Exhibit Number (10)(i)
To 3/31/96 Form 10-Q
NORTHERN TRUST CORPORATION
ANNUAL PERFORMANCE PLAN
1996
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 and its subsidiaries (hereinafter referred to
as the "Corporation"), 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
---------
The Plan is effective from January 1, 1996 to December 31, 1996.
III. ELIGIBILITY AND PARTICIPATION
-----------------------------
Eligibility to participate in the Plan is restricted to officers with the
title of Vice President and above and 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 AND DETERMINATION
-------------------------------
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
Corporation'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 the Corporation 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, 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. Awards payable because of a Change in
Control of the Corporation pursuant to Paragraph VIII(h) 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 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) Awards paid under the provisions of the Plan are considered
pensionable earnings when paid.
(b) Termination of employment by a participant during the Plan year,
either voluntary or involuntary with case, and for reasons other
than death, disability, or retirement shall result in immediate
exclusion from the Plan.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
2
(g) 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.
(h) Notwithstanding any other terms contained herein, in the event of a
Change in Control of the Corporation, discretionary awards shall be
paid to participants in accordance with the last sentence of Section
VI of this Plan and as if the Corporation and Business Units had
achieved the respective earnings targets, as described in Section
IV. For purposes of this paragraph, 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 term is defined in Rule 13d-3
under the Exchange Act, or 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 (A) a merger or consolidation of the
Corporation with one or more other corporations as a result
of which the holders of the outstanding voting stock of the
Corporation immediately prior to such merger or consolidation
hold less than 60% of the voting stock of the surviving or
resulting corporation, or (B) a transfer of substantially all
of the property of the Corporation other than to an entity of
which the Corporation owns at least 80% of the voting stock;
or
(iv) The election of the Board of Directors of the Corporation,
without the recommendation or approval of the incumbent Board
of Directors of the Corporation, or the lesser of (A) three
directors or (B) directors constituting a majority of the
number of directors of the Corporation then in office.
3