-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DhAReo2x0//NqYUtBn9REsZLOOfxoJSQ//UQsM/1+YiGUrBKDr8+oW3bQILp5m3i g60Dsz5s05wEcYckMbq78Q== 0000950131-95-003147.txt : 19951119 0000950131-95-003147.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950131-95-003147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN TRUST CORP CENTRAL INDEX KEY: 0000073124 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 362723087 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05965 FILM NUMBER: 95589797 BUSINESS ADDRESS: STREET 1: 50 S LA SALLE ST CITY: CHICAGO STATE: IL ZIP: 60675 BUSINESS PHONE: 3126306000 FORMER COMPANY: FORMER CONFORMED NAME: NORTRUST CORP DATE OF NAME CHANGE: 19780525 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1995 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 0-5965 NORTHERN TRUST CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 36-2723087 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 50 SOUTH LA SALLE STREET CHICAGO, ILLINOIS 60675 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312) 630-6000 ---------------------------- 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 [X] No [_] 55,466,443 Shares -- $1.66 2/3 Par Value (Shares of Common Stock Outstanding on September 30, 1995) ================================================================================ 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements CONSOLIDATED BALANCE SHEET Northern Trust Corporation
SEPTEMBER 30 December 31 September 30 ------------ ----------- ------------ ($ In Millions) 1995 1994 1994 - ------------------------------------- ------------ ----------- ------------ ASSETS Cash and Due from Banks $ 1,444.7 $ 1,192.5 $ 1,309.9 Money Market Assets Federal Funds Sold and Securities Purchased under Agreements to Resell 247.2 777.0 193.1 Time Deposits with Banks 1,616.4 1,864.7 2,121.0 Other 11.9 9.5 111.5 - ------------------------------------- --------- --------- --------- Total 1,875.5 2,651.2 2,425.6 - ------------------------------------- --------- --------- --------- Securities (Fair value $5,885.3 at September 1995, $5,069.7 at December 1994 and $5,517.6 at September 1994) 5,855.4 5,053.1 5,491.4 Loans and Leases (Net of unearned income of $81.0 at September 1995, $70.4 at December 1994 and $68.3 at September 1994) 9,808.3 8,590.6 8,452.6 Reserve for Credit Losses (147.3) (144.8) (144.9) Buildings and Equipment 280.0 274.7 271.8 Customers' Acceptance Liability 50.0 56.3 64.9 Trust Security Settlement Receivables 234.5 305.7 210.9 Other Assets 778.6 582.3 587.5 - ------------------------------------- --------- --------- --------- Total Assets $20,179.7 $18,561.6 $18,669.7 - ------------------------------------- --------- --------- --------- LIABILITIES Deposits Demand and Other Noninterest-Bearing $ 2,642.2 $ 2,604.7 $ 2,344.1 Savings and Money Market Deposits 3,102.1 3,176.3 3,142.8 Savings Certificates 2,106.1 1,524.5 1,279.7 Other Time 375.5 342.2 289.1 Foreign Offices--Demand 310.2 225.4 509.4 --Time 2,820.9 3,861.3 3,706.0 - ------------------------------------- --------- --------- --------- Total Deposits 11,357.0 11,734.4 11,271.1 Federal Funds Purchased 2,199.7 972.0 1,102.3 Securities Sold under Agreements to Repurchase 1,277.2 2,216.9 994.6 Commercial Paper 145.6 123.8 172.3 Other Borrowings 2,805.6 1,077.9 2,421.7 Senior Medium-Term Notes 117.0 547.0 807.0 Notes Payable 341.1 244.8 248.3 Liability on Acceptances 50.0 56.3 64.9 Other Liabilities 475.9 307.8 326.6 - ------------------------------------- --------- --------- --------- Total Liabilities 18,769.1 17,280.9 17,408.8 - ------------------------------------- --------- --------- --------- STOCKHOLDERS' EQUITY Preferred Stock 170.0 170.0 170.0 Common Stock -- $1.66 2/3 Par Value 93.6 90.6 90.6
SEPTEMBER 1995 December 1994 September 1994 ----------------------------------------------------------- Shares authorized 140,000,000 140,000,000 140,000,000 Shares issued 56,158,064 54,360,374 54,360,374 Shares outstanding 55,466,443 54,089,259 54,162,085
Capital Surplus 308.2 302.2 302.2 Retained Earnings 888.4 762.7 738.8 Net Unrealized Loss on Securities (2.7) (15.8) (12.9) Translation Adjustments -- -- -- Common Stock Issuable -- Performance Plan 16.5 17.9 20.2 Deferred Compensation -- ESOP and Other (34.6) (38.8) (43.2) Treasury Stock -- at cost, 691,621 shares at September 1995, 271,115 shares at December 1994 and 198,289 shares at September 1994 (28.8) (8.1) (4.8) - ------------------------------------- --------- --------- --------- Total Stockholders' Equity 1,410.6 1,280.7 1,260.9 - ------------------------------------- --------- --------- --------- Total Liabilities and Stockholders' Equity $20,179.7 $18,561.6 $18,669.7 - ------------------------------------- --------- --------- ---------
CONSOLIDATED STATEMENT OF INCOME Northern Trust Corporation
THIRD QUARTER ENDED SEPTEMBER 30 NINE MONTHS ($ In Millions Except Per Share --------------------- --------------------- Information) 1995 1994 1995 1994 - --------------------------------- ---------- ---------- ---------- ---------- Interest Income Money Market Assets Federal Funds Sold and Securities Purchased under Agreements to Resell $ 1.9 $ 2.0 $ 9.3 $ 6.0 Time Deposits with Banks 22.4 26.1 69.9 74.7 Other .2 1.7 .7 4.4 - --------------------------------- ---------- ---------- ---------- ---------- Total 24.5 29.8 79.9 85.1 - --------------------------------- ---------- ---------- ---------- ---------- Securities 99.0 62.1 273.2 161.1 Loans and Leases 162.3 129.6 465.0 359.5 - --------------------------------- ---------- ---------- ---------- ---------- Total Interest Income 285.8 221.5 818.1 605.7 - --------------------------------- ---------- ---------- ---------- ---------- Interest Expense Deposits -- Savings and Money Market Deposits 27.5 22.1 81.5 61.8 -- Savings Certificates 32.6 14.4 87.7 38.2 -- Other Time 8.6 5.5 23.0 12.9 -- Foreign Offices 43.4 38.2 141.2 92.4 Federal Funds Purchased 29.9 13.3 62.1 40.1 Securities Sold under Agreements to Repurchase 26.6 19.8 75.7 39.5 Commercial Paper 2.1 1.7 6.4 4.0 Other Borrowings 17.8 6.6 44.2 27.5 Senior Medium-Term Notes 2.8 9.5 15.5 23.5 Notes Payable 5.1 5.4 14.9 18.0 - --------------------------------- ---------- ---------- ---------- ---------- Total Interest Expense 196.4 136.5 552.2 357.9 - --------------------------------- ---------- ---------- ---------- ---------- Net Interest Income 89.4 85.0 265.9 247.8 Provision for Credit Losses 2.0 1.0 5.0 5.0 - --------------------------------- ---------- ---------- ---------- ---------- Net Interest Income after Provision for Credit Losses 87.4 84.0 260.9 242.8 - --------------------------------- ---------- ---------- ---------- ---------- Noninterest Income Trust Fees 127.3 115.8 371.4 338.8 Security Commissions and Trading Income 5.8 4.4 16.9 17.2 Other Operating Income 40.0 32.6 114.7 125.1 Investment Security Gains (Losses) .3 (.2) .5 (.1) - --------------------------------- ---------- ---------- ---------- ---------- Total Noninterest Income 173.4 152.6 503.5 481.0 - --------------------------------- ---------- ---------- ---------- ---------- Income before Noninterest Expenses 260.8 236.6 764.4 723.8 - --------------------------------- ---------- ---------- ---------- ---------- Noninterest Expenses Salaries 84.0 80.6 250.9 235.6 Pension and Other Employee Benefits 20.4 18.1 62.7 56.2 Occupancy Expense 15.6 14.4 45.1 42.7 Equipment Expense 12.0 10.8 36.6 44.8 Other Operating Expenses 43.5 42.3 135.4 136.3 - --------------------------------- ---------- ---------- ---------- ---------- Total Noninterest Expenses 175.5 166.2 530.7 515.6 - --------------------------------- ---------- ---------- ---------- ---------- Income before Income Taxes 85.3 70.4 233.7 208.2 Provision for Income Taxes 27.2 22.4 73.2 66.1 - --------------------------------- ---------- ---------- ---------- ---------- NET INCOME $ 58.1 $ 48.0 $160.5 $142.1 - --------------------------------- ---------- ---------- ---------- ---------- Net Income Applicable to Common Stock $ 56.0 $ 46.2 $154.1 $136.9 - --------------------------------- ---------- ---------- ---------- ---------- NET INCOME PER COMMON SHARE -- Primary $ .99 $ .83 $ 2.74 $ 2.48 -- Fully Diluted .98 .83 2.71 2.47 - --------------------------------- ---------- ---------- ---------- ---------- Average Number of Common Shares Outstanding -- Primary 56,686,283 55,334,790 56,249,528 55,095,368 -- Fully Diluted 58,118,792 56,539,610 57,771,187 56,304,643 - --------------------------------- ---------- ---------- ---------- ----------
3 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Northern Trust Corporation
NINE MONTHS ENDED SEPTEMBER 30 ------------------ (In Millions) 1995 1994 - ------------------------------------------ -------- -------- PREFERRED STOCK Balance at January 1 and September 30 $ 170.0 $ 170.0 - ------------------------------------------ -------- -------- COMMON STOCK Balance at January 1 90.6 89.7 Stock Issued--Incentive Plan and Awards .3 -- Pooled Affiliate--Stock Issued 2.7 .9 - ------------------------------------------ -------- -------- Balance at September 30 93.6 90.6 - ------------------------------------------ -------- -------- CAPITAL SURPLUS Balance at January 1 302.2 303.0 Stock Issued--Incentive Plan and Awards (.9) (.4) Pooled Affiliate--Stock Issued 6.9 (.4) - ------------------------------------------ -------- -------- Balance at September 30 308.2 302.2 - ------------------------------------------ -------- -------- RETAINED EARNINGS Balance at January 1 762.7 631.9 Net Income 160.5 142.1 Dividends Declared on Common Stock (43.2) (35.6) Dividends Declared on Preferred Stock (6.7) (5.0) Pooled Affiliate 15.1 5.4 - ------------------------------------------ -------- -------- Balance at September 30 888.4 738.8 - ------------------------------------------ -------- -------- NET UNREALIZED LOSS ON SECURITIES Balance at January 1 (15.8) (.4) Unrealized Gain (Loss), net 13.1 (12.5) - ------------------------------------------ -------- -------- Balance at September 30 (2.7) (12.9) - ------------------------------------------ -------- -------- TRANSLATION ADJUSTMENTS Balance at January 1 -- .6 Sale of Foreign Investment -- (.6) - ------------------------------------------ -------- -------- Balance at September 30 -- -- - ------------------------------------------ -------- -------- COMMON STOCK ISSUABLE--PERFORMANCE PLAN Balance at January 1 17.9 11.8 Stock Issuable, net of Stock Issued (1.4) 8.4 - ------------------------------------------ -------- -------- Balance at September 30 16.5 20.2 - ------------------------------------------ -------- -------- DEFERRED COMPENSATION--ESOP AND OTHER Balance at January 1 (38.8) (43.5) Compensation Deferred (1.4) (5.3) Compensation Amortized 5.6 5.6 - ------------------------------------------ -------- -------- Balance at September 30 (34.6) (43.2) - ------------------------------------------ -------- -------- TREASURY STOCK Balance at January 1 (8.1) (11.4) Stock Options and Awards 15.4 9.0 Stock Purchased (36.1) (2.4) - ------------------------------------------ -------- -------- Balance at September 30 (28.8) (4.8) - ------------------------------------------ -------- -------- TOTAL STOCKHOLDERS' EQUITY AT SEPTEMBER 30 $1,410.6 $1,260.9 - ------------------------------------------ -------- --------
4 CONSOLIDATED STATEMENT OF CASH FLOWS Northern Trust Corporation Nine Months Ended September 30, ----------------------- (In Millions) 1995 1994 - ----------------------------------------------------------------------- ---------- --------- Cash Flows from Operating Activities: Net Income $ 160.5 $ 142.1 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Provision for Credit Losses 5.0 5.0 Depreciation on Buildings and Equipment 32.2 31.8 (Increase) Decrease in Interest Receivable (29.7) 14.8 Increase in Interest Payable 8.8 5.8 Amortization and Accretion of Securities and Unearned Income (132.6) 8.4 Gain on Sale of Foreign Investment (34.5) Net Increase in Trading Account Securities (53.2) (23.7) Other Noncash, net 4.3 89.2 - ----------------------------------------------------------------------- ---------- --------- Net Cash Flows from Operating Activities (4.7) 238.9 - ----------------------------------------------------------------------- ---------- --------- Cash Flows from Investing Activities: Net Decrease in Federal Funds Sold and Securities Purchased under Agreements to Resell 542.9 384.7 Net (Increase) Decrease in Time Deposits with Banks 248.3 (30.6) Net Increase in Other Money Market Assets (2.4) (35.5) Purchases of Securities-Held to Maturity (625.4) (344.3) Proceeds from Maturity and Redemption of Securities-Held to Maturity 703.6 374.5 Purchases of Securities-Available for Sale (23,494.1) (6,798.7) Proceeds from Sale, Maturity and Redemption of Securities-Available for Sale 22,900.5 5,309.5 Net Increase in Loans and Leases (1,131.3) (837.2) Purchases of Buildings and Equipment (33.1) (21.4) Sale of Foreign Investment - 58.1 Net Decrease in Trust Security Settlement Receivables 71.2 82.2 Other, net 2.9 10.5 - ----------------------------------------------------------------------- ---------- --------- Net Cash Flows from Investing Activities (816.9) (1,848.2) - ----------------------------------------------------------------------- ---------- --------- Cash Flows from Financing Activities: Net Increase (Decrease) in Deposits (556.8) 937.7 Net Increase (Decrease) in Federal Funds Purchased 1,227.7 (113.5) Net Increase (Decrease) in Securities Sold under Agreement to Repurchase (939.7) 392.4 Net Increase in Commercial Paper 21.8 48.2 Net Increase in Short-Term Other Borrowings 2,019.9 261.4 Proceeds from Term Federal Funds Purchased 2,383.0 3,113.6 Repayments of Term Federal Funds Purchased (2,675.3) (3,113.8) Proceeds from Senior Medium-Term Notes - 330.0 Repayments of Senior Medium-Term Notes (430.0) (340.0) Proceeds from Notes Payable 100.0 - Repayment of Notes Payable (3.7) (78.5) Treasury Stock Purchased-Incentive Plans (2.2) (0.7) Treasury Stock Purchased-Buy Back Program (29.8) - Net Proceeds from Stock Options 5.1 3.6 Cash Dividends Paid on Common and Preferred Stock (49.5) (40.2) Other, net 3.3 (0.7) - ----------------------------------------------------------------------- ---------- --------- Net Cash Flows from Financing Activities 1,073.8 1,399.5 - ----------------------------------------------------------------------- ---------- --------- Increase (Decrease) in Cash and Due from Banks 252.2 (209.8) Cash and Due from Banks at Beginning of Year 1,192.5 1,519.7 - ----------------------------------------------------------------------- ---------- --------- Cash and Due from Banks at September 30 $ 1,444.7 $ 1,309.9 - ----------------------------------------------------------------------- ---------- --------- Schedule of Noncash Investing and Financing Activities: Acquisition of Affiliate for Stock $ 24.7 $ 6.4 Supplemental Disclosures of Cash Flow Information: Interest Paid on Deposits and Short- and Long-Term Borrowings $ 543.4 $ 352.1 Income Taxes Paid 42.6 30.3 - ----------------------------------------------------------------------- ---------- ---------
5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION - The consolidated financial statements include the accounts of Northern Trust Corporation and its subsidiaries (Northern Trust), all of which are wholly owned. Significant intercompany balances and transactions have been eliminated. The consolidated financial statements as of September 30, 1995 and 1994 have not been audited by independent public accountants. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to prior periods' consolidated financial statements to place them on a basis comparable with the current period's consolidated financial statements. For a description of Northern Trust's significant accounting principles, refer to the Notes to Consolidated Financial Statements in the 1994 Annual Report to Stockholders. 2. SECURITIES - The following table summarizes the book and fair values of securities.
September 30, 1995 December 31, 1994 September 30, 1994 -------------------- --------------------- -------------------- Book Fair Book Fair Book Fair (In Millions) Value Value Value Value Value Value - --------------------------- --------- --------- --------- ---------- --------- --------- Held to Maturity U.S. Government $ 102.0 $ 102.0 $ 137.2 $ 137.0 $ 105.5 $ 105.4 Obligations of States and Political Subdivisions 435.7 465.7 474.5 491.3 455.1 481.4 Federal Agency 22.2 22.1 - - - - Other 30.3 30.3 29.6 29.6 29.9 29.9 - --------------------------- -------- -------- -------- -------- -------- -------- Subtotal 590.2 620.1 641.3 657.9 590.5 616.7 - --------------------------- -------- -------- -------- -------- -------- -------- Available for Sale U.S. Government 1,512.0 1,512.0 801.3 801.3 861.3 861.3 Federal Agency 3,414.2 3,414.2 3,251.5 3,251.5 3,611.8 3,611.8 Preferred Stock 164.8 164.8 196.6 196.6 200.6 200.6 Other 117.0 117.0 158.4 158.4 167.2 167.2 - --------------------------- -------- ------- ------- ------- -------- -------- Subtotal 5,208.0 5,208.0 4,407.8 4,407.8 4,840.9 4,840.9 - --------------------------- -------- -------- -------- -------- -------- -------- Trading Account 57.2 57.2 4.0 4.0 60.0 60.0 - --------------------------- -------- -------- -------- -------- -------- -------- Total Securities $5,855.4 $5,885.3 $5,053.1 $5,069.7 $5,491.4 $5,517.6 - --------------------------- -------- -------- -------- -------- -------- --------
Reconciliation of Book Values to Fair Values of Securities Held to Maturity September 30, 1995 - --------------------------- ---------------------------------------- Book Gross Unrealized Fair (In Millions) Value Gains Losses Value - --------------------------- ------ ----- ---------- ------ Held to Maturity U.S. Government $102.0 $ .1 $.1 $102.0 Obligations of States and Political Subdivisions 435.7 30.1 .1 465.7 Federal Agency 22.2 - .1 22.1 Other 30.3 - - 30.3 - --------------------------- ------ ----- -- ------ Total $590.2 $30.2 $.3 $620.1 - --------------------------- ------ ----- --- ------
6
Reconciliation of Amortized Cost to Fair Values of Securities Available for Sale September 30, 1995 - --------------------------- ------------------------------------------- Gross Unrealized Amortized ------------------- Fair (In Millions) Cost Gains Losses Value - --------------------------- --------- -------- --------- -------- Available for Sale U.S. Government $1,514.8 $1.1 $3.9 $1,512.0 Federal Agency 3,410.4 5.0 1.2 3,414.2 Preferred Stock 164.9 .2 .3 164.8 Other 119.1 .5 2.6 117.0 - --------------------------- -------- -------- -------- -------- Total $5,209.2 $6.8 $8.0 $5,208.0 - --------------------------- -------- -------- -------- --------
Unrealized gains and losses on off-balance sheet financial instruments used to hedge available for sale securities totaled $.8 million and $3.8 million, respectively, as of September 30, 1995. Unrealized gains on these hedges are reported as other assets in the consolidated balance sheet; unrealized losses are reported as other liabilities. As of September 30, 1995, stockholders' equity included a charge of $2.7 million, net of tax, to recognize the depreciation on securities available for sale and the related hedges. 3. PLEDGED ASSETS - Securities and loans pledged to secure public and trust deposits, repurchase agreements and for other purposes as required or permitted by law were $5.2 billion on September 30, 1995, $3.7 billion on December 31, 1994 and $4.8 billion on September 30, 1994. 4. CONTINGENT LIABILITIES - Standby letters of credit outstanding were $911.0 million on September 30, 1995, $819.9 million on December 31, 1994 and $833.4 million on September 30, 1994. 5. LOANS AND LEASES - Amounts outstanding in selected loan categories are shown below.
September 30 December 31 September 30 ------------ ----------- ------------ (In Millions) 1995 1994 1994 - --------------------------- ------------ ----------- ------------ Domestic Commercial $3,207.6 $2,672.0 $2,672.7 Residential Real Estate 3,750.6 3,299.1 3,244.9 Commercial Real Estate 505.4 494.1 472.7 Broker 225.0 274.6 356.8 Consumer 772.0 662.1 622.5 Other 706.4 642.1 452.2 Lease Financing 181.5 159.9 148.1 - --------------------------- -------- -------- -------- Total Domestic 9,348.5 8,203.9 7,969.9 International 459.8 386.7 482.7 - --------------------------- -------- -------- -------- Total Loans and Leases $9,808.3 $8,590.6 $8,452.6 - --------------------------- -------- -------- --------
7 At September 30, 1995, other domestic and international loans include $946.9 million of overnight trust-related advances in connection with next day security settlements, compared with $716.6 million at December 31, 1994 and $609.9 million at September 30, 1994. Northern Trust adopted Statements of Financial Accounting Standards Nos. 114 and 118, "Accounting by Creditors for Impairment of a Loan", effective January 1, 1995. These statements provide guidance as to when loans should be classified and reported as impaired and address how the reserve for credit losses related to these loans should be determined. Any shortfall in the estimated value of an impaired loan compared with the recorded investment of the loan, is identified as an allocated portion of the reserve for credit losses and is one of the factors considered by management in their overall assessment of reserve adequacy. No changes were required to Northern Trust's accounting policies for loans, charge-offs and interest income as a result of adopting these statements. These policies are described in Notes to Consolidated Financial Statements (Footnotes 1E and 1F) in the 1994 Annual Report. At September 30, 1995, nonperforming assets totaled $35.4 million. Included in this amount were loans with a recorded investment of $27.7 million which were also classified as impaired. Impaired loans totaling $24.5 million had no portion of the reserve for credit losses allocated to them, while $3.2 million had an allocated reserve of $.4 million. For the third quarter of 1995, the total recorded investment in impaired loans averaged $29.0 million. Total interest income recognized on impaired loans for the quarter ended September 30, 1995 was $149 thousand, most of which was recognized using the cash-basis method of accounting. 6. RESERVE FOR CREDIT LOSSES - Changes in the reserve for credit losses were as follows.
Nine Months Ended September 30 ------------------- (In Millions) 1995 1994 - ------------- ------ ------- Balance at Beginning of Period $144.8 $145.5 Charge-Offs (7.8) (8.8) Recoveries 3.0 3.2 ------ ------ Net Charge-Offs (4.8) (5.6) Provision for Credit Losses 5.0 5.0 Reserve Related to Acquisitions 2.3 - ------ ------ Balance at End of Period $147.3 $144.9 ------ ------
7. ACQUISITIONS - The acquisition of Tanglewood Bancshares, Inc., parent company of Tanglewood Bank N.A. Houston was completed on July 31, 1995 for $32.5 million in cash. 8 On October 31, 1995 Northern Trust completed the acquisition of RCB International, Inc. (RCB), an international provider of institutional investment management services. RCB shareholders received at closing $11.0 million in cash, $.6 million in notes and 392.4 thousand shares of Northern Trust Corporation common stock. The transaction was recorded under the purchase method of accounting. In addition, 216.1 thousand shares of Northern Trust Corporation common stock and $2.6 million in cash were allocated for various deferred compensation plans and other deferred payment arrangements. Shares and cash available under these deferred payment arrangements are payable over one to seven years and are contingent upon continued employment, non-competition agreements and, in some cases, meeting predetermined performance goals. 8. NOTES PAYABLE - Under the terms of a September 6, 1995 Offering Circular, The Northern Trust Company has the ability to offer from time to time up to $1.7 billion aggregate principal amount at any time outstanding of its senior bank notes (less certain medium-term bank notes issued prior to April 1993 and still outstanding), with maturities ranging from 30 days to 15 years and may offer up to $300 million aggregate principal amount of its subordinated bank notes with maturities ranging from 5 years to 15 years. On September 19, 1995, The Northern Trust Company issued $100 million of 6.7% Subordinated Notes due 2005. 9 Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIRD QUARTER EARNINGS HIGHLIGHTS Net income for the third quarter totaled a record $58.1 million, an increase of 21% from the $48.0 million reported in the third quarter of 1994. Net income per common share on a fully diluted basis increased 18% to $.98 from $.83 in 1994. This earnings performance produced an annualized return on average common equity (ROE) of 18.11% versus 17.02% reported last year and an annualized return on average assets (ROA) of 1.14% versus 1.05% in 1994. Record levels of trust fees, foreign exchange trading profits, and net interest income contributed to the quarter's performance. Total noninterest expenses increased 5.5% from the previous year while declining from the first and second quarters of 1995. NONINTEREST INCOME Noninterest income increased 14% and totaled $173.4 million for the quarter, accounting for 64% of total taxable equivalent revenue. Trust fees, which represent 73% of noninterest income and 47% of total taxable equivalent revenue, grew 10% or $11.5 million over the comparable quarter of last year reaching $127.3 million. The increase reflects an 8% growth level in Corporate and Institutional Services (C&IS) and a 12% increase in Personal Financial Services (PFS). Total trust assets under administration at quarter-end were $585.4 billion, up $90.6 billion from one year ago. Trust fees from C&IS increased $4.9 million to $64.8 million. The increase in fees reflects new business and strong growth across all products, particularly custody, retirement services, securities lending and investment management. Custody fees increased $1.6 million and totaled $30.6 million for the quarter. The growth was centered primarily in domestic custody driven by an increase in transaction-based fee revenues and new business from both new and existing clients. Fees from retirement services generated by Hazlehurst & Associates, Inc. increased 18% from the year ago quarter. Domestic securities lending fees, up 28% versus last year, reflect a 26% increase in the volume of securities loaned as well as higher spreads earned from the investment of the cash collateral. Investment management fees increased 26%, primarily as a result of new business. C&IS trust assets under administration grew 18% or $80.4 billion over last year and now total $525.0 billion. C&IS assets under the management of Northern Trust total $60.6 billion, up 29% from a year ago. PFS trust fees amounted to $62.5 million, up 12% or $6.6 million from the corresponding 1994 quarter. Total personal trust assets under administration increased $10.2 billion over last year and totaled $60.4 billion, with $36.6 billion under management. The primary contributors to this fee growth were the Wealth Management Group and PFS offices in Chicago, Florida and California. PFS fees benefited from new business growth and higher market values of assets under administration. The increase in trust fees also reflects the contribution of Beach Bank, a March 31, 1995 acquisition. 10 Security commissions and trading income totaled $5.8 million, compared with $4.4 million reported in the third quarter of last year. The increase resulted primarily from a higher volume of trading activity by individual clients. Other operating income in the quarter totaled $40.0 million, compared to $32.6 million in the third quarter of 1994. The principal items included in other operating income are foreign exchange trading profits and treasury management fees. Foreign exchange trading profits were at record levels and totaled $16.2 million, an increase of $6.6 million. Foreign exchange revenues, which are generated in both Chicago and London, have benefited from an increase in cross- border investment activities of Master Trust/Master Custody clients and favorable market conditions. The fee portion of treasury management revenues rose 9% to $12.5 million. Total treasury management revenues, which, in addition to fees, include the value of compensating deposit balances, increased during the quarter and reflect growth across each treasury management product, particularly electronic services. These revenues increased despite the fact that $.8 million was credited to treasury management clients as a result of a retroactive reduction in FDIC deposit insurance premiums. NET INTEREST INCOME Net interest income for the third quarter totaled $89.4 million, 5% higher than the $85.0 million reported in the third quarter of 1994. Net interest income is defined as the total of interest income and amortized fees on earning assets less interest expense on deposits and borrowed funds adjusted for the impact of off-balance sheet hedging activity. When net interest income is adjusted to a fully taxable equivalent (FTE) basis, yields on taxable, nontaxable and partially taxable assets are comparable, although the adjustment to a FTE basis has no impact on net income. Net interest income on a FTE basis for the third quarter was $98.9 million, up 6% from the $93.2 million reported in 1994. This increase is due to higher levels of average earning assets, reflecting in part the Beach Bank acquisition and the acquisition of Tanglewood Bank on July 31. Earning assets for the third quarter averaged $17.8 billion, up 11% from the $16.0 billion in the third quarter of 1994. The $1.8 billion growth in earning assets reflects an 11% or $922 million increase in average loans, a $1.6 billion or 30% growth in average securities and a $685 million or 28% decrease in average money market assets. Overall loan volume reflected a $1.0 billion or 13% increase in domestic lending, which was partially offset by a decline in international lending. Approximately 46% of the increase in domestic lending is attributable to residential mortgage loans now accounting for 39% of the total average loan portfolio. Commercial and industrial loans grew 13% or $372 million to average $3.1 billion for the quarter. In addition, domestic and international overnight advances related to processing certain trust client investments averaged $697 million, up $118 million from a year ago. Securities for the quarter averaged $6.7 billion, up 30% from the $5.1 billion reported last year, due primarily to a $1.4 billion increase in short-term federal agency securities. The decline in money market assets of $685 million was due to short-term interest rates providing fewer opportunities to add marginal net interest income. 11 The growth in average earning assets was funded primarily by increased levels of interest-bearing time deposits, federal funds purchased and other borrowings, and noninterest-related funds. Interest-bearing deposits averaged $9.4 billion, up $705 million from the third quarter of 1994. This growth came principally from savings certificates (up $893 million), partially offset by a $239 million decline in foreign office time deposits. The 72% increase in the average volume of savings certificates is due in large part to successful certificate of deposit campaigns conducted periodically during last year's fourth quarter and the first quarter of 1995. Average noninterest-related funds increased $163 million, due primarily to growth in stockholders' equity. Total average stockholders' equity increased $150 million or 12% from the third quarter of 1994. The increase primarily reflects the growth in retained earnings. The net interest margin decreased to 2.21% compared with 2.31% last year due primarily to narrowing spreads between short-term assets and various short-term funding sources. Also contributing to the decline in the net interest margin was the increase in the level of nonearning trust-related overnight advances. PROVISION FOR CREDIT LOSSES The provision for credit losses of $2.0 million compares to $1.0 million in the third quarter of 1994. For a discussion of the reserve for credit losses, refer to the Asset Quality section on pages 14 and 15. NONINTEREST EXPENSES Noninterest expenses totaled $175.5 million for the quarter, up 5.5% from $166.2 million in the third quarter of 1994 and less than the Corporation's noninterest expenses for each of the first two quarters of 1995. The third quarter expenses included a $3.9 million pension settlement charge for retiring officers, $1.2 million in staff-related severance costs and approximately $2.3 million of expenses from the Beach Bank and Tanglewood Bank acquisitions. These expenses were largely offset by a $4.6 million refund in FDIC deposit insurance premiums paid for the June through September 1995 period. The majority of the remaining increase in noninterest expenses was concentrated primarily in technology spending and personal trust business expansion. Salaries and benefits, which represent 60% of total noninterest expenses, increased 6% to $104.4 million. The principal items contributing to the change were merit increases, incentive compensation, severance costs, and additions to staff at Hazlehurst & Associates to support Northern's growing retirement services business and from the Beach Bank and Tanglewood Bank acquisitions. Higher costs related to retirement benefits, health care and payroll taxes also contributed to the overall increase. Staff on a full-time equivalent basis totaled 6,465 at September 30, 1995. Adjusting for the positions added by the Beach Bank and Tanglewood Bank acquisitions, staff levels declined by 285 positions since the end of 1994. 12 Net occupancy expenses totaled $15.6 million, up 9% or $1.2 million from $14.4 million in the third quarter of 1994. The principal components of the increase were higher real estate taxes and utility costs, amortization and depreciation of leasehold improvements and buildings, as well as expansion costs related to the opening of new offices in Florida, Illinois and Texas. Equipment expense, which includes depreciation, rental, and maintenance costs, totaled $12.0 million, up $1.2 million or 11% from the third quarter of 1994. The principal components of the increase were higher rental costs for computers and equipment and increased depreciation expense primarily related to personal computers. Other operating expenses totaled $43.5 million, up 2% from $42.3 million in the third quarter of 1994. Reflected in other operating expenses is the $3.9 million pension settlement charge, as well as a credit for the $4.6 million refund of FDIC deposit insurance premiums. Increases in computer software amortization, up $2.4 million to $8.7 million, along with higher costs incurred from processing errors, were partially offset by lower levels of professional service costs, transaction-based depository fees and other real estate owned operating costs. PROVISION FOR INCOME TAXES The provision for income taxes was $27.2 million for the third quarter compared with $22.4 million in the year ago quarter. The higher tax provision in 1995 resulted from the growth in taxable earnings for federal income tax purposes while tax-exempt income declined slightly. Partially offsetting this was a lower state income tax provision due to increased levels of tax-exempt income for state purposes. The effective tax rate was 32% for both years. NINE MONTHS EARNINGS HIGHLIGHTS Net income totaled $160.5 million for the nine months ended September 30, 1995 compared to $142.1 million last year, an increase of 13%. On a fully diluted basis, net income per common share was $2.71, up 9% from the $2.47 earned last year. The ROE for the nine month period was 17.37% versus 17.64% one year ago, while the ROA was 1.12% versus 1.07% in 1994. Noninterest income increased 5% to $503.5 million from $481.0 million in the like period of 1994. Excluding the $28.5 million gain recorded from the 1994 sale of the Corporation's interest in Banque Scandinave en Suisse (BSS), the year-to-year increase was $51.0 million or 11%. Noninterest income comprised 63% of total taxable equivalent revenue. Trust fees totaled $371.4 million, up 10% from $338.8 million last year. Security commissions and trading income totaled $16.9 million, down $.3 million from the $17.2 million earned last year. Other operating income, exclusive of the BSS gain from the prior year, increased 19% to $114.7 million. Foreign exchange trading profits were at record levels and totaled $43.0 million, an increase of $17.2 million compared with one year ago. The fee portion of treasury management revenues totaled $36.9 million, a 5% improvement from the $35.1 million reported in 1994. Total treasury management revenues, which, in addition to fees, include the value of compensating deposit balances, also increased and contributed to the improvement in net interest income. 13 Net interest income stated on a fully taxable equivalent basis totaled a record $294.5 million, up 8% from the $272.1 million reported in the like period of 1994. The provision for credit losses remained unchanged at $5.0 million. Net loan charge-offs declined to $4.8 million from $5.6 million in 1994. Noninterest expenses totaled $530.7 million, up 3% from $515.6 million in 1994. Exclusive of nonrecurring charges in 1994, total noninterest expenses increased 7% from prior year levels. BALANCE SHEET Total assets as of September 30, 1995 were $20.2 billion and averaged $19.1 billion for the first nine months, up 8% from last year's average of $17.7 billion. With increased lending activity, in addition to the Beach Bank and Tanglewood Bank acquisitions, loans and leases totaled $9.8 billion at September 30, 1995, and averaged $9.0 billion for the first nine months. This compares with $8.5 billion in total loans at September 30, 1994 and $8.2 billion on average for the first nine months of last year. Driven primarily by continued strong earnings growth and the acquisition of Beach Bank, common stockholders' equity increased 14% and totaled $1.24 billion at September 30, 1995, versus $1.09 billion at September 30, 1994. Total stockholders' equity also increased and totaled $1.41 billion at September 30, 1995 compared with $1.26 billion at September 30, 1994. During the quarter, the Corporation purchased approximately 630,000 common shares in connection with its stock buyback program. The Northern Trust Company successfully completed a $100 million subordinated bank note offering, adding Tier 2 capital at favorable rates. Northern Trust's risk-based capital ratios remained strong at 8.9% for tier 1 and 12.7% for total capital at September 30, 1995. These capital ratios are well above the minimum regulatory requirements of 4% for tier 1 and 8% for total risk-based capital ratios. The leverage ratio (tier 1 capital to third quarter average assets) of 6.2% at September 30, 1995, also exceeded the regulatory requirement of 3%. Refer to footnote 7 in Notes to Consolidated Financial Statements for a description of acquisitions. ASSET QUALITY Nonperforming assets consist of nonaccrual loans and leases, restructured loans, and other real estate owned (OREO). Nonperforming assets at September 30, 1995 totaled $35.4 million, compared with $30.0 million at December 31, 1994 and $39.2 million at September 30, 1994. Domestic nonaccrual loans and leases, consisting primarily of commercial loans, totaled $30.4 million, or .33% of total domestic loans and leases at September 30, 1995. Included in this total are commercial real estate loans of $5.0 million. The following Nonperforming Asset table presents the outstanding amounts of nonaccrual loans and leases, restructured loans and OREO. Also shown are loans that have interest or principal payments that are delinquent 90 days or more and are still accruing interest. The balance in this category at any quarter end can fluctuate widely based on the timing of cash collections, renegotiations and renewals. 14 Nonperforming Assets and 90 Day Past Due Loans and Leases
September 30 June 30 December 31 September 30 (In Millions) 1995 1995 1994 1994 - ------------------------------------------------------------------------------------ Nonaccrual Loans Domestic $30.4 $29.8 $26.5 $34.3 International .4 .7 1.3 1.3 - ------------------------------------------------------------------------------------ Total Nonaccrual Loans 30.8 30.5 27.8 35.6 Restructured Loans 2.8 2.8 - - OREO 1.8 1.2 2.2 3.6 - ------------------------------------------------------------------------------------ Total Nonperforming Assets $35.4 $34.5 $30.0 $39.2 - ------------------------------------------------------------------------------------ Total 90 Day Past Due Loans (still accruing) $21.5 $14.1 $17.3 $23.9 - ------------------------------------------------------------------------------------
PROVISION AND RESERVE FOR CREDIT LOSSES. The provision for credit losses is the charge against current earnings that is determined by management through a disciplined credit review process as the amount needed to maintain a reserve that is sufficient to absorb credit losses inherent in Northern Trust's loan and lease portfolios and other credit undertakings. While the largest portion of this reserve is intended to cover loan and lease losses, it is considered a general reserve that is available to cover all credit-related exposures. The 1995 third quarter provision for credit losses was $2.0 million, compared with $1.0 million in 1994. Net charge-offs totaled $1.8 million in the third quarter of 1995 versus net charge-offs of $1.0 million last year. The reserve for credit losses was $147.3 million, equal to 1.50% of outstanding loans at September 30, 1995. This compares with $144.8 million or 1.69% of outstanding loans at December 31, 1994 and $144.9 million or 1.71% of outstanding loans at September 30, 1994. The lower reserve to outstanding loans ratio at September 30, 1995 is attributable to loan growth, a significant portion of which is in low-risk residential lending and overnight trust related advances. The overall credit quality of the domestic portfolio has remained good as evidenced by the low level of nonperforming loans and net charge-offs. Management's assessment of the current U.S. economy, the financial condition of certain clients facing financial difficulties, bank acquisitions and portfolio growth were primary factors impacting management's decision to increase the reserve for credit losses to $147.3 million at September 30, 1995, up slightly from December 31, 1994 and September 30, 1994. Northern Trust continues to monitor closely several credits, but the overall quality of its loan portfolio remains sound and the reserve for credit losses is adequate to cover credit-related uncertainties as they exist today. Established credit review procedures ensure that close attention is given to commercial real estate-related loans and other commercial loans, as well as other credit exposures that might be adversely affected by significant increases in interest rates or unexpected downturns in segments of the economies of the United States or other countries. 15 (THIS PAGE INTENTIONALLY LEFT BLANK) 16 The following schedule should be read in conjunction with the Net Interest Income section of Management's Discussion and Analysis of Financial Condition and Results of Operations. CONSOLIDATED ANALYSIS OF NET INTEREST INCOME
THIRD QUARTER -------------------------------------------------- (Interest and rate on a 1995 1994 taxable equivalent basis) ------------------------ ------------------------ ($ Amounts in Millions) INTEREST VOLUME RATE Interest Volume Rate - -------------------------- -------- --------- ----- -------- --------- ----- AVERAGE EARNING ASSETS Money Market Assets Federal Funds Sold and Repurchase Agreements $ 1.9 $ 125.7 6.04% $ 2.0 $ 177.8 4.65% Time Deposits with Banks 22.4 1,604.2 5.53 26.1 2,107.6 4.90 Other .2 9.9 8.76 1.7 139.6 4.88 - -------------------------- ------ --------- ----- ------ --------- ----- Total Money Market Assets 24.5 1,739.8 5.59 29.8 2,425.0 4.88 - -------------------------- ------ --------- ----- ------ --------- ----- Securities U.S. Government 20.1 1,339.6 5.94 13.5 1,172.3 4.59 Obligations of States and Political Subdivisions 11.5 433.1 10.61 12.6 454.9 11.04 Federal Agency 69.8 4,499.3 6.16 36.8 3,054.8 4.79 Other 5.2 341.6 6.09 5.3 403.2 5.23 Trading Account 1.1 63.7 7.02 1.2 55.5 8.01 - -------------------------- ------ --------- ----- ------ --------- ----- Total Securities 107.7 6,677.3 6.41 69.4 5,140.7 5.37 - -------------------------- ------ --------- ----- ------ --------- ----- Loans and Leases 163.1 9,356.9 6.91 130.5 8,434.9 6.14 - -------------------------- ------ --------- ----- ------ --------- ----- Total Earning Assets $295.3 $17,774.0 6.59% $229.7 $16,000.6 5.70% - -------------------------- ------ --------- ----- ------ --------- ----- AVERAGE SOURCE OF FUNDS Deposits Savings and Money Market Deposits $ 27.5 $ 3,327.0 3.28% $ 22.1 $ 3,391.6 2.58% Savings Certificates 32.6 2,124.7 6.09 14.4 1,232.0 4.66 Other Time 8.6 584.8 5.82 5.5 469.5 4.59 Foreign Offices Time 43.4 3,338.4 5.15 38.2 3,576.9 4.24 - -------------------------- ------ --------- ----- ------ --------- ----- Total Deposits 112.1 9,374.9 4.74 80.2 8,670.0 3.67 Federal Funds Purchased 29.9 2,047.1 5.80 13.3 1,163.7 4.54 Repurchase Agreements 26.6 1,830.6 5.76 19.8 1,779.5 4.41 Commercial Paper 2.1 147.5 5.86 1.7 153.5 4.59 Other Borrowings 17.8 1,292.0 5.47 6.6 668.8 3.94 Senior Medium-Term Notes 2.8 174.6 6.44 9.5 801.6 4.69 Notes Payable 5.1 254.1 7.90 5.4 273.6 7.91 - -------------------------- ------ --------- ----- ------ --------- ----- Total Interest-Related Funds 196.4 15,120.8 5.15 136.5 13,510.7 4.01 - -------------------------- ------ --------- ----- ------ --------- ----- Interest Rate Spread -- -- 1.44% -- -- 1.69% - -------------------------- ------ --------- ----- ------ --------- ----- Noninterest-Related Funds -- 2,653.2 -- -- 2,489.9 -- - -------------------------- ------ --------- ----- ------ --------- ----- Total Source of Funds $196.4 $17,774.0 4.38% $136.5 $16,000.6 3.39% - -------------------------- ------ --------- ----- ------ --------- ----- NET INTEREST INCOME/MARGIN $ 98.9 -- 2.21% $ 93.2 -- 2.31% - -------------------------- ------ --------- ----- ------ --------- -----
ANALYSIS OF NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE
THIRD QUARTER 1995/94 NINE MONTHS 1995/94 ------------------ --------------------- CHANGE DUE TO CHANGE DUE TO ------------ ------------- (In Millions) VOLUME RATE TOTAL VOLUME RATE TOTAL - ---------------------- ------ ----- ----- ------ ------ ------ Earning Assets $29.0 $36.6 $65.6 $77.7 $139.0 $216.7 Interest-Related Funds 23.5 36.4 59.9 50.0 144.3 194.3 - ---------------------- ----- ----- ----- ----- ------ ------ Net Interest Income $ 5.5 $ .2 $ 5.7 $27.7 $ (5.3) $ 22.4 - ---------------------- ----- ----- ----- ----- ------ ------
17 Northern Trust Corporation
NINE MONTHS -------------------------------------------------- 1995 1994 ------------------------ ------------------------ INTEREST VOLUME RATE Interest Volume Rate -------- --------- ----- -------- --------- ----- $ 9.3 $ 205.4 6.09% $ 6.0 $ 197.7 4.07% 69.9 1,647.2 5.67 74.7 2,154.4 4.63 .7 12.7 7.07 4.4 140.1 4.22 ------ --------- ----- ------ --------- ----- 79.9 1,865.3 5.73 85.1 2,492.2 4.57 ------ --------- ----- ------ --------- ----- 45.9 1,083.8 5.65 61.9 2,052.9 4.03 36.0 442.1 10.87 39.9 469.4 11.32 197.4 4,166.7 6.33 63.3 1,882.7 4.50 17.1 366.7 6.23 14.2 372.3 5.08 2.6 49.3 7.14 3.3 55.2 7.90 ------ --------- ----- ------ --------- ----- 299.0 6,108.6 6.54 182.6 4,832.5 5.05 ------ --------- ----- ------ --------- ----- 467.8 8,958.5 6.98 362.3 8,214.2 5.90 ------ --------- ----- ------ --------- ----- $846.7 $16,932.4 6.68% $630.0 $15,538.9 5.42% ------ --------- ----- ------ --------- ----- $ 81.5 $ 3,293.3 3.31% $ 61.8 $ 3,436.2 2.40% 87.7 1,949.2 6.02 38.2 1,162.4 4.40 23.0 527.4 5.82 12.9 399.8 4.30 141.2 3,607.6 5.23 92.4 3,105.3 3.98 ------ --------- ----- ------ --------- ----- 333.4 9,377.5 4.75 205.3 8,103.7 3.39 62.1 1,416.2 5.86 40.1 1,408.7 3.81 75.7 1,731.8 5.84 39.5 1,349.8 3.91 6.4 145.9 5.89 4.0 135.9 3.98 44.2 1,089.1 5.43 27.5 1,101.0 3.34 15.5 340.2 6.05 23.5 785.7 3.98 14.9 247.9 8.02 18.0 308.8 7.81 ------ --------- ----- ------ --------- ----- 552.2 14,348.6 5.14 357.9 13,193.6 3.63 ------ --------- ----- ------ --------- ----- -- -- 1.54% -- -- 1.79% ------ --------- ----- ------ --------- ----- -- 2,583.8 -- -- 2,345.3 -- ------ --------- ----- ------ --------- ----- $552.2 $16,932.4 4.36% $357.9 $15,538.9 3.08% ------ --------- ----- ------ --------- ----- $294.5 -- 2.32% $272.1 -- 2.34% ------ --------- ----- ------ --------- -----
18 PART II - OTHER INFORMATION Item 5. Other Information On October 3, 1995, William A. Osborn became Chairman and Chief Executive Officer and Barry G. Hastings became President and Chief Operating Officer, implementing a previously announced succession plan approved by the Corporation's Board of Directors. Their elections followed the retirement of David W. Fox after 40 years of service with the Corporation and its principal subsidiary, The Northern Trust Company. Item 6. Exhibits and Reports on Form 8-K (a.) Exhibits -------- Exhibit (3) Amendment to By-laws of the Corporation and By-laws as amended. Exhibit (4) Instruments Defining the Rights of Security Holders (i) Form of The Northern Trust Company's Global Senior Bank Note (Fixed Rate). (ii) Form of The Northern Trust Company's Global Senior Bank Note (Floating Rate). (iii) Form of The Northern Trust Company's Global Subordinated Medium-Term Bank Note (Fixed Rate). (iv) Form of The Northern Trust Company's Global Subordinated Medium-Term Bank Note (Floating Rate). Exhibit (11) Computation of Per Share Earnings Exhibit (27) Financial Data Schedule (b.) Reports on Form 8-K ------------------- No reports on Form 8-K were filed for the three months ended September 30, 1995. 19 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. NORTHERN TRUST CORPORATION -------------------------- (Registrant) Date: November 13, 1995 By: PERRY R. PERO ------------------------------ PERRY R. PERO Senior Executive Vice President and Chief Financial Officer Date: November 13, 1995 By: HARRY W. SHORT ------------------------------ HARRY W. SHORT Senior Vice President and Controller (Chief Accounting Officer) 20 EXHIBIT INDEX ------------- The following exhibits have been filed herewith. Exhibit Number Description - ------ ----------- (3) Amendment to By-laws of the Corporation and By-laws as amended. (4) Instruments Defining the Rights of Security Holders (i) Form of The Northern Trust Company's Global Senior Bank Note (Fixed Rate). (ii) Form of The Northern Trust Company's Global Senior Bank Note (Floating Rate). (iii) Form of The Northern Trust Company's Global Subordinated Medium-Term Bank Note (Fixed Rate). (iv) Form of The Northern Trust Company's Global Subordinated Medium-Term Bank Note (Floating Rate). (11) Computation of Per Share Earnings. (27) Financial Data Schedule. 21 EX-3 2 AMENDMENT TO BY-LAWS Board of Directors Exhibit Number (3) To 9/30/95 Form 10-Q Resolution 8/15/95 - -------------------------------------------------------------------------------- Northern Trust Corporation AMENDED AND RESTATED BY-LAWS - ---------------------------- RESOLVED, that the By-Laws of Northern Trust Corporation are hereby amended and restated in their entirety, to read as set forth in the form of By-Laws presented to this meeting, a copy of which shall be maintained in the Secretary's file. Exhibit Number (3) To 9/30/95 Form 10-Q By-laws of Northern Trust Corporation Chicago, Illinois As Effective August 15, 1995
Table of Contents Article I--The Stockholders SECTION 1.1 --ANNUAL MEETING.............................................. 1 SECTION 1.2 --SPECIAL MEETINGS............................................ 1 SECTION 1.3 --NOTICE OF MEETINGS.......................................... 1 SECTION 1.4 --FIXING DATE OF RECORD....................................... 1 SECTION 1.5 --INSPECTORS OF ELECTION...................................... 2 SECTION 1.6 --QUORUM...................................................... 3 SECTION 1.7 --CUMULATIVE VOTING RIGHTS.................................... 3 SECTION 1.8 --PROXIES..................................................... 3 SECTION 1.9 --VOTING BY BALLOT............................................ 3 SECTION 1.10 --VOTING LISTS................................................ 3 SECTION 1.11 --PLACE OF MEETING............................................ 3 SECTION 1.12 --VOTING OF SHARES OF CERTAIN HOLDERS......................... 4 Article II--The Board of Directors SECTION 2.1 --GENERAL POWERS.............................................. 4 SECTION 2.2 --NUMBER, TENURE AND QUALIFICATIONS........................... 4 SECTION 2.3 --REGULAR MEETINGS............................................ 4 SECTION 2.4 --SPECIAL MEETINGS; NOTICE.................................... 4 SECTION 2.5 --TIME OF NOTICE.............................................. 5 SECTION 2.6 --QUORUM...................................................... 5 SECTION 2.7 --MANNER OF ACTING............................................ 5 SECTION 2.8 --DIRECTORS' COMPENSATION..................................... 5 SECTION 2.9 --VACANCIES................................................... 5 SECTION 2.10 --CONSENT IN LIEU OF MEETING.................................. 6 Article III--The Executive Committee SECTION 3.1 --NUMBER, TENURE, AND QUORUM.................................. 6 SECTION 3.2 --POWERS...................................................... 6 SECTION 3.3 --MEETINGS.................................................... 6 SECTION 3.4 --RECORDS AND REPORTS......................................... 6 Article IV--The Audit Committee SECTION 4.1 --FUNCTIONS................................................... 7 SECTION 4.2 --COMPOSITION................................................. 7 SECTION 4.3 --PROCEDURES.................................................. 7 SECTION 4.4 --COUNSEL..................................................... 7 Article V--The Nominating Committee SECTION 5.1 --THE NOMINATING COMMITTEE.................................... 8 Article VI--The Compensation and Benefits Committee SECTION 6.1 --THE COMPENSATION AND BENEFITS COMMITTEE................................................... 8 Article VII--The Personal Financial Services Committee SECTION 7.1 --THE PERSONAL FINANCIAL SERVICES COMMITTEE................... 8 Article VIII--The Corporate and Institutional Services Committee SECTION 8.1 --THE CORPORATE AND INSTITUTIONAL SERVICES COMMITTEE.......... 9
i Article IX--The Officers SECTION 9.1 --NUMBER AND TERM OF OFFICE................................... 9 SECTION 9.2 --REMOVAL..................................................... 9 SECTION 9.3 --THE CHAIRMAN OF THE BOARD................................... 9 SECTION 9.4 --THE PRESIDENT............................................... 9 SECTION 9.5 --THE CHIEF EXECUTIVE OFFICER................................. 10 SECTION 9.6 --THE VICE CHAIRMEN........................................... 10 SECTION 9.7 --THE EXECUTIVE VICE PRESIDENTS............................... 10 SECTION 9.8 --THE VICE PRESIDENTS......................................... 10 SECTION 9.9 --THE TREASURER............................................... 10 SECTION 9.10 --THE SECRETARY............................................... 11 SECTION 9.11 --ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.............. 11 SECTION 9.12 --SALARIES.................................................... 11 Article X--Contracts, Loans, Checks and Deposits SECTION 10.1 --CONTRACTS................................................... 11 SECTION 10.2 --LOANS....................................................... 11 SECTION 10.3 --CHECKS, DRAFTS, ETC......................................... 11 SECTION 10.4 --DEPOSITS.................................................... 11 SECTION 10.5 --POWER TO EXECUTE PROXIES.................................... 12 Article XI--Certificates for Shares and Their Transfer SECTION 11.1 --CERTIFICATES FOR SHARES..................................... 12 SECTION 11.2 --TRANSFERS OF SHARES......................................... 12 Article XII--Fiscal Year SECTION 12.1 --FISCAL YEAR................................................. 12 Article XIII--SEAL SECTION 13.1 --SEAL........................................................ 12 Article XIV--Waiver of Notice SECTION 14.1 --WAIVER OF NOTICE............................................ 13 Article XV--Indemnification SECTION 15.1 --INDEMNIFICATION REQUEST..................................... 13 SECTION 15.2 --DETERMINATION OF INDEMNIFICATION REQUEST.................... 13 SECTION 15.3 --PRESUMPTION OF ENTITLEMENT; CONCLUSIVE EFFECT OF FINDINGS OF FACT AND LAW; OTHER PROCEDURES.............................. 13 SECTION 15.4 --COOPERATION AND EXPENSES.................................... 14 SECTION 15.5 --SELECTION OF INDEPENDENT COUNSEL............................ 14 SECTION 15.6 --TIME FOR DETERMINATION...................................... 14 SECTION 15.7 --FAILURE TO MAKE DETERMINATION; REMEDIES FOR ENFORCEMENT..... 15 SECTION 15.8 --APPEAL OF ADVERSE DETERMINATION............................. 15 SECTION 15.9 --BURDEN OF PROOF............................................. 15 SECTION 15.10 --DEFINITION OF "DISINTERESTED DIRECTOR"...................... 15 SECTION 15.11 --DEFINITION OF "CHANGE OF CONTROL"........................... 15 SECTION 15.12 --ADVANCEMENT OF EXPENSES..................................... 16 SECTION 15.13 --PERSONAL LIABILITY OF DIRECTORS............................. 16 Article XVI--Amendments SECTION 16.1 --AMENDMENTS.................................................. 16
ii By-laws of The Northern Trust Corporation Chicago, Illinois ARTICLE I THE STOCKHOLDERS SECTION 1.1 Annual Meeting. There shall be an annual meeting of the stockholders on the third Tuesday in April of each year at ten-thirty o'clock A.M., or at such other date or time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, for the election of Directors and for the transaction of such other business as may come before the meeting. SECTION 1.2 Special Meetings. A special meeting of the stockholders may be called at any time by the Board of Directors, the Chairman of the Board, the President, or a Vice Chairman, and shall be called upon request in writing from the holders of at least one-third of the issued and outstanding shares of capital stock of the Corporation entitled to vote at such meeting specifying the purpose or purposes for which such meeting shall be called. SECTION 1.3 Notice of Meetings. Unless a different manner of giving notice is prescribed by statute, written or printed notice stating the place, day, and hour of the meeting, and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not more than 50 days nor less than 10 days (or less than 20 days if a merger or consolidation of the Corporation,or a sale, lease or exchange of all or substantially all of the Corporation's property or assets, is to be acted upon at the meeting) before the date of the meeting either personally or by mail, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid addressed to the stockholder at the stockholder's address as it appears on the records of the Corporation. SECTION 1.4. Fixing Date of Record. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days (or less than 20 days if a merger or consolidation of the Corporation, or a sale, lease or exchange of all or substantially all of the Corporation's property or assets, is to be acted upon at the meeting) before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the next day preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to an adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 1 ARTICLE (b) In order that the Corporation may determine the stockholders I entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the Restated Certificate of Incorporation of the Corporation or by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered in the manner required by law to the Corporation at its registered office in the State of Delaware or at its principal place of business or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of the Corporation's stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand delivery or by certified or registered mail, return receipt requested. If no record has been fixed by the Board of Directors and prior action by the Board of Directors is required by the Restated Certificate of Incorporation or by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (d) Only those who shall be stockholders of record on the record date so fixed as aforesaid shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding the transfer of any stock on the books of the Corporation after the applicable record date. SECTION 1.5. Inspectors of Election. The Board of Directors or the Executive Committee of the Board of Directors of the Corporation shall appoint, in advance, one or more inspectors to act at each meeting of the stockholders of the Corporation. If no inspector has been appointed or one or more have been appointed but are unable or fail to act, the presiding officer of any meeting of the stockholders shall appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain the number of shares of stock of the Corporation outstanding and entitled to vote at the meeting and the voting power of each share; determine and report the number of shares represented at the meeting, based upon their determination of the validity and effect of proxies and ballots; count all votes and ballots and report the results; and do such other acts as are required by law or are proper to conduct the election and voting with impartiality and fairness to all the stockholders. Each report of an inspector shall be in writing and signed by him or her or a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. The inspector or inspectors may appoint or retain other persons or entities to assist in performing their duties. 2 ARTICLE SECTION 1.6. Quorum. A majority of the outstanding I shares of capital stock entitled to vote at the meeting, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. In the absence of a quorum, a meeting may be adjourned from time to time without notice to the stockholders except as otherwise required by law. SECTION 1.7. Cumulative Voting Rights. At all elections of Directors of the Corporation, each stockholder entitled generally to vote for the election of Directors shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) the stockholder would be entitled to cast for the election of Directors with respect to the stockholder's shares of stock multiplied by the number of Directors to be elected, and the stockholder may cast all of such votes for a single Director or may distribute them among the number to be voted for, or for any two or more of them as the stockholder may see fit. SECTION 1.8. Proxies. At all meetings of stockholders, a stockholder entitled to vote may vote either in person or by proxy executed in writing by the stockholder or by the stockholder's duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. SECTION 1.9. Voting by Ballot. Voting in any election for Directors shall be by ballot. SECTION 1.10. Voting Lists. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 1.11. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or any special meeting called by the Board of Directors. If no designation is made, or if a special meeting is otherwise called, the place of meeting shall be the principal office of the Corporation in the City of Chicago. 3 ARTICLE SECTION 1.12. Voting of Shares of Certain Holders. I Shares of capital stock of the Corporation standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent, or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares of capital stock of the Corporation standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by his or her administrator, executor, court appointed guardian or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator. Shares of capital stock of the Corporation standing in the name of a trustee may be voted by the trustees, either in person or by proxy. Shares of capital stock of the Corporation standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into the receiver's name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own capital stock belonging to this Corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time. ARTICLE II THE BOARD OF DIRECTORS SECTION 2.1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors. SECTION 2.2. Number, Tenure and Qualifications. The Board of Directors of the Corporation shall consist of such number of Directors, not less than 5 nor more than 25, as shall be fixed from time to time by the Board of Directors. Each Director shall hold office until the next annual meeting of stockholders or until a successor is elected. SECTION 2.3. Regular Meetings. A regular meeting of the Board of Directors shall be held at least once each quarter at such place, date and hour as the Board may appoint. Notice of each regular meeting, unless waived, shall be given in the same manner as is provided for notice of a special meeting. SECTION 2.4. Special Meetings; Notice. A special meeting of the Board of Directors may be called by or at the request of the Chairman of the Board, the President, a Vice Chairman, or any two Directors. The person or persons calling or requesting such meeting may fix the place, date and hour thereof. Notice of the place, date, and hour of each special meeting, unless waived, shall be given to a Director in person, by mail, by telegram or cable, by telephone or wireless, or by any other means that reasonably may be expected to provide similar 4 ARTICLE notice. Except in emergency situations as described II below, notice by any means shall be given at least two days prior to the meeting. For purposes of dealing with an emergency situation (as conclusively determined by the officer or Directors calling the meeting), notice may be given in person, by telegram or cable, by telephone or wireless, or by any other means that reasonably may be expected to provide similar notice, not less than two hours prior to the meeting. Such notice may be given by the Secretary or by the officer or Directors calling the meeting. SECTION 2.5. Time of Notice. If notice to a Director is given: (a) in person, such notice shall be deemed to have been given when delivered; (b) by mail, such notice shall be deemed to have been given when deposited in the United States mail, postage prepaid, addressed to the Director at such address as appears on the records of the Corporation for such Director; (c) by telegram, cable or other similar means (not including mail) that provide written notice, such notice shall be deemed to have been given when delivered to any transmission company, with charges prepaid, addressed to the Director at such address as appears on the records of the Corporation for such Director; or (d) by telephone, wireless or other means of voice transmission, such notice shall be deemed to have been given when transmitted to such number or call designation as appears on the records of the Corporation for such Director. Any meeting of the Board of Directors shall be a legal meeting without any notice having been given if all the Directors are present at the meeting, and no notice of a meeting shall be required to be given to any Director who attends such meetings. SECTION 2.6. Quorum. A majority of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, provided that if less than a majority of the Directors are present at said meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice. SECTION 2.7. Manner of Acting. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, except on additions, amendments, repeal or any changes whatsoever in the By-laws or the adoption of new By-laws, when the affirmative votes of at least a majority of the members of the Board shall be necessary for the adoption of such changes. A director may participate in a meeting of the Board of Directors or any committee thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meetings. SECTION 2.8. Directors' Compensation. The Directors shall receive such compensation as may be fixed by the Board for services to the Corporation. SECTION 2.9. Vacancies. If vacancies occur in the Board of Directors caused by death, resignation, retirement, disqualification or removal from office of any Director or Directors, or otherwise, or if any new Directorship is created by any increase in the authorized number of Directors, a majority of the surviving or remaining Directors then in office, though less than a quorum, may choose a successor or successors, or fill the newly created Directorship, and the Directors so chosen shall hold office until the next annual meeting of stockholders or until their successors are elected. 5 ARTICLE SECTION 2.10. Consent in Lieu of Meeting. Unless II otherwise restricted by the Restated Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee thereof, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or committee. ARTICLE III THE EXECUTIVE COMMITTEE SECTION 3.1. Number, Tenure and Quorum. The Directors shall each year appoint no less than five Directors, one of whom shall be the Chairman of the Board and one of whom shall be the President if the President is designated the Chief Executive Officer, who shall constitute and be called the Executive Committee. Each Director so appointed shall act as a member of the Committee until another is appointed and acts in the Director's place. The Chairman of the Board shall preside at meetings of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. In the absence or inability to act of the Chairman of the Board, or upon the request of the Chairman, the President, if the President is a member of the Committee, or a member elected by the Committee shall preside at meetings of the Committee. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business. SECTION 3.2. Powers. The Executive Committee may, while the Board of Directors is not in session, exercise all or any of the powers of the Board of Directors; except that the Executive Committee shall not have the power or authority of the Board of Directors in reference to amending the Restated Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-laws of the Corporation, or declaring a dividend or authorizing the issuance of stock. SECTION 3.3. Meetings. Meetings of the Executive Committee shall be held at the office of the Corporation, or elsewhere, and at such time as they may appoint, but the Committee shall at all times be subject to the call of the Chairman of the Board or any member of the Committee. SECTION 3.4. Records and Reports. The Executive Committee, through the Secretary or any Assistant Secretary, shall keep books of separate minutes and report all its action at every regular meeting of the Board of Directors, or as often as may be required by the Board. 6 ARTICLE IV THE AUDIT COMMITTEE SECTION 4.1. Functions. An Audit Committee shall be appointed each year by the Board of Directors. The Committee shall perform the following functions for the Corporation and its subsidiaries on a consolidated basis and for such individual banking subsidiaries as the Board shall direct: (a) Reviewing with management and the independent public accountant the reports issued with respect to the annual financial statements, the internal control structure and procedures for financial reporting and compliance with laws and regulations and the basis for such reports. (b) Reviewing with management and the independent public accountant the scope of services required by the annual audit, significant accounting policies, and audit conclusions regarding significant accounting estimates. (c) Reviewing with management and the independent public accountant their assessments of the adequacy of internal controls, and the resolution of identified material weaknesses and reportable conditions in internal controls over financial reporting, including the prevention or detection of management override or compromise of the internal control system. (d) Reviewing with management and the independent public accountant compliance with those laws and regulations with respect to which management and the independent public accountant are required to report. (e) Discussing with management the selection and termination of the independent public accountant and any significant disagreements between the independent public accountant and management. (f) Reviewing the internal audit program and results of examinations. (g) Reviewing the program of the Chief Compliance Officer and the compliance function generally. (h) Reviewing the results of regulatory examinations. (i) Reviewing such other matters as the Committee deems appropriate. SECTION 4.2. Composition. The Committee shall consist of no less than four Directors. All of the members of the Committee shall, in the judgement of the Board of Directors, be independent of management of the Corporation and its subsidiaries and shall meet other applicable regulatory requirements. SECTION 4.3. Procedures. The Committee shall be appointed annually at the organization meeting of the Board of Directors and at the same time a Chairman shall be appointed. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another qualified member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. SECTION 4.4. Counsel. The Committee may, in order to assist it in the performance of its functions, engage counsel of its choosing without the approval of the engagement by the Board of Directors or management and may direct the proper officers of the Corporation to pay the reasonable fees and expenses of any such counsel. 7 ARTICLE V THE NOMINATING COMMITTEE SECTION 5.1. The Nominating Committee. A Nominating Committee and its Chairman shall be appointed each year by the Board of Directors to receive recommendations for, and to review, study and evaluate the qualifications of all candidates for senior management succession and for nomination to the Board of Directors or its Committees. The Committee shall report to the Board its conclusions with respect to such candidates and its recommendations for nominees for election or reelection or appointment to fill vacancies in the Board and as officers of the Corporation. The Committee shall consist of no less than four Directors and shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE VI THE COMPENSATION AND BENEFITS COMMITTEE SECTION 6.1. The Compensation and Benefits Committee. A Compensation and Benefits Committee and its Chairman shall be appointed each year by the Board of Directors to study, review and make recommendations to the Board with respect to the salary policy for the Corporation, the compensation of senior officers, and the development of and amendment to incentive and benefit plans. The Committee shall consist of no less than three Directors, none of whom shall be an active officer of the Corporation. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE VII THE PERSONAL FINANCIAL SERVICES COMMITTEE SECTION 7.1. The Personal Financial Services Committee. A Personal Financial Services Committee and its Chairman shall be appointed each year by the Board of Directors to review the policies, strategies and performance of the Personal Financial Services Business Unit of the Corporation and such other related matters as may from time to time be deemed appropriate by the Committee. The Committee shall consist of no less than four Directors, none of whom shall be an active officer of the Corporation. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. 8 ARTICLE VIII THE CORPORATE AND INSTITUTIONAL SERVICES COMMITTEE SECTION 8.1. The Corporate and Institutional Services Committee. A Corporate and Institutional Services Committee and its Chairman shall be appointed each year by the Board of Directors to review the policies, strategies, and performance of the Corporate and Institutional Services Business Unit of the Corporation and such other related matters as may from time to time be deemed appropriate by the Committee. The Committee shall consist of no less than four Directors, none of whom shall be an active officer of the Corporation. The Committee shall meet upon the call of the Chairman or any member of the Committee. In the absence or disqualification of a member of the Committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE IX THE OFFICERS SECTION 9.1. Number and Term of Office. The officers of the Corporation shall be a Chairman of the Board and a President, one of whom shall be designated Chief Executive Officer by the Board of Directors, and may also include one or more Vice Chairmen, one or more Executive Vice Presidents (any of whom may be designated a Senior Executive Vice President), such additional Vice Presidents with such designations, if any, as may be determined by the Board of Directors, a Secretary, and a Treasurer and one or more Assistant Secretaries and Assistant Treasurers as may be determined by the Board of Directors, and such other officers as may from time to time be appointed by the Board of Directors. Any two or more offices may be held by the same person. The Chairman of the Board, the President and the Vice Chairmen shall be elected from among the Directors; the other officers may be appointed by the Board of Directors. The officers of the Corporation shall be elected or appointed annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders. Vacancies or new offices may be filled at any time. Each officer shall hold office until a successor shall have been duly elected or appointed or until his or her death or until he or she shall resign or shall have been removed by the Board of Directors. SECTION 9.2. Removal. An officer may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby. SECTION 9.3. The Chairman of the Board. The Chairman of the Board shall have such powers as are vested in him or her by the Board of Directors, by law or by these By-laws. The Chairman shall preside at the meetings of the stockholders, of the Board of Directors, and of the Executive Committee. SECTION 9.4. The President. The President shall have the powers and duties vested in him or her by the Board of Directors, by law or by these By-laws. In the absence or inability to act of the Chairman of the Board, or upon the request of the Chairman of the Board, the President shall preside at meetings of the stockholders and of the Board of Directors and shall have and exercise all of the powers and duties of the Chairman of the Board. 9 ARTICLE SECTION 9.5. The Chief Executive Officer. The IX Chief Executive Officer of the Corporation shall have, subject to the supervision and direction of the Board of Directors or of the Executive Committee, general supervision of the business, property and affairs of the Corporation and the powers vested in him or her by the Board of Directors, by law or by these By-laws or which usually attach or pertain to such office. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors, the Chief Executive Officer may execute for the Corporation any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized, and the Chief Executive Officer may (without previous authorization by the Board of Directors) execute such contracts and other instruments as the conduct of the Corporation's business in its ordinary course requires. SECTION 9.6. The Vice Chairmen. A Vice Chairman shall have such powers as are vested in him or her by the Board of Directors, by law or by these By-laws. In the absence or inability to act of the Chairman of the Board and the President, or upon request of the Chairman of the Board, or in his or her absence upon request of the President, a Vice Chairman (or in the event there be more than one Vice Chairman, the Vice Chairmen in the order designated, or in the absence of any designation, then in the order of their election) shall preside at meetings of stockholders and of the Board of Directors and shall have and exercise all their powers and duties. SECTION 9.7. The Executive Vice Presidents. In the absence of the Chairman of the Board, the President and the Vice Chairmen or in the event of their inability or refusal to act, the Executive Vice President (or in the event there be more than one Executive Vice President, the Executive Vice Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the Chairman of the Board, of the President, and of the Vice Chairmen and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chairman of the Board, the President and the Vice Chairmen. Any Executive Vice President may sign, with the Secretary or any Assistant Secretary, certificates for shares of the corporation; and shall perform such other duties as from time to time may be assigned to him or her by the Chairman of the Board, the President, a Vice Chairman, the Board of Directors, or these By-laws. SECTION 9.8. The Vice Presidents. The Vice Presidents shall perform such duties as may be assigned to them from time to time by the Chairman of the Board, the President, the Vice Chairmen, or the Board of Directors, or these By-laws. Any Vice President may sign, with the Secretary or an Assistant Secretary, certificates for shares of the Corporation. SECTION 9.9. The Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the Board of Directors shall determine. The Treasurer shall (a) have charge and custody of and be responsible for all funds and securities of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any source whatsoever, and deposit all such moneys in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article X of these By-laws; (b) in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the Chairman of the Board, the President, a Vice Chairman, the Board of Directors, or these By-laws. 10 ARTICLE SECTION 9.10. The Secretary. The Secretary shall IX have the custody of the corporate seal and the Secretary or any Assistant Secretary shall affix the same to all instruments or papers requiring the seal of the Corporation. The Secretary, or in his or her absence, any Assistant Secretary, shall see that proper notices are sent of the meetings of the stockholders, the Board of Directors and the Executive Committee, and shall see that all proper notices are given, as required by these By-laws. The Secretary or any Assistant Secretary shall keep the minutes of all meetings of stockholders and Directors and all committees which may request their services. SECTION 9.11. Assistant Treasurers and Assistant Secretaries. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries as thereunto authorized by the Board of Directors may sign with the Chairman of the Board, the President, a Vice Chairman, or an Executive Vice President certificates for shares of the Corporation, the issue of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers and Assistant Secretaries, in general, shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the Chairman of the Board, the President, a Vice Chairman, the Board of Directors, or these By-laws. SECTION 9.12. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that the officer is also a director of the Corporation. ARTICLE X CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 10.1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 10.2. Loans. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 10.3. Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 10.4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors may select. 11 ARTICLE SECTION 10.5. Power to Execute Proxies. The Chairman X of the Board, the President, a Vice Chairman, or any Executive Vice President may execute proxies on behalf of the Corporation with respect to the voting of any shares of stock owned by the Corporation. ARTICLE XI CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 11.1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as may be determined by the Board of Directors. Such certificates shall be signed by the Chairman of the Board, the President, a Vice Chairman, an Executive Vice President or a Vice President and by the Secretary or an Assistant Secretary and shall be sealed with the seal of the Corporation. The seal may be a facsimile. If a stock certificate is countersigned (i) by a transfer agent other than the Corporation or its employee, or (ii) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 11.2. Transfers of Shares. Transfers of shares of the Corporation shall be made only on the books of the Corporation by the holder of record thereof or by the holder's legal representative, who shall furnish proper evidence of authority to transfer, or by the holder's attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. ARTICLE XII FISCAL YEAR SECTION 12.1. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January in each year and end on the last day of December in each year. ARTICLE XIII SEAL SECTION 13.1. Seal. The Board of Directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation. 12 ARTICLE XIV WAIVER OF NOTICE SECTION 14.1. Waiver of Notice. Whenever any notice whatever is required to be given under the provisions of these By-laws or under the provisions of the Restated Certificate of Incorporation or under the provisions of the General Corporation Law of Delaware, waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance of any person at a meeting for which any notice whatever is required to be given under the provisions of these By-laws, the Restated Certificate of Incorporation or the General Corporation Law of Delaware shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE XV INDEMNIFICATION SECTION 15.1. Indemnification Request. A director, officer or other person (the ``Indemnitee'') who seeks indemnification (other than advancement of expenses pursuant to Section 15.12 hereof), in respect of amounts paid or owing as expenses, judgments, fines, or in settlement, shall submit a written request for indemnification (the ``Indemnification Request'') to the Board of Directors of the Corporation by delivering or mailing the same, registered or certified mail, to the Board of Directors c/o the Secretary of the Corporation at the Corporation's principal executive offices. If mailed, the Indemnification Request shall be deemed made 48 hours after depositing the same in the United States mail addressed as aforesaid. SECTION 15.2. Determination of Indemnification Request. The determination of the Indemnitee's entitlement to indemnification as set forth in the Indemnification Request shall be made in the specific case, at the expense of the Corporation, as set forth in paragraph 5 of Article Eighth of the Restated Certificate of Incorporation. However, in the event a Change of Control (as hereinafter defined) shall have occurred, such determination shall be made by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee. SECTION 15.3. Presumption of Entitlement; Conclusive Effect of Findings of Fact and Law; Other Procedures. The termination with respect to the Indemnitee of any action, suit or 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 the Indemnitee to indemnification or create a presumption that the Indemnitee did not meet the standard of conduct required by Article Eighth of the Restated Certificate of Incorporation for indemnification. If the Indemnitee is a person referred to in paragraphs 1, 2 or 3 Article Eighth of the Restated Certificate of Incorporation, the Indemnitee shall be presumed to have met the required standard of conduct but only to the extent not contrary to any final findings of fact or law made in any action, suit or proceeding to which the Indemnitee is or was a party and for which indemnification is requested. The person, persons or entity making the determination of the Indemnitee's entitlement to indemnification shall be entitled to rely upon all such findings of fact and law made known to such person, persons or entity. Such person, persons or entity may consider such other matters as they or it deem appropriate, shall not be required to receive or hear evidence, oral presentations, briefs or other submission, shall not be required to hold hearings, and shall not otherwise be subject to any rules of evidence or procedure applicable to judicial or other proceedings. 13 ARTICLE SECTION 15.4. Cooperation and Expenses. The XV Indemnitee shall cooperate with the person, persons or entity making the determination with respect to the Indemnitee's entitlement to indemnification, including providing to such person, 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 the Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) reasonably incurred by the Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Corporation irrespective of the determination as to the Indemnitee's entitlement to indemnification. SECTION 15.5. Selection of Independent Counsel. If a determination of the Indemnitee's entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected as provided in this Section 15.5. If a Change of Control shall not have occurred, Independent Counsel shall be selected by a majority vote of a quorum of the Board of Directors consisting of Disinterested Directors. If a Change of Control shall have occurred, or if a quorum shall decline or fail to select Independent Counsel within five business days after having directed, pursuant to paragraph 5(b) of Article Eighth of the Restated Certificate of Incorporation, the determination of the Indemnitee's entitlement to indemnification to be submitted to Independent Counsel, then Independent Counsel shall be selected by the law firm regularly or most frequently engaged by the Corporation during the preceding three years for representation or counseling in connection with general corporate matters. In any event, Independent Counsel shall be selected from among those Chicago, Illinois, or Delaware law firms having a significant and continuous practice in the field of corporate law but excluding any firm that: (i) has, within the preceding three years represented the Corporation, the Indemnitee or affiliates of either in any significant matter; (ii) has, within the preceding three years, represented any other party in any significant judicial or other proceeding against or in opposition to the Corporation, the Indemnitee or any affiliate of either; (iii) had any involvement of any significant nature in or with respect to the claim for which indemnification is requested; or (iv) has any other material conflict of interest in being engaged as Independent Counsel. SECTION 15.6. Time for Determination. The determination of the Indemnitee's entitlement to indemnification shall be made within 60 days after such Indemnitee shall have submitted all such additional information, if any, as shall have been reasonably requested during the 30-day period following the initial submission of the Indemnification Request to the Board of Directors pursuant to Section 15.1 hereof. The foregoing notwithstanding, in the event that the claim with respect to which indemnification is requested is the subject of a judicial, government or other proceeding, the Board of Directors, stockholders or Independent Counsel, as the case may be, may defer their determination until 60 days after any such proceeding shall have been finally adjudicated or terminated (by settlement or otherwise) and all periods for appeal, rehearing or reinstitution of such proceeding (whether in a different forum or otherwise) have expired. 14 ARTICLE SECTION 15.7. Failure To Make Determination; XV Remedies For Enforcement. If a determination of the Indemnitee's entitlement to indemnification shall not be made within the period specified in these By-laws, unless due to a material failure of the Indemnitee to comply with his or her obligations under Section 15.4 hereof, then the Indemnitee shall be entitled to indemnification to the extent and in the manner set forth in the Indemnification Request. The Indemnitee may only enforce his or her rights to indemnification, whether pursuant to a determination that the Indemnitee is entitled to indemnification or pursuant to this Section 15.7, in any judicial proceeding brought, at the election of the Indemnitee, in any court having jurisdiction within the State of Delaware, the State of Illinois, or the state in which the Corporation shall then have its principal executive offices. The Indemnitee shall be entitled to all expenses actually and reasonably incurred by him or her in connection with the successful enforcement of the Indemnitee's right to indemnification. SECTION 15.8. Appeal of Adverse Determination. In the event that a determination shall be made that the Indemnitee is not entitled to indemnification, in whole or in part, the Indemnitee may only institute an action in any court having jurisdiction within the State of Delaware, the State of Illinois, or the state in which the Corporation shall have its principal executive offices to establish the Indemnitee's right to indemnification. Any such proceeding shall be conducted in all respects as a de novo determination on the merits and any such prior determination made pursuant to these By-laws that the Indemnitee is not entitled to indemnification shall not constitute a presumption that the Indemnitee is not entitled to indemnification. SECTION 15.9. Burden of Proof. In any judicial proceeding regarding the Indemnitee's right or entitlement to indemnification or advancement of expenses, the Corporation shall have the burden of proving that any Indemnitee who is a person referred to in paragraphs 1, 2 or 3 of Article Eighth of the Restated Certificate of Incorporation is not entitled to indemnification or advancement of expenses as the case may be, subject, however, to principles of res judicata and collateral estoppel relating to prior judicial proceedings to which the Indemnitee is or was a party. In cases in which the Indemnitee is not a person referred to in paragraphs 1, 2 or 3 of Article Eighth of the Restated Certificate of Incorporation, the Indemnitee shall have the burden of proving he or she is entitled to indemnification or the advancement of expenses. SECTION 15.10. Definition of ``Disinterested Director.'' A Disinterested Director shall mean any director who (i) was not a party to the claim or proceeding with respect to which indemnification is requested; (ii) has not submitted an Indemnification Request or a request for advancement of expenses on his or her own behalf that has not been finally resolved; or (iii) does not have any direct and material financial or other personal interest in the determination of the Indemnification Request. SECTION 15.11. Definition of ``Change of Control.'' A Change of Control shall be deemed to have occurred on the earliest of: (a) The receipt by the Corporation of a Schedule 13D or other statement filed under Section 13(d) of the Securities Exchange Act of 1934, as amended (the ``Exchange Act''), indicating that any entity, person, or group has acquired beneficial ownership, as that term is defined in Rule 13d-3 under the Exchange Act, of more than 30% of the outstanding capital stock of the Corporation entitled to vote for the election of directors (``voting stock''); 15 ARTICLE (b) The commencement by an entity, person, or group XV (other than the Corporation or a subsidiary of the Corporation) of a tender offer or an exchange offer for more than 20% of the outstanding voting stock of the Corporation; (c) The effective time of (i) a merger or consolidation of the Corporation with one or more other corporations as a result of which the holders of the outstanding voting stock of the Corporation immediately prior to such merger or consolidation hold less than 80% of the voting stock of the surviving or resulting corporation, or (ii) a transfer of substantially all of the property of the Corporation other than to an entity of which the Corporation owns at least 80% of the voting stock; or (d) The election to the Board of Directors of the Corporation, without the recommendation or approval of the incumbent Board of Directors of the Corporation, of the lesser of (i) three directors or (ii) directors constituting a majority of the number of directors of the Corporation then in office. SECTION 15.12. Advancement of Expenses. Expenses as may be incurred by a person referred to in paragraphs 1, 2 or 3 of Article Eighth of the Restated Certificate of Incorporation in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in such Article Eighth. Such expenses as may be incurred by other employees and agents may be so paid on such terms and conditions, if any, as the Board of Directors deems appropriate. For purposes of the foregoing, a determination that a person referred to in paragraphs 1, 2 or 3 of Article Eighth of the Restated Certificate of Incorporation is not entitled to be indemnified by the Corporation shall be made in the manner hereinbefore provided for the determination of an Indemnification Request; provided, however, that the Board of Directors may initiate such determination whenever it shall deem the same to be appropriate. In connection with such determination, such person shall be subject to all requirements of these By-laws imposed on an ``Indemnitee'' in respect of a determination made pursuant to Section 15.2 hereof. SECTION 15.13. Personal Liability of Directors. No director of the Corporation shall be personally liable to any person seeking indemnification or advancement of expenses for any determination, act or omission in connection therewith. ARTICLE XVI AMENDMENTS SECTION 16.1. Amendments. These By-laws may be altered, amended or repealed and new By-laws may be adopted at any meeting of the Board of Directors of the Corporation by the affirmative vote of a majority of the members of the Board. The By-laws may also be amended or repealed, or new By-laws may be adopted, by action taken by the stockholders of the Corporation. 16 EX-4.(I) 3 FORM OF FIXED RATE SENIOR BANK NOTE Exhibit Number (4)(i) To 9/30/95 Form 10-Q UNLESS THIS SENIOR NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE BANK OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SENIOR NOTE ISSUED UPON REGISTRATION OR TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS SENIOR NOTE IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. IF THIS SENIOR NOTE IS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE FOLLOWING SHALL BE COMPLETED: THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, TO THIS SENIOR NOTE. THE ISSUE DATE OF THIS SENIOR NOTE IS _______________. THE ISSUE PRICE OF THIS SENIOR NOTE IS _____% OF ITS PRINCIPAL AMOUNT. THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SENIOR NOTE IS $______________ PER $1,000 OF THE INITIAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY IS _____%, AND THE AMOUNT OF THE ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE INITIAL SHORT ACCRUAL PERIOD, IF ANY, IS $_________ PER $1,000 OF THE INITIAL PRINCIPAL AMOUNT, DETERMINED ON THE BASIS OF THE EXACT METHOD. No. SEN FXR-______________ REGISTERED CUSIP NO.: ________________________ THE NORTHERN TRUST COMPANY GLOBAL SENIOR BANK NOTE (FIXED RATE) ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT: INTEREST RATE: _______% MATURITY DATE: INTEREST PAYMENT REGULAR RECORD DATES (If other than the April 1 DATES: or October 1, prior to each Interest Payment Date): INITIAL REDEMPTION DATE: INITIAL REDEMPTION PERCENTAGE: ANNUAL REDEMPTION HOLDER'S OPTIONAL PERCENTAGE REDUCTION: REPAYMENT DATE(S): ORIGINAL ISSUE OID AMOUNT: DISCOUNT NOTE: Yes:_____ No:_____ DEFAULT RATE: ____ % OTHER PROVISIONS: The Northern Trust Company, an Illinois banking corporation (the "Bank"), for value received, hereby promises to pay to ____________________ or registered assigns, the principal sum of _________________ United States Dollars on the Maturity Date specified above and to pay interest thereon from the Original Issue Date specified above or from the most recent interest payment date to which interest on this Senior Note (or any predecessor Senior Note) has been paid or duly provided for, semi-annually on April 15 and October 15 of each year (unless otherwise specified on the face hereof) (each, an "Interest Payment Date") and at maturity or upon earlier redemption or repayment, if applicable, commencing on the first Interest Payment Date next succeeding the Original Issue Date (or, if the Original Issue Date is between a Regular Record Date and the Interest Payment Date immediately following such Regular Record Date, on the second Interest Payment Date following the Original Issue Date), at the Interest Rate per annum specified above, until the principal hereof is paid or made available for payment, and (to the extent that the payment of such interest shall be legally enforceable) at such Interest Rate (or the Default Rate per annum specified above) on any overdue principal and premium, if any, and on any overdue installment of interest. Notwithstanding the foregoing, if this Senior Note has a maturity of one year or less, interest will be paid only at maturity. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the person in whose name this Senior Note (or any predecessor Senior Note) is registered at the close of business on the Regular Record Date for such interest, which shall be the April 1 and October 1 (whether or not a Business Day (as defined below)), as the case may be, next preceding the applicable Interest Payment Date (unless otherwise specified on the face hereof); provided, however, that interest payable at maturity or upon earlier redemption or repayment, if applicable, will be payable to the person to whom principal shall be payable. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the holder on such Regular Record Date and may either be paid to the person in whose name this Senior Note (or any predecessor Senior Note) is registered at the close of business on a special record date for the payment of such defaulted interest (the "Special Record Date") to be fixed by the Bank, notice of which shall be given to the holders of Senior Notes not less than 10 calendar days prior to such Special Record Date, or be paid at any time in any other lawful manner. -2- Payment of principal of, and premium, if any, and interest on, this Senior Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The Bank will at all times appoint and maintain a paying agent (the "Paying Agent") authorized by the Bank to pay the principal of, and premium, if any, and interest on, this Senior Note on behalf of the Bank and having an office or agency (the "Paying Agent Office") in The City of New York or the City of Chicago, Illinois (the "Place of Payment"), where this Senior Note may be presented or surrendered for payment and where notices, designations or requests in respect of payments with respect to this Senior Note may be served. The Bank has initially appointed itself as the Paying Agent, with the Paying Agent Office currently located at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services. THIS SENIOR NOTE IS A DIRECT, UNCONDITIONAL, UNSECURED AND UNSUBORDINATED GENERAL OBLIGATION OF THE BANK AND DOES NOT EVIDENCE A DEPOSIT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THIS SENIOR NOTE RANKS PARI PASSU WITH ALL OTHER UNSECURED AND UNSUBORDINATED OBLIGATIONS OF THE BANK, EXCEPT DEPOSITS AND OTHER OBLIGATIONS THAT ARE SUBJECT TO A PRIORITY OR PREFERENCE. UNDER APPLICABLE LAW, CLAIMS OF CERTAIN CREDITORS, INCLUDING HOLDERS OF DEPOSITS IN THE BANK, WOULD BE ENTITLED TO PRIORITY OVER CLAIMS OF UNSECURED GENERAL CREDITORS OF THE BANK, INCLUDING THE HOLDER OF THIS SENIOR NOTE, IN THE EVENT OF A LIQUIDATION OR OTHER RESOLUTION OF THE BANK. Payment of the principal of, and premium, if any, and interest on, this Senior Note due at maturity or upon earlier redemption or repayment, if applicable, will be made in immediately available funds upon presentation and surrender of this Senior Note to the Paying Agent at the Paying Agent Office in the Place of Payment; provided that this Senior Note is presented to the Paying Agent in time for the Paying Agent to make such payment in accordance with its normal procedures. Payments of interest on this Senior Note (other than at maturity or upon earlier redemption or repayment) will be made by wire transfer to such account as has been appropriately designated to the Paying Agent by the person entitled to such payments. This Senior Note is one of a duly authorized issue of Senior Bank Notes due from 30 days to fifteen years from date of issue of the Bank (herein called the "Senior Notes"). Payments of interest hereon on any Interest Payment Date will include interest accrued to, but excluding, such Interest Payment Date. Interest hereon shall be computed on the basis of a 360-day year of twelve 30-day months, provided that if this -3- Senior Note has a maturity of one year or less, interest hereon shall be computed on the basis of actual days divided by 360. If any Interest Payment Date, Maturity Date or date of earlier redemption or repayment of this Senior Note falls on a day which is not a Business Day, the related payment of principal, premium, if any, or interest shall be made on the next succeeding Business Day with the same force and effect as if made on the date such payment were due, and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Maturity Date or date of earlier redemption or repayment, as the case may be. "Business Day" means any day that is not a Saturday or Sunday and that is not a day on which banking institutions in The City of New York or the City of Chicago, Illinois generally are authorized or obligated by law or executive order to close. This Senior Note will not be subject to any sinking fund. If so provided on the face of this Senior Note, this Senior Note may be redeemed by the Bank on and after the Initial Redemption Date, if any, specified on the face hereof. If no Initial Redemption Date is specified on the face hereof, this Senior Note may not be redeemed prior to the Maturity Date. On and after the Initial Redemption Date, if any, this Senior Note may be redeemed at any time either in whole or in part from time to time in increments of $1,000 (provided that any remaining principal amount hereof shall be at least $250,000) at the option of the Bank at the applicable Redemption Price (as defined below), together with accrued and unpaid interest hereon at the applicable rate borne by this Senior Note to the date of redemption (each such date, a "Redemption Date"), on written notice given not more than 60 nor less than 30 calendar days prior to the Redemption Date by the Bank to the registered holder hereof. Whenever less than all the Senior Notes at any time outstanding are to be redeemed, the terms of the Senior Notes to be so redeemed shall be selected by the Bank. If less than all the Senior Notes with identical terms at any time outstanding are to be redeemed, the Senior Notes to be so redeemed shall be selected by the Paying Agent by lot or in any usual manner approved by it. In the event of redemption of this Senior Note in part only, a new Senior Note for the unredeemed portion hereof shall be issued in the name of the holder hereof upon the surrender hereof. The "Redemption Price" shall initially be the Initial Redemption Percentage specified on the face hereof of the principal amount of this Senior Note to be redeemed and shall decline at each anniversary of the Initial Redemption Date specified on the face hereof by the Annual Redemption Percentage Reduction, if any, specified on the face hereof, of the principal -4- amount to be redeemed until the Redemption Price is 100% of such principal amount. This Senior Note may be subject to repayment at the option of the holder hereof in accordance with the terms hereof on the Holder's Optional Repayment Date(s), if any, specified on the face hereof. If no Holder's Optional Repayment Date is specified on the face hereof, this Senior Note will not be so repayable at the option of the holder hereof prior to maturity. On any Holder's Optional Repayment Date, this Senior Note will be repayable in whole or in part in increments of $1,000 (provided that any remaining principal amount hereof will be at least $250,000) at the option of the holder hereof at a repayment price equal to 100% of the principal amount to be repaid, together with accrued and unpaid interest hereon payable to the date of repayment. For this Senior Note to be repaid in whole or in part at the option of the holder hereof on a Holder's Optional Repayment Date, this Senior Note must be given, with the form entitled "Option to Elect Repayment" below duly completed, to the Paying Agent at its offices located at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services, or at such other address which the Bank shall from time to time notify the holders of the Senior Notes, not more than 60 nor less than 30 days prior to such Holder's Optional Repayment Date. Exercise of such repayment option by the holder hereof shall be irrevocable. If this Senior Note is an Original Issue Discount Note and if an Event of Default with respect to the Senior Notes shall have occurred and be continuing, the Default Amount (as defined hereafter) of this Senior Note may be declared due and payable in the manner and with the effect provided herein. The "Default Amount" shall be equal to the adjusted issue price as of the first day of the accrual period as determined under Proposed Treasury Regulation Section 1.1272- 1(e) (or successor regulation) under the United States Internal Revenue Code of 1986, as amended, in which the date of acceleration occurs increased by the daily portion of the original issue discount for each day in such accrual period ending on the date of acceleration, as determined under Proposed Treasury Regulation Section 1.1272-1(c) (or successor regulation) under the United States Internal Revenue Code of 1986, as amended. Upon payment of (i) the amount of principal or premium, if any, so declared due and payable and (ii) interest on any overdue principal and overdue interest or premium, if any, (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Bank's obligations in respect of the payment of the principal of, and interest or premium, if any, on, this Senior Note shall terminate. -5- In case any Senior Note shall at any time become mutilated, destroyed, lost or stolen and such Senior Note or evidence satisfactory to the Bank of the loss, theft or destruction thereof (together with indemnity satisfactory to the Bank and such other documents or proof as may be required in the premises) shall be delivered to the Bank, a new Senior Note of like tenor will be issued by the Bank in exchange for the Senior Note so mutilated, or in lieu of the Senior Note so destroyed or lost or stolen. All expenses and reasonable charges associated with procuring the indemnity referred to above and with the preparation, authentication and delivery of a new Senior Note shall be borne by the holder of the Senior Note so mutilated, destroyed, lost or stolen. If any Senior Note which has matured or is about to mature shall become mutilated, destroyed, lost or stolen, the Bank may, instead of issuing a substitute Senior Note, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Senior Note) upon compliance by the holder thereof with the provisions of this paragraph. No recourse shall be had for the payment of the principal of, premium, if any, or interest on, this Senior Note, for any claim based hereon, or otherwise in respect hereof, against any shareholder, employee, officer or director, as such, past, present or future, of the Bank or of any successor corporation, either directly or through the Bank or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and part of the consideration for the issue hereof, expressly waived and released. The occurrence of any of the following events shall constitute an "Event of Default" with respect to this Senior Note: (i) default in the payment of any interest with respect to this Senior Note when due, which continues for 30 days; (ii) default in the payment of any principal of, or premium, if any, on, this Senior Note when due; (iii) the entry by a court having jurisdiction in the premises of (a) a decree or order for relief in respect of the Bank in an involuntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, reorganization or other similar law or (b) a decree or order appointing a conservator, receiver, liquidator, assignee, trustee, sequestrator or any other similar official of the Bank, or of substantially all of the property of the Bank, or ordering the winding up or liquidation of the affairs of the Bank, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (iv) the commencement by the Bank of a voluntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, -6- reorganization or other similar law or of any other case or proceeding to be adjudicated as bankrupt or insolvent, or the consent by the Bank to the entry of a decree or order for relief in an involuntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding, or the filing by the Bank of a petition or answer or consent seeking reorganization or relief under any applicable United States federal or state law, or the consent by the Bank to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Bank or of substantially all of the property of the Bank, or the making by the Bank of an assignment for the benefit of creditors, or the taking of corporate action by the Bank in furtherance of any such action. If an Event of Default shall occur and be continuing, the holder of this Senior Note may declare the principal amount of, and accrued interest and premium, if any, on, this Senior Note due and payable immediately by written notice to the Bank. Upon such declaration and notice, such principal amount, accrued interest and premium, if any, shall become due and payable seven calendar days after such notice. Any Event of Default with respect to this Senior Note may be waived by the holder hereof. No provision of this Senior Note shall alter or impair the obligation of the Bank, which is absolute and unconditional, to pay the principal of, and premium, if any, and interest on, this Senior Note in U.S. dollars at the times, places and rate herein prescribed. The Bank shall cause to be kept at the corporate trust office of the Senior Note Registrar designated below a register (the register maintained in such corporate trust office or any other office or agency of the Bank in the Place of Payment herein referred to as the "Senior Note Register") in which, subject to such reasonable regulations as it may prescribe, the Bank shall provide for the registration of the Senior Notes and of transfers of the Senior Notes. The Bank is hereby initially appointed "Senior Note Registrar" for the purpose of registering the Senior Notes and transfers of the Senior Notes as herein provided. The transfer of this Senior Note is registrable in the Senior Note Register, upon surrender of this Senior Note for registration of transfer at the office or agency of the Bank in the Place of Payment, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Bank and the Paying Agent duly executed by, the holder hereof or his attorney duly authorized in writing, and thereupon one or more new Senior Notes of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the -7- designated transferee or transferees. Notwithstanding the foregoing, the Bank shall not be required to register the transfer of any Senior Note that has been called for redemption during a period beginning at the opening of business fifteen calendar days before the day of mailing of a notice of such redemption and ending at the close of business on the day of such mailing. No service charge shall be made for any such registration of transfer or exchange, but the Bank may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Senior Notes are issuable only in registered form without coupons in minimum denominations of $250,000 and any integral multiple of $1,000 in excess thereof. Each owner of a beneficial interest in this Senior Note is required to hold a beneficial interest in $250,000 principal amount or any integral multiple of $1,000 in excess thereof of this Senior Note at all times. Prior to due presentment of this Senior Note for registration of transfer, the Bank, the Paying Agent or any agent of the Bank or the Paying Agent may treat the person in whose name this Senior Note is registered as the owner hereof for all purposes, whether or not this Senior Note be overdue, and neither the Bank, the Paying Agent nor any such agent shall be affected by notice to the contrary. All notices to the Bank under this Senior Note shall be in writing and addressed to the Bank at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services, or to such other address of the Bank as the Bank may notify the holders of the Senior Notes. This Senior Note shall be governed by, and construed in accordance with, the laws of the State of Illinois. IN WITNESS WHEREOF, the Bank has caused this instrument to be duly executed. THE NORTHERN TRUST COMPANY By: ------------------------------ Authorized Signatory -8- ABBREVIATIONS The following abbreviations, when used in the inscription on the face of the within Senior Note, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - _______________ Custodian ______________ (Cust) (Minor) under Uniform Gifts to Minors Act __________________________ (State) Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto ___________________________________________________________________________ ________________________________________________________________________________ PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _____________________________________ _____________________________________ ________________________________________________________________________________ (Please print or typewrite name and address, including postal zip code, of assignee) ________________________________________________________________________________ the within Senior Note and all rights thereunder, and hereby irrevocably constitutes and appoints _______________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ to transfer said Senior Note on the books of the Bank, with full power of substitution in the premises. Dated:_____________________ __________________________________________ Notice: The signature to this assignment must correspond with the name as written upon the face of the within Senior Note in every particular, without alteration or enlargement or any change whatsoever. OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably request(s) and instruct(s) the Bank to repay this Senior Note (or portion hereof specified below) pursuant to its terms and at a price equal to 100% of the principal amount hereof to be repaid, together with accrued and unpaid interest hereon, payable to the date of repayment, to the undersigned, at ______________________________________________ ________________________________________________________________________________ (Please print or typewrite name and address of the undersigned) For this Senior Note to be repaid, the undersigned must give to the Paying Agent at its offices located at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services, or at such other place or places of which the Bank shall from time to time notify the holders of the Senior Notes, not more than 60 days nor less than 30 days prior to the date of repayment, this Senior Note with this "Option to Elect Repayment" form duly completed. If less than the entire principal amount of this Senior Note is to be repaid, specify the portion hereof (which shall be increments of $1,000) which the holder elects to have repaid and specify the denomination or denominations (which shall be $250,000 or an integral multiple of $1,000 in excess thereof) of the Senior Notes to be issued to the holder for the portion of this Senior Note not being repaid (in the absence of any such specification, one such Senior Note will be issued for the portion not being repaid): $___________________ Dated:______________ __________________________________________ NOTICE: The signature on this "Option to Elect Repayment" form must correspond with the name as written upon the face of the within Senior Note in every particular, without alteration or enlargement or any change whatsoever. EX-4.(II) 4 FORM OF FLOATING RATE SENIOR BANK NOTE Exhibit Number (4)(ii) To 9/30/95 Form 10-Q UNLESS THIS SENIOR NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE BANK OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SENIOR NOTE ISSUED UPON REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS SENIOR NOTE IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. IF THIS SENIOR NOTE IS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE FOLLOWING SHALL BE COMPLETED: THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, TO THIS SENIOR NOTE. THE ISSUE DATE OF THIS SENIOR NOTE IS _____________. THE ISSUE PRICE OF THIS SENIOR NOTE IS _____% OF ITS PRINCIPAL AMOUNT. THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SENIOR NOTE IS $_________ PER $1,000 OF THE INITIAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY IS ____%, AND THE AMOUNT OF THE ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE INITIAL SHORT ACCRUAL PERIOD, IF ANY, IS $_____ PER $1,000 OF THE INITIAL PRINCIPAL AMOUNT, DETERMINED ON THE BASIS OF THE EXACT METHOD. No. SEN FLR-______________ REGISTERED CUSIP NO.: ________________________ THE NORTHERN TRUST COMPANY GLOBAL SENIOR BANK NOTE (FLOATING RATE) ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT: INITIAL INTEREST RATE: ______% MATURITY DATE: INTEREST RATE BASIS: INDEX MATURITY: SPREAD AND/OR SPREAD REGULAR RECORD DATES (If other than the 15th MULTIPLIER: day prior to each Interest Payment Date): MAXIMUM INTEREST RATE: MINIMUM INTEREST RATE: INTEREST PAYMENT DATES: INTEREST PAYMENT PERIOD: INTEREST RESET DATES: INTEREST RESET PERIOD: INITIAL REDEMPTION DATE: ANNUAL REDEMPTION PERCENTAGE REDUCTION: INITIAL REDEMPTION PERCENTAGE: HOLDER'S OPTIONAL REPAYMENT DATE: ORIGINAL ISSUE DISCOUNT NOTE: OID AMOUNT: Yes: ______ No: _____ OTHER PROVISIONS: CALCULATION AGENT: DEFAULT RATE: ____ % ALTERNATE RATE EVENT SPREAD: The Northern Trust Company, an Illinois banking corporation (the "Bank"), for value received, hereby promises to pay to __________________________________ ________________________________________________, or registered assigns, the principal sum of _______________________________________________________________ ________________________________________ United States Dollars on the Maturity Date specified above and to pay interest thereon from the Original Issue Date specified above or from the most recent interest payment date (or, if the Interest Reset Period specified above is daily or weekly, from, and including, the day following the most recent Regular Record Date) to which interest on this Senior Note (or any predecessor Senior Note) has been paid or duly provided for (each, an "Interest Payment Date"), on the Interest Payment Dates specified above and at maturity or upon earlier redemption or repayment, if applicable, commencing on the first Interest Payment Date next succeeding the Original Issue Date (or, if the Original Issue Date is between a Regular Record Date and the Interest Payment Date immediately following such Regular Record Date, on the second Interest Payment Date following the Original Issue Date), at a rate per annum equal to the Initial Interest Rate specified above until the first Interest Reset Date following the Original Issue Date and, on and after such Interest Reset Date, at the rate determined in accordance with the provisions set forth herein, until the principal hereof is paid or made available for payment, and (to the extent that the payment of such interest shall be legally enforceable) at the last rate in effect prior to any payment default (or the Default Rate per annum specified above, if such Default Rate is specified above) on any overdue principal and premium, if any, and on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the person in whose name this Senior Note (or any predecessor Senior Note) is registered at the close of business on the Regular Record Date for such interest, which shall be the 15th calendar day (whether or not a Business Day (as defined below)) before such Interest Payment Date (unless otherwise specified on the face hereof); -2- provided, however, that interest payable at maturity or upon earlier redemption or repayment, if applicable, will be payable to the person to whom principal shall be payable. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the holder on such Regular Record Date and may either be paid to the person in whose name this Senior Note (or any predecessor Senior Note) is registered at the close of business on a special record date for the payment of such defaulted interest (the "Special Record Date") to be fixed by the Bank, notice of which shall be given to the holders of Senior Notes not less than 10 calendar days prior to such Special Record Date, or be paid at any time in any other lawful manner. Payment of principal of, and premium, if any, and interest on, this Senior Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The Bank will at all times appoint and maintain a paying agent (the "Paying Agent") authorized by the Bank to pay the principal of, and premium, if any, and interest on, this Senior Note on behalf of the Bank and having an office or agency (the "Paying Agent Office") in The City of New York or the City of Chicago, Illinois (the "Place of Payment"), where this Senior Note may be presented or surrendered for payment and where notices, designations or requests in respect of payments with respect to this Senior Note may be served. The Bank has initially appointed itself as such Paying Agent, with the Paying Agent Office currently located at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services. THIS SENIOR NOTE IS A DIRECT, UNCONDITIONAL, UNSECURED AND UNSUBORDINATED GENERAL OBLIGATION OF THE BANK AND DOES NOT EVIDENCE A DEPOSIT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THIS SENIOR NOTE RANKS PARI PASSU WITH ALL OTHER UNSECURED AND UNSUBORDINATED OBLIGATIONS OF THE BANK, EXCEPT DEPOSITS AND OTHER OBLIGATIONS THAT ARE SUBJECT TO A PRIORITY OR PREFERENCE. UNDER APPLICABLE LAW, CLAIMS OF CERTAIN CREDITORS, INCLUDING HOLDERS OF DEPOSITS IN THE BANK, WOULD BE ENTITLED TO PRIORITY OVER CLAIMS OF UNSECURED GENERAL CREDITORS OF THE BANK, INCLUDING THE HOLDER OF THIS SENIOR NOTE, IN THE EVENT OF A LIQUIDATION OR OTHER RESOLUTION OF THE BANK. Payment of the principal of, and premium, if any, and interest on, this Senior Note due at maturity or upon earlier redemption or repayment, if applicable, will be made in immediately available funds upon presentation and surrender of this Senior Note to the Paying Agent at the Paying Agent Office in the Place of Payment; provided that this Senior Note is presented to the Paying Agent in time for the Paying Agent to -3- make such payment in accordance with its normal procedures. Payments of interest on this Senior Note (other than at maturity or upon earlier redemption or repayment) will be made by wire transfer to such account as has been appropriately designated to the Paying Agent by the person entitled to such payments. This Senior Note is one of a duly authorized issue of Senior Bank Notes due from 30 days to fifteen years from date of issue of the Bank (herein called the "Senior Notes"). Unless otherwise indicated on the face hereof, if the rate of interest on this Senior Note resets daily, weekly or monthly the Interest Payment Date for this Senior Note will be the third Wednesday of each month; if the rate of interest on this Senior Note resets quarterly, the Interest Payment Date for this Senior Note will be the third Wednesday of March, June, September and December of each year; if the rate of interest on this Senior Note resets semi- annually, the Interest Payment Date for this Senior Note will be the third Wednesday of each of two months of each year specified on the face hereof that are six months apart; and if the rate of interest on this Senior Note resets annually, the Interest Payment Date for this Senior Note will be the third Wednesday of the month specified on the face hereof. If any Interest Payment Date, Maturity Date or date of earlier redemption or repayment of this Senior Note falls on a day that is not a Business Day, such Interest Payment Date, Maturity Date or date of earlier redemption or repayment will be the next succeeding Business Day; provided, however, that if the Interest Rate Basis specified on the face hereof is LIBOR and such next succeeding Business Day is in the next succeeding calendar month, such Interest Payment Date, Maturity Date or date of earlier redemption or repayment will be the immediately preceding Business Day. "Business Day" means any day that is not a Saturday or Sunday and that is not a day on which banking institutions in The City of New York or the City of Chicago, Illinois generally are authorized or obligated by law or executive order to close, and with respect to Senior Notes with respect to which the Interest Rate Basis specified on the face hereof is LIBOR, any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market (a "London Business Day"). This Senior Note will not be subject to any sinking fund. If so provided on the face of this Senior Note, this Senior Note may be redeemed by the Bank on and after the Initial Redemption Date, if any, specified on the face hereof. If no Initial Redemption Date is specified on the face hereof, this Senior Note may not be redeemed prior to the Maturity Date. On and after the Initial Redemption Date, if any, this Senior Note may be redeemed at any time either in whole or in part from time to time in increments of $1,000 (provided that any remaining principal -4- amount hereof shall be at least $250,000) at the option of the Bank at the applicable Redemption Price (as defined below), together with accrued and unpaid interest hereon at the applicable rate borne by this Senior Note to the date of redemption (each such date, a "Redemption Date"), on written notice given not more than 60 nor less than 30 calendar days prior to the Redemption Date by the Bank to the registered holder hereof. Whenever less than all the Senior Notes at any time outstanding are to be redeemed, the terms of the Senior Notes to be so redeemed shall be selected by the Bank. If less than all the Senior Notes with identical terms at any time outstanding are to be redeemed, the Senior Notes to be so redeemed shall be selected by the Paying Agent by lot or in any usual manner approved by it. In the event of redemption of this Senior Note in part only, a new Senior Note for the unredeemed portion hereof shall be issued in the name of the holder hereof upon the surrender hereof. The "Redemption Price" shall initially be the Initial Redemption Percentage specified on the face hereof of the principal amount of this Senior Note to be redeemed and shall decline at each anniversary of the Initial Redemption Date specified on the face hereof by the Annual Redemption Percentage Reduction, if any, specified on the face hereof, of the principal amount to be redeemed until the Redemption Price is 100% of such principal amount. This Senior Note may be subject to repayment at the option of the holder hereof in accordance with the terms hereof on the Holder's Optional Repayment Date(s), if any, specified on the face hereof. If no Holder's Optional Repayment Date is specified on the face hereof, this Senior Note will not be so repayable at the option of the holder hereof prior to maturity. On any Holder's Optional Repayment Date, this Senior Note will be repayable in whole or in part in increments of $1,000 (provided that any remaining principal amount hereof will be at least $250,000) at the option of the holder hereof at a repayment price equal to 100% of the principal amount to be repaid, together with accrued and unpaid interest hereon payable to the date of repayment. For this Senior Note to be repaid in whole or in part at the option of the holder hereof on a Holder's Optional Repayment Date, this Senior Note must be given, with the form entitled "Option to Elect Repayment" below duly completed, to the Paying Agent at its offices located at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services, or at such address which the Bank shall from time to time notify the holders of the Senior Notes, not more than 60 nor less than 30 days prior to such Holder's Optional Repayment Date. Exercise of such repayment option by the holder hereof shall be irrevocable. -5- The rate of interest on this Senior Note will be reset daily, weekly, monthly, quarterly, semi-annually or annually (each such period, an "Interest Reset Period" for this Senior Note, and the first calendar day of an Interest Reset Period, an "Interest Reset Date"), as specified on the face hereof. Unless otherwise indicated on the face hereof, if this Senior Note resets daily, the Interest Reset Date will be each Business Day; if this Senior Note resets weekly and the Interest Rate Basis is not the Treasury Rate, the Interest Reset Date will be the Wednesday of each week; if this Senior Note resets weekly and the Interest Rate Basis is the Treasury Rate, the Interest Reset Date will be the Tuesday of each week (except as provided below); if this Senior Note resets monthly and the Interest Rate Basis is not the 11th District Cost of Funds Rate, the Interest Reset Date will be the third Wednesday of each month; if this Senior Note resets monthly and the Interest Rate Basis is the 11th District Cost of Funds Rate, the Interest Reset Date will be the first calendar day of each month; if this Senior Note resets quarterly, the Interest Reset Date will be the third Wednesday of March, June, September and December; if this Senior Note resets semi-annually, the Interest Reset Date will be the third Wednesday of each of two months of each year that are six months apart, as specified on the face hereof; and if this Senior Note resets annually, the Interest Reset Date will be the third Wednesday of one month of each year, as specified on the face hereof; provided, however, that (i) the interest rate in effect from the Original Issue Date to the first Interest Reset Date will be the Initial Interest Rate specified on the face hereof, and (ii) the interest rate in effect for the ten calendar days immediately prior to maturity or earlier redemption or repayment of any installment of principal hereof will be the interest rate in effect on the tenth calendar day preceding such Maturity Date or date of earlier redemption or repayment, as the case may be. If any Interest Reset Date with respect to this Senior Note would otherwise be a day that is not a Business Day, such Interest Reset Date will be the next succeeding Business Day, except that in the case that the Interest Rate Basis specified on the face hereof is LIBOR, if such Business Day is in the next succeeding calendar month, such Interest Reset Date will be the immediately preceding Business Day. Except as otherwise specified in this paragraph, the rate of interest on this Senior Note for each Interest Reset Date shall be the rate determined in accordance with the provisions set forth under the applicable heading below corresponding to the Interest Rate Basis specified on the face hereof: Commercial Paper Rate. If the Interest Rate Basis of this Senior Note is the Commercial Paper Rate, the interest rate hereon for any Interest Reset Date shall equal the Commercial Paper Rate (as determined below), as adjusted (x) by the addition -6- or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "Commercial Paper Rate" means, with respect to any Commercial Paper Interest Determination Date (as defined below), the Money Market Yield (calculated as described below) of the rate on the relevant Commercial Paper Interest Determination Date for commercial paper having the Index Maturity specified on the face hereof as such rate is published by the Board of Governors of the Federal Reserve System in the weekly statistical release entitled "Statistical Release H.15(519), Selected Interest Rates" or any successor publication published by the Board of Governors of the Federal Reserve System ("H.15(519)") under the heading "Commercial Paper". If such rate is not published prior to 3:00 P.M., New York City time, on the Calculation Date pertaining to such Commercial Paper Interest Determination Date, then the Commercial Paper Rate will be the Money Market Yield (calculated as described below) of the rate on such Commercial Paper Interest Determination Date for commercial paper having the Index Maturity specified on the face hereof as such rate is published by the Federal Reserve Bank of New York in its daily statistical release entitled "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any successor publication published by the Federal Reserve Bank of New York ("Composite Quotations") under the heading "Commercial Paper". If such rate is published in neither H.15(519) nor in Composite Quotations by 3:00 P.M., New York City time, on such Calculation Date, the Commercial Paper Rate for such Commercial Paper Interest Determination Date will be the Money Market Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on such Commercial Paper Interest Determination Date, of three leading dealers of commercial paper in The City of New York (which may include one or more of the Agents (as defined below)) selected by the Calculation Agent for commercial paper having the Index Maturity specified on the face hereof placed for an industrial issuer whose senior unsecured bond rating is "AA", or the equivalent, from at least two nationally recognized rating agencies; provided, however, that if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Commercial Paper Rate determined on such Commercial Paper Interest Determination Date will be the Commercial Paper Rate determined on the immediately preceding Commercial Paper Interest Determination Date or, in the case of the first Commercial Paper Interest Determination Date, the Initial Interest Rate specified on the face hereof. -7- "Money Market Yield" shall be a yield (expressed as a percentage) calculated in accordance with the following formula: D x 360 Money Market Yield = _______________ x 100 360 - (D x M) where "D" refers to the per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal; and "M" refers to the actual number of days in the interest period for which interest is being calculated. LIBOR. If the Interest Rate Basis of this Senior Note is LIBOR, the interest rate hereon for any Interest Reset Date shall equal LIBOR (as determined below), as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. LIBOR shall be determined by the Calculation Agent in accordance with the following provisions: (a) With respect to any LIBOR Interest Determination Date (as defined below), LIBOR will be either: (i) if "LIBOR Reuters" is specified on the face hereof, the arithmetic mean of the offered rates for deposits in U.S. dollars having the Index Maturity specified on the face hereof, commencing on the second London Business Day immediately following such LIBOR Interest Determination Date, that appear on the Reuters Screen LIBO Page (as defined below) as of 11:00 A.M. London time on such LIBOR Interest Determination Date, if at least two such offered rates appear on the Reuters Screen LIBO Page, or (ii) if "LIBOR Telerate" is specified on the face hereof, the rate for deposits in U.S. dollars having the Index Maturity specified on the face hereof, commencing on the second London Business Day immediately following such LIBOR Interest Determination Date, that appears on Telerate Page 3750 (as defined below) as of 11:00 A.M. London time, on such LIBOR Interest Determination Date. The "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for purposes of displaying London interbank offered rates of major banks). "Telerate Page 3750" means the display designated as page 3750 on the Dow Jones Telerate Service (or such other page or pages as may replace the 3750 page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified on the face hereof, LIBOR will be determined as if LIBOR Reuters has been -8- specified. Notwithstanding the foregoing, if fewer than two offered rates appear on the Reuters Screen LIBO Page, or no rate appears on Telerate Page 3750, as applicable, LIBOR in respect of a related LIBOR Interest Determination Date will be determined as if the parties had specified the rate described in paragraph (b) below. (b) With respect to a LIBOR Interest Determination Date on which fewer than two offered rates appear on the Reuters Screen LIBO Page, as specified in paragraph (a)(i) above, or on which no rate appears on Telerate Page 3750, as specified in paragraph (a)(ii) above, as the case may be, the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, as selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for deposits for the period of the Index Maturity specified on the face hereof, commencing on the second London Business Day immediately following such LIBOR Interest Determination Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on such LIBOR Interest Determination Date and in a principal amount of not less than $1,000,000 that is representative for a single transaction in such market at such time. If at least two such quotations are provided, LIBOR determined on such LIBOR Interest Determination Date will be the arithmetic mean of such quotations. If fewer than two quotations are provided, LIBOR determined on such LIBOR Interest Determination Date will be the arithmetic mean of the rates quoted at approximately 11:00 A.M. New York City time on such LIBOR Interest Determination Date by three major banks in The City of New York selected by the Calculation Agent for loans in U.S. dollars to leading European banks, having the Index Maturity specified on the face hereof, commencing on the second London Business Day following such LIBOR Interest Determination Date, and in a principal amount of not less than $1,000,000 that is representative for a single transaction in such market at such time; provided, however, that if the banks so selected by the Calculation Agent are not quoting as mentioned in this sentence, LIBOR determined on such LIBOR Interest Determination Date will be LIBOR determined on the immediately preceding LIBOR Interest Determination Date or, in the case of the first LIBOR Interest Determination Date, the Initial Interest Rate specified on the face hereof. Treasury Rate. If the Interest Rate Basis of this Senior Note is the Treasury Rate, the interest rate hereon for any Interest Reset Date shall equal the Treasury Rate (as determined below) as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the -9- multiplication by the Spread Multiplier, if any, specified on the face hereof. "Treasury Rate" means the rate for the most recent auction of direct obligations of the United States ("Treasury bills") having the Index Maturity specified on the face hereof, as such rate is published in H.15(519) under the heading "U.S. Government Securities/Treasury Bills/Auction Average (Investment)" or, if such rate is not so published by 3:00 P.M., New York City time, on the Calculation Date, the auction average rate (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) for such auction as otherwise announced by the United States Department of the Treasury by 3:00 P.M., New York City time, on such Calculation Date. If the results of the auction of Treasury bills having the Index Maturity specified on the face hereof are neither published in H.15(519) nor otherwise published or reported as provided above by 3:00 P.M., New York City time, on such Calculation Date, or if no such auction is held in a particular week, then the Treasury Rate will be calculated by the Calculation Agent and will be a yield to maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market bid rates as of 3:30 P.M., New York City time, on such Treasury Interest Determination Date (as defined below), of three leading primary United States government securities dealers in The City of New York selected by the Calculation Agent, for the issue of Treasury bills with a remaining maturity closest to the Index Maturity specified on the face hereof or, if there are two such issues which are equidistant from the Index Maturity specified on the face hereof, then the longer of the two; provided, however, that if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Treasury Rate determined on such Treasury Interest Determination Date will be the Treasury Rate determined on the immediately preceding Treasury Interest Determination Date or, in the case of the first Treasury Interest Determination Date, the Initial Interest Rate specified on the face hereof. CD Rate. If the Interest Rate Basis of this Senior Note is the CD Rate, the interest rate hereon for any Interest Reset Date shall equal the CD Rate (as determined below), as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "CD Rate" means the rate on the relevant CD Interest Determination Date (as defined below) for negotiable certificates of deposit having the Index Maturity specified on the face hereof, as published in H.15(519) under the heading "CDs (Secondary Market)". If such rate is not so published before 3:00 P.M., New York City time, on the Calculation Date pertaining to such CD Interest Determination Date, then the CD Rate will be the rate on such CD Interest -10- Determination Date for negotiable certificates of deposit having the Index Maturity specified on the face hereof as published in Composite Quotations under the heading "Certificates of Deposit". If such rate is published neither in H.15(519) nor in Composite Quotations by 3:00 P.M., New York City time, on such Calculation Date, the CD Rate will be calculated by the Calculation Agent and will be the arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York City time, on such CD Interest Determination Date, of three leading non-bank dealers of negotiable U.S. dollar certificates of deposit in The City of New York (which may include one or more of the Agents) selected by the Calculation Agent for negotiable certificates of deposit of the four highest rated banks (as rated by two nationally recognized rating agencies) of the 25 largest United States banks based on the most recent year-end survey published in The American Banker (or a comparable publication) with a remaining maturity closest to the Index Maturity specified on the face hereof in a denomination of $5,000,000; provided, however, that, if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the CD Rate determined on such CD Interest Determination Date will be the CD Rate determined on the immediately preceding CD Interest Determination Date or, in the case of the first CD Interest Determination Date, the Initial Interest Rate specified on the face hereof. Federal Funds Rate. If the Interest Rate Basis of this Senior Note is the Federal Funds Rate, the interest rate hereon for any Interest Reset Date shall equal the Federal Funds Rate (as determined below, as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "Federal Funds Rate" means the rate on the relevant Federal Funds Interest Determination Date (as defined below) for Federal Funds having the Index Maturity specified on the face hereof, as published in H.15(519) under the heading "Federal Funds (Effective)". If such rate is not published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Federal Funds Interest Determination Date, then the Federal Funds Rate will be the rate on such Federal Funds Interest Determination Date as published in Composite Quotations under the heading "Federal Funds/Effective Rate". If such rate is published neither in H.15(519) nor in Composite Quotations by 3:00 P.M., New York City time, on such Calculation Date, the Federal Funds Rate will be calculated by the Calculation Agent and will be the arithmetic mean of the rates, as of 3:00 P.M., New York City time, on such Federal Funds Interest Determination Date, for the last transaction in overnight Federal Funds arranged by three leading brokers of Federal Funds transactions in The City of New York (which may include one or more of the Agents) selected by the Calculation Agent; provided, however, that if the brokers selected as -11- aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Federal Funds Rate determined on such Federal Funds Interest Determination Date will be the Federal Funds Rate determined on the immediately preceding Federal Funds Interest Determination Date or, in the case of the first Federal Funds Interest Determination Date, the Initial Interest Rate specified on the face hereof. Prime Rate. If the Interest Rate Basis of this Senior Note is the Prime Rate, the interest rate hereon for any Interest Reset Date shall equal the Prime Rate (as determined below), as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "Prime Rate" means the rate set forth on the relevant Prime Interest Determination Date (as defined below) in H.15(519) under the heading "Bank Prime Loan". If such rate is not published prior to 9:00 A.M., New York City time, on the Calculation Date pertaining to such Prime Interest Determination Date, then the Prime Rate will be determined by the Calculation Agent and will be the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen NYMF Page (as defined below) as such bank's prime rate or base lending rate as in effect for such Prime Interest Determination Date. If fewer than four such rates but two or more such rates appear on the Reuters Screen NYMF Page on such Prime Interest Determination Date, the Prime Rate will be determined by the Calculation Agent and will be the arithmetic mean of the prime rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on such Prime Interest Determination Date by three major money center banks in The City of New York selected by the Calculation Agent. If fewer than two such rates appear on the Reuters Screen NYMF Page, the Prime Rate will be determined by the Calculation Agent on the basis of the rates furnished in The City of New York by the appropriate number of substitute banks or trust companies organized and doing business under the laws of the United States, or any State thereof, having total equity capital of at least $500,000,000 and being subject to supervision or examination by Federal or State authority, selected by the Calculation Agent to provide such rate or rates; provided, however, that if the banks or trust companies selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Prime Rate determined on such Prime Interest Determination Date will be the Prime Rate determined on the immediately preceding Prime Interest Determination Date or, in the case of the first Prime Interest Determination Date, the Initial Interest Rate specified on the face hereof. "Reuters Screen NYMF Page" means the display designated as page "NYMF" on the Reuters Monitor Money Rates Service (or such other page as may replace the NYMF page on that service for the purpose of -12- displaying prime rates or base lending rates of major United States banks). 11th District Cost of Funds Rate Notes. If the Interest Rate Basis of this Senior Note is the 11th District Cost of Funds Rate, the interest rate hereon for any Interest Reset Date shall equal the 11th District Cost of Funds Rate (as determined below), as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "11th District Cost of Funds Rate" means the rate equal to the monthly weighted average cost of funds for the calendar month immediately preceding the month in which the relevant 11th District Cost of Funds Interest Determination Date (as defined below) falls, as set forth under the caption "11th District" on Telerate Page 7058 (as defined below) as of 11:00 A.M., San Francisco time, on such 11th District Cost of Funds Interest Determination Date. If such rate does not appear on Telerate Page 7058 on any related 11th District Cost of Funds Interest Determination Date, the 11th District Cost of Funds Rate for such 11th District Cost of Funds Interest Determination Date shall be the monthly weighted average cost of funds paid by member institutions of the 11th Federal Home Loan Bank District that was most recently announced (the "11th District Cost of Funds Index") by the Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco") as such cost of funds for the calendar month immediately preceding the date of such announcement. If the FHLB of San Francisco fails to announce such rate for the calendar month immediately preceding such 11th District Cost of Funds Interest Determination Date, then the 11th District Cost of Funds Rate determined as of such 11th District Cost of Funds Interest Determination Date will be the 11th District Cost of Funds Rate determined on the immediately preceding 11th District Cost of Funds Interest Determination Date or, in the case of the first 11th District Cost of Funds Interest Determination Date, the Initial Interest Rate specified on the face hereof. "Telerate Page 7058" means the display designated as page "7058" on the Dow Jones Telerate Service (or such other page as may replace the 7058 page on that service for the purpose of displaying the monthly weighted average cost of funds paid by member institutions of the 11th Federal Home Loan Bank District). Notwithstanding the foregoing, the interest rate hereon shall not be greater than the Maximum Interest Rate, if any, specified on the face hereof and shall not be lower than the Minimum Interest Rate, if any, specified on the face hereof. In addition, the interest rate hereon will in no event be higher -13- than the maximum rate permitted by Illinois law, as the same may be modified by United States law of general application. The Bank will at all times appoint and maintain a banking institution as Calculation Agent hereunder. Unless otherwise specified on the face hereof, the Bank has initially appointed itself as Calculation Agent. Upon the request of the holder of this Senior Note, the Calculation Agent will provide the interest rate then in effect, and, if different, the interest rate which will become effective as a result of a determination made on the most recent Interest Determination Date with respect to this Senior Note. Unless otherwise specified on the face hereof, all percentages resulting from any calculation on this Senior Note will be rounded, if necessary, to the nearest one-hundred thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts used in or resulting from such calculation on this Senior Note will be rounded to the nearest cent (with one- half cent being rounded upwards). The interest rate in effect on any Interest Reset Date will be the applicable rate as reset on such Interest Reset Date. The interest rate applicable to any other day is the interest rate from the immediately preceding Interest Reset Date (or, if none, the Initial Interest Rate). The Calculation Agent's determination of any interest rate will be final and binding in the absence of manifest error. The Interest Determination Date pertaining to an Interest Reset Date if the rate of interest hereon shall be determined in accordance with the provisions under the headings above entitled "Commercial Paper Rate" (the "Commercial Paper Interest Determination Date"), "CD Rate" (the "CD Interest Determination Date"), "Federal Funds Rate" (the "Federal Funds Interest Determination Date") or "Prime Rate" (the "Prime Interest Determination Date") will be the second Business Day preceding such Interest Reset Date. The Interest Determination Date pertaining to an Interest Reset Date if the rate of interest hereon shall be determined in accordance with the provisions under the heading above entitled "11th District Cost of Funds Rate" (the "11th District Cost of Funds Interest Determination Date") will be the last working day of the month immediately preceding such Interest Reset Date on which the FHLB of San Francisco publishes the 11th District Cost of Funds Index. The Interest Determination Date pertaining to an Interest Reset Date if the rate of interest hereon shall be determined in accordance with the provisions under the heading above entitled "LIBOR" (the "LIBOR Interest Determination Date") will be the second London Business Day preceding such Interest Reset Date. The Interest -14- Determination Date pertaining to an Interest Reset Date if the rate of interest hereon shall be determined in accordance with the provisions under the heading above entitled "Treasury Rate" (the "Treasury Interest Determination Date") will be that day of the week in which such Interest Reset Date falls on which Treasury bills would normally be auctioned. Treasury bills are normally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday, except that such auction may be held on the preceding Friday. If, as the result of a legal holiday, an auction is so held on the preceding Friday, such Friday will be the Treasury Interest Determination Date pertaining to the Interest Reset Date occurring in the next succeeding week. If an auction date shall fall on any Interest Reset Date for a Senior Note with respect to which the Interest Rate Basis specified on the face hereof is the Treasury Rate, then such Interest Reset Date shall instead be the first Business Day immediately following such auction date. The Calculation Date pertaining to the Interest Determination Date for any Senior Note shall be the tenth calendar day after such Interest Determination Date or, if any such day is not a Business Day, the next succeeding Business Day. Payments of interest hereon with respect to any Interest Payment Date will include interest accrued from, and including, the Original Issue Date or from, and including, the last date on which interest has been paid to, but excluding, such Interest Payment Date; provided, however, that, if the Interest Reset Period with respect to this Senior Note is daily or weekly, the interest payable on any Interest Payment Date, other than interest payable on any date on which principal of this Senior Note is payable, will include interest accrued from, and including, the Original Issue Date or from, but excluding, the last date in respect of which interest has been paid or made available for payment, as the case may be, to, and including, the Regular Record Date next preceding such Interest Payment Date, except that the interest payable at maturity or upon earlier redemption or repayment will include interest accrued to, but excluding, the Maturity Date or the date of earlier redemption or repayment, as the case may be. Accrued interest on this Senior Note from the Original Issue Date or from the last date to which interest has been paid or duly provided is calculated by multiplying the face amount of this Senior Note by an accrued interest factor. Such accrued interest factor is computed by adding the interest factor calculated for each day from the Original Issue Date or from the last date to which interest has been paid or duly provided for, as the case may be, to the date for which accrued interest is being calculated in the period for which interest is being -15- calculated. The interest factor for each such day is computed by dividing the interest rate applicable to such date by 360, in the case that the Interest Rate Basis specified on the face hereof is the Commercial Paper Rate, LIBOR, CD Rate, Federal Funds Rate, Prime Rate or 11th District Cost of Funds Rate, or by the actual number of days in the year, in the case that the Interest Rate Basis specified on the face hereof is the Treasury Rate. If this Senior Note is an Original Issue Discount Note and if an Event of Default with respect to the Senior Notes shall have occurred and be continuing, the Default Amount (as defined hereafter) of this Senior Note may be declared due and payable in the manner and with the effect provided herein. The "Default Amount" shall be equal to the adjusted issue price as of the first day of the accrual period as determined under Proposed Treasury Regulation Section 1.1272-1(e) (or successor regulation) under the United States Internal Revenue Code of 1986, as amended, in which the date of acceleration occurs increased by the daily portion of the original issue discount for each day in such accrual period ending on the date of acceleration, as determined under Proposed Treasury Regulation Section 1.1272-1(c) (or successor regulation) under the United States Internal Revenue Code of 1986, as amended. Upon payment of (i) the amount of principal or premium, if any, so declared due and payable and (ii) interest on any overdue principal and overdue interest or premium, if any (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Bank's obligations in respect of the payment of the principal of, and interest or premium, if any, on, this Senior Note shall terminate. In case any Senior Note shall at any time become mutilated, destroyed, lost or stolen and such Senior Note or evidence satisfactory to the Bank of the loss, theft or destruction thereof (together with indemnity satisfactory to the Bank and such other documents or proof as may be required in the premises) shall be delivered to the Bank, a new Senior Note of like tenor will be issued by the Bank in exchange for the Senior Note so mutilated, or in lieu of the Senior Note so destroyed or lost or stolen. All expenses and reasonable charges associated with procuring the indemnity referred to above and with the preparation, authentication and delivery of a new Senior Note shall be borne by the holder of the Senior Note so mutilated, destroyed, lost or stolen. If any Senior Note which has matured or is about to mature shall become mutilated, destroyed, lost or stolen, the Bank may, instead of issuing a substitute Senior Note, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Senior Note) upon compliance by the holder thereof with the provisions of this paragraph. -16- No recourse shall be had for the payment of the principal of, premium, if any, or interest on, this Senior Note, for any claim based hereon, or otherwise in respect hereof, against any shareholder, employee, officer or director, as such, past, present or future, of the Bank or of any successor corporation, either directly or through the Bank or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. The occurrence of any of the following events shall constitute an "Event of Default" with respect to this Senior Note: (i) default in the payment of any interest with respect to this Senior Note when due, which continues for 30 days; (ii) default in the payment of any principal of, or premium, if any, on, this Senior Note when due; (iii) the entry by a court having jurisdiction in the premises of (a) a decree or order for relief in respect of the Bank in an involuntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, reorganization or other similar law or (b) a decree or order appointing a conservator, receiver, liquidator, assignee, trustee, sequestrator or any other similar official of the Bank, or of substantially all of the property of the Bank, or ordering the winding up or liquidation of the affairs of the Bank, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (iv) the commencement by the Bank of a voluntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated as bankrupt or insolvent, or the consent by the Bank to the entry of a decree or order for relief in an involuntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding, or the filing by the Bank of a petition or answer or consent seeking reorganization or relief under any applicable United States federal or state law, or the consent by the Bank to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Bank or of substantially all of the property of the Bank, or the making by the Bank of an assignment for the benefit of creditors, or the taking of corporate action by the Bank in furtherance of any such action. If an Event of Default shall occur and be continuing, the holder of this Senior Note may declare the principal amount of, and accrued interest and premium, if any, on, this Senior Note due and payable immediately by written notice to the Bank. Upon such declaration and notice, -17- such principal amount, accrued interest and premium, if any, shall become due and payable seven calendar days after such notice. Any Event of Default with respect to this Senior Note may be waived by the holder hereof. No provision of this Senior Note shall alter or impair the obligation of the Bank, which is absolute and unconditional, to pay the principal, and premium, if any, and interest on, this Senior Note in U.S. dollars at the times, places and rate herein prescribed. The Bank shall cause to be kept at the corporate trust office of the Senior Note Registrar designated below a register (the register maintained in such corporate trust office or any other office or agency of the Bank in the Place of Payment herein referred to as the "Senior Note Register") in which, subject to such reasonable regulations as it may prescribe, the Bank shall provide for the registration of the Senior Notes and of transfers of the Senior Notes. The Bank is hereby initially appointed "Senior Note Registrar" for the purposes of registering the Senior Notes and transfers of the Senior Notes as herein provided. The transfer of this Senior Note is registrable in the Senior Note Register, upon surrender of this Senior Note for registration of transfer at the office or agency of the Bank in the Place of Payment, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Bank and the Paying Agent duly executed by, the holder hereof or his attorney duly authorized in writing, and thereupon one or more new Senior Notes of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. Notwithstanding the foregoing, the Bank shall not be required to register the transfer of any Senior Note that has been called for redemption during a period beginning at the opening of business fifteen calendar days before the date of mailing of a notice of such redemption and ending at the close of business on the date of such mailing. No service charge shall be made for any such registration of transfer or exchange, but the Bank may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Senior Notes are issuable only in registered form without coupons in minimum denominations of $250,000 and any integral multiple of $1,000 in excess thereof. Each owner of a beneficial interest in this Senior Note is required to hold a beneficial interest in $250,000 principal amount or any integral -18- multiple of $1,000 in excess thereof of this Senior Note at all times. Prior to due presentment of this Senior Note for registration of transfer, the Bank, the Paying Agent or any agent of the Bank or the Paying Agent may treat the person in whose name this Senior Note is registered as the owner hereof for all purposes, whether or not this Senior Note be overdue, and neither the Bank, the Paying Agent nor any such agent shall be affected by notice to the contrary. All notices to the Bank under this Senior Note shall be in writing and addressed to the Bank at 50 South LaSalle Street, Chicago, Illinois 60675, or to such other address of the Bank as the Bank may notify the holders of the Senior Notes. This Senior Note shall be governed by, and construed in accordance with, the laws of the State of Illinois. As used in this Senior Note, the term "Agents" shall mean Goldman Sachs & Co., CS First Boston Corporation, J.P. Morgan Securities Inc., Lehman Brothers, Lehman Brothers Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce Fenner & Smith Incorporated, and any other person, firm or entity which shall hereafter be designated as an "Agent" under that certain Amended and Restated Distribution Agreement, dated September 6, 1995, among the Bank, Northern Trust Corporation and the Agents (as hereinabove defined). IN WITNESS WHEREOF, the Bank has caused this instrument to be duly executed. THE NORTHERN TRUST COMPANY By:__________________________________ Authorized Signatory -19- ABBREVIATIONS The following abbreviations, when used in the inscription on the face of the within Senior Note, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - __________ Custodian ___________ (Cust) (Minor) under Uniform Gifts to Minors Act _________________________________ (State) Additional abbreviations may also be used though not in the above list. -20- ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto __________________________________________________________ ___________________________________________________________________________ PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ___________________________ | | ___________________________ ___________________________________________________________________________ ___________________________________________________________________________ (Please print or typewrite name and address, including postal zip code, of assignee) _____________________________________________________________________________ the within Senior Note and all rights thereunder, and hereby irrevocably constitutes and appoints ____________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ to transfer said Senior Note on the books of the Bank, with full power of substitution in the premises. Dated:__________________________ ______________________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within Senior Note in every particular, without alteration or enlargement or any change whatsoever. -21- OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably request(s) and instruct(s) the Bank to repay this Senior Note (or portion hereof specified below) pursuant to its terms and at a price equal to 100% of the principal amount hereof to be repaid, together with accrued and unpaid interest hereon, payable to the date of repayment, to the undersigned, at _____________________________________________ _______________________________________________________________________________ (Please print or typewrite name and address of the undersigned) For this Senior Note to be repaid, the undersigned must give to the Paying Agent at its offices located at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services, or at such other place or places of which the Bank shall from time to time notify the holders of the Senior Notes, not more than 60 days nor less than 30 days prior to the date of repayment, this Senior Note with this "Option to Elect Repayment" form duly completed. If less than the entire principal amount of this Senior Note is to be repaid, specify the portion hereof (which shall be increments of $1,000) which the holder elects to have repaid and specify the denomination or denominations (which shall be $250,000 or an integral multiple of $1,000 in excess thereof) of the Senior Notes to be issued to the holder for the portion of this Senior Note not being repaid (in the absence of any such specification, one such Senior Note will be issued for the portion not being repaid): $________________________ Dated:___________________ __________________________________________ NOTICE: The signature on this "Option to Elect Repayment" form must correspond with the name as written upon the face of the within Senior Note in every particular, without alteration or enlargement or any change whatsoever. -22- EX-4.(III) 5 FORM OF FIXED RATE SUBORDINATED MEDIUM-TERM NOTE Exhibit Number (4)(iii) To 9/30/95 Form 10-Q UNLESS THIS SUBORDINATED NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE BANK OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SUBORDINATED NOTE ISSUED UPON REGISTRATION OR TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS SUBORDINATED NOTE IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. IF THIS SUBORDINATED NOTE IS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE FOLLOWING SHALL BE COMPLETED: THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, TO THIS SUBORDINATED NOTE. THE ISSUE DATE OF THIS SUBORDINATED NOTE IS _______________. THE ISSUE PRICE OF THIS SUBORDINATED NOTE IS _____% OF ITS PRINCIPAL AMOUNT. THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SUBORDINATED NOTE IS $______________ PER $1,000 OF THE INITIAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY IS _____%, AND THE AMOUNT OF THE ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE INITIAL SHORT ACCRUAL PERIOD, IF ANY, IS $_________ PER $1,000 OF THE INITIAL PRINCIPAL AMOUNT, DETERMINED ON THE BASIS OF THE EXACT METHOD. No. SUB FXR-______________ REGISTERED CUSIP NO.: ________________________ THE NORTHERN TRUST COMPANY GLOBAL SUBORDINATED MEDIUM-TERM BANK NOTE (FIXED RATE) ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT: INTEREST RATE: _______% MATURITY DATE: INTEREST PAYMENT REGULAR RECORD DATES (If other than the DATES: April 1 or October 1, prior to each Interest Payment Date): INITIAL REDEMPTION DATE: INITIAL REDEMPTION PERCENTAGE: ANNUAL REDEMPTION PERCENTAGE REDUCTION: ORIGINAL ISSUE OID AMOUNT: DISCOUNT NOTE: Yes:_____ No:_____ OTHER PROVISIONS: The Northern Trust Company, an Illinois banking corporation (the "Bank"), for value received, hereby promises to pay to ____________________ or registered assigns, the principal sum of _________________ United States Dollars on the Maturity Date specified above and to pay interest thereon from the Original Issue Date specified above or from the most recent interest payment date to which interest on this Subordinated Note (or any predecessor Subordinated Note) has been paid or duly provided for, semi-annually on April 15 and October 15 of each year (unless otherwise specified on the face hereof) (each, an "Interest Payment Date") and at maturity or upon earlier redemption, if applicable, commencing on the first Interest Payment Date next succeeding the Original Issue Date (or, if the Original Issue Date is between a Regular Record Date and the Interest Payment Date immediately following such Regular Record Date, on the second Interest Payment Date following the Original Issue Date), at the Interest Rate per annum specified above, until the principal hereof is paid or made available for payment, and (to the extent that the payment of such interest shall be legally enforceable) at such Interest Rate on any overdue principal and premium, if any, and on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the person in whose name this Subordinated Note (or any predecessor Subordinated Note) is registered at the close of business on the Regular Record Date for such interest, which shall be the April 1 and October 1 (whether or not a Business Day (as defined below)), as the case may be, next preceding the applicable Interest Payment Date (unless otherwise specified on the face hereof); provided, however, that interest payable at maturity or upon earlier redemption, if applicable, will be payable to the person to whom principal shall be payable. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the holder on such Regular Record Date and may either be paid to the person in whose name this Subordinated Note (or any predecessor Subordinated Note) is registered at the close of business on a special record date for the payment of such defaulted interest (the "Special Record Date") to be fixed by the Bank, notice of which shall be given to the holders of Subordinated Notes not less than 10 calendar days -2- prior to such Special Record Date, or be paid at any time in any other lawful manner. Payment of principal of, and premium, if any, and interest on, this Subordinated Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The Bank will at all times appoint and maintain a paying agent (the "Paying Agent") authorized by the Bank to pay the principal of, and premium, if any, and interest on, this Subordinated Note on behalf of the Bank and having an office or agency (the "Paying Agent Office") in The City of New York or the City of Chicago, Illinois (the "Place of Payment"), where this Subordinated Note may be presented or surrendered for payment and where notices, designations or requests in respect of payments with respect to this Subordinated Note may be served. The Bank has initially appointed itself as the Paying Agent, with the Paying Agent Office currently located at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services. THIS SUBORDINATED NOTE IS A DIRECT, UNCONDITIONAL AND UNSECURED GENERAL OBLIGATION OF THE BANK, DOES NOT EVIDENCE A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THIS SUBORDINATED NOTE IS SUBORDINATE TO THE CLAIMS OF DEPOSITORS AND GENERAL CREDITORS OF THE BANK. Payment of the principal of, and premium, if any, and interest on, this Subordinated Note due at maturity or upon earlier redemption, if applicable, will be made in immediately available funds upon presentation and surrender of this Subordinated Note to the Paying Agent at the Paying Agent Office in the Place of Payment; provided that this Subordinated Note is presented to the Paying Agent in time for the Paying Agent to make such payment in accordance with its normal procedures. Payments of interest on this Subordinated Note (other than at maturity or upon earlier redemption) will be made by wire transfer to such account as has been appropriately designated to the Paying Agent by the person entitled to such payments. This Subordinated Note is one of a duly authorized issue of Subordinated Medium-Term Bank Notes due from five to fifteen years from date of issue of the Bank (herein called the "Subordinated Notes"). Payments of interest hereon on any Interest Payment Date will include interest accrued to, but excluding, such Interest Payment Date. Interest hereon shall be computed on the basis of a 360-day year of twelve 30-day months. -3- If any Interest Payment Date, Maturity Date or date of earlier redemption of this Subordinated Note falls on a day which is not a Business Day, the related payment of principal, premium, if any, or interest shall be made on the next succeeding Business Day with the same force and effect as if made on the date such payment were due, and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Maturity Date or date of earlier redemption, as the case may be. "Business Day" means any day that is not a Saturday or Sunday and that is not a day on which banking institutions in The City of New York or the City of Chicago, Illinois generally are authorized or obligated by law or executive order to close. The indebtedness of the Bank evidenced by this Subordinated Note, including principal and interest, is unsecured and subordinate and junior in right of payment to the Bank's obligations to its depositors, its obligations under bankers' acceptances and letters of credit, and its obligations to its other creditors (including any obligations to any Federal Reserve Bank and the Federal Deposit Insurance Corporation), whether now outstanding or hereafter incurred, other than any obligations which rank on a parity with, or junior to, the Subordinated Notes. In the event of any insolvency proceeding, receivership, conservatorship, reorganization, readjustment of debt, marshalling of assets and liabilities or similar proceedings or any liquidation or winding-up of the Bank, whether voluntary or involuntary, all such obligations (except obligations which rank on a parity with, or junior to, the Subordinated Notes) shall be entitled to be paid in full before any payment shall be made on account of the principal of, or interest on, the Subordinated Notes. In the event of any such proceeding, after payment in full of all sums owing with respect to such prior obligations, the holders of the Subordinated Notes, together with the holders of any obligations of the Bank ranking on a parity with the Subordinated Notes, shall be entitled to be paid, from the remaining assets of the Bank, the unpaid principal of, and the unpaid interest on, the Subordinated Notes or such other obligations before any payment or other distribution, whether in cash, property, or otherwise, shall be made on account of any capital stock or any obligations of the Bank ranking junior to the Subordinated Notes. The Subordinated Notes shall rank on a parity with the subordinated note in the principal amount of $50,000,000, due January 2, 2000, issued by the Bank to Northern Trust Corporation (the "Corporation"), the subordinated note in the principal amount of $25,000,000, due July 1, 2002, issued by the Bank to the Corporation, the $100,000,000 aggregate principal amount of 6.5% Subordinated Notes due 2003 issued by the Bank in 1993, and such other obligations which may be issued by the Bank which are specifically designated as ranking on a parity with the -4- Subordinated Notes by express provision in the instruments creating or evidencing such obligations. This Subordinated Note will not be subject to any sinking fund. If so provided on the face of this Subordinated Note and subject to the approval of the Federal Reserve Bank of Chicago, this Subordinated Note may be redeemed by the Bank on and after the Initial Redemption Date, if any, specified on the face hereof. If no Initial Redemption Date is specified on the face hereof, this Subordinated Note may not be redeemed prior to the Maturity Date. On and after the Initial Redemption Date, if any, and subject to the approval of the Federal Reserve Bank of Chicago, this Subordinated Note may be redeemed at any time either in whole or in part from time to time in increments of $1,000 (provided that any remaining principal amount hereof shall be at least $250,000) at the option of the Bank at the applicable Redemption Price (as defined below), together with accrued and unpaid interest hereon at the applicable rate borne by this Subordinated Note to the date of redemption (each such date, a "Redemption Date"), on written notice given not more than 60 nor less than 30 calendar days prior to the Redemption Date by the Bank to the registered holder hereof. Whenever less than all the Subordinated Notes at any time outstanding are to be redeemed, the terms of the Subordinated Notes to be so redeemed shall be selected by the Bank. If less than all the Subordinated Notes with identical terms at any time outstanding are to be redeemed, the Subordinated Notes to be so redeemed shall be selected by the Paying Agent by lot or in any usual manner approved by it. In the event of redemption of this Subordinated Note in part only, a new Subordinated Note for the unredeemed portion hereof shall be issued in the name of the holder hereof upon the surrender hereof. The "Redemption Price" shall initially be the Initial Redemption Percentage specified on the face hereof of the principal amount of this Subordinated Note to be redeemed and shall decline at each anniversary of the Initial Redemption Date specified on the face hereof by the Annual Redemption Percentage Reduction, if any, specified on the face hereof, of the principal amount to be redeemed until the Redemption Price is 100% of such principal amount. This Subordinated Note will not be repayable at the option of the holder hereof prior to maturity. If this Subordinated Note is an Original Issue Discount Note and if an Event of Default with respect to this Subordinated Note shall have occurred and be continuing, the Default Amount (as defined hereafter) of this Subordinated Note may be declared due and payable in the manner and with the effect provided herein. The "Default Amount" shall be equal to the adjusted issue price -5- as of the first day of the accrual period as determined under Proposed Treasury Regulation Section 1.1272-1(e) (or successor regulation) under the United States Internal Revenue Code of 1986, as amended, in which the date of acceleration occurs increased by the daily portion of the original issue discount for each day in such accrual period ending on the date of acceleration, as determined under Proposed Treasury Regulation Section 1.1272-1(c) (or successor regulation) under the United States Internal Revenue Code of 1986, as amended. Upon payment of (i) the amount of principal or premium, if any, so declared due and payable and (ii) interest on any overdue principal and overdue interest or premium, if any, (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Bank's obligations in respect of the payment of the principal of, and interest or premium, if any, on, this Subordinated Note shall terminate. In case any Subordinated Note shall at any time become mutilated, destroyed, lost or stolen and such Subordinated Note or evidence satisfactory to the Bank of the loss, theft or destruction thereof (together with indemnity satisfactory to the Bank and such other documents or proof as may be required in the premises) shall be delivered to the Bank, a new Subordinated Note of like tenor will be issued by the Bank in exchange for the Subordinated Note so mutilated, or in lieu of the Subordinated Note so destroyed or lost or stolen. All expenses and reasonable charges associated with procuring the indemnity referred to above and with the preparation, authentication and delivery of a new Subordinated Note shall be borne by the holder of the Subordinated Note so mutilated, destroyed, lost or stolen. If any Subordinated Note which has matured or is about to mature shall become mutilated, destroyed, lost or stolen, the Bank may, instead of issuing a substitute Subordinated Note, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Subordinated Note) upon compliance by the holder thereof with the provisions of this paragraph. No recourse shall be had for the payment of the principal of, premium, if any, or interest on, this Subordinated Note, for any claim based hereon, or otherwise in respect hereof, against any shareholder, employee, officer or director, as such, past, present or future, of the Bank or of any successor corporation, either directly or through the Bank or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and part of the consideration for the issue hereof, expressly waived and released. -6- An "Event of Default" with respect to this Subordinated Note will occur if the Bank shall consent to, or a court or other governmental agency shall enter a decree or order for, the appointment of a receiver or other similar official in any liquidation, insolvency or similar proceeding with respect to the Bank or all or substantially all of its property and, in the case of a decree or order, such decree or order shall have remained in force for a period of 60 days. If an Event of Default shall occur and be continuing, the holder of this Subordinated Note may declare the principal amount of, and accrued interest and premium, if any, on, this Subordinated Note due and payable immediately by written notice to the Bank. Upon such declaration and notice, such principal amount, accrued interest and premium, if any, shall become due and payable seven calendar days after such notice. Any Event of Default with respect to this Subordinated Note may be waived by the holder hereof. NO PAYMENT MAY BE MADE ON THIS SUBORDINATED NOTE IN THE EVENT OF ACCELERATION RESULTING FROM AN EVENT OF DEFAULT WITHOUT THE PRIOR WRITTEN CONSENT OF THE FEDERAL RESERVE BANK OF CHICAGO. THERE IS NO RIGHT OF ACCELERATION IN THE CASE OF A DEFAULT IN THE PAYMENT OF PRINCIPAL OF, OR INTEREST ON, THIS SUBORDINATED NOTE OR IN THE PERFORMANCE OF ANY OTHER OBLIGATION OF THE BANK UNDER THIS SUBORDINATED NOTE OR UNDER ANY OTHER SECURITY ISSUED BY THE BANK. No provision of this Subordinated Note shall alter or impair the obligation of the Bank, which is absolute and unconditional, to pay the principal of, and premium, if any, and interest on, this Subordinated Note in U.S. dollars at the times, places and rate herein prescribed. The Bank shall cause to be kept at the corporate trust office of the Subordinated Note Registrar designated below a register (the register maintained in such corporate trust office or any other office or agency of the Bank in the Place of Payment herein referred to as the "Subordinated Note Register") in which, subject to such reasonable regulations as it may prescribe, the Bank shall provide for the registration of the Subordinated Notes and of transfers of the Subordinated Notes. The Bank is hereby initially appointed "Subordinated Note Registrar" for the purpose of registering the Subordinated Notes and transfers of the Subordinated Notes as herein provided. The transfer of this Subordinated Note is registrable in the Subordinated Note Register, upon surrender of this Subordinated Note for registration of transfer at the office or agency of the Bank in the Place of Payment, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Bank and the Paying Agent duly executed by, the holder hereof or his attorney duly authorized in writing, and thereupon one or more new Subordinated Notes of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to -7- the designated transferee or transferees. Notwithstanding the foregoing, the Bank shall not be required to register the transfer of any Subordinated Note that has been called for redemption during a period beginning at the opening of business fifteen calendar days before the day of mailing of a notice of such redemption and ending at the close of business on the day of such mailing. No service charge shall be made for any such registration of transfer or exchange, but the Bank may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Subordinated Notes are issuable only in registered form without coupons in minimum denominations of $250,000 and any integral multiple of $1,000 in excess thereof. Each owner of a beneficial interest in this Subordinated Note is required to hold a beneficial interest in $250,000 principal amount or any integral multiple of $1,000 in excess thereof of this Subordinated Note at all times. Prior to due presentment of this Subordinated Note for registration of transfer, the Bank, the Paying Agent or any agent of the Bank or the Paying Agent may treat the person in whose name this Subordinated Note is registered as the owner hereof for all purposes, whether or not this Subordinated Note be overdue, and neither the Bank, the Paying Agent nor any such agent shall be affected by notice to the contrary. All notices to the Bank under this Subordinated Note shall be in writing and addressed to the Bank at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services, or to such other address of the Bank as the Bank may notify the holders of the Subordinated Notes. This Subordinated Note shall be governed by, and construed in accordance with, the laws of the State of Illinois. IN WITNESS WHEREOF, the Bank has caused this instrument to be duly executed. THE NORTHERN TRUST COMPANY By:______________________________________ Authorized Signatory -8- ABBREVIATIONS The following abbreviations, when used in the inscription on the face of the within Subordinated Note, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - _______________ Custodian ______________ (Cust) (Minor) under Uniform Gifts to Minors Act __________________________ (State) Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto ___________________________________________________________ ____________________________________________________________________________ PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ------------------------------------- | | ------------------------------------- ______________________________________________________________________________ ______________________________________________________________________________ (Please print or typewrite name and address, including postal zip code, of assignee) ______________________________________________________________________________ the within Subordinated Note and all rights thereunder, and hereby irrevocably constitutes and appoints _____________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ to transfer said Subordinated Note on the books of the Bank, with full power of substitution in the premises. Dated:____________________________ __________________________________________ Notice: The signature to this assignment must correspond with the name as written upon the face of the within Subordinated Note in every particular, without alteration or enlargement or any change whatsoever. EX-4.(IV) 6 FORM OF FLOATING RATE SUB. MEDIUM-TERM NOTE Exhibit Number (4)(iv) To 9/30/95 Form 10-Q UNLESS THIS SUBORDINATED NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE BANK OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SUBORDINATED NOTE ISSUED UPON REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS SUBORDINATED NOTE IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. IF THIS SUBORDINATED NOTE IS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE FOLLOWING SHALL BE COMPLETED: THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, TO THIS SUBORDINATED NOTE. THE ISSUE DATE OF THIS SUBORDINATED NOTE IS _____________. THE ISSUE PRICE OF THIS SUBORDINATED NOTE IS _____% OF ITS PRINCIPAL AMOUNT. THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SUBORDINATED NOTE IS $_________ PER $1,000 OF THE INITIAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY IS ____%, AND THE AMOUNT OF THE ORIGINAL ISSUE DISCOUNT ALLOCABLE TO THE INITIAL SHORT ACCRUAL PERIOD, IF ANY, IS $_____ PER $1,000 OF THE INITIAL PRINCIPAL AMOUNT, DETERMINED ON THE BASIS OF THE EXACT METHOD. No. SUB FLR-______________ REGISTERED CUSIP NO.: ________________________ THE NORTHERN TRUST COMPANY GLOBAL SUBORDINATED MEDIUM-TERM BANK NOTE (FLOATING RATE) ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT: INITIAL INTEREST RATE: ______% MATURITY DATE: INTEREST RATE BASIS: INDEX MATURITY: SPREAD AND/OR SPREAD REGULAR RECORD DATES (If other than the 15th MULTIPLIER: day prior to each Interest Payment Date): MAXIMUM INTEREST RATE: MINIMUM INTEREST RATE: INTEREST PAYMENT DATES: INTEREST PAYMENT PERIOD: INTEREST RESET DATES: INTEREST RESET PERIOD: INITIAL REDEMPTION DATE: ANNUAL REDEMPTION PERCENTAGE REDUCTION: INITIAL REDEMPTION PERCENTAGE: ORIGINAL ISSUE DISCOUNT NOTE: OID AMOUNT: Yes: ______ No: _____ OTHER PROVISIONS: CALCULATION AGENT: ALTERNATE RATE EVENT SPREAD: The Northern Trust Company, an Illinois banking corporation (the "Bank"), for value received, hereby promises to pay to __________________________________ ________________________________________________, or registered assigns, the principal sum of _______________________________________________________________ ________________________________________ United States Dollars on the Maturity Date specified above and to pay interest thereon from the Original Issue Date specified above or from the most recent interest payment date (or, if the Interest Reset Period specified above is daily or weekly, from, and including, the day following the most recent Regular Record Date) to which interest on this Subordinated Note (or any predecessor Subordinated Note) has been paid or duly provided for (each, an "Interest Payment Date"), on the Interest Payment Dates specified above and at maturity or upon earlier redemption, if applicable, commencing on the first Interest Payment Date next succeeding the Original Issue Date (or, if the Original Issue Date is between a Regular Record Date and the Interest Payment Date immediately following such Regular Record Date, on the second Interest Payment Date following the Original Issue Date), at a rate per annum equal to the Initial Interest Rate specified above until the first Interest Reset Date following the Original Issue Date and, on and after such Interest Reset Date, at the rate determined in accordance with the provisions set forth herein, until the principal hereof is paid or made available for payment, and (to the extent that the payment of such interest shall be legally enforceable) at the last rate in effect prior to any payment default on any overdue principal and premium, if any, and on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the person in whose name this Subordinated Note (or any predecessor Subordinated Note) is registered at the close of business on the Regular Record Date for such interest, which shall be the 15th calendar day (whether or not a Business Day (as defined below)) before such Interest Payment Date (unless otherwise specified on the face hereof); provided, however, that -2- interest payable at maturity or upon earlier redemption, if applicable, will be payable to the person to whom principal shall be payable. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the holder on such Regular Record Date and may either be paid to the person in whose name this Subordinated Note (or any predecessor Subordinated Note) is registered at the close of business on a special record date for the payment of such defaulted interest (the "Special Record Date") to be fixed by the Bank, notice of which shall be given to the holders of Subordinated Notes not less than 10 calendar days prior to such Special Record Date, or be paid at any time in any other lawful manner. Payment of principal of, and premium, if any, and interest on, this Subordinated Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The Bank will at all times appoint and maintain a paying agent (the "Paying Agent") authorized by the Bank to pay the principal of, and premium, if any, and interest on, this Subordinated Note on behalf of the Bank and having an office or agency (the "Paying Agent Office") in The City of New York or the City of Chicago, Illinois (the "Place of Payment"), where this Subordinated Note may be presented or surrendered for payment and where notices, designations or requests in respect of payments with respect to this Subordinated Note may be served. The Bank has initially appointed itself as such Paying Agent, with the Paying Agent Office currently located at 50 South LaSalle Street (Level BB-A), Chicago, Illinois 60675, Attention: Securities Services. THIS SUBORDINATED NOTE IS A DIRECT, UNCONDITIONAL AND UNSECURED GENERAL OBLIGATION OF THE BANK, DOES NOT EVIDENCE A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THIS SUBORDINATED NOTE IS SUBORDINATE TO THE CLAIMS OF DEPOSITORS AND GENERAL CREDITORS OF THE BANK. Payment of the principal of, and premium, if any, and interest on, this Subordinated Note due at maturity or upon earlier redemption, if applicable, will be made in immediately available funds upon presentation and surrender of this Subordinated Note to the Paying Agent at the Paying Agent Office in the Place of Payment; provided that this Subordinated Note is presented to the Paying Agent in time for the Paying Agent to make such payment in accordance with its normal procedures. Payments of interest on this Subordinated Note (other than at maturity or upon earlier redemption) will be made by wire transfer to such account as has been appropriately designated to the Paying Agent by the person entitled to such payments. -3- This Subordinated Note is one of a duly authorized issue of Subordinated Medium-Term Bank Notes due from five to fifteen years from date of issue of the Bank (herein called the "Subordinated Notes"). Unless otherwise indicated on the face hereof, if the rate of interest on this Subordinated Note resets daily, weekly or monthly, the Interest Payment Date for this Subordinated Note will be the third Wednesday of each month; if the rate of interest on this Subordinated Note resets quarterly, the Interest Payment Date for this Subordinated Note will be the third Wednesday of March, June, September and December of each year; if the rate of interest on this Subordinated Note resets semi-annually, the Interest Payment Date for this Subordinated Note will be the third Wednesday of each of two months of each year specified on the face hereof that are six months apart; and if the rate of interest on this Subordinated Note resets annually, the Interest Payment Date for this Subordinated Note will be the third Wednesday of the month specified on the face hereof. If any Interest Payment Date, Maturity Date or date of earlier redemption of this Subordinated Note falls on a day that is not a Business Day, such Interest Payment Date, Maturity Date or date of earlier redemption will be the next succeeding Business Day; provided, however, that, if the Interest Rate Basis specified on the face hereof is LIBOR and such next succeeding Business Day is in the next succeeding calendar month, such Interest Payment Date, Maturity Date or date of earlier redemption will be the immediately preceding Business Day. "Business Day" means any day that is not a Saturday or Sunday and that is not a day on which banking institutions in The City of New York or the City of Chicago, Illinois generally are authorized or obligated by law or executive order to close, and with respect to Subordinated Notes with respect to which the Interest Rate Basis specified on the face hereof is LIBOR, any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market (a "London Business Day"). The indebtedness of the Bank evidenced by this Subordinated Note, including principal and interest, is unsecured and subordinate and junior in right of payment to the Bank's obligations to its depositors, its obligations under bankers' acceptances and letters of credit, and its obligations to its other creditors (including any obligations to any Federal Reserve Bank and the Federal Deposit Insurance Corporation), whether now outstanding or hereafter incurred, other than any obligations which rank on a parity with, or junior to, the Subordinated Notes. In the event of any insolvency proceeding, receivership, conservatorship, reorganization, readjustment of debt, marshalling of assets and liabilities or similar proceedings or any liquidation or winding- up of the Bank, whether voluntary or involuntary, all such obligations (except obligations which rank -4- on a parity with, or junior to, the Subordinated Notes) shall be entitled to be paid in full before any payment shall be made on account of the principal of, or interest on, the Subordinated Notes. In the event of any such proceeding, after payment in full of all sums owing with respect to such prior obligations, the holders of the Subordinated Notes, together with the holders of any obligations of the Bank ranking on a parity with the Subordinated Notes, shall be entitled to be paid, from the remaining assets of the Bank, the unpaid principal of, and the unpaid interest on, the Subordinated Notes or such other obligations before any payment or other distribution, whether in cash, property, or otherwise, shall be made on account of any capital stock or any obligations of the Bank ranking junior to the Subordinated Notes. The Subordinated Notes shall rank on a parity with the subordinated note in the principal amount of $50,000,000, due January 2, 2000, issued by the Bank to Northern Trust Corporation (the "Corporation"), the subordinated note in the principal amount of $25,000,000, due July 1, 2002, issued by the Bank to the Corporation, the $100,000,000 aggregate principal amount of 6.5% Subordinated Notes due 2003 issued by the Bank in 1993, and such other obligations which may be issued by the Bank which are specifically designated as ranking on a parity with the Subordinated Notes by express provision in the instruments creating or evidencing such obligations. This Subordinated Note will not be subject to any sinking fund. If so provided on the face of this Subordinated Note and subject to the approval of the Federal Reserve Bank of Chicago, this Subordinated Note may be redeemed by the Bank on and after the Initial Redemption Date, if any, specified on the face hereof. If no Initial Redemption Date is specified on the face hereof, this Subordinated Note may not be redeemed prior to the Maturity Date. On and after the Initial Redemption Date, if any, and subject to the approval of the Federal Reserve Bank of Chicago, this Subordinated Note may be redeemed at any time either in whole or in part from time to time in increments of $1,000 (provided that any remaining principal amount hereof shall be at least $250,000) at the option of the Bank at the applicable Redemption Price (as defined below), together with accrued and unpaid interest hereon at the applicable rate borne by this Subordinated Note to the date of redemption (each such date, a "Redemption Date"), on written notice given not more than 60 nor less than 30 calendar days prior to the Redemption Date by the Bank to the registered holder hereof. Whenever less than all the Subordinated Notes at any time outstanding are to be redeemed, the terms of the Subordinated Notes to be so redeemed shall be selected by the Bank. If less than all the Subordinated Notes with identical terms at any time outstanding are to be redeemed, the Subordinated Notes to be so redeemed shall be selected by the -5- Paying Agent by lot or in any usual manner approved by it. In the event of redemption of this Subordinated Note in part only, a new Subordinated Note for the unredeemed portion hereof shall be issued in the name of the holder hereof upon the surrender hereof. The "Redemption Price" shall initially be the Initial Redemption Percentage specified on the face hereof of the principal amount of this Subordinated Note to be redeemed and shall decline at each anniversary of the Initial Redemption Date specified on the face hereof by the Annual Redemption Percentage Reduction, if any, specified on the face hereof, of the principal amount to be redeemed until the Redemption Price is 100% of such principal amount. This Subordinated Note will not be repayable at the option of the holder hereof prior to maturity. The rate of interest on this Subordinated Note will be reset daily, weekly, monthly, quarterly, semi-annually or annually (each such period, an "Interest Reset Period" for this Subordinated Note, and the first calendar day of an Interest Reset Period, an "Interest Reset Date"), as specified on the face hereof. Unless otherwise indicated on the face hereof, if this Subordinated Note resets daily, the Interest Reset Date will be each Business Day; if this Subordinated Note resets weekly and the Interest Rate Basis is not the Treasury Rate, the Interest Reset Date will be the Wednesday of each week; if this Subordinated Note resets weekly and the Interest Rate Basis is the Treasury Rate, the Interest Reset Date will be the Tuesday of each week (except as provided below); if this Subordinated Note resets monthly and the Interest Rate Basis is not the 11th District Cost of Funds Rate, the Interest Reset Date will be the third Wednesday of each month; if this Subordinated Note resets monthly and the Interest Rate Basis is the 11th District Cost of Funds Rate, the Interest Reset Date will be the first calendar day of each month; if this Subordinated Note resets quarterly, the Interest Reset Date will be the third Wednesday of March, June, September and December; if this Subordinated Note resets semi-annually, the Interest Reset Date will be the third Wednesday of each of two months of each year which are six months apart, as specified on the face hereof; and if this Subordinated Note resets annually, the Interest Reset Date will be the third Wednesday of one month of each year, as specified on the face hereof; provided, however, that (i) the interest rate in effect from the Original Issue Date to the first Interest Reset Date will be the Initial Interest Rate specified on the face hereof, and (ii) the interest rate in effect for the ten calendar days immediately prior to maturity or earlier redemption hereof will be the interest rate in effect on the tenth calendar day preceding such Maturity Date or date of earlier redemption, as -6- the case may be. If any Interest Reset Date with respect to this Subordinated Note would otherwise be a day that is not a Business Day, such Interest Reset Date will be the next succeeding Business Day, except that in the case that the Interest Rate Basis specified on the face hereof is LIBOR, if such Business Day is in the next succeeding calendar month, such Interest Reset Date will be the immediately preceding Business Day. Except as otherwise specified in this paragraph, the rate of interest on this Subordinated Note for each Interest Reset Date shall be the rate determined in accordance with the provisions set forth under the applicable heading below corresponding to the Interest Rate Basis specified on the face hereof: Commercial Paper Rate. If the Interest Rate Basis of this Subordinated Note is the Commercial Paper Rate, the interest rate hereon for any Interest Reset Date shall equal the Commercial Paper Rate (as determined below), as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "Commercial Paper Rate" means, with respect to any Commercial Paper Interest Determination Date (as defined below), the Money Market Yield (calculated as described below) of the rate on the relevant Commercial Paper Interest Determination Date for commercial paper having the Index Maturity specified on the face hereof as such rate is published by the Board of Governors of the Federal Reserve System in the weekly statistical release entitled "Statistical Release H.15(519), Selected Interest Rates" or any successor publication published by the Board of Governors of the Federal Reserve System ("H.15(519)") under the heading "Commercial Paper". If such rate is not published prior to 3:00 P.M., New York City time, on the Calculation Date pertaining to such Commercial Paper Interest Determination Date, then the Commercial Paper Rate will be the Money Market Yield (calculated as described below) of the rate on such Commercial Paper Interest Determination Date for commercial paper having the Index Maturity specified on the face hereof as such rate is published by the Federal Reserve Bank of New York in its daily statistical release entitled "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any successor publication published by the Federal Reserve Bank of New York ("Composite Quotations") under the heading "Commercial Paper". If such rate is published in neither H.15(519) nor in Composite Quotations by 3:00 P.M., New York City time, on such Calculation Date, the Commercial Paper Rate for such Commercial Paper Interest Determination Date will be the Money Market Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on such Commercial Paper Interest Determination Date, of three leading dealers of commercial paper in The City of New York (which may include one or more of the Agents (as defined below)) selected by the -7- Calculation Agent for commercial paper having the Index Maturity specified on the face hereof placed for an industrial issuer whose senior unsecured bond rating is "AA", or the equivalent, from at least two nationally recognized rating agencies; provided, however, that if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Commercial Paper Rate determined on such Commercial Paper Interest Determination Date will be the Commercial Paper Rate determined on the immediately preceding Commercial Paper Interest Determination Date or, in the case of the first Commercial Paper Interest Determination Date, the Initial Interest Rate specified on the face hereof. "Money Market Yield" shall be a yield (expressed as a percentage) calculated in accordance with the following formula: D x 360 Money Market Yield = _______________ x 100 360 - (D x M) where "D" refers to the per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal; and "M" refers to the actual number of days in the interest period for which interest is being calculated. LIBOR. If the Interest Rate Basis of this Subordinated Note is LIBOR, the interest rate hereon for any Interest Reset Date shall equal LIBOR (as determined below), as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. LIBOR shall be determined by the Calculation Agent in accordance with the following provisions: (a) With respect to any LIBOR Interest Determination Date (as defined below), LIBOR will be either: (i) if "LIBOR Reuters" is specified on the face hereof, the arithmetic mean of the offered rates for deposits in U.S. dollars having the Index Maturity specified on the face hereof, commencing on the second London Business Day immediately following such LIBOR Interest Determination Date, that appear on the Reuters Screen LIBO Page (as defined below) as of 11:00 A.M. London time on such LIBOR Interest Determination Date, if at least two such offered rates appear on the Reuters Screen LIBO Page, or (ii) if "LIBOR Telerate" is specified on the face hereof, the rate for deposits in U.S. dollars having the Index Maturity specified on the face hereof, commencing on the second London Business Day immediately following such LIBOR Interest Determination Date, that appears on Telerate Page 3750 (as defined below) as of 11:00 A.M. London time, on such LIBOR Interest -8- Determination Date. The "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for purposes of displaying London interbank offered rates of major banks). "Telerate Page 3750" means the display designated as page 3750 on the Dow Jones Telerate Service (or such other page or pages as may replace the 3750 page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified on the face hereof, LIBOR will be determined as if LIBOR Reuters has been specified. Notwithstanding the foregoing, if fewer than two offered rates appear on the Reuters Screen LIBO Page, or no rate appears on Telerate Page 3750, as applicable, LIBOR in respect of a related LIBOR Interest Determination Date will be determined as if the parties had specified the rate described in paragraph (b) below. (b) With respect to a LIBOR Interest Determination Date on which fewer than two offered rates appear on the Reuters Screen LIBO Page, as specified in paragraph (a)(i) above, or on which no rate appears on Telerate Page 3750, as specified in paragraph (a)(ii) above, as the case may be, the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, as selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for deposits for the period of the Index Maturity specified on the face hereof, commencing on the second London Business Day immediately following such LIBOR Interest Determination Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on such LIBOR Interest Determination Date and in a principal amount of not less than $1,000,000 that is representative for a single transaction in such market at such time. If at least two such quotations are provided, LIBOR determined on such LIBOR Interest Determination Date will be the arithmetic mean of such quotations. If fewer than two quotations are provided, LIBOR determined on such LIBOR Interest Determination Date will be the arithmetic mean of the rates quoted at approximately 11:00 A.M. New York City time on such LIBOR Interest Determination Date by three major banks in The City of New York selected by the Calculation Agent for loans in U.S. dollars to leading European banks, having the Index Maturity specified on the face hereof, commencing on the second London Business Day following such LIBOR Interest Determination Date, and in a principal amount of not less than $1,000,000 that is representative for a single transaction in such market at such time; provided, however, -9- that if the banks so selected by the Calculation Agent are not quoting as mentioned in this sentence, LIBOR determined on such LIBOR Interest Determination Date will be LIBOR determined on the immediately preceding LIBOR Interest Determination Date or, in the case of the first LIBOR Interest Determination Date, the Initial Interest Rate specified on the face hereof. Treasury Rate. If the Interest Rate Basis of this Subordinated Note is the Treasury Rate, the interest rate hereon for any Interest Reset Date shall equal the Treasury Rate (as determined below) as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "Treasury Rate" means the rate for the most recent auction of direct obligations of the United States ("Treasury bills") having the Index Maturity specified on the face hereof, as such rate is published in H.15(519) under the heading "U.S. Government Securities/Treasury Bills/Auction Average (Investment)" or, if such rate is not so published by 3:00 P.M., New York City time, on the Calculation Date, the auction average rate (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) for such auction as otherwise announced by the United States Department of the Treasury by 3:00 P.M., New York City time, on such Calculation Date. If the results of the auction of Treasury bills having the Index Maturity specified on the face hereof are neither published in H.15(519) nor otherwise published or reported as provided above by 3:00 P.M., New York City time, on such Calculation Date, or if no such auction is held in a particular week, then the Treasury Rate will be calculated by the Calculation Agent and will be a yield to maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market bid rates as of 3:30 P.M., New York City time, on such Treasury Interest Determination Date (as defined below), of three leading primary United States government securities dealers in The City of New York selected by the Calculation Agent, for the issue of Treasury bills with a remaining maturity closest to the Index Maturity specified on the face hereof or, if there are two such issues which are equidistant from the Index Maturity specified on the face hereof, then the longer of the two; provided, however, that if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Treasury Rate determined on such Treasury Interest Determination Date will be the Treasury Rate determined on the immediately preceding Treasury Interest Determination Date or, in the case of the first Treasury Interest Determination Date, the Initial Interest Rate specified on the face hereof. -10- CD Rate. If the Interest Rate Basis of this Subordinated Note is the CD Rate, the interest rate hereon for any Interest Reset Date shall equal the CD Rate (as determined below), as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "CD Rate" means the rate on the relevant CD Interest Determination Date (as defined below) for negotiable certificates of deposit having the Index Maturity specified on the face hereof, as published in H.15(519) under the heading "CDs (Secondary Market)". If such rate is not so published before 3:00 P.M., New York City time, on the Calculation Date pertaining to such CD Interest Determination Date, then the CD Rate will be the rate on such CD Interest Determination Date for negotiable certificates of deposit having the Index Maturity specified on the face hereof as published in Composite Quotations under the heading "Certificates of Deposit". If such rate is published neither in H.15(519) nor in Composite Quotations by 3:00 P.M., New York City time, on such Calculation Date, the CD Rate will be calculated by the Calculation Agent and will be the arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York City time, on such CD Interest Determination Date, of three leading non-bank dealers of negotiable U.S. dollar certificates of deposit in The City of New York (which may include one or more of the Agents) selected by the Calculation Agent for negotiable certificates of deposit of the four highest rated banks (as rated by two nationally recognized rating agencies) of the 25 largest United States banks based on the most recent year-end survey published in The American Banker (or a comparable publication) with a remaining maturity closest to the Index Maturity specified on the face hereof in a denomination of $5,000,000; provided, however, that, if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the CD Rate determined on such CD Interest Determination Date will be the CD Rate determined on the immediately preceding CD Interest Determination Date or, in the case of the first CD Interest Determination Date, the Initial Interest Rate specified on the face hereof. Federal Funds Rate. If the Interest Rate Basis of this Subordinated Note is the Federal Funds Rate, the interest rate hereon for any Interest Reset Date shall equal the Federal Funds Rate (as determined below, as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "Federal Funds Rate" means the rate on the relevant Federal Funds Interest Determination Date (as defined below) for Federal Funds having the Index Maturity specified on the face hereof, as published in H.15(519) under the heading "Federal Funds (Effective)". If such rate is not published by 3:00 P.M., New York City time, on the -11- Calculation Date pertaining to such Federal Funds Interest Determination Date, then the Federal Funds Rate will be the rate on such Federal Funds Interest Determination Date as published in Composite Quotations under the heading "Federal Funds/Effective Rate". If such rate is published neither in H.15(519) nor in Composite Quotations by 3:00 P.M., New York City time, on such Calculation Date, the Federal Funds Rate will be calculated by the Calculation Agent and will be the arithmetic mean of the rates, as of 3:00 P.M., New York City time, on such Federal Funds Interest Determination Date, for the last transaction in overnight Federal Funds arranged by three leading brokers of Federal Funds transactions in The City of New York (which may include one or more of the Agents) selected by the Calculation Agent; provided, however, that if the brokers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Federal Funds Rate determined on such Federal Funds Interest Determination Date will be the Federal Funds Rate determined on the immediately preceding Federal Funds Interest Determination Date or, in the case of the first Federal Funds Interest Determination Date, the Initial Interest Rate specified on the face hereof. Prime Rate. If the Interest Rate Basis of this Subordinated Note is the Prime Rate, the interest rate hereon for any Interest Reset Date shall equal the Prime Rate (as determined below), as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "Prime Rate" means the rate set forth on the relevant Prime Interest Determination Date (as defined below) in H.15(519) under the heading "Bank Prime Loan". If such rate is not published prior to 9:00 A.M., New York City time, on the Calculation Date pertaining to such Prime Interest Determination Date, then the Prime Rate will be determined by the Calculation Agent and will be the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen NYMF Page (as defined below) as such bank's prime rate or base lending rate as in effect for such Prime Interest Determination Date. If fewer than four such rates but two or more such rates appear on the Reuters Screen NYMF Page on such Prime Interest Determination Date, the Prime Rate will be determined by the Calculation Agent and will be the arithmetic mean of the prime rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on such Prime Interest Determination Date by three major money center banks in The City of New York selected by the Calculation Agent. If fewer than two such rates appear on the Reuters Screen NYMF Page, the Prime Rate will be determined by the Calculation Agent on the basis of the rates furnished in The City of New York by the appropriate number of substitute banks or trust companies organized and doing business under the laws of -12- the United States, or any State thereof, having total equity capital of at least $500,000,000 and being subject to supervision or examination by Federal or State authority, selected by the Calculation Agent to provide such rate or rates; provided, however, that if the banks or trust companies selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Prime Rate determined on such Prime Interest Determination Date will be the Prime Rate determined on the immediately preceding Prime Interest Determination Date or, in the case of the first Prime Interest Determination Date, the Initial Interest Rate specified on the face hereof. "Reuters Screen NYMF Page" means the display designated as page "NYMF" on the Reuters Monitor Money Rates Service (or such other page as may replace the NYMF page on that service for the purpose of displaying prime rates or base lending rates of major United States banks). 11th District Cost of Funds Rate Notes. If the Interest Rate Basis of this Subordinated Note is the 11th District Cost of Funds Rate, the interest rate hereon for any Interest Reset Date shall equal the 11th District Cost of Funds Rate (as determined below), as adjusted (x) by the addition or subtraction of the Spread, if any, specified on the face hereof and/or (y) by the multiplication by the Spread Multiplier, if any, specified on the face hereof. "11th District Cost of Funds Rate" means the rate equal to the monthly weighted average cost of funds for the calendar month immediately preceding the month in which the relevant 11th District Cost of Funds Interest Determination Date (as defined below) falls, as set forth under the caption "11th District" on Telerate Page 7058 (as defined below) as of 11:00 A.M., San Francisco time, on such 11th District Cost of Funds Interest Determination Date. If such rate does not appear on Telerate Page 7058 on any related 11th District Cost of Funds Interest Determination Date, the 11th District Cost of Funds Rate for such 11th District Cost of Funds Interest Determination Date shall be the monthly weighted average cost of funds paid by member institutions of the 11th Federal Home Loan Bank District that was most recently announced (the "11th District Cost of Funds Index") by the Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco") as such cost of funds for the calendar month immediately preceding the date of such announcement. If the FHLB of San Francisco fails to announce such rate for the calendar month immediately preceding such 11th District Cost of Funds Interest Determination Date, then the 11th District Cost of Funds Rate determined as of such 11th District Cost of Funds Interest Determination Date will be the 11th District Cost of Funds Rate determined on the immediately preceding 11th District Cost of Funds Interest Determination Date or, in the case of the first -13- 11th District Cost of Funds Interest Determination Date, the Initial Interest Rate specified on the face hereof. "Telerate Page 7058" means the display designated as page "7058" on the Dow Jones Telerate Service (or such other page as may replace the 7058 page on that service for the purpose of displaying the monthly weighted average cost of funds paid by member institutions of the 11th Federal Home Loan Bank District). Notwithstanding the foregoing, the interest rate hereon shall not be greater than the Maximum Interest Rate, if any, specified on the face hereof and shall not be lower than the Minimum Interest Rate, if any, specified on the face hereof. In addition, the interest rate hereon will in no event be higher than the maximum rate permitted by Illinois law, as the same may be modified by United States law of general application. The Bank will at all times appoint and maintain a banking institution as Calculation Agent hereunder. Unless otherwise specified on the face hereof, the Bank has initially appointed itself as Calculation Agent. Upon the request of the holder of this Subordinated Note, the Calculation Agent will provide the interest rate then in effect, and, if different, the interest rate which will become effective as a result of a determination made on the most recent Interest Determination Date with respect to this Subordinated Note. Unless otherwise specified on the face hereof, all percentages resulting from any calculation on this Subordinated Note will be rounded, if necessary, to the nearest one-hundred thousandth of a percentage point, with five one- millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts used in or resulting from such calculation on this Subordinated Note will be rounded to the nearest cent (with one-half cent being rounded upwards). The interest rate in effect on any Interest Reset Date will be the applicable rate as reset on such Interest Reset Date. The interest rate applicable to any other day is the interest rate from the immediately preceding Interest Reset Date (or, if none, the Initial Interest Rate). The Calculation Agent's determination of any interest rate will be final and binding in the absence of manifest error. The Interest Determination Date pertaining to an Interest Reset Date if the rate of interest hereon shall be determined in accordance with the provisions under the headings above entitled "Commercial Paper Rate" (the "Commercial Paper Interest Determination Date"), "CD Rate" (the "CD Interest Determination Date"), "Federal Funds Rate" (the "Federal Funds Interest Determination Date") or "Prime Rate" (the "Prime Interest -14- Determination Date") will be the second Business Day preceding such Interest Reset Date. The Interest Determination Date pertaining to an Interest Reset Date if the rate of interest hereon shall be determined in accordance with the provisions under the heading above entitled "11th District Cost of Funds Rate" (the "11th District Cost of Funds Interest Determination Date") will be the last working day of the month immediately preceding such Interest Reset Date on which the FHLB of San Francisco publishes the 11th District Cost of Funds Index. The Interest Determination Date pertaining to an Interest Reset Date if the rate of interest hereon shall be determined in accordance with the provisions under the heading above entitled "LIBOR" (the "LIBOR Interest Determination Date") will be the second London Business Day preceding such Interest Reset Date. The Interest Determination Date pertaining to an Interest Reset Date if the rate of interest hereon shall be determined in accordance with the provisions under the heading above entitled "Treasury Rate" (the "Treasury Interest Determination Date") will be that day of the week in which such Interest Reset Date falls on which Treasury bills would normally be auctioned. Treasury bills are normally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday, except that such auction may be held on the preceding Friday. If, as the result of a legal holiday, an auction is so held on the preceding Friday, such Friday will be the Treasury Interest Determination Date pertaining to the Interest Reset Date occurring in the next succeeding week. If an auction date shall fall on any Interest Reset Date for a Subordinated Note with respect to which the Interest Rate Basis specified on the face hereof is the Treasury Rate, then such Interest Reset Date shall instead be the first Business Day immediately following such auction date. The Calculation Date pertaining to the Interest Determination Date for any Subordinated Note shall be the tenth calendar day after such Interest Determination Date or, if any such day is not a Business Day, the next succeeding Business Day. Payments of interest hereon with respect to any Interest Payment Date will include interest accrued from, and including, the Original Issue Date or from, and including, the last date on which interest has been paid to, but excluding, such Interest Payment Date; provided, however, that, if the Interest Reset Period with respect to this Subordinated Note is daily or weekly, the interest payable on any Interest Payment Date, other than interest payable on any date on which principal of this Subordinated Note is payable, will include interest accrued from, and including, the Original Issue Date or from, but excluding, the last date in respect of which interest has been paid or made available for payment, as the case may be, to, and including, the Regular Record Date next preceding such Interest Payment Date, -15- except that the interest payable at maturity or upon earlier redemption will include interest accrued to, but excluding, the Maturity Date or the date of earlier redemption, as the case may be. Accrued interest on this Subordinated Note from the Original Issue Date or from the last date to which interest has been paid or duly provided is calculated by multiplying the face amount of this Subordinated Note by an accrued interest factor. Such accrued interest factor is computed by adding the interest factor calculated for each day from the Original Issue Date or from the last date to which interest has been paid or duly provided for, as the case may be, to the date for which accrued interest is being calculated in the period for which interest is being calculated. The interest factor for each such day is computed by dividing the interest rate applicable to such date by 360, in the case that the Interest Rate Basis specified on the face hereof is the Commercial Paper Rate, LIBOR, CD Rate, Federal Funds Rate, Prime Rate or 11th District Cost of Funds Rate, or by the actual number of days in the year, in the case that the Interest Rate Basis specified on the face hereof is the Treasury Rate. If this Subordinated Note is an Original Issue Discount Note and if an Event of Default with respect to this Subordinated Note shall have occurred and be continuing, the Default Amount (as defined hereafter) of this Subordinated Note may be declared due and payable in the manner and with the effect provided herein. The "Default Amount" shall be equal to the adjusted issue price as of the first day of the accrual period as determined under Proposed Treasury Regulation Section 1.1272-1(e) (or successor regulation) under the United States Internal Revenue Code of 1986, as amended, in which the date of acceleration occurs increased by the daily portion of the original issue discount for each day in such accrual period ending on the date of acceleration, as determined under Proposed Treasury Regulation Section 1.1272-1(c) (or successor regulation) under the United States Internal Revenue Code of 1986, as amended. Upon payment of (i) the amount of principal or premium, if any, so declared due and payable and (ii) interest on any overdue principal and overdue interest or premium, if any (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Bank's obligations in respect of the payment of the principal of, and interest or premium, if any, on, this Subordinated Note shall terminate. In case any Subordinated Note shall at any time become mutilated, destroyed, lost or stolen and such Subordinated Note or evidence satisfactory to the Bank of the loss, theft or destruction thereof (together with indemnity satisfactory to the Bank and such other documents or proof as may be required in the premises) shall be delivered to the Bank, a new Subordinated Note -16- of like tenor will be issued by the Bank in exchange for the Subordinated Note so mutilated, or in lieu of the Subordinated Note so destroyed or lost or stolen. All expenses and reasonable charges associated with procuring the indemnity referred to above and with the preparation, authentication and delivery of a new Subordinated Note shall be borne by the holder of the Subordinated Note so mutilated, destroyed, lost or stolen. If any Subordinated Note which has matured or is about to mature shall become mutilated, destroyed, lost or stolen, the Bank may, instead of issuing a substitute Subordinated Note, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Subordinated Note) upon compliance by the holder thereof with the provisions of this paragraph. No recourse shall be had for the payment of the principal of, premium, if any, or interest on, this Subordinated Note, for any claim based hereon, or otherwise in respect hereof, against any shareholder, employee, officer or director, as such, past, present or future, of the Bank or of any successor corporation, either directly or through the Bank or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. An "Event of Default" with respect to this Subordinated Note will occur if the Bank shall consent to, or a court or other governmental agency shall enter a decree or order for, the appointment of a receiver or other similar official in any liquidation, insolvency or similar proceeding with respect to the Bank or all or substantially all of its property and, in the case of a decree or order, such decree or order shall have remained in force for a period of 60 days. If an Event of Default shall occur and be continuing, the holder of this Subordinated Note may declare the principal amount of, and accrued interest and premium, if any, on, this Subordinated Note due and payable immediately by written notice to the Bank. Upon such declaration and notice, such principal amount, accrued interest and premium, if any, shall become due and payable seven calendar days after such notice. Any Event of Default with respect to this Subordinated Note may be waived by the holder hereof. NO PAYMENT MAY BE MADE ON THIS SUBORDINATED NOTE IN THE EVENT OF ACCELERATION RESULTING FROM AN EVENT OF DEFAULT WITHOUT THE PRIOR WRITTEN CONSENT OF THE FEDERAL RESERVE BANK OF CHICAGO. THERE IS NO RIGHT OF ACCELERATION IN THE CASE OF A DEFAULT IN THE PAYMENT OF PRINCIPAL OF, OR INTEREST ON, THIS SUBORDINATED NOTE OR IN THE PERFORMANCE OF ANY OTHER OBLIGATION OF THE BANK UNDER THIS SUBORDINATED NOTE OR UNDER ANY OTHER SECURITY ISSUED BY THE BANK. -17- No provision of this Subordinated Note shall alter or impair the obligation of the Bank, which is absolute and unconditional, to pay the principal, and premium, if any, and interest on, this Subordinated Note in U.S. dollars at the times, places and rate herein prescribed. The Bank shall cause to be kept at the corporate trust office of the Subordinated Note Registrar designated below a register (the register maintained in such corporate trust office or any other office or agency of the Bank in the Place of Payment herein referred to as the "Subordinated Note Register") in which, subject to such reasonable regulations as it may prescribe, the Bank shall provide for the registration of the Subordinated Notes and of transfers of the Subordinated Notes. The Bank is hereby initially appointed "Subordinated Note Registrar" for the purposes of registering the Subordinated Notes and transfers of the Subordinated Notes as herein provided. The transfer of this Subordinated Note is registrable in the Subordinated Note Register, upon surrender of this Subordinated Note for registration of transfer at the office or agency of the Bank in the Place of Payment, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Bank and the Paying Agent duly executed by, the holder hereof or his attorney duly authorized in writing, and thereupon one or more new Subordinated Notes of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. Notwithstanding the foregoing, the Bank shall not be required to register the transfer of any Subordinated Note that has been called for redemption during a period beginning at the opening of business fifteen calendar days before the day of mailing of a notice of such redemption and ending at the close of business on the day of such mailing. No service charge shall be made for any such registration of transfer or exchange, but the Bank may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Subordinated Notes are issuable only in registered form without coupons in minimum denominations of $250,000 and any integral multiple of $1,000 in excess thereof. Each owner of a beneficial interest in this Subordinated Note is required to hold a beneficial interest in $250,000 principal amount or any integral multiple of $1,000 in excess thereof of this Subordinated Note at all times. Prior to due presentment of this Subordinated Note for registration of transfer, the Bank, the Paying Agent or any agent of the Bank or the Paying Agent may treat the person in whose -18- name this Subordinated Note is registered as the owner hereof for all purposes, whether or not this Subordinated Note be overdue, and neither the Bank, the Paying Agent nor any such agent shall be affected by notice to the contrary. All notices to the Bank under this Subordinated Note shall be in writing and addressed to the Bank at 50 South LaSalle Street, Chicago, Illinois 60675, or to such other address of the Bank as the Bank may notify the holders of the Subordinated Notes. This Subordinated Note shall be governed by, and construed in accordance with, the laws of the State of Illinois. As used in this Subordinated Note, the term "Agents" shall mean Goldman, Sachs & Co., CS First Boston Corporation, J.P. Morgan Securities Inc., Lehman Brothers, Lehman Brothers Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce Fenner & Smith Incorporated, and any other person, firm or entity which shall hereafter be designated as an "Agent" under that certain Amended and Restated Distribution Agreement, dated September 6, 1995, among the Bank, Northern Trust Corporation and the Agents (as hereinabove defined). IN WITNESS WHEREOF, the Bank has caused this instrument to be duly executed. THE NORTHERN TRUST COMPANY By:_______________________________ Authorized Signatory -19- ABBREVIATIONS The following abbreviations, when used in the inscription on the face of the within Subordinated Note, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - __________ Custodian ___________ (Cust) (Minor) under Uniform Gifts to Minors Act _________________________________ (State) Additional abbreviations may also be used though not in the above list. -20- ASSIGNMENT FOR VALVE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _______________________________________________________________ ________________________________________________________________________________ PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________ _______________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name and address, including postal zip code, of assignee) ________________________________________________________________________________ the within Subordinated Note and all rights thereunder, and hereby irrevocably constitutes and appoints _______________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ to transfer said Subordinated Note on the books of the Bank, with full power of substitution in the premises. Dated:____________________________ ________________________________________ NOTICE: The signature to this assigment must correspond with the name as written upon the face of the within Subordinated Note in every particular, without alteration or enlargement or any change whatsoever. -21- EX-11 7 COMPUTATION OF PER SHARE EARNINGS
EXHIBIT NUMBER (11) TO 9/30/95 FORM 10-Q NORTHERN TRUST CORPORATION COMPUTATION OF PER SHARE EARNINGS Third Quarter Ended September 30, Nine Months Ended September 30, ----------------------------------- --------------------------------- 1995 1994 1995 1994 ----------- ----------- ------------ ------------ Computations Required by - ------------------------ Regulation S-K - ------------------------ Primary Earnings Per Share - --------------------------- Net Income Applicable to Common Shares $55,933,249 $46,138,483 $154,061,092 $136,870,925 =========== =========== ============ ============ Weighted Average Number of Common and Common Equivalent Shares Outstanding Common Shares 55,702,458 54,107,073 55,314,848 53,772,565 Dilutive Effect of Common Equivalent Shares (A) Stock Options 595,957 803,157 572,246 925,444 Long Term Performance Stock Plan 371,585 413,744 350,102 388,436 Other 16,283 10,816 12,332 8,924 ----------- ----------- ------------ ------------ 56,686,283 55,334,790 56,249,528 55,095,368 =========== =========== ============ ============ Net Income Per Common and Common Equivalent Share $ 0.99 $ 0.83 $ 2.74 $ 2.48 =========== =========== ============ ============
(A) Determined by application of the treasury stock method.
EXHIBIT NUMBER (11) TO 9/30/95 FORM 10-Q NORTHERN TRUST CORPORATION COMPUTATION OF PER SHARE EARNINGS Third Quarter Ended September 30, Nine Months Ended September 30, ----------------------------------- --------------------------------- 1995 1994 1995 1994 ----------- ----------- ------------ ------------ Computations Required by - ------------------------ Regulation S-K - ------------------------ Fully Diluted Earnings Per Share - -------------------------------- Net Income Applicable to Common Shares $55,933,249 $46,138,483 $154,061,092 $136,870,925 Add Back: Dividend on Series E Convertible Preferred Stock 781,250 798,422 2,343,750 2,343,750 ----------- ----------- ------------ ------------ $56,714,499 $46,936,905 $156,404,842 $139,214,675 =========== =========== ============ ============ Weighted Average Number of Common and Common Equivalent Shares Outstanding Common Shares 55,702,458 54,107,073 55,314,848 53,772,565 Dilutive Effect of Common Equivalent Shares (A) Stock Options 796,429 803,157 872,424 929,245 Long Term Performance Stock Plan 395,981 413,744 364,940 388,964 Other 19,104 10,816 14,155 9,049 Other Potentially Dilutive Securities Equivalent Shares Assuming Conversion of Series E Convertible Preferred Stock 1,204,820 1,204,820 1,204,820 1,204,820 ----------- ----------- ------------ ------------ 58,118,792 56,539,610 57,771,187 56,304,643 =========== =========== ============ ============ Net Income Per Common and Common Equivalent Share $ 0.98 $ 0.83 $ 2.71 $ 2.47 =========== =========== ============ ============
(A) Determined by application of the treasury stock method. EX-27 8 FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the Consolidated Balance Sheet and the Consolidated Statement of Income and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1,444,681 1,616,427 247,252 57,220 5,207,955 590,182 620,107 9,808,307 147,254 20,179,731 11,357,056 6,528,081 525,914 358,086 93,597 0 170,000 1,146,997 20,179,731 464,973 270,714 82,383 818,070 333,358 552,163 265,907 5,000 526 530,652 233,722 233,722 0 0 160,491 2.74 2.71 2.10 30,879 21,368 2,786 0 144,838 7,754 2,952 147,254 115,260 2,735 29,259
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