-----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, Thzg5p0n4jQ/wudA/b8mFXk9tefr8GiWg0AlA2x0q2vtKIWLgZiw18s7PdVK/1Kv Jd1YiklcqoSBK91tuUMtAg== 0000950131-96-005714.txt : 19961115 0000950131-96-005714.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950131-96-005714 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 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: 96660756 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, 1996 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 [ ] 55,905,987 Shares - $1.66 2/3 Par Value (Shares of Common Stock Outstanding on September 30, 1996) ===============================================================================
PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET NORTHERN TRUST CORPORATION SEPTEMBER 30 December 31 September 30 ------------ ----------- ------------ ($ In Millions) 1996 1995 1995 - -------------------------------------------------------------------------------- ------------ ----------- ------------ ASSETS Cash and Due from Banks $ 1,068.6 $ 1,308.9 $ 1,444.7 Money Market Assets Federal Funds Sold and Securities Purchased under Agreements to Resell 1,026.8 162.1 247.2 Time Deposits with Banks 1,312.3 1,567.6 1,616.4 Other 39.3 54.5 11.9 - -------------------------------------------------------------------------------- ------------ ----------- ------------ Total 2,378.4 1,784.2 1,875.5 - -------------------------------------------------------------------------------- ------------ ----------- ------------ Securities (Fair value $5,847.2 at September 1996, $5,787.8 at December 1995 and $5,885.3 at September 1995) 5,827.8 5,760.3 5,855.4 Loans and Leases (Net of unearned income of $111.6 at September 1996, $89.6 at December 1995, and $81.0 at September 1995) 10,909.2 9,906.0 9,808.3 Reserve for Credit Losses (147.4) (147.1) (147.3) Buildings and Equipment 288.8 281.5 280.0 Customers' Acceptance Liability 38.5 35.8 50.0 Trust Security Settlement Receivables 236.4 327.1 234.5 Other Assets 759.8 676.8 778.6 - -------------------------------------------------------------------------------- ------------ ----------- ------------ Total Assets $21,360.1 $19,933.5 $20,179.7 - -------------------------------------------------------------------------------- ------------ ----------- ------------ LIABILITIES Deposits Demand and Other Noninterest-Bearing $ 3,266.6 $ 2,853.1 $ 2,642.2 Savings and Money Market Deposits 3,711.0 3,385.3 3,102.1 Savings Certificates 2,035.7 2,158.8 2,106.1 Other Time 511.6 384.3 375.5 Foreign Offices - Demand 276.9 459.8 310.2 - Time 3,636.8 3,246.9 2,820.9 - -------------------------------------------------------------------------------- ------------ ----------- ------------ Total Deposits 13,438.6 12,488.2 11,357.0 Federal Funds Purchased 430.1 2,300.1 2,199.7 Securities Sold Under Agreements to Repurchase 738.2 1,858.7 1,277.2 Commercial Paper 153.0 146.7 145.6 Other Borrowings 3,976.6 875.9 2,805.6 Senior Notes 205.0 17.0 117.0 Notes Payable 432.0 334.6 341.1 Liability on Acceptances 38.5 35.8 50.0 Other Liabilities 431.3 423.9 475.9 - -------------------------------------------------------------------------------- ------------ ----------- ------------ Total Liabilities 19,843.3 18,480.9 18,769.1 - -------------------------------------------------------------------------------- ------------ ----------- ------------ STOCKHOLDERS' EQUITY Preferred Stock 120.0 170.0 170.0 Common Stock - $1.66 2/3 Par Value 95.0 93.6 93.6 SEPTEMBER 1996 December 1995 September 1995 - -------------------------------------------------------------------------------- Shares authorized 140,000,000 140,000,000 140,000,000 Shares issued 56,979,688 56,158,064 56,158,064 Shares outstanding 55,905,987 55,664,412 55,466,443 Capital Surplus 327.8 306.1 308.2 Retained Earnings 1,064.1 928.8 888.4 Net Unrealized Gain (Loss) on Securities (0.2) 2.6 (2.7) Common Stock Issuable - Performance Plan 10.4 14.7 16.5 Deferred Compensation - ESOP and Other (37.1) (39.4) (34.6) Treasury Stock - (at cost, 1,073,701 shares at September 1996, 493,652 shares at December 1995, and 691,621 shares at September 1995) (63.2) (23.8) (28.8) - -------------------------------------------------------------------------------- ------------ ----------- ------------ Total Stockholders' Equity 1,516.8 1,452.6 1,410.6 - -------------------------------------------------------------------------------- ------------ ----------- ------------ Total Liabilities and Stockholders' Equity $21,360.1 $19,933.5 $20,179.7 - -------------------------------------------------------------------------------- ------------ ----------- ------------
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CONSOLIDATED STATEMENT OF INCOME NORTHERN TRUST CORPORATION Third Quarter Nine Months Ended September 30 Ended September 30 ------------------------------- ---------------------------------- ($ In Millions Except Per Share Information) 1996 1995 1996 1995 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Interest Income Money Market Assets Federal Funds Sold and Securities Purchased under Agreements to Resell $ 5.0 $ 1.9 $ 12.2 $ 9.3 Time Deposits with Banks 20.0 22.4 63.7 69.9 Other .7 .2 2.3 .7 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Total 25.7 24.5 78.2 79.9 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Securities 87.3 99.0 272.6 273.2 Loans and Leases 176.9 162.3 510.1 465.0 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Total Interest Income 289.9 285.8 860.9 818.1 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Interest Expense Deposits - Savings and Money Market Deposits 28.1 27.5 84.8 81.5 - Savings Certificates 29.5 32.6 89.7 87.7 - Other Time 7.2 8.6 21.8 23.0 - Foreign Offices 47.9 43.4 137.5 141.2 Federal Funds Purchased 22.5 29.9 73.7 62.1 Securities Sold under Agreements to Repurchase 25.8 26.6 79.9 75.7 Commercial Paper 1.9 2.1 5.8 6.4 Other Borrowings 18.9 17.8 50.4 44.2 Senior Notes 2.8 2.8 10.3 15.5 Notes Payable 6.5 5.1 19.3 14.9 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Total Interest Expense 191.1 196.4 573.2 552.2 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Net Interest Income 98.8 89.4 287.7 265.9 Provision for Credit Losses 2.5 2.0 11.5 5.0 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Net Interest Income after Provision for Credit Losses 96.3 87.4 276.2 260.9 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Noninterest Income Trust Fees 147.7 127.3 440.3 371.4 Security Commissions and Trading Income 5.0 5.8 17.7 16.9 Other Operating Income 41.7 40.0 118.9 114.7 Investment Security Gains (Losses) (.1) .3 .3 .5 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Total Noninterest Income 194.3 173.4 577.2 503.5 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Income before Noninterest Expenses 290.6 260.8 853.4 764.4 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Noninterest Expenses Salaries 92.4 84.0 270.1 250.9 Pension and Other Employee Benefits 18.5 20.4 57.3 62.7 Occupancy Expense 16.3 15.6 47.7 45.1 Equipment Expense 13.9 12.0 41.3 36.6 Other Operating Expenses 50.2 43.5 150.5 135.4 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Total Noninterest Expenses 191.3 175.5 566.9 530.7 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Income before Income Taxes 99.3 85.3 286.5 233.7 Provision for Income Taxes 32.8 27.2 95.1 73.2 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- NET INCOME $ 66.5 $ 58.1 $ 191.4 $ 160.5 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Net Income Applicable to Common Stock $ 65.3 $ 56.0 $ 187.7 $ 154.1 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- NET INCOME PER COMMON SHARE - PRIMARY $ 1.14 $ .99 $ 3.27 $ 2.74 - FULLY DILUTED 1.14 .98 3.25 2.71 - ----------------------------------------------------------- ---------------- -------------- ----------------- ---------------- Average Number of Common Shares Outstanding - Primary 57,268,590 56,686,283 57,400,539 56,249,528 - Fully Diluted 57,421,147 58,118,792 57,797,034 57,771,187 - ----------------------------------------------------------- ---------------- -------------- ----------------- ----------------
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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY NORTHERN TRUST CORPORATION Nine Months Ended September 30 --------------------- (In Millions) 1996 1995 - --------------------------------------------------------- --------- --------- Preferred Stock Balance at January 1 $ 170.0 $ 170.0 Conversion of Preferred Stock, Series E (50.0) - - --------------------------------------------------------- --------- --------- Balance at September 30 120.0 170.0 - --------------------------------------------------------- --------- --------- Common Stock Balance at January 1 93.6 90.6 Stock Issued - Incentive Plan and Awards - .3 Stock Issued in Acquisitions - 2.7 Conversion of Preferred Stock, Series E 1.4 - - --------------------------------------------------------- --------- --------- Balance at September 30 95.0 93.6 - --------------------------------------------------------- --------- --------- Capital Surplus Balance at January 1 306.1 302.2 Stock Issued - Incentive Plan and Awards (7.5) (.9) Stock Issued in Acquisitions - 6.9 Conversion of Preferred Stock, Series E 29.2 - - --------------------------------------------------------- --------- --------- Balance at September 30 327.8 308.2 - --------------------------------------------------------- --------- --------- Retained Earnings Balance at January 1 928.8 762.7 Net Income 191.4 160.5 Dividends Declared on Common Stock (52.5) (43.2) Dividends Declared on Preferred Stock (3.6) (6.7) Pooled Affiliates - 15.1 - --------------------------------------------------------- --------- --------- Balance at September 30 1,064.1 888.4 - --------------------------------------------------------- --------- --------- Net Unrealized Gain (Loss) on Securities Balance at January 1 2.6 (15.8) Unrealized Gain (Loss), net (2.8) 13.1 - --------------------------------------------------------- --------- --------- Balance at September 30 (.2) (2.7) - --------------------------------------------------------- --------- --------- Common Stock Issuable - Performance Plan Balance at January 1 14.7 17.9 Stock Issuable, net of Stock Issued (4.3) (1.4) - --------------------------------------------------------- --------- --------- Balance at September 30 10.4 16.5 - --------------------------------------------------------- --------- --------- Deferred Compensation - ESOP and Other Balance at January 1 (39.4) (38.8) Compensation Deferred (2.3) (1.4) Compensation Amortized 4.6 5.6 - --------------------------------------------------------- --------- --------- Balance at September 30 (37.1) (34.6) - --------------------------------------------------------- --------- --------- Treasury Stock Balance at January 1 (23.8) (8.1) Stock Options and Awards 36.3 15.4 Stock Purchased (94.9) (36.1) Conversion of Preferred Stock, Series E 19.2 - - --------------------------------------------------------- --------- --------- Balance at September 30 (63.2) (28.8) - --------------------------------------------------------- --------- --------- Total Stockholders' Equity at September 30 $1,516.8 $1,410.6 - --------------------------------------------------------- --------- ---------
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CONSOLIDATED STATEMENT OF CASH FLOWS NORTHERN TRUST CORPORATION Nine Months Ended September 30 ----------------------- (In Millions) 1996 1995 - --------------------------------------------------------------------------------------------------------- ----------- ----------- Cash Flows from Operating Activities: Net Income $ 191.4 $ 160.5 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Provision for Credit Losses 11.5 5.0 Depreciation on Buildings and Equipment 35.7 32.2 Net (Increase) Decrease in Interest Receivable 12.7 (29.7) Increase in Interest Payable 8.1 8.8 Amortization and Accretion of Securities and Unearned Income (76.0) (132.6) Amortization of Software, Goodwill and Other Intangibles 32.8 27.5 Net (Increase) Decrease in Trading Account Securities 79.9 (53.2) Other Noncash, net (89.0) (23.2) - --------------------------------------------------------------------------------------------------------- ----------- ----------- Net Cash Provided by (Used in) Operating Activities 207.1 (4.7) - --------------------------------------------------------------------------------------------------------- ----------- ----------- Cash Flows from Investing Activities: Net (Increase) Decrease in Federal Funds Sold and Securities Purchased under Agreements to Resell (864.7) 542.9 Net Decrease in Time Deposits with Banks 255.3 248.3 Net (Increase) Decrease in Other Money Market Assets 15.2 (2.4) Purchases of Securities-Held to Maturity (7,000.8) (625.4) Proceeds from Maturity and Redemption of Securities-Held to Maturity 7,041.3 703.6 Purchases of Securities-Available for Sale (27,307.1) (23,494.1) Proceeds from Sale, Maturity and Redemption of Securities-Available for Sale 27,200.7 22,900.5 Net Increase in Loans and Leases (1,037.8) (1,131.3) Net Purchases of Buildings and Equipment (43.0) (33.1) Net Decrease in Trust Security Settlement Receivables 90.7 71.2 Other, net (15.8) 2.9 - --------------------------------------------------------------------------------------------------------- ----------- ----------- Net Cash Used in Investing Activities (1,666.0) (816.9) - --------------------------------------------------------------------------------------------------------- ----------- ----------- Cash Flows from Financing Activities: Net Increase (Decrease) in Deposits 950.4 (556.8) Net Increase (Decrease) in Federal Funds Purchased (1,870.0) 1,227.7 Net Decrease in Securities Sold under Agreements to Repurchase (1,120.5) (939.7) Net Increase in Commercial Paper 6.3 21.8 Net Increase in Short-Term Other Borrowings 3,163.1 2,019.9 Proceeds from Term Federal Funds Purchased 1,611.6 2,383.0 Repayments of Term Federal Funds Purchased (1,674.0) (2,675.3) Proceeds from Senior Notes & Notes Payable 801.5 100.0 Repayments of Senior Notes & Notes Payable (516.1) (433.7) Treasury Stock Purchased (90.5) (32.0) Net Proceeds from Stock Options 8.4 5.1 Cash Dividends Paid on Common and Preferred Stock (56.0) (49.5) Other, net 4.4 3.3 - --------------------------------------------------------------------------------------------------------- ----------- ----------- Net Cash Provided by Financing Activities 1,218.6 1,073.8 - --------------------------------------------------------------------------------------------------------- ----------- ----------- Net Increase (Decrease) in Cash and Due from Banks (240.3) 252.2 Cash and Due from Banks at Beginning of Year 1,308.9 1,192.5 - --------------------------------------------------------------------------------------------------------- ----------- ----------- Cash and Due from Banks at September 30 $ 1,068.6 $ 1,444.7 - --------------------------------------------------------------------------------------------------------- ----------- ----------- Schedule of Noncash Investing and Financing Activities: Conversion of Preferred Stock, Series E to Common Stock $ 49.7 $ - Acquisition of Affiliate for Stock - 24.7 Supplemental Disclosures of Cash Flow Information: Interest Paid on Deposits and Short- and Long-Term Borrowings $ 565.1 $ 543.4 Income Taxes Paid 58.0 42.6 - --------------------------------------------------------------------------------------------------------- ----------- -----------
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, 1996 and 1995 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 1995 Annual Report to Stockholders. 2. SECURITIES - The following table summarizes the book and fair values of securities:
September 30, 1996 December 31, 1995 September 30, 1995 ----------------------------------------------------------------- Book Fair Book Fair Book Fair (In Millions) Value Value Value Value Value Value - ---------------------------------------------------------------------------------------------- Held to Maturity U.S. Government $ 121.9 $ 121.9 $ 116.1 $ 116.3 $ 102.0 $ 102.0 Obligations of States and Political Subdivisions 330.1 349.5 366.9 394.0 435.7 465.7 Federal Agency 18.2 18.2 22.2 22.4 22.2 22.1 Other 30.4 30.4 29.9 29.9 30.3 30.3 - ---------------------------------------------------------------------------------------------- Subtotal 500.6 520.0 535.1 562.6 590.2 620.1 - ---------------------------------------------------------------------------------------------- Available for Sale U.S. Government 1,146.7 1,146.7 1,667.7 1,667.7 1,512.0 1,512.0 Obligations of States and Political Subdivisions 80.2 80.2 70.2 70.2 - - Federal Agency 3,945.5 3,945.5 3,152.8 3,152.8 3,414.2 3,414.2 Preferred Stock 89.7 89.7 147.8 147.8 164.8 164.8 Other 56.1 56.1 97.8 97.8 117.0 117.0 - ---------------------------------------------------------------------------------------------- Subtotal 5,318.2 5,318.2 5,136.3 5,136.3 5,208.0 5,208.0 - ---------------------------------------------------------------------------------------------- Trading Account 9.0 9.0 88.9 88.9 57.2 57.2 - ---------------------------------------------------------------------------------------------- Total Securities $5,827.8 $5,847.2 $5,760.3 $5,787.8 $5,855.4 $5,885.3 - ---------------------------------------------------------------------------------------------- Reconciliation of Book Values to Fair Values of Securities Held to Maturity September 30, 1996 - ------------------------------------------------------------------------------------------- Gross Unrealized Book ---------------- Fair (In Millions) Value Gains Losses Value - ------------------------------------------------------------------------------------------- Held to Maturity U.S. Government $ 121.9 $ .1 $ .1 $ 121.9 Obligations of States and Political Subdivisions 330.1 19.7 .3 349.5 Federal Agency 18.2 .1 .1 18.2 Other 30.4 - - 30.4 - ------------------------------------------------------------------------------------------- Total $ 500.6 $ 19.9 $ .5 $ 520.0 - -------------------------------------------------------------------------------------------
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Reconciliation of Amortized Cost to Fair Values of Securities Available for Sale September 30, 1996 - -------------------------------------------------------------------------------------------------------- Amortized Gross Unrealized Fair ----------------- (In Millions) Cost Gains Losses Value - -------------------------------------------------------------------------------------------------------- Available for Sale U.S. Government $1,147.5 $1.3 $2.1 $1,146.7 Obligations of States and Political Subdivisions 79.3 2.2 1.3 80.2 Federal Agency 3,945.4 2.7 2.6 3,945.5 Preferred Stock 90.1 - .4 89.7 Other 56.3 1.0 1.2 56.1 - -------------------------------------------------------------------------------------------------------- Total $5,318.6 $7.2 $7.6 $5,318.2 - -----------------------------------------------------------------------------------------------------------
Unrealized gains and losses on off-balance sheet financial instruments used to hedge available for sale securities totaled $2.9 million and $2.9 million, respectively, as of September 30, 1996. 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, 1996, stockholders' equity included a charge of $.2 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 $6.4 billion on September 30, 1996, $3.9 billion on December 31, 1995 and $5.2 billion on September 30, 1995. 4. CONTINGENT LIABILITIES - Standby letters of credit outstanding were $1.4 billion on September 30, 1996, $1.0 billion on December 31, 1995 and $911.0 million on September 30, 1995. 5. LOANS AND LEASES - Amounts outstanding in selected loan categories are shown below:
September 30 December 31 September 30 --------------------------------------- (In Millions) 1996 1995 1995 - -------------------------------------------------------------------- Domestic Commercial $ 3,391.0 $3,202.1 $3,207.6 Residential Real Estate 4,454.3 3,896.4 3,750.6 Commercial Real Estate 597.7 512.6 505.4 Broker 276.9 304.0 225.0 Consumer 859.6 758.9 772.0 Other 539.6 625.5 706.4 Lease Financing 243.3 202.3 181.5 - -------------------------------------------------------------------- Total Domestic 10,362.4 9,501.8 9,348.5 International 546.8 404.2 459.8 - -------------------------------------------------------------------- Total Loans and Leases $10,909.2 $9,906.0 $9,808.3 - --------------------------------------------------------------------
7 At September 30, 1996, other domestic and international loans include $688.3 million of overnight trust-related advances in connection with next day security settlements, compared with $810.4 million at December 31, 1995 and $946.9 million at September 30, 1995. At September 30, 1996, nonperforming loans totaled $33.3 million. Included in this amount were loans with a recorded investment of $29.7 million which were also classified as impaired. A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans totaling $22.5 million had no portion of the reserve for credit losses allocated to them, while $7.2 million had an allocated reserve of $.6 million. For the third quarter of 1996, the total recorded investment in impaired loans averaged $32.6 million. Total interest income recorded on impaired loans for the quarter ended September 30, 1996 was $28 thousand, recognized principally on the cash-basis method of accounting. At September 30, 1995, nonperforming loans totaled $33.6 million and included $27.7 million of impaired loans. $24.5 million of these impaired loans had no reserve allocation while $3.2 million had an allocated reserve of $.4 million. Impaired loans for the third quarter of 1995 averaged $29.0 million with $149 thousand of interest income recognized principally on 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) 1996 1995 - --------------------------------------------------------------------------- Balance at Beginning of Period $147.1 $144.8 Charge-Offs (12.6) (7.8) Recoveries 1.4 3.0 - --------------------------------------------------------------------------- Net Charge-Offs (11.2) (4.8) Provision for Credit Losses 11.5 5.0 Reserve Related to Acquisitions - 2.3 - --------------------------------------------------------------------------- Balance at End of Period $147.4 $147.3 - ---------------------------------------------------------------------------
7. ACQUISITIONS - In August 1996, Northern Trust Corporation entered into a definitive agreement to acquire Metroplex Bancshares, Inc., parent company of Bent Tree National Bank in Dallas, Texas for approximately $14.6 million in cash. Bent Tree's assets totaled $79.0 million at September 30, 1996 and net income totaled $1.6 million for the first nine months of the year. The agreement is subject to the approval of Metroplex shareholders and to various regulatory approvals. Federal Reserve Board and shareholder approvals have been received and the transaction is expected to close in the fourth quarter of 1996. 8. NOTES PAYABLE - Under the terms of a September 12, 1996 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 (less $100 million in subordinated notes previously 8 sold). On September 24, 1996, The Northern Trust Company issued $100 million of 7.30% Subordinated Notes due 2006, priced to yield 7.38%. At September 30, 1996, an additional $100 million of subordinated bank notes can be issued under the terms of the Offering Circular. 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 $66.5 million, an increase of 14% from the $58.1 million reported in the third quarter of 1995. Net income per common share on a fully diluted basis increased 16% to $1.14 from $.98 in 1995. This earnings performance produced an annualized return on average common equity (ROE) of 18.93% versus 18.11% reported last year, and an annualized return on average assets (ROA) of 1.26% versus 1.14% in 1995. Total revenues on a taxable equivalent basis in the quarter increased 11% to $301.5 million with double- digit growth in trust fees and treasury management fees, and net interest income reached a record level, while noninterest expenses increased 9%. NONINTEREST INCOME Noninterest income increased 12% and totaled $194.3 million for the quarter, accounting for 64% of total taxable equivalent revenue. Trust fees of $147.7 million increased 16% or $20.4 million over the like period of 1995, and now represent 76% of noninterest income and 49% of total taxable equivalent revenue. Fees generated by RCB International, Inc. (RCB), an October 31, 1995 acquisition, accounted for $6.9 million of the trust fee growth. Exclusive of these fees, trust fees increased 11% compared to the third quarter of last year, driven by new business, increased transaction volumes and higher market values of trust assets administered. Trust assets under administration at September 30, 1996 increased 23% and totaled $722.7 billion compared to $585.4 billion a year ago. Trust fees from Corporate and Institutional Services (C&IS) increased $12.7 million to $74.1 million. Exclusive of the RCB contribution, C&IS trust fees increased $5.8 million or 9% from the year-ago quarter. The increase in fees reflects new business and strong revenue growth in securities lending, investment management and retirement services. Custody fees increased 5% to $31.0 million in the quarter. The increase in custody fees reflects net new business partially offset by changing pricing structures that emphasize the payment for base custody services through add-on products, such as securities lending and foreign exchange. Securities lending fees totaled $12.2 million in the quarter compared to $8.4 million a year ago, an increase of 45%. The growth was driven by a 35% increase in volume and a 13% increase in the average spread earned on the investment of the cash collateral. The investment management fee increase was driven by new business and growth in customized products tailored to client needs. Fees from retirement services generated by Hazlehurst & Associates, Inc. increased primarily as a result of new business. C&IS trust assets under administration grew 24% or $122.9 billion over last year and now total $641.9 billion. Included in this asset base are assets 10 under the management of Northern Trust which total $77.1 billion, up 33% from a year ago. During the quarter, Northern Trust was named preferred provider of master trust and domestic institutional custody services for current clients of First Chicago NBD Corporation as it exits that business, positioning Northern Trust well to pursue these relationships. To more effectively serve existing and new Michigan- based master trust and institutional custody clients, Northern Trust announced plans to open an office in Detroit, Michigan. The transition of those First Chicago NBD clients who select Northern Trust is expected to begin in the fourth quarter and be completed during the second quarter of 1997. C&IS trust fees in the third quarter were 21% higher than a year ago, but $2.3 million or 3% below this year's second quarter. The sequential quarter comparison was affected by the fact that a much higher proportion of new 1996 C&IS trust business was transitioned and began earning fees in the second quarter than in the third quarter. The second quarter also benefited from a number of other factors, including securities lending fees that were $2.0 million higher. Unusually strong demand for certain government and international equity securities, and a higher spread on securities lending cash collateral, contributed to second quarter securities lending revenues. Higher consulting revenues in the second quarter and non-recurring items also affected the sequential quarter comparison. Trust fees from Personal Financial Services (PFS) increased 12% from the prior year level of $65.9 million and totaled $73.6 million for the third quarter, reflecting strong growth throughout Northern Trust's five-state network of PFS offices. PFS trust fee growth resulted primarily from new business and higher market values of the trust assets administered. During the third quarter of 1996, newly constructed Illinois facilities in Winnetka and on Chicago's South Side opened for business, enhancing Northern Trust's service delivery to these existing markets. At September 30, 1996, Northern Trust's network of PFS offices totaled 55 locations throughout Illinois, Florida, California, Arizona and Texas. Trust fees generated from the four states outside of Illinois now comprise approximately one-half of total PFS trust fees. Total personal trust assets under administration increased $14.4 billion from the prior year and totaled $80.8 billion at September 30, 1996, with $47.2 billion under management. Security commissions and trading income totaled $5.0 million compared with $5.8 million reported in the third quarter of 1995. The decrease was due to reduced commission revenues at Northern Futures Corporation brought about by lower trade volume. Other operating income totaled $41.7 million in the quarter, compared to $40.0 million in the third quarter of 1995. The principal items included in other operating income are foreign exchange trading profits and treasury management fees. Foreign exchange trading profits of $15.1 million were strong but fell short of the record $16.2 million 11 realized in last year's third quarter. Foreign exchange trading profits are impacted by the level of cross-border investment activity of Master Trust/Custody clients and by market volatility. Northern Trust's success in capturing custody-related foreign exchange, even in periods of lower volatility, has enabled it to meet competitive pressures on base custody fees. The fee component of treasury management revenues rose 12% to $13.9 million compared to the prior year quarter. Total treasury management revenues, including both fees and the computed value of compensating deposit balances, were $21.8 million, representing a 14% increase from the third quarter of 1995. The compensating deposit balances contributed to the increase in net interest income. The improvement in treasury management revenues resulted from new business growth in both paper- and electronic-based products. Other operating income in the third quarter of 1996 included fees from the renegotiation of a cash management services contract and gains recorded from the disposition of securities received in a prior year loan restructuring. In addition, other operating income reflects the elimination of float-related compensation resulting from the Depository Trust Company's first quarter 1996 conversion to a same-day settlement basis for security transactions. NET INTEREST INCOME Net interest income for the third quarter totaled a record $98.8 million, 10% higher than the $89.4 million reported in the third quarter of 1995. 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 $107.2 million, up 8% from the $98.9 million reported in 1995. The increase in net interest income reflects higher levels of earning assets, growth in noninterest-related funds, and an improvement in the net interest margin to 2.26% from 2.21% reported in the third quarter of 1995. Earning assets for the third quarter averaged $18.9 billion, up 6% from the $17.8 billion average for the third quarter of 1995. The $1.1 billion growth in average earning assets reflected a 13% or $1.2 billion increase in average loans, partially offset by a $.4 billion decline in average security holdings. Money market assets totaled $2.1 billion on average for the quarter, up 20% from the like period of 1995. The loan growth was concentrated in the domestic portfolio while international loans declined slightly from the prior year. Residential mortgages increased 19% to average $4.4 billion and now comprise 41% of the total average loan portfolio. Commercial and industrial loans averaged $3.4 billion during the third quarter of 1996 compared to $3.1 12 billion last year. The securities portfolio declined 6% to average $6.3 billion primarily due to a reduction in short-term federal agency securities. Funding for the growth in earning assets came from several sources. Total interest-bearing deposits averaged $10.2 billion, up $785 million from the third quarter of 1995. This growth came principally from foreign office time deposits (up $702 million) and savings and money market deposits (up $222 million), partially offset by a decline in savings certificates and other time deposits. Short-term funds were also raised utilizing repurchase agreements and other borrowings. The growth in other borrowings was concentrated primarily in higher treasury tax and loan account balances. Noninterest-related funds increased $199 million and averaged $2.9 billion due in large part to growth in common stockholders' equity. Common stockholders' equity increased $145 million or 12% and averaged $1.37 billion due primarily to growth in retained earnings and the conversion of Series E Preferred Stock in January, 1996, offset in part by the repurchase of common stock pursuant to Northern Trust's 4 million share buyback program. The remaining increase in noninterest-related funds was concentrated in foreign demand and trust-related deposits. The net interest margin increased from 2.21% in last year's third quarter to 2.26% in the current quarter, due primarily to the 13% increase in average loan volume, the reduced holdings of low margin agency securities and the higher level of noninterest-related funding sources. PROVISION FOR CREDIT LOSSES The provision for credit losses of $2.5 million was up from $2.0 million reported in the third quarter of 1995. For a discussion of the provision and reserve for credit losses, refer to the Asset Quality section. NONINTEREST EXPENSES Noninterest expenses totaled $191.3 million for the quarter, up $15.8 million or 9% from $175.5 million in the third quarter of 1995. Operating expenses of RCB and Tanglewood Bancshares, both acquired in the second half of 1995, accounted for approximately $6.9 million of the increase over last year. Without these incremental costs, expense growth would have been 5%. The increase in noninterest expenses also reflects the support necessary for higher levels of trust new business, increased treasury management and global custody volumes, investments in technology and continuing PFS office expansion. These increases were partially offset by lower expenses related to pension settlement charges for retiring officers and lower benefit costs. Salaries and benefits, which represent 58% of total noninterest expenses, increased to $110.9 million from $104.4 million in the year-ago quarter. Cost savings from changes 13 in several benefit plans effective January 1, 1996 helped moderate the increase. The principal items contributing to the increase were merit increases, incentive compensation, and staff additions resulting from 1995 acquisitions and to support Northern Trust's growing trust activities and office expansion. The incentive compensation expense increase reflects the impact of Northern Trust's higher common stock price as well as new business development and investment management results. Staff on a full- time equivalent basis at September 30, 1996 totaled 6,754, up 3% from 6,531 at the end of 1995. Net occupancy expense totaled $16.3 million, up 4% from $15.6 million in the third quarter of 1995, due in part to acquisitions and the opening of new offices. The principal components of the increase were higher real estate taxes, building maintenance costs, and amortization and depreciation of leasehold improvements and buildings, offset in part by lower utility costs. Equipment expense, which includes depreciation, rental and maintenance costs, totaled $13.9 million, up $1.9 million or 16% from the third quarter of 1995. The principal components of the increase were higher levels of computer equipment depreciation, maintenance and rental expenses. Other operating expenses in the quarter totaled $50.2 million compared to $43.5 million last year. Other operating expenses were impacted by the addition of $3.2 million in professional service fees paid to RCB's network of investment managers, higher costs associated with legal disputes, and increased levels of transaction-based depository fees, software amortization, and amortization expense of goodwill and other intangibles. The components of other operating expenses were as follows:
Third Quarter Ended September 30 -------------------- (In Millions) 1996 1995 ----- ----- Purchased Professional Services $14.3 $ 8.8 Depository Fees 5.6 3.8 Telecommunications 2.8 2.6 Business Development 5.7 4.5 Postage and Supplies 5.0 5.0 FDIC Premium -- (.4) Software Amortization 8.5 7.6 Goodwill and Other Intangibles 2.4 1.9 Amortization Pension Settlement Charge .1 3.9 Other Expense 5.8 5.8 ----- ----- Total Other Operating Expenses $50.2 $43.5 ===== =====
14 PROVISION FOR INCOME TAXES The provision for income taxes was $32.8 million for the third quarter compared with $27.2 million in the year-ago quarter. The higher tax provision in 1996 resulted from the growth in taxable earnings for both federal and state income tax purposes and a decline in tax-exempt income from the prior year. The effective tax rate was 33% for 1996 versus 32% in 1995. NINE MONTHS EARNINGS HIGHLIGHTS Net income totaled $191.4 million for the nine months ended September 30, 1996 compared to $160.5 million last year, an increase of 19%. On a fully diluted basis, net income per common share increased 20% to $3.25. The ROE for the nine month period was 18.59% versus 17.37% one year ago, while the ROA improved to 1.22% from 1.12% in the same period of last year. Noninterest income increased 15% to $577.2 million from $503.5 million in the like period of 1995. Noninterest income comprised 65% of total taxable equivalent revenue. Trust fees totaled $440.3 million, up 19% from $371.4 million last year. Security commissions and trading income totaled $17.7 million, up $.8 million or 5% from the $16.9 million earned last year. Foreign exchange trading profits totaled $42.7 million, essentially unchanged from last year's record performance. The fee portion of treasury management revenues totaled $41.4 million, up 12% from the $36.9 million reported in 1995. Total treasury management revenues, which, in addition to fees, include the computed value of compensating deposit balances, increased 11% and totaled $64.3 million. These compensating deposit balances also contributed to the improvement in net interest income. Net interest income stated on a fully taxable equivalent basis totaled $313.5 million, up 6% from the $294.5 million in the like period of 1995. The provision for credit losses increased $6.5 million to $11.5 million in 1996. Net loan charge-offs increased to $11.2 million from $4.8 million in the prior year. Noninterest expenses were up 7% and totaled $566.9 million compared to $530.7 million in 1995. Excluding $23.1 million of operating expenses of the businesses acquired in 1995 and the $7.8 million reduction in FDIC insurance premiums compared to the previous year, expense growth would have been 4%. BALANCE SHEET Total assets at September 30, 1996 were $21.4 billion and averaged $21.0 billion for the first nine months, up 10% from last year's average of $19.1 billion. Due to increased lending activity, in addition to the July 31, 1995 acquisition of Tanglewood Bank, loans 15 and leases grew to $10.9 billion at September 30, 1996, and averaged $10.2 billion for the first nine months. This compares with $9.8 billion in total loans at September 30, 1995 and $9.0 billion on average for the first nine months of last year. Driven primarily by continued strong earnings growth and the first quarter 1996 conversion of the Series E convertible preferred stock, offset in part by Northern Trust's stock buyback program, common stockholders' equity increased 14% to average $1.35 billion for the first nine months, versus $1.19 billion last year. Total stockholders' equity averaged $1.47 billion compared with $1.36 billion in 1995. During the quarter, Northern Trust Corporation acquired 498,625 of its own shares at a total cost of $31.8 million pursuant to the 4 million share buyback program authorized by the Board of Directors in 1994. This brought the total number of shares acquired in 1996 to 1,655,142 leaving an additional 617,920 shares remaining to be acquired under this program. The Northern Trust Company successfully completed a $100 million subordinated bank note offering during the quarter, adding tier 2 capital at favorable rates. Northern Trust's risk-based capital ratios remained strong at 8.4% for tier 1 and 12.3% for total capital at September 30, 1996. 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 6.3% at September 30, 1996, also exceeded the regulatory requirement of 3%. ASSET QUALITY Nonperforming assets consist of nonaccrual loans, restructured loans and other real estate owned (OREO). Nonperforming assets at September 30, 1996 totaled $37.7 million, compared with $33.7 million at December 31, 1995 and $35.4 million at September 30, 1995. Nonaccrual and restructured loans and leases, consisting primarily of commercial loans, totaled $33.3 million, or .31% of total loans and leases at September 30, 1996. Included in this total are commercial real estate loans of $25.5 million. At December 31, 1995 and September 30, 1995, nonaccrual and restructured loans and leases totaled $31.9 million and $33.6 million, respectively. The following Nonperforming Asset table presents the outstanding amounts of nonaccrual loans and leases, restructured loans and OREO. Also shown are loans 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. 16 Nonperforming Assets and 90 Day Past Due Loans and Leases
September 30 June 30 December 31 September 30 (In Millions) 1996 1996 1995 1995 - ------------------------------------------------------------------------------------- Nonaccrual Loans and Leases Domestic $30.7 $36.2 $29.0 $30.4 International - - .2 .4 - ------------------------------------------------------------------------------------- Total Nonaccrual Loans and Leases 30.7 36.2 29.2 30.8 Restructured Loans 2.6 2.7 2.7 2.8 OREO 4.4 1.6 1.8 1.8 Total Nonperforming Assets $37.7 $40.5 $33.7 $35.4 - ------------------------------------------------------------------------------------- Total 90 Day Past Due Loans (still accruing) $21.1 $14.6 $22.0 $21.5 - -------------------------------------------------------------------------------------
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 the loan and lease portfolios and other credit undertakings. The 1996 third quarter provision for credit losses was $2.5 million, compared with $2.0 million in the third quarter of 1995. Net charge-offs totaled $2.5 million in the third quarter of 1996, versus $1.8 million last year. The reserve for credit losses was $147.4 million or 1.35% of outstanding loans at September 30, 1996. This compares with $147.1 million or 1.49% of outstanding loans at December 31, 1995 and $147.3 million or 1.50% of outstanding loans at September 30, 1995. The lower reserve to outstanding loans ratio at September 30, 1996 is attributable to loan growth, a significant portion of which is in low-risk residential mortgage lending. The overall credit quality of the domestic portfolio has remained good as evidenced by the low level of nonperforming loans and relatively moderate level of net charge-offs. Management's assessment of the current U.S. economy and the financial condition of certain clients facing financial difficulties together with the types of loans creating portfolio growth were primary factors impacting management's decision to maintain the reserve for credit losses at $147.4 million at September 30, 1996, essentially unchanged from December 31, 1995 and September 30, 1995. Management continues to monitor closely several credits, but the overall quality of the loan portfolio remains sound and the reserve for credit losses is adequate to cover credit-related uncertainties as they exist today. Established credit review procedures ensure that close attention is given to commercial real estate-related loans and other commercial loans, as well as other credit exposures that might be adversely affected by significant increases in interest rates or unexpected downturns in segments of the economies of the United States or other countries. 17 THIS PAGE INTENTIONALLY LEFT BLANK 18 The following schedule should be read in conjunction with the Net Interest Income section of Management's Discussion and Analysis of Financial Condition and Results of Operations. CONSOLIDATED ANALYSIS OF NET INTEREST INCOME
Third Quarter ------------------------------------------------------------- (Interest and rate on a taxable equivalent basis) 1996 1995 ----------------------------- ---------------------------- ($ in Millions) Interest Volume Rate Interest Volume Rate - ----------------------------------------------------- -------- ------ --------- -------- -------- ------ Average Earning Assets Money Market Assets Federal Funds Sold and Securities Purchased under Agreements to Resell $ 5.0 $ 356.6 5.49% $ 1.9 $ 125.7 6.04% Time Deposits with Banks 20.0 1,676.6 4.75 22.4 1,604.2 5.53 Other .7 49.4 6.07 .2 9.9 8.76 - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Total Money Market Assets 25.7 2,082.6 4.91 24.5 1,739.8 5.59 - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Securities U.S. Government 22.3 1,525.0 5.83 20.1 1,339.6 5.94 Obligations of States and Political Subdivisions 10.1 409.8 9.84 11.5 433.1 10.61 Federal Agency 58.9 4,118.4 5.69 69.8 4,499.3 6.16 Other 3.0 198.6 6.00 5.2 341.6 6.09 Trading Account .1 5.3 7.14 1.1 63.7 7.02 - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Total Securities 94.4 6,257.1 6.00 107.7 6,677.3 6.41 - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Loans and Leases 178.2 10,533.9 6.73 163.1 9,356.9 6.91 - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Total Earning Assets $ 298.3 $18,873.6 6.29% $ 295.3 $17,774.0 6.59% - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Average Source of Funds Deposits Savings and Money Market Deposits $ 28.1 $ 3,548.8 3.15% $ 27.5 $ 3,327.0 3.28% Savings Certificates 29.5 2,047.6 5.73 32.6 2,124.7 6.09 Other Time 7.2 523.0 5.43 8.6 584.8 5.82 Foreign Offices Time 47.9 4,040.6 4.71 43.4 3,338.4 5.15 - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Total Deposits 112.7 10,160.0 4.41 112.1 9,374.9 4.74 Federal Funds Purchased 22.5 1,695.9 5.28 29.9 2,047.1 5.80 Securities Sold Under Agreements to Repurchase 25.8 1,972.7 5.20 26.6 1,830.6 5.76 Commercial Paper 1.9 145.0 5.38 2.1 147.5 5.86 Other Borrowings 18.9 1,503.4 5.01 17.8 1,292.0 5.47 Senior Notes 2.8 205.0 5.48 2.8 174.6 6.44 Notes Payable 6.5 339.7 7.58 5.1 254.1 7.90 - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Total Interest-Related Funds 191.1 16,021.7 4.75 196.4 15,120.8 5.15 - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Interest Rate Spread - - 1.54% - - 1.44% - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Noninterest-Related Funds - 2,851.9 - - 2,653.2 - - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Total Source of Funds $ 191.1 $18,873.6 4.03% $ 196.4 $17,774.0 4.38% - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Net Interest Income/Margin $ 107.2 - 2.26% $ 98.9 - 2.21% - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- ANALYSIS OF NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE Third Quarter 1996/95 Nine Months 1996/95 ----------------------------- ---------------------------- Change Due To Change Due To ------------------- ------------------ (In Millions) Volume Rate Total Volume Rate Total - ----------------------------------------------------- ------------------- ----- ------------------ ----- Earning Assets $ 18.6 $ (15.6) $ 3.0 $ 87.2 $ (47.2) $40.0 Interest-Related Funds 10.0 (15.3) (5.3) 60.0 (39.0) 21.0 - ----------------------------------------------------- ------- --------- ----- ------- --------- ----- Net Interest Income $ 8.6 $ (.3) $ 8.3 $ 27.2 $ (8.2) $19.0 - ----------------------------------------------------- ------- --------- ----- ------- --------- -----
19
NORTHERN TRUST CORPORATION Nine Months - ----------------------------------------------------------------------- 1996 1995 - -------------------------------- ---------------------------------- Interest Volume Rate Interest Volume Rate - -------- --------- ---- -------- --------- ---- $ 12.2 $ 293.0 5.55 % $ 9.3 $ 205.4 6.09 % 63.7 1,699.9 5.01 69.9 1,647.2 5.67 2.3 52.5 5.97 .7 12.7 7.07 - -------- --------- ---- ------- --------- ----- 78.2 2,045.4 5.11 79.9 1,865.3 5.73 - -------- --------- ---- ------- --------- ----- 81.7 1,909.7 5.71 45.9 1,083.8 5.65 31.0 417.1 9.90 36.0 442.1 10.87 171.6 4,017.1 5.71 197.4 4,166.7 6.33 10.3 229.4 5.99 17.1 366.7 6.23 .4 8.0 7.36 2.6 49.3 7.14 - -------- --------- ---- ------- --------- ----- 295.0 6,581.3 5.99 299.0 6,108.6 6.54 - -------- --------- ---- ------- --------- ----- 513.5 10,164.0 6.75 467.8 8,958.5 6.98 - -------- --------- ---- ------- --------- ----- $ 886.7 $18,790.7 6.30 % $ 846.7 $16,932.4 6.68 % - -------- --------- ---- ------- --------- ----- $ 84.8 $ 3,595.2 3.15 % $ 81.5 $ 3,293.3 3.31 % 89.7 2,070.4 5.79 87.7 1,949.2 6.02 21.8 532.3 5.46 23.0 527.4 5.82 137.5 3,809.2 4.82 141.2 3,607.6 5.23 - -------- --------- ---- ------- --------- ----- 333.8 10,007.1 4.46 333.4 9,377.5 4.75 73.7 1,851.8 5.32 62.1 1,416.2 5.86 79.9 2,034.1 5.24 75.7 1,731.8 5.84 5.8 143.9 5.40 6.4 145.9 5.89 50.4 1,333.2 5.05 44.2 1,089.1 5.43 10.3 257.8 5.31 15.5 340.2 6.05 19.3 336.8 7.63 14.9 247.9 8.02 - -------- --------- ---- ------- --------- ----- 573.2 15,964.7 4.80 552.2 14,348.6 5.14 - -------- --------- ---- ------- --------- ----- - - 1.50 % - - 1.54 % - -------- --------- ---- ------- --------- ----- - 2,826.0 - - 2,583.8 - - -------- --------- ---- ------- --------- ----- $ 573.2 $18,790.7 4.07 % $ 552.2 $16,932.4 4.36 % - -------- --------- ---- ------- --------- ----- $ 313.5 - 2.23 % $ 294.5 - 2.32 % - -------- --------- ---- ------- --------- -----
20 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a.) Exhibits -------- Exhibit (10) (i) Restated Northern Trust Employee Stock Ownership Plan, dated January 1, 1989 as amended to date (ii) Amended Trust Agreement between The Northern Trust Company and Citizens and Southern Trust Company (Georgia), N.A. (predecessor of NationsBank) dated January 26, 1989 (iii) Restatement of Supplemental Employee Trust Agreement between The Northern Trust Company and Harris Trust & Savings Bank regarding the Supplemental Employee Stock Ownership Plan for Employees of The Northern Trust Company, the Supplemental Thrift-Incentive Plan for Employees of The Northern Trust Company and the Supplemental Pension Plan for Employees of The Northern Trust Company (iv) Supplemental Employee Stock Ownership Plan for Employees of The Northern Trust Company as amended and restated (v) Supplemental Thrift-Incentive Plan for Employees of The Northern Trust Company as amended and restated (vi) Supplemental Pension Plan for Employees of The Northern Trust Company as amended and restated (vii) Amendment to the Northern Trust Corporation Amended Incentive Stock Plan (viii) Amendment to the Northern Trust Corporation Amended 1992 Incentive Stock Plan Exhibit (11) Computation of Per Share Earnings Exhibit (27) Financial Data Schedule 21 (b.) Reports on Form 8-K ------------------- In a report on Form 8-K dated July 16, 1996, Northern Trust incorporated by reference in Item 5 its July 15, 1996 press release, reporting on its earnings for second quarter and six months of 1996. The press release, with summary financial information, was filed pursuant to Item 7. 22 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, 1996 By: Perry R. Pero ------------------------------------- Perry R. Pero Senior Executive Vice President and Chief Financial Officer Date: November 13, 1996 By: Harry W. Short ------------------------------------ Harry W. Short Senior Vice President and Controller (Chief Accounting Officer) 23 EXHIBIT INDEX ------------- The following exhibits have been filed herewith: Exhibit Number Description ------- ----------- (10) (i) Restated Northern Trust Employee Stock Ownership Plan, dated January 1, 1989 as amended to date (ii) Amended Trust Agreement between The Northern Trust Company and Citizens and Southern Trust Company (Georgia), N.A. (predecessor of NationsBank) dated January 26, 1989 (iii) Restatement of Supplemental Employee Trust Agreement between The Northern Trust Company and Harris Trust & Savings Bank regarding the Supplemental Employee Stock Ownership Plan for Employees of The Northern Trust Company, the Supplemental Thrift-Incentive Plan for Employees of The Northern Trust Company and the Supplemental Pension Plan for Employees of The Northern Trust Company (iv) Supplemental Employee Stock Ownership Plan for Employees of The Northern Trust Company as amended and restated (v) Supplemental Thrift-Incentive Plan for Employees of The Northern Trust Company as amended and restated (vi) Supplemental Pension Plan for Employees of The Northern Trust Company as amended and restated (vii) Amendment to the Northern Trust Corporation Amended Incentive Stock Plan (viii) Amendment to the Northern Trust Corporation Amended 1992 Incentive Stock Plan (11) Computation of Per Share Earnings (27) Financial Data Schedule 24 EX-10.(I) 2 RESTATED STOCK OWNERSHIP PLAN Northern Trust Employee Stock Ownership Plan (As Initially Adopted and Subsequently Amended and Restated Effective January 1, 1989) Northern Trust Employee Stock Ownership Plan (As Initially Adopted and Subsequently Amended and Restated Effective January 1, 1989)
Contents - -------------------------------------------------------------------------------- Section Page Article I. Nature of the Plan 1.1 Establishment and Amendment of the Plan 1 1.2 Purpose of the Plan 1 1.3 Legal Qualification 1 Article II. Definitions 2.1 Definitions 2 Article III. Participation and Service 3.1 Participation 11 3.2 Duration of Participation 11 3.3 Transferred or Rehired Employees 11 3.4 Vesting 12 3.5 Break in Service 14 3.6 One-Year Break in Service 15 Article IV. Employer Contributions 4.1 Contributions 16 4.2 Medium of Payment 16 4.3 Allocation of Employer Contributions 16 4.4 No Participant Contributions 17 4.5 Uniformed Services Employment and Reemployment Rights Act 17 Article V. Investment of Trust Assets 5.1 Investments 18 5.2 Valuation of Company Stock 18 5.3 Crediting of Stock 18 5.4 Sales and Resales of Company Stock 18
Northern Trust Employee Stock Ownership Plan (As Initially Adopted and Subsequently Amended and Restated Effective January 1, 1989)
Contents - -------------------------------------------------------------------------------- Section Page Article VI. Exempt Loans 6.1 Requirements 20 6.2 Payments on Loans 21 6.3 Crediting of Released Stock 21 6.4 Payments of Principal and Interest 21 6.5 Puts, Calls, and Other Options 22 Article VII. Allocations to Participants' Accounts 7.1 Participants Entitled to Allocations 23 7.2 Allocations to Company Stock Accounts 23 7.3 Allocations to Other Investment Accounts 23 7.4 Allocations of Employer Contributions, Company Stock Acquired With a Loan and Forfeitures 24 7.5 Maximum Allocation 26 7.6 Vesting 30 7.7 Net Income or Loss of the Trust 30 7.8 Accounting for Allocations 31 7.9 Diversification of Investments 32 Article VIII. Voting and Tender of Company Stock 8.1 Procedures for Voting 34 8.2 Tender Offer 34
Northern Trust Employee Stock Ownership Plan (As Initially Adopted and Subsequently Amended and Restated Effective January 1, 1989)
Contents - -------------------------------------------------------------------------------- Section Page Article IX. Benefits 9.1 Payments on Retirement 36 9.2 Payments on Death 36 9.3 Payments on Permanent Disability 38 9.4 Payments on Termination for Other Reasons 38 9.5 Deemed Cashout 39 9.6 Property Distributed 39 9.7 Methods of Payment 40 9.8 Direct Rollover of Eligible Rollover Distributions 43 Article X. Rights and Options on Distributed Shares of Company Stock 10.1 Right of First Refusal 45 10.2 Put Option 45 Article XI. Pretermination Distributions and Dividends 11.1 Pretermination Distributions 47 11.2 Dividends 47 Article XII. Plan Administration 12.1 Powers 48 12.2 Directions to Trustee 48 12.3 Uniform Rules 49 12.4 Reports 49 12.5 Compensation 49 12.6 Claims Procedure 49 12.7 Indemnity for Liability 50
Northern Trust Employee Stock Ownership Plan (As Initially Adopted and Subsequently Amended and Restated Effective January 1, 1989)
Contents - -------------------------------------------------------------------------------- Section Page Article XIII. Amendment and Termination 13.1 Amendment 51 13.2 Termination 51 13.3 Merger, Sale 51 13.4 Distribution Upon Termination 52 Article XIV. Extension of Plan to Affiliates 14.1 Participation in the Plan 53 14.2 Withdrawal from the Plan 53 Article XV. Top-Heavy Provisions 55 Article XVI. Miscellaneous Provisions 16.1 Spendthrift Provisions 56 16.2 Incompetency 56 16.3 Unclaimed Funds 57 16.4 Rights Against the Company 57 16.5 Illegality of Particular Provision 58 16.6 Effect of Mistake 58 16.7 Compliance with Federal and State Securities Laws 58 16.8 No Discrimination 58 16.9 Exclusive Benefit of Employees 58 16.10 Governing Law 60 16.11 Change-in-Control 60
Article I. Nature of the Plan 1.1 Establishment and Amendment of the Plan Effective January 1, 1989, The Northern Trust Company (the "Company") established the Northern Trust Employee Stock Ownership Plan (the "Plan"). The Plan is hereby amended and restated effective January 1, 1989, in order to incorporate the requirements of the Tax Reform Act of 1986 and subsequent legislation. 1.2 Purpose of the Plan The purpose of the Plan is to enable Members and their Beneficiaries to share in the growth and prosperity of the Company and its Affiliates, to provide Members with an opportunity to accumulate capital for their future economic security, and to furnish additional security to Members who become permanently disabled. The primary purpose of the Plan is to enable Members to acquire ownership interests in Company Stock. Consequently, the Plan will be invested primarily in Company Stock. 1.3 Legal Qualification The Plan is an employee stock ownership plan under section 4975(e)(7) of the Code and section 407(d)(6) of ERISA. It is a stock bonus plan qualified under section 401(a) of the Code. Article II. Definitions 2.1 Definitions The following capitalized terms shall have the meanings stated below wherever they appear in the text unless the context otherwise requires. (a) "ACCOUNT" means one of several accounts maintained to record the interest of a Member in the Plan. (b) "AFFILIATE" means any corporation which is a member of the same controlled group of corporations (within the meaning of Code Section 414(b)) as the Company, or an unincorporated trade or business which is under common control with the Company (within the meaning of Code Section 414(c)), any organization which is a member of an affiliated service group (within the meaning of Code Section 414(m)) of which the Company is also a member, and any other entity required to be aggregated under Code Section 414(o). For purposes of section 2.1(mm), this section 2.1(b) shall be as modified as provided in section 415(h) of the Code. (c) "ANNIVERSARY DATE" means January 31, 1989, and December 31 of each Plan Year. (d) "ANNUAL ADDITIONS" means the total of: (1) Company or Participating Employer contributions allocated to a Participant's Accounts under this Plan and any Related Plan during any Limitation Year; (2) the amount of Employee contributions made by the Participant under any Related Plan; and (3) Forfeitures allocated to a Participant's Accounts under this Plan and any Related Plan. (e) "BENEFICIARY" means the person or persons designated as such by the Participant on a form supplied by the Committee, provided that, a married Participant may designate a Beneficiary other than the Participant's Spouse only if the requirements of section 9.2(c) are met. Upon the death of a Participant, if there is no designated Beneficiary then living, or if the designation is for any reason ineffective, as determined by the Committee, the Participant's Beneficiary shall be the Participant's Spouse, or if none, as directed in the Participant's will admitted to probate, or if there is no will, to the Participant's estate to be distributed as provided by the laws of descent of the state of Illinois in effect at the time of the Participant's death. (f) "BOARD OF DIRECTORS" OR "BOARD" means the Board of Directors of the Company. (g) "BREAK IN SERVICE" means the event described in section 3.5. (h) "CODE" means the Internal Revenue Code of 1986, as amended. (i) "COMMITTEE" means the Employee Benefits Administrative Committee of the Company, as constituted from time to time, which has the responsibility for administering the Plan and which shall be deemed to be the Plan Administrator and the Named Fiduciary for the purposes of ERISA. (j) "COMPANY" means The Northern Trust Company, an Illinois state bank, and its successors and assigns. (k) "COMPANY STOCK" means any qualifying employer security within the meaning of section 4975(e)(8) of the Code and 407(d)(1) of ERISA and regulations thereunder. (l) "COMPANY STOCK ACCOUNT" means an account of a Member that is credited with the Member's allocable share of Company Stock purchased and paid for by the Trust or contributed to the Trust. (m) "COMPENSATION" means the base salary paid by the Company to a Participant, including amounts which the Participant elects to have contributed to the Participant's before-tax deposit account under The Northern Trust Company Thrift-Incentive Plan and any amounts contributed by or on behalf of the Participant to a plan designed to comply with section 125 of the Code, plus any amounts paid as shift differential, but exclusive of severance pay or any other types of compensation. Notwithstanding the preceding provisions of this section, for purposes of sections 2.1(u) and 7.5 and Article XV, "Compensation" shall have the meaning set forth in section 7.5(h)(4). Notwithstanding any provision of this Plan to the contrary, a Participant's Compensation for any calendar year prior to January 1, 1994, shall not exceed $200,000 (or such other amount as established by the Secretary of the Treasury pursuant to section 401(a)(17) of the Code). In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, effective January 1, 1994, the Compensation of each Participant taken into account under the Plan shall not exceed the annual compensation limit under section 401(a)(17) of the Code. Effective January 1, 1994, the annual compensation limit under section 401(a)(17) is $150,000, as adjusted by the Commissioner of the Internal Revenue Service for increases in the cost of living in accordance with Code section 401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined (the "determination period") beginning in that calendar year. If a determination period consists of fewer than 12 months, the annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. In determining the Compensation of a Participant for purposes of this limitation, the rules of Code section 414(q)(6) shall apply, except that, in applying such rules, the term "family" shall include only the Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the Plan Year. If, as a result of the application of these rules, the adjusted dollar limitation of Code section 401(a)(17) applicable to family members is exceeded, then the dollar limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined under this section 2.1(m) before applying the limitation. (n) "EFFECTIVE DATE" means January 1, 1989. (o) "ELIGIBLE EMPLOYEE" means any Employee of the Company or a Participating Employer other than (1) an Employee employed by any office or branch of the Company located in a foreign country who, as to the United States, is a nonresident alien, and (2) an Employee who (A) as to the United States, is a foreign national, (B) is working for the Company or a Participating Employer at a location located in the United States, and (C) is covered by a retirement plan sponsored by a non-U.S. Affiliate in the country in which an Affiliate is located. (p) "EMPLOYEE" shall mean an individual employed by the Company or an Affiliate. A person who is considered a "leased employee" (as defined below) of the Company or an Affiliate shall not be considered an Employee for purposes of the Plan. If such a person subsequently becomes an Employee, and thereafter participates in the Plan, that person shall receive Vesting Service for employment as a leased employee except to the extent that the requirements of Section 414(n)(5) of the Code were satisfied with respect to such Employee while he or she was a leased employee. For purposes of the Plan a leased employee is a person who is not employed by the Company or an Affiliate but who performs services for the Company or an Affiliate pursuant to an agreement between the Company or Affiliate and a leasing organization, other than a person described in Code section 414(n)(5), if such person performed the services for a year and the services are of a type historically performed by employees. (q) "EMPLOYER CONTRIBUTIONS" means payments made to the Trust by the Company or a Participating Employer. (r) "ENTRY DATE" shall mean each January 1, April 1, July 1, and October 1 of each Plan Year on and after the Effective Date of this Plan. (s) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (t) "FORFEITURE" means the nonvested portion of a Participant's Accounts that becomes forfeited pursuant to section 9.4. (u) "HIGHLY COMPENSATED PARTICIPANT" means a Participant who, during the current Plan Year or the preceding Plan Year (1) was at any time a 5- percent owner of the Company, (2) received Compensation from the Company in excess of $75,000 (or such adjusted amount provided under section 414(q)(1) of the Code), (3) received Compensation from the Company in excess of $50,000 (or such adjusted amount provided under section 414(q)(1) of the Code) and was in the top-paid group of Employees for such year, or (4) was at any time an officer of the Company and received Compensation from the Company in excess of 50 percent of the amount in effect under section 415(b)(1)(A) of the Code for such Plan Year. The provisions of section 414(q) of the Code shall apply in determining whether a Participant is a Highly Compensated Participant. Highly Compensated Participants shall be identified based upon only the current Plan Year to the extent permitted by Section 414(q) of the Code and regulations issued thereunder. (v) "HOUR OF SERVICE" means each hour for which an Employee is paid or entitled to payment for the performance of duties for the Company or an Affiliate. (w) "INACTIVE PARTICIPANT" means a person who was a Participant who is transferred to and is in a position of employment either-- (1) as an Employee where he or she is not an Eligible Employee; or (2) as an Employee of an Affiliate which has not adopted this Plan. (x) "LIMITATION YEAR" means the 12-consecutive-month period to be used in determining the Plan's compliance with section 415 of the Code and the regulations thereunder. The Limitation Year shall be the calendar year unless the Company elects to use another 12-month period. (y) "LOAN" means any loan to the Trustee made or guaranteed by a disqualified person (within the meaning of section 4975(e)(2) of the Code) including, but not limited to, a direct loan of cash, a purchase money transaction, an assumption of an obligation of the Trustee, an unsecured guarantee, or the use of assets of a disqualified person (within the meaning of section 4975(e)(2) of the Code) as collateral for a loan. (z) "MEMBER" means either a Participant, Inactive Participant, or a former Participant. (aa) "NORMAL RETIREMENT DATE" means (1) in the case of a Participant who attained age 65 before the Effective Date, the Participant's 65th birthday or (2) in the case of any other Participant, the later of (A) the date on which a Participant attains 65 years of age, or (B) the fifth anniversary of the date the Participant commenced participation in the Plan. (bb) "ONE-YEAR BREAK IN SERVICE" means a period of time described in section 3.6. (cc) "OTHER INVESTMENTS ACCOUNT" means an Account of a Participant that is credited with the Participant's share of the net income or loss of the Trust and Employer Contributions and Forfeitures in other than Company Stock, and that is debited with payments made to pay for Company Stock. (dd) "PARENTAL LEAVE" shall mean an absence from employment with the Company or an Affiliate because of (1) the Employee's pregnancy, (2) the birth of the Employee's child, (3) the placement of a child with the Employee in connection with the Employee's adoption of the child, or (4) caring for such child immediately following such birth or placement, provided that, the Employee furnishes to the Company or Affiliate such timely information that the Company or Affiliate may reasonably require to establish (A) that the absence from work is for one of the reasons specified and (B) the number of days for which there was such an absence. (ee) "PARTICIPANT" means an Eligible Employee who meets the requirements of Section 3.1 and who is participating in the Plan. (ff) "PARTICIPATING EMPLOYER" means any Affiliate which has adopted the Plan in accordance with Article XIV. (gg) "PENSION PLAN" means The Northern Trust Company Pension Plan. (hh) "PERMANENT DISABILITY" means any physical or mental injury, illness or incapacity which, in the sole judgment of the Committee based on the medical reports of a physician selected by the Committee and other evidence satisfactory to the Committee, currently and permanently prevents an Employee from satisfactorily performing the Employee's usual duties for the Company or an Affiliate or the duties of such other position or job which the Company or an Affiliate makes available to him or her and for which such Employee is qualified by reason of training, education or experience. To the extent that a disability case manager determines whether an Employee is permanently disabled under the Company's short or long-term disability plan, such determination shall be binding with respect to the question of whether the Employee has incurred a Permanent Disability hereunder. (ii) "PLAN" means the Northern Trust Employee Stock Ownership Plan, as amended. (jj) "PLAN YEAR" means the calendar year. (kk) "QUALIFIED ELECTION PERIOD" means-- (1) prior to the date that section 2.1(ll)(2) becomes operative, the period beginning with the Plan Year in which the Participant first has attained age 55 and is 100 percent vested under section 7.6 and ending with the earlier of (A) the fourth succeeding Plan Year thereafter; (B) the Plan Year preceding the Plan Year during which the Participant ceases being an Employee; or (C) the Plan Year preceding the Plan Year during which the Participant becomes a Qualified Participant under section 2.1(ll)(2), or (2) on and after January 1, 1999 or such earlier date that any Participant satisfies the requirements of section 401(a)(28)(B)(iii) of the Code, the six-Plan Year period beginning with the Plan Year in which the Participant first becomes a Qualified Participant under section 2.1(ll)(1) or (2), provided that, the Qualified Election Period of a Participant who would have been a Qualified Participant in any year prior to 1989 shall begin January 1, 1989. (ll) "QUALIFIED PARTICIPANT" means-- (1) prior to the date that paragraph (2) below becomes operative, any Participant who is age 55 or older and is 100 percent vested under section 7.6; and (2) on and after January 1, 1999 or such earlier date that any Participant satisfies the requirements of section 401(a)(28)(B)(iii) of the Code, any Participant who has attained age 55 and has been a Participant in the Plan for at least ten years, or has otherwise satisfied such requirements. (mm) "RELATED PLAN" means any other defined contribution plan (as defined in section 415(k) of the Code) maintained by the Company or an Affiliate. (nn) "SEVERANCE ELIGIBLE PARTICIPANT" means, effective July 1, 1995, a Participant whose employment has terminated in a manner entitling such Participant to severance pay under any formal severance plan, program or arrangement maintained by The Northern Trust Company providing severance benefits to certain employees as a result of job elimination or termination of employment due to the acquisition or disposition of a business entity. (oo) "SPOUSE" means the person to whom an Employee is married or, in the case of a deceased Employee, the person to whom an Employee was married on the date of such Employee's death. (pp) "SUSPENSE ACCOUNT" means an account to which securities purchased with any Loans are allocated pending their release and allocation to Accounts as the Loan is repaid. (qq) "TRUST" means all money, securities, and other property held under the Trust Agreement for purposes of the Plan. (rr) "TRUST AGREEMENT" means the agreement between the Company and the Trustee (or any successor Trustee) establishing the Trust and specifying the duties of the Trustee. (ss) "TRUST ASSETS" means the assets held in the Trust for the exclusive benefit of Participants, Beneficiaries, and Spouses. (tt) "TRUSTEE" means The Northern Trust Company as Trustee of the Trust. (uu) "VALUATION DATE" means each March 31, June 30, September 30, and December 31 of the Plan Year; provided, however, that, effective July 1, 1993, "Valuation Date" means the last business day of each calendar month. (vv) "VESTED PORTION" means that percentage of a Participant's Account constituting the Participant's irrevocable right to such Account, as indicated in the following vesting schedule:
=========================================== PARTICIPANT'S YEARS OF VESTING SERVICE VESTED WITH THE COMPANY PERCENTAGE ------------------------------------------- Less than 2 years 0% 2 years but less than 3 20% 3 years but less than 4 40% 4 years but less than 5 60% 5 years but less than 6 80% 6 or more years 100%
UNVESTED PORTION means the remaining Account balance after subtracting the Vested Portion. (ww) "VESTING SERVICE" means the period of employment credited under section 3.4. Article III. Participation and Service 3.1 Participation Each Eligible Employee shall become a Participant on the Entry Date on or next following the later of the date the Eligible Employee completes one year of Vesting Service and the date the Eligible Employee attains age 21, provided that he or she is an Eligible Employee on such date. 3.2 Duration of Participation An Eligible Employee who becomes a Participant shall continue to be a Participant or Inactive Participant until he or she incurs a Break in Service, and also shall continue to be a Member thereafter for as long as he or she is entitled to receive any benefits hereunder. After receiving all benefits to which he or she is entitled hereunder, he or she shall cease to be a Member unless and until he or she thereafter becomes eligible to again become a Participant. 3.3 Transferred or Rehired Employees The following rules shall be applicable to Employees who (a) become Participants because of transfer to a status qualifying for coverage under the Plan, (b) become Inactive Participants, (c) transfer to a status not qualifying for coverage after meeting the requirements of section 3.1 but before becoming Participants, or (d) are rehired by the Company: (a) An employee becomes an Eligible Employee hereunder shall be credited with Vesting Service computed for all his or her employment with the Company and any Affiliate, before and after such transfer. (b) Any Participant who shall be transferred into employment as an Employee where he or she becomes an Inactive Participant shall continue to receive credit for Vesting Service under this Plan during the period he or she is an Inactive Participant. (c) Any Eligible Employee who shall meet the requirements of section 3.1 but shall be transferred into employment as an Employee but not as an Eligible Employee, before becoming a Participant, shall no longer be eligible to elect to have contributions made on his or her behalf hereunder. Any such Employee shall continue to accrue Vesting Service during the period computed for all of the Employee's employment with the Company and any Affiliate. (d) An Employee who has a Break in Service and is subsequently reemployed by the Company or an Affiliate shall be considered a new Employee for purposes of section 3.1, unless he or she was credited with at least one year of Vesting Service prior to his or her Break in Service. In such case, the Employee shall become eligible to have contributions hereunder made on his or her behalf (i) before January 1, 1995, on the first day of the first Valuation Period in which such person is so reemployed, and (ii) from and after January 1, 1995, on the first day of the first payroll period following such reemployment. (1) By written notice to the Committee after his or her reemployment, an Employee who has not had five consecutive One-Year Breaks in Service may deposit with the Trustee an amount which shall be equal to the aggregate value of the distributions from his or her Account at the time of his or her previous Break in Service. All deposits must be made in cash and in a single lump sum. The deposits must be made within five years after the Employee is reemployed. (2) In the case of a reemployed Employee who does not have five consecutive One-Year Breaks in Service, the Company shall contribute to the Account of such Employee the amount, if any, forfeited at the time of the Employee's termination of service, if and only if the Employee makes the deposits permitted under paragraph (1) above or the Employee did not receive a distribution at or after the time of his or her previous termination of service. The Company's contribution shall be made concurrently with the Employee's repayment if applicable, otherwise upon the date of his or her reemployment. For each other reemployed Employee, his or her beginning balance in each of his or her Accounts shall be zero, and his or her previous Forfeiture, if any, shall not be restored. 3.4 Vesting An Employee shall receive credit for Vesting Service for the period commencing with the Employee's date of hire with the Company or an Affiliate and ending on the date the Employee incurs a Break in Service. Vesting Service shall be calculated in accordance with reasonable and uniform standards and policies adopted by the Company from time to time, which standards and policies shall be consistently observed subject, however, to the following: (a) Vesting Service shall be computed on the following basis: (i) prior to July 1, 1993, an Employee shall receive credit for each calendar quarter during which the Employee earned at least one (1) Hour of Service or otherwise would receive credit for Vesting Service pursuant to subsection (a) next above; and (ii) from and after July 1, 1993, an Employee shall receive credit for each calendar month during which the Employee earned at least one (1) Hour of Service or otherwise would receive credit for Vesting Service pursuant to subsection (b) below. (b) An Employee shall earn Vesting Service for all periods of active employment with the Company or an Affiliate, and for the following periods that are not active employment but that precede a Break in Service: (i) an approved unpaid leave of absence from the Company or an Affiliate that is granted according to uniform and nondiscriminatory standards, but only if the Employee returns to work with the Company or an Affiliate upon the termination of such leave of absence; (ii) effective August 5, 1993, an absence from work with the Company or an Affiliate under the Family and Medical Leave Act of 1993, but only if the Employee returns to work with the Company or an Affiliate upon the termination of such period of absence; (iii) a period of up to one (1) year during which an Employee is on a Parental Leave; (iv) an absence from work with the Company or an Affiliate on account of military service with the armed forces of the United States, but only if the Employee reports for work within the period required under law pertaining to veteran's reemployment rights (c) If an Employee incurs a Break in Service, but returns to employment with the Company or an Affiliate prior to incurring a One-Year Break in Service (as defined in Section 3.6), the period commencing on the date the Break in Service began and ending on the date such Employee is reemployed shall be counted as Vesting Service. Notwithstanding the preceding sentence, if the Break in Service occurs during a period of absence from active employment, the Employee shall not receive Vesting Service under the preceding sentence unless such Employee returns to employment before the first (1st) anniversary of the first day of such absence. If an Employee suffers a One- Year Break in Service and the Employee is thereafter reemployed by the Company or an Affiliate, such Employee's Vesting Service before such One- Year Break in Service shall be added to the Employee's Vesting Service after reemployment. (d) A Participant's Vesting Service shall not include periods of service with an entity prior to the date it became an Affiliate, except as provided in Schedule A hereto. (e) A Severance Eligible Participant shall receive credit for one (1) year of Vesting Service beyond that earned pursuant to the foregoing. (f) All periods of Vesting Service shall be aggregated; provided, however, that a Participant shall not receive multiple credit for Vesting Service with respect to any single period. 3.5 Break in Service (a) A "Break in Service" shall occur on earliest of: (i) the date the Employee quits, is discharged, retires, or dies; or (ii) the first anniversary of the date the Employee separates from service with the Company or an Affiliate for any reason other than the reasons set forth in paragraph (i) above, such as vacation, holiday, sickness, disability, leave of absence or layoff. (b) The fact that an Employee separates from service with the Company or an Affiliate on account of military service with the armed forces of the United States shall not constitute a Break in Service unless the Employee fails to report to work within the period required under law pertaining to veteran's reemployment rights, in which case the Break in Service shall occur on the earlier of (i) the expiration of the period by which such Employee was required by law to report back to work or (ii) the first anniversary of the d ate the Employee separated from service. (c) A Break in Service shall end on the date on which an Employee again performs an Hour of Service for the Company or an Affiliate. (d) The fact that an Employee who is a Participant becomes an Inactive Participant shall not constitute a Break in Service, but the foregoing rules shall continue to apply to such an Employee during the period he or she is an Inactive Participant. (e) Effective August 5, 1993, the fact that an Employee is absent from work under the Family and Medical Leave Act of 1993 shall not constitute a Break in Service if the Employee returns to work with the Company or an Affiliate after such period of absence. 3.6 One-Year Break in Service (a) The term "One-Year Break in Service" means each 12-consecutive-month period beginning on the date an Employee incurs a Break in Service under Section 3.5 and ending on each anniversary of such date, provided that such Employee does not perform an Hour of Service for the Company or any Affiliate during such period. (b) Solely for purposes of determining whether a One-Year Break in Service has occurred, but not for purposes of determining Vesting Service or Credited Service, in the case of an Employee who is on Parental Leave, the Employee's Break In Service shall be deemed to occur on the second (2nd) anniversary of the first day of such absence, provided the Employee does not perform an Hour of Service for the Company or any Affiliate during such period of absence. The period of time between the first (1st) and second (2nd) anniversaries of a Parental Leave shall not be counted as a Break in Service, Vesting Service or Credited Service. Article IV. Employer Contributions 4.1 Contributions Subject to section 4.2, for each Plan Year, Employer Contributions under the Plan may be paid to the Trust in such amounts or under such a formula and at such times as the Board may determine. Notwithstanding any provision in the Plan or any law to the contrary, the Company shall also make Employer Contributions to the extent necessary to satisfy the provisions of Section 4.5. Employer Contributions for a Plan Year may be paid during the Plan Year and must be paid no later than the due date for filing the Company's federal income tax return for that year, including any extensions of the due date. Employer Contributions for any Plan Year shall not be paid to the Trust in amounts that would exceed the limitations of section 404 of the Code. Notwithstanding the provisions of this section, no Employer Contributions in any Limitation Year shall be in an amount that would cause (a) the Annual Additions to the Accounts of any Participant to exceed the Maximum Permissible Amount (as defined in section 7.5) for such Participant for that Year or (b) the sum of the defined benefit plan fraction (as defined in section 7.5) and the defined contribution plan fraction (as defined in section 7.5) to exceed one for such Participant for such Limitation Year. 4.2 Medium of Payment Employer Contributions may be paid to the Trust in cash or in shares of Company Stock, as determined by the Board. Employer Contributions, however, shall be paid in cash in such amounts (subject to the limitations described in section 7.5), and at such times as needed to provide the Trust with funds sufficient to pay in full when due any principal and interest payments required by a Loan incurred, pursuant to Committee direction, by the Trustee to finance acquisitions of Company Stock, except to the extent such principal and interest payments have been satisfied by the Trustee from cash dividends paid to it with respect to Company Stock. 4.3 Allocation of Employer Contributions All Employer Contributions for a Plan Year shall be allocated to Participants' Accounts as provided in Article VII. 4.4 No Participant Contributions No Participant shall be required or permitted to make contributions to the Plan or Trust. 4.5 Uniformed Services Employment and Reemployment Rights Act Effective December 12, 1994, the Plan shall be administered consistent with the provisions of Uniformed Services Employment and Reemployment Rights Act of 1994, P.L. 103-353 ("USERRA"). As such, the Company and any Participating Employer shall make special Employer Contributions as necessary to comply with USERRA and other applicable laws. Article V. Investment of Trust Assets 5.1 Investments Trust Assets under the Plan will be invested primarily in Company Stock. Employer Contributions and other Trust assets may be used to acquire shares of Company Stock from the stockholders (including former Participants) or issuer thereof. The Trustee also may hold Trust assets in cash or invest them in savings accounts, certificates of deposit, high grade short-term securities, any kind of investment fund (open-end or otherwise), a common trust fund for the investment of qualified employee benefit trusts, including any such fund maintained by the Trustee, or in other investments desirable for the Trust. 5.2 Valuation of Company Stock All purchases of Company Stock will be made at a price, or at prices, that do not exceed the fair market value of such Company Stock. Except as otherwise determined by the Trustee in accordance with ERISA, the fair market value of Company Stock as of a given date shall be the closing price as of such date on the New York Stock Exchange; provided, however, that before January 1, 1995, the fair market value as of a given date shall be the median of the high and low sale prices of Company Stock on the preceding trading day. If Company Stock is not readily tradable on an established securities market, the determination of the fair market value of Company Stock for all purposes of the Plan shall in all cases be made by an independent appraiser appointed by the Committee. Any independent appraiser appointed pursuant to this section shall meet the requirements of section 401(a)(28)(C) of the Code. 5.3 Crediting of Stock Company Stock purchased with the proceeds of a Loan shall be held in the Suspense Account pending release and allocation to the Accounts of Participants as the Loan is paid pursuant to Section 7.4. Company Stock purchased with amounts allocated to Participants' Other Investment Accounts shall immediately upon purchase be credited pro rata to the corresponding Company Stock Accounts. Company Stock contributed to the Plan pursuant to Article IV shall be allocated to the Company Stock Accounts of Participants pursuant to section 7.4. 5.4 Sales and Resales of Company Stock The Committee may direct the Trustee to sell or resell shares of Company Stock to any person. All such sales to any disqualified person must be made at no less than the fair market value and no commission may be charged. Such sales shall comply with section 408(e) of ERISA. All sales of Company Stock (except Company Stock held in a Suspense Account) by the Trustee will be charged pro rata to the Company Stock Accounts of Participants. Sales of Company Stock pursuant to this section 5.4 may only be made to the extent not inconsistent with section 1.3 of the Plan. Article VI. Exempt Loans 6.1 Requirements (a) The Committee may direct the Trustee to obtain Loans. Any such Loan will meet all requirements necessary to constitute an exempt loan within the meaning of section 4975(d)(3) of the Code and Treasury regulations section 54.4975-7(b)(1)(iii) and shall be used primarily for the benefit of Participants, Beneficiaries, and Spouses. The proceeds of any such Loan shall be used, within a reasonable time after the Loan is obtained, only to purchase Company Stock, repay the Loan, or repay any prior Loan. Any such Loan shall provide for no more than a reasonable rate of interest (as determined under Treasury regulations section 54.4975-7(b)(7)) and must be without recourse against the Plan. The number of years to maturity under the Loan must be definitely ascertainable at all times. The only assets of the Plan that may be given as collateral on a Loan are shares of Company Stock acquired with the proceeds of the Loan and shares of Company Stock that were used as collateral on a prior Loan repaid with the proceeds of the current Loan. No person entitled to payment under a Loan shall have recourse against Trust Assets other than such collateral, Employer Contributions (other than contributions of Company Stock) that are available under the Plan to meet obligations under the Loan, and earnings attributable to such collateral and the investment of such Employer Contributions. (b) All Employer Contributions paid during the Plan Year in which a Loan is made (whether before or after the date the proceeds of the Loan are received), all Employer Contributions paid thereafter until the Loan has been repaid in full, and all earnings from investment of such Employer Contributions, shall be used to meet obligations under the Loan as such obligations accrue, or before such obligations accrue, unless otherwise designated by the Committee at the time any such Employer Contribution is made. (c) Any Company Stock acquired with the proceeds of a Loan shall be placed in a Suspense Account. The Company Stock in the Suspense Account must be released from the Suspense Account upon the payment of any portion of the Loan. The number of shares to be released from the Suspense Account for each Plan Year during the duration of the Loan shall equal the number of encumbered securities held immediately before release for the current Plan Year multiplied by a fraction. The numerator of the fraction is the sum of principal and interest paid in such Plan Year. The denominator of the fraction is the sum of the numerator and the principal and interest to be paid for all future years. Such years will be determined without taking into account any possible extension of renewal periods. (d) If the collateral in the Suspense Account includes more than one class of Company Stock, the number of shares of each class to be released from the Suspense Account for a Plan Year must be determined by applying the same fraction to each class. If interest on any Loan is variable, the interest to be paid in future years under the Loan shall be computed by using the interest rate applicable as of the end of the current Plan Year. 6.2 Payments on Loans Payments of principal and interest on any Loan during a Plan Year shall be made by the Trustee (as directed by the Committee) only from (a) Employer Contributions to the Trust made to meet the Plan's obligation under a Loan and from any earnings (including dividends) attributable to such Contributions or to Company Stock held as collateral for a Loan (received either during or prior to the Plan Year), less payment from such contributions and earnings in prior Years; (b) the proceeds of a subsequent Loan made to repay a prior Loan; and (c) the proceeds of the sale of any Company Stock held as collateral for a Loan. Such Contributions and earnings must be accounted for separately by the Plan until the Loan is repaid. 6.3 Crediting of Released Stock Company Stock released by reason of the payment of principal or interest on a Loan from Employer Contributions shall, on the Anniversary Date, be allocated to Participants as set forth in section 7.4. 6.4 Payments of Principal and Interest (a) The Company shall contribute to the Trust sufficient amounts to enable the Trust to pay principal and interest on any Loans as they are due. If the limitations of section 7.5 would result in Employer Contributions in an amount insufficient to enable the Trust to pay principal and interest on such Loan as it is due, then the Company may-- (1) make a Loan to the Trust (as described in Treasury regulation section 54.4975-7(b)(4)(iii)), in sufficient amounts to meet such principal and interest payments. A new Loan must also meet all requirements of an exempt loan within the meaning of Treasury regulation section 54.4975- 7(b)(1)(iii) and shall be subordinated to the prior Loan. Company Stock released from the pledge of the prior Loan shall be pledged as collateral to secure the new Loan. Such Company Stock will be released from this new pledge and allocated to the Accounts of the Participants in accordance with applicable provisions of the Plan; (2) purchase any Company Stock pledged as collateral in an amount necessary to provide the Trustee with sufficient funds to meet the principal and interest repayments. Any such sale by the Plan shall meet the requirements of section 408(e) of ERISA; or (3) any combination of paragraphs (1) and (2). (b) Neither the Company nor any Affiliate, pursuant to this section, shall do, fail to do, or cause to be done any act that would result in a disqualification of the Plan as an employee stock ownership plan under the Code or ERISA. 6.5 Puts, Calls, and Other Options Except as provided in Article X and notwithstanding any amendment to or termination of the Plan that causes it to cease to qualify as an employee stock ownership plan within the meaning of section 4975(e)(7) of the Code, no shares of Company Stock acquired with the proceeds of a Loan obtained by the Trust to purchase Company Stock may be subject to a put, call, or other option, or buy- sell or similar arrangement while such shares are held by and when distributed from the Plan. Article VII. Allocations to Participants' Accounts 7.1 Participants Entitled to Allocations As of each Anniversary Date, a Participant is entitled to the allocations provided in this Article VII. A Participant must be an active Eligible Employee on the Anniversary Date in order to share in the allocations relating to that Anniversary Date; provided that, each Participant who is on an authorized leave of absence or whose employment terminates by reason of early or normal retirement under the terms of the Pension Plan, or by reason of Permanent Disability or death, or whose employment terminated in circumstances under which he or she is a Severance Eligible Participant, will share in allocations of Employer Contributions which have not been used to make payments on a Loan, Company Stock released from the Suspense Account according to section 6.1(c), and Forfeitures, for any Anniversary Date other than January 31, 1989 occurring with respect to the Plan Year in which the leave of absence begins or employment terminates. 7.2 Allocations to Company Stock Accounts A separate Company Stock Account will be established for each Participant. The Company Stock Account will be credited with (a) the Participant's allocable share (determined under section 7.4) of Company Stock (including fractional shares) purchased and paid for by the Trust or contributed in kind to the Trust, (b) Forfeitures of Company Stock, and (c) any stock dividends on Company Stock allocated to the Participant's Company Stock Accounts as of the record date therefor. Company Stock acquired by the Trust with the proceeds of a Loan obtained pursuant to Article VI shall be allocated to the Company Stock Accounts of Participants according to the method set forth in section 7.4 at the time the Company Stock is released from Suspense Accounts as provided in section 6.1(c). 7.3 Allocations to Other Investment Accounts A separate Other Investment Account will be established for each Participant. The Other Investments Account will be credited or debited with (a) the Participant's allocable share (as determined under section 7.7) of the net income or loss of the Trust, (b) Employer Contributions that have not been used to make principal and interest payments on a Loan or to purchase Company Stock, and (c) Forfeitures in other than Company Stock. Each Other Investment Account will be debited for its share of any cash payments for the acquisition of Company Stock for the benefit of Company Stock Accounts. 7.4 Allocations of Employer Contributions, Company Stock Acquired With a Loan and Forfeitures Subject to subsection (d) of this section and to section 7.5, Employer Contributions which have not been used to make payments on a Loan, Company Stock released from the Suspense Account according to section 6.1(c), and Forfeitures incurred since the prior Anniversary Date shall be allocated among Participants entitled to allocations under section 7.1 as follows: (a) For the Anniversary Date on January 31, 1989, with respect to Employer Contributions which have been made pursuant to a loan described in section 133(b)(1)(B) of the Code (as in effect on such date), in the proportion that each such Participant's Compensation for January 1989 bears to the total of such Compensation of all such Participants (considering in both cases, with respect to each Participant, only Compensation not in excess of $16,666.66); (b) For the Anniversary Date on December 31, 1989, with respect to Employer Contributions which have not been made to make payments on a Loan, Company Stock released from the Suspense Account according to section 6.1(c), and Forfeitures incurred on or before December 31, 1989, in accordance with the following procedure: (1) the number of shares released from the Suspense Account for the Plan Year shall be added to the number of shares allocated on the January 31, 1989 Anniversary Date; and (2) to preliminarily determine the number of shares to be allocated to each Participant entitled to share in allocations under section 3.4, the number determined under paragraph (1) above shall be multiplied by a fraction, the numerator of which is the Participant's Compensation for the 1989 Plan Year, and the denominator of which is the aggregate Compensation for the 1989 Plan Year of all Participants entitled to share in the allocation. The product so determined for each such Participant shall be decreased by the number of shares of Company Stock allocated to the Participant on the January 31, 1989 Anniversary Date; provided that, for any Participant with respect to whom the product of subsection (b)(2) is less than the number of shares allocated on the January 31, 1989 Anniversary Date, no shares allocated on such Anniversary Date shall be subtracted from the Participant's Account. To accomplish the foregoing, (A) the Participants described in the foregoing proviso (the "Deficit Participants") will receive no allocation for the December 31, 1989 Anniversary Date and (B) for all other Participants entitled to share in such allocation, the preliminary determination described in subsection (b)(2) shall be adjusted by subtracting from the shares otherwise allocable to them a number of shares equal to the shares that would have been subtracted from the Accounts of the Deficit Participants if the foregoing proviso had not applied. Such adjustment shall be accomplished pro rata based on the relative Compensation of affected Participants as described in subsection (b)(2), except that, if such adjustment would result in the subtraction of shares allocated to any Participant on the January 31, 1989 Anniversary Date, then to the extent such subtraction would occur, the adjustment will not be made to such Participant's allocation and any additional adjustment shall be made pro rata (on the same basis) among the other affected Participants; and (c) For each Anniversary Date after December 31, 1989, with respect to Employer Contributions which have not been made to make payments on a Loan, Company Stock released from the Suspense Account according to section 6.1(c), and Forfeitures incurred since the prior Anniversary Date, in the proportion that each such Participant's Compensation for the Plan Year bears to the total Compensation of all such Participants; provided, however, that a special allocation may be made pursuant to section 4.5. (d) Effective December 12, 1994, the Company and any Participating Employer shall make special allocations as necessary to comply with USERRA and other applicable laws. (e) Notwithstanding subsections (b) and (c), if for any Limitation Year more than one-third of the Employer Contributions that are deductible as principal or interest payments on a Loan pursuant to the provisions of section 404(a)(9) of the Code would, but for the provisions of this subsection (e), be allocated to Highly Compensated Participants, then such Employer Contributions otherwise allocable to such Participants shall be reduced. The reduction shall be made among all Highly Compensated Participants in the same proportion as the amounts of such Contributions otherwise allocable to them and shall be made only to the minimum extent necessary so that no further reduction would be required to satisfy the conditions of section 415(c)(6) of the Code. The allocations made pursuant to subsections (b), (c), and (d) shall be consistent with the provisions of sections 9.1, 9.2, 9.3, and 9.4. Notwithstanding the preceding provisions of this section, and subject to section 7.4(d), no allocation shall be made to the Accounts of any Participant in any Limitation Year that would cause (A) the Annual Additions of the Participant to exceed the Maximum Permissible Amount (as defined under section 7.5) for that year (except as permitted in section 7.5) or (B) the sum of the defined benefit plan fraction (as defined in section 7.5) and the defined contribution plan fraction (as defined in section 7.5) to exceed one for that Participant for that Limitation Year. 7.5 Maximum Allocation (a) Notwithstanding anything to the contrary contained elsewhere in the Plan, but subject to section 7.4(d), for each Limitation Year, the allocations to the Accounts of any Participant shall be limited so that the Participant's Annual Additions for such Year do not exceed the Maximum Permissible Amount (as defined in subsection (h)(3) below). (b) If the foregoing limitation on allocations would be exceeded in any Limitation Year for any Participant as a result of the allocation of Forfeitures, reasonable error in estimating a Participant's Compensation, or under such other limited facts and circumstances as the Commissioner of Internal Revenue, pursuant to Treasury regulation section 1.415-6(b)(6), finds justify the availability of this subsection (b), the excess amount shall be placed, unallocated to any Participant, in a Limitation Account. If a Limitation Account is in existence at any time during a particular Limitation Year, other than the Limitation Year described in the preceding sentence, all amounts in the Limitation Account must be allocated to Participants' Accounts (subject to the limits of this section 7.5) before any contributions that would constitute Annual Additions may be made to the Plan for that Limitation Year. The excess amounts allocated pursuant to this subsection (c) shall be used to reduce Employer Contributions for the next Limitation Year (and succeeding Limitation Years, as necessary) for all of the Participants in the Plan. Excess amounts held in a Limitation Account pursuant to this section 7.5 may not be distributed to Participants or former Participants. The Limitation Account will not share in the valuation of Participants' Accounts and the allocation of earnings set forth in section 7.7 of the Plan, and the change in fair market value and allocation of earnings attributable to the Limitation Account shall be allocated to the remaining accounts hereunder as set forth in this section 7.5. (c) Upon termination of the Plan, any amounts in a Limitation Account at the time of such termination shall revert to the Company or Participating Employer that employs the Employees to whom such amounts are attributable. (d) If any Participant under the Plan is also a Participant in a defined benefit plan (as defined in section 415(k) of the Code) maintained by the Company or an Affiliate, the sum of the defined benefit plan fraction (as defined below) and the defined contribution plan fraction (as defined below) for any Limitation Year with respect to such Participant shall not exceed one. If a Participant is otherwise entitled to receive an allocation under this Plan and accrue a benefit under a defined benefit plan maintained by the Company or an Affiliate, and the combination thereof would cause the limitations of this section to be exceeded, the allocation under this Plan will only be reduced if the accrual under such defined benefit plan is not decreased as necessary to cause such limitations not to be exceeded. (e) If a Participant is entitled to receive an allocation under this Plan and any Related Plan and, in the absence of the limitations contained in this section, the Company would contribute or allocate to the Accounts of that Participant an amount for a Limitation Year that would cause the Annual Additions to the Accounts of the Participant to exceed the annual Maximum Permissible Amount for such Year, then the contributions and allocations made with respect to the Participant under this Plan will only be reduced if the contributions or allocations to the Participant's accounts under the Related Plan are not decreased to the extent necessary so that the Participant's Annual Additions do not exceed the Maximum Permissible Amount. (f) Any reduction in the contributions and allocations under this Plan made with respect to a Participant's Accounts required pursuant to this section and section 415 of the Code shall be effected, to the minimum extent necessary, by reducing the Employer Contributions that would have been made by the Company for the applicable Plan Year with respect to such Participant. (g) The provisions of this section shall be interpreted by the Committee, in the administration of the Plan, to reduce contributions and allocations (as required by this section) only to the minimum extent necessary to reflect the requirements of section 415 of the Code, as amended and in force from time to time, and Treasury regulations promulgated pursuant to that section, which are incorporated by reference herein. (h) For purposes of this section 7.5-- (1) The "defined benefit plan fraction" for any Limitation Year for a Participant means a fraction, the numerator of which is the projected annual benefit of the Participant under all defined benefit plans maintained by the Company or an Affiliate, determined as of the close of the Limitation Year, and the denominator of which is the lesser of (A) the product of 1.25, and the dollar limitation in effect under section 415(b)(1)(A) of the Code for such year or (B) the product of 1.4 and the amount which may be taken into account under section 415(b)(1)(B) of the Code with respect to such Participant for such Year. (2) The "defined contribution plan fraction" for any Limitation Year for any Participant means a fraction, the numerator of which is the sum of the Annual Additions to the Participant's Account under the Plan and to the Participant's accounts under all defined contribution plans maintained by the Company or an Affiliate as of the close of the Limitation Year, and the denominator of which is the sum of the lesser of the following amounts determined for such Year and for each prior year of Vesting Service with the Company or an Affiliate (A) the product of 1.25 and the dollar limitation in effect under section 415(c)(1)(A) of the Code for such Year (determined without regard to section 415(c)(6) of the Code) and (B) the product of 1.4 and the amount which may be taken into account under section 415(c)(1)(B) of the Code with respect to such Participant for such Year. (3) "Maximum Permissible Amount" shall mean: (A) the lesser of-- (i) $30,000 (or, if greater, one-fourth of the dollar limitation in effect pursuant to section 415(b)(1)(A) of the Code); or (ii) 25 percent of a Participant's Compensation (as defined in paragraph (4) hereof). (B) Notwithstanding the provisions of paragraph (A), if no more than one-third of the Employer Contributions for the Limitation Year ending December 31, 1989 are allocated to Highly Compensated Participants, then the Maximum Permissible Amount for that Limitation Year shall mean the lesser of-- (i) 25 percent of a Participant's Compensation; or (ii) the sum of (a) $30,000 (or, if greater, one-fourth of the dollar limitation in effect under section 415(b)(1)(A) of the Code) and (b) the lesser of the amount determined under clause (a) above or the amount of employer securities (as defined in sections 4975(e)(8) and 409(1) of the Code) contributed to the Plan or purchased with cash contributions to the Plan. (C) If no more than one-third of the Employer Contributions for a Limitation Year that are deductible as principal or interest payments on a Loan pursuant to the provisions of section 404(a)(9) of the Code are allocated to Highly Compensated Participants, then the limitations imposed by paragraph (A) or (B), whichever is applicable, shall not apply to-- (i) Forfeitures of Company Stock if the Company Stock was acquired with the proceeds of a Loan; or (ii) Employer Contributions that are deductible as interest payments on a Loan under section 404(a)(9)(B) of the Code and charged against a Participant's Account. (4) For purposes of this section and sections 2.1(u) and Article XV, "Compensation" shall mean wages, salaries, fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Company or an Affiliate (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, tips, and bonuses); shall include all compensation actually paid or made available to a Participant for an entire Limitation Year; and shall not include any other items or amounts paid to or for the benefit of a Participant. (i) To the extent permitted, the limitations set forth in this section 7.5 shall be adjusted in connection with contributions made pursuant to section 7.4(d). 7.6 Vesting (a) Each Participant shall have a vested interest in the adjusted balance of his or her Company Stock and Other Investments Accounts in accordance with the vesting schedule set forth in 2.1(vv). (b) On reaching the Normal Retirement Date, a Participant shall be 100 percent vested in the adjusted balance of his or her Company Stock and Other Investments Accounts if such Participant is an Employee on his or her Normal Retirement Date. (c) In the event a Participant dies or incurs a Permanent Disability within the meaning of section 9.3, the Participant shall be 100 percent vested in the adjusted balance of the Company Stock and Other Investments Accounts as of the date of the Participant's death or Permanent Disability if such Participant is an Employee on the date he or she dies or becomes disabled. (d) In the event the Plan is terminated or upon the complete discontinuance of Employer Contributions to the Plan, each Participant shall be 100 percent vested in the adjusted balance of his or her Company Stock and Other Investments Accounts. 7.7 Net Income or Loss of the Trust (a) DIVIDENDS ON COMPANY STOCK. Any stock dividends received in respect of Company Stock allocated to a Participant's Company Stock Account as of the record date therefor shall be credited to the Participant's Company Stock Account on the Valuation Date coincident with or succeeding the Trustee's receipt of such dividends. Any stock dividends received in respect of Company Stock held in the Suspense Account as of the record date shall be allocated to such Account and released pursuant to Section 6.1(c). Any cash dividends received on Company Stock held in the Suspense Account pursuant to section 6.1(c), or any cash or stock dividends received on Company Stock that has been forfeited pursuant to section 9.4(b) but not yet reallocated pursuant to section 7.4(c), as of the record date, may be used to meet obligations under the Loan, the proceeds of which were used to acquire such Company Stock. Any dividends described in the preceding sentence shall, to the extent such amounts are not used to pay principal or interest on a Loan, be considered net income for the Trust for the Plan Year. (b) Other Income or Loss. The net income or loss of the Trust shall be determined as of each Valuation Date. Each Participant's share of the net income or loss will be allocated to the Participant's Other Investments Accounts in the ratio that the balance of all his or her Accounts on the last Valuation Date, based on the fair market value thereof (reduced by the amount of any distribution from such Accounts, including a distribution or transfer pursuant to section 7.9, other than a distribution made in the calendar quarter that the Participant ceases being an Employee), bears to the sum of such balances for all Participants as of that date. The net income or loss of the Trust includes the increase or decrease in the fair market value of Trust Assets (other than Company Stock), interest income, dividends, and other income or loss attributable to Trust Assets (other than Company Stock, except as provided in subsection (a) above) since the last Valuation Date. Net income or loss shall not include Employer Contributions or Forfeitures. Any proceeds of sales of unallocated Company Stock shall, to the extent such amounts are not used to pay principal or interest on a Loan, be considered net income for the Trust. Net income or loss attributable to any Limitation Account established under section 7.5 shall be allocated to the Other Investments Accounts of Participants in accordance with the ratio described in the second sentence of this subsection (b), and the Limitation Account shall not share in the allocation of net income or loss of the Trust under this section. 7.8 Accounting for Allocations The Committee shall adopt accounting procedures for the purpose of making the allocations, valuations, and adjustments to Participants' Accounts provided for in this section. Except as provided in Treasury regulation section 54.4975-11, Company Stock acquired by the Plan shall be accounted for as provided under Treasury regulation section 1.402(a)-l(b)(2)(ii); allocations of Company Stock shall be made separately for each class of stock; and the Committee shall maintain adequate records of the cost basis of all shares of Company Stock allocated to each Participant's Company Stock Accounts. From time to time, the Committee may modify the accounting procedures for the purpose of achieving equitable and nondiscriminatory allocations among the Accounts of Participants in accordance with the general concepts of the Plan and the provisions of this section. Annual valuations of Trust Assets shall be made at fair market value. 7.9 Diversification of Investments (a) Prior to the date that section 2.1(ll)(2) becomes operative, a Participant who is a Qualified Participant pursuant to section 2.1(ll)(1) may elect, on or before the March 15 next succeeding the end of each Plan Year in the Qualified Election Period described in section 2.1(kk)(1) to have the Trustee dispose of a specified whole number of shares of Company Stock not in excess of the Participant's "Applicable Amount" and transfer the proceeds thereof to the Northern Trust Company Thrift Incentive Plan. Participant elections shall be in such written, electronic, or other form as the Committee shall determine. A Qualified Participant's Applicable Amount for a Plan Year in the Qualified Election Period shall equal 25 percent of (1) the total number of shares of Company Stock ever acquired by or contributed to the Plan and allocated to the Participant's Accounts in the Plan as of the end of such Plan Year less (2) the number of shares to which a prior election under this subsection applied; provided that, if with respect to a Qualified Participant, such difference is not a whole number of shares of Company Stock, it shall be rounded to the nearest whole number of shares. In the case of the last year of a Qualified Election Period, the preceding sentence shall be applied by substituting "50 percent" for "25 percent." (b) On and after the date that section 2.1(ll)(2) becomes operative, a Participant who is a Qualified Participant pursuant to section 2.1(ll)(2) may elect, within 90 days after the close of each Plan Year in the Qualified Election Period described in section 2.1(kk)(2) to receive a distribution of the Applicable Amount (calculated in the manner described in subsection (a) but considering only elections, if any, made during such Qualified Election Period). Participant elections shall be in such written, electronic, or other form as the Committee shall determine. The Committee shall direct the Trustee to distribute the portion of the Participant's Accounts that is covered by the election described in this subsection (b) within 90 days after the last day of the period during which the election can be made. Such a distribution shall not be subject to the requirements of section 10.2 of the Plan. (c) The provisions of this section shall apply notwithstanding any other provisions of the Plan. (d) If the Committee receives a Qualified Participant's election pursuant to subsection (a) or (b), it shall direct the Trustee (1) to sell the required number of shares of Company Stock (and, if the Committee desires, the manner in which such sale should be accomplished) as of the March 31 next succeeding the end of the Plan Year with respect to which the election is made and (2) to transfer to the Northern Trust Company Thrift Incentive Plan or distribute to the Qualified Participant, as the case may be, an amount of cash equal to the proceeds of the sale of the subject shares. Any such transfer shall be made as of the next succeeding April 1, and any such distribution shall be made within 90 days after the last day of the period during which the election can be made. Notwithstanding any provision of the Plan to the contrary, if the Trustee is unable to sell the required shares as aforesaid in a timely manner, the Company shall buy such shares. If such shares are sold to the Company or an Affiliate, the price paid therefor shall be the greater of the fair market value of such shares as of March 31 or the fair market value of such shares on the date the sale actually occurs; provided that, any amount the Plan receives in excess of the fair market value as of March 31 shall be considered earnings of the Plan and shall be allocated as provided in section 7.7(b). (e) Notwithstanding the foregoing, a Qualified Participant shall not be entitled to make an election hereunder for a Plan Year within a Qualified Election Period if the fair market value of the total number of shares of Company Stock ever acquired by or contributed to the Plan and allocated to the Participant's Accounts in the Plan as of the last day of such Plan Year is less than $500. Article VIII. Voting and Tender of Company Stock 8.1 Procedures for Voting Each Member (or, in the event of the Member's death, the Member's Beneficiary) shall have the right to direct the Trustee as to the manner in which whole and partial shares of Company Stock allocated to the Member's Account as of the record date are to be voted on each matter brought before an annual or special stockholders' meeting. Before each such meeting of stockholders, the Trustee shall furnish to each Member (or Beneficiary) a copy of the proxy solicitation material, together with a form requesting directions on how such shares of Company Stock allocated to such Member's Account shall be voted on each such matter. Upon timely receipt of such directions, the Trustee shall on each such matter vote as directed the number of shares (including fractional shares) of Company Stock allocated to such Member's Account, and the Trustee shall have no discretion in such matter. The directions received by the Trustee from Members shall be held by the Trustee in confidence and shall not be divulged or released to any person, including officers or employees of the Company or any Affiliate. The Trustee shall vote allocated shares for which it has not received direction and unallocated shares of Company Stock in the same proportion as directed shares are voted, and shall have no discretion in such matter except as otherwise provided in accordance with ERISA. 8.2 Tender Offer If a tender or exchange offer is commenced for Company Stock-- (a) The Trustee shall distribute in a timely manner to each Member (or Beneficiary) such information as is distributed to holders of the Company Stock in connection with the tender or exchange offer. (b) All Company Stock held by the Trustee in Accounts shall be tendered or not tendered by the Trustee in accordance with directions it receives from Members (or Beneficiaries). Each Member (or Beneficiary) shall be entitled to direct the Trustee with respect to the tender of such Company Stock allocated to the Member's Account. The instructions received by the Trustee from Members (or Beneficiaries) shall be held by the Trustee in confidence and shall not be divulged or released to any person, including officers or employees of the Company or any Affiliate. (c) The Trustee shall not tender Company Stock allocated to Accounts with respect to which directions by Members (or Beneficiaries) are not received or Company Stock held by the Trustee that is not allocated to Accounts except as otherwise provided in accordance with ERISA. Article IX. Benefits 9.1 Payments on Retirement A Member who attains his or her Normal Retirement Date and continues to be an Employee shall continue to share in the allocation of Employer Contributions and Forfeitures under the Plan. Upon the retirement of a Member on or after his or her Normal Retirement Date, the Committee shall notify the Trustee in writing of the Member's retirement and shall direct the Trustee to make payment of the adjusted balance of the Member's Accounts as of the Valuation Date coinciding with or immediately preceding the date a distribution is made to the Member, unless the Member agrees to a later date in a method provided in the Plan. Notwithstanding the foregoing, if any such Member retires after December 31, 1989 and receives a distribution of the Member's Accounts before the Anniversary Date next following his or her retirement, he or she shall be entitled to share in the allocation of Employer Contributions which have not been used to make payments on a Loan, Company Stock released from the Suspense Account according to section 6.1(c), and Forfeitures, occurring on such Anniversary Date. 9.2 Payments on Death (a) Upon the death of a Member, the Committee shall promptly notify the Trustee in writing of the Member's death and the name of the Member's Beneficiary (or Spouse if subsection (c) is applicable) and shall direct the Trustee to make payment of the adjusted balances of the Member's Accounts (or the Vested Portion thereof if section 7.6(c) is not applicable) as of the Valuation Date coinciding with or immediately preceding the date a distribution is made to the Member's Beneficiary, in a method provided in the Plan. Notwithstanding the foregoing, if such Member dies after December 31, 1989 and the distribution of the Accounts of such Member is made before the Anniversary Date next following his or her death, his or her Beneficiary or Spouse, as the case may be, shall be entitled to share in the allocation of Employer Contributions which have not been used to make payments on a Loan, Company Stock released from the Suspense Account according to section 6.1(c), and Forfeitures, occurring on such Anniversary Date. (b) Each unmarried Member and each married Member whose surviving Spouse has consented to an alternate Beneficiary or an alternate method of payment as provided in subsection (c) shall have the right to designate, by giving a written designation to the Committee, a person or entity as Beneficiary to receive the death benefit provided under this section. Successive designations may be made, and the last designation received by the Committee prior to the death of the Member shall be effective and shall revoke all prior designations. If a designated Beneficiary shall die before the Member, his or her interest shall terminate, and, unless otherwise provided in the Member's designation, if the designation included more than one Beneficiary, such interest shall be paid in equal shares to those Beneficiaries, if any, who survive the Member. A Member to whom this subsection applies shall have the right to designate different Beneficiaries to receive the adjusted balance in the Member's various Accounts under the Plan. (c) The Beneficiary of each Member who is married shall be the surviving Spouse of such Member and the death benefits of any Member who is married shall be paid in full to his or her surviving Spouse in a single payment. Notwithstanding the preceding sentence, the death benefits provided pursuant to subsection (a) shall be distributed to any other Beneficiary designated by a married Member as provided in subsection (b) of this section if the Member's surviving Spouse consented to such designation, prior to the date of the Member's death, in writing. Such a consent must acknowledge the effect of the election and designation and the identity of any nonsurviving Spouse Beneficiary, including any class of Beneficiaries or contingent Beneficiaries, and must be witnessed by a representative of the Plan or a notary public. Consent of a Member's surviving Spouse shall not be required if the Member establishes to the satisfaction of the Committee that consent may not be obtained because there is no surviving Spouse or the surviving Spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by regulations. The Member may not subsequently change the designation of the Beneficiary unless his or her surviving Spouse consents to the new designation in accordance with the requirements set forth in the preceding sentence, or unless the surviving Spouse's consent permits the Member to change the designation of his or her Beneficiary without the Spouse's further consent. A surviving Spouse's consent shall be irrevocable. Any consent by a surviving Spouse, or establishment that the consent of the surviving Spouse may not be obtained, shall be effective only with respect to that surviving Spouse. 9.3 Payments on Permanent Disability Upon the termination of a Member's employment with the Company by reason of a Permanent Disability, the Committee shall notify the Trustee in writing of the Member's Permanent Disability termination and shall direct the Trustee to make payment of the adjusted balances of the Member's Accounts as of the Valuation Date coinciding with or immediately preceding the date a distribution is made to the Member. Notwithstanding the foregoing, if such termination occurs after December 31, 1989 and such Member receives a distribution of the Member's Accounts before the Anniversary Date next following the Member's termination, he or she shall be entitled to share in the allocation of Employer Contributions which have not been used to make payments on a Loan, Company Stock released from the Suspense Account according to section 6.1(c), and Forfeitures, occurring on such Anniversary Date. 9.4 Payments on Termination for Other Reasons (a) GENERAL. Upon the termination of a Member's employment with the Company for any reason other than retirement on or after the Member's Normal Retirement Date, death, or Permanent Disability, the Committee shall notify the Trustee in writing of the termination and shall direct the Trustee to make payment of the Vested Portion of the adjusted balances of the Member's Accounts as of the Valuation Date coinciding with or next preceding the date a distribution is made to the Member. Notwithstanding the foregoing, if such termination occurs after December 31, 1989 and under circumstances entitling the Member to early retirement benefits under the Pension Plan and he or she receives a distribution of the Member's Accounts before the Anniversary Date following the Member's termination, he or she shall be entitled to share in the allocation of Employer Contributions which have not been used to make payments on a Loan, Company Stock released from the Suspense Account according to section 6.1(c), and Forfeitures, occurring on such Anniversary Date. The Vested Portion of a Member's Accounts shall be determined in accordance with section 7.6 of the Plan. (b) FORFEITURE. The Unvested Portion of the adjusted balance of the Accounts of a Member who terminates employment with the Company under this section shall be forfeited as of the first Valuation Date following the date the Member terminates employment with the Company and all Affiliates. The amount forfeited shall be the entire Unvested Portion. If a Member's Company Stock Account includes more than one class of Company Stock, the Forfeiture will consist of the same proportion of each class of stock. (c) REINSTATEMENT. If a Member is reemployed by the Company or a Participating Employer after incurring a Forfeiture, the Member shall be entitled to make repayment to the Plan of the aggregate amount distributed to him, at any time before the earlier of (1) five years after the Member is reemployed and (2) the end of a Break in Service of five consecutive years incurred by the Member. Upon making repayment in a single cash sum of the fair market value (at the time of distribution) of the aggregate amount distributed to him, the amount repaid shall be credited to the Member's Account and invested by the Trustee in a cash equivalent short term investment fund. The amount which was forfeited (also based on the fair market value at the time of distribution) shall be reinstated to the Member's Account. The amount required to restore such Member's Account shall be made up from Forfeitures and, to the extent necessary, Employer Contributions prior to their allocation pursuant to section 7.4. 9.5 Deemed Cashout If a Member has no vested interest in his Account balance when his or her employment with the Company and all Affiliates terminates, such Member will be treated as having received a Deemed Cashout of the Member's Account balance as of the last day of the Plan Year in which the Member's employment terminated and the Member's Account balance will be treated as a Forfeiture on such date. "Deemed Cashout" means a distribution of zero dollars representing the Member's entire Account balance. If the Member is reemployed with the Company or any Affiliate before such Member has incurred five (5) consecutive One-Year Breaks in Service, the amount of the prior Forfeiture will be restored as the Member's Account balance. 9.6 Property Distributed Any distribution pursuant to section 9.1, 9.2, 9.3, or 9.4, from a Member's Company Stock Account, shall be made in whole shares of Company Stock, and the value of partial shares of Company Stock shall be paid in cash. Distribution from a Member's Other Investments Account shall be made in cash unless the Member requests a distribution in stock of the whole shares purchasable with such balance and the balance attributable to fractional shares in the Member's Company Stock Account, in which case the Trustee shall acquire the necessary shares for distribution. If cash is to be distributed in connection with fractional shares, the Trustee shall sell such shares as of the Valuation Date with respect to which the distribution is being made and distribute the proceeds of sale to the affected Member. Any such sale shall be subject to the last two sentences of section 7.9(d). 9.7 Methods of Payment (a) Whenever the Committee shall direct the Trustee to make payment to a Member upon termination of a Member's employment on or after the Member's Normal Retirement Date, the Committee shall direct the Trustee to pay the adjusted balances of the Member's Accounts to or for the benefit of the Member in a single sum distribution. Whenever the Committee shall direct the Trustee to make payment to a Member, the Member's Spouse, or other Beneficiary upon termination of a Member's employment for any other reason, the Committee shall direct the Trustee to pay the Vested Portion of the adjusted balances of the Member's Accounts, if any, to or for the benefit of the Member, the Member's Spouse, or the Member's Beneficiary, in a single payment distribution. (b) Payment under this section shall be made no more than 60 days after the Valuation Date coincident with or following the date the Member ceases being an Employee provided that (1) for purposes of the foregoing, any Valuation Date occurring before December 31, 1989 shall be treated as occurring on December 31, 1989, (2) any Member or Beneficiary or Spouse described in section 9.1, 9.2, or 9.3, or who would be entitled to an allocation at the next Anniversary Date under section 9.4, may elect to defer distribution to such Anniversary Date, and (3) if the Member's Accounts exceed $3,500, distribution shall not be made to the Member at any time prior to the Member's Normal Retirement Date or death without the Member's written consent. A Member described in paragraph (3) may elect to receive distribution of the Member's Accounts as of any Valuation Date following the Valuation Date next succeeding the Member's termination by filing prescribed materials with the Trustee on or before such reasonable deadline as established by the Trustee. If a distribution is one to which sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than thirty (30) days after the notice required under section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (i) the Committee clearly informs the Member that the Member has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether to elect a distribution, and (ii) the Member, after receiving the notice, affirmatively elects a distribution. (c) Notwithstanding the provisions of subsection (b) above, distribution of each Member's Accounts must commence not later than 60 days after the last day of the Plan Year in which the last of the following events occurs: (1) the date on which the Member reaches his or her Normal Retirement Date; (2) the tenth anniversary of the date on which the Member commenced participation in the Plan; or (3) the date on which the Member's employment with the Company and all Affiliates terminates. (d) Notwithstanding anything to the contrary contained elsewhere in the Plan-- (1) A Member's benefits under the Plan will-- (A) be distributed to him or her not later than the Required Distribution Date (as defined in paragraph (3)), or (B) be distributed commencing not later than the Required Distribution Date in accordance with regulations prescribed by the Secretary of the Treasury over a period not extending beyond the life expectancy of the Member or the life expectancy of the Member and the Member's Beneficiary. (2) Payments on death-- (A) If the Member dies after distribution has commenced pursuant to paragraph (1)(B) but before the Member's entire interest in the Plan has been distributed to him, then the remaining portion of that interest will be distributed at least as rapidly as under the method of distribution being used under paragraph (1)(B) at the date of the Member's death. (B) If the Member dies before distribution has commenced pursuant to paragraph (1)(B), then, except as provided in paragraphs (2)(C) and (2)(D), the Member's entire interest in the Plan will be distributed within five years after the Member's death. (C) Notwithstanding the provisions of paragraph (2)(B), if the Member dies before distribution has commenced pursuant to paragraph (1)(B) and if any portion of the Member's interest in the Plan is payable (i) to or for the benefit of a Beneficiary, (ii) in accordance with regulations prescribed by the Secretary of the Treasury over a period not extending beyond the life expectancy of the Beneficiary, and (iii) beginning not later than one year after the date of the Member's death or such later date as the Secretary of the Treasury may prescribe by regulations, then the portion referred to in this paragraph (2)(C) shall be treated as distributed on the date on which such distribution begins. (D) Notwithstanding the provisions of paragraphs (2)(B) and (2)(C), if the Beneficiary referred to in paragraph (2)(C) is the Spouse of the Member, then-- (i) the date on which the distributions are required to begin under paragraph (2)(C)(iii) of this section shall not be earlier than the date on which the Member would have attained age 70-1/2, and (ii) if the Spouse dies before the distributions to that Spouse begin, then this paragraph (2)(D) shall be applied as if the surviving Spouse were the Member. (3) For purposes of subsection (d)(1), the Required Distribution Date means April 1 of the calendar year following the calendar year in which the Member attains age 70-1/2; provided, however, that in the case of a Member who attained age 70-1/2 before January 1, 1988 such Member's Required Distribution Date shall be April 1 following the calendar year in which occurs the later of (A) the Member's attainment of age seventy and one-half (70-1/2), or (B) the Member's termination of employment, unless such Member is a Five-Percent Owner (as defined in Section 416(i) of the Code) of the Company at any time during the Plan Year ending with or within the calendar year in which such owner attains age sixty-six and one-half (66-1/2) or any subsequent year, in which case clause (B) shall not apply. (4) For purposes of subsection (d), once distribution has commenced hereunder, the life expectancy of a Member and the Member's Spouse may not be redetermined. (5) A Member may not elect a form of distribution pursuant to paragraph (1) providing payments to a Beneficiary who is other than the Member's Spouse unless the actuarial value of the payments expected to be paid to the Member is more than 50 percent of the actuarial value of the total payments expected to be paid under such form of distribution. 9.8 Direct Rollover of Eligible Rollover Distributions (a) This section 9.8 applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this section, a distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. Any portion of an eligible rollover distribution that is not paid directly to an eligible retirement plan in a direct rollover may be subject to 20% Federal income tax withholding. (b) Definitions. (1) Eligible Rollover Distribution. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible Retirement Plan. An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee's rollover distribution. However, in the case of an eligible rollover distribution to the surviving Spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (3) Distributee. A distributee includes a Participant or former Participant. In addition, the Participant's or former Participant's surviving Spouse and the Participant's or former Participant's Spouse or former Spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the Spouse or former Spouse. (4) Direct Rollover. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. Aritcle X. Rights and Options on Distributed Shares of Company Stock 10.1 Right of First Refusal (a) Shares of Company Stock distributed by the Trustee may be subject to a right of first refusal. Such a right shall provide that prior to any subsequent transfer, the shares must first be offered in writing to the Trust and then, if refused by the Trust, to the Company at a price equal to the greater of (1) the then fair market value of such shares of Company Stock as determined in good faith by the Committee, in accordance with Treasury regulation section 54.4975-11(d)(5) or (2) the purchase price offered by a buyer, other than the Company or Trustee, making an offer in good faith (as determined by the Committee) to purchase such shares of Company Stock. (b) The Trust or the Company, as the case may be, may accept the offer as to part or all of the Company Stock at any time during a period not exceeding 14 days after the Trust receives the offer, on terms and conditions no less favorable to the Trust than those offered by the independent third-party buyer. Any installment purchase shall be made pursuant to a note secured by the shares purchased and shall bear a reasonable rate of interest as determined by the Committee. (c) If the offer is not accepted by the Trust, the Company, or both, then the proposed transfer may be completed within a reasonable period following the end of the 14-day period but only upon terms and conditions no less favorable to the shareholder than the terms and conditions of the third- party buyer's prior offer. (d) Shares of Company Stock that are publicly traded within the meaning of Treasury regulation section 54.4975-7(b)(1)(iv) at the time such right may otherwise be exercised shall not be subject to this right of first refusal. 10.2 Put Option (a) Shares of Company Stock acquired by the Trust shall be subject to a put option at the time of distribution if at such time the shares are not readily tradable on an established market within the meaning of section 409(h)(1)(B) of the Code. The put option shall be exercisable by the Member, Beneficiary, Spouse, their donees, or by a person (including an estate or its distributee) to whom the Company Stock passes by reason of the death of the Member, Beneficiary, or Spouse. The put option shall provide that for a period of at least 60 days following the date of distribution of the Company Stock, the holder of the option shall have the right to cause the Company, by notifying it in writing, to purchase such shares at their fair market value, as determined pursuant to section 5.2. If the put option is not exercised within such 60-day period, the option shall be exercisable for an additional period of 60 days in the following Plan Year. The Committee may give the Trustee the option to assume the rights and obligations of the Company at the time the put option is exercised, insofar as the repurchase of Company Stock is concerned. (b) If the entire adjusted balance of a Member's Accounts is distributed to the Member within one taxable year, payment of the price of the Company Stock purchased pursuant to an exercised put option shall be made in no more than five substantially equal annual payments, and the first installment shall be paid not later than 30 days after the Member exercises the put option. The Plan shall provide adequate security and pay a reasonable rate of interest on amounts not paid after 30 days. If the entire adjusted balance of a Member's Accounts is not distributed to him or her within one taxable year, payment of the price of the Company Stock purchased pursuant to an exercised put option shall be made in a single sum not later than 30 days after the Member exercises the put option. ArticleeXI. Pretermination Distributions and Dividends 11.1 Pretermination Distributions Except as provided in sections 11.2 and 7.9, a Member is not entitled to any payment, withdrawal, or distribution under the Plan while he or she is a Participant. 11.2 Dividends Any cash dividend received by the Trustee on Company Stock allocated to the Accounts of a Member, Beneficiary, or Spouse as of the record date for such dividend shall be paid to such Member, Beneficiary, or Spouses. Any such payment in cash must be made no later than 90 days after the end of the Plan Year in which the dividend is received by the Trustee. Any such payment of cash dividends on shares of Company Stock shall be accounted for as if the Member, Beneficiary, or Spouse receiving such dividends were the direct owner of such shares of Company Stock and such payment shall not be treated as a distribution for purposes of Article X. Article XII. Plan Administration 12.1 Powers The Committee shall have all powers necessary to discharge its duties in administering the Plan including, but not by way of limitation, discretionary authority with respect to the following powers: (a) to construe and interpret the Plan; (b) to determine all questions regarding the status and rights of Members and Beneficiaries, including questions relating to age, Vesting Service, eligibility, or Compensation; (c) to make and enforce such rules and regulations as it shall deem necessary or proper for efficient administration of the Plan; and (d) to retain counsel, employ agents, and actuaries and provide for such clerical, medical, accounting, auditing, and other services as it may require in carrying out the provisions of the Plan; provided, however, that no member of the Committee shall participate in any action on any matter involving solely his or her own rights or benefits or those of his or her Spouse or children, and such matters shall be determined by the other members of the Committee. The Committee may delegate any or all of its powers under this Article XII to an agent designated under section 12.1(d). Any such designation shall be in writing, signed by the Secretary of the Committee. 12.2 Directions to Trustee The Committee shall direct the Trustee concerning all payments which shall be made out of the Trust pursuant to the provisions of the Plan. Any direction to the Trustee, including but not limited to a direction concerning payments, shall be in writing, signed by the Secretary of the Committee or any member thereof, or any agent to whom authority has been delegated. The Trustee shall act in a manner consistent with any such direction that is proper, made in accordance with the Plan, and not contrary to ERISA. 12.3 Uniform Rules All rules adopted and all actions taken by the Committee shall be uniform in nature as applied to all persons similarly situated and shall not discriminate in favor of Employees who are officers, shareholders, or highly compensated employees. 12.4 Reports The Committee shall keep on file, in such form as it shall deem convenient and proper, all reports of the Trust received from the Trustee. The Committee shall give to each Member a written report of the amount of his or her Accounts at annual or more frequent intervals. Additional reports may be given to a Member by telephone. 12.5 Compensation Members of the Committee shall not receive compensation for their services in connection with the Plan, but the Company shall reimburse them for any necessary expenses incurred in the discharge of their duties. 12.6 Claims Procedure (a) Claims for benefits under the Plan shall be made in writing to the Committee. If the Committee wholly or partially denies a claim for benefits, the Committee shall, within a reasonable period of time, but no later than 90 days after receipt of the claim, notify the claimant in writing of the denial of the claim. Notice of a denial of a claim shall be written in a manner calculated to be understood by the claimant and shall contain (1) the specific reason or reasons for denial of the claim, (2) a specific reference to the pertinent Plan provisions upon which the denial is based, (3) a description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary, and (4) an explanation of the Plan's review procedure. If notice of the denial of a claim is not furnished in accordance with this subsection (a) within 90 days after the Committee receives it, the claim shall be deemed denied and the claimant shall be permitted to proceed to the review stage described in subparagraph (b) below. (b) Within 60 days after the claimant receives the written notice of denial of the claim, or the date the claim is deemed denied pursuant to subsection (a) above, or such later time as shall be deemed reasonable taking into account the nature of the benefit subject to the claim and other attendant circumstances, or within 60 days after the claim is deemed denied as set forth above, if applicable, the claimant may file a written request with the Committee that it conduct a full and fair review of the denial of the claimant's claim for benefits, including the holding of a hearing, if deemed necessary by the Committee. In connection with the claimant's appeal of the denial of the claimant's benefit, the claimant may review pertinent documents and may submit issues and comments in writing. The Committee shall render a decision on the appeal promptly, but not later than 60 days after the receipt of the claimant's request for review, unless special circumstances (such as the need to hold a hearing, if necessary) require an extension of time for processing, in which case the 60-day period may be extended to 120 days. The Committee shall notify the claimant in writing of any such extension. Such decision shall (1) include specific reasons for the decision, (2) be written in a manner calculated to be understood by the claimant, and (3) contain specific references to the pertinent Plan provisions upon which the decision is based. 12.7 Indemnity for Liability The Company shall indemnify the Committee and each other fiduciary who is an Employee of the Company, against any and all claims, losses, damages, expenses, including counsel fees, incurred by said fiduciaries, and any liability, including any amounts paid in settlement with such a fiduciary's approval, arising from the fiduciary's action or failure to act, except when the same is judicially determined to be attributable to the gross negligence or willful misconduct of such fiduciary. Article XIII. Amendment and Termination 13.1 Amendment The Company reserves the right at any time and from time to time to amend the Plan in whole or in part either retroactively or prospectively by action of the Board or action of the Executive Committee of the Board, but no such amendment shall authorize or permit any part of the corpus or income of the Trust to be used for or diverted to purposes other than for the exclusive benefit of Members or their Beneficiaries, or to deprive any of them of any funds then held for his or her Account. 13.2 Termination It is the intention of the Company to continue the Plan and to make contributions thereto, but the Company reserves the right to terminate the Plan in whole or in part as of any Valuation Date by action of the Board or action of the Executive Committee of the Board and for any reason satisfactory to the Board. The Company, however, shall not terminate the Plan while any Loan remains outstanding and unpaid in whole or in part, without the prior written consent to any such termination by all holders and guarantors, if any, of the Plan's obligations under such Loan. Where any holder or guarantor has a representative on the Committee, prior written consent will not be required if such representative approves the amendment. Upon partial or full termination, all affected Participants shall become fully vested, and upon permanent discontinuance of contributions by the Company, all Participants shall become fully vested. After termination of the Plan, the Committee and the Trust will continue until the Accounts of each Participant have been distributed in accordance with the terms of the Plan. 13.3 Merger, Sale In the event of any merger or consolidation of the Plan with, or transfer in whole or in part of the assets and liabilities of the Trust to another trust fund held under any other plan of deferred compensation maintained or to be established for the benefit of all or some of the Participants, the Plan shall be so merged or consolidated, or the assets of the Trust applicable to such Participants shall be so transferred, only if-- (a) each Member would (if either the Plan or the other plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated); (b) resolutions of the Board of Directors or of any new or successor employer of the affected Members, shall authorize such transfer of assets; and, in the case of the new or successor employer of the affected Members, its resolutions shall include an assumption of liabilities with respect to such Members' inclusion in the new employer's plan; and (c) such other plan and trust are qualified under section 401(a) and exempt under section 501(a) of the Code. In the event a portion of the business of the Company is sold or discontinued, the Board of Directors in its discretion may direct that all Members who are employed by the new owner of that portion of the business shall become fully vested. 13.4 Distribution Upon Termination In the event of the termination of the Plan, there shall be distributed to each Member, or to his or her Beneficiary in the case of a deceased Member, a benefit equal to the sum of the value of the Member's Account as of the Valuation Date on which termination occurs. If such benefits shall not exhaust the assets of the Trust, any remaining assets shall be allocated to the Accounts of the Members as though they were additional Employer Contributions, and in no event shall any such assets revert to the Company or any Participating Employer. Article XIV. Extension of Plan to Affiliates 14.1 Participation in the Plan Any Affiliate which desires to become a Participating Employer under the Plan may elect, with the consent of the Board of Directors, to become a party to the Plan and the related Trust by adopting the Plan for the benefit of its Eligible Employees, effective as of the date specified in such adoption. The adoption resolution or decision may contain such specific changes and variations in Plan or Trust Agreement terms and provisions applicable to such Participating Employer and its Employees as may be acceptable to the Board and the Trustee. However, the sole, exclusive right of any other amendment of whatever kind or extent to the Plan is reserved to the Board of Directors. The Board of Directors may amend specific changes and variations in the Plan or Trust terms and provisions as adopted by the Participating Employer in its adoption resolution without the consent of such Participating Employer. The adoption resolution or decision shall become, as to such adopting organization and its employees, a part of this Plan as then amended or thereafter amended and the related Pension Trust. It shall not be necessary for the adopting organization to sign or execute the original or then amended Plan and Trust. The coverage date of the Plan for any such adopting organization shall be that stated in the resolution or decision of adoption, and from and after such effective date, such adopting organization shall assume all the rights, obligations, and liabilities of an individual employer entity hereunder and under the Trust. The administrative powers and control of the Company, as provided in the Plan and Trust Agreement shall not be diminished by reason of the participation of any such adopting organization in the Plan and Trust Agreement. 14.2 Withdrawal from the Plan Any Participating Employer may withdraw from the Plan and Trust after giving notice to the Board of Directors, provided the Board consents to such withdrawal. In the event of such withdrawal, the Committee shall cause a valuation of the Trust Fund to be made to ascertain the value of assets which are attributable to Members who are Employees of the terminating Participating Employer or their Beneficiaries in the case of deceased Members and shall direct the Trustee to segregate assets which are deemed to be so attributable to such Members from the Trust, and to make distribution to the Members or their Beneficiaries as if the Plan had terminated with respect to the Members or their Beneficiaries of such Participating Employer. In the event such withdrawal constitutes a partial termination of this Plan, only the affected Participants shall have fully vested and nonforfeitable rights in the benefits to be provided by the allocations (unless they were already fully vested prior to the partial termination). Distribution may be implemented through continuation of the Trust, or transfer to another trust fund exempt from tax under section 501 of the Code, or to a group annuity contract qualified under Code section 401, or distribution may be made as an immediate cash payment; provided, however, that no such action shall divert any part of such fund to any purpose other than the exclusive benefit of the Employees of such Participating Employer. Article XV. Top-Heavy Provisions The following provisions shall become effective in any Plan Year in which the Plan is determined to be a top-heavy plan. (a) Determination of Top-Heavy. The Plan will be considered a top-heavy plan for the Plan Year if as of the last day of the preceding Plan Year (1) the account balances of Participants who are key employees (as defined in section 416(i) of the Code) exceeds 60 percent of the account balances of all Participants (the "60 Percent Test") or (2) the Plan is part of a required aggregation group and the required aggregation group is top-heavy. However, and notwithstanding the results of the 60 Percent Test, the Plan shall not be considered a top-heavy plan for any plan year in which the Plan is a part of a required or permissive aggregation group which is not top-heavy. The top-heavy ratio shall be computed pursuant to section 416(g) of the Code and the regulations issued thereunder. A "required aggregation group" is each plan of the Company in which a key employee is a participant and each other plan of the Company, if any, which enables such plan to meet the requirements of Code section 401(a)(4) or 410. The Company may treat any plan not required to be included in an aggregation group as being part of a "permissive aggregation group" if such group would continue to meet the requirements of Code sections 401(a)(4) and 410 with such plan being taken into account. (b) Minimum Benefit. The Company's contribution to a Participant's Matching Contribution Account under section 5.1 shall be 3 percent of the Participant's Compensation, except that this subsection (b) shall not apply if-- (1) the Participant is also a participant in the Pension Plan, (2) the Pension Plan is a top-heavy plan, and (3) the Participant receives from the Pension Plan the defined benefit minimum required under section 416(c)(1) of the Code. XVI. Miscellaneous Provisions 16.1 Spendthrift Provisions The interests of Employees and their Beneficiaries in the Plan shall not be subject to the claims of any creditor, any Spouse for alimony or support, or others, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered. Notwithstanding the foregoing, the Plan shall make all payments required by a qualified domestic relations order within the meaning of Code section 414(p). The Committee shall establish a procedure to determine the qualified status of a domestic relations order and to administer distributions under a qualified order. In no event shall a domestic relations order be determined to be a qualified domestic relations order if it requires the Plan to make distributions to an alternate payee prior to the date that a Member attains "earliest retirement age." Notwithstanding the foregoing, the Plan may make a distribution to an alternate payee prior to the date that a Member attains "earliest retirement age" if the qualified domestic relations order provides that the Plan and the alternate payee may agree in writing to the earlier distribution and the distribution is made pursuant to such a written agreement. For purposes of a qualified domestic relations order, "earliest retirement age" means the date on which the earliest to occur of-- (a) the date the Member is entitled to a distribution under this Plan, or terminates from employment, (b) the later of (i) the date the Member attains age 50, or (ii) the earliest date on which the Member could begin receiving benefits under this Plan if the Member separated from service. 16.2 Incompetency Every person receiving or claiming benefits under the Plan shall be presumed to be mentally competent and of age until the Committee receives a written notice, in a form and manner acceptable to it, that such person is incompetent or a minor, and that a guardian, conservator, or other person legally vested with the care of his estate has been appointed. In the event that the Committee finds that any person to whom a benefit is payable under the Plan is unable to properly care for his or her affairs, or is a minor, then any payment due (unless a prior claim therefor shall have been made by a duly appointed legal representative) may be paid to the Spouse, a child, a parent, or a brother or sister, or to any person deemed by the Committee to be authorized to care for such person otherwise entitled to payment. In the event a guardian, executor, administrator, or conservator of the estate of any person receiving or claiming benefits under the Plan shall be appointed by a court of competent jurisdiction, payments shall be made to such guardian, executor, administrator, or conservator provided that proper proof of appointment is furnished in a form and manner suitable to the Committee. Any payment made under the provisions of this section 16.2 shall be a complete discharge of any liability therefor under the Plan. 16.3 Unclaimed Funds Each Member shall keep the Committee informed of the Member's current address and the current address of the Member's Spouse and Beneficiaries. Neither the Company or any Affiliate, the Committee, nor the Trustee shall be obligated to search for the whereabouts of any such person. If the then current location of a Member is not made known to the Committee within three years after the date on which the Committee directs the distribution to the Member of the Member's Accounts, distribution may be made as though the Member had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or within three years after the actual death of a Member, the Committee is unable to locate any individual who would receive a distribution upon the death of the Member pursuant to Article IX, the Member's Accounts shall be deemed a Forfeiture; provided, however, that if the Member, Beneficiary, or Spouse makes a claim for any amount that has been so forfeited, the forfeited benefits shall be reinstated. The amount required to restore such benefits shall be made up from Forfeitures and, to the extent necessary, Employer Contributions prior to their allocation pursuant to section 7.4. 16.4 Rights Against the Company Neither the establishment of the Plan, nor of the Trust, nor any modification thereof, nor any distributions hereunder shall be construed as giving to any person whomsoever any legal or equitable rights against the Committee, the Company, or the officers, directors, or shareholders as such of the Company, or as giving any Employee or Member the right to be retained in the employ of the Company. All benefits payable under the Plan shall be paid or provided for solely from the Trust, and the Company shall have no liability or responsibility for benefit distributions other than to make contributions to the Trust as herein provided. 16.5 Illegality of Particular Provision The illegality of any particular provision of this Plan shall not affect the other provisions thereof, but the Plan shall be construed in all respects as if such invalid provision were omitted. 16.6 Effect of Mistake In the event of a mistake or misstatement as to the age, eligibility, compensation, service or participation of a Member or the amount of distributions made or to be made to a Member or other person, the Committee shall, to the extent it deems possible, cause to be withheld or accelerated, or otherwise make adjustment of, such amounts as will in its judgment accord to such Member or other person, or distribution to which he or she is properly entitled under the Plan. 16.7 Compliance with Federal and State Securities Laws (a) The Company will take all necessary steps to comply with any applicable registration or other requirements of federal or state securities laws from which no exemption is available. (b) Stock certificates distributed to Members, Beneficiaries, or Spouses may bear such legends concerning restrictions imposed by federal or state securities laws, and concerning other restrictions and rights under the Plan, as the Committee in its discretion may determine. 16.8 No Discrimination Whenever in the administration of the Plan action by the Committee is required with respect to eligibility or classification of Employees, contributions, or benefits, such action shall be uniform in nature as applied to all persons similarly situated, and no such action shall discriminate in favor of Employees who are Highly Compensated Employees. 16.9 Exclusive Benefit of Employees (a) All Employer Contributions made pursuant to the Plan shall be held by the Trustee in accordance with the terms of the Trust Agreement for the exclusive benefit of those Employees who are Members under the Plan, including former Employees, Beneficiaries, and Spouses, and shall be applied to provide benefits under the Plan and to pay expenses of administration of the Plan and the Trust to the extent that such expenses are not otherwise paid. At no time prior to the satisfaction of all liabilities with respect to such Members, their Beneficiaries and Spouses shall any part of the Trust Fund (other than such part as may be required to pay administration expenses) be used for, or diverted to, purposes other than the exclusive benefit of such Members, their Beneficiaries and Spouses. (b) Notwithstanding section 16.8(a)-- (1) if an Employer Contribution under the Plan is conditioned on initial qualification of the Plan under section 401(a) of the Code, and the Plan receives an adverse determination with respect to its initial qualification, the Trustee shall, upon written request of the Company, or Participating Employer making the contribution, return to the Company or Participating Employer the amount of the contribution (increased by earnings attributable thereto and reduced by losses attributable thereto) within one calendar year after the date that qualification of the Plan is denied, provided that the application for the determination is made by the time prescribed by law for filing the employer's return for the taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe; (2) if an Employer Contribution is conditioned upon the deductibility of such contribution under section 404 of the Code, then, to the extent the deduction is disallowed, the Trustee shall, upon written request of the Company or Participating Employer making the contribution, return the contribution to the extent disallowed to the Company or Participating Employer within one year after the date the deduction is disallowed; (3) if an Employer Contribution or any portion thereof is made by the Company or a Participating Employer by a mistake of fact, the Trustee shall, upon written request of the Company or Participating Employer, return the contribution or the portion to the Company or Participating Employer within one year after the date of payment to the Trustee; and (4) earnings attributable to amounts to be returned to the Company or Participating Employer pursuant to paragraph (2) or (3) shall not be returned to the Company or Participating Employer, and losses attributable to amounts to be returned pursuant to paragraph (2) or (3) shall reduce the amount to be so returned. 16.10 Governing Law The provisions of the Plan shall be construed, administered, and enforced in accordance with the laws of Illinois, to the extent such laws are not superseded by laws of the United States. All Employer Contributions to the Trust shall be deemed to be made in Illinois. 16.11 Change-in-Control Notwithstanding any provision of the Plan to the contrary, if a Change-in- Control (as defined below) occurs-- (a) each Participant who is an Employee on the date the Change-in-Control occurs shall be 100 percent vested in the adjusted balance of the Participant's Company Stock and Other Investments Accounts; (b) no merger, transfer of assets, or other similar transactions involving the Plan shall be permitted until all Loans outstanding at the time of the Change-in-Control have been repaid and all shares of Company Stock held in a Suspense Account in respect thereof have been released and allocated to Participants' Company Stock Account of Participants employed as of the Change-in-Control date; (c) no other action may be taken pursuant to Article XIII that would have the affect of diverting such shares to the Company Stock Accounts of Participants who are not employees of the Company or a Participating Employer as of the Change-in-Control date; or (d) if, in connection with the Change-in-Control, Company Stock held by the Plan has been sold for consideration other than securities constituting Company Stock, then the date that the Change-in-Control occurs shall be a special Valuation Date and each Participant with an Account under the Plan as of the date the Change-in-Control occurs shall be entitled to share in the proceeds of such sale in the manner described in section 7.7(b). For purposes of this section, a "Change-in-Control" shall be deemed to occur on the earliest of-- (1) the receipt by Northern Trust Corporation (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 percent of the outstanding capital stock of the Corporation entitled to vote for the election of directors ("voting stock"); (2) the commencement by any entity, person, or group (other than the Corporation or a subsidiary of the Corporation) of a tender offer or an exchange offer for more than 20 percent of the outstanding voting stock of the Corporation; (3) the effective time of (A) 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 percent of the voting stock of the surviving or resulting corporation or (B) a transfer of substantially all of the property of the Corporation other than to an entity of which the Corporation owns at least 80 percent of the voting stock; or (4) the election to the Board, without the recommendation or approval of the incumbent Board, of the lesser of (A) three directors or (B) directors constituting a majority of the number of Board members then in office. * * * * * * * * * * In Witness Whereof, the Company has caused this Plan to be executed on its behalf by its duly authorized officer this 21st day of November, 1995. THE NORTHERN TRUST COMPANY ATTEST: By /s/ -------------------------- By /s/ Mary T. Jamieson --------------------- PLAN DOCUMENT Schedule A - -------------------------------------------------------------------------------- Affiliate Name ESOP Earliest Vesting Date ================================================================================ O'Hare N/A Acquired: 5/17/82 - -------------------------------------------------------------------------------- Woodfield N/A Acquired: 7/26/82 - -------------------------------------------------------------------------------- Naperville N/A Acquired: 10/01/82 - -------------------------------------------------------------------------------- Oak Brook N/A Acquired: 06/01/83 - -------------------------------------------------------------------------------- Hickey/NT Brokerage N/A Acquired: 04/09/84 Joined TNT Plans 1/07/87 - -------------------------------------------------------------------------------- Phoenix National N/A Acquired: 06/06/86 Joined TNT Plans 1/1/87 - -------------------------------------------------------------------------------- Lake Forest N/A Acquired: 12/81/86 - -------------------------------------------------------------------------------- Concorde Bank Later of: Acquired: 6/18/89 6/18/89 or DOH - -------------------------------------------------------------------------------- Berry, Hartell, Evers & Osborne, Inc. (BHE) Later of: Acquired: 11/30/89 11/30/89 or DOH - -------------------------------------------------------------------------------- Heritage Trust As of 10/01/91: Acquired: 09/28/90 DOH w/Heritage [before or after acquisition (Plan of Merger 10/01/91)] - -------------------------------------------------------------------------------- Tri Valley National Bank Later of: (CA) charter 6/27/91 or DOH Acquired: 6/27/91 - -------------------------------------------------------------------------------- Trust Services of America Later of: Acquired: 01/31/92 1/31/92 or DOH Joined TNT Plans 2/1/92 ================================================================================ Hazlehurst & Assoc. DOH w/Hazlehurst Acquired: 04/15/94 (before or after acquisition) - --------------------------------- ------------------------------------ Purchase of Master Trust Services N/A Unit of FNBC ================================================================================ DOH = Date of Hire AMENDMENT NUMBER ONE TO THE NORTHERN TRUST EMPLOYEE STOCK OWNERSHIP PLAN WHEREAS, The Northern Trust Company (the "Company") maintains the Northern Trust Company Employee Stock Ownership Plan, as amended and restated effective January 1, 1989 (the "Plan"); and WHEREAS, amendment of the Plan is now deemed desirable in order to clarify certain provisions of the Plan; NOW, THEREFORE, by virtue and in exercise of the amending power reserved to the Company under Section 13.1 of the Plan, and pursuant to the authority delegated to the undersigned officer in a resolution of the Board of Directors dated July 18, 1995, the Plan is hereby amended effective January 1, 1989, in the following particulars: l. Section 3.4(a) is amended in its entirety to read as follows: "(a) Vesting Service shall be computed on the following bases: (i) prior to July l, l993, an Employee shall receive credit for each calendar quarter during which the Employee earned at least one (1) Hour of Service or otherwise would receive credit for Vesting Service pursuant to this subsection (b) below; and (ii) from and after July l, l993, an Employee shall receive credit for each calendar month during which the Employee earned at least one (1) Hour of Service or otherwise would receive credit for Vesting Service pursuant to subsection (b) below." 2. Section 3.4(b)(i) is amended in its entirety to read as follows: "(i) an approved absence of up to 12 months from the Company or an Affiliate (e.g. vacation, paid holiday, sick, short term disability, long term disability, Family Medical Leave, unpaid leave of absence) that is granted according to uniform and nondiscriminatory standards." 3. Section 3.4(b)(ii) is deleted in its entirety. 4. Section 3.4(b)(iii) is redesignated as 3.4(b)(ii) and amended in its entirety to read as follows: "(ii) a period of up to one (1) year during which an Employee is on Parental Leave; and" 5. Section 3.4(b)(iv) is redesignated as 3.4(b)(iii). 6. Section 3.6(b) is amended to delete the words "or Credited Service" in the first and last sentences, and to add the word "or" immediately before "Vesting Service" in the last sentence. 7. Section 5.2 is amended to replace the words "New York Stock Exchange" with "NASDAQ Stock Market." 8. Section 11.1 is amended to replace the introductory clause with "Except as provided in sections 7.9, 9.7(d) and 11.2,". 9. Section 16.1 is amended to replace the second full paragraph with the following: "Notwithstanding the foregoing, the Plan shall make all payments required by a qualified domestic relations order within the meaning of Code section 414(p). The Committee shall establish a procedure to determine the qualified status of a domestic relations order and to administer distributions under a qualified order. If the qualified domestic relations order so provides, the Plan may make a distribution to an alternate payee prior to the date that a Member attains "earliest retirement age." For purposes of a qualified domestic relations order, "earliest retirement age" means the earlier of-- (a) the date the Member is entitled to a distribution under this Plan, or (b) the later of (i) the date the Member attains age 50, or (ii) the earliest date on which the Member could begin receiving benefits under this Plan if the member separated from service." 10. Schedule A is amended to add "01/04/85" immediately after "Purchase of Master Trust Services Unit of FNBC" in the "Affiliate Name" column. IN WITNESS WHEREOF, the Company has caused this amendment to be executed on its behalf by the undersigned officer this 21st day of November, 1995 ____________________________ Martin J. Joyce, Jr. Senior Vice President 2 AMENDMENT NUMBER TWO TO THE NORTHERN TRUST EMPLOYEE STOCK OWNERSHIP PLAN WHEREAS, The Northern Trust Company (the "Company") maintains the Northern Trust Company Employee Stock Ownership Plan, as amended and restated effective January 1, 1989 (the "Plan"); and WHEREAS, amendment of the Plan is now deemed desirable; NOW, THEREFORE, by virtue and in exercise of the amending power reserved to the Company under Section 13.1 of the Plan, and pursuant to the authority delegated to the undersigned officer in a resolution of the Board of Directors dated April 16, 1996, the Plan is hereby amended effective May 1, 1996, in the following particular: Section 16.11 is amended by modifying clause (A) of subparagraph (3) of the definition of "Change-in-Control" to read as follows: ". . . (A) 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 60 percent of the voting stock of the surviving or resulting corporation or . . ." IN WITNESS WHEREOF, the Company has caused this amendment to be executed on its behalf by the undersigned officer this 26th day of April, 1996. /s/ Martin J. Joyce, Jr ---------------------------- Martin J. Joyce, Jr. Senior Vice President EX-10.(II) 3 AMENDED TRUST AGREEMENT Exhibit Number (10)(ii) to 9/30/96 Form 10-Q FIRST AMENDMENT TO NORTHERN TRUST COMPANY EMPLOYEE STOCK OWNERSHIP TRUST THIS AGREEMENT is made as of the 21st day of February 1995 by and between THE NORTHERN TRUST COMPANY, an Illinois state bank of Chicago, Illinois (the "Company"), and NATIONSBANK, as trustee (the "Trustee"); WHEREAS, the Company and the Trustee executed the NORTHERN TRUST COMPANY EMPLOYEE STOCK OWNERSHIP TRUST agreement (the "Trust") dated the 26th day of January, 1988; and WHEREAS, the Company and the Trustee desire to amend the Trust pursuant to Section 7.1; NOW, THEREFORE, the sections of the Trust set forth below are amended as follows, but all other sections of the Trust shall remain in full force and effect. 1. The second sentence of Section 1.2 is amended in its entirety to read as follows: The Company shall furnish to the Trustee at the time of its appointment and from time to time thereafter the name and specimen signature of each Committee member or agent of the Committee upon whose statement the Trustee is authorized to rely. 2. Section 3.1 is hereby amended by adding the following paragraph: Notwithstanding the foregoing, the Committee may appoint a Paying Agent (including the Company) to make distributions from the Trust Fund through an account established by the Committee with such Paying Agent for such purpose after written notice to the Trustee that such an appointment has been made and that an account has been so established. The Trustee shall make such deposits from the Trust Fund to such an account as the Committee may from time to time direct. 3. Section 4.1 is amended by inserting the following language at the end thereof: Anything contained herein to the contrary notwithstanding, any part or all of the assets of the Trust Fund may be deposited with The Northern Trust Company, an Illinois corporation, of Chicago, Illinois, as Trustee under that certain "Declaration of Trust creating the Collective Employee Benefit Trust Fund of The Northern Trust Company" dated October 2, 1961, as the same may be amended from time to time, such funds to be held and invested by The Northern Trust Company as such Trustee pursuant to all the terms and conditions of such Declaration, which is hereby incorporated by reference. IN WITNESS WHEREOF, the Company and the Trustee have caused this Amendment to be executed and their respective corporate seals to be affixed and attested by their respective corporate officers on the day and year first written above. THE NORTHERN TRUST COMPANY By: /s/ Martin J. Joyce, Jr. ------------------------ Its: Senior Vice President ATTEST: /s/ Victoria Antoni - ------------------------- Its: Assistant Secretary NATIONSBANK By: /s/ ------------------------- Its: Vice President ATTEST: /s/ - ------------------------- Its: Assistant Secretary EX-10.(III) 4 RESTATEMENT OF SUPPLEMENTAL EMPLOYEE TRUST AGRMT Exhibit Number (10) (iii) to 9/30/96 Form 10-Q RESTATEMENT OF SUPPLEMENTAL EMPLOYEE TRUST AGREEMENT This Restated Trust Agreement made this 18th day of June, 1996, by and between The Northern Trust Company ("Company") and Harris Trust & Savings Bank ("Trustee"). WHEREAS, Company has adopted the nonqualified deferred compensation Plans as listed in Appendix A; WHEREAS, Company established a trust (hereinafter called "Trust") September 14, 1989, which was restated effective September 14, 1989, and now wishes to again restate the Trust, effective June 18, 1996, the Trust assets to be held therein, subject to the claims of Company's creditors in the event of Company's insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plans; WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plans as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plans; NOW, THEREFORE, the parties do hereby restate the Trust in its entirety as follows: SECTION 1. ESTABLISHMENT OF TRUST. (a) Company hereby establishes the Supplemental Employee Trust of The Northern Trust Company, the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. (b) The Trust hereby established shall be irrevocable. The Trust shall only be amended with the written consent of the Trustee and the Company; provided that no amendment shall (i) reduce or otherwise affect any amounts held in the Trust as of the effective date of such amendment, or (ii) require the distribution of any such amounts at any date earlier than the applicable distribution dates provided hereunder and under the terms of the Plans as of the effective date of such amendment. (c) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of subpart E, part I, subchapter J, Chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon, shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plans and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. (e) Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither Trustee nor any Plan participant or beneficiary shall have any right to compel such additional deposits. SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES. (a) Company shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Plan participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to Trustee for determining the amount so payable, the form in which such amount is to be paid as provided for or available under the Plans), and the time of commencement for payment of such amounts. Except as otherwise provided herein, Trustee shall make payments to Plan participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plans and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Company. (b) The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plans shall be determined by Company or such party as it shall designate under the Plans, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plans. (c) Company may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plans. Company shall notify Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plans, Company shall make the balance of each such payment as it falls due. Trustee shall notify Company where principal and earnings are not sufficient. -2- SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT. (a) Trustee shall cease payment of benefits to Plan participants and their beneficiaries if the Company is Insolvent. Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as they become due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of Company shall have the duty to inform Trustee in writing of Company's insolvency. If a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become insolvent, Trustee shall determine whether Company is insolvent and, pending such determination, Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries. (2) Unless Trustee has actual knowledge of Company's insolvency or has received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Company is insolvent. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time Trustee has determined that Company is Insolvent, Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their right as general creditors of Company with respect to benefits due under the Plans or otherwise. (4) Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plans for -3- the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by Company in lieu of the payments provided hereunder during any such period of discontinuance. SECTION 4. PAYMENTS TO COMPANY. Except as provided in Sections 2 and 3 hereof, Company shall have no right or power to direct Trustee to return to Company or to divert to others any of the Trust assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plans. SECTION 5. INVESTMENT AUTHORITY. (a) Subject to paragraph (b) below of this Section 5, subject further to such investment guidelines as may be issued to Trustee from time to time by Company, Trustee may invest and reinvest Trust assets in property of any kind. (b) Company may, by written notice to Trustee, assume investment responsibility for any portion of the Trust assets; Trustee shall act with respect to such assets only as directed by Company and shall have no responsibility to make any investment review of such assets. SECTION 6. DISPOSITION OF INCOME. During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. SECTION 7. ACCOUNTING BY TRUSTEE. Trustee shall keep accurate and detailed records of all investments, receipts, disbursements and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Company and Trustee. Within 30 days following the close of each calendar year and within 30 days after the removal or resignation of Trustee, Trustee shall deliver to Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. -4- SECTION 8. RESPONSIBILITY OF TRUSTEE. (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of alike character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Company which is contemplated by, and in conformity with, the terms of the Plans for this Trust and is given in writing by Company. In the event of a dispute between Company and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If Trustee undertakes or defends any litigation arising in connection with this Trust, Company agrees to indemnify Trustee against Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If Company does not pay such costs, expenses and liabilities in a reasonably timely manner, Trustee may obtain payment from the Trust. (c) Trustee may consult with legal counsel (who may also be counsel for Company generally) with respect to any of its duties or obligations hereunder. (d) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (e) Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (f) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE. Company shall pay all administrative and Trustee's fees and expenses. If not so paid, the fees and expenses shall be paid from the Trust. -5- SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE. (a) Trustee may resign at any time by written notice to Company, which shall be effective 30 days after receipt of such notice unless Company and Trustee agree otherwise. (b) Trustee may be removed by Company on 30 days' notice or upon shorter notice accepted by Trustee. (c) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 30 days after receipt of notice of resignation, removal or transfer, unless Company extends the time limit. (d) If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under paragraph(s) (a) or (b) of this Section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. SECTION 11. APPOINTMENT OF SUCCESSOR. If Trustee resigns or is removed in accordance with Section 10(a) or (b) hereof, Company may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Company or the successor Trustee to evidence the transfer. SECTION 12. AMENDMENT OR TERMINATION. (a) This Trust Agreement may be amended by a written instrument executed by Trustee and Company, subject to Section 1(b) hereof. (b) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plans. Upon termination of the Trust any assets remaining in the Trust shall be returned to Company. -6- SECTION 13. MISCELLANEOUS. (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with the laws of Illinois. SECTION 14. EFFECTIVE DATE. The effective date of this Restated Trust Agreement shall be June 18, 1996. IN WITNESS WHEREOF, Company and Trustee have caused these presents to be signed by their respective officers thereunto duly authorized on this 18th day of June, 1996. THE NORTHERN TRUST COMPANY By /s/ Martin J. Joyce, Jr. ----------------------------- Its: Senior Vice President ----------------------------- HARRIS TRUST & SAVINGS BANK By: /s/ Its: Vice President -7- APPENDIX A TO RESTATEMENT OF SUPPLEMENTAL EMPLOYEE TRUST AGREEMENT 1. The Restated Supplemental Pension Plan for Employees of The Northern Trust Company 2. The Restated Supplemental Thrift - Incentive Plan for the Employees of The Northern Trust Company 3. The Restated Supplemental Employee Stock Ownership Plan for Employees of The Northern Trust Company -8- EX-10.(IV) 5 SUPPLEMENTAL EMPLOYEE STOCK OWNERSHIP PLAN Exhibit Number (10)(iv) to 9/30/96 Form 10-Q RESTATED SUPPLEMENTAL EMPLOYEE STOCK OWNERSHIP PLAN FOR EMPLOYEES OF THE NORTHERN TRUST COMPANY The Supplemental Employee Stock Ownership Plan for Employees of The Northern Trust Company ( the "Plan"), was initially adopted effective September 1, 1989, restated effective September 1, 1989, again restated effective February 19, 199l and further amended and restated effective January 1, 1996 (the "Restated Supplemental ESOP"). The Northern Trust Company desires to further amend and restate the Restated Supplemental ESOP, which has been established and is maintained by The Northern Trust Company soley for the purpose of permitting certain employees of the Company who participate in the Northern Trust Stock Ownership Plan to receive allocations of amounts in excess of certain limitations on contributions imposed by Section 40l(a)(17) and Section 415 of the Code. Accordingly, effective May 1, 1996, The Northern Trust Company hereby further amends and restates the Restated Supplemental ESOP pursuant to the terms and provisions set forth below: ARTICLE I DEFINITIONS Wherever used herein the following terms shall have the meanings hereinafter set forth: 1.1 "Beneficiary" means any person eligible to receive a death benefit under the Plan as designated by the Participant, in the event of death of the Participant. 1.2 "Board" means the Board of Directors of The Northern Trust Company. 1.3 "Change-in-Control" means the earliest to occur of: (a) The receipt by Northern Trust Corporation (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"); (b) The commencement by any entity, person, or group (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 60% 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. 1.4 "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. 1.5 "Committee" means the Employee Benefit Administrative Committee of The Northern Trust Company, as constituted from time to time, which has the responsibility for administering the Qualified Plan. 1.6 "Company" means The Northern Trust Company, an Illinois banking corporation, and such of its subsidiaries and affiliates as shall, with the consent of the Board, adopt the Plan, and, to the extent provided in Section 8.8 below, any successor corporation or other entity resulting from a merger or consolidation into or with the Company or a transfer or sale of substantially all of the assets of the Company. 1.7 "Company Stock" means any qualifying employer security within the meaning of Section 4975(e)(8) of the Code and Section 407(d)(1) of the Employee Retirement Income Security Act of 1974 and regulations thereunder. 1.8 "Participant" means any employee of the Company who is a participant under the Qualified Plan as described in Section 2.1 of the Plan and with respect to whom contributions may be made under the Plan. 1.9 "Plan" means the Restated Supplemental Employee Stock Ownership Plan, for employees of The Northern Trust Company, as amended and restated effective January 1, 1996. 1.10 "Plan Year" means the calendar year or any other twelve consecutive month period that may be designated by the Company as the fiscal year of the Qualified Plan; provided, however, that the first Plan Year shall be the four consecutive month period commencing on September 1, 1989 and ending on December 31, 1989. 1.11 "Qualified Plan" means the Northern Trust Employee Stock Ownership Plan, as amended and restated effective January 1, 1989, and as further amended from time to each, and each predecessor, successor or replacement employee stock ownership plan. 1.12 "Qualified Plan Company Stock Account" means the account established for a Participant under the Qualified Plan and known as the Company Stock Account. 1.13 "Qualified Thrift-Incentive Plan" means The Northern Trust Company Thrift- Incentive Plan as amended and restated effective January 1, 1989, and each predecessor, successor or replacement employees' cash or deferred arrangement. 1.14 "Section 415 Limits" means the limit imposed by Section 415 of the Code, or any successor section, on aggregate annual additions in any Plan Year to the accounts of a Participant under the Qualified Plan and The Northern Trust Company Thrift-Incentive Plan, and the limits imposed by Section 415(c)(6) of the Code, or any successor section, on the Plan. 1.15 "Supplemental ESOP Account" means the account maintained by the Company under the Plan for each Participant who receives Supplemental ESOP Allocations under the Plan. 1.16 "Supplemental ESOP Allocation" means the amount allocated for the benefit of a Participant under and in accordance with the terms of Section 3.1 of the Plan in any Plan Year. 1.17 "Supplemental Matching Contribution Account" means the account maintained by the Company under the Supplemental Thrift-Incentive Plan for a Participant that is credited with Supplemental Matching Contributions contributed under such plan. 1.18 Except as otherwise expressly provided herein, all words and phrases in the Qualified Plan shall have the same meaning in the Plan. ARTICLE II ELIGIBILITY 2.1 Participant. An employee of the Company who is eligible in any Plan Year to receive an allocation of Company Stock to his Company Stock Account under the Qualified Plan, the total amount of which is reduced by reason of the application of the limitation on contributions imposed by Section 40l(a)(17), or Section 415 of the Code, as in effect on any date for allocation of such shares, or as in effect at any time thereafter, on the Qualified Plan, shall be a Participant in the Plan for such Plan Year. ARTICLE III SUPPLEMENTAL ALLOCATIONS 3.1 Supplemental ESOP Allocations. The Supplemental ESOP Allocation to be made for the benefit of a Participant for any Plan Year shall be an amount equal to (i) the closing price of a share of Company Stock on the NASDAQ Stock Market on the last trading day of such Plan Year, times, (ii) the difference between (a) and (b) below: (a) The number of shares of Company Stock that would have been allocated to the Qualified Plan Company Stock Account of the Participant for the Plan Year, without giving effect to the Section 415 Limits or to the limitations imposed by Section 40l(a)(17) of the Code on the Qualified Plan; LESS (b) The number of shares of Company Stock actually allocated to the Qualified Plan Company Stock Account of the Participant for the Plan Year. Supplemental ESOP Allocations made for the benefit of a Participant for any Plan Year shall be allocated to a Supplemental ESOP Account maintained under the Plan in the name of such Participant as of the last day of such Plan Year. 3.2 Vesting. Each Participant shall vest in the balance of his Supplemental ESOP Account in accordance with the vesting schedule set forth in the Qualified Plan applicable to the undistributed balance of his Qualified Plan Company Stock Account. Notwithstanding the preceding sentence or any other provision of the Plan, each Participant shall immediately become fully vested in the undistributed balance of his Supplemental ESOP Account in the event of a Change- in-Control. ARTICLE IV INVESTMENT OF SUPPLEMENTAL ALLOCATIONS 4.1 Investments. The Company may contribute amounts allocated hereunder to the Supplemental ESOP Accounts of Participants to a trust ("Trust") established under the trust agreement between the Company and Harris Trust & Savings Bank, a bank organized and existing under the laws of the State of Illinois, as trustee ("Trust Agreement"). Amounts allocated hereunder to the Supplemental ESOP Account of a Participant and contributed to the Trust, shall be invested in one or more of the investment funds from time to time offered by the trustee of the Trust Agreement as set forth on Schedule A attached hereto and shall be subject to the same administrative procedures and Participant investment elections that apply to his Supplemental Matching Contribution Account. A Participant shall be entitled to change investment elections applicable to his Supplemental ESOP Account, or to direct transfers of amounts in his Supplemental ESOP Account among the investment funds set forth on Schedule A, provided that such directions shall also apply to his Supplemental Matching Contribution Account. Such changes can be made monthly by written request. 4.2 Company Securities. Notwithstanding anything to the contrary contained herein, in no event shall amounts allocated to the Supplemental ESOP Account of a Participant be invested in any fund that provides for investment in stock or other securities of the Company; provided, however, that nothing contained herein shall prohibit investment of amounts allocated to the Supplemental ESOP of any Participant in a common or collective trust fund of the trustee of the Trust Agreement in which no more than five percent of the total fair market value of the assets of such common or collective trust fund are invested in stock or other securities of the Company. ARTICLE V DISTRIBUTIONS 5.1 Distribution. (a) In the event that the Participant's employment with the Company terminates for any reason, the Participant shall receive on the last day of the calendar month following the month in which such termination occurs, a lump sum distribution, in cash, equal to the vested adjusted balance of the Participant's Supplemental ESOP Account, including gains or losses attributable to investments made pursuant to Section 4.1, determined as of the last day of the calendar month in which such termination occurs. Notwithstanding the foregoing, if a Participant is entitled to receive a Supplemental ESOP Allocation for the Plan Year in which he terminated employment, such Supplemental ESOP Allocation and any gains or losses attributable thereto shall be distributed to or with respect to the Participant upon completion of the first valuation following the posting of such Supplemental ESOP Allocation to his Supplemental ESOP Account. Any nonvested portion of a Participant's Supplemental ESOP Account shall be forfeited and retained by the Company. (b) The amount to be paid from the Supplemental ESOP in the year of the Participant's termination shall be limited to an amount which will not cause the total amount of compensation received from the Company, to exceed the maximum amount deductible by the Company under Code section 162(m). Amounts not paid as a result of the above limitation shall be paid in subsequent years, to the extent permissible under the above limitation. (c) If a Participant dies before a complete distribution of his Supplemental ESOP Account has been made to him, the vested adjusted balance of such Participant's Supplemental ESOP Account, including gains or losses attributable to investments made pursuant to Section 4.1, determined as of the last day of the calendar month in which the Participant's employment with the Company terminated, shall be distributed in one lump sum, in cash, to the Beneficiary last designated by the Participant in a writing delivered to the Committee prior to his death. If a Participant has not designated a Beneficiary, or if no designated Beneficiary is living on the date of distribution, the vested adjusted balance of such Participant's Supplemental ESOP Account, shall be distributed in one lump sum, in cash, to those persons entitled to receive distributions of the Participant's accounts under the Qualified Plan. ARTICLE VI ADMINISTRATION OF THE PLAN 6.1 Administration by the Committee. The Committee shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. The Committee shall have discretion to interpret and construe the provisions of the Plan. 6.2 General Powers of Administration. All provisions set forth in the Qualified Plan with respect to the administrative powers and duties of the Committee, expenses of administration, and procedures for filing claims shall also be applicable with respect to the Plan. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Committee with respect to the Plan. ARTICLE VII AMENDMENT OR TERMINATION 7.1 Amendment or Termination. The Company intends the Plan to be permanent but reserves the right to amend or terminate the Plan when, in the sole discretion of the Company, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution of the Board and shall be effective as of the date set forth in such resolution. 7.2 Effect of Amendment or Termination. No amendment or termination of the Plan shall directly or indirectly reduce the balance of any Supplemental ESOP Account held hereunder as of the effective date of such amendment or termination. Upon termination of the Plan, distribution of amounts in a Participant's Supplemental ESOP Account shall be made to him or his Beneficiary in the manner and at the time described in Section 5.1 of the Plan. No additional Supplemental ESOP Allocations shall be made to the Supplemental ESOP Account of any Participant after termination of the Plan. ARTICLE VIII GENERAL PROVISIONS 8.1 Participant's Rights Unsecured. The Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any benefits hereunder. No Participant, beneficiary or any other person shall have any interest in any particular assets of the Company by reason of the right to receive a benefit under the Plan and any such Participant, Beneficiary or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan. 8.2 General Conditions. Except as otherwise expressly provided herein, all terms and conditions of the Qualified Plan applicable to allocations of Company Stock under the Qualified Plan shall also be applicable to a Supplemental ESOP Allocation made hereunder. Any allocation of Company Stock or dividends to be made under the Qualified Plan shall be made solely in accordance with the terms and conditions of the Qualified Plan and nothing in this Plan shall operate or be construed in any way to modify, amend or affect the terms and provisions of the Qualified Plan. 8.3 No Guaranty of Benefits. Nothing contained in the Plan shall constitute a guaranty by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder. 8.4 No Enlargement of Employee Rights. No Participant shall have any right to receive a distribution under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of the Company. 8.5 Spendthrift Provision. No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. 8.6 Applicable Law. The Plan shall be construed and administered under the laws of the State of Illinois to the extent not inconsistent with the Employee Retirement Income Security Act of 1974. 8.7 Incapacity of Recipient. If any benefit under the Plan shall be payable to a minor or a person not adjudicated incompetent but who, by reason of illness or mental or physical disability, is, in the opinion of the Committee, unable to properly manage his affairs, such benefit shall be paid in such of the following ways as the Committee deems best: (a) to the person directly; (b) in the case of a minor, to a custodian under any Uniform Gift to Minors Act for the person; or (c) to the person's spouse, adult child or blood relative. Any benefit so paid shall be a complete discharge of any liability of the Company and Plan therefor. 8.8 Successors. The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of Section 7.2. 8.9 Unclaimed Benefit. Each Participant shall keep the Committee informed of his current address and the current address of his designated Beneficiary. Neither the Company nor the Committee shall be obligated to search for the whereabouts of any person. If the location of a Participant is not made known to the Committee within three (3) years after the date on which distribution of the Participant's Supplemental ESOP Account may first be made, distribution may be made as though the Participant had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or within three years after the actual death of a Participant, neither the Company nor the Committee is able to locate any designated Beneficiary of the Participant, then the Company shall have no further obligation to pay any benefit hereunder to such Participant or designated Beneficiary and such benefit shall be forfeited; provided, however, that if the Participant or designated Beneficiary makes a valid claim for any benefit that has been so forfeited, the forfeited benefit shall be reinstated. 8.10 Limitations on Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company, any member of the Committee, nor any individual acting as an employee or agent of the Company or Committee shall be liable to any Participant, former Participant, Beneficiary or any other person for any claim, loss, liability or expense incurred in connection with the Plan. 8.11 Gender; Headings. Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless qualified by the context. Any headings used herein are included for ease of reference only, and are not to be construed so as to alter the terms hereof. IN WITNESS WHEREOF, The Northern Trust Company has caused this Plan to be signed by its duly authorized officer as of the 30th day of April, 1996. THE NORTHERN TRUST COMPANY BY /s/ Martin J. Joyce Jr. ----------------------- SCHEDULE A SUPPLEMENTAL EMPLOYEE STOCK OWNERSHIP PLAN & SUPPLEMENTAL THRIFT-INCENTIVE PLAN INVESTMENT FUND OPTIONS 1. Insight Money Market Fund 2. Intermediate Bond Fund 3. Equity Fund EX-10.(V) 6 SUPPLEMENTAL THRIFT-INCENTIVE PLAN Exhibit Number (10)(v) to 9/30/96 Form 10-Q RESTATED SUPPLEMENTAL THRIFT-INCENTIVE PLAN FOR EMPLOYEES OF THE NORTHERN TRUST COMPANY The Northern Trust Company Supplemental Plan was adopted on September l6, l975 and amended through December 16, l986. The portions of that plan that pertained to The Northern Trust Company Thrift-Incentive Plan were amended and restated by the Restated Supplemental Thrift-Incentive Plan for Employees of The Northern Trust Company, initially adopted effective September l, l989, restated effective September l, l989 and further amended and restated effective January 1, 1996 (the "Restated Supplemental Thrift-Incentive Plan"). The Northern Trust Company desires to further amend and restate the Restated Supplemental Thrift-Incentive Plan, which has been established and is maintained by The Northern Trust Company solely for the purpose of permitting certain of the employees of the Company who participate in The Northern Trust Company Thrift-Incentive Plan to receive contributions in excess of certain limitations imposed by Section 401(a)(17) of the Code. Accordingly, effective May 1, 1996, The Northern Trust Company hereby further amends and restates the Restated Supplemental Thrift-Incentive Plan pursuant to the terms and conditions set forth below: ARTICLE I DEFINITIONS Wherever used herein the following terms shall have the meanings hereinafter set forth: 1.1 "Beneficiary" means any person eligible to receive a death benefit under the Plan as designated by the Participant, in the event of death of the Participant. 1.2 "Board" means the Board of Directors of The Northern Trust Company. 1.3 "Change-in-Control" means the earliest to occur of: (a) The receipt by Northern Trust Corporation (the "Corporation") of a Schedule 13D or other statement filed under Section l3(d) of the Securities Exchange Act of l934, as amended (the "Exchange Act"), indicating that any entity, person, or group has acquired beneficial ownership, as that term is defined in Rule l3d-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"); (b) The commencement by any entity, person, or group (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 60% 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. 1.4 "Code" means the Internal Revenue Code of l986, as amended from time to time, and any regulations promulgated thereunder. 1.5 "Committee" means the Employee Benefit Administrative Committee of The Northern Trust Company, as constituted from time to time, which has the responsibility for administering the Qualified Plan. 1.6 "Company" means The Northern Trust Company, an Illinois banking corporation, and such of its subsidiaries and affiliates as shall, with the consent of the Board, adopt the Plan, and, to the extent provided in Section 8.8 below, any successor corporation or other entity resulting from a merger or consolidation into or with the Company or a transfer or sale of substantially all of the assets of the Company. 1.7 "Deferral Distribution Date" means the date for distribution of a Participant's Supplemental Before-Tax Deposits as irrevocably set forth in each of his Supplemental Before-Tax Deposit Agreements. 1.8 "Participant" means an employee of the Company who is a participant under the Qualified Plan as described in Section 2.l of the Plan and by whom or with respect to whom contributions may be made under the Plan. 1.9 "Plan" means the Restated Supplemental Thrift-Incentive Plan for Employees of The Northern Trust Company, as amended from time to time. 1.10 "Plan Year" means the calendar year or other twelve-consecutive- month period that may be designated by the Company as the fiscal year of the Qualified Plan, provided, however, that the first Plan Year shall be the four-consecutive- month period commencing on September l, l989 and ending on December 31, l989. 1.11 "Qualified Plan" means The Northern Trust Company Thrift-Incentive Plan as amended and restated effective January l, l989, and as further amended from time to time, and each predecessor, successor or replacement employees' cash or deferred arrangement. 1.12 "Qualified Plan Matching Contribution" means the total of all matching contributions made by the Company for the benefit of a Participant under and in accordance with the terms of the Qualified Plan in any Plan Year. 1.13 "Qualified Plan Matching Contribution Account" means the account established for a Participant under the Qualified Plan and known as the Matching Contribution Account. 1.14 "Qualified Plan Before-Tax Deposit" means the total of all salary reduction contributions made by the Company as authorized by a Participant under and in accordance with the terms of the Qualified Plan in any Plan Year. 1.15 "Qualified Plan Before-Tax Deposit Account" means the account established for the Participant under the Qualified Plan and known as the Before-Tax Deposit Account. 1.16 "Supplemental Account" means either or both of the Supplemental Before-Tax Deposit Account and the Supplemental Matching Contribution Account. 1.17 "Supplemental ESOP Allocation" means the amount allocated for the benefit of a Participant under and in accordance with the terms of Section 3.1 of the Supplemental ESOP Plan in any Plan year. 1.18 "Supplemental Matching Contribution" means the matching contribution made by the Company for the benefit of a Participant under and in accordance with the terms of the Plan in any Plan Year. 1.19 "Supplemental Matching Contribution Account" means the account maintained by the Company under the Plan for a Participant that is credited with Supplemental Matching Contributions contributed under the Plan. 1.20 "Supplemental Before-Tax Deposit" means the salary reduction contribution made by the Company as authorized by a Participant under and in accordance with the terms of the Plan in any Plan Year. 1.21 "Supplemental Before-Tax Deposit Account" means the account maintained by the Company under the Plan for a Participant that is credited with Supplemental Before-Tax Deposits contributed under the Plan. 1.22 Except as otherwise expressly provided herein, all words and phrases in the Qualified Plan shall have the same meaning in the Plan. ARTICLE II ELIGIBILITY 2.1 (a) Conditions for Participation. An employee of the Company: (i) who is eligible to participate in the Qualified Plan on the first day of a Plan Year and (ii) whose Salary (as defined in the Qualified Plan), determined as of November 30 of the prior plan year, exceeds the compensation limitation under Section 40l(a)(17) of the Code for such prior Plan Year, shall be eligible to make salary deferrals under the Plan for such Plan Year as soon as he has reached the Code Section 40l(a)(17) limitation. However, if the compensation limit for the Plan Year for which participation is being determined is known by November 30 of such prior Plan Year, participation will be based upon such limit. In the event an employee of the Company who is ineligible to participate in the Plan on the first day of a Plan Year either because he was not eligible for the Qualified Plan on the first day of the Plan Year or because his Salary does not exceed the Code Section 40l(a)(17) limitation for the prior Plan Year subsequently becomes eligible for the Qualified Plan or has his Salary increased and becomes ineligible to make contributions to the Qualified Plan because his Salary exceeds the compensation limit set forth in Code Section 40l(a)(17), such employee shall become eligible to participate in the Plan for purposes of Supplemental Matching Contributions only as of the date he is no longer eligible to make contributions to the Qualified Plan as a result of the above limitation. Such Supplemental Matching Contributions shall be based on the employee's rate of contribution to the Qualified Plan at the time his contributions ceased. (b) Participant Elections. An employee who meets the eligibility requirements on November 30 for Plan participation in the following Plan Year will be allowed to elect (i) to decline participation in the Plan, or (ii) to begin contributions to the Plan once he is no longer able to contribute to the Qualified Plan because he has reached the limitations of Section 40l(a)(17). ARTICLE III SUPPLEMENTAL CONTRIBUTIONS 3.1 Supplemental Before-Tax Deposit. The Supplemental Before-Tax Deposit authorized by a Participant for any Plan Year shall be applied only to salary in excess of Section 40l(a)(17) limitations, in any amount equal to at least one percent (1%), but not to exceed twelve percent (12%). The Supplemental Before-Tax Deposit made for the benefit of a Participant for any Plan Year shall be allocated to a Supplemental Before-Tax Deposit Account maintained under the Plan in the name of such Participant on or before the last day of such Plan Year. 3.2 Supplemental Before-Tax Deposit Agreement. As a condition to the Company's obligation to make a Supplemental Before-Tax Deposit for the benefit of a Participant pursuant to Section 3.1 for any Plan Year, the Participant must execute a Supplemental Before-Tax Deposit Agreement, in such form as the Committee in its discretion shall determine, on which the Participant shall elect to have his Salary for such Plan Year reduced, and a Supplemental Before- Tax Deposit made on his behalf, on salary in excess of Section 40l(a)(17) limitations, in any amount equal to at least one percent (l%) of his Salary, or any multiple thereof, but not to exceed twelve percent (12%). An Agreement that is effective for any Plan Year shall be executed and delivered to the Committee by the specified date before the beginning of that Year and shall be irrevocable for that year and for subsequent Years unless and until revoked or revised by a Participant by written instrument delivered to the Committee prior to the beginning of the Plan Year in which such revocation or revision is to be effective. 3.3 Supplemental Matching Contributions. The Supplemental Matching Contribution to be made by the Company on behalf of a Participant for any Plan Year who (i) is a Participant at the beginning of a Plan Year eligible to make salary deferrals after reaching the Section 40l(a)(17) limitations, who actually makes salary deferrals or (ii) during the Plan Year becomes a Participant eligible to participate for purposes of Supplemental Matching Contributions only, shall be made in accordance with the matching contribution formula and provisions set forth in the Qualified Plan. Supplemental Matching Contributions made for the benefit of a Participant for any Plan Year shall be allocated to a Supplemental Matching Contribution Account maintained under the Plan in the name of such Participant as of the last day of such Plan Year. 3.4 Vesting of Benefits. Each Participant shall at all times be fully vested in the adjusted balance of his Supplemental Before-Tax Deposit Account. Each Participant shall vest in the adjusted balance of his Supplemental Matching Contribution Account in accordance with the vesting schedule applicable to his Qualified Plan Matching Contribution Account set forth in the Qualified Plan. Notwithstanding the preceding sentence or any other provision of the Plan, each Participant shall become fully vested in the adjusted balance of his Supplemental Matching Contribution Account on the effective date of a Change-in- Control. ARTICLE IV INVESTMENT OF SUPPLEMENTAL CONTRIBUTIONS 4.1 Investments. The Company may contribute amounts allocated hereunder to the Supplemental Accounts of Participants to a trust ("Trust") established under the trust agreement between the Company and Harris Trust & Savings Bank, a bank organized and existing under the laws of the State of Illinois, as trustee ("Trust Agreement"). Amounts allocated hereunder to the Supplemental Account of a Participant shall be subject to such administrative procedures relating to investment elections as the Committee may from time to time establish. When amounts are allocated to the Supplemental Account of a Participant and are contributed to the Trust, they shall be invested in one or more of the investment funds from time to time offered by the trustee of the Trust Agreement, as set forth on Schedule A attached hereto. A Participant shall be entitled to change investment elections applicable to his Supplemental Account, or to direct transfers of amounts in his Supplemental Account among the investment funds set forth on Schedule A, provided that such directions shall also apply to his Supplemental ESOP Allocation. Such changes can be made monthly by written request. 4.2 Company Securities. Notwithstanding anything to the contrary contained herein, in no event shall amounts allocated to the Supplemental Account of a Participant be invested in any fund that provides for investment in stock or other securities of the Company; provided, however, that nothing contained herein shall prohibit investment of amounts allocated to the Supplemental Account of any Participant in a common or collective trust fund of the trustee of the Trust Agreement in which no more than five percent of the total fair market value of the assets of such common or collective trust fund are invested in stock or other securities of the Company. ARTICLE V DISTRIBUTIONS 5.1 Distribution. (a) Subject to Section 8.2, all amounts allocated to a Participant's Supplemental Before-Tax Deposit Account, including gains and losses attributable to investments made pursuant to Section 4.1, shall be distributed to or with respect to the Participant in one lump sum as of the first to occur of (a) the Deferral Distribution Date irrevocably set forth in the related Supplemental Before-Tax Deposit Agreement or (b) the last day of the calendar month following the month in which the Participant's employment with the Company terminates for any reason, including death. The vested adjusted balance of a Participant's Supplemental Matching Contribution Account, including gains and losses attributable to investments made pursuant to Section 4.1, shall be distributed to or with respect to a Participant as of the last day of the calendar month following the month in which the Participant's employment with the Company and all affiliates terminates for any reason, including death. Notwithstanding the foregoing, if a Participant is entitled to receive a Supplemental Matching Contribution for the Plan Year in which he terminated employment, such Supplemental Matching Contribution and any gains or losses attributable thereto shall be distributed to or with respect to the Participant upon completion of the first valuation following the posting of such Supplemental Matching Contribution to the Supplemental Matching Contribution Account. Any unvested amounts credited to a Participant's Supplemental Matching Contribution Account shall be forfeited and retained by the Company. (b) The annual amount to be paid from the Supplemental TIP shall be limited to an amount which will not cause the total amount of compensation received from The Northern Trust to exceed the maximum amount deductible by The Northern Trust under Code section 162(m). Amounts not paid as a result of the above limitation shall be paid in subsequent years, to the extent permissible under the above limitation. (c) If a Participant dies before a complete distribution of his Supplemental Before Tax Deposit Account or his Supplemental Matching Contribution Account has been made to him, such amounts shall be distributed to the Beneficiary designated by the Participant in a writing last delivered to the Committee prior to his death. If a Participant has not designated a Beneficiary, or if no designated Beneficiary is living on the date of distribution, such amounts shall be distributed to those persons entitled to receive distributions of the Participant's accounts under the Qualified Plan. ARTICLE VI ADMINISTRATION OF THE PLAN 6.1 Administration by the Committee. The Committee shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. The Committee shall have discretion to interpret and construe the provisions of the Plan. 6.2 General Powers of Administration. All provisions set forth in the Qualified Plan with respect to the administrative powers and duties of the Committee, expenses of administration, and procedures for filing claims shall also be applicable with respect to the Plan. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Committee with respect to the Plan. ARTICLE VII AMENDMENT OR TERMINATION 7.1 Amendment or Termination. The Company intends the Plan to be permanent but reserves the right to amend or terminate the Plan when, in the sole discretion of the Company, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution of the Board and shall be effective as of the date set forth in such resolution. 7.2 Effect of Amendment or Termination. No amendment or termination of the Plan shall directly or indirectly reduce the balance of any Supplemental Account held hereunder as of the effective date of such amendment or termination. Upon termination of the Plan, distribution of amounts in a Participant's Supplemental Account shall be made to him or his Beneficiary in the manner and at the time described in Section 5.1 of the Plan. No additional credits of Supplemental Before-Tax Deposits or Supplemental Matching Contributions shall be made to the Supplemental Account of a Participant after termination of the Plan, but the Company shall continue to credit gains and losses attributable to investments made pursuant to Section 4.1 to such Supplemental Account until the balance of such Account has been fully distributed to the Participant or his Beneficiary. ARTICLE VIII GENERAL PROVISIONS 8.l Participant's Rights Unsecured. If and to the extent amounts allocated hereunder to the Supplemental Accounts of Participants are contributed by the Company to the Trust described in Section 4.1, benefits under the Plan shall be payable pursuant to the Trust Agreement. Pursuant to the Trust Agreement, all assets held thereunder shall remain subject to the general creditor of the Company. The Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any benefits hereunder. No Participant, Beneficiary or any other person shall have any interest in any particular assets of the Company by reason of the right to receive a benefit under the Plan and Trust Agreement and any such Participant, Beneficiary or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan and Trust Agreement. 8.2 General Conditions. Except as otherwise expressly provided herein, all terms and conditions of the Qualified Plan applicable to a Qualified Plan Before-Tax Deposit or a Qualified Plan Matching Contribution shall also be applicable to a Supplemental Before-Tax Deposit or a Supplemental Matching Contribution to be made hereunder. Any Qualified Plan Before-Tax Deposit or Qualified Plan Matching Contribution, or any other contributions to be made under the Qualified Plan, shall be made solely in accordance with the terms and conditions of the Qualified Plan and nothing in this Plan shall operate or be construed in any way to modify, amend or affect the terms and provisions of the Qualified Plan. 8.3 No Guaranty of Benefits. Nothing contained in the Plan shall constitute a guaranty by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder. 8.4 No Enlargement of Employee Rights. No Participant shall have any right to receive a distribution of contributions made under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of the Company. 8.5 Spendthrift Provision. No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimoney, support, separate maintenance and claims in bankruptcy proceedings. 8.6 Applicable Law. The Plan shall be construed and administered under the laws of the State of Illinois to the extent not inconsistent with the Employee Retirement Income Security Act of l974. 8.7 Incapacity of Recipient. If any benefit under the Plan shall be payable to a minor or a person not adjudicated incompetent but who, by reason of illness or mental or physical disability, is, in the opinion of the Committee, unable to properly manage his affairs, such benefit shall be paid in such of the following ways as the Committee deems best: (a) to the person directly; (b) in the case of a minor, to a custodian under any Uniform Gift to Minors Act for the person; or (c) to the person's spouse, adult child or blood relative. Any benefit so paid shall be a complete discharge of any liability of the Company and the Plan therefor. 8.8 Successors. The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of Section 7.2. 8.9 Unclaimed Benefit. Each Participant shall keep the Committee informed of his current address and the current address of his designated Beneficiary. Neither the Company nor the Committee shall be obligated to search for the whereabouts of any person. If the location of a Participant is not made known to the Committee within three (3) years after the date on which distribution of the Participant's Supplemental Before-Tax Deposit Account and Supplemental Matching Contribution Account may first be made, distribution may be made as though the Participant had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or within three years after the actual death of a Participant, neither the Company nor the Committee is able to locate any designated Beneficiary of the Participant, then the Company shall have no further obligation to pay any benefit hereunder to such Participant or designated Beneficiary and such benefit shall be forfeited; provided, however, that if the Participant or designated Beneficiary makes a valid claim for any benefit that has been so forfeited, the forfeited benefit shall be reinstated. 8.10 Limitations on Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company, any member of the Committee nor any individual acting as an employee or agent of the Company or Committee shall be liable to any Participant, former Participant, Beneficiary or any other person for any claim, loss, liability or expense incurred in connection with the Plan. 8.11 Gender; Headings. Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless qualified by the context. Any headings used herein are included for ease of reference only, and are not to be construed so as to alter the terms hereof. IN WITNESS WHEREOF, The Northern Trust Company has caused this Plan to be signed by its duly authorized officer as of the 30th day of April, 1996. THE NORTHERN TRUST COMPANY BY /s/ Martin J. Joyce, Jr. ------------------------ SCHEDULE A SUPPLEMENTAL THRIFT-INCENTIVE PLAN & SUPPLEMENTAL EMPLOYEE STOCK OWNERSHIP PLAN INVESTMENT FUND OPTIONS 1. Insight Money Market Fund 2. Intermediate Bond Fund 3. Equity Fund EX-10.(VI) 7 SUPPLEMENTAL PENSION PLAN Exhibit Number (10)(vi) to 9/30/96 Form 10-Q RESTATED SUPPLEMENTAL PENSION PLAN FOR EMPLOYEES OF THE NORTHERN TRUST COMPANY The Northern Trust Company Supplemental Plan was adopted on September l6, l975 and amended through December l6, l986. The portions of that plan that pertained to The Northern Trust Company Pension Plan were amended and restated by The Restated Supplemental Pension Plan for Employees of The Northern Trust Company, initially adopted effective September l, l989, restated effective September l, l989 and further amended and restated effective January 1, 1996 ("the Restated Supplemental Pension Plan"). The Northern Trust Company desires to further amend and restate The Restated Supplemental Pension Plan, which has been established and is maintained by The Northern Trust Company solely for the purpose of providing benefits for certain employees of the Company who participate in The Northern Trust Company Pension Plan and whose benefits under such plan are limited by the restrictions on benefits imposed by Section 40l(a)(17) and Section 415 of the Code. Accordingly, effective May l, l996, The Northern Trust Company hereby further amends and restates The Restated Supplemental Pension Plan pursuant to the terms and provisions set forth below. ARTICLE I DEFINITIONS Wherever used herein the following terms shall have the meanings hereinafter set forth: 1.1 "Beneficiary" means (i) Spouse or, (ii) if the Participant had fifteen or more years of credited service under the Qualified Plan and dies without a Spouse but with Eligible Child(ren) as defined in the Qualified Plan, such Participant's Eligible Child(ren). 1.2 "Board" means the Board of Directors of The Northern Trust Company. 1.3 "Code" means the Internal Revenue Code of l986, as amended from time to time, and any regulations promulgated thereunder. 1.4 "Change-in-Control" means the earliest to occur of: (a) The receipt by Northern Trust Corporation (the "Corporation") of a Schedule 13D or other statement filed under Section l3(d) of the Securities Exchange Act of l934, as amended (the "Exchange Act"), indicating that any entity, person, or group has acquired beneficial ownership, as that term is defined in Rule l3d-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"); (b) The commencement by any entity, person, or group (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 60% 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. 1.5 "Committee" means the Employee Benefit Administrative Committee of The Northern Trust Company, as constituted from time to time, which has the responsibility for administering the Qualified Plan. 1.6 "Company" means The Northern Trust Company, an Illinois banking corporation, and such of its subsidiaries and affiliates as shall, with the consent of the Board, adopt the Plan, and, to the extent provided in Section 8.8 below, any successor corporation or other entity resulting from a merger or consolidation into or with the Company or a transfer or sale of substantially all of the assets of the Company. 1.7 "Participant" means any employee of the Company who is a participant under the Qualified Plan as described in Section 2.l of the Plan and to whom or with respect to whom a benefit is payable under the Plan. 1.8 "Payment Entitlement Date" means either (i) the first of the month following termination in the case of a Participant eligible for a benefit under Section 5.4 of the Qualified Plan or, (ii) the day following termination in the case of a Participant eligible for a benefit under Sections 5.1, 5.2, or 5.3 of the Qualified Plan. 1.9 "Payment Date" means, with respect to a Participant who is retirement eligible under the Qualified Plan, the last business day of the month next following the month in which the Participant's employment with the Company terminates. With respect to a Vested Terminated Participant as defined in the Qualified Plan, "Payment Date" means the last day of the third calendar month following the calendar month in which the Participant terminates employment. 1.10 "Plan" means the Restated Supplemental Pension Plan for employees of The Northern Trust Company as further amended and restated effective January l, l996. 1.11 "Qualified Plan" means The Northern Trust Company Pension Plan as amended and restated effective January l, l989, and as further amended from time to time, and each predecessor, successor or replacement employees' pension plan. 1.12 "Qualified Plan Pension Benefit" means the aggregate pension benefit payable to a Participant pursuant to the Qualified Plan, and all annuities purchased for the Participant under the Qualified Plan (whether or not terminated) by reason of his termination of employment with the Company and all affiliates. 1.13 "Qualified Plan Survivor Benefit" means the aggregate survivor benefit payable to a Beneficiary of a Participant pursuant to Section 6.1 of the Qualified Plan, or any successor section, and all annuities purchased under such section of the Qualified Plan (whether or not terminated) in the event of death of the Participant at any time prior to the Participant's Payment Entitlement Date under the Qualified Plan. 1.14 "Spouse" means the person to whom the Participant was married on the date of his death. 1.15 "Supplemental Pension Benefit" means the lump sum benefit payable to a Participant pursuant to the Plan by reason of his termination of employment with the Company and all affiliates for any reason. 1.16 "Supplemental Survivor Benefit" means the lump sum benefit payable to the Beneficiary of a Participant pursuant to the Plan. 1.17 Except as otherwise expressly provided herein, all words and phrases in the Qualified Plan shall have the same meaning in the Plan. ARTICLE II ELIGIBILITY 2.1 Participant. An employee of the Company who is eligible in any Plan Year to receive a Qualified Plan Pension Benefit, the amount of which is reduced by reason of the application of the limitations on benefits imposed by either or both of Section 40l(a)(17) and Section 415 of the Code on the Qualified Plan, shall be a Participant and shall be eligible to receive a Supplemental Pension Benefit for such Plan Year. ARTICLE III SUPPLEMENTAL PENSION BENEFIT 3.1 Amount. The Supplemental Pension Benefit payable to an eligible Participant shall be the difference between (a) the lump sum value of the Participant's Qualified Plan Pension Benefit based on a straight life annuity over the lifetime of the Participant only (i) after considering Code Section 401(a)(17) and Section 415 restrictions, and (ii) compensation for any period of time considered in computing such Benefit is determined including amounts of base salary and bonus earned with respect to such period of time and deferred because of Internal Revenue Code Section 162(m) limitations under the Northern Trust Corporation Annual Performance Plan, and (b) the lump sum value of the Participant's Qualified Plan Pension Benefit, based on the Participant's qualified joint and survivor lump sum benefit (without consideration of such statutory restrictions). (a) If a Participant dies following his termination of employment with the Company but prior to his Payment Entitlement Date the following rules apply: (i) if he is survived by a Beneficiary who is living on his Payment Entitlement Date, fifty percent (50%) of the amount that would have been paid to the Participant on his Payment Date shall be paid in a single lump sum on such Payment Date to his surviving Beneficiary, and no other benefit shall be payable hereunder with respect to such Participant, or (ii) if he is not survived by a Beneficiary who is living on his Payment Entitlement Date, no benefit shall be payable hereunder with respect to such Participant. (b) If a Participant dies following his termination of employment with the Company but after his Payment Entitlement Date the following rules apply: (i) if he is survived by a Beneficiary who is living on the Payment Date, l00% of the amount that would have been paid to the Participant on his Payment Date shall be paid in a single lump sum on such Payment Date to his Beneficiary, and no other benefit shall be payable hereunder with respect to such Participant, or (ii) if he is not survived by a Beneficiary who is living on his Payment Date, the full benefit shall be payable to his estate. (c) In the event that a Participant's entire Qualified Plan Pension Benefit has been distributed due to the payment of a qualified domestic relations order (QDRO), the Participant will be entitled to the Supplemental Pension Benefit to which he or she would have been entitled, calculated without regard to the QDRO. The Participant's Supplemental Pension Benefit will not replace any amount actually paid to an alternative payee pursuant to the QDRO. (d) Notwithstanding anything to the contrary contained herein, the annual amount to be paid from the Plan in the year of a Participant's termination shall be limited to an amount which will not cause the total amount of compensation received from the Company and the amount paid from the Plan to exceed the maximum amount deductible by the Company under Code Section 162(m). Any amount which is not paid as the result of this limitation shall be transferred to the Supplemental Thrift-Incentive Plan for Employees of The Northern Trust Company as of the end of the month next following the month in which such amount would have been paid, but for such limitation. Amounts so transferred shall be paid in subsequent years, to the extent permissible under this limitation, to the Participant, or in the event of the Participant's death, to the Participant's Beneficiary, if he or she survives the Participant, and if not, to the Participant's estate. 3.2 Vesting of Benefit. Each Participant shall vest in his Supplemental Pension Benefit in accordance with the vesting schedule applicable to his Qualified Plan Pension Benefit set forth in the Qualified Plan. Notwithstanding the preceding sentence or any other provision of the Plan, each Participant shall become fully vested in his Supplemental Pension Benefit on the effective date of a Change-in-Control. 3.3 Form of Benefit. The Supplemental Pension Benefit of a Participant whose employment with the Company terminates for any reason shall be paid in a single lump sum, which shall be equal to the amount calculated pursuant to Section 3.1 above, as determined by the same actuarial adjustments as those specified in the Qualified Plan with respect to determination of the amount of the Qualified Plan Pension Benefit or Qualified Plan Survivor Benefit. 3.4 Commencement of Benefit. Payment to a Participant of his Supplemental Pension Benefit shall be made on his Payment Date. If such Benefit is paid prior to the Participant's Normal Retirement Date, it shall be adjusted to reflect such early payment as determined by the same early retirement adjustment factors as are specified in the Qualified Plan with respect to the adjustment of the Qualified Plan Pension Benefit for early commencement. 3.5 Grandfather Provision. Notwithstanding anything to the contrary contained herein, any Participant who commenced receiving payment of a Supplemental Pension Benefit hereunder in the form of an annuity prior to September l, l989, pursuant to the terms of the Plan on the date payment of such Benefit commenced, shall continue to receive such payments from and after September l, l989 in the form of such annuity. Notwithstanding anything to the contrary contained herein, any Beneficiary who commenced receiving payment of a Supplemental Survivor Benefit hereunder in the form of an annuity prior to January 1, 1995, pursuant to the terms of the Plan on the date payment of such Benefit commenced, shall continue to receive such payments from and after January l, l995 in the form of such annuity. ARTICLE IV SUPPLEMENTAL SURVIVOR BENEFIT 4.1 Amount. If a Participant dies prior to termination of employment under circumstances in which a Qualified Plan Survivor Benefit is payable to his Beneficiary, then a Supplemental Survivor Benefit is payable to his Beneficiary as hereinafter provided. The amount of the Supplemental Survivor Benefit payable to a Participant's Beneficiary shall be equal to the difference between (a) and (b) below: (a) the lump sum value of the Qualified Plan Survivor Benefit to which the Beneficiary would have been entitled under the Qualified Plan if (i) such Benefit were computed without giving effect to the limitations on benefits imposed by Sections 401(a)(17) and 415 of the Code, and (ii) Compensation for any period of time considered in computing such Benefit was determined including amounts of base salary and bonus which are eligible for computing such benefit under the Qualified Plan; (b) the lump sum value of the Qualified Plan Survivor Benefit actually payable to the Beneficiary under the Qualified Plan. 4.2 Form and Commencement of Benefit. If a Supplemental Survivor Benefit shall be payable hereunder, such Benefit shall be payable in one lump sum payment, to be made according to the schedule for payment of a Qualified Plan Survivor Benefit as though it had commenced immediately. ARTICLE V ADMINISTRATION OF THE PLAN 5.1 Administration by the Committee. The Committee shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. The Committee shall have discretion to interpret and construe the provisions of the Plan. 5.2 General Powers of Administration. All provisions set forth in the Qualified Plan with respect to the administrative powers and duties of the Committee, expenses of administration, and procedures for filing claims shall also be applicable with respect to the Plan. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Committee with respect to the Plan. ARTICLE VI AMENDMENT OR TERMINATION 6.1 Amendment or Termination. The Company intends the Plan to be permanent but reserves the right to amend or terminate the Plan when, in the sole discretion of the Company, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution of the Board and shall be effective as of the date set forth in such resolution. 6.2 Effect of Amendment or Termination. No amendment or termination of the Plan shall directly or indirectly deprive any current or former Participant or Beneficiary of all or any portion of any Supplemental Pension Benefit or Supplemental Survivor Benefit, payment of which has commenced prior to the effective date of such amendment or termination, or that would be payable if the Participant terminated employment for any reason, including death on such effective date. ARTICLE VII GENERAL PROVISIONS 7.1 Funding. The Company may contribute amounts to fund the benefits under the Plan to a trust ("Trust") established pursuant to a trust agreement between the Company and Harris Trust & Savings Bank, a bank organized and existing under the laws of the State of Illinois, as trustee ("Trust Agreement"). If and to the extent amounts are contributed hereunder by the Company to the Trust, benefits under the Plan shall be payable pursuant to the Trust Agreement. Pursuant to the Trust Agreement, all assets held thereunder shall remain subject to the general creditors of the Company. The Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any benefits hereunder. No Participant, Beneficiary or any other person shall have any interest in any particular assets of the Company by reason of right to receive a benefit under the Plan and Trust Agreement and any such Participant, Beneficiary or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan and Trust Agreement. 7.2 General Conditions. Except as otherwise expressly provided herein, all terms and conditions of the Qualified Plan applicable to a Qualified Plan Pension Benefit or a Qualified Plan Survivor Benefit shall also be applicable to a Supplemental Pension Benefit or a Supplemental Survivor Benefit payable hereunder. Any Qualified Plan Pension Benefit or Qualified Plan Survivor benefit, or any other benefit payable under the Qualified Plan, shall be paid solely in accordance with the terms and conditions of the Qualified Plan and nothing in the Plan shall operate or be construed in any way to modify, amend or affect the terms and provisions of the Qualified Plan. 7.3 No Guaranty of Benefits. Nothing contained in the Plan shall constitute a guaranty by the Company or any other entity or person that the assets of the Company will be sufficient to pay any benefit hereunder. 7.4 No Enlargement of Employee Rights. No Participant or Beneficiary shall have any right to a benefit under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of the Company. 7.5 Spendthrift Provision. No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimoney, support, separate maintenance and claims in bankruptcy proceedings. 7.6 Applicable Law. The Plan shall be construed and administered under the laws of the State of Illinois to the extent not inconsistent with the Employee Retirement Income Security Act of l974. 7.7 Incapacity of Recipient. If any benefit under the Plan shall be payable to a minor or a person not adjudicated incompetent but who, by reason of illness or mental or physical disability, is, in the opinion of the Committee, unable to properly manage his affairs, such benefit shall be paid in such of the following ways as the Committee deems best: (a) to the person directly; (b) in the case of a minor, to a custodian under any Uniform Gift to Minors Act for the person; or (c) to the person's spouse, adult child or blood relative. Any benefit so paid shall be a complete discharge of any liability of the Company and Plan therefor. 7.8 Successors. The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of Section 6.2. 7.9 Unclaimed Benefit. Each Participant shall keep the Committee informed of his current address and the current address of his Beneficiary. Neither the Company nor the Committee shall be obligated to search for the whereabouts of any person. If the location of a Participant is not made known to the Committee within three (3) years after the date on which payment of the Participant's Supplemental Pension Benefit may first be made, payment may be made as though the Participant had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or within three years after the actual death of a Participant, neither the Company nor the Committee is able to locate any Beneficiary of the Participant, then the Company shall have no further obligation to pay any benefit hereunder to such Participant or Beneficiary and such benefit shall be forfeited; provided, however, that if the Participant or Beneficiary makes a valid claim for any benefit that has been so forfeited, the forfeited benefit shall be reinstated. 7.10 Limitations on Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company, any member of the Committee, nor any individual acting as an employee or agent of the Company or Committee shall be liable to any Participant, former Participant, Beneficiary or any other person for any claim, loss, liability or expense incurred in connection with the Plan. 7.11 Gender; Headings. Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless qualified by the context. Any headings used herein are included for ease of reference only, and are not to be construed so as to alter the terms hereof. IN WITNESS WHEREOF, The Northern Trust Company has caused this Plan to be signed by its duly authorized officer as of the 30th day of April, 1996. THE NORTHERN TRUST COMPANY BY /s/ Martin J. Joyce, Jr. ------------------------ EX-10.(VII) 8 AMENDMENT TO AMENDED INCENTIVE STOCK PLAN Exhibit Number (10)(vii) to 9/30/96 Form 10-Q AMENDMENT TO THE NORTHERN TRUST CORPORATION AMENDED INCENTIVE STOCK PLAN WHEREAS, Northern Trust Corporation (the "Corporation") adopted the Northern Trust Corporation Amended Incentive Stock Plan (the "Plan"), and reserved the right to amend the Plan; and WHEREAS, the Corporation deems it to be in its best interest to amend the Plan as described below; NOW, THEREFORE, IT IS RESOLVED that, pursuant to the power reserved to the Board of Directors of the Corporation under Section 14 of the Plan, the Plan be and hereby is amended, effective as of September 17, 1996, the date on which the Board adopted the resolutions authorizing the amendment, as follows: Section 13 of the Plan is hereby amended by (a) deleting the reference to Subsection (i) in the third sentence, and (b) deleting the language in the third sentence beginning with ", and" and continuing through clause (ii), so that the sentence reads in its entirety as follows: "Notwithstanding any provision of the Plan to the contrary, a participant's election pursuant to the preceding sentence must be made on or prior to the date as of which income is realized by the participant in connection with such benefit and must be irrevocable." This Amendment has been executed by the Corporation, by its duly authorized officer, on November 1, 1996 and attested by its Assistant Secretary. NORTHERN TRUST CORPORATION By: /s/ Peter L. Rossiter -------------------------- Executive Vice President ATTEST: /s/ Victoria Antoni - ----------------------------- Assistant Secretary 26444-2 EX-10.VIII 9 AMENDMENT TO AMENDED 1992 INCENTIVE STOCK PLAN Exhibit Number (10)(viii) to 9/30/96 Form 10-Q AMENDMENT TO THE NORTHERN TRUST CORPORATION AMENDED 1992 INCENTIVE STOCK PLAN WHEREAS, Northern Trust Corporation (the "Corporation") adopted the Northern Trust Amended 1992 Incentive Stock Plan (the "Plan"), and reserved the right to amend the Plan; and WHEREAS, the Corporation deems it to be in its best interest to amend the Plan as described below; NOW, THEREFORE, IT IS RESOLVED that, pursuant to the power reserved to the Board of Directors of the Corporation under Section 15 of the Plan, the Plan be and hereby is amended, effective as of February 20, 1996, the date on which the Board adopted the resolutions authorizing the amendment, as follows: Section 6(g)(iii)(1) of the Plan is hereby amended by deleting the language in its entirety and replacing it with the following language: "(1) 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 60% of the voting stock of the surviving or resulting corporation," This Amendment has been executed by the Corporation, by its duly authorized officer, on November 1, 1996 and attested by its Assistant Secretary. NORTHERN TRUST CORPORATION By:/s/ Peter L. Rossiter --------------------------- Executive Vice President ATTEST: /s/ Victoria Antoni - ----------------------------- Assistant Secretary EX-11 10 COMPUTATION OF PER SHARE EARNINGS EXHIBIT NUMBER (11) TO 9/30/96 FORM 10-Q NORTHERN TRUST CORPORATION COMPUTATION OF PER SHARE EARNINGS
Third Quarter Ended September 30 Nine Months Ended September 30 -------------------------------- ------------------------------ 1996 1995 1996 1995 ----------- ----------- ------------ ------------ Computations Required by - ------------------------ Regulation S-K - -------------- Primary Earnings Per Share - -------------------------- Net Income Applicable to Common Shares $65,225,457 $55,933,249 $187,669,908 $154,061,092 =========== =========== ============ ============ Weighted Average Number of Common and Common Equivalent Shares Outstanding Common Shares 55,871,796 55,702,458 56,110,777 55,314,848 Dilutive Effect of Common Equivalent Shares (A) Stock Options 1,005,588 595,957 939,745 572,246 Long Term Performance Stock Plan 315,745 371,585 291,059 350,102 Other 75,461 16,283 58,958 12,332 ----------- ----------- ------------ ------------ 57,268,590 56,686,283 57,400,539 56,249,528 =========== =========== ============ ============ Net Income Per Common and Common Equivalent Share $1.14 $0.99 $3.27 $2.74 ========== ========== =========== ===========
(A) Determined by application of the treasury stock method. EXHIBIT NUMBER (11) TO 9/30/96 FORM 10-Q NORTHERN TRUST CORPORATION COMPUTATION OF PER SHARE EARNINGS
Third Quarter Ended September 30 Nine Months Ended September 30 -------------------------------- ------------------------------ 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Computations Required by - ------------------------ Regulation S-K - -------------- Fully Diluted Earnings Per Share - -------------------------------- Net Income Applicable to Common Shares $65,225,457 $55,933,249 $187,669,908 $154,061,092 Add Back: Dividend on Series E Convertible Preferred Stock 781,250 14,756 2,343,750 ----------- ----------- ------------ ------------ $65,225,457 $56,714,499 $187,684,664 $156,404,842 =========== =========== ============ ============ Weighted Average Number of Common and Common Equivalent Shares Outstanding Common Shares 55,871,796 55,702,458 56,110,777 55,314,848 Dilutive Effect of Common Equivalent Shares (A) Stock Options 1,125,970 796,429 1,185,038 872,424 Long Term Performance Stock Plan 337,931 395,981 307,293 364,940 Other 85,450 19,104 66,409 14,155 Other Potentially Dilutive Securities Equivalent Shares Assuming Conversion of Series E Convertible Preferred Stock 1,204,820 127,517 1,204,820 ----------- ----------- ------------ ------------ 57,421,147 58,118,792 57,797,034 57,771,187 =========== =========== ============ ============ Net Income Per Common and Common Equivalent Share $ 1.14 $ 0.98 $ 3.25 $ 2.71 =========== =========== ============ ============
(A) Determined by application of the treasury stock method. EX-27 11 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-31-1996 JAN-01-1996 SEP-30-1996 1,068,652 1,312,314 1,026,790 8,991 5,318,204 500,641 520,016 10,909,180 147,386 21,360,117 13,438,643 5,497,350 469,830 437,487 94,966 0 120,000 1,301,841 21,360,117 510,116 272,158 78,586 860,860 333,761 573,194 287,666 11,500 344 566,859 286,451 286,451 0 0 191,401 3.27 3.25 2.23 30,690 21,085 2,618 0 147,131 12,587 1,342 147,386 108,328 2,741 36,317
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