed income securities portfolio or consumer credit products would adversely affect our earnings. Issuers of the fixed income securities that we own may default on principal and interest payments. As of December 31, 2005, approximately 7% of our investment portfolio had ratings below investment-grade. Moreover, economic downturns and corporate malfeasance can increase the number of companies, including those with investment-grade ratings, that default on their debt obligations, as occurred in 2001 and 2002. As of December 31, 2005, we had fixed income securities in or near default (where the issuer had missed payment of principal or interest or entered bankruptcy) with a fair value of $58.1 million. Default-related declines in the value of our fixed income securities portfolio or consumer credit products could cause our net earnings to decline and could also cause us to contribute capital to some of our regulated subsidiaries, which may require us to obtain funding during periods of unfavorable market conditions. If the counterparties to our reinsurance arrangements or to the derivative instruments we use to hedge our business risks default, we may be exposed to risks we had sought to mitigate, which could adversely affect our financial condition and results of operations. We use reinsurance to mitigate our risks in various circumstances. See Item 1 of this Annual Report on Form 10-K— ”Protection—Reinsurance.” Reinsurance does not relieve us of our direct liability to our policyholders, even when the reinsurer is liable to us. Accordingly, we bear credit and performance risk with respect to our reinsurers. A reinsurer’s insolvency or its inability or unwillingness to make payments under the terms of our reinsurance agreement could have an adverse effect on our financial condition and results of operations that could be material. In addition, we use a variety of derivative instruments to hedge several business risks. If our counterparties fail to honor their obligations under the derivative instruments, our hedges of the related risk will be ineffective. That failure could have an adverse effect on our financial condition and results of operations that could be material. Some of our investments are relatively illiquid. We invest a portion of our owned assets in privately placed fixed income securities, mortgage loans, policy loans, limited partnership interests, real estate and restricted investments held by securitization trusts, among others, all of which are relatively illiquid. These asset classes represented approximately 12.4% of the carrying value of our investment portfolio as of December 31, 2005. If we require significant amounts of cash on short notice in excess of our normal cash requirements, we may have difficulty selling these investments in a timely manner, or be forced to sell them for an amount less than we would otherwise have been able to realize, or both, which could have an adverse effect on our financial condition and results of operations. Intense competition and the economics of changes in our product revenue mix and distribution channels could negatively affect our ability to maintain or increase our market share and profitability. Our businesses operate in intensely competitive industry segments. We compete based on a number of factors including name recognition, service, the quality of investment advice, investment performance, product features, price, perceived financial strength, and claims-paying and credit ratings. Our competitors include broker-dealers, banks, asset managers, insurers and other financial institutions. Many of our businesses face competitors that have greater market share, offer a broader range of products, have greater financial resources, or have higher claims-paying or credit ratings than we do. In addition, over time certain sectors of the financial services industry have become considerably more concentrated, as financial institutions 33
  • involved in a broad range of financial services have been acquired by or merged into other firms. This convergence could result in our competitors gaining greater resources and we may experience pressures on our pricing and market share as a result of these factors and as some of our competitors seek to increase market share by reducing prices. Over recent years, sales of our own mutual funds by our financial advisor network, including sales within our wrap account products (for which we receive a fee based on assets in the account), have declined as a percentage of our total mutual funds sales. We expect this trend to continue for the near-term. This is principally a result of the addition of mutual funds of other companies to our product offerings in response to competition and clients’ desire for expanded product choice. In addition, other critical factors such as shareholder demographics and increasing sales of alternative investment products have caused our RiverSource Funds to experience significant net outflows overall since 2000. In recent years, a substantial portion of the mutual funds sold by our financial advisors was comprised of the products of other companies. Generally, our profits from sales of other companies’ mutual funds are lower than those from our own mutual funds. Part of our growth strategy is to expand alternative distribution channels for our own products. If we are unable to efficiently manage the economics of selling a growing proportion of mutual funds of other companies, to maintain an acceptable level of sales of our own products through our financial advisor network, to effectively develop third party distribution channels for our own mutual funds, or to expand the third party distribution channels for our annuity products, our results of operations could be adversely affected. Currently, our branded advisor network distributes annuity and protection products issued almost exclusively by our IDS Life companies. If our branded advisor distribution network is opened to annuity and protection products of other companies, there can be no assurance that there would not be a material adverse effect on our financial condition and results of operations. We face intense competition in attracting and retaining key talent. We are dependent on our network of branded advisors for a significant portion of the sales of our mutual funds, annuities, face-amount certificates and insurance protection products. In addition, our continued success depends to a substantial degree on our ability to attract and retain qualified personnel to conduct our fund management and investment advisory businesses, as well as senior management. The market for financial advisors, registered representatives, management talent, qualified fund managers, and investment analysts is extremely competitive and has grown more so in recent periods due to industry growth. If we are unable to attract and retain qualified individuals or our recruiting and retention costs increase significantly, our financial condition and results of operations could be materially adversely affected. Our businesses are heavily regulated, and changes in regulation may reduce our profitability, limit our growth, or impact our ability to pay dividends or achieve targeted return-on-equity levels. We operate in highly regulated industries, and are required to obtain and maintain licenses for many of the businesses we operate in addition to being subject to regulatory oversight. Securities regulators have significantly increased the level of regulation in recent years and have several outstanding proposals for additional regulation. In addition, we are subject to heightened regulatory requirements relating to privacy and the protection of customer data. These regulations, as well as possible legislative or regulatory changes, may constrain our ability to market our products and services to our potential customers and could negatively affect our profitability and make it more difficult for us to pursue our growth strategy. Our insurance companies are subject to state regulation, so must comply with statutory reserve and capital requirements. State regulators are continually reviewing and updating these requirements. As of December 31, 2005, our life insurance companies were subject to new capital requirements for variable annuity contracts with guaranteed death or living benefits. These new requirements had minimal impact on our balance sheet in 2005, but that may not continue to be true in the event equity market values fall in the future. Moreover, there is active discussion at the NAIC of moving to a principles-based reserving system. This could change statutory reserve requirements significantly, and it is not possible to estimate the impact at this time. Compliance with applicable laws and regulations is time consuming and personnel-intensive. Changes in these laws and regulations may increase materially our direct and indirect compliance and other expenses of doing business. Our financial advisors may decide that the direct cost of compliance and the indirect cost of time spent on compliance matters outweigh the benefits of a career as a financial advisor, which could lead to financial advisor attrition. The costs of the compliance requirements we face, and the constraints they impose on our operations, could have a material adverse effect on our financial condition and results of operations. 34
  • In addition, we may be required to reduce our fee levels, or restructure the fees we charge, as a result of regulatory initiatives or proceedings that are either industry-wide or specifically targeted at our company. Reductions or other changes in the fees that we charge for our products and services could reduce our revenues and earnings. Moreover, in the years ended December 31, 2005 and 2004, we received approximately $1.2 billion and $1.1 billion, respectively, in distribution fees. A significant portion of these revenues was paid to us by our own RiverSource family of mutual funds in accordance with plans and agreements of distribution adopted under Rule 12b-1 promulgated under the Investment Company Act of 1940, as amended, or Rule 12b-1. We believe that these fees are a critical element in the distribution of our own mutual funds. There have recently been suggestions from regulatory agencies and other industry participants that Rule 12b-1 fees in the mutual fund industry should be reconsidered and potentially reduced or eliminated. We believe that distribution and servicing-related fees paid to financial advisors will remain a key element in the mutual fund industry. However, an industry-wide reduction or restructuring of Rule 12b-1 fees could have a material adverse effect on our ability to distribute our own mutual funds and the fees we receive for distributing other companies’ mutual funds, which could, in turn, have an adverse effect on our revenues and earnings. For a further discussion of the regulatory framework in which we operate, see Item 1 of this Annual Report on Form 10-K— “Regulation.” Conflicts of interest are increasing and a failure to appropriately deal with conflicts of interest could adversely affect our businesses. Our reputation is one of our most important assets. As we have expanded the scope of our businesses and our client base, we increasingly have to address potential conflicts of interest, including those relating to our proprietary activities. For example, conflicts may arise between our position as a provider of financial planning products and a manufacturer and/or distributor or broker of asset accumulation, income or insurance protection products that one of our financial advisors may recommend to a financial planning client. We have procedures and controls that are designed to address conflicts of interest. However, appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with conflicts of interest. In addition, the SEC and other federal and state regulators have increased their scrutiny of potential conflicts of interest. It is possible that potential or perceived conflicts could give rise to litigation or enforcement actions. It is possible that the regulatory scrutiny of, and litigation in connection with, conflicts of interest will make our clients less willing to enter into transactions in which such a conflict may occur, and will adversely affect our businesses. Legal and regulatory actions are inherent in our businesses and could result in financial losses or harm our businesses. We are, and in the future may be, subject to legal and regulatory actions in the ordinary course of our operations, both domestically and internationally. Various regulatory and governmental bodies have the authority to review our products and business practices and those of our employees and independent financial advisors and to bring regulatory or other legal actions against us if, in their view, our practices, or those of our employees or independent financial advisors, are improper. Pending legal and regulatory actions include proceedings relating to aspects of our businesses and operations that are specific to us and proceedings that are typical of the industries and businesses in which we operate. Some of these proceedings have been brought on behalf of various alleged classes of complainants. In certain of these matters, the plaintiffs are seeking large and/or indeterminate amounts, including punitive or exemplary damages. See Item 3 of this Annual Report on Form 10-K— “Legal Proceedings.” Substantial legal liability in these or future legal or regulatory actions could have a material adverse financial effect or cause significant reputational harm, which in turn could seriously harm our business prospects. A downgrade or a potential downgrade in our financial strength or credit ratings could adversely affect our financial condition and results of operations. Financial strength ratings, which various ratings organizations publish as a measure of an insurance company’s ability to meet contractholder and policyholder obligations, are important to maintaining public confidence in our products, the ability to market our products and our competitive position. Any downgrade in our financial strength ratings, or the announced potential for a downgrade, could have a significant adverse effect on our financial condition and results of operations in many ways, including: • reducing new sales of insurance products, annuities and investment products; • adversely affecting our relationships with our financial advisors and third party distributors of our products; • materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders; 35
  • • requiring us to reduce prices for many of our products and services to remain competitive; and • adversely affecting our ability to obtain reinsurance or obtain reasonable pricing on reinsurance. A downgrade in our credit ratings could also adversely impact our future cost and speed of borrowing and have an adverse effect on our financial condition, results of operations and liquidity. If our reserves for future policy benefits and claims are inadequate, we may be required to increase our reserve liabilities, which could adversely affect our results of operations and financial condition. We establish reserves as estimates of our liabilities to provide for future obligations under our insurance policies, annuities and investment certificate contracts. Reserves do not represent an exact calculation of liability, but rather are estimates of contract benefits and related expenses we expect to incur over time. The assumptions and estimates we make in establishing reserves require certain judgments about future experience and, therefore, are inherently uncertain. We monitor our reserve levels continually. If we were to conclude that our reserves are insufficient to cover actual or expected contract benefits, we would be required to increase our reserves and potentially incur income statement charges for the period in which we make the determination, which could adversely affect our results of operations and financial condition. For more information on how we set our reserves, see Note 2 to our consolidated financial statements included in our 2005 Annual Report to Shareholders. Morbidity rates or mortality rates that differ significantly from our pricing expectations could negatively affect profitability. We set prices for our life insurance, disability income insurance and some annuity products based upon expected claim payment patterns, derived from assumptions we make about the morbidity rates, or likelihood of sickness, and mortality rates, or likelihood of death, of our policyholders and contractholders. The long-term profitability of these products depends upon how our actual experience compares with our pricing assumptions. For example, if morbidity rates are higher, or mortality rates are lower, than our pricing assumptions, we could be required to make greater payments under disability income insurance policies and immediate annuity contracts than we had projected. The same holds true for long-term care policies we previously underwrote to the extent they are not fully reinsured. If mortality rates are higher than our pricing assumptions, we could be required to make greater payments under our life insurance policies and annuity contracts with guaranteed minimum death benefits than we had projected. The risk that our claims experience may differ significantly from our pricing assumptions is particularly significant for our long-term care insurance products notwithstanding our ability to implement future price increases. As with life insurance, long-term care insurance policies provide for long-duration coverage and, therefore, our actual claims experience will emerge over many years. However, as a relatively new product in the market, long-term care insurance does not have the extensive claims experience history of life insurance, and, as a result, our ability to forecast future claim rates for long-term care insurance is more limited than for life insurance. We have sought to moderate these uncertainties to some extent by partially reinsuring long-term policies we previously underwrote and by limiting our present long-term care insurance offerings to policies underwritten fully by an unaffiliated third party. We may face losses if there are significant deviations from our assumptions regarding the future persistency of our insurance policies and annuity contracts. The prices and expected future profitability of our life insurance and deferred annuity products are based in part upon assumptions related to persistency, which is the probability that a policy or contract will remain in force from one period to the next. The effect of persistency on profitability varies for different products. For most of our life insurance and deferred annuity products, actual persistency that is lower than our persistency assumptions could have an adverse impact on profitability, especially in the early years of a policy or contract, primarily because we would be required to accelerate the amortization of expenses we deferred in connection with the acquisition of the policy or contract. For our long-term care insurance, actual persistency that is higher than our persistency assumptions could have a negative impact on profitability. If these policies remain in force longer than we assumed, then we could be required to make greater benefit payments than we had anticipated when we priced or partially reinsured these products. Some of our long-term care insurance policies have experienced higher persistency than we had assumed, which led us to increase premium rates on certain of these policies. Because our assumptions regarding persistency experience are inherently uncertain, reserves for future policy benefits and claims may prove to be inadequate if actual persistency experience is different from those assumptions. Although some of 36
  • our products permit us to increase premiums during the life of the policy or contract, we cannot guarantee that these increases would be sufficient to maintain profitability. Additionally, some of these pricing changes require regulatory approval, which may not be forthcoming. Moreover, many of our products do not permit us to increase premiums or limit those increases during the life of the policy or contract. Significant deviations in experience from pricing expectations regarding persistency could have an adverse effect on the profitability of our products. We may be required to accelerate the amortization of deferred acquisition costs, which would increase our expenses and reduce profitability. Deferred acquisition costs (“DAC”) represent the costs of acquiring new business, principally direct sales commissions and other distribution and underwriting costs that have been deferred on the sale of annuity, life and disability income insurance and, to a lesser extent, marketing and promotional expenses for personal auto and home insurance, and distribution expense for certain mutual fund products. For annuity and insurance products, we amortize DAC over periods approximating the lives of the related policy or contract, generally as a percentage of premiums or estimated gross profits associated with that policy or contract. For certain mutual fund products, we generally amortize DAC over fixed periods on a straight-line basis. Our projections underlying the amortization of DAC require the use of certain assumptions, including interest margins, mortality rates, persistency rates, maintenance expense levels and customer asset value growth rates for variable products. We periodically review and, where appropriate, adjust our assumptions. When we change our assumptions, we may be required to accelerate the amortization of DAC or to record a charge to increase benefit reserves. As of December 31, 2005 and December 31, 2004, we had $4.2 billion and $4.0 billion of DAC, respectively, and we amortized $431 million and $437 million, respectively, of DAC as a current-period expense for the years ended December 31, 2005 and 2004, respectively. For more information regarding DAC, see the information contained in our 2005 Annual Report to Shareholders under the captions “Management’s Discussion and Analysis—Critical Accounting Policies—Deferred Acquisition Costs” and “—Recent Accounting Pronouncements.” Risk management policies and procedures may not be fully effective in mitigating risk exposure in all market environments or against all types of risk, including employee and financial advisor misconduct. We have devoted significant resources toward developing our risk management policies and procedures and will continue to do so in the future. Nonetheless, our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. Many of our methods of managing risk and exposures are based upon our use of observed historical market behavior or statistics based on historical models. As a result, these methods may not accurately predict future exposures, which could be significantly greater than what our models indicate. Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that is publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated. Moreover, we are subject to the risks of misconduct by our employees and financial advisors – such as fraud, non-compliance with policies, recommending transactions that are not suitable, and improperly using or disclosing confidential information – which is difficult to detect in advance and deter, and could harm our business, results of operations or financial condition. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. As a holding company, we depend on the ability of our subsidiaries to transfer funds to us to pay dividends and to meet our obligations. We act as a holding company for our insurance and other subsidiaries. Dividends from our subsidiaries and permitted payments to us under our intercompany arrangements with our subsidiaries are our principal sources of cash to pay shareholder dividends and to meet our other financial obligations. These obligations include our operating expenses and interest and principal on our borrowings and also include amounts we must pay under the tax allocation agreement and transition services agreement we entered into with American Express Company. If the cash we receive from our subsidiaries pursuant to dividend payment and intercompany arrangements is insufficient for us to fund any of these obligations, we may be required to raise cash through the incurrence of additional debt, the issuance of additional equity or the sale of assets. If any of this happens, it could adversely affect our financial condition and results of operations. Insurance and securities laws and regulations regulate the ability of many of our subsidiaries (such as our insurance and brokerage subsidiaries and our face-amount certificate company) to pay dividends or make other distributions. See Item 1 of this Annual Report on Form 10-K—”Protection – Risk-Based Capital” and “Regulation” as well as the information contained in our 37
  • 2005 Annual Report to Shareholders under the heading “Management’s Discussion and Analysis – Liquidity and Capital Resources.” When we form our new banking subsidiary, its ability to pay dividends will also be regulated. In addition to the various regulatory restrictions that constrain our subsidiaries’ ability to pay dividends to our company, the rating agencies impose various capital requirements on our company and our insurance company subsidiaries in order for us to maintain our ratings and the ratings of our insurance subsidiaries, which also constrains our and their ability to pay dividends. Changes in U.S. federal income tax law could make some of our products less attractive to clients. Many of the products we issue or on which our businesses are based (including both insurance products and non-insurance products) enjoy favorable treatment under current U.S. federal income tax law. Changes in U.S. federal income tax law could thus make some of our products less attractive to clients. We are subject to tax contingencies that could adversely affect reserves. We are subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we have significant business operations. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. We must make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes and must also make estimates about when in the future certain items affect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws may be settled with the taxing authority upon examination or audit. Risks Relating to Our Common Stock The market price of our shares may fluctuate. The market price of our common stock may fluctuate widely, depending upon many factors, some of which may be beyond our control, including: • changes in expectations concerning our future financial performance and the future performance of the financial services industry in general, including financial estimates and recommendations by securities analysts; • differences between our actual financial and operating results and those expected by investors and analysts; • strategic moves by us or our competitors, such as acquisitions or restructurings; • changes in the regulatory framework of the financial services industry and regulatory action; and • changes in general economic or market conditions. Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock. Provisions in our certificate of incorporation and bylaws and of Delaware law may prevent or delay an acquisition of our company, which could decrease the market value of our common stock. Our certificate of incorporation and bylaws and Delaware law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making them unacceptably expensive to the raider and to encourage prospective acquirors to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include, among others: • a board of directors that is divided into three classes with staggered terms; • elimination of the right of our shareholders to act by written consent; • rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; • the right of our board of directors to issue preferred stock without shareholder approval; and • limitations on the right of shareholders to remove directors. 38
  • Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal, and are not intended to make our company immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of our company and our shareholders. Risks Relating to Our Separation from American Express Company We will only have the right to use the “American Express” brand name and logo in a limited capacity for up to two years. If our new brand names “Ameriprise” and “RiverSource” do not develop a strong reputation, our revenue and profitability could decline. In connection with the separation from American Express Company, we changed our corporate name to “Ameriprise Financial, Inc.” and are operating under two new brand names, although we and our subsidiaries may use the “American Express” brand name and logo in a limited capacity in conjunction with our brand names and logos until September 30, 2007 pursuant to our marketing and branding agreement with American Express Company. For more information regarding these arrangements, see Item 1 of this Annual Report on Form 10-K— “Our Relationship with American Express Company.” When our right to use the “American Express” brand name and logo expires, we may not be able to maintain or enjoy comparable name recognition or status under our new brands. If we are unable to successfully manage the transition of our business to our new brands, the benefit we previously offered our branded advisors, customers and employees of having a recognized brand will be reduced, which could have an adverse effect on our revenue and profitability. Client acquisition may be adversely affected by our separation from American Express Company. Although we generally operated independently of American Express Company’s other operations with respect to client services, we did rely on the “American Express” brand and cardmember relationships in acquiring clients as part of our retail growth strategy. As part of the marketing and branding arrangement with American Express Company, we will continue to market our products in a manner similar to the methods we used prior to the separation from American Express Company. However, overall response rates, marginal costs and profitability from these efforts may be negatively affected as a result of the change in our brand name. For additional information regarding this arrangement, see Item 1 of this Annual Report on Form 10-K— “Our Relationship with American Express Company.” We cannot assure you that the clients we gained as a result of being affiliated with American Express Company will not move some or all of their existing business from us to another company or that we will be able to implement our mass affluent client acquisition strategy as cost-effectively as when our cross-selling relationship with American Express Company was operated on an affiliated basis. Loss of a significant portion of these clients could negatively impact our results of operations and failure to acquire these clients could also have a negative impact on our business. Our historical consolidated financial information is not necessarily representative of the results we would have achieved as a stand-alone company and may not be a reliable indicator of our future results. Our historical consolidated financial information does not reflect the financial condition, results of operations or cash flows we would have achieved as a stand-alone company during the periods presented or those we will achieve in the future. This is primarily a result of the following factors: • Our historical consolidated financial information reflects certain businesses that are not included in our company following the separation from American Express Company; • Our historical consolidated financial results reflect allocations of corporate expenses from American Express Company. Those allocations may be lower than the comparable expenses we would have actually incurred as a stand-alone company; • Our working capital requirements historically have been satisfied as part of American Express Company’s corporate- wide cash management policies. Our cost of debt and our capitalization is different from that reflected in our historical consolidated financial statements; 39
  • • Significant changes have occurred and may continue to occur in our cost structure, management, financing and business operations as a result of our separation from American Express Company, including the costs for us to establish our new brands and operating infrastructure; and • Our separation from American Express Company and the creation of our new brands may have an adverse effect on our customer and other business relationships. We have made adjustments based upon available information and assumptions that we believe are reasonable to reflect these factors. However, our assumptions may prove not to be accurate, and accordingly, our financial information should not be assumed to be indicative of what our financial condition or results of operations actually would have been as a stand-alone company nor to be a reliable indicator of what our financial condition or results of operations actually may be in the future. For a description of the components of our historical consolidated financial information and adjustments, see “Management’s Discussion and Analysis – Significant Factors Affecting our Results of Operations and Financial Condition —Separation from American Express” and our historical consolidated financial statements contained in our 2005 Annual Report to Shareholders. We have experienced increased costs in connection with the separation from American Express Company and as an independent company. We are in the process of developing certain independent facilities, systems, infrastructure and personnel to replace services we had access to from American Express Company. We have also made significant investments to develop our new brand and establish our ability to operate without access to American Express Company’s operational and administrative infrastructure. These initiatives have been costly to implement. We have incurred approximately $293 million in total pretax non-recurring separation costs through December 31, 2005 and we expect to incur an additional $582 million in separation costs. Due to the scope and complexity of the underlying projects, the amount of total costs could be materially higher and the timing of incurrence of these costs is subject to change. We pay American Express Company to continue performing many important corporate functions for our operations, including information technology support, treasury, accounting, financial reporting, tax administration, human resource administration, marketing, procurement and other services. The amounts we pay for this transitional support are arm’s length rates generally based on American Express Company’s direct and indirect costs. For more information regarding the transition arrangements, see Item 1 of this Annual Report on Form 10-K —”Our Relationship with American Express Company.” Although we implemented many independent functions, if we are not able to complete the establishment of these functions, or obtain them from third parties, we may not be able to operate our business effectively or at comparable costs, and our profitability may decline. As a stand-alone company, we do not have the same purchasing power we had through American Express Company and, in some cases, we may not have as favorable terms or prices as those obtained prior to the separation from American Express Company, which could decrease our overall profitability. We may not have sufficient capital generation ability to meet our operating and regulatory capital requirements, and current and future funding may adversely affect holders of our common stock through the issuance of more senior securities or through dilution. As a stand-alone company we are required to maintain higher capital ratios to retain our credit ratings. In addition, we need to cover volatility associated with variations in our operating, risk-based and regulatory capital requirements, including separation costs and contingent exposures, for example, in connection with our ongoing legal and regulatory matters. See Item 1 of this Annual Report on Form 10-K— “Regulation” for more information regarding capital requirements and see Item 3 of this Annual Report on Form 10- K— “Legal Proceedings” for more information regarding pending regulatory and legal proceedings. Although American Express Company made a substantial capital contribution to our company to cover, among other things, certain separation costs and the costs to establish our new brands, we cannot be certain that this capital contribution will be sufficient to cover all of our additional costs. If it is not sufficient, our financial condition could be adversely affected and our company credit ratings and/or the financial strength ratings of our insurance subsidiaries may be downgraded. In connection with the separation from American Express Company we incurred external debt, and we may from time to time need to incur additional debt or issue equity, in order to fund working capital, capital expenditures and product development requirements or to make acquisitions and other investments. Any debt incurred or preferred stock issued has or will have liquidation rights, preferences and privileges senior to those of holders of our common stock. If we raise funds through 40
  • the issuance of equity, the issuance will dilute the ownership interest of common shareholders. We cannot assure you that debt or equity financing will be available to us on acceptable terms, if at all. If we are not able to obtain sufficient financing, we may be unable to maintain or grow our business. It may also be more expensive for us to raise funds through the issuance of additional debt than the cost of raising funds or issuing debt for our business while we were part of American Express Company. As we build our information technology infrastructure and transition our data to our own systems, we could experience temporary business interruptions and incur substantial additional costs. We are in the process of installing and implementing information technology infrastructure to support our business functions, including accounting and reporting, customer service and distribution. We anticipate this will involve significant costs. We may incur temporary interruptions in business operations if we cannot transition effectively from American Express Company’s existing technology infrastructure (which covers hardware, applications, network, telephony, databases, backup and recovery solutions), as well as the people and processes that support them. We may not be successful in implementing our new technology infrastructure and transitioning our data, and we may incur substantially higher costs for implementation than currently anticipated. Our failure to avoid operational interruptions as we implement the new infrastructure and transition our data, or our failure to implement the new infrastructure and transition our data successfully, could disrupt our business and have a material adverse effect on our profitability. In addition, technology service failures could have adverse regulatory consequences for our business and make us vulnerable to our competitors. We continue to rely on American Express Company’s disaster recovery capabilities as part of our business continuity processes. We will only have the right to use American Express Company’s disaster recovery resources for up to two years after the Distribution. We are developing and implementing our own disaster recovery infrastructure and developing business continuity for our operations, which we anticipate will involve significant costs. We may not be successful in developing stand-alone disaster recovery capabilities and business continuity processes, and may incur substantially higher costs for implementation than currently anticipated. Our failure to avoid operational interruptions as we implement new business continuity processes, or our failure to implement the new processes successfully, could disrupt our business and have a material adverse effect on our profitability in the event of a significant business disruption. We agreed to certain restrictions to preserve the treatment of the Distribution as tax free to American Express Company and its shareholders, which reduces our strategic and operating flexibility. In connection with the Internal Revenue Service ruling and opinion confirming the tax free status of the Distribution, we made certain representations and undertakings. In addition, current tax law generally creates a presumption that the Distribution would be taxable to American Express Company, but not to its shareholders, if we or our shareholders were to engage in a transaction that would result in a 50% or greater change by vote or by value in our stock ownership during the four-year period beginning on the date that begins two years before the Distribution date, unless it is established that the Distribution and the transaction are not part of a plan or series of related transactions to effect such a change in ownership. In the case of such a 50% or greater change in our stock ownership, tax imposed on American Express Company in respect of the Distribution would be based on the fair market value of our stock on the Distribution date over American Express Company’s tax basis in our stock. Under our tax allocation agreement with American Express Company, we are generally prohibited, for a period of two years following the Distribution, except in certain circumstances, from (i) consenting to certain acquisitions of significant amounts of our stock; (ii) transferring significant amounts of our assets; (iii) failing to maintain certain components of our business as an active business; or (iv) engaging in certain other actions or transactions that could jeopardize the tax free status of the Distribution. In addition, we are generally prohibited from consenting to certain acquisitions of significant amounts of our stock or assets, or from participating in certain other corporate transactions, unless the other parties to the transaction agree to be jointly and severally liable with us in respect of our indemnification obligation to American Express Company under the tax allocation agreement (described below). We agreed to indemnify American Express Company and its shareholders for taxes and related losses resulting from certain actions that cause the Distribution to fail to qualify as a tax free transaction. Under the tax allocation agreement, we agreed to indemnify American Express Company and its shareholders for taxes and related losses they suffer as a result of the Distribution failing to qualify as a tax free transaction, if the taxes and related losses are attributable to (i) direct or indirect acquisitions of our stock or assets (regardless of whether we consent to such acquisitions); (ii) negotiations, understandings, agreements, or arrangements in respect of such acquisitions; or (iii) our failure to comply with certain representations and undertakings from us, including the restrictions described in the preceding risk factor. See Item 1 of this Annual Report on Form 10-K— “Our Relationship with American Express Company.” Our indemnity will 41
  • cover both corporate level taxes and related losses imposed on American Express Company in the event of a 50% or greater change in our stock ownership described in the preceding risk factor, as well taxes and related losses imposed on both American Express Company and its shareholders if, due to our representations or undertakings being incorrect or violated, the Distribution is determined to be taxable for other reasons. We currently estimate that the indemnification obligation to American Express Company for taxes due in the event of a 50% or greater change in our stock ownership could exceed $1.5 billion. This estimate, which does not take into account related losses such as interest, penalties, and other additions to tax, depends upon several factors that are beyond our control. As a consequence, the indemnity to American Express Company could vary substantially from the estimate. Furthermore, the estimate does not address the potential indemnification obligation to both American Express Company and its shareholders in the event that, due to our representations or undertakings being incorrect or violated, the Distribution is determined to be taxable for other reasons. In that event, the total indemnification obligation would likely be much greater. Our separation from American Express Company could increase our U.S. federal income tax costs. Due to the separation from American Express Company, our life insurance subsidiaries will not be able to file a consolidated U.S. federal income tax return with the other members of our affiliated group for five tax years following the Distribution. As a consequence, during this period, net operating and capital losses, credits, and other tax attributes generated by one group will not be available to offset income earned or taxes owed by the other group for U.S. federal income tax purposes. Any benefits relating to taxes arising from being part of the larger American Express group may also not be available. As a result of these and other inefficiencies, the aggregate amount of U.S. federal income tax that we pay may increase and we may in addition not be able to fully realize certain of our deferred tax assets. The continued ownership of American Express Company common stock and options by our executive officers may create, or may create the appearance of, conflicts of interest. Because of their former positions with American Express Company, substantially all of our executive officers, including our Chairman and Chief Executive Officer and our Chief Financial Officer, own American Express Company common stock and options to purchase American Express Company common stock. Although these holdings in the aggregate are insubstantial in relation to American Express Company, the individual holdings of American Express Company stock and options to purchase that stock that remain after the Distribution may be significant for some of these persons compared to that person’s total assets. Even though our board of directors consists of a majority of directors who are independent from both American Express Company and our company and our executive officers who were formally employees of American Express Company have ceased to be employees of American Express Company following the Distribution, ownership of American Express Company common stock and options to purchase American Express Company stock by our officers after the Distribution may create, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for American Express Company than they do for us. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. We operate our business from two principal locations, both of which are located in Minneapolis, Minnesota: the Ameriprise Financial Center, a 897,280 square foot building that we lease, and our 903,722 square foot Client Service Center, which we own. Our lease term for the Ameriprise Financial Center began in November 2000 and is for 20 years, with several options to extend the term. Our aggregate annual rent for the Ameriprise Financial Center is approximately $15 million. We also own the 170,815 square foot Oak Ridge Conference Center, a training facility and conference center in Chaska, Minnesota, which can also serve as a disaster recovery site if necessary. We also lease space in an operations center located in Minneapolis. American Express Travel Related Services Company, an American Express Company subsidiary, also leases space in the center from the same landlord and we share common space in the building with them. We transferred title to the Minneapolis operations center to American Express Travel Related Services Company in the first quarter of 2004, and it sold the property to the current landlord as part of a December 2004 sale- leaseback transaction. Additionally, we occupy space in a second operations center located in Phoenix, Arizona, which is owned by American Express Travel Related Services Company. Our property and casualty subsidiary, IDS Property Casualty, leases its corporate headquarters in Ashwaubenon, Wisconsin, a suburb of Green Bay. In December 2004, it entered into a sale-and-leaseback agreement with Inland Real 42
  • Estate Acquisitions, Inc., and sold that property for $18 million. Under the terms of the agreement, Inland leased the property back to IDS Property Casualty for a ten-year term with an option to renew the lease for up to six renewal terms of five years each. The lease is a net lease, which means our subsidiary is responsible for all costs and expenses relating to the property in addition to annual rent. Generally, we lease the premises we occupy in other locations, including the executive offices that we maintain in New York, New York. We believe that the facilities owned or occupied by our company suit our needs and are well maintained. Item 3. Legal Proceedings. We and our subsidiaries are involved in the normal course of business in legal, regulatory and arbitration proceedings, including class actions, concerning matters arising in connection with the conduct of our activities as a diversified financial services firm. These include proceedings specific to us as well as proceedings generally applicable to business practices in the industries in which we operate. We can also be subject to litigation arising out of our general business activities, such as our investments, contracts, leases and employment relationships. In addition, from time to time we receive requests for information from, and have been subject to examination or investigation by, the SEC, NASD, OTS and various state regulatory authorities concerning our business activities and practices, including: sales and product or service features of, or disclosures pertaining to, financial plans, our mutual funds, annuities, insurance products and brokerage services; non–cash compensation paid to our financial advisors; supervision of our financial advisors; operational and data privacy issues; and sales of, or brokerage or revenue sharing practices relating to, other companies’ REIT shares, mutual fund shares or other investment products. The number of reviews and investigations has increased in recent years with regard to many firms in the financial services industry, including our company. We have cooperated and will continue to cooperate with the applicable regulators regarding their inquiries. These proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on our consolidated financial condition, results of operations or credit ratings. Certain legal and regulatory proceedings involving our company are described below. Legal In November 2002, a suit, now captioned Haritos et al. v. American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The suit was filed by plaintiffs who purport to represent a class of all persons that have purchased financial plans from our financial advisors from November 1997 through July 2004. Plaintiffs allege that the sale of the plans violates the Investment Advisers Act of 1940. The suit seeks an unspecified amount of damages, rescission of the investment advisor plans and restitution of monies paid for such plans. On January 3, 2006, the Court granted the parties joint stipulation to stay the action pending the approval of the proposed settlement in the putative class action, “In re American Express Financial Advisors Securities Litigation,” which is described below. In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to our motion to dismiss the complaint, the Court dismissed one of plaintiffs’ four claims and granted plaintiffs limited discovery. In October 2005, we reached a comprehensive settlement regarding the consolidated securities class action lawsuit filed against us, our former parent and affiliates in October 2004 called “In re American Express Financial Advisors Securities Litigation.” The settlement, under which we deny any liability, includes a one-time payment of $100 million to the class members. The class members include individuals who purchased mutual funds in our Preferred Provider Program, Select Group Program, or any similar revenue sharing program, purchased mutual funds sold under the American Express® or AXP® brand; or purchased for a fee financial plans or advice from our company between March 10, 1999 and through the date on which a formal stipulation of settlement is signed. The settlement will be submitted to the Court for approval. Two 43
  • lawsuits making similar allegations (based solely on state causes of actions) are pending in the United States District Court for the Southern District of New York: “Beer v. American Express Company and American Express Financial Advisors” and “You v. American Express Company and American Express Financial Advisors.” Plaintiffs have moved to remand the cases to state court. The Court’s decision on the remand motion is pending. Regulatory As with other financial services firms, the level of regulatory activity and inquiry concerning our businesses remains elevated. We have continued to receive requests for information from, and have been subject to examination by, the SEC, NASD, OTS and various state regulatory agencies concerning our business activities and practices, including: sales and product or service features of, or disclosures pertaining to, financial plans, our mutual funds, annuities, insurance products and brokerage services; non– cash compensation paid to our financial advisors; supervision of our financial advisors; operational issues relating to the RiverSource mutual funds; and sales of, or brokerage or revenue sharing practices relating to, other companies’ REIT shares, mutual fund shares or other investment products. Other open matters relate, among other things, to the portability (or network transferability) of our RiverSource mutual funds, the suitability of product recommendations made to retail financial planning clients, licensing matters related to sales by our financial advisors to out-of-state clients and net capital and reserve calculations. We have also received a number of regulatory inquiries in connection with our notification of the theft of a laptop computer containing certain client and financial advisor information. These open matters relate to the activities of various of our legal entities, including AMPF (formerly known as “American Express Financial Advisors Inc.” or “AEFA”), Ameriprise Enterprise Investment Services, Inc. (our clearing- broker subsidiary) and SAI. We have cooperated and will continue to cooperate with the regulators regarding their inquiries. In 2005 we resolved by settlement a number of pending matters that pre-dated the Distribution. The majority of these settlements involved AEFA. On December 1, 2005, we announced settlement of two additional SEC enforcement matters relating to periods before the Distribution. The first matter involved allegations that AEFA failed to adequately disclose the details of various revenue sharing programs we maintained in connection with sales of certain non-proprietary mutual funds and 529 college savings plans. The SEC announcement also covers a second enforcement action alleging that AEFC permitted improper market timing in our own mutual funds (including market timing by a limited number of our employees through their own personal 401(k) retirement accounts) as well as in certain of our annuity products, notwithstanding prohibitions against this practice in the product disclosures. Under the terms of the settlements we agreed to a censure and to pay an aggregate of $45 million ($30 million allocated to revenue sharing and $15 million to market timing) in the form of civil penalties and disgorgement. We are required to develop plans of distribution with the assistance of an independent distribution consultant. Regarding revenue sharing, the plan will address how such funds will be distributed to benefit customers that purchased the particular mutual funds between January 1, 2001 through August 31, 2004. A second plan will address how funds will be distributed to benefit investors in our mutual funds for market-timing activity that took place between January 1, 2002 and September 30, 2003. The distribution plans will be subject to final approval by the SEC. As part of the settlements, we also agreed to certain undertakings regarding disclosure, compliance and training. Additionally on December 1, 2005, we announced that we had reached agreement with the NASD to settle alleged violations of NASD conduct rules prohibiting directed brokerage in connection with our revenue sharing programs with certain preferred non- proprietary mutual funds. Under the settlement we received a censure and paid a fine of $12.3 million. During the course of 2005 we reached settlements with four states in regulatory matters regarding supervisory practices, financial advisor misappropriations of customer funds, 529 plan and Class B mutual fund sales practices, incentives for AEFA’s branded advisors to sell both its proprietary mutual funds and other companies’ mutual funds, the sale of proprietary mutual fund products to financial planning clients, and the matters raised in the SEC and NASD enforcement actions described above. As part of these state settlements we paid approximately $13.4 million total in fines and penalties and also agreed, in certain instances, to provide restitution and to independent consultant review of certain of our practices and policies, including certain of our sales and advice supervisory practices. One such review was delivered in January 2006, and we have commenced implementation of the recommended enhancements. We will continue to meet our obligations under these settlements throughout 2006. There are pending investigations and demands made by regulators of other states regarding matters substantially similar to those which have settled, as well as the open matters described in the first paragraph under the heading “Regulatory”, and there can be no assurance that any one or more of these investigations, demands and matters will settle or otherwise conclude without a material adverse effect on our consolidated financial condition, results of operations or credit ratings. 44
  • Item 4. Submissions of Matters to a Vote of Security Holders. None. PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock trades principally on The New York Stock Exchange under the trading symbol AMP. As of February 28, 2006, we had approximately 38,350 common shareholders of record. Price and dividend information concerning our common shares may be found in Note 21 to our consolidated financial statements included in our 2005 Annual Report to Shareholders and incorporated herein by reference. We are primarily a holding company and as a result, our ability to pay dividends in the future will depend on receiving dividends from our subsidiaries. For information regarding our ability to pay dividends, see the information set forth under the heading “Management’s Discussion and Analysis—Liquidity and Capital Resources” contained in our 2005 Annual Report to Shareholders and incorporated herein by reference. Item 6. Selected Financial Data. The “Consolidated Five-Year Summary of Selected Financial Data” appearing on pages 99 and 100 of our 2005 Annual Report to Shareholders is incorporated herein by reference. The “Schedule I - Condensed Financial Information of Registrant (Parent Company Only)” appearing on pages F-1 through F-7 of this report is incorporated herein by reference. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The information set forth under the heading “Management’s Discussion and Analysis” appearing on pages 22 through 52 of our 2005 Annual Report to Shareholders is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The information set forth under the heading “Management’s Discussion and Analysis — Quantitative and Qualitative Disclosures About Market Risk” appearing on pages 51 and 52 of our 2005 Annual Report to Shareholders is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. The “Report of Independent Registered Public Accounting Firm,” the “Consolidated Financial Statements” and the “Notes to Consolidated Financial Statements” appearing on pages 55 through 98 of our 2005 Annual Report to Shareholders are incorporated herein by reference. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. The information set forth under the heading “Changes in and Disagreements With Accountants on Accounting and Financial Disclosure” appearing on page 54 of our 2005 Annual Report to Shareholders is incorporated herein by reference. Item 9A. Controls and Procedures. Disclosure Controls and Procedures. Our company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) designed to provide reasonable assurance that the information required to be reported in the Exchange Act filings is recorded, processed, summarized and reported within the time periods specified and pursuant to SEC regulations, including controls and procedures designed to ensure that this information is accumulated and communicated to our management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. It should be noted that, because of inherent limitations, our company’s disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the 45
  • effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our company’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable level of assurance as of December 31, 2005. Changes in Internal Control over Financial Reporting American Express Company has historically provided a variety of corporate and other support services for our company, including information technology, treasury, accounting, financial reporting, tax administration, human resources, marketing, legal, procurement and other services. American Express Company will continue to provide us with many of these services pursuant to a transition services agreement for transition period of up to two years following the Distribution. We are now relying upon American Express Company as a third party to perform these services, many of which may impact our financial reporting processes. During this transition there have been some changes in personnel and in relative responsibility for oversight of the processes. We consider this a material change in our internal control over financial reporting. Other than the changes mentioned above, no other changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter of the year to which this report relates have materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting. Item 9B. Other Information. None. PART III. Item 10. Directors and Executive Officers of the Registrant. The following portions of the Proxy Statement are incorporated herein by reference: information included under the caption “Items to be Voted on by Shareholders—Item 1 - Election of Directors”; • information included under the caption “Corporate Governance—Director Independence”; • information under the caption “Corporate Governance—Board Meetings”; • information included in the table under the caption “Corporate Governance—Membership on Board Committees”; • information under the caption “Corporate Governance—Compensation and Benefits Committee”; • information under the caption “Corporate Governance—Nominating and Governance Committee”; • information included under the caption “Corporate Governance—Audit Committee”; and • information under the caption “Section 16(a) Beneficial Ownership Reporting Compliance.” • In addition, the information regarding executive officers called for by Items 401(b), (e) and (f) of Regulation S-K may be found under the caption “Executive Officers of the Company” in this Annual Report on Form 10-K. We have adopted a set of Corporate Governance Principles and Categorical Standards of Director Independence, which together with the charters of the three standing committees of the Board of Directors (Audit; Compensation and Benefits; and Nominating and Governance) and our Code of Conduct (which constitutes the Company’s code of ethics), provide the framework for the governance of our company. A complete copy of our Corporate Governance Principles and Categorical Standards of Director Independence, the charters of each of the Board committees, the Code of Conduct (which applies not only to our Chief Executive Officer, Chief Financial Officer and Controller, but also to all other employees of our company) and the Code of Business Conduct for the Members of the Board of Directors may be found by clicking on the “Corporate Governance” link found on our Investor Relations website at http://ir.ameriprise.com. You may also access our Investor Relations website through our main website at www.ameriprise.com by clicking on the “Investor Relations” link, which is located at the top of our homepage. (Information from such sites is not incorporated by reference into this report.) You may obtain free copies of these materials by also writing to our Corporate Secretary at our principal executive offices. 46
  • Item 11. Executive Compensation. The following portions of the Proxy Statement are incorporated herein by reference: • information included under the caption “Compensation of Executive Officers” (excluding the Compensation and Benefits Committee Report, which precedes the Summary Compensation Table, and excluding the information under the caption “- Performance Graph”); and information included under the caption “Compensation of Directors.” • Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information included under the caption “Ownership of Our Common Shares” in the Proxy Statement is incorporated herein by reference. Equity Compensation Plan Information The following table provides information about our company’s equity compensation plans as of December 31, 2005. Number of securities remaining available Number of securities to be for future issuance issued upon Weighted-average under equity exercise of exercise price of compensation plans outstanding options, outstanding options, (excluding securities warrants and rights warrants and rights reflected in column (a)) Plan category (a) (b) (c) Equity compensation plans approved by security holders (1) 11,396,709 $ 31.569 22,772,793 Equity compensation plans not approved by security holders (2) 0 Not Applicable 2,500,000 Total 11,396,709 $ 31.569 25,272,793 (1) In connection with the separation from American Express Company, our former sole stockholder approved the Ameriprise Financial 2005 Incentive Compensation Plan (“2005 ICP”). Under the 2005 ICP, stock and cash incentive awards may be granted to employees, directors and independent contractors including stock options, restricted stock awards, restricted stock units, performance shares and similar awards (“Incentive Awards”) designed to comply with the applicable federal regulations and laws of jurisdiction. Subject to the limit of the plan’s total authorization as reflected in the table above, the 2005 ICP does not limit the number of shares of company common stock that may be issued other than upon the exercise of an option, warrant or other right. The plan’s total authorization is automatically increased to the extent that participants tender common shares in payment of any obligation in connection with any Incentive Awards and to the extent the company uses cash received from participants as exercise or purchase price in connection with Incentive Awards to repurchase common shares. See Note 10 to the consolidated financial statements contained in our 2005 Annual Report to Shareholders for further descriptive information regarding the 2005 ICP. (2) The only equity compensation plan not approved by shareholders pursuant to which equity securities are outstanding or remaining available for grant as reflected in the table above is our Deferred Equity Program for Independent Financial Advisors (“P2 Deferral Plan”). The P2 Deferral Plan provides for the issuance of common shares only to our independent branded advisors (“P2 Advisors”). Issuances may be made (i) to an eligible P2 Advisor in respect of deferrals of compensation elected by the P2 Advisor, which elections are subject to qualification based on certain financial planning revenues earned by the P2 Advisor and are also subject to certain minimum and maximum limits, and (ii) to certain P2 Advisors who were affiliated with our company on December 31, 2005 as a retention incentive in connection with the Distribution and separation from American Express Company. The P2 Deferral Plan and the issuance of common shares under the P2 Deferral Plan is determined and administered by the Compensation and Benefits Committee of our Board of Directors (“CBC”) or such other committee as the Board or the CBC may designate (“Committee”). The Committee determines all terms by which deferrals may be made or shares of common stock may be issued under the P2 Deferral Plan, 47
  • including such terms as the threshold performance levels that a P2 Advisor must meet in order to make deferrals under the P2 Deferral Plan and the vesting in account balances. Vesting of P2 Deferral Plan interests accelerate immediately upon a “Change in Control,” as defined in the P2 Deferral Plan. The P2 Deferral Plan is not anticipated to terminate at any specific future date, although the Board may terminate or amend the P2 Deferral Plan at any time so long as no such amendment or termination adversely affects any P2 Deferral Plan interests then outstanding. This summary of the P2 Deferral Plan does not purport to be complete and is qualified in its entirety by the terms of the P2 Deferral Plan, the entire text of which is filed as Exhibit 10.27 to this Annual Report on Form 10-K. Item 13. Certain Relationships and Related Transactions. The information under the caption “Certain Transactions” in the Proxy Statement is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information set forth under the heading “Items to be Voted on by Shareholders — Item 2 – Ratification of Audit Committee’s Selection of Independent Registered Public Accountants—Audit Fees”; “—Audit-Related Fees”; “—Tax Fees”; “—All Other Fees”; “—Services to Associated Organizations”; and “—Policy on Pre-Approval of Services Provided by Independent Registered Public Accountants,” in the Proxy Statement is incorporated herein by reference. PART IV. Item 15. Exhibits and Financial Statement Schedules. (a) 1. Financial Statements: The financial statements filed as a part of this report are listed on page F-1 hereof under “Schedule I - Condensed Financial Information of the Registrant (Parent Company Only),” which is incorporated herein by reference. 2. Financial Statement Schedules: The financial statement schedules required to be filed in this report are listed on page F-1 hereof under “Schedule I - Condensed Financial Information of the Registrant (Parent Company Only),” which is incorporated herein by reference. 3. Exhibits: The list of exhibits required to be filed as exhibits to this report are listed on pages E-1 through E-3 hereof under “Exhibit Index,” which is incorporated herein by reference. 48
  • SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERIPRISE FINANCIAL, INC. (Registrant) Date: March 8, 2006 By /s/ Walter S. Berman Walter S. Berman Executive Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned directors and officers of Ameriprise Financial, Inc., a Delaware corporation, does hereby make, constitute and appoint James M. Cracchiolo, Walter S. Berman and John C. Junek, and each of them, the undersigned’s true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name as such director and/or officer of said corporation to an Annual Report on Form 10-K or other applicable form, and all amendments thereto, to be filed by such corporation with the Securities and Exchange Commission, Washington, D.C., under the Securities Exchange Act of 1934, as amended, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and any of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers herein expressly granted. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated. Date: March 8, 2006 /s/ James M. Cracchiolo James M. Cracchiolo Chairman and Chief Executive Officer (Principal Executive Officer and Director) Date: March 8, 2006 /s/ Walter S. Berman Walter S. Berman Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: March 8, 2006 /s/ David K. Stewart David K. Stewart Senior Vice President and Controller (Principal Accounting Officer) Date: March 8, 2006 /s/ Ira D. Hall Ira D. Hall Director Date: March 8, 2006 /s/ W. Walker Lewis W. Walker Lewis Director Date: March 8, 2006 /s/ Siri S. Marshall Siri S. Marshall Director Date: March 8, 2006 /s/ Jeffrey Noddle Jeffrey Noddle Director 49
  • Date: March 8, 2006 /s/ Richard F. Powers III Richard F. Powers III Director Date: March 8, 2006 /s/ H. Jay Sarles H. Jay Sarles Director Date: March 8, 2006 /s/ Robert F. Sharpe, Jr. Robert F. Sharpe, Jr. Director Date: March 8, 2006 /s/ William H. Turner William H. Turner Director 50
  • AMERIPRISE FINANCIAL, INC. SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Parent Company Only) Table of Contents Condensed Statements of Income F-2 Condensed Balance Sheets F-3 Condensed Statements of Cash Flows F-4 Notes to Condensed Financial Information of Registrant F-5 F-1
  • AMERIPRISE FINANCIAL, INC. SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003 (Parent Company Only) 2005 2004 2003 (in millions) REVENUES Management and service fees $ 339 $ 413 $ 420 Distribution fees 54 19 11 Net investment income 20 19 4 Other revenues 6 10 6 Total revenues 419 461 441 EXPENSES Compensation and benefits 418 356 357 Interest and debt expense 70 51 45 Separation costs 76 — — Other expenses 30 182 61 Total expenses 594 589 463 Loss before income tax (benefit) provision, equity in earnings of subsidiaries and discontinued (175) (128) (22) operations of subsidiary Income tax (benefit) provision (27) (15) 5 Loss before equity in earnings of subsidiaries and discontinued operations of subsidiary (148) (113) (27) Equity in earnings of subsidiaries before discontinued operations of subsidiary(a) 706 867 708 Income before discontinued operations of subsidary 558 754 681 Discontinued operations of subsidiary, net of tax 16 40 44 Net income $ 574 $ 794 $ 725 (a) 2004 includes a $71 million non-cash after tax charge ($109 million pretax) relating to the January 1, 2004 adoption of American Institute of Certified Public Accountants Statement of Position 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts.” 2003 includes a $13 million non-cash after-tax charge ($20 million pretax) relating to the December 31, 2003 adoption of Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities,” as revised December 2003. See Notes to Condensed Financial Information of Registrant. F-2
  • AMERIPRISE FINANCIAL, INC. SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEETS DECEMBER 31, 2005 AND 2004 (Parent Company Only) 2005 2004 (in millions) ASSETS Cash and cash equivalents $ 1,192 $ 17 Investments 303 380 Receivables 29 30 Due from subsidiaries 148 149 Land, buildings, equipment, and software, net of accumulated depreciation of $336 and $274 566 550 Investment in subsidiaries 7,777 7,504 Other assets 214 258 Parent Company assets applicable to and investment in discontinued operations of subsidiary — 242 Total assets $ 10,229 $ 9,130 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities: Accounts payable and accrued expenses $ 599 $ 396 Due to subsidiaries 245 135 Payable to American Express 16 1,686 Debt 1,550 50 Other liabilities 132 161 Total liabilities 2,542 2,428 Shareholders’ Equity: Common shares ($.01 par value, 1,250 million shares authorized; 249.9 million issued and outstanding as of December 31, 2005; $.01 par value, 100 shares authorized, issued and outstanding (prior to adjusting for September 2005 stock split) as of December 31, 2004) 2 — Additional paid-in capital 4,091 2,907 Retained earnings 3,745 3,415 Accumulated other comprehensive (loss) income, net of tax, including amounts applicable to equity investments in subsidiaries: Net unrealized securities (losses) gains (129) 425 Net unrealized derivative gains (losses) (28) 6 Foreign currency translation adjustment (25) (16) Minimum pension liability (3) (1) Total accumulated other comprehensive (loss) income (151) 380 Total shareholders’ equity 7,687 6,702 Total liabilities and shareholders’ equity $ 10,229 $ 9,130 See Notes to Condensed Financial Information of Registrant. F-3
  • AMERIPRISE FINANCIAL, INC. SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003 (Parent Company Only) 2005 2004 2003 (in millions) Cash Flows from Operating Activities Net income $ 574 $ 794 $ 725 Less: Discontinued operations of subsidiary, net of tax (16) (40) (44) Income before discontinued operations of subsidiary 558 754 681 Adjustments to reconcile income before discontinued operations of subsidiary to net cash provided by (used in) operating activities: Equity in earnings of subsidiaries before discontinued operations of subsidiary (706) (867) (708) Dividends received from subsidiaries and affiliates 486 1,147 124 Other operating activities, primarily with subsidiaries 615 124 591 Net cash provided by operating activities 953 1,158 688 Cash Flows from Investing Activities Available-for-Sale securities: Proceeds from sales 243 156 261 Maturities 179 21 14 Purchases (278) (162) (265) Purchase of land, buildings, equipment, and software (113) (100) (108) Investment in subsidiaries (924) (29) (1,140) Net cash used in investing activities (893) (114) (1,238) Cash Flows from Financing Activities Debt issuance costs (7) — — Proceeds from issuance of debt 2,850 — — Principal repayments of debt (1,350) (78) — Payable to American Express, net (1,578) 263 269 Dividends paid to American Express (53) (1,325) (334) Dividends paid to shareholders (27) — — Capital transactions with American Express, net 1,256 40 566 Net cash provided by (used in) financing activities 1,091 (1,100) 501 Parent Company Operations Applicable to Discontinued Operations of Subsidiary Net cash provided by operating activities 48 95 130 Net cash used in financing activities (24) (40) (65) Cash provided by Parent Company operations applicable to discontinued operations of 24 55 65 subsidiary (1) Net increase (decrease) in cash and cash equivalents 1,175 16 Cash and cash equivalents at beginning of year 17 18 2 Cash and cash equivalents at end of year $ 1,192 $ 17 $ 18 Supplemental Disclosures: Interest paid $ 80 $ 52 $ 44 Income taxes received, net $ 169 $ 21 $ 15 Supplemental schedule of non-cash transactions in connection with separation: Non-cash dividend of AEIDC to American Express $ 164 $ — $ — See Notes to Condensed Financial Information of Registrant. F-4
  • AMERIPRISE FINANCIAL, INC. SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Parent Company Only) Note 1 Basis of Presentation Ameriprise Financial, Inc. (the Company or Ameriprise Financial) was formerly a wholly-owned subsidiary of American Express Company (American Express). On February 1, 2005, the American Express Board of Directors announced its intention to pursue the disposition of 100% of its shareholdings in the Company (the Separation) through a tax-free distribution to American Express shareholders. In preparation for the disposition, the Company approved a stock split of its 100 common shares entirely held by American Express into 246 million common shares. Effective as of the close of business on September 30, 2005, American Express completed the separation of Ameriprise Financial and the distribution of the Ameriprise Financial common shares to American Express shareholders (the Distribution). The Distribution was effectuated through a pro-rata dividend to American Express shareholders consisting of one share of Ameriprise Financial common stock for every 5 shares of American Express common stock owned by its shareholders on September 19, 2005, the record date. Prior to August 1, 2005, Ameriprise Financial was named American Express Financial Corporation. The accompanying condensed financial statements include the accounts of Ameriprise Financial, Inc. (the Registrant or Parent Company) and, on an equity basis, its subsidiaries and affiliates. The financial information of the Parent Company should be read in conjunction with the consolidated financial statements of Ameriprise Financial and the notes thereto. Parent Company revenues and expenses, other than compensation and benefits and debt and interest expense, are primarily related to intercompany transactions with subsidiaries and affiliates. Until the fourth quarter of 2005, the Parent Company was a Registered Investment Advisor. During the fourth quarter of 2005, the Parent Company ceased being a Registered Investment Advisor and in turn, an Ameriprise Financial subsidiary became a Registered Investment Advisor. Note 2 Discontinued Operations Effective August 1, 2005, the Company transferred its 50% ownership interest and the related assets and liabilities of its subsidiary, American Express International Deposit Company (AEIDC), to American Express for $164 million through a non-cash dividend equal to the net book value excluding net unrealized investment losses of $26 million and accordingly, no gain or loss was recorded. In connection with the AEIDC transfer, American Express made a cash capital contribution of $164 million to the Company. The investment in and equity in the operations of AEIDC are shown as Parent Company assets applicable to and investments in discontinued operations of subsidiary and discontinued operations of subsidiary, net of tax in the accompanying Condensed Financial Statements. F-5
  • The components of earnings associated with discontinued operations of subsidiary for the years ended December 31 are as follows: 2005 2004 2003 (in millions) Parent Company income tax provision applicable to discontinued operations of $ 9 $ 21 $ 24 subsidiary Loss before equity in earnings of subsidiaries and discontinued operations of subsidiary (9) (21) (24) Equity in earnings of subsidiaries before discontinued operations of subsidiary 25 61 68 Discontinued operations of subsidiary, net of tax $ 16 $ 40 $ 44 The Parent Company assets applicable to and investment in discontinued operations of subsidiary included in the Parent Company’s Condensed Balance Sheet as of December 31, 2004 consisted of the following: December 31, 2004 (in millions) Investment in subsidiaries $ 178 Receivable from American Express 64 Total assets $ 242 Note 3 Investments The following is a summary of investments at December 31, 2005 and 2004: 2005 2004 (in millions) Available-for-Sale securities, at fair value $ 129 $ 254 Trading securities, at fair value 174 126 Total $ 303 $ 380 Note 4 Goodwill Goodwill was $185 million at both December 31, 2005 and 2004. Goodwill reflected in the Parent Company Condensed Financial Statements relates to Ameriprise Financial’s predecessor, Investors Diversified Services Inc., which was founded in 1894 and acquired by American Express in 1984. Note 5 Debt All of the borrowings of Ameriprise Financial are borrowings of the Parent Company, except as indicated below. At December 31, 2005 and 2004, Ameriprise Financial had a combined $283 million and $317 million, respectively, of debt relating to a collateralized debt obligation (CDO), which was consolidated beginning December 31, 2003 upon the adoption of Financial Accounting Standards Boards Interpretation No. 46, “Consolidation of Variable Interest Entities,” as revised (FIN 46). This debt is non-recourse to Ameriprise Financial and will be extinguished from the cash flows of the investments held within the portfolio of the CDO. F-6
  • Note 6 Payable to American Express Payable to American Express at December 31 consisted of: 2005 2004 (in millions) Debt $ — $ 1,578 Interest payable — 11 Taxes payable 10 35 Accounts payable 6 62 Total payable to American Express $ 16 $ 1,686 Note 7 Commitments and Contingencies The Parent Company is the guarantor for an operating lease of IDS Property Casualty Insurance Company. The Parent Company is involved in the normal course of business in legal, regulatory and arbitration proceedings, including class actions and investigations, concerning matters arising in connection with the conduct of its activities as a diversified financial services firm. These include proceedings specific to the Parent Company as well as proceedings generally applicable to business practices in the industries in which the Parent Company operates. The Parent Company can also be subject to litigation arising out of its general business activities, such as its investments, contracts, leases and employment relationships. These proceedings are subject to uncertainties and, as such, the Parent Company is unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the Parent Company’s results of operations, financial condition or credit ratings. In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to a motion to dismiss the complaint, the Court dismissed one of plaintiffs’ four claims and granted plaintiffs limited discovery. In October 2005, the Parent Company reached a comprehensive settlement regarding the consolidated securities class action lawsuit filed against the Parent Company, its former parent and affiliates in October 2004 called “In re American Express Financial Advisors Securities Litigation.” The settlement, under which the Parent Company denies any liability, includes a one-time payment of $100 million to the class members. The class members include individuals who purchased mutual funds in certain revenue sharing programs; purchased mutual funds sold under the American Express® or AXP® brand; or purchased for a fee financial plans or advice between March 10, 1999 and through the date on which a formal stipulation of settlement is signed. The settlement will be submitted to the Court for approval. Two lawsuits making similar allegations (based solely on state causes of actions) are pending in the United States District Court for the Southern District of New York: “Beer v. American Express Company and American Express Financial Advisors” and “You v. American Express Company and American Express Financial Advisors.” Plaintiffs have moved to remand the cases to state court. The Court’s decision on the remand motion is pending. On December 1, 2005, the Parent Company announced settlement of an SEC enforcement matter relating to periods before the Distribution. The matter involved allegations that the Parent Company permitted improper market timing in the Parent Company’s own mutual funds (including market timing by a limited number of the Parent Company’s employees through their own personal 401(k) retirement accounts) as well as in certain annuity products, notwithstanding prohibitions against this practice in the product disclosures. Under the terms of the settlement the Parent Company agreed to a censure and to pay $15 million in the form of civil penalties and disgorgement. The Parent Company is required to develop a plan of distribution with the assistance of an independent distribution consultant. The plan will address how funds will be distributed to benefit investors in the Company’s mutual funds for market-timing activity that took place between January 1, 2002 and September 30, 2003. The distribution plan will be subject to final approval by the SEC. As part of the settlement, the Parent Company also agreed to certain undertakings regarding disclosure, compliance and training. F-7
  • EXHIBIT INDEX Pursuant to the rules and regulations of the Securities and Exchange Commission, Ameriprise Financial, Inc. has filed certain agreements as exhibits to this Annual Report on Form 10-K. These agreements may contain representations and warranties by the parties. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in Ameriprise Financial, Inc.’s public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe Ameriprise Financial, Inc.’s actual state of affairs at the date hereof and should not be relied upon. The following exhibits are filed as part of this Annual Report on Form 10-K. The exhibit numbers followed by an asterisk (*) indicate exhibits electronically filed herewith. All other exhibit numbers indicate exhibits previously filed and are hereby incorporated herein by reference. Exhibits numbered 10.5 through 10.26 and Exhibit 10.28 are management contracts or compensatory plans or arrangements. Exhibit Description 3.1 Amended and Restated Certificate of Incorporation of Ameriprise Financial, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 3.2 Amended and Restated Bylaws of Ameriprise Financial, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 4.1 Form of Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 3 to Form 10 Registration Statement, File No. 1-32525, filed on August 19, 2005). Other instruments defining the rights of holders of long-term debt securities of the registrant are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The registrant agrees to furnish copies of these instruments to the SEC upon request. 10.1 Separation and Distribution Agreement between American Express Company and Ameriprise Financial, Inc., dated August 24, 2005 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, File No. 1-32525, filed on August 30, 2005). 10.2 Transition Services Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 10.3 Tax Allocation Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 10.4 Employee Benefits Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 10.5 Ameriprise Financial 2005 Incentive Compensation Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8, File No. 333-128789, filed on October 5, 2005). 10.6 Ameriprise Financial Deferred Compensation Plan (incorporated by reference to Exhibit 10.5 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005). 10.7 Ameriprise Financial Supplemental Retirement Plan (incorporated by reference to Exhibit 10.7 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005). E-1
  • 10.8 Form of Ameriprise Financial 2005 Incentive Compensation Plan Master Agreement for Substitution Awards (incorporated by reference to Exhibit 10.8 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005). 10.9 Form of Ameriprise Financial 2005 Incentive Compensation Plan Agreement for Assumed Portfolio Grant Awards (incorporated by reference to Exhibit 10.9 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005). 10.10 Form of Ameriprise Financial 2005 Incentive Compensation Plan Agreement for Assumed Performance Grants (incorporated by reference to Exhibit 10.10 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005). 10.11 Key Employee Retention Award for Mr. Berman (incorporated by reference to Exhibit 10.11 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005). 10.12 Key Employee Retention Award for Mr. Heath (incorporated by reference to Exhibit 10.12 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005). 10.13 Key Employee Retention Award for Mr. Truscott (incorporated by reference to Exhibit 10.13 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005). 10.14 Letter sent by American Express Company to Mr. Cracchiolo (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, File No. 1-32525, filed on August 30, 2005). 10.15 Ameriprise Financial Form of Award Certificate — Non-Qualified Stock Option Award (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 10.16 Ameriprise Financial Form of Award Certificate — Restricted Stock Award (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 10.17 Ameriprise Financial Form of Award Certificate — Restricted Stock Unit Award (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 10.18 Ameriprise Financial Form of Agreement — Cash Incentive Award (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 10.19 Ameriprise Financial Long-Term Incentive Award Program Guide (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 10.20 Ameriprise Financial Deferred Share Plan for Outside Directors (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005). 10.21 Compensatory Arrangements for CEO (incorporated by reference to Item 1.01 of the Current Report on Form 8-K, File No. 1-32525, filed on August 30, 2005). 10.22 CEO Security and Compensation Arrangements (incorporated by reference to Item 1.01 of the Current Report on Form 8- K, File No. 1-32525, filed on October 31, 2005). 10.23 Completion/Retention Awards (incorporated by reference to Item 1.01 of the Current Report on Form 8-K, File No. 1- 32525, filed on October 31, 2005). 10.24* Ameriprise Financial, Inc. Senior Executive Severance Plan, as amended November 14, 2005. 10.25 Restricted Stock Awards in lieu of Key Executive Life Insurance Program (incorporated by reference to Item 1.01 of the Current Report on Form 8-K, File No. 1-32525, filed on November 18, 2005). 10.26 Treatment of Portfolio Grants and Portfolio Grant for CEO (incorporated by reference to Item 1.01 of the Current Report on Form 8-K, File No. 1-32525, filed on December 21, 2005). 10.27* Ameriprise Financial, Inc. Deferred Equity Program for Independent Financial Advisors. E-2
  • 10.28* Ameriprise Financial Annual Incentive Award Plan, adopted effective as of September 30, 2005. 10.29* Form of Indemnification Agreement for directors, Chief Executive Officer, Chief Financial Officer, General Counsel and Principal Accounting Officer and any other officers designated by the Chief Executive Officer. 10.30 Indenture dated as of October 5, 2005, between the Registrant and U.S. Bank National Association, trustee (incorporated by reference to Exhibit 4(a) to the Registration Statement on Form S-3, File No. 333-128834, filed on October 5, 2005). 10.31* Credit Agreement, dated as of September 30, 2005, among Ameriprise Financial, Inc., the lenders listed therein, Wells Fargo Bank, National Association, Citibank, N.A., Bank of America, N.A., HSBC Bank USA, National Association, Wachovia Bank, National Association and Citigroup Global Markets, Inc. 12* Ratio of Earnings to Fixed Charges. 13* Portions of the Ameriprise Financial, Inc. 2005 Annual Report to Shareholders, which, except for those sections incorporated herein by reference, are furnished solely for the information of the SEC and are not to be deemed “filed”. 16.1 Letter from Ernst & Young LLP addressed to the Securities and Exchange Commission, dated June 6, 2005, regarding change in certifying accountant (incorporated by reference to Exhibit 16.1 to Form 10 Registration Statement, File No. 1- 32525, filed on June 7, 2005). 16.2 Letter from PricewaterhouseCoopers LLP addressed to the Securities and Exchange Commission, dated June 3, 2005, regarding change in certifying accountant (incorporated by reference to Exhibit 16.2 to Form 10 Registration Statement, File No. 1-32525, filed on June 7, 2005). 21* Subsidiaries of Ameriprise Financial, Inc. 23* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. 24 Powers of attorney (included on Signature Page). 31.1* Certification of James M. Cracchiolo pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. 31.2* Certification of Walter S. Berman pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. 32* Certification of James M. Cracchiolo and Walter S. Berman pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. E-3
  • Exhibit 10.24 AMERIPRISE FINANCIAL SENIOR EXECUTIVE SEVERANCE PLAN Amended and Restated as of November 14, 2005
  • AMERIPRISE FINANCIAL SENIOR EXECUTIVE SEVERANCE PLAN INTRODUCTION The Board of Directors of Ameriprise Financial, Inc. established the Ameriprise Financial Senior Executive Severance Plan (hereinafter referred to as the “Plan”), effective as of September 30, 2005 and restated as of November 14, 2005, to provide for severance benefits for certain eligible senior executives of Ameriprise Financial, Inc. and its participating subsidiaries whose employment is terminated under certain conditions. Severance benefits under the Plan are to be provided to such eligible executives in exchange for a signed agreement that includes a release of all claims. 1
  • ARTICLE ONE DEFINITIONS 1.1. “Affiliated Company” means any corporation which is a member of a controlled group of corporations (determined in accordance with Section 4l4(b) of the Code) of which the Company is a member and any other trade or business (whether or not incorporated) which is controlled by, or under common control (determined in accordance with Section 4l4(c) of the Code) with the Company, but which is not an Employing Company. 1.2. “Base Salary” means the regular basic cash remuneration before deductions for taxes and other items withheld, payable to an Employee for services rendered to an Employing Company, but not including pay for bonuses, incentive compensation, special pay, awards or commissions. 1.3. “Board of Directors” means the board of directors of the Company. 1.4. “Bonus” means the greater of: (1) the largest of any one of the last three annual incentive compensation amounts paid to an Employee over and above Base Salary earned and paid in cash or otherwise under any executive bonus or sales incentive plan or program of an Employing Company or (2) the Employee’s designated target bonus. 1.5. “Change in Control” has the meaning set forth in the Ameriprise Financial 2005 Incentive Compensation Plan; provided that, notwithstanding anything to the contrary therein, a Change in Control shall not be deemed to occur under this Plan as a result of any event or transaction to the extent that treating such event or transaction as a Change in Control would cause any tax to become due under Section 409A of the Code. 1.6. “Code” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder. 1.7. “Committee” means the Compensation and Benefits Committee of the Board of Directors or any committee established and appointed by the Board of Directors or by a committee of the Board of Directors, or any successor committee appointed by the Board of Directors to administer the Plan. 1.8. “Company” means Ameriprise Financial, Inc., a Delaware corporation, its successors and assigns. 1.9. “Comparable Position” means a job with the Company, an Employing Company, an Affiliated Company or successor company at the same or higher Total Cash Compensation as an Employee’s current job and at a work location within reasonable commuting distance from an Employee’s home, as determined by such Employee’s Employing Company. For Employees in a qualifying international 2
  • expatriate program adopted by an Employee’s Employing Company, “Comparable Position” means a job with an Employing Company, an Affiliated Company or successor company at the same or higher Total Cash Compensation as an Employee’s current job and at a work location in the Employee’s country of assignment, home country or career base country. 1.10. “Completed Years of Service” means the number of full one-year periods that have transpired since the Employee’s original date of hire or, in the case of someone who has incurred a break in service as defined in the Ameriprise Financial Retirement Plan, the adjusted date of hire, through the Employee’s last day of active employment with the Company. The determination of Completed Years of Service will take into account years of service with American Express Company if and to the extent, and in accordance with, the provisions of the Employee Benefits Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (the “Employee Benefits Agreement”). 1.11. “Constructive Termination” means resignation or other employment termination by an Employee from an Employing Company as a result of one or more of the following without the Employee’s written consent within two (2) years after a Change in Control: (a) a reduction in Base Salary, except for across-the-board changes similarly affecting all Employees of the Employing Company and all Employees of any Person in control of the Employing Company, or any material reduction in the aggregate of the Employee’s annual target bonus and long term incentive opportunity, in each case from that in effect immediately prior to the Change in Control, (b) the Employing Company’s requirement that the Employee be based more than fifty (50) miles from the location at which the Employee was based immediately prior to the Change in Control and which location is more than thirty-five (35) miles from the Employee’s residence, (c) the assignment to the Employee of any duties that are materially inconsistent with the Employee’s duties prior to the Change in Control, or (d) a significant reduction in the Employee’s position, duties, or responsibilities from those in effect prior to the Change in Control. 1.12. “Defined Termination” means a termination of employment of an Employee within two (2) years after a Change in Control that occurs as a result of either: (a) an Involuntary Termination, or (b) a Constructive Termination. 1.13. “Disability” shall have the meaning set forth in Section 409A of the Code. 3
  • 1.14. “Employee” means any person, at the senior executive level as defined by the Committee, paid through the payroll function of the Employing Company (as opposed to the accounts payable function of the Employing Company) and employed on a regular full-time basis (i.e., an employee whose scheduled workweek is consistent with the standard workweek schedule of a business unit or department) or regular part time basis (i.e., an employee who is scheduled to work at least twenty (20) hours per week, but fewer than the hours of a regular full-time employee) by an Employing Company, who receives from an Employing Company a regular stated compensation and an annual IRS Form W-2; provided, however, that an Employing Company or operating business unit thereof, due to business, marketplace or employee relations reasons, may, in its sole discretion, by policy exclude from the definition of Employee under the Plan any category or level of Employee employed in a non-exempt, exempt or executive level position or in an initial probationary or trial period of employment. The term “Employee” shall not include any person who has entered into an independent contractor agreement, consulting agreement, franchise agreement or any similar agreement with an Employing Company, nor the employees of any such person, regardless of whether that person (including his or her employees) is later found to be an employee by any court of law or regulatory authority. 1.15. “Employing Company” means each of the Company and the subsidiary and affiliated companies of the Company listed on Schedule A attached hereto, as such Schedule A may be amended by the Committee, in its sole discretion, from time to time. 1.16. “ERISA” means the Employee Retirement Income Security Act of l974, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder. 1.17. “Good Cause” means a discontinuance of an Employee’s employment by an Employing Company upon one of the following: (a) an Employee’s Willful and continued failure to adequately perform substantially all of the Employee’s duties with an Employing Company, (b) an Employee’s Willful engagement in conduct which is demonstrably and materially injurious to an Employing Company or an affiliate thereof, monetarily or otherwise, or (c) an Employee’s conviction of, or entering a plea of guilty or nolo contendere to (i) a felony or (ii) any misdemeanor that disqualifies an Employee from employment with an Employing Company. 1.18. “Involuntary Termination” means any involuntary discontinuance of an Employee’s employment by an Employing Company for reasons other than Good Cause within two (2) years after a Change in Control. 4
  • 1.19. “Leave of Absence” means the period during which an Employee is absent from work pursuant to a leave of absence granted by an Employing Company. 1.20. “Person” means a “person” as such term is used in Section 13(d) and 14(d) of the Securities and Exchange Act of 1934 (the “Exchange Act”), including any “group” within the meaning of Section 13(d)(3) under the Exchange Act. 1.21. “Plan” means the Ameriprise Financial Senior Executive Severance Plan, as set forth herein and as hereafter amended from time to time. 1.22. “Retirement” means early, normal or deferred retirement as defined in and meeting the terms and conditions of the Ameriprise Financial Retirement Plan, as amended, or any successor plan thereto. 1.23. “Separation Period” means the period of time over which an Employee receives severance benefits under the Plan in biweekly or other installment payments. 1.24. “Specified Employee” means a key employee (as defined for purposes of Section 409A of the Code) of an Employing Company, as determined by the Committee in its sole discretion. 1.25. “Termination of Active Employment” means the date on which an Employee ceases performing services for an Employing Company. 1.26. “Total Cash Compensation” means an Employee’s Base Salary and any Bonus. 1.27. “Willful” means that an act or failure to act on an Employee’s part is done, or omitted to be done, by the Employee in a manner that is not in good faith, and that is without reasonable belief that such action or omission was in the best interests of an Employing Company. 1.28. The masculine pronoun shall be construed to mean the feminine and the singular shall be construed to mean the plural, wherever appropriate herein. 1.29. Headings in this document are for identification purposes only and do not constitute a part of the Plan. 5
  • ARTICLE TWO ELIGIBILITY TO RECEIVE BENEFITS 2.1. Eligibility to Receive Benefits. Each Employee shall be eligible to receive benefits under the Plan in the event his employment is terminated by an Employing Company for one of the following reasons: 2.1.1. Reduction in force; 2.1.2. Position elimination; 2.1.3. Office closing; 2.1.4. Poor performance; 2.1.5. Mutually satisfactory resignation; 2.1.6. Relocation of an Employee’s current position that does not meet the definition of Comparable Position; 2.1.7. Defined Termination, as defined in Section 1.12, (applicable only within two (2) years after a Change in Control), and notwithstanding any provision of Section 2.3. The Committee may, in its sole discretion, grant eligibility to receive benefits under the Plan to any Employee or group of Employees employed in a business unit of the Company or an Employing Company who terminate employment due to a sale of such business unit not later than six (6) months following such sale. 2.2. Limitations on Eligibility. In the event an Employee who is otherwise eligible to receive benefits under the Plan is offered a Comparable Position (whether the position is accepted or rejected by the Employee), he will not be eligible to receive benefits under the Plan. In addition, an Employee is not eligible to receive benefits under the Plan if the Employee accepts any position in the Employing Company, an Affiliated Company or successor company (regardless of whether it is a Comparable Position). An Employee who is offered or placed on a temporary layoff status (often referred to as a furlough) with reduced or no pay for a period of less than six (6) months during which time the Employee continues to participate in certain benefit plans as determined by the Company is not eligible to receive benefits under the Plan. 2.3. Ineligibility to Receive Benefits. An Employee is ineligible to receive benefits under the Plan in the event his employment by an Employing Company terminates for a reason other than those enumerated in Section 2.1 above, including, but not limited to, the following: 2.3.1. Voluntary resignation; 2.3.2. Failure to report for work; 2.3.3. Failure to return from leave; 2.3.4. Return from a Leave of Absence which extends beyond the policy reinstatement period, if applicable, and no position is available; 2.3.5. Excessive absenteeism or lateness; 6
  • 2.3.6. Merger, acquisition, sale, transfer, outsourcing or reorganization of all or part of the Employing Company that does not constitute a Change in Control where either (i) a Comparable Position is offered with, or (ii) the Employee accepts any position (regardless of whether it is a Comparable Position) with, a successor company, whether affiliated or unaffiliated with the Employing Company, including an outside contractor, and whether or not the successor company participates the Plan. 2.3.7. Violation of a policy or procedure of the Employing Company, insubordination, unwillingness to perform the duties of a position, or other misconduct; 2.3.8. Retirement, including the acceptance of any Employing Company sponsored retirement incentive; provided, however, that in the event an Employee is otherwise eligible for a severance pay benefit in accordance with Section 2.1 above and also eligible for Retirement, the Employee shall be eligible to receive benefits under the Plan in accordance with Article 3 below; 2.3.9. Death; or 2.3.10. Disability. 7
  • ARTICLE THREE AMOUNT OF BENEFITS 3.1 Amount of Benefits. The severance benefit payable to an eligible Employee under the Plan shall be based on his Completed Years of Service and position with the Company, Employing Company or an Affiliated Company. The formula for determining an Employee’s severance benefit payment shall be calculated by first adding together (i) the Employee’s annual Base Salary in effect immediately prior to the date of Termination of Active Employment; provided that, in the case of an Employee whose employment is terminated pursuant to 1.11(a), then the Base Salary that was in effect immediately before such reduction in Base Salary, and (ii) the Employee’s Bonus. The sum of subsections (i) and (ii) above shall then be divided by fifty-two (52) to calculate the weekly severance benefit. The amount of the total severance benefit to which an Employee may be entitled is set out in Schedule B. Notwithstanding the foregoing and in accordance with the terms of the Employee Benefits Agreement, any Employee who was eligible to receive severance benefits under the American Express Company Senior Executive Severance Plan immediately prior to the Distribution Date (as defined in the Employee Benefits Agreement) and becomes eligible to receive severance benefits pursuant to the Plan during the period commencing on the Distribution Date (as defined in the Employee Benefits Agreement) and ending on the first anniversary of the Distribution Date, shall receive an amount of severance benefit that is not less than the number of weeks of pay that such Employee would have received under the American Express Company Senior Executive Severance Plan as in effect immediately prior to the Distribution Date. 3.2 Special Retirement Program Contributions. An Employee eligible for benefits under the Plan due to a Defined Termination resulting from a Change in Control shall, in addition to the benefits provided above in Article 3.1, receive the value of Company contributions that would have been made to the Ameriprise Financial Retirement Plan, Ameriprise Financial 401(k) Plan, Ameriprise Financial Supplemental Retirement Plan or other similar plans adopted by the Company, for the period during which the Employee is receiving weekly severance payments under this Plan. Effective on the date of the Defined Termination, this amount will be credited to the Employee’s book reserve account in the Ameriprise Financial Supplemental Retirement Plan, consistent with the terms of such plan. 3.3 Limitations on Amount of Severance Benefits. Severance benefits payable under the Plan shall be inclusive of and offset by any other severance, redundancy or termination payment made by an Employing Company to an Employee, including, but not limited to, any amounts paid pursuant to federal, state, local or foreign government worker notification (e.g., Worker Adjustment and Retraining Notification Act) or office closing requirements, any amounts owed the Employee pursuant to a contract with the Employing Company (unless the contract specifically provides otherwise) and amounts paid to an Employee placed in a temporary layoff status (often referred to as a furlough) which immediately precedes the commencement of the severance payments. 8
  • 3.4 Reemployment. In the event an Employee is reemployed by the Employing Company or an Affiliated Company within the period covered by the schedule of severance benefits in Section 3.1 above, the severance benefits, if any, that are in excess of the number of weeks between the Termination of Active Employment and the rehire date shall be repaid by the Employee or withheld by the Employing Company, as the case may be. In the further event an eligible Employee who is receiving severance benefits under the Plan is later rehired by an Employing Company or an Affiliated Company, and employment later terminates under conditions making such Employee eligible for severance benefits under the Plan, the amount of the second severance benefit will be based on such Employee’s actual date of reemployment and not the original date of employment; provided, however, that any benefits withheld or repaid in accordance with the preceding sentence that are in excess of one (1) year shall be additionally paid to the terminating Employee. 3.5 Withholding Tax. The Employing Company shall deduct from the amount of any severance benefits payable under the Plan, any amount required to be withheld by the Employing Company by reason of any law or regulation, for the payment of taxes or otherwise to any federal, state, local or foreign government. In determining the amount of any applicable tax, the Employing Company shall be entitled to rely on the number of personal exemptions on the official form(s) filed by the Employee with the Employing Company for purposes of income tax withholding on regular wages. 3.6 Requirement of Signed Agreement. Receipt of severance benefits under the Plan is conditioned upon the Employee signing an agreement with the Employee’s Employing Company in a form satisfactory to the Company and in accordance with the requirements of applicable law (the “Agreement”). The Agreement must include a release of claims and may include whatever other terms the Employing Company deems appropriate, including restrictive covenants. If the terms of the Agreement are found to be legally unenforceable, the Employee must return any severance benefits paid pursuant to Section 3.1 of the Plan plus the value of any long term incentive awards which vested during the Separation Period; provided, however, that in the event the Employee has a Defined Termination, such restrictive covenants shall: (a) be reasonable under the applicable facts and circumstances; (b) include the following (i) non-solicitation of customers and employees; (ii) confidentiality of business data; (iii) full release of claims; and (iv) non-denigration of the Company and its affiliates, and their officers, directors and agents and (c) not include any non-competition limitations. Notwithstanding anything herein to the contrary, the Company shall, for a period of two (2) years and one (1) day following a Change in Control, be prohibited from entering into any agreement with an Employee, which contains a more expansive Competitor List (as provided in Paragraph 2 of the Consent to the Application of Forfeiture and Detrimental Conduct Provisions to Long-Term Incentive Awards relating to awards issued under the Ameriprise Financial 2005 Incentive Compensation Plan) than that which was in effect for such Employee immediately prior to the date of such Change in Control. If an Employee has already signed an Agreement as required by Section 3.6 prior to the date of a Change in Control, the Employee is not eligible to receive any benefits that would otherwise be triggered by a Change in Control, except as provided by Section 4.2. 9
  • 3.7 Excise Tax. (a) Section 3.7 shall apply in the event of a Change in Control, as defined in Section 1.5 hereof. (b) In the event that any payment or benefit received or to be received by an Employee from the Company, an Employing Company or any Affiliated Company in connection with a Change in Control or termination of such Employee’s employment (such payments and benefits, excluding any Gross-Up Payment (as hereinafter defined), being hereinafter referred to collectively as the “Payments”), will be subject to the excise tax (the “Excise Tax”) referred to in Section 4999 of the Code, then the Company shall pay to such Employee, within five (5) days after receipt by such Employee of the written statement referred to in subsection (d) below, an additional amount (the “Gross-Up Payment”) such that the net amount retained by such Employee, after deduction of any Excise Tax on the Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Payments. (c) For purposes of determining whether the Payments will be subject to the Excise Tax and the amount of such Excise Tax: (i) all payments and benefits received or to be received by an Employee in connection with such Change in Control or the termination of such Employee’s employment, whether pursuant to the terms of the Plan or any other plan, arrangement or agreement with the Company, any Employing Company, any Person (as such term is defined in Section 1.20) whose actions result in such Change in Control or any Person affiliated with the Company, such Employing Company or such Person (all such payments and benefits, excluding the Gross-Up Payment and any similar gross-up payment to which an Employee may be entitled under any such other plan, arrangement or agreement, being hereinafter referred to as the “Total Payments”), shall be treated as “parachute payments” (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of the accounting firm which was, immediately prior to the Change in Control, the Company’s independent auditor, or if that firm refuses to serve, by another qualified firm, whether or not serving as independent auditors, designated by the Committee (the “Auditor”), such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(2)(A) or section 280G(b)(4)(A) of the Code; (ii) no portion of the Total Payments the receipt or enjoyment of which the Employee shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of section 280G(b) of the Code shall be taken into account; (iii) all “excess parachute payments” within the meaning of section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of the Auditor, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount (within the meaning of section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax; and (iv) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code and regulations or other guidance there under. For purposes of determining the amount of the Gross-Up Payment in respect of an 10
  • Employee, the Employee shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation (and state and local income taxes at the highest marginal rate of taxation in the state and locality of such Employee’s residence, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes) in the calendar year in which the Gross-Up Payment is to be made. The Auditor will be paid reasonable compensation by the Company for its services. (d) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, then an amount equal to the amount of the excess of the earlier payment over the redetermined amount (the “Excess Amount”) will be treated as if it were a loan to the Employee made on the date of the Employee’s receipt of such Excess Amount, which the Employee will have an obligation to repay to the Company on the fifth business day after demand, together with interest on such amount at the lowest applicable federal rate (as defined in Section 1274(d) of the Code or any successor provision thereto), compounded semi-annually (the “Section 1274 Rate”) from the date of the Employee’s receipt of such Excess Amount until the date of such repayment (or such lesser rate (including zero) as may be designated by the Auditor such that the Excess Amount and such interest will not be treated as a parachute payment as previously defined). In the event that the Excise Tax is finally determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), within five (5) business days of such determination, the Company will pay to the Employee an additional amount, together with interest thereon from the date such additional amount should have been paid to the date of such payment, at the Section 1274 Rate (or such lesser rate (including zero) as may be designated by the Auditor such that the amount of such deficiency and such interest will not be treated as a parachute payment as previously defined). The Employee and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the amount of any Gross-Up Payment. (e) As soon as practicable following a Change in Control, the Company shall provide to each Employee, a written statement setting forth the manner in which the Total Payments in respect of such Employee were calculated and the basis for such calculations, including, without limitation, any opinions or other advice the Company has received from the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). (f) Notwithstanding anything herein to the contrary, the Committee may designate by resolution any group of Employees or individual Employee that would not be eligible to receive a Gross-Up Payment or any other benefit provided for under this Section 3.6. With regard to any such Employee or group of Employees, the Committee may provide for a reduction in Payments for the purpose of avoiding the imposition of the Excise Tax, in all or certain specified circumstances, such reduction to be implemented pursuant to such rules as the Committee shall adopt from time to time. 11
  • 3.8. Payment for Cancelled Stock Options. An Employee eligible for benefits under the Plan due to a Change in Control may receive the value of American Express Company vested stock options that are cancelled, on or before December 31, 2009, due to a (a) Change in Control or (b) Defined Termination. The value, if any, will be determined by the Company, in its sole discretion and be equal to the Black Scholes value (for the remaining term) less the intrinsic value of the option (all measured at the options’ cancellation date). Subject to Article 4.1, this benefit will be payable in a one-time lump sum payment made as soon as reasonably practicable following the cancellation of the option due to (a) or (b) above. 12
  • ARTICLE FOUR METHOD OF PAYMENT 4.1. Payment. A severance benefit under the Plan may be payable in biweekly or other installments (if permitted under Section 409A of the Code) over a number of weeks not exceeding the number of weekly severance benefit payments determined pursuant to Section 3.1 above (including any resolution referred to therein) at the sole discretion of the Employing Company; provided, however, that in the event the Employee has a Defined Termination or the payment of severance in installments would result in the imposition of a tax under Section 409A of the Code, the severance benefit under the Plan will be paid as soon as practicable after the date of such Employee’s last day of active employment (but no earlier than six (6) months following the date of such termination of employment in the case of a Specified Employee). If installment payments are made under the Plan to a Specified Employee, the first installment payment shall be made on or as soon as administratively practical after the six-month anniversary of the date such Specified Employee’s employment terminates and (i) the amount of the first payment will equal the sum of the installment payments that would have been paid to the Specified Employee during the six-month period immediately following the Specified Employee’s termination of employment had the payment commenced as of such date and (ii) the remainder of the severance benefit shall be paid in substantially equivalent installments. Notwithstanding anything in this Plan to the contrary, if the Employee’s employment terminates within two (2) years following a Change in Control and if the Employee receives lump-sum severance, to the extent permitted under Section 409A, the Employee shall continue to be eligible to receive benefits under the Company’s medical and dental plans for a number of weeks equal to the number of weekly severance benefit payments determined pursuant to Section 3.1 above (including any resolution referred to therein), such benefits to be substantially identical to the benefits provided to other employees who remain in active employment status on substantially the same terms and conditions as apply to such active employees (including without limitation, any requirement that the Employee pay premiums or other similar costs). In the event that continuing to provide any such benefits would result in the imposition of a tax under Section 409A of the Code, instead of continuing to provide such benefits, the Company will make a lump-sum payment to the Employee as soon as practicable after the date of the Employee’s last day of active employment (but no earlier than six (6) months following the date of such termination of employment in the case of a Specified Employee) in an amount equal to the present value of such benefits as determined by the Committee in its sole discretion. 4.2. Inactive Employment Status. During the Separation Period (where severance benefits are paid in biweekly or other installments) the Employee receiving such payments will remain in an inactive employment status until receipt of such payments is completed, at which time such inactive status will be terminated. During the Separation Period, certain other employee benefits may be continued to 13
  • the extent permitted under Section 409A of the Code, payment for which shall be deducted from such severance payments in accordance with the Employee’s previously elected benefit coverage. If an Employee has already signed an Agreement as required by Section 3.5 and is receiving severance payments under the Plan on the date of Change in Control, the following would apply (subject to applicable governing documents): a) immediate vesting of outstanding unvested stock option shares and restricted stock awards under the Company’s incentive compensation plans; and b) cash payment equivalent to the amount of excise tax paid as a result of the Employee being deemed a “disqualified” individual under current U.S. tax laws. During the Separation Period, the Company reserves the right to continue other programs such as the Ameriprise Financial 2005 Incentive Compensation Plan and the Perquisite Program in accordance with its policies, which may be changed or terminated from time to time. Nothing in this section shall create a contract to provide such benefits. 4.3. Death. In the event an Employee dies before full receipt of severance benefits payable under the Plan, the remaining severance benefits will be paid to the legal representative of such Employee’s estate in a lump sum as soon as practicable after receipt of notice of such death and evidence satisfactory to the Company of the payment or provision for the payment of any estate, transfer, inheritance or death taxes which may be payable with respect thereto. 14
  • ARTICLE FIVE ADMINISTRATION OF THE PLAN 5.1. Powers of the Employing Company. The Employing Company shall have such powers, authorities and discretion as are necessary or appropriate in order to carry out its duties under the Plan, including, but not limited to, the power: 5.1.1. To obtain such information as it shall deem necessary or appropriate in order to carry out its duties under the Plan; 5.1.2. To make determinations with respect to the grounds for termination of employment of any Employee; and 5.1.3. To establish and maintain necessary records. 5.2. Employing Company Authority. Nothing contained in the Plan shall be deemed to qualify, limit or alter in any manner the Employing Company’s sole and complete authority and discretion to establish, regulate, determine or modify at any time, the terms and conditions of employment, including, but not limited to, levels of employment, hours of work, the extent of hiring and employment termination, when and where work shall be done, marketing of its products, or any other matter related to the conduct of its business or the manner in which its business is to be maintained or carried on, in the same manner and to the same extent as if the Plan were not in existence. 5.3. Committee Duties and Powers. The Committee shall be responsible for the general administration and interpretation of the Plan and the proper execution of its provisions and shall have full discretion to carry out its duties. The Committee shall be the “Administrator” of the Plan and shall be, in its capacity as Administrator, a “Named Fiduciary,” as such terms are defined or used in ERISA. For the purposes of carrying out its duties as Administrator, the Committee may, in its sole discretion, allocate its responsibilities under the Plan among its members, and may, in its sole discretion, designate persons other than members of the Committee to carry out such of its responsibilities under the Plan as it may deem fit. In addition to the powers of the Committee specified elsewhere in the Plan, the Committee shall have all discretionary powers necessary to discharge its duties under the Plan, including, but not limited to, the following discretionary powers and duties: 5.3.1. To interpret or construe the Plan, and resolve ambiguities, inconsistencies and omissions; 5.3.2. To make and enforce such rules and regulations and prescribe the use of such forms as it deems necessary or appropriate for the efficient administration of the Plan; and 15
  • 5.3.3. To decide all questions on appeal concerning the Plan and the eligibility of any person to receive benefits under the Plan. 5.4. Determinations. The determination of the Committee as to any question involving the general administration and interpretation or construction of the Plan shall be within its sole discretion and shall be final, conclusive and binding on all persons, except as otherwise provided herein or by law. 5.5. Claims Review Procedure. Consistent with the requirements of ERISA and the regulations thereunder as promulgated by the Secretary of Labor from time to time, the following claims review procedure shall be followed with respect to the denial of severance benefits to any Employee: 5.5.1. Within thirty (30) days from the date of an Employee’s Termination of Active Employment, the Employing Company shall furnish such Employee either an agreement offering severance benefits under the Plan or notice of such Employee’s ineligibility for or denial of severance benefits, either in whole or in part. Such notice from the Employing Company will be in writing and sent to the Employee or the legal representatives of his estate stating the reasons for such ineligibility or denial and, if applicable, a description of additional information that might cause a reconsideration by the Committee or its delegate of the decision and an explanation of the Plan’s claims review procedure. In the event such notice is not furnished within thirty (30) days, any claim for severance benefits shall be deemed denied and the Employee shall be permitted to proceed to Section 5.5.2 below. 5.5.2. Within sixty (60) days after receiving notice of such denial or ineligibility or within ninety (90) days after the date of an Employee’s Termination of Active Employment if no notice is received, the Employee, the legal representatives of his estate or a duly authorized representative may then submit to the Committee a written request for a review of such decision of denial. 5.5.3. The Committee will review the claim and within sixty (60) days (or one hundred twenty (120) days in special circumstances) provide a written response to the appeal setting forth specific reasons for such decision. In the event the decision on review is not furnished within such time period, the claim shall be deemed denied. 16
  • ARTICLE SIX ADOPTING COMPANIES AND PLAN MERGERS 6.1. Adopting Companies. Any corporation which succeeds to the business and assets of the Company or any part of its operations, may by appropriate resolution adopt the Plan and shall thereupon succeed to such rights and assume such obligations hereunder as the Company and said corporation shall have agreed upon in writing. Any corporation which succeeds to the business of any Employing Company other than the Company, or any part of the operations of such Employing Company, may by appropriate resolution adopt the Plan and shall thereupon succeed to such rights and assume such obligations hereunder as such Employing Company and said corporation shall have agreed upon in writing; provided, however, that such adoption and the terms thereof agreed upon in such writing have been approved by the Company. 17
  • ARTICLE SEVEN AMENDMENT AND TERMINATION 7.1. Right to Amend or Terminate. The Company reserves the right, by action of the Board of Directors or the Committee, to amend or terminate this Plan in whole or in part at any time and from time to time, and any amendment or effective date of termination may be given retroactive effect. The foregoing sentence to the contrary notwithstanding, for a period of two (2) years and one (1) day after the date of an occurrence of a Change in Control, neither the Board of Directors nor the Committee may terminate this Plan or amend this Plan in a manner that is detrimental to the rights of any Employee receiving severance benefits under the Plan without his or her written consent. 7.2. Termination by an Employing Company. Any Employing Company other than the Company may withdraw from participation in the Plan at any time by delivering to the Committee written notification to that effect signed by such Employing Company’s chief executive officer or his delegate. Withdrawal by any Employing Company pursuant to this section or complete discontinuance of severance benefits under the Plan by any Employing Company other than the Company, shall constitute termination of the Plan with respect to such Employing Company. The foregoing sentence to the contrary notwithstanding, neither the Board of Directors nor the Committee may terminate this Plan or amend this Plan in a manner that is detrimental to the rights of any Employee receiving severance benefits under the Plan without his written consent (i) with respect to the provisions of the Plan which become applicable upon a Change in Control, and (ii) with respect to all provisions of the Plan for a period of two (2) years and one (1) day after the date of a Change in Control. 7.3. Limitation on Benefits. In the event any Employing Company withdraws from participation or the Company terminates the Plan as provided in this Article Seven, no Employee shall be entitled to receive benefits hereunder for Employment either before or after such action. 18
  • ARTICLE EIGHT FINANCIAL PROVISIONS 8.1. Funding. All severance benefits payable under the Plan shall be payable and provided for solely from the general assets of the Employing Company in accordance with the Plan, at the time such severance benefits are payable, unless otherwise determined by the Employing Company. The Employing Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any severance benefits under the Plan. 19
  • ARTICLE NINE LIABILITY AND INDEMNIFICATION 9.1. Standard of Conduct. To the extent permitted by ERISA and other applicable law, no member (which term, as used in this Article Nine, shall include any employee of any Employing Company designated to carry out any responsibility of the Committee pursuant to Section 5.3 above) of the Committee shall be liable for anything done or omitted to be done by him in connection with the Plan, unless the member failed to act (i) in good faith and (ii) for a purpose which such member reasonably believed to be in accordance with the intent of the Plan. The Company or Employing Company as applicable hereby indemnifies each person made, or threatened to be made, a party to an action or proceeding, whether civil or criminal, or against whom any claim or demand is made, by reason of the fact that he, his testator or intestate, was or is a member of the Committee, against judgments, fines, amounts paid in settlement and reasonable expenses (including attorney’s fees) actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, or as a result of such claim or demand, if such member of the Committee acted in good faith for a purpose which he reasonably believed to be in accordance with the intent of the Plan and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful. 9.2. Presumption of Good Faith. The termination of any such civil or criminal action or proceeding or the disposition of any such claim or demand, by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not in itself create a presumption that any such member of the Committee did not act (i) in good faith and (ii) for a purpose which he reasonably believed to be in accordance with the intent of the Plan. 9.3. Successful Defense. A person who has been wholly successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding or claim or demand of the character described in Section 9.1 above shall be entitled to indemnification as authorized in such Section 9.1. 9.4. Unsuccessful Defense. Except as provided in Section 9.3 above, any indemnification under Sections 9.1 and 9.2 above, unless ordered by a court of competent jurisdiction, shall be made by the Company or Employing Company as applicable only if authorized in the specific case: 9.4.1. By the Board of Directors acting by a quorum consisting of directors who are not parties to such action, proceeding, claim or demand, upon a finding that the member of the Committee has met the standard of conduct set forth in Section 9.1 above; or 9.4.2. If a quorum under Section 9.4.1 above is not obtainable with due diligence: 20
  • 9.4.2.1 By the Board of Directors upon the opinion in writing of independent legal counsel (who may be counsel to any Employing Company) that indemnification is proper in the circumstances because the standard of conduct set forth in Section 9.1 above has been met by such member of the Committee; or 9.4.2.2 By the shareholders of the Company upon a finding that the member of the Committee has met the standard of conduct set forth in such Section 9.1 above. 9.5. Advance Payments. Expenses incurred in defending a civil or criminal action or proceeding or claim or demand may be paid by the Company or Employing Company as applicable in advance of the final disposition of such action or proceeding, claim or demand, if authorized in the manner specified in Section 9.4 above, except that, in view of the obligation of repayment set forth in Section 9.6 below, there need be no finding or opinion that the required standard of conduct has been met. 9.6. Repayment of Advance Payments. All expenses incurred in defending a civil or criminal action or proceeding, claim or demand, which are advanced by the Company or Employing Company as applicable under Section 9.5 above shall be repaid in case the person receiving such advance is ultimately found, under the procedures set forth in this Article Nine, not to be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced by the Company or Employing Company as applicable exceed the indemnification to which he is entitled. 9.7. Right to Indemnification. Notwithstanding the failure of the Company or Employing Company as applicable to provide indemnification in the manner set forth in Section 9.4 or 9.5 above, and despite any contrary resolution of the Board of Directors or of the shareholders in the specific case, if the member of the Committee has met the standard of conduct set forth in Section 9.1 above, the person made or threatened to be made a party to the action or proceeding or against whom the claim or demand has been made, shall have the legal right to indemnification from the Company or Employing Company as applicable as a matter of contract by virtue of this Plan, it being the intention that each such person shall have the right to enforce such right of indemnification against the Company or Employing Company as applicable in any court of competent jurisdiction. 21
  • ARTICLE TEN MISCELLANEOUS 10.1. No Right to Continued Employment. Nothing in the Plan shall be construed as giving any Employee the right to be retained in the employ of any Employing Company or any right to any payment whatsoever, except to the extent of the severance benefits provided for by the Plan. Each Employing Company expressly reserves the right to dismiss any Employee at any time and for any reason without liability for the effect which such dismissal might have upon him as a Employee receiving severance benefits under of the Plan. 10.2. Construction. This Plan shall be governed by and construed in accordance with the substantive laws but not the choice of law rules of the state of New York, except to the extent that such laws have been superseded by federal law. 10.3. Expenses of the Plan. The expenses of establishment and administration of the Plan shall be paid by the Employing Companies. Any expenses paid by the Company pursuant to this Section 10.3 and indemnification under Article Nine shall be subject to reimbursement by the other Employing Companies of their proportionate shares of such expenses and indemnification, as determined by the Committee in its sole discretion. 10.4. ERISA Rights. Plan Sponsor. Ameriprise Financial, Inc. is the Plan Sponsor. The address is: Ameriprise Financial, Inc. 200 Ameriprise Financial Center Minneapolis, MN 55474 Employer Identification Number. The employer identification number assigned to Ameriprise Financial, Inc. by the IRS is: 13-3180631. Plan Administrator. The Compensation and Benefits Committee of the Board of Directors, or its delegate, is the Plan Administrator. The address is: Ameriprise Financial, Inc. 360 Ameriprise Financial Center Minneapolis, MN 55474 22
  • Agent for Service of Legal Process. Process can be served on the Company or the Plan Administrator by directing service to: Plan Administrator c/o General Counsel Amerprise Financial, Inc. 52 Ameriprise Financial Center Minneapolis, MN 55474 ERISA Rights. Employees in the Ameriprise Financial Senior Executive Severance Pay Plan (the “Plan”), are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that participants are entitled to: Receive Information About the Plan and Benefits Examine, without charge, at the Plan Administrator’s office and at other specified locations, all documents governing the Plan, including a copy of the latest annual report (Form 5500 Series) filed by the Plan with the U.S. Department of Labor, and available at the Public Disclosure Room of the Employee Benefits Security Administration. Obtain, upon written request to the Plan Administrator, copies of documents governing the administration of the Plan, including copies of the latest annual report (Form 5500 Series) and updated summary plan descriptions. The Plan Administrator may make a reasonable charge for the copies. Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report. Prudent Actions by Plan Fiduciaries In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit Plan. The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of Plan participants and beneficiaries. No one, including Ameriprise Financial, Inc. or any other person, may terminate a participant’s employment or otherwise discriminate against a participant in any way in order to prevent a participant from obtaining a benefit to which a participant is entitled or from exercising their rights under ERISA. Enforce Participant’s Rights If a participant’s claim for a benefit is denied or ignored, in whole or in part, a participant has a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules. Under ERISA, there are steps a participant can take to enforce the above rights. For instance, if a participant requests a copy of a Plan document from the Plan Administrator 23
  • or the latest annual report from the Plan and does not receive them within 30 days, the participant may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until the participant receives them, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If a participant has a claim for benefits that is denied or ignored, in whole or in part, the participant may file suit in a state or federal court provided that the participant has exhausted their administrative rights under the Plan. If it should happen that Plan fiduciaries misuse the Plans’ money, or if a participant is discriminated against for asserting their rights, the participant may seek assistance from the U.S. Department of Labor, or may file suit in a federal court. The court will decide who should pay court costs and legal fees. If the participant is successful, the court may order the person being sued to pay the court costs and legal fees. If the participant loses, the court may order the participant to pay these costs and fees, for example, if it finds the participant’s claim is frivolous. Assistance with Questions If a participant has any questions about the Plan, they should contact the Plan Administrator. If a participant has any questions about their rights under ERISA, or needs assistance in obtaining documents from the Plan Administrator, they should contact the nearest office of the Employee Benefits Security Administration of the U.S. Department of Labor, listed in the telephone directory, or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, D.C. 20210. A participant may also obtain publications about their rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration. 24
  • Ameriprise Financial Senior Executive Severance Plan Schedule A November 14, 2005 Employing Companies • American Centurion Life Assurance Company • Ameriprise Enterprise Investment Services, Inc. • Ameriprise Financial Services Inc. • RiverSource Investments, LLC • RiverSource Client Service Corporation • IDS Life Insurance Company • IDS Life Insurance Company of New York • IDS Property Casualty Insurance Company • Ameriprise Trust Company 25
  • Exhibit 10.27 AMERIPRISE FINANCIAL DEFERRED EQUITY PROGRAM FOR INDEPENDENT FINANCIAL ADVISORS Adopted effective as of September 30, 2005
  • AMERIPRISE FINANCIAL DEFERRED EQUITY PROGRAM FOR INDEPENDENT FINANCIAL ADVISORS Adopted effective as of September 30, 2005 Purpose The purpose of the Plan is to provide a means for the deferral by Eligible Financial Advisors of GDC. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. Article 1 Definitions For purposes of the Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the meanings indicated in this Article 1: 1.01 “Account Adjustment” shall mean an adjustment made to the balance of any Plan Account in accordance with Section 3.05 hereof. 1.02 “Advisor” shall mean an independent contractor who is a party to an effective Franchise Agreement. 1.03 “Aggregate Vested Balance” shall mean, with respect to the Plan Accounts of any Participant as of a given date, the sum of the amounts that have become vested under all of the Participant’s Plan Accounts, as adjusted to reflect all applicable Account Adjustments and all prior withdrawals and distributions, in accordance with Article 4 of the Plan and the provisions of the applicable Enrollment Forms. 1.04 “Amended Beneficiary Designation Form” shall mean the Amended Beneficiary Designation Form required by the Committee to be signed and submitted by a Participant to effect a permitted change in the designation of a Participant’s Beneficiary or Beneficiaries previously made by the Participant under any Beneficiary Designation Form. 1.05 “Annual Deferral Account” shall mean a notional, bookkeeping account established under the Plan to reflect the amount credited in a Plan Year with respect to a Participant’s elective deferral for such Plan Year in accordance with Sections 3.01 and 3.02 of the Plan, as adjusted to reflect all applicable dividend crediting pursuant to Section 3.04 and Account Adjustments pursuant to Section 3.05 hereof. 1.06 “Annual Election Form” shall mean the Annual Election Form required by the Committee to be signed and submitted by a Participant by the December 31
  • immediately preceding the start of each Plan Year in connection with the Participant’s Annual Participant Deferral Percentage election with respect to a given Plan Year. 1.07 “Annual Participant Deferral Percentage” shall mean the percentage of GDC a Participant elects to defer in respect of a particular Plan Year pursuant to Section 3.01(a). 1.08 “Annual Stock Match” shall mean the aggregate amount credited to a Participant in respect of a particular Plan Year pursuant to Section 3.03 hereof. 1.09 “Annual Stock Match Account” shall mean a notional, bookkeeping account established under the Plan to reflect the amount credited in a Plan Year with respect to a Participant’s Annual Stock Match for a such Plan Year in accordance with Section 3.03 of the Plan, as adjusted to reflect all applicable dividend crediting pursuant to Section 3.04 and Account Adjustments pursuant to Section 3.05 hereof. 1.10 “Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 6 hereof, that are entitled to receive a Participant’s Aggregate Vested Balance under the Plan in the event of the Participant’s death. 1.11 “Beneficiary Designation Form” shall mean the Beneficiary Designation Form or Amended Beneficiary Designation Form last signed and submitted by a Participant and accepted by the Committee. 1.12 “Board” shall mean the board of directors of the Company. 1.13 “Change in Control” has the meaning set forth in Section 4.03(a) herein. 1.14 “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder. 1.15 “Committee” shall mean the Compensation and Benefits Committee of the Company or such other committee designated by the Board to administer the Plan. 1.16 “Company” shall mean Ameriprise Financial, Inc., a Delaware corporation, and any successor to all or substantially all of its assets or business. 1.17 “Company Stock” shall mean the common stock, par value $0.01 per share, of the Company. 1.18 “Disability” shall have the meaning set forth in Section 409A of the Code. 1.19 “Distribution Election” shall mean an irrevocable election made in accordance with Section 4.01 hereof. 2
  • 1.20 “Distribution Election Form” shall mean the Distribution Election Form required by the Committee to be signed and submitted by a Participant with respect to a Distribution Election for a given Plan Year. 1.21 “Elected Amount” shall mean the aggregate amount a Participant elects to defer in respect of a particular Plan year pursuant to Section 3.01(a). 1.22 “Eligible Financial Advisor” shall mean an Advisor who meets eligibility criteria established by the Committee to participate in the Plan for a given Plan Year. 1.23 “Enrollment Forms” shall mean, for any Plan Year, the Annual Election Form, the Distribution Election Form, the Beneficiary Designation Form and any other forms or documents which may be required of a Participant by the Committee, in its sole discretion. 1.24 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. 1.25 “Financial Planning GDC” shall mean GDC from any financial plan account governed by an ADV that requires an annual written deliverable. 1.26 “Franchise Agreement” shall mean an Independent Advisor Business Franchise Agreement, including all addenda and amendments thereto, entered into between a Participating Company and an Advisor. 1.27 “GDC” shall mean a Participant’s gross dealer concessions which shall be expressed in U.S. dollars. 1.28 “Investment Benchmark” shall mean a benchmark made available under the Plan from time to time by the Committee for purposes of valuing Plan Accounts. 1.29 “Mandatory Early Distribution” shall mean the portion of a Participant’s Elected Amount paid to the Participant by a Participating Company in accordance with Section 3.05(b) hereof. 1.30 “Market Value” of a share of Company Stock shall mean the fair market value thereof, with respect to dividends paid on Company Stock, Elected Amounts and payments made pursuant to Section 3.05(b) hereof, as the case may be, which shall be the price per common share which is equal to the closing price per common share of Company Stock on the NYSE as of the date of determination. If at any time the Company Stock is no longer listed or traded on the NYSE, the Market Value shall be calculated in such manner as may be determined by the Committee from time to time. 1.31 “NASD” shall mean the National Association of Securities Dealers, Inc. 1.32 “NYSE” shall mean the New York Stock Exchange, Inc. 3
  • 1.33 “Participant” shall mean any Eligible Financial Advisor (i) who elects to participate in the Plan, (ii) who signs the applicable Enrollment Forms, (iii) whose signed Enrollment Forms are accepted by the Committee, (iv) who commences participation in the Plan, and (v) whose participation in the Plan has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant’s benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce. 1.34 “Participating Company” shall mean the Company and each of its subsidiaries listed on Schedule A attached hereto, as such Schedule A may be amended by the Committee, in its sole discretion, from time to time. 1.35 “Person” means a “person” as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any “group” within the meaning of Section 13(d)(3) under the Exchange Act. 1.36 “Plan” shall mean the Ameriprise Financial Deferred Equity Program for Independent Financial Advisors, which shall be evidenced by this instrument and by each Enrollment Form, as they may be amended from time to time. 1.37 “Plan Accounts” shall mean the Annual Deferral Accounts and Annual Stock Match Accounts, established under the Plan for a Participant. 1.38 “Plan Year” shall mean a period with a duration defined by the Committee from time to time under the Plan. 1.39 “Qualified Transition” shall mean with respect to a Participant, at any time after January 20, 2009: (i) a transfer of 100% of such Participant’s interest in his or her Individual Financial Advisor Business (as such term is defined in the Franchise Agreement) and in all client accounts and (ii) Termination of Franchise Agreement; provided that such Participant meets the Rule of 60 and remits to the Company a signed non-competition and non-solicitation and general release provided by the Company. 1.40 “Reference Date” shall mean the date used to determine the Market Value of a share of Company Stock for purposes of determining the number of Share Units to be credited to a Participant’s Plan Accounts, which date shall be, unless otherwise determined by the Committee and approved by the Board: (a) with respect to dividend payments, the date dividends are paid on Company Stock, (b) with respect to the Elected Amounts, the last trading day prior to and including the last day of a given Service Period, and (c) with respect to any payments pursuant to Section 3.05 (b), the last trading day of the January that includes the last day of the Plan Year to which the relevant deferrals relate. 1.41 “Rule of 60” shall mean that the sum of a Participant’s Years of Association and age must be at least 60. 1.42 “Securities Act” means the Securities Act of 1933, as amended. 4
  • 1.43 “Service Period” shall mean any of the biweekly periods of a Plan Year, the first of which begins on the first day of such Plan Year. 1.44 “Settlement Date” shall mean, unless otherwise determined by the Committee, the date on which shares of Company Stock shall be delivered in settlement of Share Units in accordance with Article 4 hereof. 1.45 “Share Unit” shall mean a unit credited to a Participant’s Plan Accounts in accordance with the terms and conditions of the Plan. Each Share Unit shall represent the right to receive a share of Company Stock at the time or times designated in the Plan. 1.46 “Stock Match Crediting Date” shall mean with respect to any Plan Year, the date used to determine the Stock Match Market Value of a share of Company Stock for purposes of determining the number of Share Units to be credited in respect of such Plan Year to a Participant’s Annual Stock Match Account, which date shall be, unless otherwise determined by the Committee and approved by the Board, the last trading day of February following the end of the applicable Plan Year. 1.47 “Stock Match Market Value” of a share of Company Stock with respect to Annual Stock Matches shall mean the fair market value thereof, which shall be the price per common share which is equal to the average closing price per common share of Company Stock on the NYSE during the five trading days immediately preceding the date of determination. If at any time the Company Stock is no longer listed or traded on the NYSE, the Stock Match Market Value shall be calculated in such manner as may be determined by the Committee from time to time. 1.48 “Termination of Franchise Agreement” shall mean, with respect to a Participant, the termination of such Participant’s Franchise Agreement and the subsequent provision of all services to a Participating Company or any of their affiliates, if applicable, voluntarily or involuntarily, under circumstances that would constitute a “separation from service” for purposes of Section 409A of the Code. 1.49 “T & O Plan Account” shall mean the account to which amounts received and adjusted pursuant to the terms of the Transition and Opportunity Stock Program. 1.50 “Transition and Opportunity Stock Program” shall mean the one-time stock bonus program offered by the Company in 2005 to eligible Advisors. 1.51 “Trust” shall mean the trust established in accordance with Article 11 of the Plan. 1.52 “Vesting Date” with respect to the deferred amounts in a Participant’s Plan Accounts for a given Plan Year, the first January 1st following the last day of the Plan Year to which any such Plan Account relates. 1.53 “Voting Securities” means, at any time, the Company’s then outstanding voting securities. 5
  • 1.54 “Years of Association” shall mean the years that a Participant has been affiliated with as an independent advisor, or employed by, the Company, the Company’s predecessors, any Participating Company and, solely with respect to affiliation or employment prior to September 30, 2005, American Express Company and its affiliates. Article 2 Eligibility, Selection, Enrollment 2.01 Eligibility. Participation in the Plan shall be limited to Eligible Financial Advisors. If an Eligible Financial Advisor is permitted to defer Elected Amounts and/or receive an Annual Stock Match in respect of a particular Plan Year, he or she will not automatically be entitled to defer an Elected Amount or receive an Annual Stock Match for any subsequent Plan Year, unless such Eligible Financial Advisor again meets eligibility criteria as established by the Committee for such subsequent Plan Year. 2.02 Enrollment Requirements. As a condition to being eligible to defer an Elected Amount for any Plan Year, each Eligible Financial Advisor shall complete, execute and return to the Committee each of the required Enrollment Forms no later than the December 31 immediately preceding any such Plan Year (or such earlier date as the Committee may establish from time to time). 2.03 Commencement of Participation. Provided an Eligible Financial Advisor in respect of a particular Plan Year has met all enrollment requirements set forth in the Plan and any other requirements imposed by the Committee, including signing and submitting all Enrollment Forms to the Committee within the specified time period, the Eligible Financial Advisor’s designated deferrals with respect to such Plan Year shall commence as of the date established by the Committee in its sole discretion. If an Eligible Financial Advisor fails to meet all such requirements within the specified time period with respect to a Plan Year, such Eligible Financial Advisor shall not be eligible to defer an Elected Amount or receive an Annual Stock Match under the Plan with respect to such Plan Year. 2.04 Subsequent Elections. The Enrollment Forms submitted by a Participant in respect of a particular Plan Year will not be effective with respect to any subsequent Plan Year, except that the Beneficiary Designation Form on file with the Committee will remain effective for all subsequent Plan Years unless and until an Amended Beneficiary Designation Form is submitted to the Committee. If an Eligible Financial Advisor is eligible to participate in the Plan for a subsequent Plan Year and the required Enrollment Forms are not timely delivered for the subsequent Plan Year, the Participant shall not be eligible to defer an Elected Amount or receive an Annual Stock Match under the Plan with respect to such subsequent Plan Year. Article 3 Participant Deferrals, Commitments, Account Adjustments, and Vesting 3.01 Participant Deferrals. 6
  • (a) Deferral Election. The Committee shall have sole discretion to determine in respect of each Plan Year: (i) the Eligible Financial Advisors; (ii) the form(s) of compensation which may be the subject of any Elected Amount; and (iii) any other terms and conditions applicable to the Elected Amount. To the extent permitted by the Committee and subject to the terms and conditions provided by the Committee, a Participant for a given Plan Year may make an election to defer a percentage of his or her GDC for such Plan Year (the “Annual Participant Deferral Percentage”). Such election shall be evidenced by an Annual Election Form completed by a Participant and submitted to the Committee in accordance with the procedures and time frames as may be established by the Committee in its sole discretion. The aggregate amount that the Participant elected to defer prior to the commencement of a given Plan Year based on the Participant’s Annual Participant Deferral Percentage multiplied by the Participant’s aggregated earned GDC for such Plan Year (the “Elected Amount”) will be credited to the Participant’s Annual Deferral Account in accordance with Section 3.02 below. A separate Annual Deferral Account shall be established and maintained for each Participant’s deferrals with respect to a given Plan Year. (b) Deferral Limitations. (i) Maximum and Minimum Deferrals. The Committee may from time to time designate a minimum and maximum deferral amount applicable to Participants with respect to a given Plan Year. If an election is made for less than the minimum amount, or if no election is made, the amount deferred shall be zero. If an election is made for more than the maximum amount, the amount deferred shall be equal to the maximum amount deferrable as determined by the Committee. (ii) Other Deferral Limitations. In all cases, a Participant’s deferral elections as set forth in Section 3.01(a) shall be made pursuant to the limitations established by the Committee from time to time under the Plan. 3.02 Annual Deferral Account. A Participant’s Elected Amount will be credited to his or her Annual Deferral Account during the Plan Year on the Reference Date for each Service Period in the form of Share Units. Commencing in the Plan Year that begins in calendar year 2006 and subject to adjustment pursuant to the provisions of Sections 3.04 and 3.05 below, the number of Share Units to be credited with respect to a Service Period shall be determined in accordance with the following formula: the quotient of (A) the product of (i) the Participant’s Annual Participant Deferral Percentage multiplied by (ii) the Participant’s GDC for such Service Period, divided by (B) the Market Value of a share of Company Stock on the Reference Date for such Service Period. Fractional Share Units, if any, will be credited to the Participant’s Annual Deferral Account and rounded to three decimal places. The Committee may, but is not required to, make available other Investment Benchmarks from time to time to measure the value of a Participant’s Plan Accounts. 3.03 Annual Stock Match. If a Participant meets the Minimum Financial Planning GDC Requirement (as described in Section 3.05(a)) for a Plan Year, the Committee may credit a Participant’s Annual Stock Match Account with an Annual Stock Match in respect 7
  • of such Plan Year on the Stock Match Crediting Date. The amount of the Annual Stock Match shall be determined pursuant to the criteria established by the Committee in its sole discretion and shall be expressed as a percentage of the difference between the Participant’s Elected Amount and the Mandatory Early Distribution, if any (the “Match Amount”). If the Committee determines to credit a Participant with an Annual Stock Match in a Plan Year, the number of Share Units to be credited for such Plan Year with effect on the Stock Match Crediting Date shall be equal to the quotient of: (A) the Match Amount, divided by (B) the Stock Match Market Value of a share of Company Stock on the Stock Match Crediting Date for such Plan Year. Fractional Share Units, if any, will be credited to the Participant’s Annual Stock Match Account and rounded to three decimal places. A separate Annual Stock Match Account shall be established and maintained for each Participant and each Annual Stock Match. 3.04 Dividends. A Participant shall, from time to time during such Participant’s period of participation under the Plan, including during the period following the Participant’s Termination of Franchise Agreement and until the Settlement Date, have credited to each of his or her Plan Accounts on the applicable Reference Date with respect to dividend payments with additional Share Units, the number of which shall be equal to the quotient determined by dividing: (A) the product of (i) one hundred percent (100%) of each dividend declared and paid by the Company on the Company Stock on a per share basis and (ii) the number of Share Units recorded in the Participant’s Plan Accounts on the record date for the payment of any such dividend, by (B) the Market Value of a share of Company Stock on the Reference Date for such dividend, in each case, with fractions computed to three decimal places. In the event of any change in the capitalization of the Company, the Committee may make such adjustments in the Shares Units credited to Participants’ Plan Accounts on the date on which such change occurs and in such other terms of such Share Units as the Committee may consider appropriate. 3.05 Account Adjustments. (a) Minimum Financial Planning GDC Requirement. The Committee may determine that a Participant must earn a minimum amount of Financial Planning GDC in order to effectuate the deferrals requested by such Participant for a Plan Year (the “Minimum Deferral Threshold”). Whether a Participant has met the Minimum Deferral Threshold will be determined by the Committee on the last day of the applicable Plan Year and will be based on an objective standard. If a Participant does not meet the Minimum Deferral Threshold for a given Plan Year, the value of the Share Units credited during such Plan Year pursuant to a Participant’s Elected Amount (including any dividends credited on the Participant’s Elected Amount during such Plan Year) will be distributed to the Participant in cash based on the Market Value of Company Stock at the time the distribution is processed, but in any case no later than March 15 immediately following the Plan Year to which such deferrals relate. (b) Mandatory Early Distribution. On the last day of each Plan Year, the Committee shall determine the amount of Financial Planning GDC earned by each Participant in respect of such Plan Year. If such amount is greater than the Minimum Deferral Threshold but less than the Elected Amount, the Company will, or will cause a Participating Company to: (i) distribute to the Participant a lump sum cash payment equal to the lesser of (A) the difference 8
  • between the Participant’s earned Financial Planning GDC and the Elected Amount and (B) the amount in such Participant’s Annual Deferral Account on the applicable Reference Date (either such amount, the “Mandatory Early Distribution”), (ii) debit the Participant’s Annual Deferral Account by a number of Share Units determined by dividing (A) the Mandatory Early Distribution by (B) the Market Value on the applicable Reference Date. Any such distribution will be made no later than March 15 immediately following the end of the Plan Year to which such deferrals relate. 3.06 Vesting. (a) Forfeiture of Unvested Amounts. Except as expressly set forth in Sections 3.06(c) and 3.06(d) below, as of the date of a Participant’s Termination of Franchise Agreement (including a termination for Cause as defined in Section 17 of the Franchise Agreement), the amounts credited to the Participant’s Plan Accounts shall be reduced by the amount which has not become vested in accordance with the vesting provisions set forth below, and such unvested amounts shall be forfeited by the Participant. (b) Vesting of Amounts. The Participant shall be vested in all amounts credited to his or her Plan Accounts with respect to amounts deferred for a given Plan Year and proportionate earnings on such amounts based on the following schedule: Amount vested Date of vesting 25% The Vesting Date 25% One Year following the Vesting Date 25% Two Years following the Vesting Date 25% Three Years following the Vesting Date Notwithstanding anything to the contrary, the Committee has the discretion to change the vesting schedule for any subsequent Plan Year at any time before Eligible Financial Advisors are required to submit their Annual Election Forms for such Plan Year. (c) Vesting upon Plan Termination. In the event of a termination of the Plan as it relates to any Participant, all amounts credited to any and all Plan Accounts of such Participant as of the effective date of such termination shall be 100% vested and paid to the Participant, to the extent not yet paid, in a lump sum as soon as reasonably practical after termination of the Plan. (d) Vesting upon Certain Events. Notwithstanding anything to the contrary contained in the Plan or any Annual Election Form, the Committee shall have the authority, exercisable in its sole discretion, to accelerate the vesting of any amounts credited to any Plan Account of any Participant and any such acceleration shall be evidenced by a written notice to the Participant setting forth in detail the Plan Account(s) and the amounts affected by the Committee’s decision to accelerate vesting and the terms of the new vesting schedule applicable 9
  • to such amounts. Unless otherwise determined by the Committee, the following sets forth the guidelines the Committee shall follow with respect to accelerated vesting of Plan Accounts: (i) Death. In the case of a Participant’s death, all amounts credited to the Plan Accounts of the affected Participant shall be 100% vested and shall be paid to the Participant or the Participant’s Beneficiary, to the extent not yet paid, in a lump sum notwithstanding any elections made by the Participant on his or her Distribution Election Forms, and the Annual Election Forms relating to each the Participant’s Plan Accounts shall terminate upon full payment of such Plan Accounts. Such lump sum payment will be made as soon as administratively practical after the date on which the Committee is notified in writing of the Participant’s death. (ii) Disability. In the case of the Participant’s Disability, all amounts credited to the Plan Accounts of the affected Participant shall be 100% vested and shall be paid to the Participant, to the extent not yet paid, in accordance with any such Participant’s Distribution Election Forms. From and after the date that a Participant is deemed to have suffered a Disability, any standing deferral election of the Participant shall automatically be terminated and no further deferrals shall be made with respect to the Participant under the Plan. (iii) Qualified Transition. In the case of a Qualified Transition, a Participant’s Plan Accounts shall be immediately 100% vested and paid to the Participant, to the extent not yet paid, in accordance with such Participant’s Distribution Election Forms. For purposes of clarification, if the Participant who has a Qualified Transition elected to receive a distribution of his or her Plan Accounts in annual installment payments commencing following Termination of Franchise Agreement, the effective date of the Termination of Franchise Agreement for purposes of the distribution provisions of the Plan will be deemed to be the effective date of the Qualified Transition. No transition that occurs prior to January 20, 2009 will be considered a Qualified Transition under the Plan. (iv) Transfer to Employee Status. In the event a Participant transfers to employee status by becoming an employee of the Company or any Participating Company, the Participant’s Plan Accounts will continue to vest in accordance with Section 3.06(b) above and shall be paid to the Participant, to the extent not yet paid, in accordance with the Participant’s Distribution Election Forms. For purposes of the payment provisions of Section 4 of the Plan, a Participant who transfers to employment status will not be deemed to have a “Termination of Franchise Agreement” until the Participant’s employment with the Company and any Participating Company terminates. If employee status is terminated prior to the date on which the Participant’s Plan Accounts have fully vested, all unvested portions of the Plan Accounts will be forfeited, unless otherwise determined by the Committee. 10
  • 3.07 Savings Clause. No provision of this Article 3 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Article 4 Distribution of Plan Accounts 4.01 Distribution Elections. The Participant shall make a Distribution Election at the time he or she completes his or her Annual Election Form with respect to a given Plan Year to have the Aggregate Vested Balance of the Participant’s respective Plan Accounts for that Plan Year distributed as follows: (i) Lump sum payments of Aggregate Vested Balance on the first March 31 following each annual vesting date; (ii) Lump sum payment on March 31 of a specified year that is at least four years from the last day of the Plan Year in which a given Annual Participant Deferral Percentage was elected; or (iii) Annual installment payments following Termination of Franchise Agreement. If this option is elected, the first installment will be paid at the end of the calendar quarter that follows the Participant’s Termination of Agreement and all future installments will be paid on March 31 of a given year, commencing on the March 31 of the year following the year in which the initial installment distribution is made. 4.02 Valuation of Plan Accounts Pending Distribution. To the extent that the distribution of any portion of any Plan Account is deferred, whether pursuant to the limitations imposed under this Article 4 or for any other reason, any amounts remaining to the credit of the Plan Accounts shall continue to be adjusted by the applicable Account Adjustments in accordance with Article 3. 4.03 Change in Control. (a) Definition of Change in Control. As used in this Plan, the term “Change in Control” means the occurrence of any of the following: (i) Any Person becoming the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act, a “Beneficial Owner”) of twenty-five percent or more of the combined voting power of Voting Securities; provided, however that a Change in Control shall not be deemed to occur by reason of an acquisition of Voting Securities by the Company or by an employee benefit plan (or a trust forming a part thereof) maintained by the Company; and provided, further that a Change in Control shall not be deemed to occur solely because any Person 11
  • becomes the Beneficial Owner of twenty-five percent or more of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities deemed to be outstanding, increases the proportional number of shares Beneficially Owned by such Person, except that a Change in Control shall occur if a Change in Control would have occurred (but for the operation of this proviso) as a result of the acquisition of Voting Securities by the Company, and after such acquisition such Person becomes the Beneficial Owner of any additional Voting Securities following which such Person is the Beneficial Owner of twenty-five percent or more of the outstanding Voting Securities; (ii) The individuals who, as of September 30, 2005, are members of the Board of Directors (the “Incumbent Board”), cease for any reason to constitute at least a majority of the members of the Board; provided, however that if the election or appointment, or nomination for election by the Company’s common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of the Plan, thereafter be considered as a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Proxy Contest; or (iii) The consummation of: (A) A merger, consolidation, reorganization or similar transaction (any of the foregoing, a “Business Combination”) with or into the Company or in which securities of the Company are issued, unless such Business Combination is a Non-Control Transaction; (B) A complete liquidation or dissolution of the Company; or (C) The sale or other disposition of all or substantially all of the assets of the Company (on a consolidated basis) to any Person other than the Company or an employee benefit plan (or a trust forming a part thereof) maintained by the Company or by a Person which, immediately thereafter, will have all its voting securities owned by the holders of the Voting Securities immediately prior thereto, in substantially the same proportions. For purposes of the Plan, a “Non-Control Transaction” is a Business Combination involving the Company where: (A) the holders of Voting Securities immediately before such Business Combination own, directly or indirectly immediately following such 12
  • Business Combination more than fifty percent of the combined voting power of the outstanding voting securities of the parent corporation resulting from, or issuing its voting securities as part of, such Business Combination (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such Business Combination by reason of their prior ownership of Voting Securities; (B) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such Business Combination constitute a majority of the members of the board of directors of the Surviving Corporation, or a corporation beneficially owning a majority of the voting securities of the Surviving Corporation; and (C) no Person other than the Company or any employee benefit plan (or any trust forming a part thereof) maintained immediately prior to such Business Combination by the Company, is a Beneficial Owner of twenty-five percent or more of the combined voting power of the Surviving Corporation’s voting securities outstanding immediately following such Business Combination. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur as a result of any event or transaction to the extent that treating such event or transaction as a Change in Control would cause any tax to become due under Section 409A of the Code. (b) Payment on Change in Control. Notwithstanding anything to the contrary set forth in a Participant’s Annual Election Form or the Plan, upon the occurrence of a Change in Control, and in the event that the resulting company does not continue the Plan or maintain a comparable plan, each Participant will vest in all amounts attributable to his or her unvested Plan Accounts and the Company will, or will cause a Participating Company to, distribute all previously undistributed Plan Accounts to Participants (or their Beneficiaries, as the case may be). 4.04 Form of Payment. All distributions under the Plan will be paid in Company Stock. Such Company Stock may be newly issued shares, currently traded shares that have been repurchased by the Company or treasury shares. Notwithstanding the foregoing, Mandatory Early Distributions shall be paid in cash. 4.05 Savings Clause. No provision of this Article 4 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Article 5 Transition and Opportunity Stock Program 5.01 Notwithstanding anything to the contrary set forth herein, effective as of 13
  • January 1, 2006, the Company will, or will cause a Participating Company to, establish a T & O Plan Account under the Plan for each Advisor who is eligible to receive a transition and opportunity stock bonus pursuant to the terms of the Transition and Opportunity Stock Program, whether or not such Advisor is otherwise a Participant under the Plan. All transition and opportunity bonus amounts will be credited to the respective T & O Plan Accounts and distributed to participating Advisors pursuant to the terms of the Transition and Opportunity Stock Program. The T & O Plan Accounts are not eligible to receive dividends. Article 6 Beneficiary Designation 6.01 Beneficiary. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under the Plan may be the same as or different from the beneficiary designation under any other plan or arrangement in which the Participant participates. 6.02 Beneficiary Designation; Change. A Participant shall designate his or her Beneficiary by completing and signing a Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and submitting to the Committee an Amended Beneficiary Designation Form in accordance with the Committee’s rules and procedures, as in effect from time to time. Upon the acceptance by the Committee of an Amended Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death. 6.03 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Committee or its designated agent. 6.04 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s Plan Accounts, then the Participant’s designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant’s estate. 6.05 Doubt as to Beneficiary. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to the Plan, the Committee shall have the right, exercisable in its discretion, to cause the Company to withhold such payments until this matter is resolved to the Committee’s satisfaction. 6.06 Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge the Company, a Participating Company and the Committee from all further obligations under the Plan with respect to the Participant, and each of 14
  • the Participant’s Annual Election Forms shall terminate upon such full payment of benefits. 6.07 Disclaimer of Interest. Subject to certain requirements as determined by the Committee, any Beneficiary shall have the right to disclaim his or her interest under the Plan. Article 7 Termination, Amendment or Modification 7.01 Termination. Although the Company may anticipate that it will continue the Plan for an indefinite period of time, there is no guarantee that the Company will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, the Company reserves the right to terminate the Plan, at any time, with respect to its participating Eligible Financial Advisors by action of the Board. Upon the termination of the Plan by the Company, subject to Section 4.02, all amounts credited to each of the Plan Accounts of each affected Participant shall be 100% vested and shall be paid to the Participant. 7.02 Amendment. The Company may, at any time, amend or modify the Plan in whole or in part by the actions of the Committee; provided, however, that (i) no amendment or modification shall be effective to decrease or restrict the value of a Participant’s Aggregate Vested Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Franchise Agreement as of the effective date of the amendment or modification and (ii) except as specifically provided in Section 7.01 above, no amendment or modification shall be made after a Change in Control which adversely affects the calculation or payment of benefits hereunder or diminishes any other rights or protections any Participant or Beneficiary would have had but for such amendment or modification, unless each affected Participant or Beneficiary consents in writing to such amendment. 7.03 Effect of Payment. The full payment of the applicable benefit under the provisions of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under the Plan and each of the Participant’s Annual Election Forms shall terminate. 7.04 Savings Clause. Neither the Company nor any Participating Company shall have any right to so accelerate the payment of any amount in this Article 7 to the extent such right would cause the Plan to fail to comply with, or cause a Participant or such Participant’s Beneficiary to be subject to a tax under, the provisions of Section 409A of the Code. Article 8 Administration 8.01 Committee Duties. This Plan shall be administered by the Committee. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and 15
  • enforce all appropriate rules and regulations for the administration of the Plan and (ii) decide or resolve any and all questions including interpretations of the Plan, as may arise in connection with the Plan. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or a Participating Company. 8.02 Agents. In the administration of the Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to the Company. Any reference herein to the Committee shall be deemed to include any person to whom any such duty of the Committee has been delegated. 8.03 Binding Effect of Decisions. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 8.04 Indemnity of Committee. The Company shall indemnify and hold harmless the members of the Committee and any of its designees to whom duties of the Committee may be delegated, against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to the Plan, except in the case of willful misconduct by the Committee or any of its members or any such designee. Article 9 Other Benefits and Agreements The benefits provided for a Participant and Participant’s Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program made available to Participants. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. Article 10 Claims Procedures 10.01 Presentation of Claim. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. The claim must state with particularity the determination desired by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 10.02 Notification of Decision. The Committee shall consider a Claimant’s claim within a reasonable time, and shall notify the Claimant in writing: 16
  • (a) that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the claim review procedure set forth in Section 10.03 below. 10.03 Review of a Denied Claim. Within sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than thirty (30) days after the review procedure began, the Claimant (or the Claimant’s duly authorized representative): (i) may review pertinent documents; (ii) may submit written comments or other documents; and/or (iii) may request a hearing, which the Committee, in its sole discretion, may grant. 10.04 Decision on Review. The Committee shall render its decision on review promptly, and not later than sixty (60) days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee’s decision must be rendered within one hundred twenty (120) days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (i) specific reasons for the decision; (ii) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (iii) such other matters as the Committee deems relevant. 17
  • 10.05 Arbitration. Any dispute, claim or controversy that may arise between a Participant and the Company or any other person (“Claims”) under the Plan is subject to arbitration, unless otherwise agreed to in writing by the Participant and the Company. To the extent that such Claims are required to be arbitrated under the rules, constitutions, or by-laws of the NASD, as amended form time to time, they will be arbitrated in accordance with the policies and procedures established by the NASD. If either the NASD declines to administer an arbitration of any Claims or the NASD rules do not allow for arbitration of any Claims, the Claims shall be finally decided by arbitration conducted pursuant to the Commercial Dispute Resolution Procedures of the American Arbitration Association (“AAA”), and its Supplementary Rules for Securities Arbitration, or other applicable rules promulgated by the AAA. In addition, all claims, statutory or otherwise, which allege discrimination or other violation of employment laws, including but not limited to claims of sexual harassment, shall be finally decided by arbitration pursuant to the AAA unless otherwise agreed to in writing by a Participant and the Company. By agreement of a Participant and the Company in writing, disputes may be resolved in arbitration by a mutually agreed-upon organization other than the NASD or the AAA. In consideration of the promises and the compensation provided in this Plan, neither a Participant nor the Company shall have a right (a) to arbitrate a Claim on a class action basis or in a purported representative capacity on behalf of any Participants, employees, applicants or other persons similarly situated; (b) to join or to consolidate in an arbitration Claims brought by or against another Participant, employee, applicant or the Participant, unless otherwise agreed to in writing by the Participant and the Company; (c) to litigate any Claims in court or to have a jury trial on any Claims; and (d) to participate in a representative capacity or as a member of any class of claimants in an action in a court of law pertaining to any Claims. Nothing in this Plan relieves a Participant or the Company from any obligation the Participant or the Company may have to exhaust certain administrative remedies before arbitrating any claims or disputes under this Section 10.05. Either a Participant or the Company may compel arbitration of any Claims filed in a court of law. In addition, either a Participant or the Company may apply to a court of law for an injunction to enforce the terms of the Plan pending a final decision on the merits by an arbitration panel pursuant to this provision. The Company shall pay all fees, costs or other charges charged by the AAA or any other organization administering arbitration proceeding agreed upon pursuant to this Section 10 that are above and beyond the filing fees of the federal or state court in the jurisdiction in which the dispute arises, whichever is less. A Participant or the Company shall each be responsible for their own costs of legal representation, if any, except where such costs of legal representation may be awarded as a statutory remedy by the arbitrator. Any award by an arbitration panel shall be final and binding upon a Participant or the Company. Judgment upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the relevant party or its assets. This provision is covered and enforceable under the terms of the Federal Arbitration Act. Article 11 Trust 11.01 Establishment of the Trust. The Company may establish one or more Trusts to which Participating Companies may transfer such assets as the Participating Companies determine in their sole discretion to assist in meeting their obligations under the Plan. 18
  • 11.02 Interrelationship of the Plan and the Trust. The provisions of the Plan and the relevant Annual Election Forms shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Participating Companies, Participants and the creditors of the Participating Companies to the assets transferred to the Trust. 11.03 Distributions from the Trust. Each Participating Company’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Participating Company’s obligations under this Agreement. Article 12 Miscellaneous 12.01 Status of Plan. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent. All Plan Accounts and all credits and other adjustments to such Plan Accounts shall be bookkeeping entries only and shall be utilized solely as a device for the measurement and determination of amounts to be paid under the Plan. No Plan Accounts, credits or other adjustments under the Plan shall be interpreted as an indication that any benefits under the Plan are in any way funded. In addition, the Committee shall use its reasonable best efforts to interpret and administer the Plan in a manner that satisfies the requirements of Section 409A of the Code. 12.02 Securities Matters. The Company shall be under no obligation to effect the registration pursuant to the Securities Act of any shares of Company Stock to be issued hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be issued or delivered any certificates evidencing shares of Company Stock pursuant to the Plan unless and until the Company is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Company Stock are traded. The Committee may require, as a condition to the issuance and delivery of certificates evidencing shares of Company Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that such certificates bear such legends, as the Committee deems necessary or desirable. 12.03 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Company or any Participating Company. For purposes of the payment of benefits under the Plan, any and all of the Company’s and Participating Companies’ assets, shall be, and remain, the general, unpledged unrestricted assets of the Company or the Participating Companies, as applicable. A Participating Company’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 12.04 Nonassignability. Neither a Participant nor any other person shall have 19
  • any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. 12.05 No Right to Service. Nothing in the Plan or any Annual Election Form shall be deemed to give a Participant the right to continue to be retained in the service of the Company or any Participating Company. 12.06 Furnishing Information. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 12.07 Terms. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 12.08 Captions. The captions of the articles, sections and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 12.09 Governing Law. The provisions of the Plan shall be construed and interpreted according to the internal laws of the State of New York without regard to its conflicts of laws principles. 12.10 Notice. Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: Ameriprise Financial, Inc. 361 Ameriprise Financial Center Minneapolis, Minnesota 55474 Attn: VP, Compensation and Benefits with a copy to: General Counsel’s Office 20
  • Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under the Plan shall be sufficient if in writing and hand- delivered, or sent by mail, to the last known address of the Participant. 12.11 Successors. The provisions of the Plan shall bind and inure to the benefit of the Company and its successors and assigns and the Participant and the Participant’s designated Beneficiaries. 12.12 Spouse’s Interest. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession. 12.13 Validity. In case any provision of the Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but the Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 12.14 Incompetent. If the Committee determines in its discretion that a benefit under the Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 12.15 Taxation. (a) Distribution in the Event of Taxation. If, for any reason, all or any portion of a Participant’s benefit under the Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee before a Change in Control, or the trustee of the Trust after a Change in Control, for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld, the Company shall, or shall cause a Participating Company to, distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant’s unpaid Account Balances under the Plan). If the petition is granted, the tax liability distribution shall be made within ninety (90) days of the date when the Participant’s petition is granted. Such a distribution shall affect and reduce the benefits to be paid under the Plan. (b) Tax Withholding. No withholding is required on distributions of Plan Accounts, unless at the time of any such distribution, a Participant is an employee of the 21
  • Company or a Participating Company (or is terminated as an employee of the Company or a Participating Company). 12.16 Insurance. The Company, on its own behalf or on behalf of the trustee of the Trust, and, in its sole discretion, may, or may cause a Participating Company to, apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Company, the Participating Company or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Company or a Participating Company, as the case may be, shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Company or such Participating Company has applied for insurance. 12.17 Legal Fees To Enforce Rights After Change in Control. The Company is aware that upon the occurrence of a Change in Control, the Board (which might then be composed of new members) or a shareholder of the Company, or of any successor corporation might then cause or attempt to cause the Company or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company to institute, or may institute, arbitration or litigation seeking to deny Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company or any successor corporation or any Participating Company or successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, a Participating Company or any other person takes any action to declare the Plan void or unenforceable or institutes any arbitration, litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company and the applicable Participating Company irrevocably authorize such Participant to retain counsel of his or her choice at the expense of the Company and the Participating Company to represent such Participant in connection with the initiation or defense of any arbitration, litigation or other legal action, whether by or against the Company, the Participating Company or any director, officer, shareholder or other person affiliated with the Company, the Participating Company or any successor thereto in any jurisdiction; provided, however, that in the event that the trier in any such legal action determines that the Participant’s claim was not made in good faith or was wholly without merit, the Participant shall return to the Company any amount received pursuant to this Section 12.17. 22
  • Ameriprise Financial Deferred Equity Progam For Independent Financial Advisors Schedule A September 30, 2005 Participating Employers • Ameriprise Financial Services Inc. • IDS Life Insurance Company • IDS Life Insurance Company of New York 23
  • Exhibit 10.28 AMERIPRISE FINANCIAL ANNUAL INCENTIVE AWARD PLAN (Adopted effective as of September 30, 2005) ARTICLE I PURPOSE The purpose of this Ameriprise Financial Annual Incentive Award Plan (the “Plan”) is to provide added incentive for those officers and key executives of Ameriprise Financial, Inc. (the “Company”) and its subsidiaries and affiliated companies who are in a position to make substantial contributions to the earnings and growth of these companies and to reward them collectively and individually for performance which contributes significantly toward such earnings and growth. The companies participating in this Plan include the Company and such subsidiaries and affiliated companies of the Company listed on Schedule A attached hereto, as such Schedule A may be amended by the Committee, in its sole discretion, from time to time (the “Participating Companies”). ARTICLE II ADMINISTRATION OF THE PLAN This plan shall be administered by the Compensation and Benefits Committee of the Board of Directors of the Company (the “Committee”) as constituted from time to time, unless and until the Board of Directors of the Company provides otherwise. The Committee shall be responsible for the general administration of the Plan. It shall also be responsible for the interpretation of the Plan and the determination of all questions arising hereunder. It shall have power to establish, interpret, enforce, amend and revoke from time to time such rules and regulations for the administration of the Plan and the conduct of its business as it deems appropriate. The Committee shall also have the power to delegate any of its authority under the Plan as allowed by law. Any action taken by the Committee within the scope of its authority shall be final and binding upon the Participating Companies, upon each and every person who participates in the Plan and any successors in interest of such persons, and any and all other persons claiming under or through any such person. ARTICLE III ANNUAL PERFORMANCE GOALS AND AWARD GUIDELINES (a) As soon as practicable at the beginning of each calendar year, the Committee shall determine the individual, division/group, Company, other Participating Company and/or other appropriate performance goals, and award guidelines for such year. In fixing such goals and guidelines, the Committee shall receive and consider the
  • recommendations of the chief executive officer of the Company who, in turn, shall have received and considered the respective recommendations of other appropriate officers and executives of the Company and any of the other Participating Companies. (b) If the Committee finds, during the course of and with respect to any year, that any of the performance goals and/or award guidelines determined as herein above provided would not be justified for such year in the circumstances, it may in its sole discretion fix such performance goals and/or award guidelines for such year at such different levels as it deems appropriate. ARTICLE IV PARTICIPATION IN THE PLAN (a) Those eligible to participate for any calendar year shall include such key executives of the Participating Companies as shall be designated by the Committee. In designating such persons the Committee shall receive and consider the recommendations of the chief executive officer of the Company who, in turn, shall have received and considered the respective recommendations of other appropriate officers and executives of the Company and any of the other Participating Companies. However, the Committee shall have full authority to act in the matter and its determination shall be in all respects final and conclusive. Further, the Committee shall have full authority to delegate eligibility determination. Participants shall be designated prior to the beginning of the year or as soon as practicable thereafter, but new executives or executives whose duties and responsibilities have been materially increased during the year may be designated participants for such year at any time during the year. Designation as a participant shall not of itself entitle a person to an award under the Plan. The Committee has the sole discretion to consider an award (if any) for a participant in the event of termination, retirement, disability, death, or other individual circumstances. Participants must generally remain in continuous active employment with the Company or any other Participating Company (or any affiliate of the Company or such other Participating Company), through the end of the performance period (year end) and up until the payment date, and shall also make progress towards goals and fulfill Article VII. The Committee, upon recommendations provided by management, will approve to what extent, if any, payment of an award should be made if termination occurs after December 31, but before an actual payment date. No member of the Committee shall be eligible to participate in or receive awards or deferred payments of awards under the Plan. (b) The Committee may, by rules and regulations of general or specific application, establish one or more classes of awards, the payment of which shall, in whole or in part, be deferred and made at such later time or times, in a lump sum or in such installments, as the Committee shall prescribe, provided that the participant shall have fulfilled the conditions specified in Article VII hereof. At the time each year that an employee shall be designated as a participant in the Plan, or as soon as practicable thereafter, the Committee, in or without consultation with such employee, shall determine what proportion, if any, of any award that may be made to him for such year shall be paid to him immediately and what proportion shall consist of a class or classes 2
  • of awards so established by the Committee. If the Committee shall have failed to make such a determination in the case of any participant for any year, the award to such participant shall be paid in cash as soon as practicable after the award shall be made. ARTICLE V DETERMINATION OF INCENTIVE AWARDS (a) As soon as practicable after the end of each calendar year, the Committee shall fix the amount of each award. The Committee shall also have the power to delegate to the chief executive officer of the Company the authority to approve individual awards and award changes for employees below the executive officer level. Notwithstanding the previous sentence, the Committee shall continue to approve annual awards for executive officers, and to approve the aggregate annual incentive awards for all plan participants below the executive officer level, subject to adjustment for delegated award changes after each February. In determining the aggregate annual incentive awards, the Committee, may approve the establishment of maximum award guidelines for employees of a Participating Company, division, business unit or other designated group, based upon specified Company and other applicable organizational performance goals subject to applicable past limitations. The Committee shall also have the authority to approve payments upon retirement and disability termination executive officers. In fixing such awards the Committee shall receive and consider the recommendations of the chief executive officer of the Company who, in turn, shall have received and considered the respective recommendations of other appropriate officers and executives of the Company and any of the other Participating Companies, as to whether and to what extent the individual, Participating Company, division/group, and/or Company performance goals have been met for such year, and as to where in the range of award guidelines each participant’s performance falls. Individual awards shall then be calculated based on the AIA award grid subject to available pool monies. If the employment of a participant shall have terminated during a calendar year for any reason, including, but without limitation, as the result of termination by a Participating Company without cause, he, or, in the event of his death, his widow, legal representatives, or such other person or persons, as the Committee may in its discretion select, may (but need not) be granted such award, if any, on such basis, as the Committee may in its discretion determine; provided, however, that if within two years following the occurrence of a Change in Control (as defined in the Ameriprise Financial 2005 Incentive Compensation Plan), a participant under the Plan experiences a termination of employment that would otherwise entitle him to receive the payment of severance benefits under the provisions of the severance plan that are in effect and that he participates in as of the date of such Change in Control, and is at Job Band 50 or higher on the date of such termination of employment, then such participant in the Plan shall, notwithstanding the provisions of Article III, be paid, within five days after the date of such termination of employment, a prorata award under the Plan equal to (i) (A) the average award paid or payable to such participant under the Plan (or any other annual incentive award program of the Company, any other Participating Company, or any of their respective subsidiaries at the time of such prior payment) for the two years prior to the Change in Control, or (B) if such participant has not received two such awards, the most recent award paid or payable (or target amount so payable if such 3
  • participant has not previously received any such award) to such participant under the Plan (or any other annual incentive award program of the Company, any other Participating Company, or any of their respective subsidiaries at the time of such prior payment), multiplied by (ii) the number of full or partial months that have elapsed during the performance year under the Plan at the time of such termination of employment divided by 12, provided, further, that in the event such termination of employment occurs after the end of the performance year under the Plan but before the payment date under the Plan, then such participant shall also be paid, within five days after such termination of employment, an award under the Plan equal to (X) the average award paid or payable to such participant under the Plan (or any other annual incentive award program of the Company, any other Participating Company, or any of their respective subsidiaries at the time of such prior payment) for the two years prior to the Change in Control, or (Y) if such participant has not received two such awards, the most recent award paid or payable (or target amount so payable, if such participant has not previously received any such award) to such participant under the Plan (or any other annual incentive award program of the Company, any other Participating Company or any of their respective subsidiaries at the time of such prior payment). (b) The Committee, upon recommendations as provided by paragraph (a) of this Article, may also make special awards to a limited number of participants under the Plan. The chief executive officer of the Company may also authorize special awards under the Plan, at any time or times during the year, provided that any special awards authorized by the chief executive officer of the Company shall be reported to the Committee at its next regular meeting. These special awards shall be made in recognition of outstanding individual achievement. (c) Except for awards payable as a result of a Change in Control pursuant to section (a) above and except as otherwise determined by the Committee, no award to a single participant or employee for any year shall exceed (i) 200% of his total award guideline for such year, or (ii) 200% of his base salary for such year. ARTICLE VI PAYMENT OF INCENTIVE AWARDS (a) Each incentive award shall be paid as soon as practicable after the amount of the award shall have been determined, or at such subsequent time or times as the Committee shall determine. Such payment shall be made in cash unless the Committee shall, at any time or from time to time, according to rules and regulations of general application, provide for a different method of payment, in whole or in part, of incentive awards. Such payment may be made (i) by the issuance or transfer of securities or other property, including common shares or other securities of Ameriprise Financial, Inc., another corporation or of a regulated investment company or companies, subject to restrictions and requirements to assure compliance with the conditions set forth in Article VII hereof and elsewhere in the Plan and such other restrictions and requirements as the Committee shall prescribe, (ii) by undertaking to issue or transfer such securities or other property in the future, together with a sum or sums equal to dividend equivalents and other income equivalents earned thereon from 4
  • the date of such undertaking until the date or dates of payment, (iii) in cash measured by the value of such securities or other property, or of a portfolio comprised of either securities or other property or both, together with dividend equivalents and other income equivalents earned thereon from the date that such measure has been established until the date or dates of payment, or (iv) by undertaking to pay cash in the future together with such additional amounts of income equivalents earned thereon until the date or dates of payment, such additional amounts to be determined by a measure established by the Committee in its discretion. (b) If any incentive award or installment thereof shall become payable by reason of or following the death of a participant or former participant, such award or installment shall be payable, at the same time or times and in the same manner as if such participant or former participant were alive, to such beneficiaries of the participant or former participant as he shall have designated in the manner described herein. If such participant or former participant shall have failed to designate any beneficiary, or if no such beneficiary shall survive him, then such payments shall be made to his legal representatives. With the approval of the Committee, a participant or former participant may designate one or more beneficiaries by executing and delivering to the Committee or its delegate written notice thereof at any time prior to his death, and may revoke or change the beneficiaries designated therein without their consent by written notices similarly executed and delivered to the Committee at any time and from time to time prior to his death. (c) Any Participating Company required to make payments under this Plan shall deduct and withhold from any such payment all amounts which its officers believe in good faith it is required to deduct or withhold pursuant to the laws of any jurisdiction whatsoever or, in the event that any such payment shall be made in securities, shall require that arrangements satisfactory to such Participating Company shall be made for the payment of all such amounts before such securities are delivered. No such Participating Company is required to pay any amount to the beneficiary or legal representatives of any former participant until such beneficiary or legal representatives shall have furnished evidence satisfactory to it of the payment or provision for the payment of all estate, transfer, inheritance and death taxes, if any, which may be payable with respect thereto. (d) The obligation of any Participating Company under the Plan to make deferred payments or awards when due is merely contractual and no amount credited to an account of a participant or former participant on the books of any Participating Company shall be deemed to be held in trust for such participant or former participant or for his beneficiary or legal representatives. Nothing contained in the Plan shall require any Participating Company under the Plan to segregate or earmark any cash or other property. Any securities or other property held or acquired by any such Participating Company specifically for use under the Plan or otherwise shall, unless and until transferred in accordance with the terms and conditions of the Plan, be and at all times remain the property of such Participating Company, irrespective of whether such securities or other property are entered in a special account for the purpose of the Plan, and such securities or other property shall at all times be and remain available for any corporate purpose. 5
  • (e) Upon a deferral of the payment of an incentive award, the terms of such deferral and the payments thereunder shall be governed by the provision of the deferral plan where such deferral has been made. ARTICLE VII CONDITIONS AND FORFEITURES (a) In addition to any other condition that may be imposed by the Committee, the payment of all awards (or any part thereof) deferred under the Plan shall be contingent on the following: (1) The participant or former participant entitled thereto shall refrain from engaging (A) in any business or other activity which, in the judgment of the Committee, is competitive with any activity of any Participating Company or any affiliate thereof, in which he was engaged at any time during the last five years of his employment by a Participating Company or any affiliate thereof, or (B) in any business or other activity which is so competitive and of which he shall have special knowledge as the result of having been employed by the Participating Company or any affiliate thereof; and from counseling or otherwise assisting any person, firm or organization that is so engaged; (2) He shall not furnish, divulge or disclose to any unauthorized person, firm or other organization any trade secrets, information or data with respect to any Participating Company or any affiliate thereof, or any of their employees, that he shall have reason to believe is confidential; (3) He will make himself available for such consultation and advice concerning matters with respect to which he was familiar while employed by any Participating Company or affiliate as may reasonably be requested, taking fairly into consideration his age, health, residence and individual circumstances and the total amount of the payments that he is receiving, and shall render such assistance and cooperation (including testimony and depositions) in respect of matters of which he shall have knowledge, as may reasonably be requested in any action, proceeding or other dispute, pending or prospective, to which any Participating Company or affiliate may be a party or in which it may have an interest. The participant or former participant shall have no obligation to render any services after he shall have ceased to be an employee of the Participating Companies and affiliates thereof, except as may be required under this subparagraph, and the death of the participant or former participant, or the failure to call upon him for the rendition of services called for under this subparagraph, shall not in any way affect the right of the participant or former participant or his beneficiary or legal representatives, as the case may be, to receive any unpaid portion of any amounts payable to him; 6
  • (4) His employment by any Participating Company, subsidiary or any affiliate thereof, shall not have terminated as a result of his gross negligence, willful misconduct or poor performance and he shall not, while employed by a Participating Company, subsidiary or affiliate, have engaged in conduct which, had it been known at the time, would have resulted, on grounds of gross negligence or willful misconduct, in the termination of his employment by the Participating Company, subsidiary or affiliate by which he had been employed. (5) If, in the judgment of the Committee, reasonably exercised, a participant or former participant shall have failed at any time to comply with any of the conditions set forth in paragraph (a) of this Article VII, the obligation of the Participating Company to make further payments to such participant or former participant or his beneficiary or legal representatives shall forthwith terminate, provided that no installment or amount delivered or paid prior to the date of any such determination by the Committee shall be required to be repaid. (6) No payment of any award under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void. No payment of any award shall be subject to any jurisdictional payment requirement upon death or termination. No such payments shall be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled thereto, except as specifically provided in rules or regulations established by the Committee under the Plan; and in the event that any participant, former participant or beneficiary under the Plan becomes bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any such payment or a part thereof, then all such payments due him shall cease and in that event, the Participating Company shall hold and apply the same to or for his benefit or that of his spouse, children, or other dependents, or any of them, in such manner and in such proportions as the Committee, with the approval of the chief executive officer of such Participating Company, may deem proper. ARTICLE VIII PARTICIPATING COMPANIES (a) Any Participating Company may cease to be a Participating Company at any time and shall cease to be one upon delivering to the Committee certified copies of an appropriate resolution duly adopted by its Board of Directors terminating its participation in the Plan. If any Participating Company hereunder ceases to be a subsidiary, such corporation may continue to be a Participating Company hereunder only upon such terms and conditions as the Company and such corporation shall agree upon in writing. In no event shall the termination of a corporation’s participation in this Plan relieve it of obligations theretofore incurred by it under the Plan, except to the extent that the same have been assumed by another corporation pursuant to paragraph (b) of this Article VIII. 7
  • (b) Any corporation which succeeds to all or any part of the business or assets of a Participating Company may, by appropriate resolution of its board of directors, adopt the Plan and shall thereupon succeed to such rights and assume such obligations under the Plan as such corporation, such Participating Company and the Company shall have agreed upon in writing. (c) For the purposes of this Article VIII the term “subsidiary” shall mean any corporation (other than the Company and any non-Participating Company specifically designated by the Committee) in one or more unbroken chains of corporations connected through stock ownership with the Company, if the Company directly or indirectly through one or more such chains owns stock possessing more than 50% of the total combined voting power of all classes of stock and more than 50% of each class of non-voting stock of such corporation. ARTICLE IX GENERAL PROVISIONS (a) No member of the Committee shall be liable for anything done or omitted to be done by him or by any other member of the Committee in connection with the Plan, unless such act or omission constitutes willful misconduct on his part. (b) The Board of Directors of the Company may amend this Plan in whole or in part from time to time, and may terminate it at any time, without prior notice to any interested party. The Board of Directors may delegate its amendment power to such individual or individuals as it deems appropriate in its sole discretion. The foregoing sentence to the contrary notwithstanding, for a period of two years and one day following a Change in Control, neither the Board of Directors nor the Committee may amend this Plan in a manner that is detrimental to the rights of any participant of the Plan without his or her written consent. No amendment or termination shall deprive any participant, former participant, beneficiary or legal representatives of a former participant of any right under this Plan as such right exists at the time of such amendment or termination, nor increase the obligations of any company that is or has been a Participating Company without its consent. (c) Nothing in this Plan shall be construed as giving any person employed by a company which is or has been a Participating Company the right to be retained in the employ of such company or any right to any payment whatsoever, except to the extent provided by the Plan. Each such company shall have the right to dismiss any employee at any time with or without cause and without liability for the effect which such dismissal might have upon him as a participant under the Plan. (d) The Plan shall not be deemed a substitute for any other employee benefit or compensation plans or arrangements that may now or hereafter be provided for employees. The Plan shall not preclude any group, division, subsidiary or affiliate of the Company, whether or not a Participating Company, from continuing or adopting one or more separate or additional such plans or arrangements for all or a defined class of 8
  • the employees of such group, division, subsidiary or affiliate. Any payment under any such plan or arrangement may be made independently of the Plan. (e) By accepting any benefits under the Plan, each participant, each beneficiary and each person claiming under or through him shall be conclusively bound by any action or decision taken or made, or to be taken or to be made under the Plan, by the Company, the Board of Directors of the Company, or the Committee. (f) No provision of the Plan shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. (g) The masculine pronoun means the feminine, the singular the plural, and vice versa wherever appropriate. (h) This Plan shall be governed by and construed in accordance with the laws of the State of New York. 9
  • Ameriprise Financial Annual Incentive Award Plan Schedule A September 30, 2005 Participating Companies • American Centurion Life Assurance Company • Ameriprise Enterprise Investment Services, Inc. • Ameriprise Financial Services Inc. • RiverSource Investments, LLC • RiverSource Client Service Corporation • IDS Life Insurance Company • IDS Life Insurance Company of New York • IDS Property Casualty Insurance Company • Ameriprise Trust Company 10
  • Exhibit 10.29 INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is made and entered into as of ___________, 2006 between Ameriprise Financial, Inc. a Delaware corporation (the “Company”), and _________________ (“Indemnitee”). WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is essential to the Company to retain and attract the most capable persons available; and A. WHEREAS, the substantial increase in corporate litigation subjects directors and officers to expensive litigation risks at the same time that the availability of and coverage provided by directors’ and officers’ liability insurance has become uncertain; and WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons of increased certainty of indemnification protections; and B. WHEREAS, it is now and has been the express policy of the Company to indemnify its directors and officers so as to provide them with the maximum possible protection permitted by law; and WHEREAS, the Company does not regard the protection available to Indemnitee as adequate in the present circumstances, and realizes that Indemnitee may not be willing to serve as a director or officer without adequate protection, and the Company desires Indemnitee to serve in such a capacity; and WHEREAS, highly competent persons have become more reluctant to serve corporations as directors, officers, or in other capacities unless they are provided with adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation; and WHEREAS, the General Corporation Law of the State of Delaware (“DGCL”) and the By-laws expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and its directors and officers with respect to indemnification; and WHEREAS, this Agreement is a supplement to and in furtherance of the By-laws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and WHEREAS, the uncertainties relating to directors’ and officers’ liability insurance and to indemnification have increased the difficulty of attracting and retaining such qualified persons to serve as directors and officers of the Company;
  • NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as a director or officer after the date hereof, the parties hereto agree as follows: 1. Indemnity of Indemnitee. The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof: (a) Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of his or her Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), including judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her, or on his or her behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful. (b) Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his or her Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware or the court in which such Proceeding was brought shall determine that such indemnification may be made; provided further, further, that in no event shall Indemnitee be indemnified against Expenses not allowable under applicable law. (c) Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he or she shall be indemnified to the maximum extent permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection with each successfully resolved claim, issue or matter. 2
  • 2. Contribution. (a) If Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute the amount of Expenses actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all its officers, directors or employees, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) from the transaction from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all its officers, directors or employees, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) in connection with the events that resulted in such Expenses, as well as any other equitable considerations which the Law may require. The relative fault of the Company and all its officers, directors or employees, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, and the degree to which their conduct is active or passive. (b) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee, the Company, in lieu of indemnifying Indemnitee, may contribute to the amount of Expenses incurred by Indemnitee in connection with a claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s). 3. Indemnification for Expenses as a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he or she shall be indemnified against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith. 4. Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf 3
  • of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. 5. Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the Delaware General Corporation Law and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement: (a) Written Request. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing of the request. (b) Method of Determination. Upon such written request by Indemnitee for indemnification pursuant to Section 5(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement to indemnification shall be made in the specific case by one of the following four methods, which shall be at the election of the Board: (1) by a majority vote of the Disinterested Directors, as defined herein, even though less than a quorum, or by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (2) if there are no Disinterested Directors or if the Disinterested Directors so direct, by Independent Counsel, as defined herein, in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee, or (3) if so directed by the Board, by the stockholders of the Company; provided, however, in the event of a Potential Change of Control, as defined herein, or a Change of Control, as defined below, or within two (2) months after a Change of Control, Independent Counsel shall make such determination rather than the Board. (c) Change in Control. A “Change in Control” shall be deemed to occur, after the date of this Agreement, upon the earliest of any of the following events: (i) Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding securities; (ii) Change in Board. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in this Section 5(c)), whose election by the Board or nomination for election by 4
  • the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a least a majority of the members of the Board; (iii) Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the governing board of such surviving entity; (iv) Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and (v) Other Events. Regardless whether the Company is then subject to such a reporting requirement, there occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For purposes of this Section 5(c), the following terms shall have the following meanings: (A) “Person” shall mean any natural person, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, governmental authority or other entity; provided, however, that Person shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (B) “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act. (d) Selection of Independent Counsel. If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 5(b) 5
  • hereof, the Independent Counsel shall be selected by the Disinterested Directors (or a committee thereof) as provided in Section 5 (b) or if there are no Disinterested Directors, by the Board. Indemnitee may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of Section 13(e) of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 5(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 5(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 5(b) hereof. (e) Presumptions in Favor of Indemnitee. In making a determination with respect to entitlement to indemnification hereunder, the persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement and that Indemnitee has at all times acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Anyone, including the Company, seeking to overcome this presumption shall have the burden of proof. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination of entitlement to indemnification pursuant to this Agreement prior to the commencement of any action, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met the applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. (f) Prompt Determination of Entitlement. If the persons or entity empowered or selected to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent: (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 30-day period may be extended for a reasonable time if the persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; 6
  • (g) Cooperation. Indemnitee shall cooperate with the persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board or stockholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement. (h) Termination of Proceeding. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful. 6. Remedies of Indemnitee. (a) In the event that: (i) a determination is made pursuant to this Agreement that Indemnitee is not entitled to indemnification under this Agreement; (ii) advancement of Expenses is not timely made pursuant to this Agreement; (iii) no determination of entitlement to indemnification is made pursuant to this Agreement within thirty (30) days after receipt by the Company of the request for indemnification (as such period may be extended pursuant to Section 5(f)) ; (iv) payment of indemnification is not made pursuant to this Agreement within thirty (30) days after receipt by the Company of a written request; or (v) payment of indemnification is not made within thirty (30) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification. (b) In the event that a determination has been made pursuant to this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding regarding an Indemnitee’s entitlement shall be conducted as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the prior adverse determination. 7
  • 7. Non-Exclusivity; Survival of Rights; Insurance; Subrogation. (a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the certificate of incorporation of the Company, the By-laws, any agreement, a vote of stockholders, a resolution of directors or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the Delaware General Corporation Law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. (b) To the extent the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of an Enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies with no less coverage than any other individual receives under the Company’s policy or policies. The Company shall maintain such insurance for Indemnitee for two years post-termination at the same level as it then maintains for its then current directors and officers. The Company shall give prompt notice of the commencement of a Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take reasonable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of an Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such Enterprise. 8. Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee: 8
  • (a) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company or any Enterprise within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law; (b) where it is determined by final adjudication that the liability imposed upon Indemnitee was the result of Indemnitee’s actual improper receipt of a personal benefit or profit or of Indemnitee’s deliberate dishonesty to the Company; or (c) in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless: (i) the Board of Directors of the Company authorized the Proceeding, (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, or (iii) as provided in the By-Laws. 9. Joint Representation and Selection of Counsel. In the event the Company shall be obligated hereunder to pay an Indemnitee’s Expenses, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee (which approval shall not be unreasonably withheld). The Company and Indemnitee shall be jointly represented until such time as Indemnitee reasonably concludes that there is a conflict of interest between the Company and Indemnitee in the conduct of any such defense. Notwithstanding this provision, Indemnitee retains the right to employ separate counsel, wholly at Indemnitee’s own expense, in any such proceeding in addition to or in place of any counsel retained by the Company on behalf of Indemnitee. 10. Duration of Agreement. All agreements and obligations of the Company contained herein, including advancement of expenses, shall continue past Indemnitee’s time of service to the Company or an Enterprise, and shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. 11. Security. To the extent requested by Indemnitee and approved by the Board of Directors of the Company, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee. In the event of a Potential Change in Control, as defined herein, or a Change in Control, the Company shall, promptly upon written request by Indemnitee, create a Trust for the benefit of Indemnitee and from time to time, upon written request by or on behalf of Indemnitee to the Company, shall fund such Trust in an amount, as set forth in such request, sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with an indemnifiable event. The terms of the Trust shall provide that upon a Change in Control: (i) the Trust shall not be revoked or the principal thereof invaded, without the written consent of Indemnitee; (ii) the Trustee shall advance, within ten (10) business days of a request by 9
  • Indemnitee, any and all Expenses to Indemnitee, not advanced directly by the Company to Indemnitee (and Indemnitee hereby agrees to reimburse the Trust under the circumstances under which Indemnitee would be required to reimburse the Company under this Agreement); (iii) the Trust shall continue to be funded by the Company in accordance with the funding obligation set forth above; (iv) the Trustee shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise; and (v) all unexpended funds in such Trust shall revert to the Company upon a final determination that Indemnitee has been fully indemnified under the terms of this Agreement. Nothing in this Section 11 shall relieve the Company of any of its obligations under this Agreement. A Potential Change in Control shall be deemed to have occurred if: (i) the Company enters into an agreement or arrangement, the consummation of which would result in the occurrence of a Change in Control; (ii) the Company or any person publicly announces an intention to take or to begin taking actions which if completed would constitute a Change in Control; or (iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. 12. Enforcement. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company. (b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof. 13. Definitions. For purposes of this Agreement: (a) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other Enterprise that such person is or was serving at the request of the Company. Indemnitee’s service to an Enterprise at the request of the Company is expressly deemed to be included within an Indemnitee’s Corporate Status. Indemnitee’s service as a director, officer, employee, agent or fiduciary to any of the following Enterprises shall be deemed to be at the express written request of the Company: any direct or indirect subsidiary of the Company, any entity for which the Company accounts on the equity method, any special purpose entity or variable interest entity of the Company, and any investment company as to which an affiliate of the Company serves as investment advisor. (b) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. 10
  • (c) “Enterprise” shall mean the Company and any other corporation, partnership, direct or indirect subsidiary, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary. Enterprise shall also include, but is not limited to, entities for which the Company accounts on the equity method, special purpose entities, variable interest entities, and investment companies as to which an affiliate of the Company serves as investment advisor. (d) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, appeal costs and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding. Expenses shall also include judgments, penalties or fines against Indemnitee and amounts paid in settlement by Indemnitee (only if such settlement is approved by the Company, which approval shall not be unreasonably withheld) of any claim relating to a Proceeding. In addition, Expenses shall include the incremental personal income taxes (whether federal, state, local or foreign) actually paid or payable by Indemnitee, together with any interest or penalties thereon, by virtue of the receipt of indemnification payments under this Agreement. (e) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements); or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person (i) who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement or (ii) who, or whose firm, represented a third party that was adverse to the Company, or any affiliate of the Company, or Indemnitee within the preceding twelve months. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel. (f) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact of Indemnitee’s past or present Corporate Status, by reason of any action taken by him or her or of any inaction on his or her part while acting as an officer or director of the Company or any Enterprise, or by reason of the fact that he or she is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another Enterprise, in each case whether or not he or she is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement, including one pending on or before the date of this Agreement, but excluding one initiated by an 11
  • Indemnitee pursuant to Section 6 of this Agreement to enforce his or her rights under this Agreement. 14. Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict. 15. Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 16. Notice. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise, unless and only to the extent that such failure or delay materially prejudices the Company. All communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to Indemnitee at the address set forth below Indemnitee’s signature hereto, and to the Company at: Ameriprise Financial, Inc. 55 Ameriprise Financial Center Minneapolis, MN 55474 Attention: General Counsel or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 12
  • 18. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. 19. No Construction as Employment Agreement. Nothing contained herein shall be construed as giving Indemnitee, if an employee of the Company or any Enterprise, any right to be retained in the employ of the Company or any Enterprise. 20. Governing Law. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SIGNATURE PAGE TO FOLLOW 13
  • IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the day and year first above written. AMERIPRISE FINANCIAL, INC. By Its INDEMNITEE Address of Indemnitee: Signature Page to Indemnification Agreement with Ameriprise Financial, Inc.
  • Exhibit 10.31 CREDIT AGREEMENT DATED AS OF SEPTEMBER 30, 2005 AMONG AMERIPRISE FINANCIAL, INC., as Borrower, THE LENDERS LISTED HEREIN, as Lenders, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, CITIBANK, N.A., as Syndication Agent and BANK OF AMERICA, N.A., HSBC BANK USA, NATIONAL ASSOCIATION and WACHOVIA BANK, NATIONAL ASSOCIATION, as Co-Documentation Agents ______________________________ WELLS FARGO BANK, NATIONAL ASSOCIATION and CITIGROUP GLOBAL MARKETS INC., as Joint Lead Arrangers and Joint Bookrunners
  • TABLE OF CONTENTS SECTION 1. DEFINITIONS 1 1.1 Certain Defined Terms. 1 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement. 21 1.3 Other Definitional Provisions and Rules of Construction. 22 SECTION 2. AMOUNTS AND TERMS OF LOANS 22 2.1 Loans; Making of Loans; the Register; Optional Notes; Bid Loans. 22 2.2 Interest on the Loans. 31 2.3 Fees. 34 2.4 Repayments, Prepayments and Reductions of Revolving Loan Commitment Amount; General 35 Provisions Regarding Payments. 2.5 Use of Proceeds. 38 2.6 Special Provisions Governing Eurodollar Rate Loans. 38 2.7 Increased Costs; Taxes; Capital Adequacy. 40 2.8 Statement of Lenders; Obligation of Lenders and Issuing Lenders to Mitigate. 44 2.9 Replacement of a Lender. 45 2.10 Increase in Commitments. 46 2.11 Extension of Revolving Loan Commitment Termination Date. 47 SECTION 3. LETTERS OF CREDIT 47 3.1 Issuance of Letters of Credit and Lenders’ Purchase of Participations Therein. 47 3.2 Letter of Credit Fees. 50 3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit. 50 3.4 Obligations Absolute. 53 3.5 Nature of Issuing Lenders’ Duties. 54 3.6 Applicability of UCP. 54 SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT 55 4.1 Conditions to Closing. 55 4.2 Conditions to Effective Date; All Loans. 57 4.3 Conditions to Letters of Credit. 58 SECTION 5. COMPANY’S REPRESENTATIONS AND WARRANTIES 59 5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries. 59 5.2 Authorization of Borrowing, etc. 59 i
  • 5.3 Financial Condition. 60 5.4 No Material Adverse Change. 60 5.5 Title to Properties; Liens. 60 5.6 Litigation; Adverse Facts. 61 5.7 Payment of Taxes. 61 5.8 Governmental Regulation. 61 5.9 Securities Activities. 61 5.10 Employee Benefit Plans. 61 5.11 Environmental Protection. 62 5.12 Solvency. 62 5.13 Disclosure. 62 5.14 Foreign Assets Control Regulations, etc. 62 SECTION 6. AFFIRMATIVE COVENANTS 63 6.1 Financial Statements and Other Reports. 63 6.2 Existence, etc. 66 6.3 Payment of Taxes and Claims. 66 6.4 Maintenance of Properties; Insurance. 66 6.5 Inspection Rights. 66 6.6 Compliance with Laws, etc. 67 SECTION 7. NEGATIVE COVENANTS 67 7.1 Liens and Related Matters. 67 7.2 Acquisitions. 69 7.3 Restricted Junior Payments. 69 7.4 Financial Covenants. 69 7.5 Restriction on Fundamental Changes; Asset Sales. 70 7.6 Transactions with Affiliates. 70 7.7 Conduct of Business. 70 SECTION 8. EVENTS OF DEFAULT 71 8.1 Failure to Make Payments When Due. 71 8.2 Default in Other Agreements. 71 8.3 Breach of Certain Covenants. 71 8.4 Breach of Warranty. 71 8.5 Other Defaults Under Loan Documents. 72 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. 72 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. 72 8.8 Judgments and Attachments. 73 8.9 Dissolution. 73 8.10 Employee Benefit Plans. 73 8.11 Change in Control. 73 8.12 Licensing. 73 8.13 Certain Proceedings. 73 ii
  • 8.14 Invalidity of Loan Documents; Repudiation of Obligations. 74 SECTION 9. ADMINISTRATIVE AGENT 75 9.1 Appointment. 75 9.2 Powers and Duties; General Immunity. 75 9.3 Independent Investigation by Lenders; No Responsibility For Appraisal of Creditworthiness. 77 9.4 Right to Indemnity. 77 9.5 Resignation of Agents; Successor Administrative Agent and Swing Line Lender. 77 9.6 Duties of Other Agents. 78 9.7 Administrative Agent May File Proofs of Claim. 78 SECTION 10. MISCELLANEOUS 79 10.1 Successors and Assigns; Assignments and Participations in Loans and Letters of Credit. 79 10.2 Expenses. 82 10.3 Indemnity. 83 10.4 Set-Off. 83 10.5 Ratable Sharing. 84 10.6 Amendments and Waivers. 85 10.7 Independence of Covenants. 86 10.8 Notices; Effectiveness of Signatures; Posting on Electronic Delivery Systems. 86 10.9 Survival of Representations, Warranties and Agreements. 88 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative. 88 10.11 Marshalling; Payments Set Aside. 88 10.12 Severability. 89 10.13 Obligations Several; Independent Nature of Lenders’ Rights; Damage Waiver. 89 10.14 Applicable Law. 89 10.15 Construction of Agreement; Nature of Relationship. 90 10.16 Consent to Jurisdiction and Service of Process. 90 10.17 Waiver of Jury Trial. 90 10.18 Confidentiality. 91 10.19 Counterparts; Effectiveness. 92 10.20 USA Patriot Act. 92 iii
  • EXHIBITS I FORM OF NOTICE OF REVOLVING BORROWING IA FORM OF BID REQUEST IB FORM OF COMPETITIVE BID II FORM OF NOTICE OF CONVERSION/CONTINUATION III FORM OF REQUEST FOR ISSUANCE IV FORM OF REVOLVING NOTE V FORM OF SWING LINE NOTE VI FORM OF COMPLIANCE CERTIFICATE VII FORM OF ASSIGNMENT AGREEMENT iv
  • SCHEDULES 1.1 SIGNIFICANT SUBSIDIARIES 2.1 LENDERS’ COMMITMENTS AND PRO RATA SHARES 5.6 LITIGATION 7.1 CERTAIN EXISTING LIENS 10.8 NOTICE ADDRESSES v
  • AMERIPRISE FINANCIAL, INC. CREDIT AGREEMENT This CREDIT AGREEMENT is dated as of September 30, 2005 and entered into by and among AMERIPRISE FINANCIAL, INC., a Delaware corporation (“Company”), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a “Lender” and collectively as “Lenders”), WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), as administrative agent for Lenders (in such capacity, “Administrative Agent”), and CITIBANK, N.A., as syndication agent for Lenders (in such capacity, “Syndication Agent”), and BANK OF AMERICA, N.A., HSBC BANK USA, NATIONAL ASSOCIATION and WACHOVIA BANK, NATIONAL ASSOCIATION, as co-documentation agents for Lenders (in such capacity, “Co-Documentation Agents”). RECITALS WHEREAS, Lenders, at the request of Company, have agreed to extend certain credit facilities to Company, the proceeds of which will be used to provide financing for working capital and other general corporate purposes of Company and its Subsidiaries: NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders and Administrative Agent agree as follows: Section 1. DEFINITIONS 1.1 Certain Defined Terms. The following terms used in this Agreement shall have the following meanings: “Absolute Rate” means a fixed rate of interest expressed in multiples of 1/100th of one percent. “Absolute Rate Loan” means a Bid Loan that bears interest at a rate determined by reference to an Absolute Rate. “Administrative Agent” has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 9.5A. “Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent. “Affected Lender” has the meaning assigned to that term in subsection 2.6C. “Affected Loans” has the meaning assigned to that term in subsection 2.6C.
  • “Affiliate”, as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise; provided, however, that the term “Affiliate” shall specifically exclude the Agents and each Lender. “Agents” means Administrative Agent, the Syndication Agent and the Co-Documentation Agents named in the introduction to this Agreement. “Agreement” means this Credit Agreement. “Annual Statement” means the annual statutory financial statement of any Insurance Subsidiary required to be filed with the insurance commissioner (or similar authority) of its jurisdiction of incorporation, which statement shall be in the form required by such Insurance Subsidiary’s jurisdiction of incorporation or, if no specific form is so required, in the form of financial statements permitted by such insurance commissioner (or such similar authority) to be used for filing annual statutory financial statements and shall contain the type of information permitted by such insurance commissioner (or such similar authority) to be disclosed therein, together with all exhibits or schedules filed therewith. “Applicable Margin” means, from time to time, the following rate per annum based upon the Debt Rating as set forth below: Pricing Debt Rating Eurodollar Facility Utilization Level S&P/Moody’s Margin Fee Fee Pricing Level I > A / A2 0.24% 0.06% 0.05% Pricing Level II A- / A3 0.28% 0.07% 0.05% Pricing Level III BBB+ / Baa1 0.31% 0.09% 0.10% Pricing Level IV BBB / Baa2 0.375% 0.125% 0.125% Pricing Level V < BBB / Baa2 0.45% 0.175% 0.125% Initially, the Applicable Margin shall be Pricing Level II. Thereafter, each change in the Applicable Margin resulting from a publicly announced change in the Debt Rating shall be effective, in the case of an upgrade, during the period commencing on the date of the public announcement thereof and ending on the date immediately preceding the effective date of the next such change and, in the case of a downgrade, during the period commencing on the date of the public announcement thereof and ending on the date immediately preceding the effective date of the next such change. If, at any time, Company has no Debt Rating from S&P or 2
  • Moody’s, the Applicable Margin shall be Pricing Level V; provided that until S&P issues a Debt Rating, only the Debt Rating issued by Moody’s shall be taken into account. “Approved Fund” means a Fund that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender. “Asset Sale” means the sale by Company or any of its Subsidiaries to any Person other than Company or any of its wholly-owned Subsidiaries of (i) any of the stock of any of Company’s Subsidiaries, (ii) substantially all of the assets of any division or line of business of Company or any of its Subsidiaries, or (iii) any other assets (whether tangible or intangible) of Company or any of its Subsidiaries (other than (a) sales, assignments, transfers or dispositions of accounts in the ordinary course of business for purposes of collection and (b) sales, assignments, transfers or dispositions of investment assets by Insurance Subsidiaries in the ordinary course of business). “Assignment Agreement” means an Assignment and Assumption in substantially the form of Exhibit VII annexed hereto. “Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute. “Base Rate” means, at any time, the higher of (i) the Prime Rate or (ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change. “Base Rate Loans” means Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A. “Bid Borrowing” means a borrowing consisting of simultaneous Bid Loans of the same Type from each of the Lenders whose offer to make one or more Bid Loans as part of such borrowing has been accepted under the auction bidding procedures described in Section 2.03. “Bid Loan” has the meaning specified in subsection 2.1A(iii). “Bid Loan Lender” means, in respect of any Bid Loan, the Lender making such Bid Loan to Company. “Bid Request” means a written request for one or more Bid Loans substantially in the form of Exhibit IA. “Bridge Loan Agreement” means that certain Credit Agreement, dated as of September , 2005, among Company, Citibank, N.A., as agent, and the financial institutions party thereto. 3
  • “Business Day” means (i) except as set forth in clause (ii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or the State of Minnesota or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close, and (ii) with respect to all notices, determinations, fundings and payments in connection with the Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day described in clause (i) above and that is also a day for trading by and between banks in Dollar deposits in the London interbank market. “Capital Lease”, as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. “Capital Stock” means the capital stock of or other equity interests in a Person. “Cash” means money, currency or a credit balance in a Deposit Account. “Change in Control” means any of the following: (a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), but excluding any employee benefit plan of such Person or its Subsidiaries, of 20% or more of the outstanding shares of voting stock of Company; (b) during any period of 12 consecutive months, a majority of the members of the board of directors of Company cease to be composed of individuals (i) who were members of the board of directors on the first day of such period, (ii) whose election or nomination to the board of directors was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of the board of directors or (iii) whose election or nomination to the board of directors was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of the board of directors; or (c) any Person or two or more Persons acting in concert will have acquired by contract or otherwise, or will have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of Company, or control over the equity securities of Company entitled to vote for members of the board of directors or equivalent governing body of Company on a fully- diluted basis (and taking into account all such securities that such Person or group has the right to acquire pursuant to any option right) representing 20% or more of the combined voting power of such securities. “Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (i) the adoption or taking effect of any law, rule, regulation, treaty or order, (ii) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Government Authority, (iii) any determination of a court or other 4
  • Government Authority or (iv) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Government Authority. “Closing Date” means the date on which the conditions precedent set forth in subsection 4.1 have been satisfied. “Commitments” means the commitments of Lenders to make Loans as set forth in subsections 2.1A and 3.3. “Competitive Bid” means a written offer by a Lender to make one or more Bid Loans, substantially in the form of Exhibit IB, duly completed and signed by a Lender. “Company” has the meaning assigned to that term in the introduction to this Agreement. “Compliance Certificate” means a certificate substantially in the form of Exhibit VI annexed hereto. “Confidential Information Memorandum” means the Confidential Information Memorandum dated August 2005 relating to the credit facilities evidenced by this Agreement, which Confidential Information Memorandum incorporates by reference the Form 10. “Consolidated Leverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (i) Consolidated Total Debt as of such day to (ii) Consolidated Total Capitalization as of such day. “Consolidated Net Worth” means, as of any date of determination, the consolidated shareholders’ equity of Company and its Subsidiaries determined on a consolidated basis as of such date in accordance with GAAP (excluding the effect of Statement of Financial Accounting Standards No. 115). “Consolidated Total Capitalization” means, as of any date of determination, the sum of (a) Consolidated Net Worth and (b) Consolidated Total Debt. “Consolidated Total Debt” means, as of any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. “Contingent Obligation”, as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof or (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings. Contingent Obligations shall include (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, 5
  • discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (1) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (2) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (1) or (2) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited. “Contractual Obligation”, as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. “Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party. “Debt Rating” means, as of any date of determination, the rating as determined by S&P and Moody’s (collectively, the “Debt Ratings”) of Company’s non-credit-enhanced, senior unsecured long-term debt; provided that if a Debt Rating is issued by each of the foregoing rating agencies, then the higher of such Debt Ratings shall apply (with the Debt Rating for Pricing Level I being the highest and the Debt Rating for Pricing Level V being the lowest), unless there is a split in Debt Ratings of more than one level, in which case the Pricing Level that is one Pricing Level higher than the lower Debt Rating shall apply. “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Revolving Loans, participations in Letters of Credit or participations in Swing Line Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding. “Deposit Account” means a demand, time, savings, passbook or similar account maintained with a Person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company. “Dollars” and the sign “$” mean the lawful money of the United States of America. “Effective Date” means the date on which the conditions precedent set forth in subsections 4.1 and 4.2A have been satisfied. 6
  • “Eligible Assignee” means (i) any Lender, any Affiliate of any Lender or any Approved Fund of any Lender; and (ii) (a) a commercial bank organized under the laws of the United States or any state thereof; (b) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (c) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (1) such bank is acting through a branch or agency located in the United States or (2) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (d) any other entity that is an institutional “accredited investor” (as defined in Regulation D under the Securities Act) that extends credit or buys loans as one of its businesses, including insurance companies and mutual funds; provided that neither Company nor any Affiliate of Company shall be an Eligible Assignee. “Employee Benefit Plan” means any “employee benefit plan”, as defined in Section 3(3) of ERISA, which is or was maintained or contributed to by Company, any of its Subsidiaries or any of their respective ERISA Affiliates. “Environmental Claim” means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Government Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity, or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. “Environmental Laws” means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of any Government Authority relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries or any of its properties. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. “ERISA Affiliate”, as applied to any Person, means (i) any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) that is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of a Person or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of such Person or such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of such Person or such Subsidiary and with 7
  • respect to liabilities arising after such period for which such Person or such Subsidiary could be liable under the Internal Revenue Code or ERISA. “ERISA Event” means (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in material liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which would reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there would be any liability therefor, or the receipt by Company, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the assertion of a claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Company, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan that would reasonably be expected to result in a material liability to Company or any of its Subsidiaries; (ix) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401 (a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code where such failure would reasonably be expected to result in a Material Adverse Effect; or (x) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. With respect to a Multiemployer Plan or a Pension Plan not maintained or contributed to by Company or its Subsidiaries, an event described above shall not be an ERISA Event unless it is reasonably likely to result in material liability to Company or any of its Subsidiaries. “Eurodollar Bid Margin” means the margin above or below the Eurodollar Base Rate to be added to or subtracted from the Eurodollar Base Rate, which margin shall be expressed in multiples of 1/100th of one percent. 8
  • “Eurodollar Margin Bid Loan” means a Bid Loan that bears interest at a rate based upon the Eurodollar Base Rate. “Eurodollar Rate” means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (i) (A) the rate per annum (rounded upward to the nearest 1/16 of one percent) that appears on the Moneyline Telerate page 3750 (or such other comparable page as may, in the opinion of Administrative Agent, replace such page for the purpose of displaying such rate) as the interbank offered rate for Dollar deposits with maturities comparable to such Interest Period as of approximately 11:00 A.M. (London time) on such Interest Rate Determination Date or (B) if such rate is not available at such time for any reason, the rate per annum obtained by dividing (i) the arithmetic average (rounded upward to the nearest 1/16 of one percent) of the offered quotations, if any, to first class banks in the interbank Eurodollar market by Wells Fargo (or, in the case of a Bid Loan, the applicable Bid Loan Lender) for Dollar deposits of amounts in same day funds comparable to the principal amount of the Eurodollar Rate Loan of Wells Fargo (or, in the case of a Bid Loan, the applicable Bid Loan Lender) for which the Eurodollar Rate is then being determined with maturities comparable to such Interest Period as of approximately 12:00 Noon (New York time) on such Interest Rate Determination Date by (ii) a percentage equal to 100% minus the stated maximum rate of all reserve requirements (including any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination Date to any member bank of the Federal Reserve System in respect of “Eurocurrency liabilities” as defined in Regulation D (or any successor category of liabilities under Regulation D). “Eurodollar Rate Loan” means a Eurodollar Rate Revolving Loan or a Eurodollar Margin Bid Loan. “Eurodollar Rate Margin” means the margin over the Eurodollar Rate used in determining the rate of interest of Eurodollar Rate Revolving Loans in accordance with the definition of Applicable Margin. “Eurodollar Rate Revolving Loans” means Revolving Loans bearing interest at rates determined by reference to the Eurodollar Rate as provided in subsection 2.2A. “Event of Default” means each of the events set forth in Section 8. “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, or any other recipient of any payment to be made by or on account of any obligation of Company hereunder (i) taxes that are imposed on the overall net income (however denominated) and franchise taxes imposed in lieu thereof (a) by the United States, (b) by any other Government Authority under the laws of which such Lender is organized or has its principal office or maintains its applicable lending office or (c) by any Government Authority solely by reason of any connection between the Administrative Agent or any Lender (as the case may be) and the taxing jurisdiction (other than such connection arising solely from the execution or delivery of, 9
  • the receipt of payments pursuant to, or the enforcement of, this Agreement or any other Loan Document), (ii) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which Company is located, (iii) any gross income taxes (other than gross income taxes imposed in the form of withholding taxes) imposed by the United States on any Lender (x) at the time such Lender became a party hereto (or designated a new lending office), except in the case of an assignee pursuant to subsection 2.9, or (y) as a result of such Lender ceasing to be eligible for a complete exemption from such taxes after the date such Lender becomes a party hereto (except to the extent that such Lender’s failure to be so eligible is as a result of a Change in Law, any action that Company or any of its Affiliates takes, or as a result of an assignment pursuant to Company’s request under subsection 2.9); and (iv) any withholding tax that (x) would have been imposed on amounts payable to such Lender at the time it became a party hereto (or designated a new lending office), except in the case of an assignee pursuant to a request of Company under subsection 2.9, (y) is attributable to such Lender’s failure or inability (including by reason of not being legally entitled to do so, other than as a result of a Change in Law) to comply with its obligations under subsection 2.7B(iv), except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from Company with respect to such withholding tax pursuant to subsection 2.7B or (z) as a result of a Lender or Administrative Agent ceasing to be eligible for a complete exemption from such taxes after the date the Lender becomes a party hereto (except to the extent that such Lender’s Agent failure to be so eligible is as a result of a Change in Law, any action that Company or any of its Affiliates takes, or as a result of an assignment pursuant to Company’s request under subsection 2.9). “Extension Request” is defined in subsection 2.11. “Federal Funds Effective Rate” means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent. “Fiscal Quarter” means a fiscal quarter of any Fiscal Year. “Fiscal Year” means the fiscal year of Company and its Subsidiaries ending on December 31 of each calendar year. For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year ends. “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which Company is resident for tax purposes. For purposes of this definition, the United States, each state thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. “Form 10” means that certain filing on Securities and Exchange Commission Form 10-12B of Company filed with the Securities and Exchange Commission on June 7, 2005, 10
  • as amended by those certain filings on Securities and Exchange Commission Form 10-12B/A filed on July 25, 2005, August 15, 2005 and August 19, 2005. “Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course. “Funding and Payment Office” means (i) the office of Administrative Agent and Swing Line Lender located at 201 Third Street, 8th Floor, San Francisco, California 94103 or (ii) such other office of Administrative Agent and Swing Line Lender as may from time to time hereafter be designated as such in a written notice delivered by Administrative Agent and Swing Line Lender to Company and each Lender. “Funding Date” means the date of funding of a Loan. “GAAP” means, subject to the limitations on the application thereof set forth in subsection 1.2, generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination. “Governing Body” means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company. “Government Authority” means the government of the United States or any other nation, or any state, regional or local political subdivision or department thereof, and any other governmental or regulatory agency, authority, body, commission, central bank, board, bureau, organ, court, instrumentality or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, in each case whether federal, state, local or foreign (including supra-national bodies such as the European Union or the European Central Bank). “Governmental Authorization” means any permit, license, registration, authorization, plan, directive, accreditation, consent, order or consent decree of or from, or notice to, any Government Authority. “Hazardous Materials” means (i) any chemical, material or substance at any time defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous waste”, “acutely hazardous waste”, “radioactive waste”, “biohazardous waste”, “pollutant”, “toxic pollutant”, “contaminant”, “restricted hazardous waste”, “infectious waste”, “toxic substances”, or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, “TCLP toxicity” or “EP toxicity” or words of similar import under any applicable Environmental Laws); (ii) any oil, petroleum, 11
  • petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Government Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any facility of Company or any of its Subsidiaries or to the indoor or outdoor environment. “Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. “Hedge Agreement” means an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively. “Indebtedness”, as applied to any Person, means (i) indebtedness created, issued or incurred for borrowed money (whether by loan or the issuance and sale of debt securities), but excluding customer deposits, investment accounts and certificates, and insurance reserves, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) obligations to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business (excluding any such obligations incurred under ERISA), (iv) obligations in respect of letters of credit or similar instruments; and (v) Contingent Obligations of such Person in respect of Indebtedness of the types described in clauses (i), (ii), (iii) and (iv) of this definition. “Indemnified Liabilities” has the meaning assigned to that term in subsection 10.3. “Indemnified Taxes” means any Taxes imposed on, asserted with respect to or attributable to (i) any payment made or received under any Loan Document or (ii) the execution, entering into, delivery, performance or enforcement of any Loan Document, including all Other Taxes, but in each case excluding Excluded Taxes. “Indemnitee” has the meaning assigned to that term in subsection 10.3. “Insurance Subsidiary” means any Subsidiary which is engaged in the insurance business. “Interest Payment Date” means (i) with respect to any Base Rate Loan, the last Business Day of each March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and (ii) with respect to any Eurodollar Rate Loan, 12
  • the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period of longer than three months “Interest Payment Date” shall also include each date that is three months, or a multiple thereof, after the commencement of such Interest Period. “Interest Period” has the meaning assigned to that term in subsection 2.2B. “Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party. “Interest Rate Determination Date”, with respect to any Interest Period, means the second Business Day prior to the first day of such Interest Period. “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute. “Issuing Lender”, with respect to any Letter of Credit, means Wells Fargo or another Lender requested by Company and approved by Administrative Agent that agrees or is otherwise obligated to issue such Letter of Credit, determined as provided in subsection 3.1B(ii). “Lender” and “Lenders” means the Persons identified as “Lenders” and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.1, and the term “Lenders” shall include Swing Line Lender unless the context otherwise requires. “Letter of Credit” or “Letters of Credit” means standby letters of credit issued or to be issued by Issuing Lenders for the account of Company pursuant to subsection 3.1. “Letter of Credit Usage” means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under Letters of Credit honored by Issuing Lenders and not theretofore reimbursed out of the proceeds of Revolving Loans pursuant to subsection 3.3B or otherwise reimbursed by Company. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of the UCP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn. “License” means any license, certificate of authority, permit or other authorization which is required to be obtained from any Government Authority in connection with the operation, ownership or transaction of insurance, broker-dealer or investment advisory businesses or other regulated businesses. “Lien” means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing. 13
  • “Loan” or “Loans” means one or more of the Loans made by Lenders to Company pursuant to subsection 2.1A and shall include one or more Revolving Loans, Bid Loans and Swing Line Loans. “Loan Documents” means this Agreement, the Notes and the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Company in favor of an Issuing Lender relating to, the Letters of Credit). “Margin Stock” has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. “Material Adverse Effect” means a material adverse effect upon (i) the business, financial condition, prospects or operations of Company and its Subsidiaries taken as a whole or (ii) Company’s ability to perform its obligations under the Loan Documents, or (iii) the enforceability of the Obligations. “Moody’s” means Moody’s Investors Service, Inc. “Multiemployer Plan” means any Employee Benefit Plan that is a “multiemployer plan” as defined in Section 3 (37) of ERISA. “Notes” means one or more of the Revolving Notes or Swing Line Note or any combination thereof. “Notice of Conversion/Continuation” means a notice substantially in the form of Exhibit II annexed hereto. “Notice of Revolving Borrowing” means a notice substantially in the form of Exhibit I annexed hereto. “Obligations” means all obligations of every nature of Company from time to time owed to Administrative Agent, Lenders or any of them under the Loan Documents, whether for principal, interest, reimbursement of amounts drawn under Letters of Credit, fees, expenses, indemnification or otherwise. “Officer” means the president, chief executive officer, a vice president, chief financial officer, treasurer, general partner (if an individual), managing member (if an individual) or other individual appointed by the Governing Body or the Organizational Documents of a corporation, partnership, trust or limited liability company to serve in a similar capacity as the foregoing. “Officer’s Certificate”, as applied to any Person that is a corporation, partnership, trust or limited liability company, means a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company. 14
  • “Organizational Documents” means the documents (including bylaws, if applicable) pursuant to which a Person that is a corporation, partnership, trust or limited liability company is organized. “Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes (other than property taxes generally imposed), charges, fees, expenses or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. “Participant” means a purchaser of a participation in the rights and obligations under this Agreement pursuant to subsection 10.1C. “PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto. “Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, that is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. “Permitted Encumbrances” means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, and any such Lien relating to or imposed in connection with any Environmental Claim): (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 6.3; (ii) statutory Liens of landlords, Liens of collecting banks under the UCC on items in the course of collection, statutory Liens and rights of set-off of banks, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (a) for amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 5 days) are being contested in good faith by appropriate proceedings, so long as (1) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (2) no foreclosure, sale or similar proceedings have been commenced; (iii) deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance, old age pensions and other types of social security, for the maintenance of self-insurance or to secure the performance of statutory obligations, bids, leases, government contracts, trade contracts, and other similar obligations (exclusive of obligations for the payment of borrowed money), so long as no foreclosure, sale or similar proceedings have been commenced with respect thereto; (iv) any attachment or judgment Lien not constituting an Event of Default under subsection 8.8; 15
  • (v) licenses (with respect to intellectual property and other property), leases or subleases granted to third parties not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries; (vi) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries; (vii) any (a) interest or title of a lessor or sublessor under any lease not prohibited by this Agreement, (b) Lien or restriction that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any Lien or restriction referred to in the preceding clause (b), so long as the holder of such Lien or restriction agrees to recognize the rights of such lessee or sublessee under such lease; (viii) Liens arising from filing UCC financing statements relating solely to leases not prohibited by this Agreement; (ix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (x) any zoning or similar law or right reserved to or vested in any Government Authority to control or regulate the use of any real property; and (xi) Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of Company and its Subsidiaries. “Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Government Authorities. “Potential Event of Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. “Prime Rate” means the rate that Wells Fargo announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Wells Fargo or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. “Proceedings” means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration. 16
  • “Pro Rata Share” means (i) with respect to all payments, computations and other matters relating to the Revolving Loan Commitment or the Revolving Loans of any Lender or any Letters of Credit issued or participations therein deemed purchased by any Lender or any assignments of any Swing Line Loans deemed purchased by any Lender, the percentage obtained by dividing (x) the Revolving Loan Exposure of that Lender by (y) the aggregate Revolving Loan Exposure of all Lenders, and (ii) for all other purposes with respect to each Lender, the percentage obtained by dividing (x) the Revolving Loan Exposure of that Lender by (y) the aggregate Revolving Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of each Lender for purposes of each of clauses (i), (ii), and (iii) of the preceding sentence is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto. “Quarterly Statement” means the quarterly statutory financial statement of any Insurance Subsidiary required to be filed with the insurance commissioner (or similar authority) of its jurisdiction of incorporation or, if no specific form is so required, in the form of financial statements permitted by such insurance commissioner (or such similar authority) to be used for filing quarterly statutory financial statements and shall contain the type of financial information permitted by such insurance commissioner (or such similar authority) to be disclosed therein, together with all exhibits or schedules filed therewith. “Refunded Swing Line Loans” has the meaning assigned to that term in subsection 2.1A(ii). “Register” has the meaning assigned to that term in subsection 2.1D. “Regulated Subsidiary” means any Insurance Subsidiary or any other Subsidiary of Company engaged in the broker-dealer or investment advisory businesses or otherwise subject to specific licensing or regulatory schemes by a Government Authority. “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. “Reimbursement Date” has the meaning assigned to that term in subsection 3.3B. “Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater. “Request for Issuance” means a request substantially in the form of Exhibit III annexed hereto. “Requisite Lenders” means Lenders having or holding more than 50% of the aggregate Revolving Loan Exposure of all Lenders; provided that the Commitment of, and the portion of the Total Utilization of Revolving Credit Commitments held or deemed held by, any 17
  • Defaulting Lender shall be excluded for purposes of making a determination of Requisite Lenders. “Response Date” is defined in subsection 2.11. “Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class or an increase in the liquidation value of shares of that class of stock, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding, and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding. “Revolving Loan Commitment” means the commitment of a Lender to make Revolving Loans to Company pursuant to subsection 2.1A(i), and “Revolving Loan Commitments” means such commitments of all Lenders in the aggregate. “Revolving Loan Commitment Amount” means, at any date, the aggregate amount of the Revolving Loan Commitments of all Lenders. “Revolving Loan Commitment Termination Date” means September 30, 2010, as such date may be extended in accordance with subsection 2.11; provided that if the Spin-Off Transaction has not been consummated on or before October 31, 2005, the Revolving Loan Commitment Termination Date shall be October 31, 2005. “Revolving Loan Exposure”, with respect to any Lender, means, as of any date of determination (i) prior to the termination of the Revolving Loan Commitments, the amount of that Lender’s Revolving Loan Commitment, and (ii) after the termination of the Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (in each case net of any participations purchased by other Lenders in such Letters of Credit or in any unreimbursed drawings thereunder) plus (c) the aggregate amount of all participations purchased by that Lender in any outstanding Letters of Credit or any unreimbursed drawings under any Letters of Credit plus (d) in the case of Swing Line Lender, the aggregate outstanding principal amount of all Swing Line Loans (net of any assignments thereof deemed purchased by other Lenders) plus (e) the aggregate amount of all assignments deemed purchased by that Lender in any outstanding Swing Line Loans. “Revolving Loans” means the Loans made by Lenders to Company pursuant to subsection 2.1A(i). “Revolving Notes” means any promissory notes of Company issued pursuant to subsection 2.1E to evidence the Revolving Loans of any Lenders, substantially in the form of Exhibit IV annexed hereto. 18
  • “S&P” means Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. “SAP” means, with respect to any Insurance Subsidiary, the statutory accounting practices prescribed or permitted by the insurance commissioner (or other similar authority) in the jurisdiction of such Person for the preparation of annual statements and other financial reports by insurance companies of the same type as such Person in effect from time to time, applied in a manner consistent with those used in preparing the financial statements referred to in Section 6.1. “Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002. “Securities” means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated, certificated or uncertificated, or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. “Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute. “Securities Laws” means the Securities Act, the Exchange Act, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the Securities and Exchange Commission or the Public Company Accounting Oversight Board, as each of the foregoing may be amended and in effect on any applicable date hereunder. “Separation and Distribution Agreement” means the Separation and Distribution Agreement dated as of August 24, 2005 by and between Company and American Express Company. “Significant Subsidiary” means, at any date of determination, any Subsidiary of Company which either (i) has assets at such time in excess of $1,000,000,000 or (ii) has net income in an amount in excess of 10% of the consolidated net income of Company and its Subsidiaries on a consolidated basis as reflected in the then most recent consolidated financial statements of Company and its Subsidiaries delivered pursuant to Section 6.1. The Significant Subsidiaries of Company as of June 30, 2005 are listed on Schedule 1.1 annexed hereto. “Solvent”, with respect to any Person, means that as of the date of determination both (i)(a) the then fair saleable value of the property of such Person is (1) greater than the total amount of liabilities (including contingent liabilities) of such Person and (2) not less than the amount that will be required to pay the probable liabilities on such Person’s then existing debts as they become absolute and due considering all financing alternatives, ordinary operating income and potential asset sales reasonably available to such Person; (b) such Person’s capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (c) such Person does not intend to incur, or believe (nor should it reasonably believe) that it 19
  • will incur, debts beyond its ability to pay such debts as they become due; and (ii) such Person is “solvent” within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. “Spin-Off Transaction” means the distribution by American Express Company to its stockholders by means of a share dividend of 100% of the outstanding common stock of Company owned by American Express Company and all transactions related thereto, all substantially as described in the Form 10. “Spin-Off Transaction Documents” means, collectively, the Separation and Distribution Agreement, the Tax Allocation Agreement, the Transition Services Agreement and all other material definitive documents pertaining to the Spin-Off Transaction. “Subsidiary”, with respect to any Person, means any corporation, partnership, trust, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the members of the Governing Body is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. “Swap Counterparty” means a Lender or an Affiliate of a Lender that has entered into a Hedge Agreement with Company or one of its Subsidiaries. “Swing Line Lender” means Wells Fargo, or any Person serving as a successor Administrative Agent hereunder, in its capacity as Swing Line Lender hereunder. “Swing Line Loan Commitment” means the commitment of Swing Line Lender to make Swing Line Loans to Company pursuant to subsection 2.1A(ii). “Swing Line Loans” means the Loans made by Swing Line Lender to Company pursuant to subsection 2.1A(ii). “Swing Line Note” means any promissory note of Company issued pursuant to subsection 2.1E to evidence the Swing Line Loans of Swing Line Lender, substantially in the form of Exhibit V annexed hereto. “Tax” or “Taxes” means any present or future tax, levy, impost, duty, fee, assessment, deduction, withholding or other charge of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed, including interest, penalties, additions to tax and any similar liabilities with respect thereto. “Tax Allocation Agreement” means the Tax Allocation Agreement dated as of September 30, 2005 by and between Company and American Express Company. 20
  • “Total Utilization of Revolving Loan Commitments” means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans plus (ii) the aggregate principal amount of all outstanding Bid Loans plus (iii) the aggregate principal amount of all outstanding Swing Line Loans plus (iv) the Letter of Credit Usage. “Transition Services Agreement” means the Transition Services Agreement dated as of September 30, 2005 by and between Company and American Express Company. “Type” means (a) with respect to a Revolving Loan, its character as a Base Rate Loan or a Eurodollar Rate Revolving Loan, and (b) with respect to a Bid Loan, its character as an Absolute Rate Loan or a Eurodollar Margin Bid Loan. “UCC” means the Uniform Commercial Code as in effect in any applicable jurisdiction. “UCP” is defined in subsection 3.6. “Unasserted Obligations” means, at any time, Obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities (except for (i) the principal of and interest on, and fees relating to, any Indebtedness and (ii) contingent reimbursement obligations in respect of amounts that may be drawn under Letters of Credit) in respect of which no claim or demand for payment has been made (or, in the case of Obligations for indemnification, no notice for indemnification has been issued by the Indemnitee) at such time. “Wells Fargo” has the meaning assigned to that term in the introduction to this Agreement. 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement. Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to subsection 6.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in subsection 6.1(v)). Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize GAAP as in effect on the date of determination, applied in a manner consistent with that used in preparing the financial statements referred to in subsection 5.3. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and Company, Administrative Agent or Requisite Lenders shall so request, Administrative Agent, Lenders and Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of Requisite Lenders), provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and Company shall provide to Administrative Agent and Lenders reconciliation statements provided for in subsection 6.1(v). For purposes of determining compliance with the financial covenants in Section 7.4 of this Agreement, the application of Financial Accounting Standards Board Interpretation No. 46 shall be disregarded with respect to 21
  • financial consolidation of any entity that is required to be included in the consolidated financial statements of Company solely as a result of such application. 1.3 Other Definitional Provisions and Rules of Construction. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the A. plural, depending on the reference. References to “Sections” and “subsections” shall be to Sections and subsections, respectively, of this B. Agreement unless otherwise specifically provided. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. The use in any of the Loan Documents of the word “include” or “including”, when following any general C. statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. Unless otherwise expressly provided herein, references to Organizational Documents, agreements D. (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document. Section 2. AMOUNTS AND TERMS OF LOANS 2.1 Loans; Making of Loans; the Register; Optional Notes; Bid Loans. Loans. Subject to the terms and conditions of this Agreement and in reliance upon the representations and A. warranties of Company herein set forth, each Lender hereby severally agrees to make Revolving Loans as described in subsection 2.1A(i) and Swing Line Lender hereby agrees to make the Swing Line Loans as described in subsection 2.1A(ii). In addition, Company may request Bid Loans as described in subsection 2.1A(iii). (i) Revolving Loans. Each Lender severally agrees, subject to the limitations set forth below with respect to the maximum amount of Revolving Loans permitted to be outstanding from time to time, to make revolving loans (each such loan a “Revolving Loan”) to Company from time to time during the period from the Effective Date to but excluding the Revolving Loan Commitment Termination Date in an aggregate amount not exceeding its Pro Rata Share of the aggregate amount of the Revolving Loan Commitments to be used in accordance with the terms of this Agreement. The original amount of each Lender’s Revolving Loan Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the original Revolving Loan Commitment Amount is $750,000,000; provided that the amount of the Revolving Loan Commitment of each 22
  • Lender shall be adjusted to give effect to any assignment of such Revolving Loan Commitment pursuant to subsection 10.1B and shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsection 2.4. Each Lender’s Revolving Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and Company hereby agrees that all Revolving Loans and all other Obligations shall be paid in full no later than that date. Amounts borrowed under this subsection 2.1A(i) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be subject to the limitation that in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the Revolving Loan Commitment Amount then in effect. (ii) Swing Line Loans. (a) General Provisions. Swing Line Lender hereby agrees, subject to the limitations set forth in the last paragraph of subsection 2.1A(ii) and set forth below with respect to the maximum amount of Swing Line Loans permitted to be outstanding from time to time, to make a portion of the Revolving Loan Commitments available to Company from time to time during the period from the Effective Date to but excluding the Revolving Loan Commitment Termination Date by making Swing Line Loans to Company in an aggregate amount not exceeding the amount of the Swing Line Loan Commitment to be used for the purposes identified in subsection 2.5A, notwithstanding the fact that such Swing Line Loans, when aggregated with Swing Line Lender’s outstanding Revolving Loans and Swing Line Lender’s Pro Rata Share of the Letter of Credit Usage then in effect, may exceed Swing Line Lender’s Revolving Loan Commitment. The original amount of the Swing Line Loan Commitment is $25,000,000; provided that any reduction of the Revolving Loan Commitment Amount made pursuant to subsection 2.4 that reduces the Revolving Loan Commitment Amount to an amount less than the then current amount of the Swing Line Loan Commitment shall result in an automatic corresponding reduction of the amount of the Swing Line Loan Commitment to the amount of the Revolving Loan Commitment Amount, as so reduced, without any further action on the part of Company, Administrative Agent or Swing Line Lender. The Swing Line Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Swing Line Loans and all other amounts owed hereunder with respect to the Swing Line Loans shall be paid in full no later than that date. (b) Swing Line Loan Prepayment with Proceeds of Revolving Loans. With respect to any Swing Line Loans that have not been voluntarily prepaid by Company pursuant to subsection 2.4A(i), Swing Line Lender may, at any time in its sole and absolute discretion but not less frequently than once weekly, deliver to Administrative Agent (with a copy to Company), no later than 12:00 noon (Minneapolis time) on the first Business Day in advance of the proposed Funding Date, a notice requesting Lenders to make Revolving Loans that are Base Rate 23
  • Loans on such Funding Date in an amount equal to the amount of such Swing Line Loans (the “Refunded Swing Line Loans”) outstanding on the date such notice is given. Company hereby authorizes the giving of any such notice and the making of any such Revolving Loans. Anything contained in this Agreement to the contrary notwithstanding, (1) the proceeds of such Revolving Loans made by Lenders other than Swing Line Lender shall be immediately delivered by Administrative Agent to Swing Line Lender (and not to Company) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (2) on the day such Revolving Loans are made, Swing Line Lender’s Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by Swing Line Lender, and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans and shall no longer be due under the Swing Line Note, if any, of Swing Line Lender but shall instead constitute part of Swing Line Lender’s outstanding Revolving Loans and shall be due under the Revolving Note, if any, of Swing Line Lender. If any portion of any such amount paid (or deemed to be paid) to Swing Line Lender should be recovered by or on behalf of Company from Swing Line Lender in any bankruptcy proceeding, in any assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by subsection 10.5. (c) Swing Line Loan Assignments. On the Funding Date of each Swing Line Loan, each Lender shall be deemed to, and hereby agrees to, purchase an assignment of such Swing Line Loan in an amount equal to its Pro Rata Share. If for any reason (1) Revolving Loans are not made upon the request of Swing Line Lender as provided in the immediately preceding paragraph in an amount sufficient to repay any amounts owed to Swing Line Lender in respect of such Swing Line Loan or (2) the Revolving Loan Commitments are terminated at a time when such Swing Line Loan is outstanding, upon notice from Swing Line Lender as provided below, each Lender shall fund the purchase of such assignment in an amount equal to its Pro Rata Share (calculated, in the case of the foregoing clause (2), immediately prior to such termination of the Revolving Loan Commitments) of the unpaid amount of such Swing Line Loan together with accrued interest thereon. Upon one Business Day’s notice from Swing Line Lender, each Lender shall deliver to Swing Line Lender such amount in same day funds at the Funding and Payment Office. In order to further evidence such assignment (and without prejudice to the effectiveness of the assignment provisions set forth above), each Lender agrees to enter into an Assignment Agreement at the request of Swing Line Lender in form and substance reasonably satisfactory to Swing Line Lender. In the event any Lender fails to make available to Swing Line Lender any amount as provided in this paragraph, Swing Line Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by Swing Line Lender for the correction of errors among banks for three Business Days and thereafter at the Base Rate. In the event Swing Line Lender receives a payment of any amount with respect to which other Lenders have funded the purchase of 24
  • assignments as provided in this paragraph, Swing Line Lender shall promptly distribute to each such other Lender its Pro Rata Share of such payment. (d) Lenders’ Obligations. Anything contained herein to the contrary notwithstanding, each Lender’s obligation to make Revolving Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to subsection 2.1A(ii)(b) and each Lender’s obligation to purchase an assignment of any unpaid Swing Line Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Swing Line Lender, Company or any other Person for any reason whatsoever; (2) the occurrence or continuation of an Event of Default or a Potential Event of Default; (3) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; (4) any breach of this Agreement or any other Loan Document by any party thereto; or (5) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that such obligations of each Lender are subject to the condition that (x) Swing Line Lender believed in good faith that all conditions under Section 4 to the making of the applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, as the case may be, were satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line Loans were made or (y) the satisfaction of any such condition not satisfied had been waived in accordance with subsection 10.6 prior to or at the time such Refunded Swing Line Loans or other unpaid Swing Line Loans were made. (iii) Bid Loans. (a) General. Subject to the terms and conditions set forth herein, each Lender agrees that Company may from time to time request the Lenders to submit offers to make loans in Dollars (each such loan, a “Bid Loan”) to Company prior to the Revolving Loan Commitment Termination Date pursuant to this subsection 2.1A(iii); provided, however, that after giving effect to any Bid Borrowing, the Total Utilization of Revolving Loan Commitments shall not exceed the Revolving Loan Commitment Amount. There shall not be more than seven different Interest Periods in effect with respect to Bid Loans at any time. Company shall repay each Bid Loan on the last day of the Interest Period in respect thereof. (b) Requesting Competitive Bids. Company may request the submission of Competitive Bids by delivering a Bid Request to the Administrative Agent not later than 1:00 P.M. (Minneapolis time) (i) one Business Day prior to the requested date of any Bid Borrowing that is to consist of Absolute Rate Loans, or (ii) four Business Days prior to the requested date of any Bid Borrowing that is to consist of Eurodollar Margin Bid Loans. Each Bid Request shall specify (i) the requested date of the Bid Borrowing (which shall be a Business Day), (ii) the aggregate principal amount of Bid Loans requested (which must be in a minimum amount of $5,000,000 and a multiple of $1,000,000 25
  • in excess thereof), (iii) the Type of Bid Loans requested, (iv) the duration of the Interest Period with respect thereto (which shall be for maturities of 7 to 360 days) and (v) the day-count convention, if other than actual/360, and shall be signed by an authorized Officer of Company. No Bid Request shall contain a request for (i) more than one Type of Bid Loan or (ii) Bid Loans having more than three different Interest Periods. Unless the Administrative Agent otherwise agrees in its sole and absolute discretion, Company may not submit a Bid Request if it has submitted another Bid Request within the prior five Business Days. (c) Submitting Competitive Bids. (i) The Administrative Agent shall promptly notify each Lender of each Bid Request received by it from Company and the contents of such Bid Request. (ii) Each Lender may (but shall have no obligation to) submit a Competitive Bid containing an offer to make one or more Bid Loans in response to such Bid Request. Such Competitive Bid must be delivered to the Administrative Agent not later than 11:30 A.M. (Minneapolis time) (A) on the requested date of any Bid Borrowing that is to consist of Absolute Rate Loans, and (B) three Business Days prior to the requested date of any Bid Borrowing that is to consist of Eurodollar Margin Bid Loans; provided, however, that any Competitive Bid submitted by Wells Fargo in its capacity as a Lender in response to any Bid Request must be submitted to the Administrative Agent not later than 11:15 A.M. (Minneapolis time) on the date on which Competitive Bids are required to be delivered by the other Lenders in response to such Bid Request. Each Competitive Bid shall specify (A) the proposed date of the Bid Borrowing; (B) the principal amount of each Bid Loan for which such Competitive Bid is being made, which principal amount (x) may be equal to, greater than or less than the Commitment of the bidding Lender, (y) must be in a minimum amount of $5,000,000 and a multiple of $1,000,000 in excess thereof, and (z) may not exceed the principal amount of Bid Loans for which Competitive Bids were requested; (C) if the proposed Bid Borrowing is to consist of Absolute Rate Loans, the Absolute Rate offered for each such Bid Loan and the Interest Period applicable thereto; (D) if the proposed Bid Borrowing is to consist of Eurodollar Margin Bid Loans, the Eurodollar Bid Margin with respect to each such Eurodollar Margin Bid Loan and the Interest Period applicable thereto; and (E) the identity of the bidding Lender. (iii) Any Competitive Bid shall be disregarded if it (A) is received after the applicable time specified in subsection (ii) above, (B) is not substantially in the form of a Competitive Bid as specified herein, (C) contains qualifying, conditional or similar language, (D) proposes terms other than or in addition to those set forth in the applicable Bid Request, or (E) is otherwise not responsive to such Bid Request. Any Lender may 26
  • correct a Competitive Bid containing a manifest error by submitting a corrected Competitive Bid (identified as such) not later than the applicable time required for submission of Competitive Bids. Any such submission of a corrected Competitive Bid shall constitute a revocation of the Competitive Bid that contained the manifest error. The Administrative Agent may, but shall not be required to, notify any Lender of any manifest error it detects in such Lender’s Competitive Bid. (iv) Subject only to the provisions of subsections 2.6B, 2.6C and 4.2 and subsection (iii) above, each Competitive Bid shall be irrevocable. (d) Notice to Borrower of Competitive Bids. Not later than 12:00 noon (Minneapolis time) (i) on the requested date of any Bid Borrowing that is to consist of Absolute Rate Loans, or (ii) three Business Days prior to the requested date of any Bid Borrowing that is to consist of Eurodollar Margin Bid Loans, the Administrative Agent shall notify Company of the identity of each Lender that has submitted a Competitive Bid that complies with subsection 2.1A(iii)(c) and of the terms of the offers contained in each such Competitive Bid. (e) Acceptance of Competitive Bids. Not later than 12:30 P.M. (Minneapolis time) (i) on the requested date of any Bid Borrowing that is to consist of Absolute Rate Loans, and (ii) three Business Days prior to the requested date of any Bid Borrowing that is to consist of Eurodollar Margin Bid Loans, Company shall notify the Administrative Agent of its acceptance or rejection of the offers notified to it pursuant to subsection 2.1A(iii) (d). Company shall be under no obligation to accept any Competitive Bid and may choose to reject all Competitive Bids. In the case of acceptance, such notice shall specify the aggregate principal amount of Competitive Bids for each Interest Period that is accepted. Company may accept any Competitive Bid in whole or in part; provided that: (i) the aggregate principal amount of each Bid Borrowing may not exceed the applicable amount set forth in the related Bid Request; (ii) the principal amount of each Bid Loan must be $5,000,000 and a multiple of $1,000,000 in excess thereof; (iii) the acceptance of offers may be made only on the basis of ascending Absolute Rates or Eurodollar Bid Margins within each Interest Period; and (iv) Company may not accept any offer that is described in subsection 2.1A(iii)(c)(iii) or that otherwise fails to comply with the requirements hereof. (f) Procedure for Identical Bids. If two or more Lenders have submitted Competitive Bids at the same Absolute Rate or Eurodollar Bid Margin, 27
  • as the case may be, for the same Interest Period, and the result of accepting all of such Competitive Bids in whole (together with any other Competitive Bids at lower Absolute Rates or Eurodollar Bid Margins, as the case may be, accepted for such Interest Period in conformity with the requirements of subsection 2.1A(iii)(e)(iii)) would be to cause the aggregate outstanding principal amount of the applicable Bid Borrowing to exceed the amount specified therefor in the related Bid Request, then, unless otherwise agreed by Company, the Administrative Agent and such Lenders, such Competitive Bids shall be accepted as nearly as possible in proportion to the amount offered by each such Lender in respect of such Interest Period, with such accepted amounts being rounded to the nearest whole multiple of $1,000,000. (g) Notice to Lenders of Acceptance or Rejection of Bids. The Administrative Agent shall promptly notify each Lender having submitted a Competitive Bid whether or not its offer has been accepted and, if its offer has been accepted, of the amount of the Bid Loan or Bid Loans to be made by it on the date of the applicable Bid Borrowing. Any Competitive Bid or portion thereof that is not accepted by Company by the applicable time specified in subsection 2.1A(iii)(e) shall be deemed rejected. (h) Notice of Eurodollar Base Rate. If any Bid Borrowing is to consist of Eurodollar Margin Loans, the Administrative Agent shall determine the Eurodollar Base Rate for the relevant Interest Period, and promptly after making such determination, shall notify Company and the Lenders that will be participating in such Bid Borrowing of such Eurodollar Base Rate. (i) Funding of Bid Loans. Each Lender that has received notice pursuant to subsection 2.1A(iii)(g) that all or a portion of its Competitive Bid has been accepted by Company shall make the amount of its Bid Loan(s) available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 2:00 P.M. (Minneapolis time) on the date of the requested Bid Borrowing. Upon satisfaction of the applicable conditions set forth in subsection 4.2, the Administrative Agent shall make all funds so received available to Company in like funds as received by the Administrative Agent. (j) Notice of Range of Bids. After each Competitive Bid auction pursuant to this subsection 2.1A (iii), the Administrative Agent shall notify each Lender that submitted a Competitive Bid in such auction of the ranges of bids submitted (without the bidder’s name) and accepted for each Bid Loan and the aggregate amount of each Bid Borrowing. Borrowing Mechanics. Revolving Loans made on any Funding Date (other than Swing Line Loans, B. Revolving Loans made pursuant to a request by Swing Line Lender pursuant to subsection 2.1A(ii) or Revolving Loans made pursuant to subsection 3.3B) shall be in an aggregate minimum amount of $5,000,000 and multiples of $1,000,000 in excess of that amount. Swing Line Loans made on any Funding Date shall be in an aggregate minimum amount of $1,000,000 and multiples of $500,000 in excess of that amount. Whenever Company 28
  • desires that Lenders make Revolving Loans it shall deliver to Administrative Agent a duly executed Notice of Revolving Borrowing no later than 1:00 P.M. (Minneapolis time) at least three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan). Whenever Company desires that Swing Line Lender make a Swing Line Loan, it shall deliver to Administrative Agent a duly executed Notice of Revolving Borrowing no later than 1:00 P.M. (Minneapolis time) on the proposed Funding Date. Revolving Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of delivering a Notice of Revolving Borrowing, Company may give Administrative Agent telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; provided that such notice shall be promptly confirmed in writing by delivery of a duly executed Notice of Revolving Borrowing to Administrative Agent on or before the applicable Funding Date. Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by an Officer or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B or under subsection 2.2D, and upon funding of Loans by Lenders, and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Loans pursuant to subsection 2.2D, in each case in accordance with this Agreement, pursuant to any such telephonic notice Company shall have effected Loans or a conversion or continuation, as the case may be, hereunder. Company shall notify Administrative Agent prior to the funding of any Revolving Loans in the event that any of the matters to which Company is required to certify in the applicable Notice of Revolving Borrowing is no longer true and correct as of the applicable Funding Date, and the acceptance by Company of the proceeds of any Revolving Loans shall constitute a re- certification by Company, as of the applicable Funding Date, as to the matters to which Company is required to certify in the applicable Notice of Revolving Borrowing. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Revolving Borrowing for, or a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing or to effect a conversion or continuation in accordance therewith. Disbursement of Funds. All Revolving Loans shall be made by Lenders simultaneously and C. proportionately to their respective Pro Rata Shares, it being understood that neither Administrative Agent nor any Lender shall be responsible for any default by any other Lender in that other Lender’s obligation to make a Revolving Loan requested hereunder nor shall the amount of the Commitment of any Lender to make the particular Type of Loan requested be increased or decreased as a result of a default by any other Lender in that other Lender’s obligation to make a Revolving Loan requested hereunder. Promptly after receipt by Administrative Agent of a Notice of Revolving Borrowing pursuant to subsection 2.1A (or telephonic notice in lieu thereof), Administrative Agent shall notify each Lender for that Type of Loan or Swing Line Lender, as the case may be, of the proposed borrowing. Each such Lender 29
  • (other than Swing Line Lender) shall make the amount of its Revolving Loan available to Administrative Agent not later than 1:00 P.M. (Minneapolis time) on the applicable Funding Date, and Swing Line Lender shall make the amount of its Swing Line Loan available to Administrative Agent not later than 3:00 P.M. (Minneapolis time) on the applicable Funding Date, in each case in same day funds in Dollars, at the Funding and Payment Office. Except as provided in subsection 2.1A(ii) and subsection 3.3B with respect to Revolving Loans used to repay Refunded Swing Line Loans or to reimburse any Issuing Lender for the amount of a drawing under a Letter of Credit issued by it, upon satisfaction or waiver of the conditions precedent specified in subsections 4.1 and 4.2, Administrative Agent shall make the proceeds of such Revolving Loans available to Company on the applicable Funding Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Revolving Loans received by Administrative Agent from Lenders to be credited to the account of Company at the Funding and Payment Office. Unless Administrative Agent shall have been notified by any Lender prior to a Funding Date that such Lender does not intend to make available to Administrative Agent the amount of such Lender’s Revolving Loan requested on such Funding Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Funding Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent’s demand therefor, Administrative Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. The Register. Administrative Agent, acting for these purposes solely as an agent of Company (it being D. acknowledged that Administrative Agent, in such capacity, and its officers, directors, employees, agent and affiliates shall constitute Indemnitees under subsection 10.3), shall maintain (and make available for inspection by Company and by each Lender, but only as to information regarding the Loans made by such Lender, upon reasonable prior notice at reasonable times) at its address referred to in subsection 10.8 a register for the recordation of, and shall record, the names and addresses of Lenders and the respective amounts of the Revolving Loan Commitment, Swing Line Loan Commitment, Revolving Loans and Swing Line Loans of each Lender from time to time (the “Register”). Company, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof; all amounts owed with respect to any Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof; and any request, authority or consent of any Person who, at the 30
  • time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. Each Lender shall record on its internal records the amount of its Loans and Commitments and each payment in respect hereof, and any such recordation shall be conclusive and binding on Company, absent manifest error, subject to the entries in the Register, which shall, absent manifest error, govern in the event of any inconsistency with any Lender’s records. Failure to make any recordation in the Register or in any Lender’s records, or any error in such recordation, shall not affect any Loans or Commitments or any Obligations in respect of any Loans. Optional Notes. If so requested by any Lender by written notice to Company (with a copy to E. Administrative Agent) at least two Business Days prior to the Closing Date or at any time thereafter, Company shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to subsection 10.1) on the Closing Date (or, if such notice is delivered after the Closing Date, promptly after Company’s receipt of such notice) a promissory note or promissory notes to evidence such Lender’s Revolving Loans or Swing Line Loans, substantially in the form of Exhibit IV or Exhibit V annexed hereto, respectively, with appropriate insertions. 2.2 Interest on the Loans. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7, each Revolving Loan shall bear A. interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate or the Eurodollar Rate. Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate. The applicable basis for determining the rate of interest with respect to any Revolving Loan shall be selected by Company initially at the time a Notice of Revolving Borrowing is given with respect to such Loan pursuant to subsection 2.1B, and the basis for determining the interest rate with respect to any Revolving Loan may be changed from time to time pursuant to subsection 2.2D. If on any day a Revolving Loan is outstanding with respect to which notice has not been delivered to Administrative Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Base Rate. (i) Subject to the provisions of subsections 2.2E, 2.2G and 2.7, the Revolving Loans shall bear interest through maturity as follows: (a) if a Base Rate Loan, then at the Base Rate; or (b) if a Eurodollar Rate Loan, then at the sum of the Eurodollar Rate plus the Eurodollar Rate Margin. (ii) Each Bid Loan shall bear interest on the outstanding principal amount thereof for the Interest Period therefor at a rate per annum equal to the Eurodollar Rate 31
  • for such Interest Period plus (or minus) the Eurodollar Bid Margin, or at the Absolute Rate for such Interest Period, as the case may be. (iii) Subject to the provisions of subsections 2.2E, 2.2G and 2.7, the Swing Line Loans shall bear interest through maturity at the Base Rate. Interest Periods. In connection with each Eurodollar Rate Loan or Bid Request, Company may, pursuant B. to the applicable Notice of Revolving Borrowing, Notice of Conversion/Continuation or Bid Request, as the case may be, select an interest period (each an “Interest Period”) to be applicable to such Loan, which Interest Period shall be, at Company’s option, (a) as to each Eurodollar Rate Revolving Loan, the period commencing on the date such Eurodollar Rate Revolving Loan is disbursed or converted to or continued as a Eurodollar Rate Revolving Loan and ending on the date one, two, three or six months thereafter, as selected by Company in its Notice of Revolving Borrowing or nine or twelve months if requested by Company and available to all the Lenders; and (b) as to each Bid Loan, a period of not less than 7 days and not more than 360 days as selected by Company in its Bid Request; provided that: (i) the initial Interest Period for any Eurodollar Rate Loan shall commence on the Funding Date in respect of such Loan, in the case of a Loan initially made as a Eurodollar Rate Loan, or on the date specified in the applicable Notice of Conversion/Continuation, in the case of a Loan converted to a Eurodollar Rate Revolving Loan; (ii) in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month; (v) no Interest Period with respect to any portion of the Revolving Loans or any Bid Loans shall extend beyond the Revolving Loan Commitment Termination Date; (vi) there shall be no more than seven Interest Periods with respect to Revolving Loans outstanding at any time; and (vii) in the event Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Notice of Revolving Borrowing or Notice of 32
  • Conversion/Continuation, Company shall be deemed to have selected an Interest Period of one month. Interest Payments. Subject to the provisions of subsection 2.2E, interest on each Loan shall be payable C. in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity); provided that, in the event any Swing Line Loans or any Revolving Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4A(i), interest accrued on such Loans through the date of such prepayment shall be payable on the next succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity). Conversion or Continuation. Subject to the provisions of subsection 2.6, Company shall have the option D. (i) to convert at any time all or any part of its outstanding Revolving Loans equal to $1,000,000 and multiples of $100,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Revolving Loan, to continue all or any portion of such Loan equal to $1,000,000 and multiples of $1,000,000 in excess of that amount as a Eurodollar Rate Revolving Loan; provided, however, that a Eurodollar Rate Revolving Loan may only be converted into a Base Rate Loan on the expiration date of an Interest Period applicable thereto. Company shall deliver a duly executed Notice of Conversion/Continuation to Administrative Agent no later than 1:00 P.M. (Minneapolis time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Revolving Loan). In lieu of delivering a Notice of Conversion/Continuation, Company may give Administrative Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2D; provided that such notice shall be promptly confirmed in writing by delivery of a duly executed Notice of Conversion/Continuation to Administrative Agent on or before the proposed conversion/continuation date. Administrative Agent shall notify each Lender of any Loan subject to a Notice of Conversion/Continuation. Default Rate. Upon the occurrence and during the continuation of any Event of Default, the outstanding E. principal amount of all Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand by Administrative Agent at a rate that is 2% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 33
  • 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender. Computation of Interest. Except as may be provided with respect to a Bid Loan, interest on the Loans F. shall be computed on the basis of a 365-day year (or a 366-day year in case of a leap year) with respect to Base Rate Loans bearing interest based on the Prime Rate and otherwise a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Revolving Loan, the date of conversion of such Eurodollar Rate Revolving Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Revolving Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan. Maximum Rate. Notwithstanding the foregoing provisions of this subsection 2.2, in no event shall the G. rate of interest payable by Company with respect to any Loan exceed the maximum rate of interest permitted to be charged under applicable law. 2.3 Fees. Facility Fee. Company shall pay to the Administrative Agent for the account of each Lender in A. accordance with its Pro Rata Share, a facility fee equal to the Applicable Margin times the actual daily amount of the Revolving Loan Commitment Amount (or, if the Revolving Loan Commitment Amount has terminated, on the Total Utilization of Revolving Loan Commitments), regardless of usage. The facility fee shall accrue at all times from the Closing Date to the Revolving Loan Commitment Termination Date (and thereafter so long as any Loans or Letter of Credit Usage remain outstanding), including at any time during which one or more of the conditions in subsection 4.2 is not met, and shall be due and payable in arrears on and to (but excluding) the last Business Day of each March, June, September and December of each year and on the Revolving Loan Commitment Termination Date (and, if applicable, thereafter on demand). The facility fee and utilization fee referred to in subsection 2.3B shall be calculated quarterly in arrears, and if there is any change in the Applicable Margin during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Margin separately for each period during such quarter that such Applicable Margin was in effect. Utilization Fee. Company agrees to pay to the Administrative Agent for the pro rata account of each B. Lender, in accordance with such Lender’s Loans, a utilization fee for each quarter during which the average daily Total Utilization of Revolving Loan Commitments for such quarter is greater than 50% of the Revolving Loan Commitment Amount. The utilization fee shall accrue at all such times, including at any time during which one or more of the conditions in subsection 4.2 is not met. If applicable, such utilization fee shall be equal to the Applicable Margin times the average daily Total Utilization of Revolving Loan Commitments during such quarter, due and payable in arrears on the last Business Day of each March, June, 34
  • September and December of each year and on the Revolving Loan Commitment Termination Date (and, if applicable, thereafter on demand). Other Fees. Company agrees to pay to the Agents such fees in the amounts and at the times separately C. agreed upon between Company and the Agents. 2.4 Repayments, Prepayments and Reductions of Revolving Loan Commitment Amount; General Provisions Regarding Payments. A. Prepayments and Reductions in Revolving Loan Commitment Amount. (i) Voluntary Prepayments. Company may, upon written or telephonic notice to Administrative Agent on or prior to 12:00 noon (Minneapolis time) on the date of prepayment, which notice, if telephonic, shall be promptly confirmed in writing, at any time and from time to time prepay, without premium or penalty, any Swing Line Loan on any Business Day in whole or in part in an aggregate minimum amount of $1,000,000 and multiples of $500,000 in excess of that amount. Company may, upon not less than one Business Day’s prior written or telephonic notice, in the case of Base Rate Loans, and three Business Days’ prior written or telephonic notice, in the case of Eurodollar Rate Loans, in each case given to Administrative Agent by 12:00 noon (Minneapolis time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent, who will promptly notify each Lender whose Loans are to be prepaid of such prepayment, at any time and from time to time prepay, without premium or penalty, any Revolving Loans on any Business Day in whole or in part in an aggregate minimum amount of $5,000,000 and multiples of $1,000,000 in excess of that amount. Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4A(iv) and, in the case of Eurodollar Rate Loans, shall be subject to subsection 2.6D. (ii) Voluntary Reductions of Revolving Loan Commitments. Company may, upon not less than three Business Days’ prior written or telephonic notice confirmed in writing to Administrative Agent, or upon such lesser number of days’ prior written or telephonic notice, as determined by Administrative Agent in its sole discretion, at any time and from time to time, terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Loan Commitment Amount in an amount up to the amount by which the Revolving Loan Commitment Amount exceeds the Total Utilization of Revolving Loan Commitments at the time of such proposed termination or reduction; provided that any such partial reduction of the Revolving Loan Commitment Amount shall be in an aggregate minimum amount of $1,000,000 and multiples of $100,000 in excess of that amount. Company’s notice to Administrative Agent (who will promptly notify each Lender of such notice) shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction shall be effective on the date specified in Company’s notice and shall reduce the amount of the Revolving Loan Commitment of each Lender 35
  • proportionately to its Pro Rata Share. Any such voluntary reduction of the Revolving Loan Commitment Amount shall be applied as specified in subsection 2.4A(iv). (iii) Mandatory Prepayments Due to Reductions of Revolving Loan Commitment Amount. Company shall from time to time prepay first the Swing Line Loans, second the Revolving Loans and third the Bid Loans (and, after prepaying all Loans, Cash collateralize any outstanding Letters of Credit by depositing the requisite amount with the Issuing Lender) to the extent necessary so that the Total Utilization of Revolving Loan Commitments shall not at any time exceed the Revolving Loan Commitment Amount then in effect. At such time as the Total Utilization of Revolving Loan Commitments shall be equal to or less than the Revolving Loan Commitment Amount if no Event of Default has occurred and is continuing, to the extent any Cash collateral was provided by Company and has not been applied to any Obligations, such amount shall be released to Company. (iv) Application of Prepayments. (a) Application of Voluntary Prepayments by Type of Loans and Order of Maturity. Any voluntary prepayments pursuant to subsection 2.4A(i) shall be applied as specified by Company in the applicable notice of prepayment; provided that in the event Company fails to specify the Loans to which any such prepayment shall be applied, such prepayment shall be applied first to repay outstanding Swing Line Loans to the full extent thereof, and second to repay outstanding Revolving Loans to the full extent thereof. (b) Application of Mandatory Prepayments by Type of Loans. Any mandatory reduction of the Revolving Loan Commitment Amount pursuant to this subsection 2.4A shall be in proportion to each Lender’s Pro Rata Share. (c) Application of Prepayments to Base Rate Loans and Eurodollar Rate Loans. Considering Revolving Loans being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner that minimizes the amount of any payments required to be made by Company pursuant to subsection 2.6D. (v) No Bid Loan may be prepaid without the prior consent of the applicable Bid Loan Lender. B. General Provisions Regarding Payments. (i) Manner and Time of Payment. All payments by Company of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 2:00 P.M. (Minneapolis time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. 36
  • (ii) Application of Payments to Principal and Interest. Except as provided in subsection 2.2C, all payments in respect of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments shall be applied to the payment of interest before application to principal. (iii) Apportionment of Payments. Aggregate payments of principal and interest shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders’ respective Pro Rata Shares or, in the case of Bid Loans, for the account of the respective Lenders entitled to such payments. Administrative Agent shall promptly distribute to each Lender, at the account specified in the payment instructions delivered to Administrative Agent by such Lender, its Pro Rata Share of all such payments received by Administrative Agent and fees of such Lender, if any, when received by Administrative Agent pursuant to subsections 2.3 and 3.2. Notwithstanding the foregoing provisions of this subsection 2.4B(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Revolving Loans, Administrative Agent shall give effect thereto in apportioning interest payments received thereafter. (iv) Payments on Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be. Payments after Event of Default. Upon the occurrence and during the continuation of an Event of C. Default, if requested by Requisite Lenders, or upon acceleration of the Obligations pursuant to Section 8, all payments received by Administrative Agent, whether from Company or otherwise may, in the discretion of Administrative Agent, be held by Administrative Agent, and/or (then or at any time thereafter) shall be applied in full or in part by Administrative Agent, in each case in the following order of priority: (i) to the payment of all costs and expenses of such sale, collection or other realization, all other expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, and all amounts for which Administrative Agent is entitled to compensation (including the fees described in subsection 2.3C), reimbursement and indemnification under any Loan Document and all advances made by Administrative Agent thereunder for the account of Company, and to the payment of all costs and expenses paid or incurred by Administrative Agent in connection with the Loan Documents, all in accordance with subsections 9.4, 10.2 and 10.3 and the other terms of this Agreement and the Loan Documents; (ii) thereafter, to the payment of all other Obligations for the ratable benefit of the holders thereof (subject to the provisions of subsection 2.4B(ii) hereof); and 37
  • (iii) thereafter, to the payment to or upon the order of Company or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. 2.5 Use of Proceeds. Loans. The proceeds of any Loans may be applied by Company for working capital or any other general A. corporate purposes. Margin Regulations. No portion of the proceeds of any borrowing under this Agreement shall be used by B. Company or any of its Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.6 Special Provisions Governing Eurodollar Rate Loans. Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: Determination of Applicable Interest Rate. On each Interest Rate Determination Date, Administrative A. Agent shall determine in accordance with the terms of this Agreement (which determination shall, absent manifest error, be conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Revolving Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each applicable Lender. Inability to Determine Applicable Interest Rate. In the event that Administrative Agent shall have B. determined (which determination shall be conclusive and binding upon all parties hereto), on any Interest Rate Determination Date that by reason of circumstances affecting the interbank Eurodollar market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Revolving Loans until such time as Administrative Agent notifies Company and Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice of Revolving Borrowing or Notice of Conversion/Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be for a Base Rate Loan. C. Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined (which determination shall be conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, 38
  • treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank Eurodollar market or the position of such Lender in that market, then, and in any such event, such Lender shall be an “Affected Lender” and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and Administrative Agent of such determination. Administrative Agent shall promptly notify each other Lender of the receipt of such notice. Thereafter (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Revolving Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Revolving Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender’s obligation to maintain its outstanding Eurodollar Rate Loans (the “Affected Loans”) shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Revolving Borrowing, Bid Request or a Notice of Conversion/Continuation, Company shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of Revolving Borrowing, Bid Request or Notice of Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above. Administrative Agent shall promptly notify each other Lender of the receipt of such notice. Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement. Compensation For Breakage or Non-Commencement of Interest Periods. Company shall compensate D. each Lender, upon written request by that Lender pursuant to subsection 2.8A, for all reasonable losses, expenses and liabilities (including any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Revolving Borrowing or a telephonic request therefor, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a telephonic request therefor, (ii) if any prepayment or other principal payment or any conversion of any of its Eurodollar Rate Loans (including any prepayment or conversion occasioned by the circumstances described in subsection 2.6C) occurs on a date prior to the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company, or (iv) as a consequence of any other default by Company in the repayment of its Eurodollar Rate Loans on a date prior to the last day 39
  • of the Interest Period therefor. Breakage cost loss shall consist of an amount equal to the excess, if a positive number, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Rate Loans provided for herein (excluding, however, the Eurodollar Rate Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, E. to, or for the account of any of its branch offices or the office of an Affiliate of that Lender. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a F. Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had funded each of its Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period, whether or not its Eurodollar Rate Loans had been funded in such manner. Eurodollar Rate Loans After Default. After the occurrence of and during the continuation of an Event G. of Default, (i) Company may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of Revolving Borrowing or Notice of Conversion/Continuation given by Company with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed to be for a Base Rate Loan or, if the conditions to making a Loan set forth in subsection 4.2 cannot then be satisfied, to be rescinded by Company. 2.7 Increased Costs; Taxes; Capital Adequacy. Compensation for Increased Costs. Subject to the provisions of subsection 2.7B (which shall be A. controlling with respect to the matters covered thereby including, for the avoidance of doubt, Excluded Taxes), in the event that any Lender (including any Issuing Lender) shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any Change in Law: (i) subjects such Lender to any additional tax of any kind whatsoever with respect to this Agreement or any of its obligations hereunder (including with respect to issuing or maintaining any Letters of Credit or purchasing or maintaining any participations therein or maintaining any Commitment hereunder) or any payments to such Lender of principal, interest, fees or any other amount payable hereunder (except for the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender); 40
  • (ii) imposes, modifies or holds applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Eurodollar Rate); or (iii) imposes any other condition (other than with respect to Taxes) on or affecting such Lender or its obligations hereunder or the interbank Eurodollar market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining its Loans or Commitments or agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Lender with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the statement referred to in subsection 2.8A, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion may reasonably determine) as may be necessary to compensate such Lender on an after-tax basis for any such increased cost or reduction in amounts received or receivable hereunder. Company shall not be required to compensate a Lender pursuant to this subsection 2.7A for any increased cost or reduction in respect of a period occurring more than 90 days prior to the date on which such Lender notifies Company of such Change in Law and such Lender’s intention to claim compensation therefor, except, if the Change in Law giving rise to such increased cost or reduction is retroactive, no such 90 day time limitation shall apply to such period of retroactivity, so long as such Lender requests compensation within 90 days from the date on which such Lender obtained actual knowledge of such Change in Law. B. Taxes. (i) Payments to Be Free and Clear. Any and all payments by or on account of any obligation of Company under this Agreement and the other Loan Documents (except as required by law) shall be made free and clear of, and without any deduction or withholding on account of, any Indemnified Taxes. (ii) Grossing-up of Payments. If Company or any other Person is required by law to make any deduction or withholding on account of any Tax from any sum paid or payable by Company to Administrative Agent or any Lender under any of the Loan Documents: (a) Company shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Company becomes aware of it; (b) Company shall timely pay any such Tax to the relevant Government Authority when such Tax is due, in accordance with applicable law; (c) unless such Tax is an Excluded Tax, the sum payable by Company shall be increased to the extent necessary to ensure that, after making the required 41
  • deductions (including deductions applicable to additional sums payable under this subsection 2.7B(ii)), Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to the sum it would have received had no such deduction been required or made; and (d) within 30 days after the due date of payment of any Tax which it is required by clause (b) above to pay, Company shall deliver to Administrative Agent the original or a certified copy of an official receipt or other document that provides reasonable evidence the payment and its remittance to the relevant Government Authority. (iii) Indemnification by Company. Company shall indemnify Administrative Agent and each Lender, within 30 days after the date Administrative Agent or such Lender (as the case may be) makes written demand therefor, for the full amount of any Indemnified Taxes (including for the full amount of any Indemnified Taxes imposed or asserted on or attributable to amounts payable under this subsection 2.7B(iii)) paid by Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Government Authority. A certificate as to the amount of such payment or liability delivered to Company by a Lender (with a copy to Administrative Agent), or by Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (iv) Tax Status of Lenders. Unless not legally entitled to do so: (a) any Foreign Lender shall deliver two (2) copies to Company and Administrative Agent on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter, as may be necessary in the determination of Company or Administrative Agent, each in the reasonable exercise of its discretion), of either: (1) properly completed and duly executed copies of Internal Revenue Service Form W- 8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party, or (2) properly completed and duly executed copies of Internal Revenue Service Form W- 8ECI, or (3) in the case of a Foreign Lender claiming the benefits of the exemption for “portfolio interest” under Section 881(c) of the Internal Revenue Code, (A) a duly executed certificate to the effect that such Foreign Lender is not (i) a “bank” within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (ii) a ten-percent shareholder (within the meaning of Section 881(c)(3)(B) of the Internal Revenue Code) of Company or (iii) a controlled foreign corporation described in Section 881(c)(3)(C) of the Internal Revenue Code and (B) properly 42
  • completed and duly executed copies of Internal Revenue Service Form W-8BEN, in each case together with properly completed and duly executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in any Tax and such supplementary documentation as may be prescribed by applicable law to permit Company and Administrative Agent to determine the withholding or deduction required to be made, if any; (b) any Lender that is not a Foreign Lender and has not otherwise established to the reasonable satisfaction of Company and Administrative Agent that it is an exempt recipient (as defined in section 6049(b)(4) of the Internal Revenue Code and the United States Treasury Regulations thereunder) shall deliver to Company and Administrative Agent two (2) copies on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter as prescribed by applicable law or upon the request of Company or Administrative Agent), duly executed and properly completed copies of Internal Revenue Service Form W-9; and (c) each Lender hereby agrees, from time to time after the initial delivery by such Lender of such forms, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence so delivered obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent and Company two original copies of renewals, amendments or additional or successor forms, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is entitled to an exemption from or reduction of any Tax with respect to payments to such Lender under the Loan Documents and, if applicable, that such Lender does not act for its own account with respect to any portion of such payment, or (2) notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence. (v) Refunds. If Company believes that a Lender or Administrative Agent shall be entitled to a refund for any Indemnified Tax that Company has paid hereunder, it shall notify such Lender or Administrative Agent, as applicable, in writing of the availability of such refund and such Lender or Administrative Agent shall, within 30 days after the receipt of a request from Company, apply for such refund at Company’s sole expense. If Company has paid any Indemnified Taxes pursuant to this subsection 2.7B and any Lender or Administrative Agent at any time thereafter receives, in its sole judgment, a refund of such Indemnified Taxes (whether by receipt of a payment or direct offset for other such Taxes due), then such Lender or Administrative Agent shall promptly pay to Company the amount of such refund or credit (net of all expenses incurred by such Lender or Administrative Agent to obtain such refund and without interest, except for the after-Tax amount of any interest paid by the relevant Government Authority with respect to the refund); provided, however, that under no circumstances shall any Lender or Administrative Agent be required to make a payment under this 43
  • subsection 2.7B(v) to the extent the after-Tax proceeds that such Lender or Administrative Agent receives under this Agreement or any other Loan Document (determined after any payment required under this subsection 2.7B(v)) is less than the after-Tax proceeds that such Lender or Administrative Agent would have received (as determined by such Lender or Administrative Agent in its sole judgment) had no Indemnified Taxes been imposed on the relevant payment hereunder. If a Lender or Administrative Agent makes a payment to Company under this subsection 2.7B(v) and such Lender or Administrative Agent is required to repay such refund to any Government Authority, Company agrees to repay the amount paid over to Company under this subsection 2.7B(v) (plus any penalties, interest, and other related charges imposed on such Lender or Administrative Agent by the applicable Government Authority with respect to the repayment of such refund). Capital Adequacy Adjustment. If any Lender shall have determined that any Change in Law regarding C. capital adequacy has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender’s Loans or Commitments or Letters of Credit or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such Change in Law (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within ten Business Days after receipt by Company from such Lender of the statement referred to in subsection 2.8A, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. Company shall not be required to compensate a Lender pursuant to this subsection 2.7C for any reduction in respect of a period occurring more than 90 days prior to the date on which such Lender notifies Company of such Change in Law and such Lender’s intention to claim compensation therefor, except, if the Change in Law giving rise to such reduction is retroactive, no such 90 day time limitation shall apply to such period of retroactivity, so long as such Lender requests compensation within 90 days from the date on which such Lender obtained actual knowledge of such Change in Law. 2.8 Statement of Lenders; Obligation of Lenders and Issuing Lenders to Mitigate. Statements. Each Lender claiming compensation or reimbursement pursuant to subsection 2.6D, 2.7 or A. 2.8B shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such compensation or reimbursement, which statement shall be conclusive and binding upon all parties hereto absent manifest error. Mitigation. Each Lender and Issuing Lender agrees that, as promptly as practicable after the officer of B. such Lender or Issuing Lender responsible for administering the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender or Issuing Lender to receive payments under subsection 2.7, it will use reasonable efforts to make, issue, fund or maintain the 44
  • Commitments of such Lender or the Loans or Letters of Credit of such Lender or Issuing Lender through another lending or letter of credit office of such Lender or Issuing Lender, if (i) as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7 would be materially reduced and (ii) as determined by such Lender or Issuing Lender in its good faith, reasonable judgment, such action would not otherwise be disadvantageous to such Lender or Issuing Lender; provided that such Lender or Issuing Lender will not be obligated to utilize such other lending or letter of credit office pursuant to this subsection 2.8B unless Company agrees to pay all incremental expenses incurred by such Lender or Issuing Lender as a result of utilizing such other lending or letter of credit office as described above. 2.9 Replacement of a Lender. If (i) Company receives a statement of amounts due pursuant to subsection 2.8A from a Lender (other than for breakage costs under subsection 2.6D), (ii) a Lender is a Defaulting Lender, (iii) a Lender (a “Non-Consenting Lender”) refuses to consent to an amendment, modification or waiver of this Agreement that, pursuant to subsection 10.6, requires consent of 100% of the Lenders or 100% of the Lenders with Obligations directly affected or (iv) a Lender becomes an Affected Lender (any such Lender, a “Subject Lender”), so long as (i) no Event of Default shall have occurred and be continuing and Company has obtained a commitment from another Lender or an Eligible Assignee to purchase at par the Subject Lender’s Loans and assume the Subject Lender’s Commitments and all other obligations of the Subject Lender hereunder, (ii) such Lender is not an Issuing Lender with respect to any Letters of Credit outstanding (unless all such Letters of Credit are terminated or arrangements reasonably acceptable to such Issuing Lender (such as a “back-to-back” letter of credit) are made) and (iii), if applicable, the Subject Lender is unwilling to withdraw the notice delivered to Company pursuant to subsection 2.8 upon 10 days prior written notice to the Subject Lender and Administrative Agent and/or is unwilling to remedy its default upon three days prior written notice to the Subject Lender and Administrative Agent, Company may require the Subject Lender to assign all of its Loans and Commitments to such other Lender, Lenders, Eligible Assignee or Eligible Assignees pursuant to the provisions of subsection 10.1B; provided that, prior to or concurrently with such replacement, (1) the Subject Lender shall have received payment in full of all principal, interest, fees and other amounts (including all amounts under subsections 2.6D, 2.7 and/or 2.8B (if applicable)) through such date of replacement and a release from its obligations under the Loan Documents, (2) the processing fee required to be paid by subsection 10.1B(i) shall have been paid to Administrative Agent by Company or the assignee, (3) all of the requirements for such assignment contained in subsection 10.1B, including, without limitation, the consent of Administrative Agent (if required) and the receipt by Administrative Agent of an executed Assignment Agreement and other supporting documents, have been fulfilled, and (4) in the event such Subject Lender is a Non-Consenting Lender, each assignee shall consent, at the time of such assignment, to each matter in respect of which such Subject Lender was a Non-Consenting Lender. 45
  • 2.10 Increase in Commitments. Request for Increase. Provided there exists no Potential Event of Default or Event of Default, upon A. notice to the Administrative Agent (which shall promptly notify the Lenders), Company may from time to time request an increase in the Revolving Loan Commitment Amount by an amount (for all such requests) not exceeding $250,000,000; provided that (i) the Revolving Loan Commitment Amount may not exceed $1,000,000,000; and provided further that any such request for an increase shall be in a minimum amount of $25,000,000 and in multiples of $5,000,000 in excess thereof and (ii) Company may not request more than two increases during any twelve month period. At the time of sending such notice, Company (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders). Lender Elections to Increase. Each Lender shall notify the Administrative Agent within such time B. period whether or not it agrees to increase its Revolving Loan Commitment and, if so, whether by an amount equal to, greater than, or less than its Pro Rata Share of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Revolving Loan Commitment. Notification by Administrative Agent; Additional Lenders. The Administrative Agent shall notify C. Company and each Lender of the Lenders’ responses to each request made hereunder. If the Lenders do not agree to the full amount of a requested increase, subject to the approval of the Administrative Agent and the Issuing Lender (which approvals shall not be unreasonably withheld or delayed), Company may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel. Effective Date and Allocations. If the Revolving Loan Commitment Amount is increased in accordance D. with this Section, the Administrative Agent and Company shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase. The Administrative Agent shall promptly notify Company and the Lenders of the final allocation of such increase, the Increase Effective Date and revised Pro Rata Shares. Conditions to Effectiveness of Increase. As a condition precedent to such increase, Company shall E. deliver to the Administrative Agent an Officer’s Certificate dated as of the Increase Effective Date (i) certifying and attaching the resolutions adopted by Company approving or consenting to such increase, and (ii) certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Section 5 and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and (B) no Potential Event of Default or Event of Default exists. Company shall prepay any Revolving Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to subsection 2.6D) to the extent necessary to keep the outstanding Revolving Loans ratable with any revised Pro Rata Shares arising from any nonratable increase in the Revolving Loan Commitments under this subsection. 46
  • Conflicting Provisions. This Section shall supersede any provisions in subsection 10.5 or 10.6 to the F. contrary. 2.11 Extension of Revolving Loan Commitment Termination Date. Prior to the Revolving Loan Commitment Termination Date, Company may request an extension of the Revolving Loan Commitment Termination Date by submitting a request for an extension to the Administrative Agent (an “Extension Request”) no earlier than 90 days, but no later than 60 days prior to either or both of the first and second anniversaries of the Closing Date. The Extension Request must specify the new Revolving Loan Commitment Termination Date requested by Company and the date (which must be at least 30 days after the Extension Request is delivered to the Administrative Agent) as of which the Lenders must respond to the Extension Request, which date shall not be less than 20 days prior to the applicable anniversary date (the “Response Date”). Promptly upon receipt of an Extension Request, the Agent shall notify each Lender of the contents thereof and shall request each Lender to approve the Extension Request. Each Lender may, in its sole and absolute discretion, approve or deny any Extension Request. Each Lender approving the Extension Request (an “Extending Lender”) shall deliver its written consent no later than the Response Date. The Administrative Agent shall provide written notice to Company of the Lenders’ response no later than 15 days prior to the applicable anniversary date. The Extending Lenders’ Revolving Loan Commitments (and the Revolving Loan Commitment Termination Date) shall be extended for one additional year after the Revolving Loan Commitment Termination Date in effect at the time the Extension Request is received, including the Revolving Loan Commitment Termination Date as one of the days in the calculation of the days elapsed; provided that at least 50% of the Revolving Loan Commitment Amount is extended or otherwise committed to by Extending Lenders and any new lenders. Otherwise, the Revolving Loan Commitment Termination Date shall not be extended. The Commitment of any Lender that declines an Extension Request or fails to approve an Extension Request on or prior to the Response Date (a “Declining Lender”) shall be terminated on the Revolving Loan Commitment Termination Date in effect at the time the Extension Request is received (without regard to any extension by other Lenders) and Company shall pay to such Declining Lender all principal, interest, fees and other amounts owing to such Declining Lender on the Revolving Loan Commitment Termination Date in effect at the time the Extension Request is received (without regard to any extension by other Lenders). Company shall have the right, on or prior to the applicable anniversary date, to replace any Declining Lender with a third party financial institution reasonably acceptable to the Administrative Agent and Company in the manner set forth in subsection 2.9. Section 3. LETTERS OF CREDIT 3.1 Issuance of Letters of Credit and Lenders’ Purchase of Participations Therein. Letters of Credit. Company may request, in accordance with the provisions of this subsection 3.1, from A. time to time during the period from the Effective Date to but excluding the Revolving Loan Commitment Termination Date, that one or more Lenders issue Letters of Credit for the account of Company for the general corporate purposes of 47
  • Company or a Subsidiary of Company. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, any one or more Lenders may, but (except as provided in subsection 3.1B(ii)) shall not be obligated to, issue such Letters of Credit in accordance with the provisions of this subsection 3.1; provided that Company shall not request that any Lender issue (and no Lender shall issue): (i) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Revolving Loan Commitments would exceed the Revolving Loan Commitment Amount then in effect; (ii) any Letter of Credit if, after giving effect to such issuance, the Letter of Credit Usage would exceed $50,000,000; (iii) any Letter of Credit having an expiration date later than the earlier of (a) five days prior to the Revolving Loan Commitment Termination Date and (b) the date which is one year from the date of issuance of such Letter of Credit; provided that the immediately preceding clause (b) shall not prevent any Issuing Lender from agreeing that a Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each unless such Issuing Lender elects not to extend for any such additional period; and provided, further that such Issuing Lender shall elect not to extend such Letter of Credit if it has knowledge that an Event of Default has occurred and is continuing (and has not been waived in accordance with subsection 10.6) at the time such Issuing Lender must elect whether or not to allow such extension; or (iv) any Letter of Credit denominated in a currency other than Dollars. Notwithstanding anything contained in this Agreement, no Issuing Lender shall be under any obligation to issue any Letter of Credit if (i) the Issuing Lender has received written notice that the conditions precedent set forth in subsection 4.3 have not been satisfied or (ii) a default of any Lender’s obligations to fund under subsection 3.3C exists or any Lender is at such time a Defaulting Lender hereunder, unless the Issuing Lender has entered into satisfactory arrangements with Company or such Lender to eliminate the Issuing Lender’s risk with respect to such Lender. B. Mechanics of Issuance. (i) Request for Issuance. Whenever Company desires the issuance of a Letter of Credit, it shall deliver to the proposed Issuing Lender (with a copy to Administrative Agent if Administrative Agent is not the proposed Issuing Lender) a Request for Issuance no later than 1:00 P.M. (Minneapolis time) at least five Business Days or such shorter period as may be agreed to by the Issuing Lender in any particular instance, in advance of the proposed date of issuance. The Issuing Lender, in its reasonable discretion, may require changes in the text of the proposed Letter of Credit or any documents described in or attached to the Request for Issuance. In furtherance of the provisions of subsection 10.8, and not in limitation thereof, Company may submit Requests for Issuance by telefacsimile and Administrative Agent and Issuing Lenders may rely and act upon any such Request for Issuance without receiving an original signed copy thereof. 48
  • Company shall notify the applicable Issuing Lender (and Administrative Agent, if Administrative Agent is not such Issuing Lender) prior to the issuance of any Letter of Credit in the event that any of the matters to which Company is required to certify in the applicable Request for Issuance is no longer true and correct as of the proposed date of issuance of such Letter of Credit, and upon the issuance of any Letter of Credit Company shall be deemed to have re-certified, as of the date of such issuance, as to the matters to which Company is required to certify in the applicable Request for Issuance. (ii) Determination of Issuing Lender. Upon receipt by a proposed Issuing Lender of a Request for Issuance pursuant to subsection 3.1B(i) requesting the issuance of a Letter of Credit, (a) in the event Administrative Agent is the proposed Issuing Lender, Administrative Agent shall be the Issuing Lender with respect to such Letter of Credit and shall issue such Letter of Credit, notwithstanding the fact that the Letter of Credit Usage with respect to such Letter of Credit and with respect to all other Letters of Credit issued by Administrative Agent, when aggregated with Administrative Agent’s outstanding Revolving Loans and Swing Line Loans, may exceed the amount of Administrative Agent’s Revolving Loan Commitment then in effect; and (b) in the event any other Lender is the proposed Issuing Lender, such Lender shall promptly notify Company and Administrative Agent whether or not, in its sole discretion, it has elected to issue such Letter of Credit, and (1) if such Lender so elects to issue such Letter of Credit it shall be the Issuing Lender with respect thereto and (2) if such Lender fails to so promptly notify Company and Administrative Agent or declines to issue such Letter of Credit, Company may request Administrative Agent or another Lender to be the Issuing Lender with respect to such Letter of Credit in accordance with the provisions of this subsection 3.1B. (iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in accordance with subsection 10.6) of the conditions set forth in subsection 4.3, the Issuing Lender shall issue the requested Letter of Credit in accordance with the Issuing Lender’s standard operating procedures. (iv) Notification to Lenders. Upon the issuance of or amendment to any Letter of Credit the applicable Issuing Lender shall promptly notify Administrative Agent and Company of such issuance or amendment in writing and such notice shall be accompanied by a copy of such Letter of Credit or amendment. Upon receipt of such notice (or, if Administrative Agent is the Issuing Lender, together with such notice), Administrative Agent shall notify each Lender in writing of such issuance or amendment and the amount of such Lender’s respective participation in such Letter of Credit or amendment, and, if so requested by a Lender, Administrative Agent shall provide such Lender with a copy of such Letter of Credit or amendment. In the event that Issuing Lender is other than Administrative Agent, such Issuing Lender will send by facsimile transmission to Administrative Agent, promptly upon the first Business Day of each week, a report of its daily aggregate maximum amount available for drawing under commercial Letters of Credit for the previous week. Upon receipt of such report, Administrative Agent shall notify each Lender in writing of the contents thereof. 49
  • Lenders’ Purchase of Participations in Letters of Credit. Immediately upon the issuance of each C. Letter of Credit, each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and any drawings honored thereunder in an amount equal to such Lender’s Pro Rata Share of the maximum amount that is or at any time may become available to be drawn thereunder. 3.2 Letter of Credit Fees. Company agrees to pay the following amounts with respect to Letters of Credit issued hereunder: (i) with respect to each Letter of Credit, (a) a fronting fee, payable directly to the applicable Issuing Lender for its own account, in an amount agreed to between Company and the applicable Issuing Lender and (b) a letter of credit fee, payable to Administrative Agent for the account of Lenders, equal to the applicable Eurodollar Rate Margin plus, for as long as any increased rates of interest apply pursuant to subsection 2.2E, 2% per annum, multiplied by the daily amount available to be drawn under such Letter of Credit, each such fronting fee or letter of credit fee to be payable in arrears on and to (but excluding) the last Business Day of each March, June, September and December of each year and computed on the basis of a 360-day year for the actual number of days elapsed; and (ii) with respect to the issuance, amendment or transfer of each Letter of Credit and each payment of a drawing made thereunder (without duplication of the fees payable under clause (i) above), documentary and processing charges payable directly to the applicable Issuing Lender for its own account in accordance with such Issuing Lender’s standard schedule for such charges in effect at the time of such issuance, amendment, transfer or payment, as the case may be. For purposes of calculating any fees payable under clause (i) of this subsection 3.2, the daily amount available to be drawn under any Letter of Credit shall be determined as of the close of business on any date of determination. 3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit. Responsibility of Issuing Lender With Respect to Drawings. In determining whether to honor any A. drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit. Reimbursement by Company of Amounts Paid Under Letters of Credit. In the event an Issuing B. Lender has determined to honor a drawing under a Letter of Credit issued by it, such Issuing Lender shall immediately notify Company and Administrative Agent, and Company shall reimburse such Issuing Lender on or before the Business Day immediately following the date on which such drawing is honored (the “Reimbursement Date”) in an amount in Dollars and in same day funds equal to the amount of such payment; provided that, anything contained in this Agreement to the contrary notwithstanding, (i) unless Company 50
  • shall have notified Administrative Agent and such Issuing Lender prior to 12:00 noon (Minneapolis time) on the date such drawing is honored that Company intends to reimburse such Issuing Lender for the amount of such payment with funds other than the proceeds of Revolving Loans, Company shall be deemed to have given a timely Notice of Revolving Borrowing to Administrative Agent requesting Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars equal to the amount of such payment and (ii) subject to satisfaction or waiver of the conditions specified in subsection 4.2, Lenders shall, on the Reimbursement Date, make Revolving Loans that are Base Rate Loans in the amount of such payment, the proceeds of which shall be applied directly by Administrative Agent to reimburse such Issuing Lender for the amount of such payment; and provided, further that if for any reason proceeds of Revolving Loans are not received by such Issuing Lender on the Reimbursement Date in an amount equal to the amount of such payment, Company shall reimburse such Issuing Lender, on demand, in an amount in same day funds equal to the excess of the amount of such payment over the aggregate amount of such Revolving Loans, if any, which are so received. Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its obligation to make Revolving Loans on the terms and conditions set forth in this Agreement, and Company shall retain any and all rights it may have against any Lender resulting from the failure of such Lender to make such Revolving Loans under this subsection 3.3B. During the continuance of an Event of Default, if Administrative Agent receives any Cash collateral in respect of any outstanding Letter of Credit, such Cash collateral shall be held by Administrative Agent for the ratable benefit of the Lenders. C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of Credit. (i) Payment by Lenders. In the event that Company shall fail for any reason to reimburse any Issuing Lender as provided in subsection 3.3B in an amount equal to the amount of any payment by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall promptly notify Administrative Agent, who shall promptly notify each Lender of the unreimbursed amount of such honored drawing and of such Lender’s respective participation therein based on such Lender’s Pro Rata Share (after giving effect to any Revolving Loans made by such Lender under subsection 3.3B in respect of such drawing). Each Lender (other than such Issuing Lender) shall make available to Administrative Agent an amount equal to its respective participation, in Dollars, in same day funds, at the Funding and Payment Office, not later than 1:00 P.M. (Minneapolis time) on the first Business Day after the date notified by Administrative Agent, and Administrative Agent shall make available to such Issuing Lender in Dollars, in same day funds, at the office of such Issuing Lender on such Business Day the aggregate amount of the payments so received by Administrative Agent. In the event that any Lender fails to make available to Administrative Agent on such Business Day the amount of such Lender’s participation in such Letter of Credit as provided in this subsection 3.3C, such Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by such Issuing Lender for the correction of errors among banks for three Business Days and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the right of Administrative Agent to recover, for the benefit of Lenders, from any Issuing Lender any amounts made available to such Issuing Lender pursuant to this subsection 51
  • 3.3C in the event that it is determined by the final judgment of a court of competent jurisdiction that the payment with respect to a Letter of Credit by such Issuing Lender in respect of which payments were made by Lenders constituted gross negligence or willful misconduct on the part of such Issuing Lender. (ii) Distribution to Lenders of Reimbursements Received From Company. In the event any Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of any payment by such Issuing Lender under a Letter of Credit issued by it, and Administrative Agent or such Issuing Lender thereafter receives any payments from Company in reimbursement of such payment under the Letter of Credit, to the extent any such payment is received by such Issuing Lender, it shall distribute such payment to Administrative Agent, and Administrative Agent shall distribute to each other Lender that has paid all amounts payable by it under subsection 3.3C(i) with respect to such payment such Lender’s Pro Rata Share of all payments subsequently received by Administrative Agent or by such Issuing Lender from Company. Any such distribution shall be made to a Lender at the account specified in subsection 2.4B(iii). D. Interest on Amounts Paid Under Letters of Credit. (i) Payment of Interest by Company. Company agrees to pay to Administrative Agent, with respect to payments under any Letters of Credit issued by any Issuing Lender, interest on the amount paid by such Issuing Lender in respect of each such payment from the date a drawing is honored to but excluding the date such amount is reimbursed by Company (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for the period from the date such drawing is honored to but excluding the Reimbursement Date, the rate then in effect under this Agreement with respect to Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement with respect to Base Rate Loans. Interest payable pursuant to this subsection 3.3D(i) shall be computed on the basis of a 365-day year (or 366-day year in case of a leap year) for the actual number of days elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. (ii) Distribution of Interest Payments by Administrative Agent. Promptly upon receipt by Administrative Agent of any payment of interest pursuant to subsection 3.3D(i) with respect to a payment under a Letter of Credit, (a) Administrative Agent shall distribute to (x) each Lender (including the Issuing Lender) out of the interest received by Administrative Agent in respect of the period from the date such drawing is honored to but excluding the date on which the applicable Issuing Lender is reimbursed for the amount of such payment (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B), the amount that such Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period pursuant to subsection 3.2 if no drawing had been honored under such Letter of Credit, and (y) such Issuing Lender the amount, if any, remaining after payment of the amounts applied pursuant to clause (x), 52
  • and (b) in the event such Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of such payment, Administrative Agent shall distribute to each Lender (including such Issuing Lender) that has paid all amounts payable by it under subsection 3.3C(i) with respect to such payment such Lender’s Pro Rata Share of any interest received by Administrative Agent in respect of that portion of such payment so made by Lenders for the period from the date on which such Issuing Lender was so reimbursed to but excluding the date on which such portion of such payment is reimbursed by Company. Any such distribution shall be made to a Lender at the account specified in subsection 2.4B(iii). 3.4 Obligations Absolute. The obligation of Company to reimburse each Issuing Lender for payments under the Letters of Credit issued by it and to repay any Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations of Lenders under subsection 3.3C (i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including any of the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Company or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), any Issuing Lender or other Lender or any other Person or, in the case of a Lender, against Company, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Company or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); (iii) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by the applicable Issuing Lender under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit; (v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; (vi) any breach of this Agreement or any other Loan Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or (viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing; 53
  • provided, in each case, that payment by the applicable Issuing Lender under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of such Issuing Lender under the circumstances in question (as determined by a final judgment of a court of competent jurisdiction). 3.5 Nature of Issuing Lenders’ Duties. As between Company and any Issuing Lender, Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by such Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, such Issuing Lender shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of such Issuing Lender, including any act or omission by a Government Authority, and none of the above shall affect or impair, or prevent the vesting of, any of such Issuing Lender’s rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this subsection 3.5, any action taken or omitted by any Issuing Lender under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to Company. Notwithstanding anything to the contrary contained in this subsection 3.5, Company shall retain any and all rights it may have against any Issuing Lender for any liability arising solely out of the gross negligence or willful misconduct of such Issuing Lender, as determined by a final judgment of a court of competent jurisdiction. 3.6 Applicability of UCP. Unless otherwise expressly agreed by the Issuing Lender and Company when a Letter of Credit is issued, the rules of the Uniform Customs and Practice for Documentary Credits (UCP 500) (the “UCP”), as most recently published by the International Chamber of Commerce at the time of issuance, shall apply to each Letter of Credit. 54
  • Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT The obligations of Lenders to make Loans and the issuance of Letters of Credit hereunder are subject to the satisfaction of the following conditions. 4.1 Conditions to Closing. This Agreement shall become effective subject to prior or concurrent satisfaction of the following conditions, upon which the Closing Date shall occur: Loan Documents. Company shall deliver to Lenders (or to Administrative Agent with sufficient A. originally executed copies, where appropriate, for each Lender) the following with respect to Company, each, unless otherwise noted, dated the date hereof: (i) Copies of the Organizational Documents of Company, certified by the Secretary of State of its jurisdiction of organization or, if such document is of a type that may not be so certified, certified by the secretary or similar officer of Company, together with a good standing certificate from the Secretary of State of its jurisdiction of organization dated a recent date prior to the date hereof; (ii) Resolutions of the Governing Body of Company approving and authorizing the execution, delivery and performance of the Loan Documents, certified as of the date hereof by the secretary or similar officer of Company as being in full force and effect without modification or amendment; (iii) Signature and incumbency certificates of the officers of Company executing the Loan Documents; (iv) Executed originals of the Loan Documents; and (v) Such other opinions, documents or materials as Administrative Agent or any Lender may reasonably request. Fees. Company shall have paid to Administrative Agent, for distribution (as appropriate) to B. Administrative Agent, the Syndication Agent and Lenders, the fees payable on the date hereof referred to in subsection 2.3. Representations and Warranties. Company shall have delivered to Administrative Agent an Officer’s C. Certificate, in form and substance satisfactory to Administrative Agent, to the effect that the representations and warranties in Section 5 are true and correct in all material respects on and as of the date hereof to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true and correct in all material respects on and as of such earlier date); provided that, if a representation and warranty is qualified as to materiality, the applicable materiality qualifier set forth above shall be disregarded with respect to such representation and warranty for purposes of this condition. 55
  • Financial Statements. Lenders shall have received from Company audited financial statements for the D. year ended December 31, 2004 and unaudited financial statements for the fiscal quarter ended June 30, 2005 of Company and its Subsidiaries in form and substance reasonably satisfactory to Administrative Agent. Opinions of Counsel. Lenders shall have received executed copies of the opinion of Cleary Gottlieb E. Steen & Hamilton LLP, counsel for Company, and John Junek, Esq., Executive Vice President and General Counsel of Company, each dated as of the date hereof and in form and substance reasonably satisfactory to Administrative Agent. Solvency Assurances. Administrative Agent and Lenders shall have received an Officer’s Certificate of F. Company dated as of the date hereof as to solvency matters in form and substance reasonably satisfactory to Administrative Agent. Debt Ratings. Company shall have furnished to Administrative Agent a letter or a public statement from G. either S&P or Moody’s stating that after the Spin-Off Transaction and subject to the conditions in such letter(s) (which conditions shall be satisfactory to Administrative Agent), Company shall have a Debt Rating of not less than A- or A3, respectively, and neither S&P’s nor Moody’s Debt Rating shall be less than BBB+ or Baa1, respectively. H. Necessary Governmental Authorizations and Consents; Expiration of Waiting Periods, Etc. Company shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Loan Documents and all Governmental Authorizations and consents necessary for the continued operation of the business conducted by Company and its Subsidiaries in substantially the same manner as conducted prior to the date hereof. Each such Governmental Authorization and consent shall be in full force and effect, except in a case where the failure to obtain or maintain a Governmental Authorization or consent, either individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Loan Documents or the financing thereof. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending. Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with I. the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request. 56
  • 4.2 Conditions to Effective Date; All Loans. The obligations of Lenders to make any Revolving Loans and Swing Line Loans on any Funding Date are, in addition to the conditions precedent specified in subsection 4.1, subject to prior or concurrent satisfaction of the following conditions: A. Spin-Off Transaction. (i) In the good faith judgment of Administrative Agent, there shall not exist (A) any order, decree, judgment, ruling or injunction which would materially and adversely affect any aspect of the Spin-Off Transaction, or any portion thereof, or the transactions hereunder in the manner contemplated hereunder, and (b) any pending or, to the knowledge of Company or to Administrative Agent, threatened action, suit, investigation or other arbitral, administrative or judicial proceeding, which, if adversely determined, would reasonably be expected to result in a Material Adverse Effect or materially and adversely affect any aspect of the Spin-Off Transaction. (ii) American Express Company and Company shall have received all approvals, consents and waivers, and shall have made or given all necessary filings and notices as shall be required to consummate the Spin-Off Transaction, and each portion thereof, and the other transactions contemplated hereby without the occurrence of any material default under, material conflict with or material violation of (A) any applicable laws or approvals, consents and waivers from any Government Authority, or (B) any agreement, document or instrument to which Company or any of its Subsidiaries is a party or by which any of them or their properties or their businesses are bound, and all applicable waiting periods shall have expired without any action being taken by any Government Authority that could restrain, prevent or impose any material adverse conditions on Company and its Subsidiaries or such other transactions or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable which in the reasonable judgment of the Administrative Agent would have such effect. (iii) The Spin-Off Transaction shall have been consummated substantially consistent with the description set forth in the Form 10 and in accordance with the terms of the Spin-Off Transaction Documents and the Form 10, which Spin- Off Transaction Documents shall not have been materially altered, amended or otherwise changed or supplemented or any condition therein waived in any manner which would materially adversely affect the Lenders without the prior written consent of the Lenders, and in compliance with all applicable laws and regulations or approvals, consents and waivers from any Government Authority. (iv) Company shall have delivered to Administrative Agent an Officer’s Certificate in form and substance reasonably satisfactory to Administrative Agent, (i) certifying as to and attaching true and correct copies of the Spin-Off Transaction Documents and (ii) certifying as to compliance, on a pro forma basis, with the Consolidated Leverage Ratio and Consolidated Net Worth for Company and its Subsidiaries as of the date of consummation of the Spin-Off Transaction. 57
  • Notice of Revolving Borrowing. Administrative Agent shall have received before that Funding Date, in B. accordance with the provisions of subsection 2.1B, a duly executed Notice of Revolving Borrowing, in each case signed by a duly authorized Officer of Company. Representations and Warranties True; No Default; Etc. As of that Funding Date: C. (i) the representations and warranties contained herein (other than subsection 5.4) and in the other Loan Documents shall be true and correct in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; provided, that, if a representation and warranty is qualified as to materiality, the materiality qualifier set forth above shall be disregarded with respect to such representation and warranty for purposes of this condition; (ii) no event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Revolving Borrowing that would constitute an Event of Default or a Potential Event of Default; and (iii) no order, judgment or decree of any arbitrator or Government Authority shall purport to enjoin or restrain such Lender from making the Loans to be made by it on that Funding Date. 4.3 Conditions to Letters of Credit. The issuance of any Letter of Credit hereunder (whether or not the applicable Issuing Lender is obligated to issue such Letter of Credit) is subject to the following conditions precedent: On or before the date of issuance of such Letter of Credit, Administrative Agent shall have received, in A. accordance with the provisions of subsection 3.1B(i), an originally executed Request for Issuance (or a facsimile copy thereof) in each case signed by a duly authorized Officer of Company, together with all other information specified in subsection 3.1B(i) and such other documents or information as the applicable Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. On the date of issuance of such Letter of Credit, all conditions precedent described in subsection 4.2C B. shall be satisfied to the same extent as if the issuance of such Letter of Credit were the making of a Loan and the date of issuance of such Letter of Credit were a Funding Date. 58
  • Section 5. COMPANY’S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Agreement and to make the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce Lenders to purchase participations therein, Company represents and warrants to each Lender: 5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries. Organization and Powers. Company is a corporation duly organized, validly existing and in good A. standing under the laws of the State of Delaware. Company has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby. Qualification and Good Standing. Company is qualified to do business and in good standing in every B. jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing would not reasonably be expected to result in a Material Adverse Effect. Conduct of Business. Company and its Subsidiaries are engaged only in the businesses permitted to be C. engaged in pursuant to subsection 7.7. Subsidiaries. The Capital Stock of each of the Significant Subsidiaries of Company is duly authorized, D. validly issued, fully paid and nonassessable and none of such Capital Stock constitutes Margin Stock. Each of the Subsidiaries of Company is a corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization set forth therein, has all requisite organizational power and authority to own and operate its properties and to carry on its business as now conducted, and is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such power and authority would not reasonably be expected to result in a Material Adverse Effect. 5.2 Authorization of Borrowing, etc. Authorization of Borrowing. The execution, delivery and performance of the Loan Documents have A. been duly authorized by all necessary organizational action on the part of Company. No Conflict. The execution, delivery and performance by Company of the Loan Documents and the B. consummation of the transactions contemplated by the Loan Documents do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Organizational Documents of Company or any of its Subsidiaries or any order, judgment or decree of any court or other Government Authority binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any 59
  • Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the date hereof and disclosed in writing to Lenders and except, in each case, to the extent such violation, conflict, Lien or failure to obtain such approval or consent would not reasonably be expected to result in a Material Adverse Effect. Governmental Consents. The execution, delivery and performance by Company of the Loan Documents C. and the consummation of the transactions contemplated by the Loan Documents do not and will not require any Governmental Authorization except to the extent failure to obtain any such Governmental Authorization would not reasonably be expected to have a Material Adverse Effect. Binding Obligation. Each of the Loan Documents has been duly executed and delivered by Company D. and is the legally valid and binding obligation of Company, enforceable against Company in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability. 5.3 Financial Condition. Company has heretofore delivered to Lenders, at Lenders’ request, the audited consolidated balance sheets, statements of income and cash flows of Company and its Subsidiaries as at and for the year ended December 31, 2004, and the unaudited consolidated balance sheets, statements of income and cash flows of Company and its Subsidiaries as at and for the fiscal quarter ended June 30, 2005. All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments and the absence of footnote disclosure. 5.4 No Material Adverse Change. Since December 31, 2004, no event or change has occurred that has resulted in or evidences, either in any case or in the aggregate, a Material Adverse Effect, except for the occurrence of the Spin-Off Transaction, including the incurrence of expenses related thereto. 5.5 Title to Properties; Liens. Company and its Significant Subsidiaries have good and marketable title to all of their respective properties and assets reflected in the financial statements referred to in subsection 5.3 or in the most recent financial statements delivered pursuant to subsection 6.1, in 60
  • each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 7.5 and except for defects and irregularities that would not reasonably be expected to result in a Material Adverse Effect. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. 5.6 Litigation; Adverse Facts. Except as set forth in Schedule 5.6 annexed hereto, there are no Proceedings (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any court or other Government Authority (including any Environmental Claims) that are pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries and that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or other Government Authority that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect. 5.7 Payment of Taxes. Except to the extent permitted by subsection 6.3, all federal and all other material tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all material assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises that are due and payable have been paid when due and payable, unless such taxes, assessments, fees or charges are being actively contested by Company or such Subsidiary in good faith and by appropriate proceedings and reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 5.8 Governmental Regulation. Company is not subject to regulation under the Public Utility Holding Company Act of 1935 or the Investment Company Act of 1940. 5.9 Securities Activities. No part of the proceeds of the Loans will be used for the purpose, directly or indirectly, of buying or carrying any Margin Stock. 5.10 Employee Benefit Plans. Company, each of its Subsidiaries and each of their respective ERISA Affiliates are in material A. compliance with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan. To the 61
  • knowledge of Company and each of its Subsidiaries, each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Internal Revenue Code is so qualified. No ERISA Event has occurred or is reasonably expected to occur. B. 5.11 Environmental Protection. In the ordinary course of its business, the officers of Company and its Subsidiaries consider the effect of Environmental Laws on the business of Company and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to Company due to Environmental Laws. On the basis of this consideration, Company has concluded that Environmental Laws would not reasonably be expected to have a Material Adverse Effect. Neither Company nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any Hazardous Materials into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.12 Solvency. Company is and, after the consummation of the Spin-Off Transaction and upon the incurrence of any Obligations by Company on any date on which this representation is made, will be, Solvent. 5.13 Disclosure. No representation or warranty of Company contained in the Confidential Information Memorandum or in any Loan Document or in any other document, certificate or written statement furnished to Lenders by or on behalf of Company for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to Company, in the case of any information not furnished by it) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. 5.14 Foreign Assets Control Regulations, etc.. Neither the making of the Loans to, or issuance of Letters of Credit on behalf of, Company nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. Without limiting the foregoing, neither Company nor any of its Subsidiaries or Affiliates (a) is or will become a Person whose property or interests in property 62
  • are blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such Person. Company and its Subsidiaries and Affiliates are in compliance, in all material respects, with the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001). Section 6. AFFIRMATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations (other than Unasserted Obligations) and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 6.1 Financial Statements and Other Reports. Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Company will deliver, or cause to be delivered, to Administrative Agent and Lenders: (i) Events of Default, etc.: reasonably promptly upon any officer of Company obtaining knowledge of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to Administrative Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, an Officer’s Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default or Potential Event of Default, and what action Company has taken, is taking and proposes to take with respect thereto; (ii) Quarterly Financials: (a) as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheets of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income, stockholders’ equity and cash flows of Company and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments and the absence of footnote disclosure, and (b) within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, a narrative report describing the operations of Company and its Subsidiaries in the 63
  • form prepared for presentation to senior management for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter; it being understood and agreed that the delivery of Company’s Form 10-Q promptly following the filing thereof with the Securities and Exchange Commission shall satisfy the delivery requirements set forth in this clause (subject to the time periods set forth in this clause (ii)); (iii) Year-End Financials: as soon as available and in any event within 90 days after the end of each Fiscal Year, (a) the consolidated balance sheets of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the consolidated financial condition of Company and its Subsidiaries as at the dates indicated and the consolidated results of their operations and their cash flows for the periods indicated, (b) a report for Company and its Subsidiaries setting forth in comparative form the corresponding figures for the previous Fiscal Year, (c) a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management for such Fiscal Year, (d) in the case of all such consolidated financial statements, a report and opinion thereon of Ernst & Young LLP or other independent certified public accountants of recognized national standing selected by Company and reasonably satisfactory to Administrative Agent, which report and opinion shall be prepared in accordance with audit standards of the Public Company Accounting Oversight Board and applicable Securities Laws unqualified as to the scope of the audit or the ability of Company and its Subsidiaries to continue as a going concern, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the consolidated results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards, and it being understood and agreed that the delivery of Company’s Form 10-K promptly after the filing thereof with the Securities and Exchange Commission shall satisfy the requirements set forth in this clause (subject to the time periods set forth in this clause (iii)); (iv) Compliance Certificates: together with each delivery of financial statements pursuant to subdivisions (ii) and (iii) above, (a) an Officer’s Certificate of Company stating that the signers have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of such Officer’s Certificate, of any condition or event that constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof 64
  • and what action Company has taken, is taking and proposes to take with respect thereto; and (b) a Compliance Certificate demonstrating in reasonable detail compliance at the end of the applicable accounting periods with the restrictions contained in subsection 7.4; (v) SAP Financial Statements. (a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, copies of the unaudited Quarterly Statement of IDS Property Casualty Insurance Company, IDS Life Insurance Company and each other Insurance Subsidiary requested in writing by Administrative Agent, certified by the chief financial officer or the treasurer of such Insurance Subsidiary, all such statements to be prepared in accordance with SAP consistently applied throughout the periods reflected therein and (b) as soon as available and in any event within 100 days after the end of each Fiscal Year, copies of the audited Annual Statement of IDS Property Casualty Insurance Company, IDS Life Insurance Company and each other Insurance Subsidiary requested in writing by Administrative Agent certified by Ernst & Young LLP or other independent certified public accountants of recognized national standing selected by Company and reasonably satisfactory to Administrative Agent, all such statements to be prepared in accordance with SAP consistently applied throughout the periods reflected therein. (vi) SEC Filings and Press Releases: promptly upon their becoming available, copies of (a) regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority, and (b) all press releases and other statements made available generally by Company or any of its Subsidiaries to the public concerning material developments in the business of Company and its Subsidiaries, taken as a whole; (vii) ERISA Events: promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (viii) ERISA Notices: with reasonable promptness, copies of all notices received by Company or any of its Subsidiaries from a Multiemployer Plan sponsor concerning an ERISA Event; (ix) Ratings: reasonably promptly after becoming aware of any change in Company’s Debt Rating, a statement describing such change, whether such change was made by S&P, Moody’s or both and the effective date of such change; and (x) Other Information: with reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by Administrative Agent. 65
  • 6.2 Existence, etc. Except as permitted under subsection 7.5, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights and franchises material to its business; provided, however that neither Company nor any of its Subsidiaries shall be required to preserve any such right or franchise if the Governing Body of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and that the loss thereof would not reasonably be expected to result in a Material Adverse Effect; provided further that Company will not be required to preserve and keep in full force and effect the existence of any Subsidiary, if the Governing Body of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary and that the loss thereof would not reasonably be expected to result in a Material Adverse Effect. 6.3 Payment of Taxes and Claims. Company will, and will cause each of its Significant Subsidiaries to, pay all material taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any material penalty accrues thereon, and all material claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any material penalty or fine shall be incurred with respect thereto; provided that no such tax, assessment, charge or claim need be paid if it is being contested in good faith by appropriate proceedings, so long as (i) such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor and (ii) in the case of a tax, assessment, charge or claim which has or may become a Lien against any of the assets of Company or its Significant Subsidiaries, the Lien is not being enforced by foreclosure or sale of any portion of such assets to satisfy such charge or claim or is otherwise permitted by this Agreement. 6.4 Maintenance of Properties; Insurance. Maintenance of Properties. Company will, and will cause each of its Significant Subsidiaries to, A. maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Significant Subsidiaries (including all material intellectual property). Insurance. Company will insure its and its Subsidiaries’ assets and businesses in such manner and to B. such extent as is customary for companies engaged in the same or similar businesses in similar locations. 6.5 Inspection Rights. Company shall, and shall cause each of its Significant Subsidiaries to, permit any authorized representatives designated by Administrative Agent (and, during the continuance of an Event of Default, any Lender) to visit and inspect any of the properties of Company or of any of its Significant Subsidiaries, to inspect, copy and take extracts from its and their financial and 66
  • accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested or at any time or from time to time following the occurrence and during the continuation of an Event of Default. 6.6 Compliance with Laws, etc. Company shall comply, and shall cause each of its Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any Government Authority (including all Environmental Laws), noncompliance with which would reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect. Section 7. NEGATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations (other than Unasserted Obligations) and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 7. 7.1 Liens and Related Matters. Prohibition on Liens. Company shall not, and shall not permit any of its Subsidiaries to, directly or A. indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Company or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC or under any similar recording or notice statute, except: (i) Permitted Encumbrances; (ii) Liens described in Schedule 7.1 annexed hereto; (iii) Liens securing obligations in an aggregate amount not to exceed 10% of Consolidated Net Worth incurred in connection with any transaction (including an agreement with respect thereto) now existing or hereafter entered into which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) and any combination of these transactions, parallel loans, back-to-back loans or other similar arrangements or contracts, in each case entered into in the ordinary course of business for the purpose of asset and liability management; 67
  • (iv) Liens on any property or assets existing at the time such property or asset was acquired (including Liens on the property or assets of any Person that becomes a Subsidiary of Company that existed at the time such Person became a Subsidiary by acquisition, merger, consolidation or otherwise), which Liens were not created in contemplation of such acquisition; provided that (i) such Liens shall not extend to or cover any property or assets of any character other than the property being acquired and (ii) such Liens shall secure only those obligations which such Liens secured on the date of such acquisition; (v) Liens in respect of purchase money and Capital Lease obligations upon or in any real property or equipment acquired or held by Company or any Subsidiary in the ordinary course of business to secure the purchase price of such property or equipment or to secure Indebtedness incurred solely for the purpose of financing the acquisition of such property or equipment; provided that (i) such Liens shall not extend to or cover any property or assets of any character other than the property or equipment being financed and (ii) the aggregate amount of Indebtedness secured by such Liens does not exceed $100,000,000 at any time outstanding; (vi) Liens on any real property securing Indebtedness in respect of which (i) the recourse of the holder of such Indebtedness (whether direct or indirect and whether contingent or otherwise) under the instrument creating the Lien or providing for the Indebtedness secured by the Lien is limited to such real property directly securing such Indebtedness and (ii) such holder may not under the instrument creating the Lien or providing for the Indebtedness secured by the Lien collect by levy of execution or otherwise against assets or property of such Borrower (other than such real property directly securing such Indebtedness) if such Borrower fails to pay such Indebtedness when due and such holder obtains a judgment with respect thereto, except for recourse obligations that are customary in “non-recourse” real estate transactions; (vii) Liens on assets held by entities which are required to be included in Company’s consolidated financial statements solely as a result of the application of Financial Accounting Standards Board Interpretation No. 46; (viii) other Liens securing liabilities in an aggregate amount not to exceed 5% of Consolidated Net Worth; and (ix) the replacement, extension or renewal of any Lien permitted by clauses (ii), (iv) and (v) above upon or in the same property subject thereto arising out of the replacement, extension or renewal of the Indebtedness secured thereby (without any increase in the amount thereof). No Further Negative Pledges. Neither Company nor any of its Subsidiaries shall enter into any B. agreement prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than (i) any agreement evidencing Indebtedness secured by Liens permitted by this Agreement, as to the assets securing such Indebtedness, (ii) any agreement evidencing an asset sale, as to the assets being sold and (iii) the Bridge Loan Agreement and any indenture or other agreement pursuant to 68
  • which any Indebtedness is issued, the proceeds of which are used to repay Indebtedness incurred under the Bridge Loan Agreement (and any indenture or other agreement entered into in connection with a refinancing or replacement thereof). No Restrictions on Subsidiary Distributions to Company or Other Subsidiaries. Company will not, C. and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary’s Capital Stock owned by Company or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or advances to Company or any other Subsidiary of Company, or (iv) transfer any of its property or assets to Company or any other Subsidiary of Company, except in each case (a) as provided in this Agreement, (b) as to transfers of assets, as may be provided in an agreement with respect to a sale of such assets and (c) as required by law. 7.2 Acquisitions. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, acquire, by purchase or otherwise, all or substantially all the business, property or fixed assets of, or Capital Stock of any Person, or any division or line of business of any Person except Company and its Subsidiaries may acquire, in a single transaction or series of related transactions (a) all or substantially all of the assets or a majority of the outstanding Securities entitled to vote in an election of members of the Governing Body of a Person or (b) any division, line of business or other business unit of a Person (such Person or such division, line of business or other business unit of such Person being referred to herein as the “Target”), in each case that is a type of business (or assets used in a type of business) permitted to be engaged in by Company and its Subsidiaries pursuant to subsection 7.7, so long as (1) no Event of Default or Potential Event of Default shall then exist or would exist after giving effect thereto and (2) after giving effect to such acquisition and any financing thereof on a pro forma basis as if such acquisition had been completed on the first day of the four Fiscal Quarter period ending on the last day of the most recent Fiscal Quarter for which financial statements have been delivered pursuant to subsection 6.1(ii) (such last day, the “test date”), Company and its Subsidiaries would have been in compliance with each of the financial covenants set forth in subsection 7.4. 7.3 Restricted Junior Payments. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment so long as any Event of Default or Potential Event of Default shall have occurred and be continuing or shall be caused thereby. 7.4 Financial Covenants. Maximum Leverage Ratio. Company shall not permit the Consolidated Leverage Ratio as of the last day A. of the most recently ended Fiscal Quarter to exceed 40%. 69
  • Consolidated Net Worth. Company shall maintain a Consolidated Net Worth at all times equal to at least B. 75% of the greater of (i) pro forma Consolidated Net Worth as of the Effective Date and (ii) pro forma Consolidated Net Worth as of June 30, 2005. 7.5 Restriction on Fundamental Changes; Asset Sales. Company shall not, and shall not permit any of its Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or substantially all of its business, property or assets, whether now owned or hereafter acquired, except: (i) any Subsidiary of Company may be merged with or into Company or any wholly-owned Subsidiary, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any wholly-owned Subsidiary; provided that, in the case of such a merger, Company or such wholly-owned Subsidiary shall be the continuing or surviving Person; and (ii) any Person may be merged with or into Company or any Subsidiary if the acquisition of the Capital Stock of such Person by Company or such Subsidiary would have been permitted pursuant to subsection 7.2; provided that (a) in the case of Company, Company shall be the continuing or surviving Person, (b) if a Subsidiary is not the surviving or continuing Person, the surviving Person becomes a Subsidiary and (c) no Potential Event of Default or Event of Default shall have occurred or be continuing after giving effect thereto. 7.6 Transactions with Affiliates. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) of any kind with any Affiliate of Company, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to Company or such Subsidiary as would be obtainable by Company or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction will not apply to the Spin-Off Transaction or transactions between or among the Company and any of its wholly-owned Subsidiaries or between and among any wholly-owned Subsidiaries. 7.7 Conduct of Business. From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries to, engage in any businesses that are material to Company and its Subsidiaries, taken as a whole, other than the businesses engaged in by Company and its Subsidiaries on the Closing Date and businesses reasonably related thereto. 70
  • Section 8. EVENTS OF DEFAULT If any of the following conditions or events (“Events of Default”) shall occur: 8.1 Failure to Make Payments When Due. Failure by Company to pay any principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by Company to pay when due any amount payable to an Issuing Lender in reimbursement of any drawing under a Letter of Credit; or failure by Company to pay any interest on any Loan or any fee or any other amount due under this Agreement within five Business Days after the date due; or 8.2 Default in Other Agreements. (i) Failure of Company or any of its Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in subsection 8.1) or Contingent Obligations with an aggregate principal amount of $50,000,000 or more, in each case beyond the end of any grace period provided therefor; or (ii) breach or default by Company or any of its Subsidiaries with respect to any other material term of (a) one or more items of Indebtedness or Contingent Obligations in the individual or aggregate principal amounts referred to in clause (i) above or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (with all notices provided for therein having been given and all grace periods provided for therein having lapsed, such that no further notice or passage of time is required in order for such holders or such trustee to exercise such right, other than notice of their or its election to exercise such right); or 8.3 Breach of Certain Covenants. Failure of Company to perform or comply with any term or condition contained in subsections 2.5, 6.1(i), 6.2 or Section 7 (other than subsection 7.1B, to the extent such failure to comply therewith relates solely to an agreement entered into by a Subsidiary of Company which is not a Significant Subsidiary) of this Agreement; or 8.4 Breach of Warranty. Any representation, warranty or certification made by Company in any Loan Document or in any certificate at any time given by Company in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or 71
  • 8.5 Other Defaults Under Loan Documents. Company shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than any such term referred to or covered in any other subsection of this Section 8, and such default shall not have been remedied or waived within 30 days after receipt by Company of notice from Administrative Agent or any Lender of such default; or 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Company or any of its Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order shall remain unstayed for a period of 60 days; or any other similar relief shall be granted under any applicable federal or state law and shall remain unstayed for a period of 60 days; or (ii) an involuntary case shall be commenced against Company or any of its Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, conservator, custodian or other officer having similar powers over Company or any of its Subsidiaries, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any of its Subsidiaries for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any of its Subsidiaries, and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. (i) Company or any of its Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any of its Subsidiaries shall make any assignment for the benefit of creditors; or (ii) Company or any of its Subsidiaries shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Governing Body of Company or any of its Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or 72
  • 8.8 Judgments and Attachments. Any money judgment, writ or warrant of attachment or similar process involving in the aggregate at any time an amount in excess of $50,000,000 to the extent not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage, shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or 8.9 Dissolution. Any order, judgment or decree shall be entered against Company or any of its Subsidiaries decreeing the dissolution or split up of Company or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 60 days; or 8.10 Employee Benefit Plans. There shall occur one or more ERISA Events that individually or in the aggregate result in or would reasonably be expected to result in liability of Company in excess of $25,000,000; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans to which Company or any of its Subsidiaries has contributed (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which would reasonably be expected to result in a Material Adverse Effect; or 8.11 Change in Control. A Change in Control shall have occurred after the Spin-Off Transaction; or 8.12 Licensing. Any License of any Regulated Subsidiary (a) shall be revoked by the Government Authority which issued such License, or any action (administrative or judicial) to revoke a License shall have been commenced against any Regulated Subsidiary and shall not have been dismissed within 180 days after the commencement thereof, (b) shall be suspended by such Government Authority for a period in excess of thirty (30) days or (c) shall not be reissued or renewed by such Government Authority upon the expiration thereof following application for such reissuance or renewal by any Regulated Subsidiary, in each case to the extent such revocation, action, suspension, nonreissuance or nonrenewal would reasonably be expected to have a Material Adverse Effect; or 8.13 Certain Proceedings. Any Regulated Subsidiary shall become subject to any conservation, rehabilitation or liquidation order, directive or mandate issued by any Government Authority or any Regulated Subsidiary shall become subject to any other directive or mandate issued by any 73
  • Government Authority which would reasonably be expected to have a Material Adverse Effect and which is not stayed within ten (10) days; or 8.14 Invalidity of Loan Documents; Repudiation of Obligations. At any time after the execution and delivery thereof, (i) any Loan Document or any provision thereof, for any reason other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void, or (ii) Company shall contest the validity or enforceability of any Loan Document or any provision thereof in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Loan Document or any provision thereof: THEN (i) upon the occurrence of any Event of Default described in subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and accrued interest on the Loans, (b) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (c) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company, and the obligation of each Lender to make any Loan, the obligation of Administrative Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, Administrative Agent shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Company, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, and the obligation of each Lender to make any Loan, the obligation of Administrative Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate; provided that the foregoing shall not affect in any way the obligations of Lenders under subsection 3.3C(i) or the obligations of Lenders to purchase assignments of any unpaid Swing Line Loans as provided in subsection 2.1A(ii). Notwithstanding anything contained in the preceding paragraph, if at any time within 60 days after an acceleration of the Loans pursuant to clause (ii) of such paragraph Company shall pay all arrears of interest and all payments on account of principal which shall have become due otherwise than as a result of such acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than non-payment of the principal of and accrued interest on the Loans, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to Company, may at their option rescind and annul such acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. The provisions of this paragraph are intended merely to bind Lenders to a decision which may be made at the election of Requisite Lenders and are not intended, directly or indirectly, to benefit Company, and such provisions 74
  • shall not at any time be construed so as to grant Company the right to require Lenders to rescind or annul any acceleration hereunder or to preclude Administrative Agent or Lenders from exercising any of the rights or remedies available to them under any of the Loan Documents, even if the conditions set forth in this paragraph are met. Section 9. ADMINISTRATIVE AGENT 9.1 Appointment. Appointment of Administrative Agent. Wells Fargo is hereby appointed Administrative Agent A. hereunder and under the other Loan Documents. Each Lender hereby authorizes Administrative Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. Wells Fargo agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 9 are solely for the benefit of Agents and Lenders and none of Company or any of its Subsidiaries shall have rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, Administrative Agent (other than as provided in subsection 2.1D) shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any of its Subsidiaries. 9.2 Powers and Duties; General Immunity. Powers; Duties Specified. Each Lender irrevocably authorizes Administrative Agent to take such action A. on such Lender’s behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to Administrative Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Administrative Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents. Administrative Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. Administrative Agent shall not have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender or Company; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon Administrative Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. No Responsibility for Certain Matters. No Agent shall be responsible to any Lender for the execution, B. effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by such Agent to Lenders or by or on behalf of Company to such Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for the payment of any Obligations, nor shall such Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or 75
  • agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. Exculpatory Provisions. No Agent or any of its officers, directors, employees or agents shall be liable to C. Lenders for any action taken or omitted by such Agent under or in connection with any of the Loan Documents except to the extent caused by such Agent’s gross negligence or willful misconduct. An Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions; provided that no Agent shall be required to take any action that, in its opinion or the opinion of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable law. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication (including any electronic message, Internet or intranet website posting or other distribution), instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against an Agent as a result of such Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6). Agents Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the D. rights and powers of, or impose any duties or obligations upon, an Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Letters of Credit, an Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term “Lender” or “Lenders” or any similar term shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. An Agent and its Affiliates may accept deposits from, lend money to, acquire equity interests in and generally engage in any kind of commercial banking, investment banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Company for services in connection with this Agreement and otherwise without having to account for the same to Lenders. 76
  • 9.3 Independent Investigation by Lenders; No Responsibility For Appraisal of Creditworthiness. Each Lender agrees that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans and the issuance of Letters of Credit hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. 9.4 Right to Indemnity. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify each Agent and its officers, directors, employees, agents, attorneys, professional advisors and Affiliates to the extent that any such Person shall not have been reimbursed by Company, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including reasonable counsel fees and disbursements and fees and disbursements of any financial advisor engaged by Agents) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against an Agent or such other Person in exercising the powers, rights and remedies of an Agent or performing duties of an Agent hereunder or under the other Loan Documents or otherwise in its capacity as Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of an Agent resulting solely from such Agent’s gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. If any indemnity furnished to an Agent or any other such Person for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 9.5 Resignation of Agents; Successor Administrative Agent and Swing Line Lender. Resignation; Successor Administrative Agent. Any Agent may resign at any time by giving 30 days’ A. prior written notice thereof to Lenders and Company. Upon any such notice of resignation by Administrative Agent, Requisite Lenders shall have the right, upon five Business Days’ notice to Company, to appoint a successor Administrative Agent. If no such successor shall have been so appointed by Requisite Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, the retiring Administrative Agent may, on behalf of Lenders, appoint a successor Administrative Agent. If Administrative Agent shall notify Lenders and Company that no Person has accepted such appointment as successor Administrative Agent, such resignation shall nonetheless become effective in accordance with Administrative Agent’s notice and (i) the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan 77
  • Documents, and (ii) all payments, communications and determinations provided to be made by, to or through Administrative Agent shall instead be made by, to or through each Lender directly, until such time as Requisite Lenders appoint a successor Administrative Agent in accordance with this subsection 9.5A. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement (if not already discharged as set forth above). After any retiring Agent’s resignation hereunder, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement. Successor Swing Line Lender. Any resignation of Administrative Agent pursuant to subsection 9.5A B. shall also constitute the resignation of Wells Fargo or its successor as Swing Line Lender, and any successor Administrative Agent appointed pursuant to subsection 9.5A shall, upon its acceptance of such appointment, become the successor Swing Line Lender for all purposes hereunder. In such event (i) Company shall prepay any outstanding Swing Line Loans made by the retiring Administrative Agent in its capacity as Swing Line Lender, (ii) upon such prepayment, the retiring Administrative Agent and Swing Line Lender shall surrender any Swing Line Note held by it to Company for cancellation, and (iii) if so requested by the successor Administrative Agent and Swing Line Lender in accordance with subsection 2.1E, Company shall issue a Swing Line Note to the successor Administrative Agent and Swing Line Lender substantially in the form of Exhibit V annexed hereto, in the amount of the Swing Line Loan Commitment then in effect and with other appropriate insertions. 9.6 Duties of Other Agents. To the extent that any Lender is identified in this Agreement as a co-agent, documentation agent or syndication agent, such Lender shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender. 9.7 Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to Company or any of the Subsidiaries of Company, Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Administrative Agent shall have made any demand on Company) shall be entitled and empowered, by intervention in such proceeding or otherwise (i) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Loans and any other Obligations that are owing and unpaid and to file such other papers or documents as may be necessary or advisable in order to have the claims of Lenders and Agents (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders and Agents and their 78
  • agents and counsel and all other amounts due Lenders and Agents under subsections 2.3 and 10.2) allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to Lenders, to pay to Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Agents and their agents and counsel, and any other amounts due Agents under subsections 2.3 and 10.2. Nothing herein contained shall be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lenders or to authorize Administrative Agent to vote in respect of the claim of any Lender in any such proceeding. Section 5. MISCELLANEOUS 10.1 Successors and Assigns; Assignments and Participations in Loans and Letters of Credit. General. This Agreement shall be binding upon the parties hereto and their respective successors and A. assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders’ rights of assignment are subject to the further provisions of this subsection 10.1). Neither Company’s rights nor obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders (and any attempted assignment or transfer by Company without such consent shall be null and void). No sale, assignment or transfer or participation of any obligations of a Lender in respect of a Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the Revolving Loan Commitment and the Revolving Loans of the Lender effecting such sale, assignment, transfer or participation. Anything contained herein to the contrary notwithstanding, except as provided in subsection 2.1A(ii) and subsection 10.5, the Swing Line Loan Commitment and the Swing Line Loans of Swing Line Lender may not be sold, assigned or transferred as described below to any Person other than a successor Administrative Agent and Swing Line Lender to the extent contemplated by subsection 9.5. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Affiliates of each of Administrative Agent and Lenders and Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. B. Assignments. (i) Amounts and Terms of Assignments. Any Lender may assign to one or more Eligible Assignees all or any portion of its rights and obligations under this 79
  • Agreement; provided that (a), except in the case of an assignment of the entire remaining amount of the assigning Lender’s rights and obligations under this Agreement the aggregate amount of the Revolving Loan Exposure of the assigning Lender and the assignee subject to each such assignment shall not be less than $5,000,000, unless Administrative Agent otherwise consents (such consent not to be unreasonably withheld or delayed), provided that simultaneous assignments to or by two or more related Funds shall be treated as one assignment for purposes of this clause (a), (b) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned; and any assignment of all or any portion of a Revolving Loan Commitment, Revolving Loan or Letter of Credit participation shall be made only as an assignment of the same proportionate part of the assigning Lender’s Revolving Loan Commitment, Revolving Loans and Letter of Credit participations, (c) the parties to each assignment shall execute and deliver to Administrative Agent an Assignment Agreement, together with a processing and recordation fee of $3,500, and the Eligible Assignee, if it shall not already be a Lender, shall deliver to Administrative Agent information reasonably requested by Administrative Agent, including forms, certificates or other information in compliance with subsection 2.7B(iv) and (d), except in the case of an assignment to another Lender, an Affiliate of a Lender (provided that such Affiliate has a long-term non-credit enhanced unsecured debt rating of at least A- (in the case of S&P) or A3 (in the case of Moody’s)) or an Approved Fund of a Lender, Administrative Agent and, if no Event of Default has occurred and is continuing, Company, shall have consented thereto (which consent shall not be unreasonably withheld or delayed). Upon such execution, delivery and consent, from and after the effective date specified in such Assignment Agreement, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 10.9B) and be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto; provided that, anything contained in any of the Loan Documents to the contrary notwithstanding, if such Lender is an Issuing Lender such Lender shall continue to have all rights and obligations of an Issuing Lender until the cancellation or expiration of any Letters of Credit issued by it and the reimbursement of any amounts drawn thereunder). The assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Notes, if any, to Administrative Agent for cancellation, and thereupon new Notes shall, if so requested by the assignee and/or the assigning Lender in accordance with subsection 2.1E, be issued to the assignee and/or to the assigning Lender, substantially in the form of Exhibit IV or Exhibit V annexed hereto, as the case may be, with appropriate insertions, to reflect the amounts of the new Commitments and/or outstanding Revolving Loans, as the case may be, of the assignee and/or the assigning Lender. Other than as provided in subsection 2.1A(ii) and subsection 10.5, any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection 80
  • 10.1B shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection 10.1C. (ii) Acceptance by Administrative Agent; Recordation in Register. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing and recordation fee referred to in subsection 10.1B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Administrative Agent pursuant to subsection 2.7B(iv), Administrative Agent shall, if Administrative Agent and Company have consented to the assignment evidenced thereby (in each case to the extent such consent is required pursuant to subsection 10.1B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), (b) record the information contained therein in the Register, and (c) give prompt notice thereof to Company. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 10.1B(ii). Participations. Any Lender may, without the consent of, or notice to, Company or Administrative Agent, C. sell participations to one or more Persons (other than a natural Person or Company or any of its Affiliates) in all or a portion of such Lender’s rights and/or obligations under this Agreement; provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Company, Administrative Agent and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver directly affecting (i) subsection 2.4A (iii) or the extension of the scheduled final maturity date of any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation. Subject to the further provisions of this subsection 10.1C, Company agrees that each Participant shall be entitled to the benefits of subsections 2.6D and 2.7 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection 10.1B. To the extent permitted by law, each Participant also shall be entitled to the benefits of subsection 10.4 as though it were a Lender, provided such Participant agrees to be subject to subsection 10.5 as though it were a Lender. A Participant shall not be entitled to receive any greater payment under subsections 2.6D and 2.7A than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant unless the sale of the participation to such Participant is made with Company’s prior written consent. No Participant shall be entitled to the benefits of subsection 2.7 unless Company is notified of the participation sold to such Participant and such Participant agrees, for the benefit of Company, to comply with subsection 2.7B(iv) as though it were a Lender. 81
  • Pledges and Assignments. Any Lender may, without the consent of Administrative Agent or Company, D. at any time pledge or assign a security interest in all or any portion of its Loans, and the other Obligations owed to such Lender, to secure obligations of such Lender, including without limitation (A) any pledge or assignment to secure obligations to any Federal Reserve Bank and (B) in the case of any Lender that is a Fund, any pledge or assignment to any holders of obligations owed, or securities issued, by such Lender including to any trustee for, or any other representative of, such holders; provided that (i) no Lender shall be relieved of any of its obligations hereunder as a result of any such assignment or pledge and (ii) in no event shall any assignee or pledgee be considered to be a “Lender” or be entitled to require the assigning Lender to take or omit to take any action hereunder. Information. Each Lender may furnish any information concerning Company and its Subsidiaries in the E. possession of that Lender from time to time to pledgees under subsection 10.10D, assignees and participants (including prospective assignees and participants), in each case subject to subsection 10.18. Agreements of Lenders. Each Lender listed on the signature pages hereof hereby agrees, and each F. Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree, (i) that it is an Eligible Assignee described in clause (ii) of the definition thereof; (ii) that it has experience and expertise in the making of or purchasing loans such as the Loans; and (iii) that it will make or purchase Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 10.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control). 10.2 Expenses. Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all reasonable and documented out-of-pocket costs and expenses incurred by Administrative Agent and the Syndication Agent, including reasonable and documented fees, expenses and disbursements of counsel to the Agents, in connection with the negotiation, preparation, execution and administration of the Loan Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Company; (ii) all other costs and expenses incurred by the Administrative Agent and the Syndication Agent in connection with the syndication of the Commitments; (iii) all reasonable costs and expenses, including reasonable attorneys’ fees (including allocated costs of internal counsel) and reasonable fees, costs and expenses of accountants, advisors and consultants, incurred by Administrative Agent and its counsel at any time when an Event of Default has occurred and is continuing, relating to efforts to evaluate or assess Company or any of its Subsidiaries and its business or financial condition; and (iv) all reasonable costs and expenses, including reasonable attorneys’ fees (including allocated costs of internal counsel), reasonable fees, costs and expenses of accountants, advisors and consultants and costs of settlement, incurred by Administrative Agent and Lenders in enforcing any Obligations of or in collecting any payments due from Company hereunder or under the other Loan Documents (including in connection with the enforcement of the Loan Documents) or in connection with any 82
  • refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work-out” or pursuant to any insolvency or bankruptcy proceedings. 10.3 Indemnity. In addition to the payment of expenses pursuant to subsection 10.2, whether or not the transactions contemplated hereby shall be consummated, Company agrees to defend (subject to Indemnitees’ selection of counsel), indemnify, pay and hold harmle