SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NORTHERN TRUST CORPORATION
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
[NORTHERN TRUST LOGO]LOGO
Notice and Proxy Statement
Annual Meeting of Stockholders
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 18, 199516, 1996
The annual meeting of stockholders of Northern Trust Corporation will be
held on Tuesday, April 18, 1995,16, 1996, at 10:30 a.m., Chicago time, at the office of
the Corporation, northwest corner of LaSalle and Monroe Streets, Chicago, for
the following purposes:
(1) to elect fifteenfourteen Directors to hold office until the next annual
meeting of stockholders and until their successors shall have been
elected and qualified; (2) to consider and
vote upon approval of the Northern Trust Corporation
Amended 1992 Incentive Stock Plan; and
(3)(2) to transact such other business as may properly come before the
meeting.
Only stockholders of record on the books of the Corporation at 5 p.m.,
Chicago time, on February 27, 1995,26, 1996, will be entitled to vote at the meeting.
PETER L. ROSSITER
Secretary
March 13, 199511, 1996
IMPORTANT--PLEASE MAIL YOUR PROXY PROMPTLY
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION
AT THE MEETING, YOU ARE URGED TO SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. YOU
MAY NEVERTHELESS VOTE IN PERSON IF YOU DO ATTEND
THE MEETING.
[NORTHERN[LOGO--NORTHERN TRUST LOGO]CORPORATION]
50 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60675
MARCH 13, 199511, 1996
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Northern Trust Corporation (the "Corporation") of proxies
for use at the annual meeting of stockholders of the Corporation to be held
April 18, 1995,16, 1996, at 10:30 a.m., Chicago time, at the office of the Corporation,
northwest corner of LaSalle and Monroe Streets, Chicago. The Corporation is a
bank holding company whose principal subsidiary is The Northern Trust Company
(the "Bank").
Any stockholder giving a proxy will have the right to revoke it at any time
prior to the voting thereof. All shares represented by effective proxies will
be voted at the meeting, or at any adjournment thereof, in accordance with the
instructions reflected in the proxies. Absent any voting instructions to the
contrary, shares will be voted FOR the election of the fifteenfourteen nominees for
Director and FOR approval of the Northern Trust Corporation Amended 1992
Incentive Stock Plan.Director.
This Proxy Statement and the enclosed proxy, along with the Corporation's
19941995 Annual Report, including financial statements, are being mailed on or
about March 13, 1995,11, 1996, to each stockholder of record as of February 27, 1995.26, 1996.
As of February 27, 1995,26, 1996, the record date for the annual meeting, the
Corporation had outstanding and entitled to vote 54,271,37956,860,230 shares of common
stock, par value $1.66 2/3 per share (the "Common Stock"), exclusive of 100,405119,349
shares held by the Corporation as treasury stock, which will not be voted.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the inspectors of election appointed for the meeting and will determine whether
or not a quorum is present. A majority of the outstanding shares of Common
Stock will constitute a quorum at the annual meeting. Abstentions will be
counted as present for purposes of determining the existence of a quorum and
for purposes of determining whether a proposal has been approved.
ELECTION OF DIRECTORS
FifteenFourteen Directors are to be elected at the annual meeting of stockholders.
It is intended that, absent any voting instructions to the contrary, shares
represented by the enclosed proxy will be voted for the election of all
nominees listed below. All Directors will be elected to serve until the next
annual meeting and until their successors shall have been elected and
qualified. In the event, however, that any such nominee shall be unable to
serve, which is not now contemplated, the proxy holders may or may not vote for
a substitute nominee.
The proxy provides instructions for voting for all Director nominees or for
withholding authority to vote for one or more Director nominees. Stockholders
have cumulative voting rights in the election of Directors. Accordingly, each
stockholder is entitled to as many votes as shall equal the number of his
shares of Common Stock multiplied by the number of Directors to be elected. It
is expected that the proxy holders will divide these cumulative votes equally
among all Director nominees for whom authority to vote has not been withheld,
unless the stockholder chooses to allocate his votes otherwise and so indicates
on the proxy. Notwithstanding the foregoing, the proxy holders reserve the
right, exercisable in their sole discretion, to vote proxies cumulatively so as
to elect all or as many as possible of such Director nominees depending upon
circumstances at the meeting. Whether or not any shares are voted cumulatively,
the fifteenfourteen persons receiving the highest number of votes cast will be elected
as Directors.
1
INFORMATION ABOUT NOMINEES
The following information with respect to nominees for election to the Board
of Directors of the Corporation at the 19951996 annual meeting of stockholders is
as of December 31, 1994.1995.
Nominee, Age
and
Year Became
Director of Principal Occupation and Other Information
Corporation -------------------------
or Bank
- --------------
RETIRED CHAIRMAN OF THE BOARD, NALCO CHEMICAL
COMPANY since July, 1994, Chairman of the Board and
(PHOTO) Chief Executive Officer from 1984 to 1994
(Manufacturer of specialized service chemicals).
Mr. Clark is a director of USG Corporation, NICOR
Inc., James River Corp., Bethlehem Steel Corp. and
Diamond Shamrock Corp.
WORLEY H. CLARK
Age 62 1986
PRESIDENT, CHICAGO STATE UNIVERSITY since 1990;
[PHOTO HERE] Associate Provost and Associate Vice President for
(PHOTO)
Academic Affairs, University of Minnesota, from
1988 to 1990 (Educational institutions).
Dr. Cross is a director of the Student Loan Market-
ing Association.
DOLORES E. CROSS
Age 5758 1994
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE
CORPORATION AND THE BANK since January, 1994,
Chairman, President and Chief Executive Officer
(PHOTO) from April, 1990 to January, 1994, President and
Chief Executive Officer from December, 1989 to
April, 1990.
Mr. Fox is a director of USG Corporation, North-
western Memorial Corporation, Northwestern Memorial
Hospital, and the Federal Reserve Bank of Chicago
and a Governor of the Chicago Stock Exchange.
DAVID W. FOX
Age 63 1981
DEAN AND EDWARD EAGLE BROWN DISTINGUISHED SERVICE
[PHOTO HERE] PROFESSOR OF FINANCE, GRADUATE SCHOOL OF BUSINESS,
UNIVERSITY OF CHICAGO since July, 1993, Edward
Eagle
(PHOTO) Brown Professor of Finance from 1989 to July,
1993 and member of the Faculty since 1966 GRADUATE
SCHOOL OF BUSINESS, UNIVERSITY OF CHICAGO
(Educational institution).
Mr. Hamada is a director of A. M. Castle & Co. and
the Chicago Board of Trade.
ROBERT S. HAMADA
Age 5758 1988
2
Nominee, Age
and
Year Became
DirectorPRESIDENT since October, 1995 AND CHIEF OPERATING
[PHOTO HERE] OFFICER since June, 1995 of Principal Occupation and Other Information
Corporation
or Bank
- --------------- VICE CHAIRMAN OF THEthe CORPORATION AND THE
BANK, sinceVice Chairman from January, 1994 to June,
1995, Senior Executive Vice President from
November, 1992 through December, 1993, and
Executive Vice
(PHOTO) President of the Bank from April,
1987 to November, 1992 and of the Corporation from
April, 1990 to November, 1992.
Mr. Hastings currently serves as head of the
Personal Financial Services Business Unit.
BARRY G. HASTINGS
Age 4748 1994
PARTNER, MAYER, BROWN & PLATT since January, 1967
[PHOTO HERE] (Law
(PHOTO) firm).
Mr. Helman is a director of The Horsham
Corporation,
LaSalle Street Fund, Brambles USA, Inc. and Alberta Natural
Gas Company Ltd. and a Governor of the Chicago
Stock Exchange.
ROBERT A. HELMAN
Age 6061 1986
2
Nominee, Age
and
Year Became
Director of Principal Occupation and Other Information
Corporation
or Bank
- --------------- MANAGING PARTNER, KEL ENTERPRISES L.P. since 1982
(PHOTO)[PHOTO HERE] (Holding and investment partnership).
Mr. Kelly is a director of Bayerische Motoren Werke (BMW)
A.G., Deere & Company, Nalco Chemical Company, Snap-on
Incorporated and Snap-on
Incorporated.Tejas Gas Corporation.
ARTHUR L. KELLY
Age 5758 1988
(PHOTO)[PHOTO HERE] GENERAL DIRECTOR, LYRIC OPERA OF CHICAGO since January,
1981 (Opera company).
ARDIS KRAINIK
Age 6566 1985
PRESIDENT AND CHIEF EXECUTIVE OFFICER, BURLINGTON
[PHOTO HERE] NORTHERN SANTA FE CORPORATION since September, 1995,
President and Chief Executive Officer, Santa Fe Pacific
Corporation from July, 1987 to September, 1995, and
Chairman from May, 1988 to September, 1995
(Transportation companies).
Mr. Krebs is a director of Burlington Northern Santa Fe
Corporation, Phelps Dodge Corporation, Santa Fe Energy
Resources, Inc., Santa Fe Pacific Pipelines, Inc., Santa
Fe Pacific Gold Corporation, Burlington Northern Inc. and
Burlington Northern Railroad Company.
ROBERT D. KREBS
Age 53 1989
CHAIRMAN since November, 1993, AND CHIEF EXECUTIVE OFFI-
[PHOTO HERE] CER since July, 1988, MOLEX INCORPORATED (Manufacturer of
electrical/electronic interconnecting products and sys-
tems).
Mr. Krehbiel is a director of Molex Incorporated,
Tellabs, Inc. and Nalco Chemical Company.
FREDERICK A. KREHBIEL
Age 54 1988
3
Nominee, Age
and
Year Became
Director of Principal Occupation and Other Information
Corporation
or Bank
- --------------- CHAIRMAN since May, 1988, AND PRESIDENT AND CHIEF
EXECUTIVE OFFICER since July, 1987, SANTA FE PACIFIC
CORPORATION (Transportation company).
(PHOTO) Mr. Krebs is a director of Santa Fe Pacific Corporation,
Phelps Dodge Corporation, Santa Fe Energy Resources,
Inc., Catellus Development Corporation, Santa Fe Pacific
Pipelines, Inc., Santa Fe Pacific Gold Corporation and
The Atchison, Topeka and Santa Fe Railway Company.
ROBERT D. KREBS
Age 52 1989
CHAIRMAN since November, 1993, AND CHIEF EXECUTIVE OFFI-
CER since July, 1988, MOLEX INCORPORATED (Manufacturer of
electrical/electronic interconnecting products and sys-
(PHOTO) tems).
Mr. Krehbiel is a director of Molex Incorporated,
Tellabs, Inc., A. M. Castle & Co. and Nalco Chemical
Company.
FREDERICK A. KREHBIEL
Age 53 1988
RETIRED VICE CHAIRMAN, CENTEL CORPORATION since May, 1987
(PHOTO)[PHOTO HERE] (Telecommunications company).
Mr. Mitchell is a director of The Interlake Corporation,
Peoples Energy Corporation and The Sherwin-Williams Co.
WILLIAM G. MITCHELL
Age 6364 1975
CHAIRMAN since July, 1994, CHIEF EXECUTIVE OFFICER since
[PHOTO HERE] April, 1994, AND PRESIDENT since 1990, NALCO CHEMICAL
COMPANY; Chief Operating Officer from 1992 to 1994
(Manufacturer of specialized service chemicals).
Mr. Mooney is a director of Nalco Chemical Company,
Morton International, Inc. and the Chemical
Manufacturers' Association.
EDWARD J. MOONEY
Age 54 --
CHAIRMAN since October, 1995 AND CHIEF OPERATINGEXECUTIVE OFFICER
OF THE[PHOTO HERE] since June, 1995 of the CORPORATION AND THE BANK,
sincePresident from January, 1994 to October, 1995, Chief
Operating Officer from January, 1994 to June, 1995,
Senior Executive Vice
(PHOTO) President from November, 1992
through December, 1993 and Executive Vice President of
the Bank from April, 1987 to November, 1992 and of the
Corporation from April, 1989 to November, 1992.
WILLIAM A. OSBORN
Age 4748 1994
4
Nominee, Age
and
Year Became
Director of
Corporation Principal Occupation and Other Information
or Bank
- ---------------
CHAIRMAN OF THE EXECUTIVE COMMITTEE, ILLINOIS TOOL WORKS
[PHOTO HERE] INC. since January, 1982 (Manufacturer and marketer of
engineered components and industrial systems and
(PHOTO)
consumables).
Mr. Smith is a director of Illinois Tool Works Inc. and
W. W. Grainger, Inc. and is a trustee of The Northwestern
Mutual Life Insurance Company.
HAROLD B. SMITH
Age 6162 1974
4
Nominee, Age
and
Year Became
Director of
Corporation Principal Occupation and Other Information
or Bank
- ---------------
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE
[PHOTO HERE] QUAKER OATS COMPANY since November, 1995, Chairman and
Chief Executive Officer from January, 1993.1993 to November,
1995, Chairman, President and Chief Executive Officer
from November, 1990 tothrough December, (PHOTO) 1992 Chairman and Chief Executive Officer from November,
1983 to November, 1990 (Diversified food(Worldwide
manufacturer and marketer)marketer of beverages and grain-based
products).
Mr. Smithburg is a director of The Quaker Oats Company,
Abbott Laboratories, Corning Incorporated and Prime
Capital Corp.
WILLIAM D. SMITHBURG
Age 5657 1981
RETIRED PRESIDENT, COMMONWEALTH EDISON COMPANY since
[PHOTO HERE] December, 1992.1992; President from September, 1987 to
(PHOTO)
December, 1992 (Company engaged in production,
distribution and sale of electric energy).
Mr. Thomas is a director of R. R. Donnelley & Sons Com-
pany and L. E. Myers Company.MYR Group Inc.
BIDE L. THOMAS
Age 5960 1984
5
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of the Common Stock for
each Director and Director nominee, each executive officer named in the Summary
Compensation Table elsewhere in this Proxy Statement and all Directors and
executive officers of the Corporation as a group.
None of the persons listed
below owns any Preferred Stock of the Corporation.
COMMON STOCK(/1/)
OWNED AS OF
DECEMBER 31, 19941995
-----------------------
NO. OF PERCENT
NAME SHARES OF CLASS
- ----------------------------------------------------------------------------------------------------------------------------------
Worley H. Clark......... 3,150 *
Dolores E. Cross........ 600Cross.................................. 644 *
David W. Fox............ 321,361(/Fox...................................... 311,505(/2/) *
Robert S. Hamada........Hamada.................................. 1,950 *
Barry G. Hastings....... 153,354(/Hastings................................. 160,931(/2/) *
Robert A. Helman........Helman.................................. 1,650 *
Arthur L. Kelly......... 8,250Kelly................................... 8,250(/3/) *
Ardis Krainik...........Krainik..................................... 1,650 *
Robert D. Krebs.........Krebs................................... 1,650 *
Frederick A. Krehbiel...Krehbiel............................. 10,250 *
James J. Mitchell................................. 85,473(/2/) *
William G. Mitchell.....Mitchell............................... 3,450 *
Edward J. Mooney.................................. -- (/3/) -- (/3/)
William A. Osborn....... 132,070(/Osborn................................. 138,097(/2/) *
Sheila A. Penrose................................. 30,590(/2/) *
Perry R. Pero........... 147,744(/2/) *
Peter L. Rossiter....... 40,501(/Pero..................................... 153,850(/2/) *
Harold B. Smith......... 3,630,263(/3/Smith................................... 3,631,655(/4/) 6.71%6.52%
William D. Smithburg....Smithburg.............................. 1,650 *
John S. Sutfin.......... 137,782(/2/) *
Bide L. Thomas..........Thomas.................................... 1,950 *
ALL DIRECTORS AND EXECU-
TIVEEXECUTIVE OFFICERS AS A GROUP.................. 5,173,589(2) 9.57%GROUP... 4,986,660(2) 8.96%
- --------------------------------------------------------------------------------
* Less than one percent of the outstanding Common Stock.
(1) The information contained in this columntable is furnished to the Corporation
by the individuals named in the table and reflects the Securities and
Exchange Commission's definition of beneficial ownership. The nature of
beneficial ownership for shares shown in this columntable is sole voting and/or
sole investment power, except as set forth below. The number
of shares includes shares granted under the Restricted Stock Plan for non-
employee Directors. See "Information About the Board and Committees--
Compensation of Directors," below.
(2) Includes shares issuable pursuant to stock options exercisable within
60 days after December 31, 1994,1995, as follows: Mr. Fox, 138,00097,985 shares; Mr.
Hastings, 67,78862,788 shares; Mr. James J. Mitchell, 20,750 shares; Mr. Osborn,
68,57564,875 shares; Ms. Penrose, 21,000 shares; Mr. Pero, 63,376 shares;
Mr. Rossiter, 40,000 shares; Mr. Sutfin, 35,00057,100 shares; and all
Directors and executive officers as a group, 730,325569,858 shares.
(3) As of February 26, 1996, the record date for the annual meeting, Mr.
Kelly and Mr. Mooney beneficially owned 10,850 and 300 shares of Common
Stock, respectively.
(4) See note 2 on page 7.
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table showsincludes information concerning Common Stock ownership of
stockholders who were the beneficial owners of more than 5% of the outstanding
shares of the Common Stock on December 31, 1994.1995.
COMMON STOCK(/1/)
OWNEDHELD AS OF
DECEMBER 31, 19941995
-----------------------
NO. OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
---------------------------------------------------- --------- --------
Harold B. Smith..................................... 3,630,263(/3,631,655(/2/) 6.71%6.52%
3600 West Lake Avenue, Glenview, Illinois 60025-
5811
NationsBank, of Georgia, N.A., as Trustee of the
Northern Trust Employee Stock Ownership Plan....... 4,094,147(/ (South)........................... 3,978,721(/3/) 7.57%7.15%
600 Peachtree St., N.E., Suite 700, Atlanta, Geor-
gia 30308
- --------------------------------------------------------------------------------
(1) The information contained in this columntable is furnished to the Corporation
by the persons named in the table and reflects the Securities and Exchange
Commission's definition of beneficial ownership. The nature of beneficial
ownership for sharesof the holdings shown in this columntable is set forth in notes 2 and 3
which follow.
(2) Harold B. Smith serves as co-fiduciary and shares voting and investment
power with various family members and the Bank with respect to 2,233,008
shares or 4.13%4.01% of the outstanding Common Stock. As co-trustee with the Bank
and two individuals he shares voting and investment power for 1,291,614
shares or 2.39%2.32% of the outstanding Common Stock. With respect to 39,67038,570
shares or .07% of the outstanding Common Stock, he serves as co-fiduciary
and shares voting and investment power with other family members. Mr. Smith
also has sole voting and investment power over 13,62613,776 shares or .02% of the
outstanding Common Stock held in a trust, and shared voting and investment
power over 52,04554,537 shares or .10% of the outstanding Common Stock as co-
trustee of three additional trusts.
(3) NationsBank, N.A. (South) holds 3,978,721 shares or 7.15% of Georgia, N.A.,the
outstanding Common Stock, including 3,948,700 shares or 7.09% of the
outstanding Common Stock in its capacity as Trustee of the Northern Trust
Employee Stock Ownership Plan holds 4,094,147 shares or 7.57% of the outstanding
Common Stock. Shares will be voted pursuant to direction of the participants("ESOP"). NationsBank, N.A. (South) has no
voting and investment power with respect to the extent2,373,340 ESOP shares
allocated to participant accounts and has shared voting and investment power
with respect to the 1,575,360 unallocated ESOP shares. Participants in the
ESOP are entitled to direct the Trustee as to the voting of shares allocated
to their accounts.accounts under the ESOP. Unallocated shares and allocated shares
for which no direction is received will be voted by the Trustee in the same
proportion that the allocated shares were voted, unless inconsistent with
the Trustee's fiduciary responsibility.
The Bank and its affiliates individually act as sole or co-fiduciary with
respect to trusts and other fiduciary accounts which own, hold or control
through intermediaries in the aggregate 8,455,4508,464,101 shares or 15.63%15.21% of the
outstanding Common Stock over which the Bank and its affiliates have, directly
or indirectly, sole or shared voting power and/or sole or shared investment
power. No single trust or other fiduciary account holds a beneficial interest
in excess of 5%. The Bank and its affiliates have sole voting power with
respect to 1,600,6271,813,639 shares or 2.96%3.26% of the outstanding Common Stock, and they
share voting power with respect to 5,899,9375,773,352 shares or 10.91%10.37% of the
outstanding Common Stock. They have sole investment power with respect to
1,441,2301,178,405 shares or 2.66%2.12% of the outstanding Common Stock, and they share
investment power with respect to 4,759,0585,225,456 shares or 8.80%9.39% of the outstanding
Common Stock.
In addition, the Bank, as Trustee of The Northern Trust Company ThriftThrift-
Incentive Plan, holds in the Northern Trust Common Stock Fund of that Plan
2,532,8962,401,422 shares or 4.68%4.31% of the outstanding Common Stock. The Bank has no
voting or investment power with respect to these shares since sole voting and
investment power for the shares is held by the 4,1453,804 Northern Trust Common
Stock Fund participants who are employees of the Corporation or its
subsidiaries.
7
INFORMATION ABOUT THE BOARD AND COMMITTEES
COMMITTEES
The Corporation's Board of Directors presently has six standing committees:
an Executive Committee, a Compensation and Benefits Committee, an Audit
Committee, a Nominating Committee, a Corporate and Institutional Services
Committee and a NominatingPersonal Financial Services Committee. The Bank's Board of
Directors also has an Executive Committee, an Audit Committee, a Corporate and
Institutional Services Committee and a Personal Financial Services Committee.
Current members of the Compensation and Benefits Committee are William D.
Smithburg, Chairman, Worley H. Clark, Arthur L. Kelly, Frederick A. Krehbiel, Harold B. Smith
and Bide L. Thomas. During 1994,1995, the Committee met on six occasions to review
and make recommendations to the full Board of Directors with respect to the
following matters: compensation policy, including executive compensation policy
and compensation levels, benefit plans and programs, incentive plans and
payments thereunder and management development and succession planning.
Current members of the Audit Committee are Robert D. Krebs, Chairman, Worley
H. Clark, Robert
S. Hamada, Arthur L. Kelly and William G. Mitchell. During 1994,1995, the Committee
met on four occasions to review and make recommendations to the full Board of
Directors with respect to the following matters: examinations by regulatory
authorities, internal audit procedures, internal controls, compliance with laws
and regulations, engagement of independent public accountants and matters
having a material effect upon the Corporation's financial operations. (See
"Independent Public Accountants," below.)
Current members of the Nominating Committee are Frederick A. Krehbiel,
Chairman, Ardis Krainik, Robert D. Krebs, Harold B. Smith and William D.
Smithburg. During 1994,1995, the Committee met on threetwo occasions to review and make
recommendations to the full Board of Directors with respect to the evaluation
of candidates for nomination to the Board of Directors and the structure and
membership of Board committees. The Committee will consider recommendations
from the stockholders of the Corporation, submitted in writing to the Secretary
of the Corporation, regarding potential nominees for election as Directors.
The Board of Directors held 12 regular and twothree special meetings during
1994.1995. All persons who were Directors during 19941995 attended at least 75% of
these meetings and meetings of Committees on which they serve.
Also,served, except for Ms.
Krainik, Mr. Krehbiel and Mr. Mitchell.
The Executive Committee meets as required between meetings of the Bank's Board of
Directors has aand exercises the powers of the Board in the management of the
business and affairs of the Corporation as may be delegated by the Board,
subject to limitations imposed by law and the By-Laws of the Corporation. The
Corporate and Institutional Services Committee and athe Personal Financial
Services Committee which review the policies, strategies and performance of these
business units.
COMPENSATION OF DIRECTORS
Compensation of non-employee Directors of the Corporation and the Bank
consists of an annual retainer fee of $22,000, with the Chairmen of the
Corporation's Compensation and Benefits, Audit, and Nominating Committees and
the Bank's Corporate and Institutional Services and Personal Financial Services
Committees each receiving an additional annual retainer fee of $4,000. All non-
employee Directors receive a fee of $1,000 for each Board and Committee meeting
attended. Non-employee Directors are also eligible to receive a per diem fee of
$1,000 when required to perform specific services on behalf of the Corporation.
ForNo payments were made for such services during 1994, the Corporation paid $5,000.in 1995.
Directors may elect to defer payment of the cash portion of their retainer or
their attendance fees which, if deferred, accrue earnings at an interest rate
determined from time to time by the
8
Compensation and Benefits Committee. After a Director ceases to be a Director
of the Corporation and the Bank, the amount accrued to his or her account is
payable to the Director in a lump sum or in quarterly installments according to
a formula.
8
The Corporation maintains aUnder the Corporation's Restricted Stock Plan for non-employee Directors.
Under the Plan,Directors, on
December 20, 1991, each non-employee Director was granted 750 shares of Common
Stock (as adjusted for a subsequent stock split) which arewere distributable at
the rate of 150 shares per year commencing with December, 20,
1991.1991 and ending December,
1995. The Director maycould vote and receive dividends on all the shares granted
but maycould not dispose of such shares until after the shares havehad been
distributed. If a Director ceasesceased to serve as director, shares granted but not
yet distributed shall bewere forfeited. Newly elected non-employee Directors
participateparticipated in the Plan on the same terms, except that the number of shares
granted to each will
equalequalled 150 times the number of distribution dates remaining.
The Corporation's Board of Directors expects to consider the adoption of a new
or modified restricted stock plan in 1996 as part of its periodic review of
director compensation.
MANAGEMENT TRANSACTIONS AND INDEBTEDNESS
Directors and executive officers of the Corporation, as well as members of
their immediate families and their associates, were customers of and had
transactions with the Corporation and its subsidiaries in the ordinary course
of business during 1994.1995. These transactions included loans; purchases, sales
and placements of investment securities and other financial instruments;
fiduciary transactions; deposits; and other purchase, sale and finance
transactions. It is anticipated that similar transactions may occur in the
ordinary course of business in the future. All credit transactions were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons and
did not involve more than the normal risk of collectibility or present other
unfavorable features. Transactions in 19941995 involving the purchase or sale of
products and services did not result in payments that were material to the
gross revenues of either the Corporation or the company with which a director
or executive officer was associated. Mr. Helman, a director of the Corporation,
is a partner in the law firm of Mayer Brown & Platt, which renders legal
services to the Corporation and its subsidiaries.
9
EXECUTIVE COMPENSATION
COMPENSATION AND BENEFITS COMMITTEE REPORT
The Corporation links executives' short-term and longer-term financial
rewards to the Corporation's performance and return to stockholders.
Accordingly, the Corporation's compensation program makes a significant portion
of the executives' rewards variable, dependent on performance. Rewards to
executives should increase when performance goals are achieved and surpassed,
and correspondingly decrease if goals are not achieved. The Corporation's
program relies significantly on equity incentives in order to align the
executives' interests closely with those of the stockholders. The components of
the Corporation's executive compensation program are designed to reflect these
reward principles in each of the following: base salary, annual incentive cash
award, performance shares under a long-term incentive plan and stock options. The Corporation also has made
specific awards of restricted stock from time to time.
Each year the Compensation and Benefits Committee (the "Committee") reviews
the components of the Corporation's executive compensation programs,program, comparing
themcompensation levels to a peer group of financial service organizations that
represent the Corporation's competition for executive talent. The Committee
considers recommendations from the Corporation's Human Resources Department
which works closely with outside consultants. The organizations selected for
comparison purposes generally have one or more of the following
characteristics: superior financial performance; lines of business similar to
those of the Corporation; significant operations in the Corporation's principal
geographic areas; and size, either overall or in particular lines of business,
comparable to that of the Corporation. The Keefe, Bruyette & Woods 50 Bank
Index, which is used in the Five YearFive-Year Cumulative Total Return table presented
elsewhere in this Proxy Statement, includes all of the organizations in the
peer group used for compensation comparison purposes.
The Committee reviews and approves the compensation of the Corporation's most
highly compensated executives, including the executive officers whose
compensation is detailed in this Proxy Statement. For other executives the
Committee reviews overall compensation policies and payment levels. In
reviewing the compensation of executives other than David W. Fox, Chairman andthe Chief Executive
Officer, the Committee takes Mr. Fox'sthe Chief Executive Officer's counsel and
recommendations into account.
BASE SALARIES--Base salaries are generally determined by evaluating the
responsibilities of the position and the individual's experience, performance,
career progress and development. A review is also made of the competitive
marketplace for executive talent, including a comparison to base salaries for
comparable positions at other banking and financial services companies.
The Committee generally determines annual salary adjustments, within the
context of the Corporation's overall salary budget, by evaluating the
performance of each executive officer and also takes into account any changes in the executive's
responsibilities. With respectDuring 1995, however, no adjustments were made to the base salary set for
Mr. Fox in 1994, the Committee considered the base
salaries of chief executive
officers of the peer group organizations previously described, the
Corporation's performance in 1993 and its assessment of Mr. Fox's individual
performance and leadership. In evaluating the Corporation's performance, the
Committee considered the Corporation's earnings, return on equity, return on
assets, total return to stockholders and financial condition. No weighting was
assigned to these factors, as the Committee believes the Corporation's
performance in each area has compared favorably with its peers. The Committee
also considered Mr. Fox's career service to the Corporation and his
contribution to the Corporation by service on its behalf in various community
and banking industry organizations. In setting Mr. Fox's 1994 salary, however,
the Committee placed primary importance on the fact that the Corporation
adopted an overall 3.5% salary budget in 1994 for all executives participating
in various cash incentive plans. Mr. Fox's base salary was accordingly set at
an annual rate of $650,000 commencing April 1, 1994, an increase of $20,000 or
3.2% over the base salary established on April 1, 1993, consistent with this
overall salary budget.
The 1994 salary levels of William A. Osborn, Barry G. Hastings and John S.
Sutfin were established on January 1, 1994 coincident with Mr. Osborn's
promotion to President and Chief
10
Operating Officer, and the promotion of Messrs. Hastings and Sutfin to Vice
Chairman. The changes in responsibilities and evaluation of performance
reflected in the promotions were the principal factors affecting these salary
determinations. With respect to the other executive officers named in the Summary Compensation Table, although
the salaries of some of these executives had been adjusted during 1994. The
Committee accepted management's recommendation that no 1995 salary determinations reflected individual
evaluations ofadjustments
be made for the factors described above,named executive officers and certain other highly compensated
executives in light oforder to demonstrate this group's commitment to the Corporation's
salary budget in 1994. In 1994,1995 expense management initiatives. 1996 adjustments to the base salaries set forof
these executives reflect the factors referred to above, and with respect to Mr.
Osborn and Mr. Hastings, their promotions, in October, 1995, to Chairman and
Chief Executive Officer, and President and Chief Operating Officer,
respectively.
ANNUAL INCENTIVE CASH AWARDS--During 1995 the executive officers named in the
Summary Compensation Table were targeted to fall between
the median and the 75th percentile of salaries for similar positions at those
companies used for comparison purposes that are deemed to be most comparable
to the Corporation.
ANNUAL INCENTIVE CASH AWARD--The executive officers named in the Summary
Compensation Table are eligible for annual incentive cash awards under
the
provisionsone of two plans. Messrs. Fox, Osborn, Hastings, and Pero participated in the
Management Performance Plan; Ms. Penrose and Mr. Mitchell participated in the
Annual Performance Plan. The amount available under the
10
Management Performance Plan is tied by a formula directly to the achievement
of a corporate net income goal. At the beginning of the Plan year the
Committee reviewed and recommended to the Board the corporate net income
objective and the individual target awards expressed as a percentage of
salary. Following completion of the Plan year, the Committee approved
individual award payments based on a comparison of actual achievement with the
corporate net income objective and an evaluation of individual performance.
All approvedUnder the Annual Performance Plan, annual incentive cash awards for each
individual are determined on a discretionary basis from a pool of funds for
that individual's business unit. The aggregate amount available for business
unit pools is based on the achievement of a corporate net income goal and
business unit earnings goals set at the beginning of the year. Individual
awards are based on an evaluation of each executive's performance. Awards
under both the Management Performance Plan and Annual Performance Plan were
paid in cash.
Mr. Fox's 1994Osborn's 1995 Management Performance Plan awardAward of $370,617 reflected$251,000 recognized
that the Corporation's net income, although aCorporation achieved record fell belowearnings and surpassed the Plan's net
income objectiveobjective. Mr. Fox's award of $324,000 was based on the same factors,
but also recognized that he did not serve for that year.the full year because of his
retirement on September 29, 1995.
Section 162(m) of the Internal Revenue Code provides that compensation in
excess of $1,000,000 per year paid to the chief executive officer and the four
other most highly compensated executive officers employed at year-end, other
than compensation meeting the technical definition ofin the Code for
"performance based compensation,"compensation" or otherwise exempt from the provisions of
Section 162(m), will not be deductible by a corporation for federal income tax
purposes. The Corporation provided in 1995 Management Performance Plan provides that
any portion of an executive's incentive award which would not be deductible by
the Corporation after taking into account all other compensation paid to the
executive will be deferred and paid to the executive, with interest, in the
calendar year following retirement or other termination of employment. With
this provision, substantially allAll
compensation paid in 1995 to thesethe executive officers named in 1994Summary
Compensation Table, however, was deductible.deductible without regard to this provision.
The Committee will continue to review the deductibility of compensation under
Section 162(m) and any regulations adopted under it,, with the goal of assuring that compensation paid is deductible
by the Corporation to the extent that this can be accomplished in a manner
that provides adequate incentives and allows the Corporation to attract and
retain qualified executives.
LONG-TERM INCENTIVE PLAN--Performance shares typically are awardedPERFORMANCE SHARES--Performance share awards to the
Corporation's executive officers annuallyare
determined generally on an annual basis under the long-term performance share provisions
of the Amended 1992 Incentive Stock Plan (the "Plan"). For each year's award,
there is a three-year performance period followed by a three-
yearthree-year vesting
period. The three-year performance period is intended to reflect a longer term
strategic business focus and the three-year vesting period is designed to
encourage the executives to remain with the Corporation. The Committee, at the
beginning of the performance period, establishes a return on
equityreturn-on-equity corporate
performance goalgoals for the period and performance share target awards for the
Plan's participants. The awards provide for the crediting of 50% of the shares
awarded if a minimum goal is met and 100% if a higher goal is met for the
relevant performance period. Individual performance share target awards are
based on multiple-of-salary guidelines and competitive compensation data. The
Committee also considers the amount of long-term performance share awards and
stock options previously granted to the individual. If the executive leaves
the Corporation prior to the completion of the performance period for reasons
other than death, disability or retirement (in which cases the award amounts
are prorated), the performance shares are forfeited. Following the completion
of each three-year performance period, the Committee determines whether the return on equity goalwhat level of
return-on-equity for that performance period has been achieved and authorizes
the crediting of the appropriate number of performance shares to the
participants' accounts.accounts if the minimum goal has been met. Typically the shares
are distributed to the participant on the third anniversary following the date
on which the shares were credited to the participant's account, together with
cash in an amount equal to the dividends declared on that number of shares
during the three-year period plus interest at an assumed rate on those
dividends. If the executive leaves the Corporation prior to this
time11
distribution date for reasons other than death, disability or retirement, (in which cases the awards are prorated), the
performance shares and imputed earningsrelated cash balance are forfeited. 11
In cases of death,
disability or retirement during the three-year vesting period, the performance
shares and related cash balance become distributable.
In February, 1994,1995, the Committee applied the factors described above and set
for Mr. Fox a performance share target awardawards of 12,000 and 15,000 shares for the 1994-19961995-1997
performance period. The award is subject to achievingperiod for Mr. Osborn and Mr. Fox, respectively. Upon the
three-year returnretirement of Mr. Fox on equity goalSeptember 29, 1995, and satisfactionper the provisions of the
ensuing three-yearperformance share award agreement, the award was reduced for pro-ration of
service vesting
restriction.to 3,750 shares. Mr. Osborn's target share award represents
approximately 7.6% of the total of 157,500 target shares awarded for the 1995-
1997 performance period.
STOCK OPTIONS--Stock option grants to executive officers are determined
generally on an annual basis under the provisions of the Plan. Individual stock
option awards are based on multiple-of-salarymultiples of salary guidelines, incorporating both a
current value of the shares under option and a projected option value to the recipient, and competitive
compensation data. The Committee also considers the amount of long-
termlong-term
performance share awards and stock options previously granted to the
individual.
Option grants are designed to align the interests of executives with those of
the stockholders. Stock options are granted with an exercise price equal to the
market price of the Common Stock on the date of grant and may be exercised over
ten years. This approach is designed to motivate the executive to contribute to
the creation of stockholder value over the long term.
In September, 1994,1995, the Committee applied the factors described above and
granted to Mr. FoxOsborn an option to purchase 40,00025,000 shares with an exercise
price of $37.6875.$47.00. This constituted 4% of the options on 629,800 shares granted
in 1995. Mr. FoxOsborn now holds options to purchase a total of 178,000104,875 shares.
RESTRICTED STOCK AWARDS--On January 1, 1994 the Committee approved restricted
stock awards of 25,000 shares each for William A. Osborn, Barry G. Hastings and
John S. Sutfin. These awards, which will vest over a period of nine years, were
made coincident with Mr. Osborn's promotion to President and Chief Operating
Officer, and the promotion of Messrs. Hastings and Sutfin to Vice Chairman. The
awards are designed to provide an incentive to these key executive officers to
remain with the Corporation. They will be distributed to the recipient,
together with cash in an amount equal to the dividends declared on the shares
plus interest at an assumed rate on the dividends. Mr. Sutfin subsequently
forfeited his restricted stock award upon his retirement from the Corporation
on November 30, 1994.
* * * * *
Through the programs described above, a significant portion of the
Corporation's executive compensation is linked directly to individual and
corporate performance and stock price appreciation. In 19941995 the group of six
executive
officers namedexecutives listed in the Summary Compensation Table received in the aggregate over half of their
compensation in the aggregate (consisting of the dollar amounts shown in the
Summary Compensation Table and the value realized on stock options exercised) in the form of
performance-based variable elements. The Committee intends to continue the
policy of linking executive compensation to corporate performance and returnreturns
to stockholders.
This report is submitted on behalf of the members of the Committee:
William D. Smithburg, Chairman
Worley H. Clark
Arthur L. Kelly
Frederick A. Krehbiel
Harold B. Smith
Bide L. Thomas
12
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the years 19921993
through 19941995 with respect to David W. Fox and William A. Osborn, each of whom
served as the Corporation's chief executive officer during 1995, and certain
other executive officers who received the highest annual compensation during
1994.1995.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- -----------------------------------------
AWARDS
(SECURITIES
NAME AND RESTRICTED UNDERLYING PAYOUTS
NAME ANDPRINCIPAL POSITION TOTAL OF STOCK OPTIONS (LONG-TERM ALL OTHER
PRINCIPAL POSITION(AT DECEMBER 31, 1995) YEAR SALARY BONUS(1) SALARY & BONUS AWARDS(2) GRANTED) INCENTIVE PLAN)(3) COMPENSATION(4)
- ---------------------------------------------------------------------------------------------------------------------------
David W. FoxFox(5) 1995 $487,500 $324,000 $ 811,500 0 $2,828,468 $77,911
1994 $645,000 $370,617 $1,015,617 40,000 $0$ 0 $78,516
Chairman and
1993 $616,250 $414,982 $1,031,232 37,500 $631,901$ 631,901 $83,262
William A. Osborn 1995 $410,000 $251,000 $ 661,000 25,000 $ 456,563 $65,525
Chairman and 1994 $410,000 $225,000 $ 635,000 $987,500 15,000 $ 0 $49,909
Chief Executive Officer 1992 $562,500 $408,038 $970,538 33,000 $353,268 $83,894
William A. Osborn 1994 $410,000 $225,000 $635,000 $987,500 15,000 $0 $49,909
President and 1993 $335,000 $190,884 $525,884$ 525,884 12,000 $379,141$ 379,141 $45,262
Barry G. Hastings 1995 $385,000 $236,000 $ 621,000 20,000 $ 456,563 $61,530
President and 1994 $385,000 $215,000 $ 600,000 $987,500 15,000 $ 0 $46,866
Chief Operating Officer 1992 $287,500 $157,191 $444,691 10,500 $240,735 $42,879
Barry G. Hastings 1994 $385,000 $215,000 $600,000 $987,500 15,000 $0 $46,866
Vice Chairman 1993 $345,000 $196,582 $541,582$ 541,582 12,000 $379,141$ 379,141 $46,613
1992 $298,750 $160,016 $458,766 10,500 $240,735 $44,558
John S. Sutfin(5) 1994 $339,167 $150,000 $489,167 $987,500 0 $1,153,290 $41,286
Vice Chairman 1993 $330,000 $188,034 $518,034 11,000 $379,141 $44,586
1992 $282,500 $134,117 $416,617 10,500 $240,735 $42,133
Perry R. Pero 1995 $325,000 $183,000 $ 508,000 11,000 $ 456,563 $51,941
Senior Executive 1994 $322,500 $163,000 $485,500$ 485,500 10,000 $0$ 0 $39,258
Senior ExecutiveVice President 1993 $315,000 $194,488 $509,488$ 509,488 10,000 $379,141$ 379,141 $42,560
Vice President 1992 $272,083 $134,191 $406,274 9,750 $214,524 $40,580
Peter L. Rossiter(6) 1994 $268,750 $125,000 $393,750 10,000 $0 $32,715Sheila A. Penrose 1995 $300,000 $150,000 $ 450,000 12,000 $ 0 $47,945
Executive Vice 1994 $237,500 $ 86,000 $ 323,500 8,000 $ 0 $28,911
President 1993 $250,000 $118,600 $368,600$206,667 $ 75,000 $ 281,667 6,000 $ 0 $20,245
James J. Mitchell 1995 $315,000 $130,000 $ 445,000 10,000 $0 $0$ 456,563 $50,342
Executive Vice 1994 $286,333 $ 80,000 $ 366,333 8,000 $ 0 $34,856
President General 1992 $40,705 $17,845 $58,550 30,000 $0 $0
Counsel and Secretary1993 $270,000 $110,400 $ 380,400 8,000 $ 379,141 $30,584
- --------------------------------------------------------------------------------
(1) Award amounts under the Management Performance Plan for Mr. Fox, Mr.
Osborn, Mr. Hastings and Mr. Pero; amounts under the Annual Performance Plan
for Ms. Penrose and Mr. Mitchell. In the event of a change in control of the
Corporation, as defined in each Plan, award amounts would be payable as
follows: under the Management Performance Plan, discretionary awards
consistent with the Plan would be paid as soon as practicable; under the
Annual Performance Plan, available Plan award to Mr. Rossiter.funding would be calculated as
if business unit and corporate earnings targets had been achieved and
discretionary awards would be paid as soon as practicable.
(2) This column shows the market valueThe total number of restricted stock awards and their aggregate market
value as of December 31, 1995 were: Mr. Osborn, 25,000 shares valued at
$1,392,188; and Mr. Hastings, 25,000 shares valued at $1,392,188, based at
$39.50on
$55.6875 per share, the mean of the high and low sale prices of the Common
Stock as reported by The Nasdaq Stock Market on January 3, 1994, the
effective date of the grant.December 29, 1995. The
restrictions on these stock awards, granted on January 3, 1994, lapse
beginning four years after the date of grant, and the stock becomes fully
vested nine years after the date of grant, subject to earlier vesting in the
event of a change in control of the Corporation, as defined in the Plan, or
earlier prorated vesting upon a participant's death, normal retirement or
disability, a change
in control of the Corporation or a determinationas otherwise determined by the Compensation and Benefits
Committee. Dividends are paid on restricted stock awards, as adjusted by an
interest factor, and distributed to participants in accordance with the
vesting schedule described above.
The total number of restricted
stock awards and their aggregate market value as of December 31, 1994 were:
Mr. Osborn, 25,000 shares valued at $881,250; and Mr. Hastings, 25,000 shares
valued at $881,250. The award of 25,000 shares to Mr. Sutfin was forfeited
upon his retirement from the Corporation on November 30, 1994.
(3) For 1994,1995, the amount shown for Mr. SutfinFox represents the awards for the
1989-
1991,1989-1991, 1990-1992, 1991-1993, and 1991-19931992-1994 performance periods, the
latter three of which were accelerated for distribution upon his retirement
in 1994. With respect to all executive
officers named in the Summary Compensation Table, for 1993, the amount
represents the award for the 1988-1990 performance period, which would
ordinarily have been payable in 1994. For 1992, the amount represents the
awards for both the 1986-1988 performance period (ordinarily payable in 1992)
and the 1987-1989 performance period (ordinarily payable in 1993).1995. The Compensation and Benefits Committee approved the distributionrespective values of the awardsamounts shown for the 1988-1990 and the 1987-1989 performance periods just prior to the
beginning of the year in which the vesting restriction would otherwise have
been satisfied. The respective valuesall named executive
officers were determined by multiplying the total number of shares awarded by
the mean of the high and low sale prices of the Common Stock as reported by
The Nasdaq Stock Market on the dates of distribution and adding dividend
equivalents and an assumed interest factor.
(4) The "All Other Compensation" category is comprised of contributions made by the Corporation on
behalf of the named executive officers to the Thrift
IncentiveThrift-Incentive Plan ("TIP")
and allocations on behalf of the named executive officers under the Northern
Trust Employee Stock Ownership Plan ("ESOP"), both of which are defined
contribution plans. For each of the following executives, the 19941995 TIP and
ESOP contributionsamounts (in that order) were: Mr. Fox, $32,250$24,375 and $46,266;$53,536; Mr. Osborn,
$20,500 and $29,409;$45,025; Mr. Hastings, $19,250 and $27,616; Mr. Sutfin, $16,958 and $24,328;$42,280; Mr. Pero, $16,125$16,250 and
$23,133$35,691; Ms. Penrose, $15,000 and $32,945; and Mr. Rossiter, $13,438Mitchell, $15,750 and
$19,277.
(5) Mr. Sutfin retired on November 30, 1994.
(6) Mr. Rossiter joined the Corporation on November 2, 1992.
13
EMPLOYMENT AGREEMENTS
The Corporation and Mr. Fox are parties to an employment agreement that
provides for employment commencing June 1, 1986 and expiring May 31, 1996 (the
year in which Mr. Fox reaches age 65).$34,592. In the event of terminationa change in control of
employment either by the Corporation, without good cause or byparticipants
become fully vested in all benefits payable under the ESOP and all benefits
payable under the TIP that are in excess of applicable Internal Revenue Code
limits.
(5) Mr. Fox with good
reason, as defined inretired on September 29, 1995, at which time he held the
agreement, the Corporation isposition of Chairman. Prior to pay a lump sum
amount equal to the balanceJuly 1, 1995, Mr. Fox was Chairman and Chief
Executive Officer of the salary remaining to be paid during the term
of the agreement.Corporation.
13
EMPLOYMENT SECURITY AGREEMENTS
Messrs. Osborn, Hastings, Pero, and Rossiter, along with other
executives,Mitchell and Ms. Penrose are parties to
employment security agreements that provide lump sum cash payments equivalent
to twothree years' salary and bonus (and payment of a pro rata bonus for the year
of termination, as well as continuation of medical, dental, life insurance and
similar benefits for three years) upon the termination of each such
executive officer's employment either by
the Corporation without good cause or by the executive with good reason, as
defined in the agreements, within one
yeartwo years after a change in control of the
Corporation, as defined in the agreements. The agreements also provide that the
Corporation will reimburse the executives for any excise tax imposed on
payments under the agreements as well as taxes imposed on such reimbursement
amounts.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to the stock
options granted during the last fiscal year to the executive officers named in
the Summary Compensation Table. Using a range of 0% to 10% in assumed rates of
stock price appreciation (compounded annually) for the option term of ten
years, the table also shows the potential realizable pre-tax value of the stock
options. These assumed rates are used for illustrative purposes only, and are
not intended to represent or predict future increases in the price of the
Corporation's Common Stock.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
FOR OPTION TERM OF 10 YEARS
INDIVIDUAL GRANTS YEARS (2)
-------------------------------------------------------------------------------------------------------------------------------------------------
PERCENT
NUMBER OF OF TOTAL 5% ($61.3976.56
SECURITIES OPTIONS STOCK 10% ($97.75121.91
UNDERLYING GRANTED TO PRICE STOCK PRICE
OPTIONS EMPLOYEES EXERCISE EXPIRATION AFTER AFTER
NAME GRANTED (1) IN FISCAL YEAR PRICE DATE 0% 10 YEARS) 10 YEARS)
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
David W.
Fox 40,000 6.3% $37.6875 09/20/04 $ 0 $948,100 $2,402,500-- -- -- -- -- --
William
A.
Osborn 15,000 2.4% $37.687525,000 4.0% $47.00 09/20/0419/05 $ 0 $355,538 $900,938$739,000 $1,872,750
Barry G.
Hastings 15,000 2.4% $37.687520,000 3.2% $47.00 09/20/0419/05 $ 0 $355,538 $900,938
John S.
Sutfin 0 0.0% $ 0 $0 $0$591,200 $1,498,200
Perry R.
Pero 11,000 1.7% $47.00 09/19/05 $ 0 $325,160 $ 824,010
Sheila
A.
Penrose 12,000 1.9% $47.00 09/19/05 $ 0 $354,720 $ 898,920
James J.
Mitchell 10,000 1.6% $37.6875$47.00 09/20/0419/05 $ 0 $237,025 $600,625
Peter L.
Rossiter 10,000 1.6% $37.6875 09/20/04$295,600 $ 0 $237,025 $600,625749,100
- --------------------------------------------------------------------------------
(1) All options to the named executive officers were granted on September
20, 199419, 1995 and first become exercisable September 20, 1996.19, 1997. In the event of a
change in control of the Corporation, as defined in the Plan, all
outstanding stock options become fully vested and exercisable.
(2) No gain to the optionees is possible without an increase in the stock
price, which will benefit all stockholders commensurately. The pre-tax gain
to all stockholders, using as a base the $37.6875$47.00 mean of the high and low
sale prices of Common Stock as reported by The Nasdaq Stock Market on
September 20, 1994,19, 1995, would be $0 for 0% appreciation, approximately $1.3$1.6
billion for 5% appreciation and approximately $3.2$4.2 billion for 10%
appreciation.
14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth the number of shares for which stock options
were exercised during 1994,1995, the actual as well as annualized pre-tax value
realized, the number of shares for which options were outstanding and the pre-
tax value of those options as of year-end.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(4)
ANNUALIZED ---------------------------- ----------------------------
SHARES ACQUIRED VALUE VALUE SINCE EXERCISABLE(3) UNEXERCISABLE EXERCISABLE(3) UNEXERCISABLE
NAME ON EXERCISE REALIZED(1) GRANT DATE(2)
- ----------------------------------------------------------------------------------------------------------------------
David W. Fox 45,000 $1,188,747 $176,634 138,00040,015 $916,476 $197,174 97,985 40,000 $818,122 $ 0$1,840,636 $720,000
William A. Osborn 2,3003,700 $ 76,15598,923 $ 8,743 68,575 15,000 $788,628 $ 010,459 64,875 40,000 $1,916,350 $487,188
Barry G. Hastings 9,8965,000 $132,430 $ 269,553 $ 32,778 67,788 15,000 $727,069 $ 0
John S. Sutfin 10,869 $ 304,220 $ 44,09714,001 62,788 35,000 0 $142,375 $ 0$1,776,244 $443,750
Perry R. Pero 25,7246,276 $166,226 $ 834,062 $108,444 63,376 10,000 $768,923 $ 0
Peter L. Rossiter17,575 57,100 21,000 $1,678,618 $275,562
Sheila A. Penrose 0 $ 0 $ 0 40,000 10,00021,000 20,000 $ 0458,937 $248,250
James J. Mitchell 7,287 $192,093 $ 020,309 20,750 18,000 $ 386,578 $230,875
- --------------------------------------------------------------------------------
(1) Calculated on a pre-tax basis using the spread between the option
exercise price and the mean of the high and low sale prices as reported by
The Nasdaq Stock Market on the date of exercise.
(2) Amount of pre-tax value realized annualized over period between date
of grant and exercise.
(3) Amounts represent options granted since 19901991 to Mr. Fox and Mr.
Sutfin,Mitchell, since 19851990 to Ms. Penrose, since 1987 to Mr. Hastings, and since
1986 to Mr. Osborn Mr. Hastings and Mr. Pero, and since 1992
to Mr. Rossiter.Pero.
(4) Calculated on a pre-tax basis using the spread between the option
exercise price and $35.25,$55.6875, which was the mean of the high and low sale
prices of the Common Stock as reported by The Nasdaq Stock Market on
December 30, 1994.29, 1995.
15
LONG-TERM INCENTIVE PLANS--AWARDSPLAN--AWARDS IN LAST FISCAL YEAR
The following table sets forth the Long-Term Incentive Plan (Performance
Shares) target awards made to the named executive officers during 1994.1995.
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD
OR OTHER UNTIL MATURATION
NAME RIGHTS(1) OR PAYOUT(2)
------------------------------------------
David W. FoxFox(3) 15,000 shares 6 years
William A.
Osborn 10,00012,000 shares 6 years
Barry G. Has-
tings 9,000 6 years
John S. Sut-
fin(3) 9,00010,000 shares 6 years
Perry R. Pero 8,000 shares 6 years
Peter L. Ros-
siter 8,000Sheila A.
Penrose 6,000 shares 6 years
James J. Mitch-
ell 6,000 shares 6 years
----------------------------------------------
(1) Awarded by the Compensation and
Benefits Committee with an established return on equity goalreturn-
on-equity goals for the 1994-19961995-1997
performance period.
(2) Shares are subject to performance
goals over a three-year performance period
fol-
lowedfollowed by a three-year vesting restriction.
Allperiod.
Either one-half or the full number of
shares awarded will be distributed if the
minimum or target performance goals aregoal, respec-
tively, is met or exceeded and the vesting restrictions
are satisfied; no shares will be distributeddistrib-
uted if the per-
formance goals areminimum performance goal is not
met. In the event of a change in control of
the Corporation, as defined in the Plan,
all shares credited to participants' ac-
counts and related cash balances become
distributable to participants; target award
shares for performance periods currently in
progress will be credited on a pro-rata ba-
sis of actual full months lapsed to plan
period and become distributable to partici-
pants. See "Compensa-
tion"Compensation and Benefits Committee Report--Long-
Term Incentive Plan,Com-
mittee Report--Performance Shares," above
for a descrip-
tiondescription of the terms of the Plan.
(3) The original award of 9,00015,000 shares
to Mr. SutfinFox was reduced to 2,7503,750 shares per
the proration formula in the award agree-
ment upon his retirement on November 30,
1994.September 29,
1995. Under the Plan, these shares will not
be subject to an additional three-year vesting restriction following the three-
year performanceper-
formance period.
1516
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG NORTHERN TRUST CORPORATION COMMON STOCK, S&P 500 INDEX AND
KEEFE, BRUYETTE & WOODS 50 BANK INDEX
(TOTAL RETURN ASSUMES $100 INVESTED ON
JANUARY 1, 19901991 WITH REINVESTMENT OF DIVIDENDS)
[GRAPH APPEARS HERE]
NORTHERN
Measurement Period TRUSTNorthern Trust S&P (Fiscal Year Covered) CORPORATION 500 INDEXIndex KBW INDEX
- ------------------- ------------ ---------Index
-------------- ------------- ---------
Measurement Pt-
12/31/891990 $100 $100 $100
FYE 12/31/90 $ 98 $ 97 $ 72
FYE 12/31/91 $170 $126 $114
FYE 12/31/92 $218 $136 $145
FYE 12/31/93 $209 $150 $153
FYE 12/31/94 $189 $152 $1451991 173 130 158
1992 222 140 202
1993 213 155 213
1994 193 157 202
1995 316 215 324
For the five-year period ended December 31, 1994,1995, the Corporation's total
return to stockholders was 89%216% compared with 52%115% for the S&P 500 Index and
45%224% for the KBW 50 Bank Index. During the same period, the Corporation's
Common Stock market capitalization increased $820,500,000$2,115,900,000 or 76%211% from
$1,072,600,000$1,001,300,000 to $1,893,100,000,$3,117,200,000, reflecting both an increase in the stock
price and a greater number of shares outstanding. The Corporation's net income
increased in 19941995 for the seventheighth consecutive year, from $113.2$115.4 million in 19891990
to $182.2$220.0 million in 1994,1995, or an increase of 61%91% from 19891990 to 1994.
161995. In terms of
total return to stockholders for the fiscal year ended December 31, 1995, the
Corporation ranked 15th out of the 50 banking institutions comprising the KBW
50 Bank Index.
17
PENSION PLAN TABLE
The table below sets forth the estimated annual benefits payable upon
retirement at age 65 under the Bank's Pension Plan (including amounts payable
under the Bank's Supplemental Pension Plan) to persons in the remuneration and
service classifications specified.
REMUNERATION
YEARS OF SERVICE AT RETIREMENT
AVERAGE COMPENSATION -----------------------------------------------------
IN 5 HIGHEST YEARS 15 20 25 30 35 40
- --------------------------------------------------------------------------------
$ 250,000.............. $ 90,000 $120,000 $132,500 $145,000 $157,500 $170,000
350,000.............. 126,000 168,000 185,500 203,000 220,500 238,000
450,000.............. 162,000 216,000 238,500 261,000 283,500 306,000
550,000.............. 198,000 264,000 291,500 319,000 346,500 374,000
650,000.............. 234,000 312,000 344,500 377,000 409,500 442,000
750,000.............. 270,000 360,000 397,500 435,000 472,500 510,000
850,000.............. 306,000 408,000 450,500 493,000 535,500 578,000
950,000.............. 342,000 456,000 503,500 551,000 598,500 646,000
1,050,000.............. 378,000 504,000 556,500 609,000 661,500 714,000
1,150,000.............. 414,000 552,000 609,500 667,000 724,500 782,000
1,250,000.............. 450,000 600,000 662,500 725,000 787,500 850,000
Compensation covered by the Pension Plan includes salaries, before tax
deposits made by a participant to the Thrift IncentiveThrift-Incentive Plan, shift differential
pay, overtime pay and awards under the Management or Annual Performance Incentive Plan
(or predecessor plans), as applicable. The average covered compensation for the
highest five consecutive years is used in the pension calculation.
Credited years of service for individuals listed in the Summary Compensation
Table are as follows: David W. Fox-39Fox-40 years, William A. Osborn-24Osborn-25 years, Barry
G. Hastings-20 years, John S. Sutfin-33Hastings-21 years, Perry R. Pero-30Pero-31 years, Sheila A. Penrose-18 years and
Peter L. Rossiter-2James J. Mitchell-31 years.
The above pension payments, which are shown as if paid in the form of a
straight life annuity, will be reduced by .39% of the average Social Security
taxable wage base for the individual ("Social Security Covered Compensation
Offset"), which varies by year of birth, for each year of service up to 35
years. For participants hired after 1988 the percentage is .50%. The Corporation has an agreement with Mr. Fox which provides thatIn the event
of a change in control of the Corporation, will pay a death benefit to Mr. Fox's beneficiariesas defined in the event
that Mr. Fox dies prior to his retirement from the Corporation. The amount of
the benefit is intended to make up for the diminutionSupplemental
Pension Plan, participants become fully vested in lump-sumall benefits payable under
the Supplemental Pension Plan.
The Bank's Pension Plan and Supplemental Pension Plan that Mr.
Fox's beneficiaries would suffer in this event. The agreement does not increase
Mr. Fox'swere recently amended
to change the formula used to calculate retirement benefits beginning January
1, 1996. The new formula will generally result in lower retirement benefits,
due principally to a change to a uniform accrual rate (1.8% per year of
credited service), a cap on credited service (at 35 years), adoption of a
uniform Social Security Covered Compensation Offset (.50%) and terminates upon his retirement.the elimination
of special subsidies applicable to surviving spouse benefits and early
retirement benefits. However, all participants employed on December 31, 1995
will be allowed to continue accruing benefits under the prior Plans, as set
forth in the Pension Plan table above, through December 31, 2000. At
termination or retirement they will be entitled to receive the greater of the
minimum benefit accrued through December 31, 2000 (or termination date if
earlier) or the benefit calculated under the new formula.
COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation and Benefits Committee is an officer,
employee or former employee of the Corporation or any of its subsidiaries.
Members of the Committee, as well as members of their immediate families and
their associates, may have loans and other transactions with the Corporation
and its subsidiaries. All credit transactions were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated persons and did not involve
more than the normal risk of collectibility or present other unfavorable terms.
17
APPROVAL OF THE NORTHERN TRUST
CORPORATION AMENDED 1992 INCENTIVE STOCK PLAN
GENERAL
The Northern Trust Corporation Amended 1992 Incentive Stock Plan (the "1992
Plan") is a stock-based compensation plan providing for the grant of incentive
stock options, nonqualified stock options, stock appreciation rights,
restricted stock, performance shares and other stock-based awards to key
officers of the Corporation and its subsidiaries. The 1992 Plan was approved by
the stockholders of the Corporation at the 1992 annual meeting of stockholders
and amended in certain respects by the Board earlier this year. At its meeting
on February 21, 1995, the Board of Directors of the Corporation adopted certain
additional amendments to the 1992 Plan (the "Amendments") and directed that the
1992 Plan, as amended by the Amendments, be submitted to stockholders for their
approval. The Amendments, as described below, provide for the following
principal changes to the 1992 Plan: (a) the option exercise period for
nonqualified stock options granted on or after April 18, 1995 would be extended
from three years to five years in the case of termination of employment on
account of retirement, disability or death (but in no event beyond the
expiration of ten years from the date of grant), and (b) a maximum number of
shares available for awards of stock options and stock appreciation rights to
any participant under the 1992 Plan would be established to ensure that such
awards qualify as "performance-based compensation" that is fully deductible by
the Corporation under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). If the 1992 Plan, as proposed to be amended by the
Amendments, is not approved by stockholders, the Corporation intends to
continue the 1992 Plan in its current form. A copy of the 1992 Plan, as
proposed to be amended by the Amendments, is set forth as Exhibit A to this
Proxy Statement. The following descriptions are qualified in their entirety by
reference to the full text of the 1992 Plan set forth as Exhibit A.
DESCRIPTION OF THE 1992 PLAN
The 1992 Plan is administered by the Compensation and Benefits Committee of
the Board of Directors (the "Committee"). The Committee determines the key
officers of the Corporation and its subsidiaries who participate in the 1992
Plan based upon their contributions and value to the Corporation. The Committee
also determines the number and types of benefits to be granted under the 1992
Plan and the terms and conditions of such benefits. The determination of awards
under the 1992 Plan is made on a year-to-year basis by the Committee. No
separate determination of eligibility is made by the Committee from among the
Corporation's approximately 2,480 officers. In 1994, 184 persons received
awards under the 1992 Plan.
The total number of shares of Common Stock of the Corporation available for
awards under the 1992 Plan is 3,750,000 (reflecting a three-for-two stock split
in November, 1992), of which 1,598,510 shares remain available for awards as of
the date of this Proxy Statement. Available shares may consist in whole or in
part of authorized and unissued shares or shares issued but held in the
treasury of the Corporation. Shares involved in the unexercised portion of any
lapsed or cancelled awards, or forfeited awards, shall become available for
future use under the 1992 Plan.
Information relating to awards made in 1994 under the 1992 Plan to the
executive officers named in the Summary Compensation Table is presented in the
various tables under the caption "Executive Compensation." In addition, in
1994, 132,500 options at an exercise price of $37.6875 were granted to all
executive officers as a group, and 633,000 options at exercise prices of $37.25
to $42.00 were granted to all employees of the Corporation as a group. Awards
to be made in 1995 under the 1992 Plan are not yet determinable.
The Board of Directors may at any time terminate, suspend or amend the 1992
Plan without approval of the stockholders of the Corporation, except for
amendments which would require stockholder approval under Rule 16b-3 of the
Securities Exchange Act of 1934.
Stock Options. The 1992 Plan provides for the grant of nonqualified stock
options and incentive stock options. The prices at which, and the periods
during which, options may be exercised are fixed
18
by the Committee, but in no case may the price be less than 100% of the fair
market value of the shares on the date of the grant. On March 1, 1995, the mean
of the high and low sales prices of the Common Stock, as reported by The Nasdaq
Stock Market, was $34 1/8 per share. Options are exercisable not earlier than
six months after the date of grant and are nontransferable except by will, the
laws of descent and distribution and, in the case of nonqualified stock
options, by an optionee's assignment during his or her life to (i) the
optionee's spouse or lineal descendants, (ii) a trustee of a trust for the
primary benefit of the optionee's spouse or lineal descendants, or (iii) a
partnership of which the optionee's spouse and lineal descendants are the only
partners. In addition, options may become exercisable upon a "change in
control" of the Corporation, as defined in the 1992 Plan. Upon exercise of an
option, payment of the purchase price must be made in full, in cash or shares
of Common Stock or a combination thereof, as provided in the option agreement.
Stock Appreciation Rights. Stock appreciation rights may be granted with
respect to options granted under the 1992 Plan. Each right will permit the
holder to receive, in lieu of exercising the related option, up to 100% of the
difference between the market price of the option shares on the date of
exercise of the right and the aggregate option price thereof. Stock
appreciation rights will be exercisable only if and to the extent that the
related options are exercisable. Upon exercise, stock appreciation rights will
be paid in cash or shares of Common Stock (based upon their fair market value
on the date of exercise) or a combination thereof, as set forth in the right.
Stock Awards (including Performance Shares). Stock awards will consist of
shares of Common Stock transferred to employees for consideration less than the
fair market value thereof or as a bonus for services rendered and without
further consideration. Such awards will be subject to terms and conditions
determined by the Committee, which may include restrictions on transferability,
rights of the Corporation to reacquire the shares upon termination of the
participant's employment, requirements of meeting specified performance goals
or other stated circumstances which might reflect certain corporate earnings
achievements. An employee may be entitled to have a portion of the awarded
Common Stock credited to an account maintained for the employee if established
performance goals are achieved for one or more of the "performance periods"
designated for the employee. After stock has been credited to an account and
until it is distributed, the account will also be credited with amounts equal
to dividends payable with respect to the number of shares credited to the
account. Each employee's account will be distributed, provided the employee is
employed by the Corporation or subsidiary upon the first to occur of death,
retirement, disability, or change in control of the Corporation, or on the
third anniversary date on which an award was credited to the account, or at the
Committee's discretion.
Stock Equivalents. Stock equivalents may be granted entitling the holders
thereof to receive a payment in an amount equal to the fair market value or
book value of a designated number of shares of Common Stock on a specified date
or dates (which may be the date of the award) or the increase in the fair
market value or book value of a designated number of shares of Common Stock
during a specified period of time. Such payment will be made in cash or shares
of Common Stock, as provided in the award, at the date or dates, not later than
ten years after the date of the award, set forth in the award. Stock
equivalents may also provide for the payment to the recipients of "dividend
equivalents" on the shares designated in an award and will be subject to such
other terms and conditions as the Committee determines, which may include the
requirement of achievement of specified performance goals.
AMENDMENT TO STOCK OPTION EXERCISE PERIOD
The 1992 Plan currently provides that stock options will terminate not later
than three years after termination of employment for any reason. The Board has
determined that it is advisable and in the best interests of the Corporation
and its stockholders to amend this provision for nonqualified stock options
granted on or after April 18, 1995 to extend the option exercise period
following termination of employment on account of retirement, disability or
death from three years to five years, but in no event beyond the expiration of
ten years from the date of grant. The Board believes this Amendment
19
furthers the purpose of the 1992 Plan by providing increased opportunities for
key officers of the Corporation and its subsidiaries to acquire shares of
Common Stock based on an increase in the value of such shares. It is also
consistent, in the Board's view, with the use of stock options as a longer-term
reward designed to provide value to key employees as stockholder value is
created. Under the Amendment, key employees would have additional time to share
in any stock price appreciation which has occurred since the date of the grant
of the option.
AMENDMENT LIMITING NUMBER OF SHARES
In August 1993, the Omnibus Budget Reconciliation Act of 1993 added Section
162(m) to the Code, limiting the deductibility of certain compensation in
excess of $1 million per year paid by a publicly traded corporation to each of
its chief executive officer and the four other most highly compensated officers
at the end of the corporation's fiscal year. Section 162(m) and proposed
regulations issued thereunder by the Internal Revenue Service provide, however,
that the deduction limit does not apply to "qualified performance-based
compensation" meeting the following requirements: (a) the compensation must be
payable solely on account of the attainment of one or more pre-established
performance goals, (b) the performance goals must be established by a
compensation committee comprised solely of two or more outside directors, (c)
the material terms of the performance goals must be disclosed to and approved
by stockholders before any compensation is paid, and (d) the compensation
committee must certify in writing that the performance goals have been
satisfied before any compensation is paid.
The Board of Directors has determined that it is desirable, to the extent
possible, to assure full deductibility of stock options and stock appreciation
rights granted under the 1992 Plan. The proposed regulations issued by the
Internal Revenue Service provide that compensation attributable to a stock
option or stock appreciation right is deemed to be payable on account of pre-
established performance goals if, among other things, the underlying plan
includes a per-employee limitation on the number of shares for which stock
options or stock appreciation rights may be granted during a specified period.
The proposed Amendment to the 1992 Plan would state that a participant in the
1992 Plan shall be entitled to receive a maximum of 300,000 shares of Common
Stock subject to stock options and stock appreciation rights during the term of
the 1992 Plan (including awards already made under the 1992 Plan).
FEDERAL INCOME TAX CONSEQUENCES
Nonqualified Stock Options. Tax aspects of nonqualified stock options granted
under the 1992 Plan generally are as follows: (a) no income will be realized by
the optionee at the time the option is granted, (b) at exercise, ordinary
income will be realized by the optionee in an amount equal to the difference
between the option price and the fair market value of the shares on the date of
exercise, and the Corporation will receive a tax deduction for the same amount,
and (c) upon sale of such shares, any gain or loss realized is treated as
either short-term or long-term capital gain or loss depending on whether the
shares have been held more than one year.
Incentive Stock Options. Stock options granted under the 1992 Plan may
qualify as incentive stock options if the exercise price is not less than 100%
of the fair market value of the shares on the date of the grant and such
options may not be exercised later than three months after termination of
employment for any reason other than death or disability and not later than one
year after termination for disability. Incentive stock options also may not be
exercisable later than 10 years after the date of grant. If shares are issued
to an optionee pursuant to an incentive stock option, and if no disqualifying
disposition of such shares is made by such optionee within one year after the
transfer of such shares to such optionee or within two years after the date of
grant, (a) no income will be realized by the optionee at the time of the grant
of option, (b) no income, for federal income tax purposes, will be realized by
the optionee at the date of exercise, (c) upon sale of such shares, any amount
realized in excess of the option price will be taxed to the optionee, for
federal income tax purposes, as a long-
20
term capital gain and any loss sustained will be a long-term capital loss, and
(d) no deduction will be allowed to the Corporation for federal income tax
purposes. Upon exercise of an incentive stock option the optionee may be
subject to alternative minimum tax on certain items of tax preference.
Stock Appreciation Rights. At the date of granting of stock appreciation
rights, the recipient will not be deemed to receive income, and the Corporation
will not be entitled to a deduction. Upon exercise, the holder of a stock
appreciation right will realize ordinary income equal to the amount of cash or
the market value of the shares received on exercise. The Corporation will be
entitled to a deduction with respect to the ordinary income realized by the
exercising holder.
Stock Awards (including Performance Shares). Ordinary income will be realized
by a recipient of a stock award upon becoming entitled to transfer the shares
at the end of the restriction period, if any, without forfeiture. The amount of
income realized will be equal to the fair market value of the shares on the
first day after the end of the restriction period. Such amount will also
constitute the tax basis for the shares. In addition, the holding period
commences on the day following the day the restriction expires for purposes of
determining whether the recipient has long-term or short-term capital gain or
loss on a subsequent sale of shares. The Corporation will be entitled to a
deduction with respect to the ordinary income realized by the recipient.
A recipient of a stock award who makes an election under Section 83(b) of the
Code within 30 days after the date of the grant will have ordinary income equal
to the fair market value on the date of grant, and will recognize no additional
income until the shares are subsequently sold. If the shares subject to such
election are forfeited, the recipient will not be entitled to any deduction,
refund, or loss for tax purposes, and the Corporation will have to include the
amount that it previously deducted from its gross income in the taxable year of
the forfeiture. Upon sale of the shares after the forfeiture period has
expired, the tax basis will be equal to the fair market value on the date of
the grant and the holding period for capital gains purposes commences on the
day following the day the restriction expires.
Stock Equivalents. Stock equivalents will not result in taxable income to a
recipient or provide a deduction to the Corporation until a payment is made to
a participant. Upon such a payment, the recipient will realize ordinary income
measured by the amount so paid and a corresponding amount will ordinarily be
deductible by the Corporation.
VOTE REQUIRED FOR APPROVAL
Approval of the 1992 Plan, as proposed to be amended by the Amendments,
requires the affirmative vote of the holders of a majority of the Common Stock
present in person or represented by proxy and entitled to vote at the annual
stockholders' meeting. Abstentions will have the same effect as if voted
against the 1992 Plan, as proposed to be amended by the Amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE NORTHERN TRUST CORPORATION AMENDED 1992 INCENTIVE STOCK PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP were the Corporation's independent public accountants
during 1994.1995. The appointment of auditors is approved annually by the Board of
Directors. The decision of the Board of Directors is based on the
recommendation of the Audit Committee. In making its recommendation, the Audit
Committee reviews both the audit scope and estimated fees for professional
services for the coming year. For the year 1995,1996, the Board of Directors has
authorized the engagement of Arthur Andersen LLP as its auditors.
Representatives of Arthur Andersen LLP will be present at the annual meeting
of stockholders on April 18, 1995,16, 1996, and will be given an opportunity to make any
comments they wish and will be available to respond to any questions raised at
the meeting.
21
STOCKHOLDERS' PROPOSALS
Any stockholder proposal intended to be presented at the annual meeting in
19961997 must be received by the Corporation on or before November 14, 1995,12, 1996, for
inclusion in the Corporation's Proxy Statement and form of proxy relating to
that meeting.
GENERAL
The cost of soliciting proxies will be borne by the Corporation. In addition
to solicitation by mail, officers and regular employees of the Corporation,
without receiving additional compensation therefor, may solicit proxies by
telephone or telegraph or in person. Kissel-Blake Inc. has been retained to aid
in the solicitation of proxies for a fee of $10,500,$11,500, plus out-of-pocket
expenses.
As of the date of this Proxy Statement, the Board of Directors knows of no
matters to be brought before the meeting other than the election of Directors
and approval of the 1992 Plan.Directors.
If, however, further business is presented by others, the proxy holders will
act in accordance with their best judgment.
By order of the Board of Directors.
PETER L. ROSSITER
Secretary
March 13, 1995
22
EXHIBIT A
NORTHERN TRUST CORPORATION
AMENDED 1992 INCENTIVE STOCK PLAN
[ALL CHANGES TO BE EFFECTED BY THE PROPOSED AMENDMENTS ARE SHOWN IN BOLDFACE
TYPE.]
1. PURPOSE. The Northern Trust Corporation Amended 1992 Incentive Stock Plan
(the "Plan") is intended to provide a sense of recognition and managerial
participation among key officers of Northern Trust Corporation (the
"Corporation") and its subsidiaries, by providing them with opportunities to
acquire shares of Common Stock of the Corporation ("Common Stock") and cash
payments ("Awards") based on the value or increase in the value of such
shares in accordance with the terms of the Awards described herein.
2. ADMINISTRATION. The Plan will be administered by the Compensation and
Benefits Committee (the "Committee") of the Board of Directors of the
Corporation. The Committee shall consist of at least two (2) of such
Directors as the Board may designate from time to time. Notwithstanding
anything to the contrary contained herein, membership of the Committee shall
be limited to Board members who meet the "disinterested person" definition
in Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934 and
the "outside director" definition under Section 162(m) of the Internal
Revenue Code and the regulations thereunder.
3. PARTICIPANTS. Participants will consist of key officers of the Corporation
or its subsidiaries as the Committee in its sole discretion determines to be
mainly responsible for the success and future growth and profitability of
the Corporation and whom the Committee may designate from time to time to
receive Awards under the Plan. Awards may be granted to participants who are
or were previously participants under this or other plans of the Corporation
or any subsidiary and, with the agreement of the participant, may be granted
in substitution, exchange or cancellation of any rights or benefits then or
theretofore held under this or other plans of the Corporation or any
subsidiary. The Corporation may continue to award bonuses and other
compensation to participants under other programs now in existence or
hereafter established.
4. TYPES OF AWARDS. Awards under the Plan may be granted in any one or a
combination of (a) Stock Options, (b) Stock Appreciation Rights, (c)
Performance Shares, (d) Stock Awards, and (e) Stock Equivalents, all as
described below.
5. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for issuance under
the Plan an aggregate of 3,750,000 (reflecting an adjustment for the
November, 1992 three-for-two stock split) shares of Common Stock, $1.66 2/3
par value, which may be authorized but unissued or treasury shares. Such
total number of shares shall be adjusted in accordance with the provisions
of Section 11, hereof, and a share subject to a Stock Option and its related
Stock Appreciation Right shall only be counted once. THE MAXIMUM NUMBER OF
SHARES OF COMMON STOCK AS TO WHICH A PARTICIPANT MAY RECEIVE STOCK OPTIONS
AND STOCK APPRECIATION RIGHTS UNDER THE PLAN IS 300,000, SUBJECT TO THE
PROVISIONS OF SECTION 11 HEREOF. Any shares subject to Stock Options or
Stock Appreciation Rights, issued as Performance Shares or Stock Awards or
allotted as Stock Equivalents may thereafter be subject to new Stock Options
or Stock Appreciation Rights, issued as Performance Shares or Stock Awards
or allotted as Stock Equivalents under this Plan if there is a lapse,
cancellation, forfeiture, surrender, expiration or termination of any such
Stock Options, Stock Appreciation Rights, Performance Shares, Stock Awards
or Stock Equivalents, or if shares are issued under such Stock Options or
Stock Appreciation Rights or as such Performance Shares, Stock Awards or
Stock Equivalents, and thereafter are reacquired by the Corporation pursuant
to rights reserved by the Corporation upon issuance thereof.
6. STOCK OPTIONS. The Committee may, in its discretion, grant Stock Options
under the Plan to any participant hereunder. Each Stock Option granted
hereunder shall be subject to such terms and conditions as the Committee may
determine at the time of grant, the general provisions of the
A-1
Plan, the terms and conditions of the applicable Stock Option Agreement, and
the following specific rules:
(a) Stock Options granted to a participant under the Plan shall be governed
by a Stock Option Agreement, which shall specify such terms and
conditions, not inconsistent with the terms and conditions of the Plan,
as the Committee shall determine.
(b) Except as provided in subsection (d) below, Stock Options will consist
of options to purchase Common Stock at purchase prices not less than
100% of the fair market value thereof on the date the Stock Options are
granted.
(c) Stock Options will be exercisable not earlier than six months after the
date they are granted and will terminate not later than three years
after termination of employment for any reason other than death.
NOTWITHSTANDING THE PRECEDING SENTENCE, STOCK OPTIONS GRANTED ON OR
AFTER APRIL 18, 1995, WHICH ARE NOT INCENTIVE STOCK OPTIONS, WILL
TERMINATE NOT LATER THAN FIVE YEARS FROM THE DATE OF THE PARTICIPANT'S
TERMINATION OF EMPLOYMENT ON ACCOUNT OF RETIREMENT, DISABILITY OR DEATH
(BUT IN NO EVENT BEYOND THE EXPIRATION OF TEN YEARS FROM THE DATE OF
GRANT).
(d) Stock Options may, but need not, be "Incentive Stock Options" under
Section 422 of the Internal Revenue Code of 1986 ("Code"); provided,
however, that (i) the exercise price of each Incentive Stock Option
shall be at least 100% of the fair market value of the Common Stock
subject to such Incentive Stock Option on the date of grant; (ii)
Incentive Stock Options will be exercisable not later than ten years
after the date of grant; and (iii) in the case of an Incentive Stock
Option granted to a participant who, at the time of grant, owns (as
defined in Section 425(d) of the Code) stock of the Corporation or its
subsidiaries possessing more than 10% of the total combined voting
power of all classes of stock of any such corporation, the exercise
price shall be at least 110% of the fair market value of the Common
Stock subject to the Incentive Stock Option at the time it is granted
and the Incentive Stock Option, by its terms, shall not be exercisable
after the expiration of five (5) years from the date of its grant. The
aggregate fair market value (determined with respect to each Incentive
Stock Option as of the time such Incentive Stock Option is granted) of
the shares of capital stock with respect to which Incentive Stock
Options are exercisable for the first time by a participant during any
calendar year (under all Incentive Stock Option plans of the
Corporation and subsidiary corporations) shall not exceed $100,000.
(e) Leaves of absence for military service or illness, and transfers of
employment between the Corporation and any subsidiary thereof or
between subsidiaries, shall not constitute termination of employment.
(f) Stock Options may provide that they may be exercised by payment of the
purchase price (i) in cash, (ii) by the Corporation's withholding a
portion of the shares of Common Stock otherwise distributable to the
participant, and/or (iii) by the participant's delivering to the
corporation shares of Common Stock of the Corporation. In the event
that the exercise price of a Stock Option is paid in whole or in part
by the withholding or delivery of shares of Common Stock pursuant to
clause (ii) or (iii) above, the number of shares so withheld or
delivered shall be the number of shares having an aggregate fair market
value on the date of such withholding or delivery equal to such Stock
Option exercise price, or portion thereof, so paid.
(g) Notwithstanding any other provision of the Plan to the contrary, a
Stock Option Agreement may provide that a Stock Option will become
exercisable as of the date of a Change in Control of the Corporation.
For purposes of the Plan, a "Change in Control" of the Corporation
shall be deemed to occur on the earliest of:
(i) The receipt by the Corporation of a Schedule 13D or other statement
filed under Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), indicating that any entity, person, or
group has acquired beneficial ownership, as that
A-2
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");
(ii) The commencement by an 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;
(iii) The effective time of (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 80%
of the voting stock of the surviving or resulting corporation, or (2)
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
(iv) 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 (1) three directors or (2)
directors constituting a majority of the number of directors of the
Corporation then in office.
(h) The Committee may prescribe such other terms and conditions applicable
to Stock Options granted to a participant under the Plan that are
neither inconsistent with nor prohibited by the Plan or any Stock
Option Agreement.
7. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant a
Stock Appreciation Right under the Plan to the holder of any Stock Option
granted hereunder. Each Stock Appreciation Right granted hereunder shall be
subject to such terms and conditions as the Committee may determine at the
time of grant, the general provisions of the Plan, the terms and conditions
of the applicable Stock Appreciation Right Agreement, and the following
specific rules:
(a) Stock Appreciation Rights granted to a participant under the Plan shall
be governed by a Stock Appreciation Right Agreement, which shall
specify such terms and conditions, not inconsistent with the terms and
conditions of the Plan, as the Committee shall determine.
(b) A Stock Appreciation Right may be granted in connection with a Stock
Option at the time of the grant of the Stock Option or at any time
thereafter up to six months prior to the expiration of the Stock
Option.
(c) Each Stock Appreciation Right will entitle the holder to elect to
receive, in lieu of exercising the Stock Option to which it relates, an
amount (payable in cash or in shares of Common Stock of the
Corporation, or a combination thereof, determined by the Committee and
set forth in the related Stock Appreciation Agreement) of up to 100%
(or such lesser percentage as determined by the Committee and set forth
in the related Stock Appreciation Right Agreement) of the excess of (i)
the fair market value per share of Common Stock on the date of exercise
of such Stock Appreciation Right, multiplied by the number of shares of
the Common Stock with respect to which the Stock Appreciation Right is
being exercised, over (ii) the aggregate exercise price under the terms
of the related Stock Option for such number of shares.
(d) Each Stock Appreciation Right will be exercisable at the time and to
the extent that the Stock Option to which it relates is exercisable,
provided that no Stock Appreciation Right shall be exercisable during
the first six months following the date of its grant.
(e) Upon exercise of a Stock Appreciation Right, the Stock Option (or
portion thereof) with respect to which such Stock Appreciation Right is
exercised and any other Stock Appreciation Rights with respect to such
Stock Option (or portion thereof) shall be surrendered to the
Corporation and shall not thereafter be exercisable.
A-3
(f) Exercise of a Stock Appreciation Right will reduce the number of shares
of Common Stock purchasable pursuant to the related Stock Option and
available under the Plan to the extent of the total number of shares of
Common Stock with respect to which the Stock Appreciation Right is
exercised.
(g) The Committee may, in its discretion, grant Limited Stock Appreciation
Rights, which shall be exercisable only for cash automatically upon a
Change in Control of the Corporation (as defined in Section 6(g)).
Except as provided in this subsection (g) hereof, a Limited Stock
Appreciation Right shall be subject to the same terms and conditions as
other Stock Appreciation Rights.
(h) The Committee may prescribe such other terms and conditions applicable
to Stock Appreciation Rights and Limited Stock Appreciation Rights that
are neither inconsistent with nor prohibited by the Plan or any Stock
Appreciation Right Agreement.
8. PERFORMANCE SHARES. The Committee may, in its discretion, grant Performance
Shares under the Plan to any participant hereunder. Each Performance Share
granted hereunder shall be subject to such terms and conditions as the
Committee may determine at the time of grant, the general provisions of the
Plan, the terms and conditions of the related Performance Share Agreement,
and the following specific rules:
(a) Performance Shares granted to a participant under the Plan shall be
governed by a Performance Share Agreement, which shall specify such
terms and conditions, not inconsistent with the terms and conditions of
the Plan, as the Committee shall determine.
(b) With respect to each performance period (each of which shall be no less
than one year in duration), the Committee shall establish such
performance goals relating to the profitability of the Corporation over
such performance periods measured by such factors or combination of
factors, as the Committee in its sole discretion shall determine.
Performance goals may vary among participants. If, in the sole opinion
of the Committee, achievement of established performance goals has
ceased to be a reasonable measure of the intended performance, the
Committee may, in its sole discretion, increase or decrease such
performance goals and establish new performance goals that are a
reasonable measure of the intended performance.
(c) With respect to each performance period, the Committee shall establish
targets for participants for achievement of performance goals. All
targets so established shall be stated as numbers of Performance
Shares, each of which shall represent the right, subject to the terms
and conditions of the Plan and the Performance Share Agreement
governing its grant, to the distribution of a share of Common Stock of
the Corporation plus dividends, as adjusted, accruing from the
effective date of the credit (as described in subsection (d) below) of
such Performance Share.
(d) Following the completion of each performance period, the Committee
shall determine the extent to which performance goals for that
performance period have been achieved and shall authorize credit as of
the end of such performance period of Performance Shares, in accordance
with the terms of the applicable Performance Share Agreements, to the
Accounts of participants for whom targets were established, which
Accounts shall be maintained by the Corporation for each participant
who is credited with Performance Shares under the Plan and remains
eligible for any distribution therefrom.
(e) Each Performance Share credited to a participant's Account, along with
dividends accruing from the effective date of credit of such
Performance Share, shall be distributed to him, or in the event of his
death to his beneficiary, upon the first to occur during his employment
of (i) his retirement, disability or death, (ii) the third anniversary
of the date on which such Performance Share was credited to the
participant's Account, or (iii) for any other reason deemed appropriate
by the Committee in its sole discretion. Notwithstanding, clause (ii)
of the preceding sentence, a participant may elect, in writing, to have
a Performance Share and
A-4
related dividends distributed to him on a date later than on the third
anniversary of the date on which such Performance Share was credited to
his Account; provided, however, that in such event, distribution of the
Performance Share and related dividends shall be distributed on the
first to occur during the participant's employment of the events
specified in clause (i) or (iii) above or, if earlier, upon the first to
occur of the date specified by the participant or the date his
employment with the Corporation terminates for any reason following the
third anniversary of the date on which such Performance Share was
credited to his Account.
(f) Notwithstanding any other provision of the Plan to the contrary, a
Performance Share Agreement may provide that Performance Shares
credited to participants' Accounts, as well as Performance Shares
targeted with respect to any performance period, will become
immediately distributable to participants, in whole or in part, upon a
Change in Control (as defined in Section 6(g)).
(g) The Committee may prescribe such other terms and conditions applicable
to Performance Shares granted to a participant under the Plan that are
neither inconsistent with nor prohibited by the Plan or any Performance
Share Agreement.
9. STOCK AWARDS. The Committee may, in its discretion, grant, or sell for such
amount of cash, Common Stock or such other consideration as the Committee
deems appropriate (which amount may be less than the fair market value of
the Common Stock on the date of grant or sale), shares of Common Stock under
the Plan to any participant hereunder. Each share of Common Stock granted or
sold hereunder shall be subject to such restrictions, conditions and other
terms as the Committee may determine at the time of grant or sale, the
general provisions of the Plan, the restrictions, terms and conditions of
the related Stock Award Agreement, and the following specific rules:
(a) Shares of Common Stock issued to a participant under the Plan shall be
governed by a Stock Award Agreement, which shall specify whether the
shares of Common Stock are granted or sold to the participant and such
other provisions, not inconsistent with the terms and conditions of the
Plan, as the Committee shall determine.
(b) The Corporation shall issue, in the name of the participant, stock
certificates representing the total number of shares of Common Stock
granted or sold to the participant, as soon as may be reasonably
practicable after such grant or sale, which shall be held by the
Secretary of the Corporation as provided in subsection (g) hereof.
(c) Subject to the provisions of subsections (b) and (d) hereof, and the
restrictions set forth in the related Stock Award Agreement, the
participants receiving a grant of or purchasing Common Stock shall
thereupon be a stockholder with respect to all of the shares
represented by such certificate or certificates and shall have the
rights of a stockholder with respect to such shares, including the
right to vote such shares and to receive dividends and other
distributions paid with respect to such shares.
(d) The Committee may prescribe, in its discretion, that any share of
Common Stock granted to a participant pursuant to the Plan shall be
forfeited, and any share of Common Stock sold to a participant pursuant
to the Plan shall, at the Corporation's option, be resold to the
Corporation for an amount equal to the value of the cash and/or
property paid therefor, and, in either case, such shares shall revert
to the Corporation, if (i) the participant violates a non-competition
or confidentiality agreement or other condition set forth in the Stock
Award Agreement, or (ii) the participant's employment with the
Corporation or its subsidiaries terminates prior to a date or dates for
expiration of the forfeiture or resale provisions set forth in his
Stock Award Agreement, which date shall not be earlier than the first
anniversary of such grant or sale. The Corporation shall exercise its
right to require a forfeiture, and may exercise its right to require a
resale, of Common Stock pursuant to this subsection by giving written
notice to the participant at any time within the thirty-day period
following (i) the date that the Corporation acquires knowledge of his
violation of a non-competition or confidentiality agreement or other
condition, or (ii) the participant's termination of
A-5
employment with the Corporation or its subsidiaries prior to such date
set forth in the related Stock Award Agreement. Upon receipt of such
notice, the Secretary of the Corporation shall promptly cancel shares of
Common Stock that are forfeited or resold to the Corporation, and the
Corporation shall make payment therefor, if applicable, as soon as
reasonably practicable following the date of such resale.
(e) The Committee, in its discretion, shall have the power to accelerate
the date on which the restrictions contained in any Stock Award
Agreement shall lapse with respect to any or all shares of Common Stock
granted or sold under the Plan that have been outstanding for at least
one year.
(f) Notwithstanding any provision of the Plan to the contrary, a Stock
Award Agreement may provide that (i) upon the participant's termination
of employment because of his retirement, death or disability (as
determined by the Committee), or (ii) upon a Change in Control of the
Corporation (as described in section 6(g)), any restrictions of this
Section 9 or in any Stock Award Agreement shall lapse.
(g) The Secretary of the Corporation shall hold the certificate or
certificates representing shares of Common Stock issued under this
Section 9 of the Plan on behalf of each participant who holds such
shares, whether by grant or sale, until such time as the Common Stock
is forfeited, resold to the Corporation, or the restrictions lapse.
(h) The Committee may prescribe such other restrictions, terms and
conditions applicable to the shares of Common Stock issued to a
participant under this Section 9 of the Plan that are neither
inconsistent with nor prohibited by the Plan or any Stock Award
Agreement, including, without limitation, terms providing for a lapse
of the restrictions of this Section 9 or in any Stock Award Agreement,
in installments.
10. STOCK EQUIVALENTS. The Committee may, in its discretion, award Stock
Equivalents under the Plan to participants hereunder. Each Stock Equivalent
granted hereunder shall be subject to such terms and conditions as the
Committee may determine at the time of grant, the general provisions of the
Plan, the terms and conditions of the applicable Stock Equivalent Agreement
and the following specific rules:
(a) Grants of Stock Equivalents to a participant under the Plan shall be
governed by a Stock Equivalent Agreement, which shall specify such
terms and conditions, not inconsistent with the terms and conditions of
the Plan, as the Committee shall determine.
(b) Any participant who is awarded a Stock Equivalent shall be entitled to
receive a payment, in cash or in shares of Common Stock of the
Corporation, as provided in the Stock Equivalent Agreement, equal to
(i) the fair market value or book value, at a specified date or dates,
of a designated number of shares of Common Stock; (ii) the appreciation
in the fair market value or the book value, occurring during a
specified period of time, of a designated number of shares of Common
Stock; or (iii) the fair market value or book value, at the date of the
Award, payable at a specified date or dates, of a designated number of
shares of Common Stock.
(c) The date or dates for determining fair market value or book value, or
for payment, or the period of time over which the appreciation in fair
market value or book value shall be measured, as the case may be, shall
be established by the Committee and shall be specified in the
applicable Stock Equivalent Agreement, provided that such date, dates
or period of time shall not include any dates or period occurring later
than ten years after the date of the Award.
(d) Stock Equivalents may be subject to such terms and conditions, not
inconsistent with the terms and conditions of the Plan, as the
Committee determines appropriate, which may include, without
limitation, requirements for the achievement of performance goals.
(e) Any Stock Equivalent may provide that the participant shall receive, on
the date of payment of any dividend on Common Stock occurring during
the period preceding payment of the Award, an amount in cash equal in
value to the dividends that the participant would have
A-6
received had he been the actual owner of the number of shares of Common
Stock designated by the Committee at the time of the Award.
(f) The Corporation's obligation to make payments or distributions with
respect to Stock Equivalents shall not be funded or secured in any
manner.
(g) Notwithstanding any provision of the Plan to the contrary, a Stock
Equivalent Agreement may provide that a Stock Equivalent will become
immediately vested and payable, in whole or in part, upon a Change in
Control (as defined in Section 6(g)).
(h) The Committee may prescribe such other terms and conditions applicable
to Stock Equivalents granted to a participant under the Plan that are
neither inconsistent with nor prohibited by the Plan or any Stock
Equivalent Agreement.
11. ADJUSTMENT PROVISIONS.
(a) The aggregate number of shares of Common Stock with respect to which
Awards may be granted, the aggregate number of shares of Common Stock
subject to each outstanding Award, and, where applicable, the exercise
price per share of each Award, may all be appropriately adjusted as the
Board of Directors of the Corporation may determine for any increase or
decrease in the number of shares of issued Common Stock resulting from
a subdivision or consolidation of shares, whether through
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the payment of a share dividend or other
increase or decrease in the number of such shares outstanding effected
without receipt of consideration by the Corporation. Adjustments under
this Section 11 shall be made according to the sole discretion of the
Board of Directors of the Corporation, and its decision shall be
binding and conclusive.
(b) Notwithstanding any other provisions of the Plan, and without affecting
the number of shares reserved or available hereunder, the Committee may
authorize the issuance or assumption of benefits in connection with any
merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem
appropriate.
(c) If the shares of Common Stock shall be changed into another kind of
stock of the Corporation or into securities of another corporation,
whether through reorganization, sale of assets, merger, consolidation,
or similar transaction, the Corporation shall cause adequate provision
to be made whereby participants shall thereafter be entitled to
receive, upon distribution of their Awards, the securities that they
would have been entitled to receive for shares distributed pursuant to
the Plan immediately prior to the effective date of the transaction.
12. NONTRANSFERABILITY. Except as provided below, each Award granted under the
Plan to an employee shall not be transferable by him other than by will or
the laws of descent and distribution and shall be exercisable, during his
lifetime, only by him. In the event of the death of a participant during
employment or prior to the termination, expiration, cancellation or
forfeiture of any Award held by him hereunder, each Award theretofore
granted to him shall be exercisable or payable to the extent provided
therein but no later than five years after his death and then only:
(a) by or to the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's
rights under the Award shall pass by will or the laws of descent and
distribution; and
(b) to the extent set forth in the Agreement.
Notwithstanding the foregoing, a Stock Option Agreement for an Award of
Stock Options that are not Incentive Stock Options (including a Stock
Option Agreement for an Award made prior to the January 1, 1995 effective
date of the amendment to this Section 12), may permit the participant who
received the Award, at any time prior to his death, to assign all or any
portion of the Stock Option granted to him to: (i) his spouse or lineal
descendants; (ii) the trustee of a trust for the primary benefit of his
spouse or lineal descendants; or (iii) a partnership of which his spouse
and lineal descendants are the only partners. In such event, the spouse,
lineal descendant,
A-7
trustee or partnership will be entitled to all of the rights of the
participant with respect to the assigned portion of such Stock Option, and
such portion of the Stock Option will continue to be subject to all of the
terms, conditions and restrictions applicable to the Award, as set forth
herein and in the related Stock Option Agreement immediately prior to the
effective date of the assignment. Any such assignment will be permitted
only if: (i) the participant does not receive any consideration therefor;
and (ii) the assignment is expressly permitted by the applicable Stock
Option Agreement (as such Stock Option Agreement may be amended) as
approved by the Committee. Any such assignment shall be evidenced by an
appropriate written document executed by the participant, and a copy
thereof shall be delivered to the Committee on or prior to the effective
date of the assignment.
13. OTHER PROVISIONS. Any Award under the Plan shall be subject to other
provisions as the Committee determines, including, without limitation,
provisions for the installment purchase of Common Stock under Stock
options, provisions to assist the participant in financing the acquisition
of Common Stock, provisions for the forfeiture of, or restrictions on
resale or other disposition of shares acquired under any Award, provisions
to comply with Federal and state securities laws, provisions permitting
acceleration of exercise in the event of death or disability,
understandings or conditions as to the participant's employment in addition
to those specifically provided for under the Plan, provisions giving the
Corporation the right to repurchase shares acquired under any Award in the
event the participant elects to dispose of such shares, provisions
requiring the achievement of specified performance goals, and provisions
permitting acceleration of exercise upon the occurrence of specified events
or otherwise in the discretion of the Committee.
14. TAXES. The Corporation shall be entitled, if necessary or desirable, to pay
or withhold the amount of any tax attributable to any amounts payable under
any benefit after giving the person entitled to receive such amount notice
as far in advance as practicable, and the Corporation may defer making
payment as to any benefit if any such tax, charge or assessment may be
pending until indemnified to its satisfaction. In connection with an Award
under the Plan in the form of shares of Common Stock, and in lieu of
requiring a participant to make a cash payment to the Corporation in an
amount related to the tax resulting from such benefit, the Committee may,
in its discretion, provide that, at the participant's election, the tax
withholding obligation in connection with such benefit shall be satisfied
by the Corporation's withholding a portion of the shares otherwise
distributable to the participant or by the participant's delivering to the
Corporation the shares previously delivered by the Corporation in respect
of such Award, such shares being valued in either event at their fair
market value as of the date of such withholding or delivery, as the case
may be. Notwithstanding any provision of the Plan to the contrary, (i) 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 Award and must be irrevocable; and (ii) if the
election is made by a participant who is subject to the restrictions of
Section 16 of the Securities Exchange Act of 1934, then the election must
be made in accordance with such restrictions and the restrictions of Rule
16b-3.
15. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN. The Board of Directors of the
Corporation may at any time suspend or terminate the Plan or amend the Plan
as it deems advisable and in the best interests of the Corporation. No
amendment, without approval of the stockholders of the Corporation, shall
(i) except as provided in Section 11, materially increase the total number
of shares that may be issued under the Plan, or increase the amount or type
of benefits that may be granted under the Plan, provided that,
notwithstanding the foregoing, in no event shall the number of shares
issuable under the Plan as Incentive Stock Options exceed 2,500,000, as
adjusted pursuant to Section 11; (ii) materially change the class of
eligible employees; or (iii) materially increase benefits to any
participant who is subject to the restrictions of Section 16 of the
Securities Exchange Act of 1934. All benefits in effect at the time of
termination of the Plan shall remain in effect according to their original
terms.
A-8
16. NO CONTRACT OF EMPLOYMENT. Neither the adoption of the Plan nor the grant
of any Award hereunder shall be deemed to obligate the Corporation or any
subsidiary thereof to continue the employment of any participant for any
particular period, nor shall the granting of an Award constitute a request
or consent to postpone the retirement date of any participant.
17. STOCKHOLDER APPROVAL. The Plan has been adopted by the Board of Directors
of the Corporation as of May 1, 1992, and approved by the stockholders of
the Corporation. THE PLAN WAS AMENDED ON FEBRUARY 21, 1995, WITH CERTAIN
AMENDMENTS ADOPTED SUBJECT TO APPROVAL BY STOCKHOLDERS OF THE CORPORATION.
THESE AMENDMENTS SHALL BE NULL AND VOID IF STOCKHOLDER APPROVAL IS NOT
OBTAINED.
18. DURATION OF THE PLAN. This Plan shall be effective for the ten-year period
commencing May 1, 1992 and no benefits shall be granted hereunder after
April 30, 2002.
19. APPLICABLE LAW. All questions pertaining to the validity, construction and
administration of the Plan and all Awards hereunder shall be determined in
conformity with the laws of the State of Illinois and, in the case of
Incentive Stock Options, Section 422 of the Code and regulations issued
thereunder.
A-9
Printed on Recycled paper.
LOGO1996
19
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
PROXY CARD PROXY CARD
NORTHERN TRUST CORPORATION
PROXY FOR ANNUAL MEETING 19951996
VOTING DIRECTION SOLICITED BY THE TRUSTEE OF THE THRIFT INCENTIVE TRUSTTHRIFT-INCENTIVE PLAN
The undersigned hereby directs The Northern Trust Company, Trustee of the
Thrift Incentive Trust,Thrift-Incentive Plan, to vote at the annual meeting of stockholders of
Northern Trust Corporation on April 18, 1995,16, 1996, or any adjournment of such
meeting, all shares of Common Stock for which the undersigned is entitled to
give voting direction onin the Proposalselection of Directors, as more fully described in
the proxy
statementProxy Statement for the meeting in the manner specified, and on any other
business properly coming before the meeting:meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES ONCHOICE IN THE PROPOSALSELECTION OF DIRECTORS
BY MARKING THE APPROPRIATE SPACES.SPACE. SEE REVERSE SIDE.
THE BOARD OF DIRECTORS RECOMMENDS VOTESA VOTE FOR THE ELECTION OF ALL NOMINEES AND
FOR APPROVAL OF THE NORTHERN TRUST CORPORATION AMENDED 1992 INCENTIVE STOCK
PLAN
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- --------------------------------------------------------------------------------------------------------------------------------------------------------------
- -
NORTHERN TRUST CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [x]
1. ELECTION OF 1514 DIRECTORS. NOMINEES: WORLEY H. CLARK, DOLORES E. CROSS, DAVID
W. FOX, ROBERT S. HAMADA,
BARRY G. HASTINGS, ROBERT A. HELMAN, ARTHUR L. KELLY, ARDIS KRAINIK, ROBERT
D. KREBS, FREDERICK A. KREHBIEL, WILLIAM G. MITCHELL, EDWARD J. MOONEY,
WILLIAM A. OSBORN, HAROLD B. SMITH, WILLIAM D. SMITHBURG, BIDE L. THOMAS
For Withhold For All
[_] [_] [_]
(Except Nominee(s) written below)
---------------------------------
2. APPROVAL OF THE NORTHERN TRUST CORPORATION AMENDED 1992 INCENTIVE STOCK PLAN
For Against Abstain
[_] [_] [_]
In its sole discretion, the Trustee is authorized to vote as it shall
determine on such other matters as may properly come before the meeting.
Listed on this card are the number of shares of Common Stock which you are
entitled to vote. You may direct the Trustee of the Thrift Incentive TrustThrift-Incentive Plan to
vote all of the shares for which you are entitled to direct the voting at the
annual meeting. Please express your choices onchoice in the Proposals,election of Directors, date
and sign below, and mail this card in the envelope provided.
Dated __________________________________________________________ ,1995,1996
Signature(s) ___________________________________________________________________
________________________________________________________________________________- --------------------------------------------------------------------------------
DIRECTION TO THE NORTHERN TRUST COMPANY, AS TRUSTEE OF THE THRIFT INCENTIVE
TRUST,THRIFT-INCENTIVE
PLAN, TO VOTE MY SHARE PARTICIPATION.
Please sign exactly as name appears hereon. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as such.
- -
- -------------------------------------------------------------------------------
PROXY CARD PROXY CARD
NORTHERN TRUST CORPORATION
PROXY FOR ANNUAL MEETING 19951996
VOTING DIRECTION SOLICITED BY THE TRUSTEE OF THE NORTHERN TRUST EMPLOYEE STOCK
OWNERSHIP PLAN
The undersigned hereby directs NationsBank, of Georgia, N.A. (South), Trustee of the
Northern Trust Employee Stock Ownership Plan ("ESOP"), to vote at the annual
meeting of stockholders of Northern Trust Corporation on April 18, 1995,16, 1996, or any
adjournment of such meeting, all shares of Common Stock that have been
allocated to the account of the undersigned onin the Proposalselection of Directors, as
more fully described in the proxy statementProxy Statement for the meeting in the manner
specified, and on any other business properly coming before the meeting:meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES ONCHOICE IN THE PROPOSALSELECTION OF DIRECTORS
BY MARKING THE APPROPRIATE SPACES.SPACE. SEE REVERSE SIDE.
THE BOARD OF DIRECTORS RECOMMENDS VOTESA VOTE FOR THE ELECTION OF ALL NOMINEES AND
FOR APPROVAL OF THE NORTHERN TRUST CORPORATION AMENDED 1992 INCENTIVE STOCK
PLAN
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- -------------------------------------------------------------------------------
- -
NORTHERN TRUST CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [x]
1. ELECTION OF 1514 DIRECTORS. NOMINEES: WORLEY H. CLARK, DOLORES E. CROSS, DAVID
W. FOX, ROBERT S. HAMADA,
BARRY G. HASTINGS, ROBERT A. HELMAN, ARTHUR L. KELLY, ARDIS KRAINIK, ROBERT
D. KREBS, FREDERICK A. KREHBIEL, WILLIAM G. MITCHELL, EDWARD J. MOONEY,
WILLIAM A. OSBORN, HAROLD B. SMITH, WILLIAM D. SMITHBURG, BIDE L. THOMAS
For Withhold For All
[_] [_] [_]
(Except Nominee(s) written below)
--------------------------------
2. APPROVAL OF THE NORTHERN TRUST CORPORATION AMENDED 1992 INCENTIVE STOCK PLAN
For Against Abstain
[_] [_] [_]---------------------------------
In its sole discretion, the Trustee is authorized to vote as it shall
determine on such other matters as may properly come before the meeting.
Listed on this card are the number of shares of Common Stock allocated to
your account. You may direct the Trustee of the ESOP to vote all such shares at
the annual meeting. Please express your choices onchoice in the Proposals,election of Directors,
date and sign below, and mail this card in the envelope provided.
Unallocated shares and shares for which no direction is received will be
voted by the Trustee in the same proportion that the allocated shares were
voted, unless inconsistent with the Trustee's fiduciary responsibility.
Dated __________________________________________________________ ,1995,1996
Signature(s) ___________________________________________________________________
________________________________________________________________________________- --------------------------------------------------------------------------------
DIRECTION TO NATIONSBANK, OF GEORGIA, N.A. (SOUTH), AS TRUSTEE OF THE NORTHERN TRUST EM-
PLOYEE STOCK OWNERSHIP TRUST,PLAN, TO VOTE ALL SHARES FOR WHICH I AM ENTITLED TO GIVE
VOTING DIRECTION.
Please sign exactly as name appears hereon. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as such.
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PROXY CARD PROXY CARD
NORTHERN TRUST CORPORATION
PROXY FOR ANNUAL MEETING 19951996
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Frederick A. Krehbiel, William G. Mitchell
and William D. Smithburg, or any of them, with the power of substitution,
attorneys and proxies for the undersigned to vote at the annual meeting of
stockholders of Northern Trust Corporation on April 18, 1995,16, 1996, or any
adjournment of such meeting, all shares of Common Stock which the undersigned
is entitled to vote onin the Proposalselection of Directors, as more fully described in
the proxy
statementProxy Statement for the meeting in the manner specified, and on any other
business properly coming before the meeting:meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES ONCHOICE IN THE PROPOSALSELECTION OF DIRECTORS
BY MARKING THE APPROPRIATE SPACES,SPACE, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY
SPACE IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF
DIRECTORS'
RECOMMENDATION.DIRECTORS. THE ABOVE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN, DATE AND
RETURN THIS CARD.
THE BOARD OF DIRECTORS RECOMMENDS VOTESA VOTE FOR THE ELECTION OF ALL NOMINEES AND
FOR APPROVAL OF THE NORTHERN TRUST CORPORATION AMENDED 1992 INCENTIVE STOCK
PLAN
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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NORTHERN TRUST CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [x]
1. ELECTION OF 1514 DIRECTORS. NOMINEES: WORLEY H. CLARK, DOLORES E. CROSS, DAVID
W. FOX, ROBERT S. HAMADA,
BARRY G. HASTINGS, ROBERT A. HELMAN, ARTHUR L. KELLY, ARDIS KRAINIK, ROBERT
D. KREBS, FREDERICK A. KREHBIEL, WILLIAM G. MITCHELL, EDWARD J. MOONEY,
WILLIAM A. OSBORN, HAROLD B. SMITH, WILLIAM D. SMITHBURG, BIDE L. THOMAS
For [_] Withhold [_] For All
[_] [_] [_]
(Except Nominee(s) written below)
---------------------------------
2. APPROVAL OF THE NORTHERN TRUST CORPORATION AMENDED 1992 INCENTIVE STOCK PLAN
For Against Abstain
[_] [_] [_]--------------------------------
In their sole discretion, the Proxies are authorized to vote as they shall
determine on such other matters as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
ALL NOMINEES FOR DIRECTOR, CUMULATIVELY FOR SOME IF THE ABOVE PROXIES SHALL SO
DETERMINE AT THEIR SOLE DISCRETION, AND FOR APPROVAL OF THE NORTHERN TRUST
CORPORATION AMENDED 1992 INCENTIVE STOCK PLAN.DISCRETION.
Dated __________________________________________________________ ,1995,1996
Signature(s) ___________________________________________________________________
________________________________________________________________________________- --------------------------------------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as an attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation or partnership, sign in name of en-
tity by authorized person.
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