Exhibit Number (10)(iii)
To 6/30/96 Form 10-Q
EMPLOYMENT SECURITY AGREEMENT
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THIS EMPLOYMENT SECURITY AGREEMENT is entered into this 21st day of May,
1996, between NORTHERN TRUST CORPORATION, a Delaware corporation (the
"Company"), and (NAME) (the "Executive").
WITNESSETH THAT:
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WHEREAS, Executive is employed by the Company or one of its wholly-owned
subsidiaries (referred to collectively as the "Company") and the Company desires
to provide certain security to Executive in connection with any potential change
in control of the Company; and
NOW, THEREFORE, it is hereby agreed by and between the parties, for good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, as follows:
1. Payments and Benefits Upon a Change in Control. If within two (2) years
after a Change in Control (as defined below) or during the Period Pending a
Change in Control (as defined below), (i) the Company shall terminate
Executive's employment with the Company without Good Cause (as defined
below), or (ii) Executive shall voluntarily terminate such employment with
Good Reason (as defined below), the Company shall, within 30 days of
Executive's Employment Termination (as defined below), make the payments
and provide the benefits described below.
(a) Cash Payment. The Company shall make a lump sum cash payment to
Executive equal to two times the Executive's Annual Compensation (as
defined below).
(b) Short-Year Bonus. The Company shall make a lump sum cash payment to
Executive equal to a pro rata portion (based on the date on which
Executive's Employment Termination occurs) of the average of the
annual amounts paid to Executive under the Management Performance Plan
or any successor plan (the "MPP"), the Annual Performance Plan or any
successor plan (the "APP"), the Specialized Incentive Plans or any
successor plans (the "SIP") and any other cash-based incentive or
bonus plans, with respect to the last three full fiscal years of
Executive's participation in such plans prior to Employment
Termination or, if higher, prior to the Change in Control. For
purposes of the preceding sentence, if Executive's number of full
fiscal years of participation in the MPP, APP, SIP, and other cash-
based plan prior to the Change in Control is less than three, the
average amount shall be calculated as the average of the annual
amounts paid to Executive over the number of full fiscal years of
Executive's participation in the MPP, APP, SIP, and other plans prior
to the Change in Control, or the number of full fiscal years of
Executive's participation in the MPP, APP, SIP, and other plans prior
to Employment Termination, whichever produces a higher average annual
amount. The provisions of this paragraph (b)
shall supersede any provisions of the APP relating to bonus amounts in
the event of a Change in Control, and the amount paid to the Executive
under this paragraph shall be in lieu of any amount that would be
payable in the event of a Change in Control under the APP.
(c) Welfare Benefit Plans. With respect to each Welfare Benefit Plan (as
defined below), for the period beginning on Executive's Employment
Termination and ending on the earlier of (i) two years following
Executive's Employment Termination, or (ii) the date Executive becomes
covered by a welfare benefit plan or program maintained by an entity
other than the Company which provides coverage or benefits at least
equal, in all respects, to such Welfare Benefit Plan, Executive shall
continue to participate in such Welfare Benefit Plan on the same basis
and at the same cost to Executive as was the case immediately prior to
the Change in Control (or, if more favorable to Executive, as was the
case at any time hereafter), or, if any benefit or coverage cannot be
provided under a Welfare Benefit Plan because of applicable law or
contractual provisions, Executive shall be provided with substantially
similar benefits and coverage for such period. Immediately following
the expiration of the continuation period required by the preceding
sentence, Executive shall be entitled to continued group health
benefit plan coverage (so-called "COBRA coverage") in accordance with
Section 4980B of the Internal Revenue Code of 1986, as amended (the
"Code"), it being intended that COBRA coverage shall be consecutive to
the benefits and coverage provided for in the preceding sentence.
Executive's eligibility for, and premium contribution level under, The
Northern Trust Retiree Medical Care Plan and The Northern Trust
Medicare Supplemental Plan and any similar or successor plans or
programs maintained or contributed to by the Company, shall be
determined by adding two years to Executive's age and years of service
at Executive's Employment Termination.
(d) Supplemental Retirement Plans. All amounts accrued or accumulated on
behalf of Executive under the Supplemental Pension Plan for Employees
of The Northern Trust Company (the "SERP"), the Supplemental Thrift-
Incentive Plan for Employees of The Northern Trust Company (the
"Supplemental TIP") and the Supplemental Employee Stock Ownership Plan
for Employees of The Northern Trust Company (the "Supplemental ESOP")
will immediately be fully vested upon the Change in Control, and the
Company shall promptly pay or distribute all such amounts to Executive
in accordance with the terms of such plans as in effect on the date of
this Agreement (or as of Executive's Employment Termination, if more
favorable to Executive).
(e) Stock Incentive Plans. All stock options granted under the Northern
Trust Corporation Amended 1985 Incentive Stock Plan (the "1985 ISP"),
the Northern Trust Corporation 1992 Incentive Stock Plan (the "1992
ISP"), the Northern Trust Corporation Amended 1992 Incentive Stock
Plan (the "1995 ISP") and any other stock plan or program
(collectively referred to as the "ISPs"), will immediately become
fully vested and exercisable upon the Change in Control. All
restricted stock granted under the ISPs will immediately be fully
vested and distributed to Executive upon the Change in Control. With
respect to
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performance shares granted under the ISPs pursuant to the Northern
Trust Corporation Long Term Incentive Plan ("LTIP") or otherwise, upon
the Change in Control: (i) all performance shares credited to
Executive's performance share account will be immediately distributed
to Executive (together with any other amounts then credited to
Executive's performance share account); (ii) a pro rata portion of all
performance shares awarded to Executive but not then credited to
Executive's performance share account will be immediately distributed
to Executive; and (iii) Executive will remain eligible for crediting
to Executive's performance share account as of the end of the
performance period, in accordance with the provisions of the LTIP in
effect as of the Change in Control, any remaining performance shares
awarded to Executive but not distributed in accordance with this
paragraph.
(f) Salary to Date of Employment Termination. The Company shall pay to
Executive any unpaid salary or other compensation of any kind earned
with respect to any period prior to Executive's Employment Termination
and a lump sum cash payment for accumulated but unused vacation earned
through such Employment Termination.
2. Definitions. For purposes of this Agreement:
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(a) "Good Cause" shall mean: (i) Executive's conviction of any criminal
violation involving dishonesty, fraud, or breach of trust; (ii)
Executive's willful engagement in any misconduct in the performance of
Executive's duty that materially injures the Company; (iii)
Executive's performance of any act which, if known to the customers,
clients, stockholders or regulators of the Company or any of its
subsidiaries, would materially and adversely impact on the business of
the Company or any of its subsidiaries; (iv) any act or omission by
Executive that causes a regulatory body with jurisdiction over the
Company or any of its subsidiaries, to demand, request, or recommend
that Executive be suspended or removed from any position in which
Executive serves with the Company or any of its subsidiaries; or (v)
Executive's willful and substantial nonperformance of assigned duties,
provided that such nonperformance has continued more than ten days
after the Company has given written notice of such nonperformance and
of its intention to terminate Executive's employment because of such
nonperformance.
(b) "Good Reason" shall exist if, without Executive's express written
consent:
(i) The Company shall materially reduce the nature, scope, level or
extent of Executive's responsibilities from the nature, scope,
level or extent of such responsibilities prior to the Change in
Control, or shall fail to provide Executive with adequate
office facilities and support services to perform such
responsibilities;
(ii) The Company shall reduce Executive's salary below that in
effect as of the date of this Agreement (or as of the Change in
Control, if greater);
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(iii) The Company shall require Executive to relocate Executive's
principal business office or his principal place of residence
outside the (LOCATION) Standard Metropolitan Statistical Area
(the "Geographical Employment Area"), or assign to Executive
duties that would reasonably require such relocation;
(iv) The Company shall require Executive, or assign duties to
Executive which would reasonably require Executive, to spend
more than fifty normal working days away from the Geographical
Employment Area during any consecutive twelve-month period; or
(v) The Company shall fail to continue in effect any cash or stock-
based incentive or bonus plan, retirement plan, welfare benefit
plan, or other benefit plan, program or arrangement, unless the
aggregate value (as computed by an independent employee
benefits consultant selected by the Company) of all such
compensation, retirement and benefit plans, programs and
arrangements provided to Executive is not materially less than
their aggregate value as of the date of this Agreement (or as
of the Change in Control, if greater).
(c) "Change in Control" shall be deemed to occur on the earliest of:
(i) The receipt by the Company of a Schedule 13D or other statement
filed under Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), indicating that any
entity, person, or group has acquired beneficial ownership, as
that term is defined in Rule 13d-3 under the Exchange Act, of
more than 30% of the outstanding capital stock of the Company
entitled to vote for the election of directors ("voting
stock");
(ii) The commencement by an entity, person, or group (other than the
Company or a subsidiary of the Company) of a tender offer or an
exchange offer for more than 20% of the outstanding voting
stock of the Company;
(iii) The effective time of (A) a merger or consolidation of the
Company with one or more other corporations as a result of
which the holders of the outstanding voting stock of the
Company 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 Company other than to an entity of which the
Company owns at least 80% of the voting stock; or
(iv) The election to the Board of Directors of the Company, without
the recommendation or approval of the incumbent Board of
Directors of the Company, of the lesser of: (A) three
directors; or (B) directors constituting a majority of the
number of directors of the Company then in office.
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(d) "Annual Compensation" shall mean the sum of: (i) Executive's salary at
the greater of (A) Executive's salary rate in effect on the date of
the Change in Control, or (B) Executive's salary rate in effect on
Executive's Employment Termination; and (ii) the Amounts Payable Under
Any Cash Bonus Plans (as defined below) in which Executive
participates.
(e) "Employment Termination" shall mean the effective date of: (i)
Executive's voluntary termination of employment with the Company with
Good Reason; or (ii) the termination of Executive's employment by the
Company without Good Cause.
(f) "Welfare Benefit Plan" shall mean each welfare benefit plan maintained
or contributed to by the Company, including, but not limited to a plan
that provides health (including medical and dental), life, accident or
disability benefits or insurance, or similar coverage, in which
Executive was participating at the time of the Change in Control.
(g) "Amounts Payable Under Any Cash Bonus Plans" shall mean the sum of
whichever of the following are applicable to Executive: (i) the amount
that would be awarded to Executive under the MPP, assuming the target
award percentage was applicable and Executive was employed for the
full fiscal year in which Executive's Employment Termination occurs;
(ii) the average of the annual amounts paid to Executive under the APP
with respect to the last three full fiscal years of Executive's
participation in the APP prior to Employment Termination or, if
higher, prior to the Change in Control; (iii) the average of the
annual amounts paid to Executive under the SIPs with respect to the
last three full fiscal years of Executive's participation in the SIPs
prior to Employment Termination or, if higher, prior to the Change in
Control; and (iv) the average of the annual amounts paid to Executive
under any other cash-based incentive or bonus plans in which Executive
participates after the date of this Agreement with respect to the last
three full fiscal years of Executive's participation in such plans
prior to Employment Termination or, if higher, prior to the Change in
Control. For purposes of the preceding sentence, if Executive's number
of full fiscal years of participation in the APP, SIP, or other cash-
based plan prior to the Change in Control is less than three, the
amount under clause (ii), (iii) or (iv) of this paragraph shall be
calculated as the average of the annual amounts paid to Executive over
the number of full fiscal years of Executive's participation in the
APP, SIP, or other plans prior to the Change in Control, or the number
of full fiscal years of Executive's participation in the APP, SIP, or
other plans prior to Employment Termination, whichever produces a
higher average annual amount.
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(h) "Period Pending a Change in Control" shall mean the period after the
approval by the Company's stockholders and prior to the effective time
of (A) a merger or consolidation of the Company with one or more other
corporations as a result of which the holders of the outstanding
voting stock of the Company 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 Company other than to an entity of which the
Company owns at least 80% of the voting stock.
3. Certain Additional Payments by the Company.
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(a) Gross-Up. Anything in this Agreement to the contrary notwithstanding,
in the event that any payment or distribution by or on behalf of the
Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments
required under this Section 3) (the "Payments") is determined to be an
"excess parachute payment" pursuant to Code Section 280G or any
successor or substitute provision of the Code, with the effect that
Executive is liable for the payment of the excise tax described in
Code Section 4999 or any successor or substitute provision of the
Code, or any interest or penalties are incurred by Executive with
respect to such Payments (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as
the "Excise Tax"), then Executive shall be entitled to receive an
additional payment (the "Gross-Up Payment") in an amount such that
after payment by Executive of all taxes imposed upon the Gross-Up
Payment, including, without limitation, federal, state, local or other
income taxes, FICA taxes, and additional Excise Tax (and any interest
and penalties imposed with respect to such taxes), Executive retains a
portion of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Determination of Gross-Up. Subject to the provisions of Section 3(c),
all determinations required to be made under this Section 3, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by the public accounting firm that
serves as the Company's auditors (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and
Executive within 15 business days of the receipt of notice from the
Company or Executive that there have been Payments, or such earlier
time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or
group effecting the Change in Control, Executive shall designate
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses
of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 3, shall be
paid by the Company to Executive within five days after the receipt by
the Company and Executive of the Accounting firm's determination. If
the Accounting Firm determines that no Excise Tax is payable
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by Executive, it shall furnish Executive with a written opinion that
failure to report the Excise Tax on Executive's applicable federal
income tax return would not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and Executive, except as provided in
paragraph (c) below.
(c) IRS Claims. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by
the Accounting Firm hereunder, it is possible that the Internal
Revenue Service or other agency will claim that a greater Excise Tax
is due, and thus a greater amount of Gross-Up Payment should have been
made by the Company than that determined pursuant to paragraph (b)
above (an "Underpayment"). In the event that Executive is required to
make a payment of any such Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred, if any,
and such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive. Executive shall notify the Company in
writing of any claim by the Internal Revenue Service or other agency
that, if successful, would require the payment by the Company of the
Gross-Up Payment or an Underpayment.
4. Mitigation and Set-Off. Executive shall not be required to mitigate
Executive's damages by seeking other employment or otherwise. The Company's
obligations under this Agreement shall not be reduced in any way by reason
of any compensation or benefits received (or foregone) by Executive from
sources other than the Company after Executive's Employment Termination, or
any amounts that might have been received by Executive in other employment
had Executive sought such other employment. Executive's entitlement to
benefits and coverage under this Agreement shall continue after, and shall
not be affected by, Executive's obtaining other employment after his
Employment Termination, provided that any such benefit or coverage shall
not be furnished if Executive expressly waives the specific benefit or
coverage by giving written notice of waiver to the Company.
5. Litigation Expenses. The Company shall pay to Executive all out-of-pocket
expenses, including attorneys' fees, incurred by Executive in the event
Executive successfully enforces any provision of this Agreement in any
action, arbitration or lawsuit.
6. Assignment; Successors. This Agreement may not be assigned by the Company
without the written consent of Executive but the obligations of the Company
under this Agreement shall be the binding legal obligations of any
successor to the Company by merger, consolidation or otherwise, and in the
event of any business combination or transaction that results in the
transfer of substantially all of the assets or business of the Company, the
Company will cause the transferee to assume the obligations of the Company
under this Agreement. This Agreement may not be assigned by Executive
during Executive's life, and upon Executive's death will inure to the
benefit of Executive's heirs, legatees and legal representatives of
Executive's estate.
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7. Interpretation. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Illinois,
without regard to the conflict of law principles thereof. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.
8. Withholding. The Company may withhold from any payment that it is required
to make under this Agreement amounts sufficient to satisfy applicable
withholding requirements under any federal, state or local law.
9. Amendment or Termination. This Agreement may be amended at any time by
written agreement between the Company and Executive. The Company may
terminate this Agreement by written notice given to Executive at least two
years prior to the effective date of such termination, provided that, if a
Change in Control occurs prior to the effective date such termination, the
termination of this Agreement shall not be effective and Executive shall be
entitled to the full benefits of this Agreement. Any such amendment or
termination shall be made pursuant to a resolution of the Board.
10. Financing. Cash and benefit payments under this Agreement shall constitute
general obligations of the Company. Executive shall have only an unsecured
right to payment thereof out of the general assets of the Company.
Notwithstanding the foregoing, the Company may, by agreement with one or
more trustees to be selected by the Company, create a trust on such terms
as the Company shall determine to make payments to Executive in accordance
with the terms of this Agreement.
11. Severability. In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first written above.
NORTHERN TRUST CORPORATION
By:_____________________
____________________
Its:___________________ Executive
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