Exhibit 10
NORTHERN TRUST CORPORATION
ANNUAL PERFORMANCE PLAN
2001
I. Purpose of Plan
The purpose of the Annual Performance Plan (the "Plan") is to promote the
achievement of superior financial and operating performance of the Northern
Trust Corporation (the "Corporation") and its subsidiaries (collectively,
the Corporation and its subsidiaries, "Northern Trust"), and further the
objective of delivering unrivaled service quality to its clients and
partners through the awarding of cash incentive payments to selected
officers.
II. Plan Year/Effective Date/Termination
The Plan Year for this Plan will be the calendar year from January 1, 2001
to December 31, 2001. The Plan is effective as of January 1, 2001 and
automatically terminates on December 31, 2001.
III. Eligibility and Participation
Eligibility to participate in the Plan is restricted to officers with the
title of Vice President and above who are not eligible for participation in
a Specialized Incentive Plan. Plan participation is reviewed each year, and
participation in one year does not automatically indicate participation in
subsequent Plan years. Participation in the Plan is based upon
recommendation from the respective Business Unit Head.
IV. Award Funding
At the beginning of the Plan year, the Compensation and Benefits Committee
of the Board of Directors of the Corporation will determine a Corporate
Earnings Target and profit plan funding for awards under the Annual
Performance Plan. The allocation of the plan award funding to each
respective Business Unit will be based on the salaries of the eligible
officers within the Business Unit. Within each Business Unit, one-half of
the available funding for awards under the Plan will be based on the
Northern Trust's financial achievement versus the Corporate Earnings
Target. The other half of the award funding is based on the financial
achievement of the Business Unit versus the Business Unit's earnings
target. For staff support personnel, the available funding for awards
will be based entirely on the financial achievement of Northern Trust
versus the Corporate Earnings Target. The formula determining the pool
level funding based on Corporate and Business Unit performance is described
in Attachment I.
V. Individual Award Determination
Individual participant awards will be discretionary. They will be
determined by Business Unit Management based on an assessment of individual
performance relative to performance expectations, contribution to financial
and operating goals, competitive level of total compensation, and available
award pool funding.
VI. Payment of Awards
Awards will be paid in cash as soon as practicable following the completion
of the Plan year. For Plan year 2001 awards, officers receiving an award
equal to or greater than $12,500 from the Plan will have their award
delivered as a combination of approximately 80% cash and 20 % in the form
of a non-qualified Stock Option grant. All other awards will be paid in
cash. Awards payable because of a Change in Control of the Corporation
pursuant to Paragraph IX shall be paid in cash as soon as practicable
following such Change in Control.
VII. Administration
The Plan shall be administered by the Management Committee of the
Corporation (the "Committee"). Subject to the provisions of the Plan, the
Committee shall be authorized to interpret the Plan, to establish, amend,
and rescind any rules and regulations relating to the Plan, and to make all
other determinations necessary or advisable for the administration of the
Plan. The determinations of the Committee in the effective administration
of the Plan, as described herein, shall be final and conclusive.
The Compensation and Benefits Committee of the Board of Directors of the
Corporation, by written resolution, may amend, suspend, or terminate any or
all provisions of the Plan at any time.
VIII. Other Provisions
The following miscellaneous provisions are applicable to the Plan:
(a) None of the provisions of this Plan will override general Corporate
Policy.
(b) Awards paid under the provisions of the Plan are considered
pensionable earnings when paid.
(c) Termination of employment by a participant during the Plan Year,
either voluntary or involuntary with cause, and for reasons other than
death, disability, or retirement shall result in immediate exclusion
from the Plan. For purposes of this Plan, "Retirement" means the
termination of the participant's employment with Northern Trust by
reason of participant having attained the age of 65 years or older or
after the participant has qualified for an Early Retirement Pension
under The Northern Trust Company Pension Plan. For purposes of this
Plan, "Disability" means the participant is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than 12 months.
(d) Except in the event of the death of a participant, the rights and
interests of a participant under the Plan shall not be assigned,
encumbered, or transferred.
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(e) No employee or other person shall have any claim or right to be granted an
award under the Plan. Neither the Plan, nor any action taken thereunder,
shall be construed as giving any employee or other person any right to be
retained in the employ of the Corporation for any length of time.
Participants in the Plan will remain at-will employees for all purposes.
(f) The Corporation shall have the right to deduct from all payments made under
the Plan any taxes required by law to be withheld with respect to such
payment.
(g) All questions pertaining to the validity, construction and administration
of the Plan and any award hereunder shall be determined in conformity with
the laws of the State of Illinois.
(h) Each participant shall designate a beneficiary (the "Designated
Beneficiary") to receive the award, if any, allocated to a participant, in
the event of such participant's death. If no Designated Beneficiary
survives the participant, it shall be the surviving spouse of the
participant or, if there is no surviving spouse, it shall be the
participant's estate.
IX. Change in Control
Notwithstanding any other terms contained herein, in the event of a Change
in Control of the Corporation, funding for awards under the Plan shall be
determined as if the Corporation and Business Units had achieved the
respective earnings targets, as described in Section IV. Discretionary
awards shall be paid to participants as soon as practicable. For purposes
of this paragraph, a "Change in Control" shall be deemed to have occurred
if
(1) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Corporation or its affiliates) representing 20% or
more of the combined voting power of the Corporation's then
outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause
(i) of paragraph (3) below; or
(2) the election to the Board of Directors of the Corporation, without
the recommendation or approval of two thirds of the incumbent Board of
Directors of the Corporation, of the lesser of: (A) three directors;
or (B) directors constituting a majority of the number of directors of
the Corporation then in office, provided, however, that directors
whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Corporation
will not be considered as incumbent members of the Board of Directors
of the Corporation for purposes of this section; or
(3) there is consummated a merger or consolidation of the Corporation
or any direct or indirect subsidiary of the Corporation with any other
company, other than (i) a merger or consolidation which would result
in the voting securities of the Corporation outstanding immediately
prior to such merger or consolidation continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof), at least 60% of the
combined voting power of the securities of the Corporation or such
surviving
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entity or any parent thereof outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Corporation (or similar
transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation (not
including in the securities Beneficially Owned by such Person any
securities acquired directly from the Corporation or its Affiliates)
representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; or
(4) the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or there is consummated
an agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets, other than a sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets to an entity, at least 60% of the combined voting
power of the voting securities of which are owned by stockholders of
the Corporation in substantially the same proportions as their
ownership of the Corporation immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Corporation immediately prior to such transaction or series
of transactions continue to have substantially the same proportionate ownership
in an entity which owns all or substantially all of the assets of the
Corporation immediately following such transaction or series of transactions.
For purposes of the foregoing, the following definitions shall apply:
"Affiliate" shall have the meaning set forth in Rule 12b-2 under Section 12
of the Exchange Act; "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act, except that a Person shall not be deemed
to be the Beneficial Owner of any securities with respect to which such
Person has properly filed a Form 13-G; "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended from time to time; and "Person"
shall have the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Corporation or any of its Affiliates, (ii) a
trustee or other fiduciary holding securities under an employee benefits
plan of the Corporation or any of its subsidiaries, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities
or (iv) a corporation owned, directly or indirectly, by the stockholders of
the Corporation in substantially the same proportions as their ownership of
stock of the Corporation.
Notwithstanding anything in this Plan to the contrary, in the event of a
Potential Change in Control and for a period of six (6) months following the
Potential Change in Control, neither the Board nor the Committee may terminate
this Plan or amend this Plan in a manner that adversely affects the rights of
any participant of the Plan.
A "Potential Change in Control" shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:
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(a) the Corporation enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(b) the Corporation or any Person publicly announces an intention to take
or to consider taking actions which, if consummated, would constitute
a Change in Control;
(c) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Corporation representing 15% or more of either the
then outstanding shares of common stock of the Corporation or the
combined voting power of the Corporation's then outstanding securities
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Corporation or its Affiliates);
or
(d) the Board adopts a resolution to the effect that, for purposes of this
Plan, a Potential Change in Control has occurred.
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