-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EwugUOzbmyejU/rUFhgH8xQ3LKj4ptJUW5TpVEpMAWG8gUlYS44ulh3dqJt85kYu TSULoduUXKZkX50JyavI6Q== 0000950131-97-003422.txt : 19970515 0000950131-97-003422.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950131-97-003422 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN TRUST CORP CENTRAL INDEX KEY: 0000073124 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 362723087 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05965 FILM NUMBER: 97605021 BUSINESS ADDRESS: STREET 1: 50 S LA SALLE ST CITY: CHICAGO STATE: IL ZIP: 60675 BUSINESS PHONE: 3126306000 FORMER COMPANY: FORMER CONFORMED NAME: NORTRUST CORP DATE OF NAME CHANGE: 19780525 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_____________to_____________ Commission File Number 0-5965 NORTHERN TRUST CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 36-2723087 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 50 SOUTH LA SALLE STREET CHICAGO, ILLINOIS 60675 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312)630-6000 ---------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] 111,496,349 Shares - $1.66 2/3 Par Value (Shares of Common Stock Outstanding on March 31, 1997) ================================================================================ PART I - FINANCIAL INFORMATION Item 1. Financial Statements CONSOLIDATED BALANCE SHEET NORTHERN TRUST CORPORATION
March 31 December 31 March 31 --------- ----------- --------- ($ In Millions) 1997 1996 1996 - ----------------------------------------------------------------------- --------- ----------- --------- Assets Cash and Due from Banks $ 948.6 $ 1,292.5 $ 1,125.7 Federal Funds Sold and Securities Purchased under Agreements to Resell 1,219.5 1,022.6 118.8 Time Deposits with Banks 2,354.9 2,060.0 1,828.9 Other Interest-Bearing 41.0 114.3 54.4 Securities Available for Sale 5,328.8 4,311.7 5,590.5 Held to Maturity (Fair value - $499.3 at March 1997, $518.9 at December 1996, $513.1 at March 1996) 481.7 498.4 489.9 Trading Account 13.7 4.8 6.9 - ----------------------------------------------------------------------- --------- --------- --------- Total Securities 5,824.2 4,814.9 6,087.3 - ----------------------------------------------------------------------- --------- --------- --------- Loans and Leases Commercial and Other 6,750.9 6,379.9 5,977.5 Residential Mortgages 4,666.4 4,557.5 4,048.1 - ----------------------------------------------------------------------- --------- --------- --------- Total Loans and Leases (Net of unearned income - $113.4 at March 1997, $109.1 at December 1996, $89.6 at March 1996) 11,417.3 10,937.4 10,025.6 - ----------------------------------------------------------------------- --------- --------- --------- Reserve for Credit Losses (148.3) (148.3) (147.2) Buildings and Equipment 291.7 291.5 287.9 Customers' Acceptance Liability 45.7 44.7 28.9 Trust Security Settlement Receivables 323.0 362.3 215.8 Other Assets 914.2 816.4 675.6 - ----------------------------------------------------------------------- --------- --------- --------- Total Assets $23,231.8 $21,608.3 $20,301.7 - ----------------------------------------------------------------------- --------- --------- --------- Liabilities Deposits Demand and Other Noninterest-Bearing $ 3,951.8 $ 3,476.7 $ 2,609.8 Savings and Money Market Deposits 3,597.9 3,880.1 3,598.4 Savings Certificates 2,003.8 2,056.3 2,077.9 Other Time 683.9 462.7 451.2 Foreign Offices - Demand 415.6 410.7 309.2 - Time 4,560.9 3,509.7 3,053.9 - ----------------------------------------------------------------------- --------- --------- --------- Total Deposits 15,213.9 13,796.2 12,100.4 Federal Funds Purchased 1,197.7 653.0 2,715.2 Securities Sold Under Agreements to Repurchase 1,685.4 966.1 1,911.5 Commercial Paper 145.2 149.0 144.3 Other Borrowings 1,943.1 3,142.1 914.8 Senior Notes 205.0 305.0 305.0 Long-Term Debt 576.3 427.8 336.1 Liability on Acceptances 45.7 44.7 28.9 Other Liabilities 626.3 580.3 376.9 - ----------------------------------------------------------------------- --------- --------- --------- Total Liabilities 21,638.6 20,064.2 18,833.1 - ----------------------------------------------------------------------- --------- --------- --------- Stockholders' Equity Preferred Stock 120.0 120.0 120.0 Common Stock, $1.66 2/3 Par Value; Authorized 140,000,000 shares at March 1997, December 1996 and March 1996; Outstanding 111,496,349 at March 1997, 111,247,732 at December 1996 and 56,648,044 at March 1996 189.9 189.9 95.0 Capital Surplus 228.3 231.7 332.7 Retained Earnings 1,160.6 1,110.2 971.7 Net Unrealized Gain (Loss) on Securities Available for Sale .2 1.6 (3.0) Common Stock Issuable - Performance Plan 12.8 10.4 10.4 Deferred Compensation - ESOP and Other (38.3) (35.5) (40.3) Treasury Stock - (at cost, 2,464,413 shares at March 1997, 2,712,780 shares at December 1996, and 331,535 shares at March 1996) (80.3) (84.2) (17.9) - ----------------------------------------------------------------------- --------- --------- --------- Total Stockholders' Equity 1,593.2 1,544.1 1,468.6 - ----------------------------------------------------------------------- --------- --------- --------- Total Liabilities and Stockholders' Equity $23,231.8 $21,608.3 $20,301.7 - ----------------------------------------------------------------------- --------- --------- ---------
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CONSOLIDATED STATEMENT OF INCOME NORTHERN TRUST CORPORATION First Quarter Ended March 31 ----------------------------- ($ In Millions Except Per Share Information) 1997 1996 - -------------------------------------------------------------------- -------------- ------------ Interest Income Loans and Leases $183.6 $163.9 Securities Available For Sale 72.1 85.0 Held to Maturity 7.9 8.4 Trading Account .1 .2 - -------------------------------------------------------------------- -------------- ------------ Total Securities 80.1 93.6 - -------------------------------------------------------------------- -------------- ------------ Time Deposits with Banks 27.2 22.8 Federal Funds Sold and Securities Purchased under Agreements to Resell and Other Interest-Bearing 9.1 4.6 - -------------------------------------------------------------------- -------------- ------------ Total Interest Income 300.0 284.9 - -------------------------------------------------------------------- -------------- ------------ Interest Expense Deposits 114.2 111.5 Federal Funds Purchased 19.6 28.7 Securities Sold under Agreements to Repurchase 21.7 26.1 Commercial Paper 1.9 1.9 Other Borrowings 22.9 12.8 Senior Notes 3.7 4.1 Long-Term Debt 9.9 6.4 - -------------------------------------------------------------------- -------------- ------------ Total Interest Expense 193.9 191.5 - -------------------------------------------------------------------- -------------- ------------ Net Interest Income 106.1 93.4 Provision for Credit Losses .5 5.0 - -------------------------------------------------------------------- -------------- ------------ Net Interest Income after Provision for Credit Losses 105.6 88.4 - -------------------------------------------------------------------- -------------- ------------ Noninterest Income Trust Fees 157.7 143.9 Treasury Management Fees 14.6 13.0 Foreign Exchange Trading Profits 20.4 12.5 Security Commissions and Trading Income 5.9 6.3 Other Operating Income 9.5 11.7 Investment Security Gains .6 .3 - -------------------------------------------------------------------- -------------- ------------ Total Noninterest Income 208.7 187.7 - -------------------------------------------------------------------- -------------- ------------ Income before Noninterest Expenses 314.3 276.1 - -------------------------------------------------------------------- -------------- ------------ Noninterest Expenses Salaries 101.4 87.7 Pension and Other Employee Benefits 21.1 20.4 Occupancy Expense 16.1 15.1 Equipment Expense 14.9 14.0 Other Operating Expenses 52.4 46.8 - -------------------------------------------------------------------- -------------- ------------ Total Noninterest Expenses 205.9 184.0 - -------------------------------------------------------------------- -------------- ------------ Income before Income Taxes 108.4 92.1 Provision for Income Taxes 36.7 30.6 - -------------------------------------------------------------------- -------------- ------------ Net Income $ 71.7 $ 61.5 - -------------------------------------------------------------------- -------------- ------------ Net Income Applicable to Common Stock $ 70.5 $ 60.2 - -------------------------------------------------------------------- -------------- ------------ Net Income Per Common Share - Primary $ .62 $ .52 - Fully Diluted .62 .52 - -------------------------------------------------------------------- -------------- ------------ Average Number of Common Shares Outstanding - Primary 114,649,493 114,981,874 - Fully Diluted 114,651,448 115,844,820 - -------------------------------------------------------------------- -------------- ------------
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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY NORTHERN TRUST CORPORATION First Quarter Ended March 31 ------------------------ (In Millions) 1997 1996 - ----------------------------------------------------------------------------------------- ----------- Preferred Stock Balance at January 1 $ 120.0 $ 170.0 Conversion of Preferred Stock, Series E - (50.0) - ----------------------------------------------------------------------------------------- ----------- Balance at March 31 120.0 120.0 - ----------------------------------------------------------------------------------------- ----------- Common Stock Balance at January 1 189.9 93.6 Conversion of Preferred Stock, Series E - 1.4 - ----------------------------------------------------------------------------------------- ----------- Balance at March 31 189.9 95.0 - ----------------------------------------------------------------------------------------- ----------- Capital Surplus Balance at January 1 231.7 306.1 Stock Issued - Incentive Plan and Awards (3.4) (2.6) Conversion of Preferred Stock, Series E - 29.2 - ----------------------------------------------------------------------------------------- ----------- Balance at March 31 228.3 332.7 - ----------------------------------------------------------------------------------------- ----------- Retained Earnings Balance at January 1 1,110.2 928.8 Net Income 71.7 61.5 Dividend Declared - Common Stock (20.1) (17.6) Dividends Declared - Preferred Stock (1.2) (1.0) - ----------------------------------------------------------------------------------------- ----------- Balance at March 31 1,160.6 971.7 - ----------------------------------------------------------------------------------------- ----------- Net Unrealized Gain (Loss) on Securities Available for Sale Balance at January 1 1.6 2.6 Unrealized Loss, net (1.4) (5.6) - ----------------------------------------------------------------------------------------- ----------- Balance at March 31 .2 (3.0) - ----------------------------------------------------------------------------------------- ----------- Common Stock Issuable - Performance Plan Balance at January 1 10.4 14.7 Stock Issuable, net of Stock Issued 2.4 (4.3) - ----------------------------------------------------------------------------------------- ----------- Balance at March 31 12.8 10.4 - ----------------------------------------------------------------------------------------- ----------- Deferred Compensation - ESOP and Other Balance at January 1 (35.5) (39.4) Compensation Deferred (3.9) (1.8) Compensation Amortized 1.1 .9 - ----------------------------------------------------------------------------------------- ----------- Balance at March 31 (38.3) (40.3) - ----------------------------------------------------------------------------------------- ----------- Treasury Stock Balance at January 1 (84.2) (23.8) Stock Options and Awards 21.8 17.2 Stock Purchased (17.9) (30.5) Conversion of Preferred Stock, Series E - 19.2 - ----------------------------------------------------------------------------------------- ----------- Balance at March 31 (80.3) (17.9) - ----------------------------------------------------------------------------------------- ----------- Total Stockholders' Equity at March 31 $1,593.2 $1,468.6 - ----------------------------------------------------------------------------------------- -----------
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CONSOLIDATED STATEMENT OF CASH FLOWS Northern Trust Corporation First Quarter Ended March 31 ------------------------ (In Millions) 1997 1996 - ------------------------------------------------------------------------------------------------ --------- --------- Cash Flows from Operating Activities: Net Income $ 71.7 $ 61.5 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Provision for Credit Losses .5 5.0 Depreciation on Buildings and Equipment 12.3 11.8 (Increase) Decrease in Interest Receivable 6.7 (2.7) Decrease in Interest Payable (1.7) (.7) Amortization and Accretion of Securities and Unearned Income (38.6) (29.7) Amortization of Software, Goodwill and Other Intangibles 11.7 11.0 Net (Increase) Decrease in Trading Account Securities (8.9) 82.0 Other Noncash, net (51.9) (22.9) - ------------------------------------------------------------------------------------------------ --------- --------- Net Cash Provided by Operating Activities 1.8 115.3 - ------------------------------------------------------------------------------------------------ --------- --------- Cash Flows from Investing Activities: Net (Increase) Decrease in Federal Funds Sold and Securities Purchased under Agreements to Resell (196.9) 43.3 Net Increase in Time Deposits with Banks (294.9) (261.3) Net Decrease in Other Money Market Assets 73.3 .1 Purchases of Securities-Held to Maturity (46.2) (62.7) Proceeds from Maturity and Redemption of Securities-Held to Maturity 64.6 108.5 Purchases of Securities-Available for Sale (2,256.8) (7,198.0) Proceeds from Sale, Maturity and Redemption of Securities-Available for Sale 1,275.4 6,754.9 Net Increase in Loans and Leases (486.3) (125.4) Purchases of Buildings and Equipment (12.5) (16.7) Net Decrease in Trust Security Settlement Receivables 39.3 111.3 Other, net (2.0) (13.2) - ------------------------------------------------------------------------------------------------ --------- --------- Net Cash Used in Investing Activities (1,843.0) (659.2) - ------------------------------------------------------------------------------------------------ --------- --------- Cash Flows from Financing Activities: Net Increase (Decrease) in Deposits 1,417.7 (387.7) Net Increase in Federal Funds Purchased 544.7 415.1 Net Increase in Securities Sold under Agreements to Repurchase 719.3 52.8 Net Decrease in Commercial Paper (3.8) (2.4) Net Increase (Decrease) in Short-Term Other Borrowings (1,203.3) 135.3 Proceeds from Term Federal Funds Purchased 254.2 902.4 Repayments of Term Federal Funds Purchased (249.9) (998.8) Proceeds from Senior Notes & Long-Term Debt 250.0 700.0 Repayments of Senior Notes & Long-Term Debt (201.5) (412.0) Treasury Stock Purchased (15.0) (29.2) Net Proceeds from Stock Options 3.5 2.1 Cash Dividends Paid on Common and Preferred Stock (21.3) (18.4) Other, net 2.7 1.5 - ------------------------------------------------------------------------------------------------ --------- --------- Net Cash Provided by Financing Activities 1,497.3 360.7 - ------------------------------------------------------------------------------------------------ --------- --------- Decrease in Cash and Due from Banks (343.9) (183.2) Cash and Due from Banks at Beginning of Year 1,292.5 1,308.9 - ------------------------------------------------------------------------------------------------ --------- --------- Cash and Due from Banks at March 31 $ 948.6 $ 1,125.7 - ------------------------------------------------------------------------------------------------ --------- --------- Schedule of Noncash Investing and Financing Activities: Conversion of Preferred Stock, Series E to Common Stock $ -- $ 49.7 Supplemental Disclosures of Cash Flow Information: Interest Paid on Deposits and Short- and Long-Term Borrowings $ 195.6 $ 192.2 Income Taxes Received (3.1) (1.9) - ------------------------------------------------------------------------------------------------ --------- ---------
5 Notes to Consolidated Financial Statements 1. Basis of Presentation - The consolidated financial statements include the accounts of Northern Trust Corporation and its subsidiaries ("Northern Trust"), all of which are wholly owned. Significant intercompany balances and transactions have been eliminated. The consolidated financial statements as of March 31, 1997 and 1996 have not been audited by independent public accountants. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to prior periods' consolidated financial statements to place them on a basis comparable with the current period's consolidated financial statements. For a description of Northern Trust's significant accounting principles, refer to the Notes to Consolidated Financial Statements in the 1996 Annual Report to Stockholders. Per share data and average shares outstanding for 1996 have been restated to give effect to the two-for-one stock split effected by means of a 100% stock distribution on December 9, 1996.
2. Securities - The following table summarizes the book and fair values of securities: March 31, 1997 December 31, 1996 March 31, 1996 ------------------------------------------------------------ Book Fair Book Fair Book Fair (In Millions) Value Value Value Value Value Value - -------------------------------------------------------------------------------------------- Held to Maturity U.S. Government $ 68.2 $ 68.1 $ 73.4 $ 73.5 $ 93.4 $ 93.3 Obligations of States and Political Subdivisions 303.6 321.3 315.9 336.3 348.9 372.2 Federal Agency 18.2 18.2 18.2 18.2 18.2 18.2 Other 91.7 91.7 90.9 90.9 29.4 29.4 - -------------------------------------------------------------------------------------------- Subtotal 481.7 499.3 498.4 518.9 489.9 513.1 - -------------------------------------------------------------------------------------------- Available for Sale U.S. Government 841.0 841.0 906.7 906.7 2,160.5 2,160.5 Obligations of States and Political Subdivisions 115.9 115.9 117.0 117.0 73.2 73.2 Federal Agency 4,255.8 4,255.8 3,096.9 3,096.9 3,167.6 3,167.6 Preferred Stock 74.8 74.8 139.4 139.4 112.4 112.4 Other 41.3 41.3 51.7 51.7 76.8 76.8 - -------------------------------------------------------------------------------------------- Subtotal 5,328.8 5,328.8 4,311.7 4,311.7 5,590.5 5,590.5 - -------------------------------------------------------------------------------------------- Trading Account 13.7 13.7 4.8 4.8 6.9 6.9 - -------------------------------------------------------------------------------------------- Total Securities $5,824.2 $5,841.8 $4,814.9 $4,835.4 $6,087.3 $6,110.5 - --------------------------------------------------------------------------------------------
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Reconciliation of Book Values to Fair Values of Securities Held to Maturity March 31, 1997 - ------------------------------------------------------------------------------------------------- Gross Unrealized Book ------------------ Fair (In Millions) Value Gains Losses Value - ------------------------------------------------------------------------------------------------- U.S. Government $ 68.2 $ - $.1 $ 68.1 Obligations of States and Political 303.6 17.8 .1 321.3 Subdivisions Federal Agency 18.2 .1 .1 18.2 Other 91.7 - - 91.7 - ------------------------------------------------------------------------------------------------- Total $481.7 $17.9 $.3 $499.3 - ------------------------------------------------------------------------------------------------- Reconciliation of Amortized Cost to Fair Values of Securities Available for Sale March 31, 1997 - ------------------------------------------------------------------------------------------------- Gross Unrealized Amortized ---------------- Fair (In Millions) Cost Gains Losses Value - ------------------------------------------------------------------------------------------------- U.S. Government $ 843.4 $ .2 $2.6 $ 841.0 Obligations of States and Political Subdivisions 114.5 2.4 1.0 115.9 Federal Agency 4,255.7 1.8 1.7 4,255.8 Preferred Stock 74.9 - .1 74.8 Other 42.5 - 1.2 41.3 - ------------------------------------------------------------------------------------------------- Total $5,331.0 $4.4 $6.6 $5,328.8 - -------------------------------------------------------------------------------------------------
Unrealized gains and losses on off-balance sheet financial instruments used to hedge available for sale securities totaled $4.5 million and $2.0 million, respectively, as of March 31, 1997. Unrealized gains on these hedges are reported as other assets in the consolidated balance sheet; unrealized losses are reported as other liabilities. As of March 31, 1997, stockholders' equity included a credit of $.2 million, net of tax, to recognize the appreciation on securities available for sale and the related hedges. 3. Pledged Assets - Securities and loans pledged to secure public and trust deposits, repurchase agreements and for other purposes as required or permitted by law were $5.3 billion on March 31, 1997, $5.5 billion on December 31, 1996 and $4.4 billion on March 31, 1996. 4. Contingent Liabilities - Standby letters of credit outstanding were $1.3 billion on March 31, 1997, $1.3 billion on December 31, 1996 and $1.1 billion on March 31, 1996. 7 5. Loans and Leases - The following table summarizes amounts outstanding in selected loan categories:
(In Millions) March 31, 1997 December 31, 1996 March 31, 1996 - -------------------------------------------------------------------------------------- Domestic Residential Real Estate $ 4,666.4 $ 4,557.5 $ 4,048.1 Commercial and Industrial 3,335.3 3,161.4 3,052.1 Broker 395.0 389.1 383.3 Commercial Real Estate 592.9 557.7 537.0 Consumer 972.5 989.8 748.1 Other 744.0 632.1 560.7 Lease Financing 267.6 267.8 198.9 - -------------------------------------------------------------------------------------- Total Domestic 10,973.7 10,555.4 9,528.2 International 443.6 382.0 497.4 - -------------------------------------------------------------------------------------- Total Loans and Leases $11,417.3 $10,937.4 $10,025.6 - --------------------------------------------------------------------------------------
At March 31, 1997, other domestic and international loans include $883.4 million of overnight trust-related advances primarily in connection with next day security settlements, compared with $765.3 million at December 31, 1996 and $612.3 million at March 31, 1996. At March 31, 1997, nonperforming loans totaled $21.7 million. Included in this amount were loans with a recorded investment of $19.8 million which were also classified as impaired. A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans totaling $16.9 million had no portion of the reserve for credit losses allocated to them, while $2.9 million had an allocated reserve of $.2 million. For the first quarter of 1997, the total recorded investment in impaired loans averaged $19.7 million. Total interest income recorded on impaired loans for the quarter ended March 31, 1997 was $96 thousand, recognized principally on the cash-basis method of accounting. At March 31, 1996, nonperforming loans totaled $30.6 million and included $27.6 million of impaired loans. Of these impaired loans, $16.0 million had no reserve allocation while $11.6 million had an allocated reserve of $3.8 million. Impaired loans for the first quarter of 1996 averaged $24.4 million with $53 thousand of interest income recognized principally on the cash-basis method of accounting. 8 6. Reserve for Credit Losses - Changes in the reserve for credit losses were as follows:
First Quarter Ended March 31 ------------------ (In Millions) 1997 1996 - ------------------------------------------------------------------------------ Balance at Beginning of Period $148.3 $147.1 Charge-Offs Commercial Real Estate - (2.0) Other (2.2) (3.5) International - (.2) - ------------------------------------------------------------------------------ Total Charge-Offs (2.2) (5.7) - ------------------------------------------------------------------------------ Recoveries 1.7 .8 - ------------------------------------------------------------------------------ Net Charge-Offs (.5) (4.9) Provision for Credit Losses .5 5.0 - ------------------------------------------------------------------------------ Balance at End of Period $148.3 $147.2 - ------------------------------------------------------------------------------
7. Floating Rate Capital Securities - On January 16, 1997, the Corporation issued $150 million of Floating Rate Capital Securities, Series A, through a wholly owned statutory business trust. The securities, which qualify as Tier 1 capital for regulatory purposes, were issued at a discount to yield 60.5 basis points above the three-month London Interbank Offered Rate (LIBOR) and have a stated maturity date of January 15, 2027. On April 25, 1997, the Corporation issued, through a separate wholly-owned statutory business trust, $120 million of Floating Rate Capital Securities, Series B, which also qualify as Tier 1 capital. These securities were issued at a discount to yield 67.9 basis points above the three-month LIBOR and have a stated maturity date of April 15, 2027. 8. Earnings Per Share - In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings Per Share". This new statement establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. SFAS No. 128 replaces the presentation of primary EPS with a presentation of basic EPS. Basic EPS is computed by dividing income available to common stockholders by the weighted- average number of common shares outstanding for the period. This approach differs from the current methodology for calculating primary net income per share which also considers common stock equivalents, such as stock options and stock awards. SFAS No. 128 also requires the presentation of diluted EPS, which is computed similarly to fully diluted EPS pursuant to Accounting Principles Board Opinion No. 15. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; earlier application is not permitted. It requires the restatement of all prior period EPS data presented. 9 The following data, which is presented for comparative purposes only, shows the pro forma effect on EPS of adopting SFAS No. 128:
First Quarter Ended March 31 ----------------------- 1997 1996 ---------------------------------------------------------------- Earnings Per Share (as reported) Primary $.62 $.52 Fully Diluted .62 .52 ---------------------------------------------------------------- Pro Forma Earnings Per Share (computed according to SFAS No. 128) Basic $.64 $.54 Diluted .62 .52 ----------------------------------------------------------------
10 Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER EARNINGS HIGHLIGHTS Net income per common share on a fully diluted basis increased 19% to a record $.62 for the first quarter, up from $.52 earned a year ago. Net income increased 17% to a record $71.7 million from the $61.5 million earned in the first quarter of last year. This earnings performance produced an annualized return on average common equity of 19.91% versus 18.35% reported last year, and an annualized return on average assets of 1.30% versus 1.19% in 1996. Total revenues on a taxable equivalent basis in the quarter increased 11% to $322.8 million with double-digit growth in trust fees, net interest income, foreign exchange and treasury management fees, while noninterest expenses increased 12%. These results exceeded Northern Trust's goal of an annualized return on common equity in the 18-20% range and a year-over-year increase in earnings per share of 10%. They also produced a 157% productivity ratio, exceeding Northern Trust's 150% goal for this ratio which divides total taxable equivalent revenue by non-interest expenses. At the April 15, 1997 annual meeting of stockholders, Northern Trust announced a new productivity goal of 160% for future periods. NONINTEREST INCOME Noninterest income increased 11% and totaled $208.7 million for the quarter, accounting for 65% of total taxable equivalent revenue. Trust fees of $157.7 million increased 10% or $13.8 million over the like period of 1996, and represent 76% of noninterest income and 49% of total taxable equivalent revenue. This fee growth was driven by new business, increased transaction volumes and higher market values of trust assets administered. Trust assets under administration at March 31, 1997 increased 27% and totaled $815.9 billion compared to $641.2 billion a year ago. Trust fees from Personal Financial Services (PFS) increased 12% from the prior year level of $71.1 million and totaled $79.3 million for the first quarter, reflecting strong growth throughout Northern Trust's five-state network of PFS offices. PFS trust fee growth resulted primarily from new business, with the ratio of new business to lost or terminated business continuing to exceed the Corporation's 4:1 goal, and from higher market values of the assets administered. The PFS Wealth Management Group, which administers significant family asset pools nationwide, also had excellent performance with trust fees increasing 30% to $7.0 million. During the first quarter of 1997, Northern Trust expanded its California presence by opening new offices at Montecito, in Santa Barbara County, and La Jolla, in San Diego County, bringing to eight the total number of offices in this attractive market. 11 Also during the quarter, Northern Trust Bank of Florida opened a Tampa location, its twenty-third office in that state. With the addition of these offices, Northern Trust's national network of PFS offices includes 60 locations in Illinois, Florida, California, Arizona, and Texas, up from 52 locations at March 31, 1996. Trust fees generated from the four states outside of Illinois now comprise approximately one-half of total PFS trust fees. Total personal trust assets under administration increased $13.1 billion from the prior year and totaled $87.2 billion at March 31, 1997, with $51.6 billion under management. A significant portion of PFS growth over the last few years has come from its expansion into attractive markets within its five-state network. Over the next 10 years, Northern Trust will seek to continue this expansion and also to expand into markets with promising demographics in other states. The goal is to build the PFS national network to approximately 100 offices in as many as 15 states where approximately 40% of all U.S. households with at least $1 million in investable assets are located. Trust fees from Corporate and Institutional Services (C&IS) increased $5.6 million to $78.4 million. These fees are derived from a full range of custody, investment and advisory services rendered to retirement and other asset pools of corporate and institutional clients worldwide, and all of these services contributed to the first quarter fee growth. The increase in custody fees reflects net new business moderated by the effect of changing pricing structures for client relationships which focus on total client revenues. These client relationships increasingly involve services such as foreign exchange which generate revenue not reflected in trust fees. Approximately two-thirds of net new C&IS annualized trust fees sold in the quarter came from new clients, reflecting continuing industry consolidation. Fees were particularly strong in securities lending and investment management-related activities. Driven by higher volume, securities lending fees increased 18% from the prior year's first quarter to $14.3 million. Revenue growth from investment management services, which includes services provided by Northern Trust Global Advisors, Inc., was also very strong in the quarter, representing 40% of the increase in C&IS trust fees. C&IS trust assets under administration grew 28% or $161.6 billion over last year and now total $728.7 billion, of which $84.7 billion is managed by Northern Trust. Foreign exchange trading profits increased 64% to $20.4 million, setting a new quarterly record, up from $12.5 million in the year-ago quarter. Foreign exchange trading profits were positively impacted by the higher level of market volatility in the quarter, and continued to benefit from the cross-border investment activity of Master Trust/Custody clients. 12 Fees generated from treasury management services were $14.6 million, also a new high, up 12% from the comparable quarter last year. Total treasury management revenues from both fees and the computed value of compensating deposit balances increased 9% from the first quarter of 1996 to $22.4 million, reflecting higher transaction volumes from existing clients in addition to continued growth in new business. The growth was spread across both electronic- and paper-based products. Security commissions and trading income totaled $5.9 million compared with $6.3 million reported in the first quarter of 1996. The decrease was due primarily to lower commission revenues at Northern Futures Corporation. Other operating income primarily includes loan, letter of credit and deposit- related service fees, which totaled $9.5 million for the quarter compared with $11.7 million in the prior year. The decrease from the prior year was due primarily to the elimination of float-related compensation resulting from the Depository Trust Company's first quarter 1996 conversion to a same-day settlement basis for security transactions. In addition, lower balances held at global subcustodians resulted in a reduction in compensation received from these entities. The lower balances reflect a more aggressive approach to investing these funds in money market assets with the related benefit recognized in net interest income. NET INTEREST INCOME Net interest income for the first quarter totaled a record $106.1 million, 14% higher than the $93.4 million reported in the first quarter of 1996. Net interest income is defined as the total of interest income and amortized fees on earning assets, less interest expense on deposits and borrowed funds, adjusted for the impact of off-balance sheet hedging activity. When net interest income is adjusted to a fully taxable equivalent (FTE) basis, yields on taxable, nontaxable and partially taxable assets are comparable, although the adjustment to a FTE basis has no impact on net income. Net interest income on a FTE basis for the first quarter was $114.1 million, up 12% from the $102.0 million reported in 1996. The increase in net interest income reflects higher levels of earning assets, growth in noninterest-related funds, and an improvement in the net interest margin to 2.33% from 2.21% reported in last year's first quarter. Earning assets for the first quarter averaged $19.9 billion, up 7% from the $18.6 billion average for the first quarter of 1996. The $1.3 billion growth in average earning assets was concentrated entirely in the loan portfolio which increased 14% to average $11.1 billion. Securities declined $874 million on average but the decline was offset by an $829 million increase in short-term money market assets. The loan growth was concentrated primarily in the domestic portfolio. Residential mortgages accounted for slightly more than one-half of the domestic growth, increasing 17% to average $4.6 billion and comprise 41% of the total loan portfolio. 13 Commercial and industrial loans averaged $3.3 billion during the first quarter compared to $3.1 billion in the prior year quarter. The securities portfolio declined 13% to average $5.9 billion as short-term U.S. Government securities either matured or were sold. Money market assets increased 40% and averaged $2.9 billion in the quarter principally driven by a higher level of foreign office time deposits resulting from growth in global custody activities. Funding for the growth in earning assets came from several sources. Total interest-bearing deposits averaged $10.7 billion, up $793 million from the first quarter of 1996. This growth came principally from foreign office time deposits (up $504 million) and savings and money market deposits (up $374 million), partially offset by a decline in savings certificates. The increase in foreign office time deposits resulted primarily from greater global custody activity concentrated in the Cayman Islands Branch. The modest growth in other interest-related funds resulted from the issuance of the $150 million of Floating Rate Capital Securities during the quarter. These funds are classified on the balance sheet as Long-Term Debt. Noninterest-related funds increased 15% to average $3.2 billion, due to strong demand deposit growth and a $117 million increase in common stockholders' equity resulting from growth in retained earnings. The net interest margin increased from 2.21% in last year's first quarter to 2.33% in the current quarter, due primarily to the 14% increase in average loan volume, lower funding costs for interest-related funds and the growth in noninterest-related funding sources. PROVISION FOR CREDIT LOSSES The provision for credit losses of $.5 million was down from $5.0 million reported in the first quarter of 1996. For a discussion of the provision and reserve for credit losses, refer to the Asset Quality section. NONINTEREST EXPENSES Noninterest expenses totaled $205.9 million for the quarter, up $21.9 million or 12% from the year-ago quarter, which had been favorably affected by a number of baseline cost reductions implemented throughout 1995. The expense growth resulted primarily from continuing investments in technology, PFS office expansion, the opening of a Singapore office, the expansion of the global custody network and the costs associated with the growth in trust assets under administration. Salaries and benefits, which represent 59% of total noninterest expenses, increased to $122.5 million from $108.1 million in the year-ago quarter. The principal items contributing to the increase were staff additions required to support growth 14 initiatives, new office expansion and record volumes of new business generated by both PFS and C&IS in 1996. Also contributing to the increase over the prior year was higher incentive compensation expense resulting from the impact of Northern Trust Corporation's higher common stock price as well as new business development and investment management performance. Staff on a full-time equivalent basis at March 31, 1997 totaled 7,081, up from 6,933 at the end of 1996 and 6,536 at March 31, 1996. Net occupancy expense totaled $16.1 million, up 7% from $15.1 million in the first quarter of 1996, due in large part to the opening of eight additional private banking and trust offices over the past twelve months, as well as the opening of a new Singapore office. The principal components of the increase were higher rental costs and real estate tax expense. Equipment expense, which includes depreciation, rental and maintenance costs, totaled $14.9 million, up $.9 million or 6% from the first quarter of 1996. The principal components of the increase were higher levels of computer equipment depreciation, maintenance of hardware and equipment, and rental expense. Other operating expenses in the quarter totaled $52.4 million compared to $46.8 million last year. The increase in the 1997 expense level was primarily the result of continued investment in technology, expansion of the personal trust and banking office network, and higher operating expenses necessary to support business growth. The expense categories affected were computer software amortization, technical and consulting services, employee hiring and relocation costs, business promotional expenses, and costs associated with processing errors and various legal claims. The components of other operating expenses were as follows:
First Quarter Ended March 31 ----------------------------- (In Millions) 1997 1996 - --------------------------------------------------------------------- Business Development $ 7.0 $ 6.0 Purchased Professional Services 17.6 16.8 Telecommunications 3.0 2.7 Postage and Supplies 5.7 5.8 Software Amortization 9.3 8.6 Goodwill and Other Intangibles 2.4 2.4 Amortization Other Expense 7.4 4.5 - --------------------------------------------------------------------- Total Other Operating Expenses $52.4 $46.8 - ---------------------------------------------------------------------
15 Technology initiatives have been and are expected to be critical to Northern Trust's success. For the years 1994 through 1996, Northern Trust spent approximately $400 million on technology, as measured by the sum of capital expenditures in the period for hardware and software, staff expense for software development and maintenance, and other technology-related expenses. Expenditures for the years 1997 through 1999, on the same basis, are expected to be approximately $500 million. Northern Trust has completed an analysis of the work necessary to assure that its mainframe and centrally controlled systems are able to deal with the advent of the year 2000. Expenses for diagnosis and reprogramming in this area are estimated at $15-20 million, and this portion of the work is expected to be completed by year-end 1998. This estimate includes the anticipated costs of testing all changes except where the testing of other scheduled development is being leveraged to do year 2000 integrity testing. There will be some additional expenses related to assuring that desktop and other noncentrally controlled systems are year 2000 compliant and in reviewing various vendor systems for compliance. PROVISION FOR INCOME TAXES The provision for income taxes was $36.7 million for the first quarter compared with $30.6 million in the year-ago quarter. The higher tax provision in 1997 resulted from the growth in taxable earnings for both federal and state income tax purposes and a decline in tax-exempt income from the prior year. The effective tax rate was 34% for 1997 versus 33% in 1996. BALANCE SHEET Total assets at March 31, 1997 were $23.2 billion and averaged $22.4 billion for the first quarter, up 7% from last year's average of $20.9 billion. Due to increased lending activity, loans and leases grew to $11.4 billion at March 31, 1997, and averaged $11.1 billion for the quarter. This compares with $10.0 billion in total loans at March 31, 1996 and $9.8 billion on average for the first quarter of last year. Driven by continued strong earnings growth, offset in part by Northern Trust's stock buyback program, common stockholders' equity increased 9% to average $1.4 billion for the quarter versus $1.3 billion last year. Total stockholders' equity averaged $1.6 billion compared with $1.5 billion in 1996. During the quarter, the Corporation acquired a total of 445,374 common shares at a total cost of $17.9 million pursuant to the share buyback program authorized by the Board of Directors. This leaves an additional 4.2 million shares remaining to be acquired under this program. 16 Northern Trust's risk-based capital ratios were strengthened by the issuance of $150 million of Floating Rate Capital Securities, Series A, which qualify as Tier 1 capital for risk-based capital purposes. The securities were issued at a discount to yield 60.5 basis points above the three-month London Interbank Offered Rate (LIBOR). Tier 1 and total capital ratios were 9.1% and 12.6%, respectively, at March 31, 1997. These capital ratios are well above the minimum regulatory requirements of 4% for tier 1 and 8% for total risk-based capital ratios. The leverage ratio (tier 1 capital to first quarter average assets) of 6.9% at March 31, 1997, also exceeded the regulatory requirement of 3%. In April, 1997, the Corporation issued $120 million of Floating Rate Capital Securities, Series B, which also qualify as Tier 1 capital. The securities were issued at a discount to yield 67.9 basis points above the three-month LIBOR. ASSET QUALITY Nonperforming assets consist of nonaccrual loans, restructured loans and other real estate owned (OREO). Nonperforming assets at March 31, 1997 totaled $23.9 million, compared with $21.4 million at December 31, 1996 and $32.1 million at March 31, 1996. Domestic nonaccrual loans and leases, consisting primarily of commercial loans, totaled $19.1 million, or .17% of total domestic loans and leases at March 31, 1997. At December 31, 1996 and March 31, 1996, domestic nonaccrual loans and leases totaled $16.9 million and $27.9 million, respectively. The following Nonperforming Asset table presents the outstanding amounts of nonaccrual loans and leases, restructured loans and OREO. Also shown are loans that have interest or principal payments that are delinquent 90 days or more and are still accruing interest. The balance in this category at any quarter end can fluctuate widely based on the timing of cash collections, renegotiations and renewals.
March 31 December 31 March 31 --------------------------------- (In Millions) 1997 1996 1996 - ------------------------------------------------------------------------- Nonaccrual Loans and Leases Domestic Residential Real Estate $ 5.3 $ 3.2 $ 1.8 Commercial 6.0 2.2 9.4 Commercial Real Estate 7.6 11.3 16.3 Consumer .2 .2 .4 - ------------------------------------------------------------------------- Total Domestic 19.1 16.9 27.9 International - - - - ------------------------------------------------------------------------- Total Nonaccrual Loans and Leases 19.1 16.9 27.9 Restructured Loans 2.6 2.6 2.7 Other Real Estate Owned 2.2 1.9 1.5 - ------------------------------------------------------------------------- Total Nonperforming Assets $23.9 $21.4 $32.1 - ------------------------------------------------------------------------- Total 90 Day Past Due Loans (still accruing) $28.1 $15.2 $36.9 - -------------------------------------------------------------------------
17 Provision and Reserve for Credit Losses. The provision for credit losses is the charge against current earnings that is determined by management through a disciplined credit review process, as the amount needed to maintain a reserve that is sufficient to absorb credit losses inherent in Northern Trust's loan and lease portfolios and other credit undertakings. While the largest portion of this reserve is intended to cover loan and lease losses, it is considered a general reserve that is available to cover all credit-related exposures. The 1997 first quarter provision for credit losses was $.5 million, compared with $5.0 million in the first quarter of 1996. Net charge-offs totaled $.5 million in the first quarter of 1997, versus $4.9 million last year. The reserve for credit losses was $148.3 million or 1.30% of outstanding loans at March 31, 1997. This compares with $148.3 million or 1.36% of outstanding loans at December 31, 1996 and $147.2 million or 1.47% of outstanding loans at March 31, 1996. The lower reserve to outstanding loans ratio at March 31, 1997 is attributable to loan growth, a significant portion of which is in low-risk residential mortgage lending. The overall credit quality of the domestic portfolio has remained good as evidenced by the low level of nonperforming loans and net charge-offs. Management's assessment of the current U.S. economy and the financial condition of certain clients facing financial difficulties together with the types of loans creating portfolio growth were primary factors impacting management's decision to maintain the reserve for credit losses at $148.3 million at March 31, 1997, unchanged from December 31, 1996. FORWARD-LOOKING INFORMATION This report contains statements that may be considered forward-looking, such as the discussion of Northern Trust's financial goals, PFS expansion plans, anticipated technology expenses and year 2000-related expenses. These statements speak of Northern Trust's plans, goals or expectations, refer to estimates, or use similar terms. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many uncertainties including: . The future health of the U.S. and international economies and other economic factors that affect wealth creation, investment and savings patterns, and Northern Trust's interest rate exposure and credit risk. . Regulatory developments in the U.S. and other countries where Northern Trust has significant business. . Changes in the nature of Northern Trust's competition, resulting from industry consolidation, regulatory change and other factors, as well as actions taken by particular competitors. 18 . Northern Trust's success in identifying and penetrating targeted markets and generating a profit in those markets in a reasonable time. . Northern Trust's ability to continue to fund and accomplish technological innovation, improve processes and controls and attract and retain capable staff in order to deal with increasing volume and complexity in many of its businesses. . The ability of each of Northern Trust's principal businesses to maintain a product mix that achieves satisfactory margins. . Changes in tax laws or other legislation that could affect Northern Trust's personal and institutional asset administration businesses. . Changes in U.S. and worldwide securities markets, with respect to the market values of financial assets and the level of volatility in certain markets such as foreign exchange. Some of these uncertainties that may affect future results are discussed in more detail in the section of Management's Discussion and Analysis of Financial Condition and Results of Operations captioned "Risk Management" in the 1996 Annual Report to Stockholders (pp. 27-34) and in the sections of "Item 1 - Business" of the 1996 Annual Report on Form 10-K captioned "Government Policies", "Competition" and "Regulation and Supervision" (pp. 6-9). All forward looking statements included in this document are based upon information presently available, and Northern Trust assumes no obligation to update any forward looking statement. 19 The following schedule should be read in conjunction with the Net Interest Income section of Management's Discussion and Analysis of Financial Condition and Results of Operations. CONSOLIDATED ANALYSIS OF NET INTEREST INCOME NORTHERN TRUST CORPORATION
First Quarter -------------------------------------------------------------------------- (Interest and rate on a taxable equivalent basis) 1997 1996 ----------------------------------- ------------------------------------- ($ in Millions) Interest Volume Rate Interest Volume Rate - ------------------------------------------------------- ---------- ------------- ---------- ----------- ----------- ----------- Average Earning Assets Money Market Assets Federal Funds Sold and Resell Agreements $ 8.5 $ 639.6 5.41% $ 3.8 $ 267.1 5.66% Time Deposits with Banks 27.2 2,215.5 4.99 22.8 1,745.3 5.26 Other .6 40.0 5.67 .8 53.5 6.06 - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Total Money Market Assets 36.3 2,895.1 5.09 27.4 2,065.9 5.33 - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Securities U.S. Government 13.3 931.1 5.80 29.6 2,084.5 5.71 Obligations of States and Political Subdivisions 10.0 420.7 9.52 10.5 422.1 9.99 Federal Agency 59.6 4,260.5 5.67 57.2 3,956.5 5.81 Other 3.7 241.7 6.19 3.9 262.3 6.02 Trading Account .1 7.1 7.29 .2 9.5 7.25 - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Total Securities 86.7 5,861.1 5.99 101.4 6,734.9 6.05 - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Loans and Leases 185.0 11,120.5 6.75 164.7 9,777.3 6.78 - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Total Earning Assets $308.0 $19,876.7 6.28% $293.5 $18,578.1 6.35% - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Average Source of Funds Deposits Savings and Money Market Deposits $ 30.7 $ 3,951.4 3.15% $ 28.1 $ 3,577.7 3.16% Savings Certificates 28.4 2,021.8 5.70 30.9 2,110.1 5.89 Other Time 8.1 614.6 5.35 8.4 611.4 5.53 Foreign Offices Time 47.0 4,081.9 4.67 44.1 3,577.4 4.96 - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Total Deposits 114.2 10,669.7 4.34 111.5 9,876.6 4.54 Federal Funds Purchased 19.6 1,517.4 5.24 28.7 2,143.3 5.39 Repurchase Agreements 21.7 1,681.5 5.24 26.1 1,977.1 5.31 Commercial Paper 1.9 145.7 5.40 1.9 143.8 5.45 Other Borrowings 22.9 1,808.7 5.13 12.8 978.2 5.25 Senior Notes 3.7 265.0 5.54 4.1 314.4 5.25 Long-Term Debt 9.9 551.6 7.18 6.4 334.8 7.68 - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Total Interest-Related Funds 193.9 16,639.6 4.72 191.5 15,768.2 4.88 - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Interest Rate Spread - - 1.56% - - 1.47% - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Noninterest-Related Funds - 3,237.1 - - 2,809.9 - - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Total Source of Funds $193.9 $19,876.7 3.95% $191.5 $18,578.1 4.14% - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ---------- Net Interest Income/Margin $114.1 - 2.33% $102.0 - 2.21% - ------------------------------------------------------- ---------- ------------- ---------- ----------- ------------- ----------
ANALYSIS OF NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE
First Quarter 1997/96 ----------- ------------------------- Change Due To -------------------------- (In Millions) Volume Rate Total - -------------------------------------------------------------------------------------------- ---------- --------------- --------- Earning Assets $19.9 $(5.4) $14.5 Interest-Related Funds 9.3 (6.9) 2.4 - -------------------------------------------------------------------------------------------- ----------- --------------- --------- Net Interest Income $10.6 $ 1.5 $12.1 - ------------------------------------------------------------------------------------------- ----------- --------------- ---------
20 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of the stockholders of Northern Trust Corporation was held on April 15, 1997 for the purpose of electing fourteen Directors to hold office until the next annual meeting of stockholders, and voting on two other proposals described below. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's nominees. All of the management's nominees for Directors as listed in the proxy statement were elected. The votes cast by proxy or in person with respect to the election of directors, as determined by the final report of the inspectors, are set forth below. There were no broker non-votes with respect to any candidate.
Candidates "FOR" "WITHHELD" ---------- ----- ---------- Duane L. Burnham 97,970,809 324,838 Dolores E. Cross 97,847,350 324,838 Susan Crown 97,789,595 324,838 Robert S. Hamada 98,071,413 324,838 Barry G. Hastings 97,935,100 324,838 Robert A. Helman 97,832,310 324,838 Arthur L. Kelly 97,894,578 324,838 Frederick A. Krehbiel 95,953,715 324,838 William G. Mitchell 97,834,025 324,838 Edward J. Mooney 98,042,231 324,838 William A. Osborn 98,020,132 324,838 Harold B. Smith 97,945,877 324,838 William D. Smithburg 97,677,886 324,838 Bide L. Thomas 97,750,887 324,838
Stockholders also approved an amendment to the Restated Certificate of Incorporation, recommended by the Board of Directors, increasing the number of shares of Common Stock, par value $1.66 2/3 per share, authorized for issuance from 140,000,000 to 280,000,000 shares. 92,515,445 shares were voted for approval of the amendment; 4,547,107 shares were voted against approval; the holders of 505,904 shares specifically abstained from voting on the amendment; and 511,089 shares entitled to vote with respect to this proposal were broker non-votes. Stockholders also approved amendments to the Amended 1992 Incentive Stock Plan (1992 Plan) described in the Corporation's Proxy Statement dated March 10, 1997. The amendments related to an increase in the 21 number of shares issued or issuable under the 1992 Plan of 8,500,000; inclusion of performance goals and setting a maximum number of performance shares issuable to an individual; increasing the maximum number of shares available for stock options and stock appreciation rights to an individual; and the addition of non-employee directors as eligible participants under the 1992 Plan. 67,586,019 shares were voted in favor of the amendments; 17,843,330 shares were voted against the amendments; the holders of 1,025,787 shares specifically abstained from voting on the amendments; and 11,624,410 shares entitled to vote with respect to the proposal were broker non-votes. 22 Item 6. Exhibits and Reports on Form 8-K (a.) Exhibits -------- Exhibit (1) Underwriting Agreement, dated April 22, 1997, by and between Northern Trust Corporation, NTC Capital II, Salomon Brothers, Inc. and Merrill, Lynch, Pierce, Fenner & Smith Incorporated, as Representatives of the Underwriters. Exhibit (3) Articles of Incorporation: (i) Amendment to Restated Certificate of Incorporation of Northern Trust Corporation. (ii) Restated Certificate of Incorporation of Northern Trust Corporation as amended to date. Exhibit (4) Instruments Defining the Rights of Security Holders, Including Indentures: (i) Amended and Restated Trust Agreement of NTC Capital II, dated as of April 25, 1997, among Northern Trust Corporation, as Depositor, The First National Bank of Chicago, as Property Trustee, First Chicago Delaware, Inc., as Delaware Trustee, and the Administrative Trustees named therein. (ii) Guarantee Agreement, dated as of April 25, 1997, relating to NTC Capital II, by and between Northern Trust Corporation, as Guarantor, and The First National Bank of Chicago, as Guarantee Trustee. Exhibit (10) Material Contracts: (i) Northern Trust Corporation (1997) Annual Performance Plan. (ii) Northern Trust Corporation (1997) Management Performance Plan. (iii) Northern Trust Corporation Amended 1992 Incentive Stock Plan. 23 (iv) Amendments effective January 1, 1996 to the Northern Trust Employee Stock Plan for former employees of Tanglewood Bank, N.A. (v) Amendment effective September 30, 1996 to the Northern Trust Employee Stock Ownership Plan for certain former employees of First Chicago NBD Corporation (supercedes Exhibit (10)(xvi) filed with the Annual Report on Form 10-K for the year ended December 31, 1996). (vi) Amendments effective January 1, 1997 to the Northern Trust Employee Stock Ownership Plan for former employees of Bent Tree National Bank. Exhibit (11) Computation of Per Share Earnings. Exhibit (27) Financial Data Schedule. Exhibit (99) Remarks delivered by Barry G. Hastings at the Annual Meeting of Stockholders of Northern Trust Corporation held on April 15, 1997. (b.) Reports on Form 8-K ------------------- The Corporation reported the issuance on January 16, 1997 of $150 million of Floating Rate Capital Securities, Series A, through a wholly owned statutory business trust. In addition, the Corporation incorporated in Item 5 its January 21, 1997 press release, reporting its earnings for the fourth quarter of 1996 and for its 1996 fiscal year. The press release, with summary financial information, was filed pursuant to Item 7. 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORTHERN TRUST CORPORATION -------------------------- (Registrant) Date: May 14, 1997 By: Perry R. Pero ------------- Perry R. Pero Senior Executive Vice President and Chief Financial Officer Date: May 14, 1997 By: Harry W. Short -------------- Harry W. Short Senior Vice President and Controller (Chief Accounting Officer) 25 EXHIBIT INDEX The following exhibits have been filed herewith: Exhibit Number Description - ------ ----------- (1) Underwriting Agreement, dated April 22, 1997, by and between Northern Trust Corporation, NTC Capital II, Salomon Brothers, Inc. and Merrill, Lynch, Pierce, Fenner & Smith Incorporated, as Representatives of the Underwriters. (3) Articles of Incorporation: (i) Amendment to Restated Certificate of Incorporation of Northern Trust Corporation. (ii) Restated Certificate of Incorporation of Northern Trust Corporation as amended to date. (4) Instruments Defining the Rights of Security Holders, Including Indentures: (i) Amended and Restated Trust Agreement of NTC Capital II, dated as of April 25, 1997, among Northern Trust Corporation, as Depositor, The First National Bank of Chicago, as Property Trustee, First Chicago Delaware, Inc., as Delaware Trustee, and the Administrative Trustees named therein. (ii) Guarantee Agreement, dated as of April 25, 1997, relating to NTC Capital II, by and between Northern Trust Corporation, as Guarantor, and The First National Bank of Chicago, as Guarantee Trustee. 26 Exhibit Number Description - ------ ----------- (10) Material Contracts: (i) Northern Trust Corporation (1997) Annual Performance Plan. (ii) Northern Trust Corporation (1997) Management Performance Plan. (iii) Northern Trust Corporation Amended 1992 Incentive Stock Plan. (iv) Amendments effective January 1, 1996 to the Northern Trust Employee Stock Plan for former employees of Tanglewood Bank, N.A. (v) Amendment effective September 30, 1996 to the Northern Trust Employee Stock Ownership Plan for certain former employees of First Chicago NBD Corporation (supercedes Exhibit (10)(xvi) filed with the Annual Report on Form 10-K for the year ended December 31, 1996). (vi) Amendments effective January 1, 1997 to the Northern Trust Employee Stock Ownership Plan for former employees of Bent Tree National Bank. (11) Computation of Per Share Earnings. (27) Financial Data Schedule. (99) Remarks delivered by Barry G. Hastings at the Annual Meeting of Stockholders of Northern Trust Corporation held on April 15, 1997. 27 EX-1 2 UNDERWRITING AGREEMENT Exhibit Number (1) To 3/31/97/ Form 10-Q NTC CAPITAL I NTC CAPITAL II NTC CAPITAL III Preferred Securities fully and unconditionally guaranteed to the extent set forth in the Guarantee by NORTHERN TRUST CORPORATION Underwriting Agreement April 22, 1997 Ladies and Gentlemen: From time to time, NTC Capital I, NTC Capital II or NTC Capital III, each a statutory business trust created under the laws of the State of Delaware (each a "Trust" and collectively, the "Trusts"), and Northern Trust Corporation, a Delaware corporation (the "Guarantor"), as depositor of each Trust and as Guarantor, propose to enter into one or more Pricing Agreements (each a "Pricing Agreement") in the form of Annex I hereto, with such additions and deletions as the parties thereto may determine, and, subject to the terms and conditions stated herein and therein, which shall provide that the Trust identified in the applicable Pricing Agreement (such Trust being the "Designated Trust" with respect to such Pricing Agreement) shall issue and sell to the firms (such firms constituting the "Underwriters" with respect to such Pricing Agreement and the securities specified therein) certain of its preferred securities (the "Securities") identified in Schedule I to the applicable Pricing Agreement (with respect to such Pricing Agreement, the "Firm Designated Securities") representing undivided beneficial interests in the assets of the Designated Trust, guaranteed by the Guarantor to the extent set forth in the guarantee agreement (the "Guarantee") identified in such Pricing Agreement. If specified in such Pricing Agreement, the Designated Trust may grant to the Underwriters the right to purchase at their election an additional number of Securities, specified in such Pricing Agreement as provided in Section 3 hereof (the "Optional Designated Securities"). The Firm Designated Securities and any Optional Designated Securities are collectively called the "Designated Securities." The proceeds of the sale of the Designated Securities and of common securities of the Designated Trust (the "Common Securities") sold to the Guarantor are to be invested in junior subordinated deferrable interest debentures of the Guarantor (the "Subordinated Debentures"), to be issued pursuant to a junior subordinated indenture (the "Indenture") identified in the Pricing Agreement. The Designated Securities may be exchangeable into Subordinated Debentures, as specified in Schedule II to such Pricing Agreement. Pursuant to the Guarantee Agreement identified in the Pricing Agreement relating to any particular issuance of Designated Securities, the Designated Securities will be guaranteed by the Guarantor to the extent set forth in such Pricing Agreement (the "Guarantee"). The terms and rights of any particular issuance of Designated Securities shall be as specified in the Pricing Agreement relating thereto and in or pursuant to the amended and restated trust agreement (the "Trust Agreement") among the Guarantor, the trustees named therein (the "Trustees") and the holders from time to time of the Designated Trust's securities issued thereunder. Particular sales of Designated Securities may be made from time to time to the Underwriters of such Securities, for whom the firms designated as representatives of the Underwriters of such Securities in the Pricing Agreement relating thereto will act as representatives (the "Representatives"). The term "Representatives" also refers to a single firm acting as sole representative of the Underwriters and to Underwriters who act without any firm being designated as their representative. This Underwriting Agreement shall not be construed as an obligation of any Trust to sell any of the Securities or as an obligation of any of the Underwriters to purchase any of the Securities. The obligation of any Trust to issue and sell any of the Securities and the obligation of any of the Underwriters to purchase any of the Securities shall be evidenced by the Pricing Agreement with respect to the Securities specified therein. Each Pricing Agreement shall specify the aggregate number of Firm Designated Securities, the aggregate number of Optional Designated Securities, if any, the initial -2- public offering price of such Firm and Optional Designated Securities or the manner of determining such price, the terms of the Designated Securities, including the terms on which and terms of the securities into which the Designated Securities will be exchangeable, the purchase price to the Underwriters of such Designated Securities, the names of the Underwriters of such Designated Securities, the names of the Representatives of such Underwriters and the number of such Designated Securities to be purchased by each Underwriter and the commission, if any, payable to the Underwriters with respect thereto and shall set forth the date, time and manner of delivery of such Designated Securities and payment therefor. The Pricing Agreement shall also specify (to the extent not set forth in the Trust Agreement or the registration statement and prospectus with respect thereto) the terms of such Designated Securities. A Pricing Agreement shall be in the form of an executed writing (which may be in counterparts), and may be evidenced by an exchange of telegraphic communications or any other rapid transmission device designed to produce a written record of communications transmitted. The obligations of the Underwriters under this Agreement and each Pricing Agreement shall be several and not joint. 1. Each of the Guarantor and each Designated Trust jointly and severally represents and warrants to, and agrees with, each of the Underwriters that: (a) A registration statement on Form S-3 (File Nos. 333-18951, 333- 18951-01, 333-18951-02 and 333-18951-03) (the "Initial Registration Statement") in respect of the Securities, the Subordinated Debentures and the Guarantees has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post- effective amendments thereto, each in the form heretofore delivered or to be delivered to the Representatives and, excluding exhibits to such registration statement, but including all documents incorporated by reference in the prospectus contained therein, to the Representatives for each of the other Underwriters, have been declared effective by the Commission in such form; no other document (other than a registration statement, if any, increasing the size of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), which became effective -3- upon filing) with respect to the Securities, the Subordinated Debentures and the Guarantees offered pursuant to the Initial Registration Statement or document incorporated by reference therein has heretofore been filed or transmitted for filing with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement or the Rule 462(b) Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act, being hereinafter called a "Preliminary Prospectus"; the various parts of the Initial Registration Statement, including (i) the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 4(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective or such part of the Rule 462(b) Registration Statement that became or hereafter becomes effective, each as amended at the time such part of a registration statement became effective, and (ii) all exhibits thereto and the documents incorporated by reference in the prospectus contained in a registration statement at the time such part of a registration statement became effective, being hereinafter collectively called a "Registration Statement"; the prospectus relating to the Securities, the Subordinated Debentures and the Guarantees, in the form in which it has most recently been filed, or transmitted for filing, with the Commission on or prior to the date of this Agreement, being hereinafter called the "Prospectus"; any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to the applicable form under the Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be; any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the date of such Preliminary Prospectus or Prospectus, as the case may be, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by -4- reference in such Preliminary Prospectus or Prospectus, as the case may be; any reference to any amendment to a Registration Statement shall be deemed to refer to and include any annual report of the Guarantor filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of such Registration Statement that is incorporated by reference in such Registration Statement; and any reference to the Prospectus, as amended or supplemented, shall be deemed to refer to the Prospectus, as amended or supplemented, in relation to the applicable Designated Securities in the form in which it is filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 4(a) hereof, including any documents incorporated by reference therein as of the date of such filing); (b) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to a Designated Trust or the Guarantor by an Underwriter of Designated Securities through the Representatives expressly for use in the Prospectus, as amended or supplemented, relating to such Securities. (c) The documents incorporated by reference in the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Prospectus or any further amendment or supplement -5- thereto, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to a Designated Trust or the Guarantor by an Underwriter of Designated Securities through the Representatives expressly for use in the Prospectus, as amended or supplemented, relating to such Securities; (d) The Initial Registration Statement, any Rule 462(b) Registration Statement and the Prospectus conform, and any further amendments or supplements to the Initial Registration Statement, any Rule 462(b) Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to the Initial Registration Statement and any Rule 462(b) Registration Statement and any amendment thereto and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to a Designated Trust or the Guarantor by an Underwriter of Designated Securities through the Representatives expressly for use in the Prospectus, as amended or supplemented, relating to such Securities; (e) Since the respective dates as of which information is given in the Initial Registration Statement, any Rule 462(b) Registration Statement and the Prospectus, there has not been any material adverse -6- change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Guarantor and its subsidiaries, considered as a whole, otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Initial Registration Statement, any Rule 462(b) Registration Statement and the Prospectus and except as otherwise set forth therein, there has not been any change in the capital stock (other than the Guarantor's purchase of treasury stock in connection with its buy back program and the issuance of stock upon the exercise of employee stock options, director stock awards, bonus stock awards and earn-outs of performance shares) or long-term debt in excess of $10 million of the Guarantor or any of its subsidiaries, otherwise than as set forth or contemplated in the Prospectus; (f) The Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction; each subsidiary of the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, except where such failure to be in good standing would not have a material adverse effect on the financial condition, operating results or business prospects of such subsidiary; and The Northern Trust Company (the "Bank") has the power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; (g) The Guarantor is duly registered under the Bank Holding Company Act of 1956, as amended; and each subsidiary of the Guarantor which conducts business as -7- a bank is duly authorized to conduct such banking business in each jurisdiction in which such banking business is conducted; (h) The Guarantor has an authorized capitalization as set forth in the Prospectus, and all the issued shares of capital stock of the Guarantor have been duly and validly authorized and issued and are fully paid and non-assessable; and all of the issued shares of capital stock of each subsidiary of the Guarantor have been duly and validly authorized and issued, are fully paid and non-assessable, except as provided in 12 U.S.C. Section 55, and (except for directors' qualifying shares and except as set forth in the Prospectus) are owned directly or indirectly by the Guarantor, free and clear of all liens, encumbrances, equities or claims; (i) The Designated Trust has been duly created and is validly existing as a statutory business trust in good standing under the Delaware Business Trust Act with the power and authority to own its properties and conduct its business as described in the Prospectus, and the Designated Trust has conducted no business to date other than as contemplated by this Agreement and any Pricing Agreement, and it will conduct no business in the future that would be inconsistent with the Trust Agreement and the description of the Designated Trust set forth in the Prospectus; the Designated Trust is not a party to or bound by any agreement or instrument other than this Agreement, any Pricing Agreement, the Trust Agreement and the agreements and instruments contemplated by the Trust Agreement; the Designated Trust has no liabilities or obligations other than those arising out of the transactions contemplated by this Agreement, any Pricing Agreement and the Trust Agreement and described in the Prospectus; based on expected operations and current law, the Designated Trust is not and will not be classified as an association taxable as a corporation for United States federal income tax purposes; and the Designated Trust is not a party to or subject to any action, suit or proceeding of any nature; (j) The Designated Securities have been duly and validly authorized by the Designated Trust, and, when issued and delivered against payment therefor as -8- provided herein, will be duly and validly issued and fully paid and non- assessable undivided beneficial interests in the assets of the Designated Trust and will conform to the description of the Designated Securities contained in the Prospectus; the issuance of the Designated Securities is not subject to preemptive or other similar rights; the Designated Securities will have the rights set forth in the Trust Agreement, and the terms of the Designated Securities are valid and binding on the Designated Trust; and the holders of the Designated Securities (the "Securityholders") will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; (k) The Common Securities of the Designated Trust have been duly and validly authorized by the Designated Trust and, upon delivery by the Designated Trust to the Guarantor against payment therefor as described in the Prospectus, will be duly and validly issued undivided beneficial interests in the assets of the Designated Trust and will conform in all material respects to the description thereof contained in the Prospectus; the issuance of the Common Securities is not subject to preemptive or other similar rights; and at the Time of Delivery, all of the issued and outstanding Common Securities of the Designated Trust will be directly owned by the Guarantor free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; (l) The Guarantee, the Subordinated Debentures, the Trust Agreement, the Indenture and the Agreement as to Expenses and Liabilities between the Guarantor and the Designated Trust (the "Expense Agreement"); the Guarantee, the Subordinated Debentures, the Trust Agreement, the Indenture and the Expense Agreement being collectively referred to as the "Guarantor Agreements"), when validly executed and delivered by the Guarantor and, in the case of the Guarantee, by the Guarantee Trustee, in the case of the Trust Agreement, by the Trustees and, in the case of the Indenture, by the Debenture Trustee, will constitute valid and legally binding obligations of the Guarantor, enforceable in accordance with their respective terms, except as such enforcement may be limited by (i) bank- -9- ruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance or transfer and other laws relating to or affecting creditors' rights generally, (ii) by general equitable principles and (iii), with respect to the Expense Agreement, the effect of public policy on the enforceability of provisions relating to indemnification and contribution; the Subordinated Debentures are entitled to the benefits of the Indenture; and the Guarantor Agreements will conform to the descriptions thereof in the Prospectus; (m) The execution and delivery of this Agreement, any Pricing Agreement and the Guarantor Agreements, and the consummation of the transactions contemplated herein and therein, have been duly authorized by all necessary corporate action and when executed by the Guarantor and the other parties thereto will not result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any security interest, lien, charge or encumbrance upon any property or assets of the Guarantor (other than the Designated Trust), pursuant to any indenture, mortgage, deed of trust, loan agreement, contract or other agreement or instrument to which the Guarantor is a party or by which the Guarantor is bound or to which any of its property or assets is subject, or to which any subsidiary of the Guarantor is a party or by which any subsidiary of the Guarantor is bound or to which any of its assets or property is subject where such subsidiary's breach or violation would have a material adverse effect on the Guarantor and its subsidiaries, considered as a whole, or would materially impair the ability of the Guarantor to perform any of its obligations hereunder, under any Pricing Agreement or in the Guarantor Agreements, nor will such action result in any violation of the provisions of the Restated Certificate of Incorporation, as amended, or the By-laws of the Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Guarantor, its subsidiaries or any of their respective properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Designated Securities or the -10- consummation by the Guarantor or the Designated Trust of the transactions contemplated by this Agreement, any Pricing Agreement or the Guarantor Agreements, except such as have been, or will have been, obtained or received prior to the applicable First Time of Delivery (as defined in Section 3 hereof) and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Designated Securities by the Underwriters; (n) Neither the Designated Trust nor the Guarantor is, and after giving effect to the offering and sale of the Designated Securities, neither the Designated Trust nor the Guarantor will be, an "investment company", or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (o) Except as set forth or contemplated in the Prospectus, there is not pending or, to the Guarantor's knowledge, threatened, any actions, suits or proceedings to which the Guarantor or any of its subsidiaries is a party, before or by any court or governmental agency or body, which, taking into account the likelihood of the outcome, the damages or other relief sought and other relevant factors, individually and in the aggregate, would reasonably be expected to result in any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Guarantor and its subsidiaries taken as a whole; (p) The statements set forth in the Prospectus under the captions "Description of Junior Subordinated Debentures", "Description of Preferred Securities", "Description of Guarantees" and "Relationship Among the Preferred Securities, the Corresponding Junior Subordinated Debentures, the Expense Agreement and the Guarantees", insofar as they constitute a summary of the terms of the Securities, the Subordinated Debentures, the Guarantees and the Guarantor Agreements, are accurate and complete in all material respects; -11- (q) To the Guarantor's knowledge, Arthur Andersen LLP, who certified the financial statements of the Guarantor and its subsidiaries included in or incorporated by reference in the Prospectus, are independent public accountants as required by the Act and the rules and regulations of the Commission thereunder; and (r) The Guarantor and its affiliates have complied, and as of the date of any Pricing Agreement will comply, with all of the provisions of Section 517.075, Florida Statutes, and all rules and regulations promulgated thereunder, relating to issuers doing business in Cuba. 2. Upon the execution of the Pricing Agreement applicable to any Designated Securities and authorization by the Representatives of the release of such Designated Securities, the several Underwriters propose to offer the Firm Designated Securities for sale upon the terms and conditions set forth in the Prospectus, as amended or supplemented. The Designated Trust may specify in the Pricing Agreement applicable to any Designated Securities that the Designated Trust thereby grants to the Underwriters the right (an "Over-allotment Option") to purchase at their election up to the number of Optional Designated Securities set forth in such Pricing Agreement, on the terms set forth in the paragraph above, for the sole purpose of covering over-allotments in the sale of the Firm Designated Securities. Any such election to purchase Optional Designated Securities may be exercised only by written notice from the Representatives to the Designated Trust and the Guarantor, given within a period specified in the Pricing Agreement, setting forth the aggregate number of Optional Designated Securities to be purchased and the date on which such Optional Designated Securities are to be delivered, as determined by the Representatives but in no event earlier than the First Time of Delivery or, unless the Representatives, the Guarantor and the Designated Trust otherwise agree in writing, earlier than or later than the respective number of business days after the date of such notice set forth in such Pricing Agreement. The number of Optional Designated Securities to be added to the number of Firm Designated Securities to be -12- purchased by each Underwriter as set forth in Schedule I to the Pricing Agreement applicable to such Designated Securities shall be, in each case, the number of Optional Designated Securities which each of the Guarantor and the Designated Trust has been advised by the Representatives have been attributed to such Underwriter, provided that, if each of the Guarantor and the Designated Trust has not been so advised, the number of Optional Designated Securities to be so added shall be, in each case, that proportion of Optional Designated Securities which the number of Firm Designated Securities to be purchased by such Underwriter under such Pricing Agreement bears to the aggregate number of Firm Designated Securities (rounded as the Representatives may determine to the nearest 100 securities). The total number of Designated Securities to be purchased by all the Underwriters pursuant to such Pricing Agreement shall be the aggregate number of Firm Designated Securities set forth in Schedule I to such Pricing Agreement plus the aggregate number of Optional Designated Securities which the Underwriters elect to purchase. 3. Designated Securities to be purchased by each Underwriter pursuant to the Pricing Agreement relating thereto, in definitive form to the extent practicable, and in such authorized denominations and registered in such names as the Representatives may request upon at least forty-eight hours' prior notice to the Designated Trust, shall be delivered by or on behalf of the Designated Trust to the Representatives for the account of such Underwriter, against payment by such Underwriter or on its behalf of the purchase price therefor by certified or official bank check or checks, payable to the order of the Designated Trust in the funds specified in such Pricing Agreement, all in the manner and at the place and time and date specified in such Pricing Agreement or at such other place and time and date as the Representatives and the Designated Trust may agree upon in writing. Such time and date for delivery of Firm Designated Securities pursuant to the Pricing Agreement relating thereto is herein called the "First Time of Delivery," such time and date for delivery of Optional Designated Securities, if not the First Time of Delivery, is herein called the "Second Time of Delivery," and each such time and date is herein called the "Time of Delivery." -13- 4. The Designated Trust and the Guarantor jointly and severally agree with each of the Underwriters of any Designated Securities: (a) To prepare the Prospectus as amended and supplemented in relation to the applicable Designated Securities in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of the Pricing Agreement relating to the applicable Designated Securities or, if applicable, such earlier time as may be required by Rule 424(b); to make no further amendment or any supplement to the Initial Registration Statement or any Rule 462(b) Registration Statement or Prospectus, as amended or supplemented, after the date of the Pricing Agreement relating to such Securities and prior to the Time of Delivery for such Securities which shall be disapproved by the Representatives for such Securities promptly after reasonable notice thereof, to advise you promptly after it receives notice thereof of the time when the Initial Registration Statement or any Rule 462(b) Registration Statement, or any amendment thereto, has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Representatives with copies thereof; to advise the Representatives promptly of any such amendment or supplement after such Time of Delivery and furnish the Representatives with copies thereof; to file promptly all reports and any definitive proxy or information statements required to be filed by the Guarantor with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of such Securities, and during such same period to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment to the Initial Registration Statement or any Rule 462(b) Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed with the Commission, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any prospectus relating to the Securities, of the suspension of the -14- qualification of such Securities or the Subordinated Debentures issuable upon exchange of the Securities for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Initial Registration Statement or any Rule 462(b) Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any such stop order or of any such order preventing or suspending the use of any prospectus relating to the Securities or suspending any such qualification, to use promptly its best efforts to obtain its withdrawal; (b) Promptly from time to time to take such action as the Representatives may reasonably request to qualify such Securities or the Subordinated Debentures issuable upon exchange of the Securities for offering and sale under the securities laws of such jurisdictions as the Representatives may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of such Designated Securities, provided that in connection therewith neither the Designated Trust nor the Guarantor shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) To furnish the Underwriters with copies of the Prospectus, as amended or supplemented, in such quantities as the Representatives may from time to time reasonably request, and, if the delivery of a prospectus is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Securities or the Subordinated Debentures issuable upon exchange of the Securities and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus or to file -15- under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Act, the Exchange Act or the Trust Indenture Act, to notify the Representatives and upon the request of the Representatives to file such document and to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as the Representatives may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case any Underwriter is required to deliver a prospectus in connection with the offering or sale of the Securities or the Subordinated Debentures issuable upon exchange of the Securities at any time nine months or more after the time of issue of the Prospectus, upon an Underwriter's request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many copies as such Underwriter may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act; (d) In the case of the Guarantor, to make generally available to its security holders as soon as practicable, but in any event not later than eighteen months after the effective date of the Initial Registration Statement (as defined in Rule 158(c)), an earnings statement of the Guarantor and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Guarantor, Rule 158); (e) During the period beginning from the date of the Pricing Agreement for such Designated Securities and continuing to and including the later of (i) the termination of trading restrictions for such Designated Securities, as notified to the Guarantor by the Representatives and (ii) the last Time of Delivery for such Designated Securities, not to offer, sell, contract to sell or otherwise dispose of, except as provided hereunder, any Securities, any other beneficial interests in the assets of the Designated Trust, or any preferred securities or any other securities of the Designated Trust or the Guarantor, as the case may be, that are substantially similar to such Designated Securities (including any guarantee of such -16- securities) or any securities that are convertible into or exchangeable for, or that represent the right to receive securities, preferred securities or any such substantially similar securities of either the Designated Trust or the Guarantor without the prior written consent of the Representatives; (f) Not to have the Designated Trust be or become, at any time prior to the expiration of three years after the Time of Delivery, an open-end investment company, unit investment trust, closed-end investment company or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act; (g) In the case of the Guarantor, to issue the Guarantee concurrently with the issue and sale of the Designated Securities as contemplated herein or in the Pricing Agreement; (h) If provided in the applicable Pricing Agreement, to use its best efforts to list, subject to notice of issuance, the Designated Securities on the Nasdaq Stock Market; and (i) If the Guarantor and the Designated Trust elect to rely upon Rule 462(b) under the Act, the Guarantor and the Designated Trust shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) under the Act by 10:00 P.M., Washington, D.C. time, on the date of the applicable Pricing Agreement, and the Guarantor and the Designated Trust shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act. 5. The Guarantor and the Designated Trust jointly and severally covenant and agree with the several Underwriters that the Guarantor and the Designated Trust will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Guarantor's or the Designated Trust's counsel and accountants in connection with the issue of the Designated Securities and all other expenses in connection with the preparation, printing and distribution of any Registration Statement, any Preliminary Prospectus and the -17- Prospectus and any amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among Underwriters, this Agreement, any Pricing Agreement, any Guarantor Agreement, any Blue Sky and Legal Investment Memoranda, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Designated Securities; (iii) all expenses in connection with the qualification of the Designated Securities and the Subordinated Debentures issuable upon exchange of the Securities for offering and sale under state securities laws as provided in Section 4(b) hereof, including the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky and legal investment surveys; (iv) any fees charged by securities rating services for rating the Designated Securities and the Subordinated Debentures; (v) any filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, any required reviews by the National Association of Securities Dealers, Inc. of the terms of the sale of the Designated Securities and the issuance of the Guarantees and the Subordinated Debentures; (vi) the cost of preparing certificates for the Designated Securities and the Subordinated Debentures; (vii) the fees and expenses of the Trustees, the Debenture Trustee and the Guarantee Trustee and any agent of the Guarantee Trustee and the Debenture Trustee and the fees and disbursements of counsel for the Trustees in connection with the Trust Agreement and the Designated Securities, counsel for the Guarantee Trustee in connection with the Guarantee and counsel for the Debenture Trustee in connection with the Indenture and the Subordinated Debentures; (viii) the cost of qualifying the Designated Securities with The Depository Trust Company; (ix) all fees and expenses, if any, in connection with the listing of the Designated Securities on the Nasdaq Stock Market and the cost of registering the Designated Securities under Section 12 of the Exchange Act; and (x) all other costs and expenses incident to the performance of its obligations hereunder and under any Over- allotment Option which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, Section 7 and Section 10 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, transfer taxes on resale of any of the Designated Securities by them, -18- and any advertising expenses connected with any offers they may make. 6. The obligations of the Underwriters of any Designated Securities under the Pricing Agreement relating to such Designated Securities shall be subject, in the discretion of the Representatives, to the condition that all representations and warranties and other statements of the Designated Trust and the Guarantor in or incorporated by reference in the Pricing Agreement relating to such Designated Securities are, at and as of the respective Time of Delivery for such Designated Securities, true and correct, the condition that the Designated Trust and the Guarantor shall have performed all of their respective obligations hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus, as amended or supplemented, in relation to the applicable Designated Securities shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 4(a) hereof; if the Guarantor and the Designated Trust have elected to rely upon Rule 462(b) under the Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of the applicable Pricing Agreement; no stop order suspending the effectiveness of any Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to the Representatives' reasonable satisfaction; (b) Sullivan & Cromwell shall have furnished to the Representatives such opinion or opinions, dated the respective Time of Delivery for such Designated Securities, with respect to such matters as the Representatives may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters. In giving such opinion, Sullivan & Cromwell may rely, as to all matters governed by the laws of jurisdictions in which such counsel is not qualified, upon opinions of other counsel, who shall be -19- counsel satisfactory to counsel for the Representatives, in which case the opinion or opinions shall state that they believe you and they are entitled to rely on such opinions; (c) Peter L. Rossiter, Esq., or the then General Counsel for the Guarantor, shall have furnished to the Representatives his or her written opinion, dated the respective Time of Delivery for such Designated Securities, in form and substance satisfactory to the Representatives, to the effect that: (i) All of the issued shares of capital stock of the Guarantor have been duly and validly authorized and issued and are fully paid and non-assessable; (ii) Each subsidiary of the Guarantor which conducts business as a bank is duly authorized to conduct such banking business and/or trust business as it conducts in each jurisdiction in the United States in which it maintains offices for the conduct of such banking and/or trust business (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Guarantor, provided that such counsel shall state that he believes that both you and he are justified in relying upon such opinions and certificates); (iii) All of the issued and outstanding shares of capital stock of each of the "significant subsidiaries" of the Guarantor, as defined in Regulation S-X adopted by the Commission, have been duly and validly authorized and issued and are fully paid and non-assessable, except as provided in 12 U.S.C. Section 55; and all of such shares of capital stock are owned directly or indirectly by the Guarantor free and clear of any liens, claims, encumbrances or rights of others (except for directors' qualifying shares and except as set forth in the Prospectus, as amended or supplemented); and -20- (iv) The documents, as amended prior to the date hereof, incorporated by reference in the Prospectus (other than the financial statements and related financial information and schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission or as so amended, complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder; and he has no reason to believe that any such documents, when such documents were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made when such documents were so filed, not misleading. (d) Schiff Hardin & Waite, counsel for the Designated Trust and the Guarantor, shall have furnished to the Representatives their written opinion, dated the respective Time of Delivery for such Designated Securities, in form and substance satisfactory to the Representatives, to the effect that: (i) The Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Prospectus, as amended or supplemented; (ii) The Guarantor has an authorized capitalization as set forth in the Prospectus, as amended or supplemented; (iii) The Guarantor has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction (such counsel being entitled to rely in respect of the opinion in this clause upon -21- opinions of local counsel and in respect of matters of fact upon certificates of officers of the Guarantor, provided that such counsel shall state that they believe both you and they are justified in relying upon such opinions or certificates); (iv) The Bank has been duly incorporated and is validly existing as a banking corporation in good standing under the laws of Illinois, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, as amended or supplemented; (v) The Guarantor is duly registered under the Bank Holding Company Act of 1956, as amended; (vi) This Agreement and the Pricing Agreement with respect to the Designated Securities have been duly authorized, executed and delivered by the Designated Trust and the Guarantor; (vii) The Guarantor Agreements have each been duly authorized, executed and delivered by the Guarantor and/or the Designated Trust, as the case may be, and the Guarantor Agreements (other than the Trust Agreement, as to which such counsel need express no opinion) constitute valid and legally binding instruments and obligations of the Guarantor and/or the Designated Trust, as the case may be, enforceable against the Guarantor and/or the Designated Trust, as the case may be, in accordance with their respective terms, except as such enforcement may be limited by (a) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance or transfer and other laws relating to or affecting creditors' rights generally, (b) by general equitable principles and (c), with respect to the Expense Agreement, the effect of public policy on the enforceability of provisions relating to indemnification and contribution; and the Subordinated Debentures are entitled to the benefits provided by the Indenture; -22- (viii) No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body is required for the issue and sale of the Guarantee or the Subordinated Debentures or consummation by the Guarantor of the transactions contemplated by this Agreement or the Guarantor Agreements, except such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Designated Securities by the Underwriters; (ix) The issue by the Guarantor of the Guarantee and the Subordinated Debentures, the compliance by the Guarantor with all of the provisions of this Agreement and the Guarantor Agreements, the execution, delivery and performance by the Guarantor of this Agreement and the Guarantor Agreements and the consummation of the transactions herein and therein contemplated will not result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument filed by the Guarantor as an exhibit to any report filed pursuant to the Act or Exchange Act on or after the filing of the Annual Report on Form 10-K for the year ended December 31, 1996, where such subsidiary's breach or violation would have a material adverse effect on the Guarantor and its subsidiaries, considered as a whole, or would materially impair the ability of the Guarantor to perform any of its obligations hereunder or under the Guarantor Agreements, nor will such actions result in any violation of the provisions of the Restated Certificate of Incorporation, as amended, or By-Laws of the Guarantor or, to the knowledge of such counsel, any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Guarantor or any of its subsidiaries or any of their properties; (x) The statements set forth in the Prospectus under the caption "Description of Junior Subordinated Debentures", "Description of -23- Preferred Securities", "Description of Guarantees", "Description of Corresponding Junior Subordinated Debentures" and "Relationship Among the Preferred Securities, the Corresponding Junior Subordinated Debentures, the Expense Agreement and the Guarantees" insofar as they purport to summarize certain provisions of documents specifically referred to therein, are accurate summaries of such provisions in all material respects; (xi) Neither the Designated Trust nor the Guarantor is an "investment company" or an entity controlled by an "investment company" required to be registered under the Investment Company Act; (xii) The documents, as amended prior to the date hereof, incorporated by reference in the Prospectus, as amended or supplemented (other than the financial statements and related financial information and schedules therein, as to which such counsel need express no opinion), when they became effective or were filed with the Commission, as the case may be, complied as to form in all material respects with the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder; and nothing has come to such counsel's attention that would lead such counsel to believe that any of such documents, when they became effective or were so filed, as the case may be, contained, in the case of a registration statement which became effective under the Act, an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and, in the case of other documents which were filed under the Act or the Exchange Act with the Commission, an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading; it being understood that such counsel need express no opinion as to the financial statements or other financial information included in any of the -24- documents mentioned in this clause and that such counsel may state that they have not independently verified factual statements in any such documents; and (xiii) The Initial Registration Statement, any Rule 462(b) Registration Statement and the Prospectus, as amended or supplemented, and any further amendments and supplements thereto made by the Guarantor or the Designated Trust prior to the Time of Delivery for the Designated Securities (other than the financial statements and related financial information and schedules therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the Trust Indenture Act and the rules and regulations thereunder; and nothing has come to such counsel's attention that would lead such counsel to believe that, as of its effective date, any Registration Statement or any further amendment thereto made by the Guarantor or the Designated Trust prior to the Time of Delivery (other than the financial statements and related financial information and schedules therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date, the Prospectus, as amended or supplemented, or any further amendment or supplement thereto made by the Guarantor or the Designated Trust prior to the Time of Delivery (other than the financial statements and related financial information and schedules therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading or that, as of the Time of Delivery, either any Registration Statement or the Prospectus, as amended or supplemented, or any further amendment or supplement thereto made by the Guarantor or the Designated Trust prior to the Time of Delivery (other than the financial statements and related financial information and schedules therein, as to -25- which such counsel need express no opinion) contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading; and such counsel does not know of any amendment to any Registration Statement required to be filed or any contracts or other documents of a character required to be filed as an exhibit to any Registration Statement or required to be incorporated by reference into the Prospectus, as amended or supplemented, or required to be described in any Registration Statement or the Prospectus, as amended or supplemented, which are not filed or incorporated by reference or described as required; (e) Richards, Layton & Finger, special Delaware counsel to the Designated Trust and the Guarantor, shall have furnished to you, the Guarantor and the Designated Trust their written opinion, dated the respective Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) The Designated Trust has been duly created and is validly existing as a business trust in good standing under the Delaware Business Trust Act and, under the Trust Agreement and the Delaware Business Trust Act, has the trust power and authority to own its properties and conduct its business, all as described in the Prospectus, and all filings required under the laws of the State of Delaware with respect to the creation and valid existence of the Designated Trust as a business trust have been made; (ii) The Trust Agreement constitutes a valid and binding obligation of the Guarantor and the Trustees, and is enforceable against the Guarantor and the Trustees, in accordance with its terms, and the terms of the Designated Securities as set forth in the Trust Agreement are valid and binding obligations of the Designated Trust in accordance with the terms of the Trust Agreement, all subject to the effect upon the Trust Agreement of (a) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance -26- or transfer and other similar laws relating to or affecting the rights and remedies of creditors generally, (b) principles of equity, including applicable law relating to fiduciary duties (regardless of whether considered and applied in a proceeding in equity or at law), and (c) the effect of applicable public policy on the enforceability of provisions relating to indemnification or contribution; (iii) Under the Trust Agreement and the Delaware Business Trust Act, the Designated Trust has the trust power and authority to (a) execute and deliver this Agreement and the Pricing Agreement and to perform its obligations under this Agreement and the Pricing Agreement, and (b) issue and perform its obligations under the Designated Securities and the Common Securities; (iv) Under the Trust Agreement and the Delaware Business Trust Act, the execution and delivery by the Designated Trust of this Agreement and the Pricing Agreement and the performance by the Designated Trust of its obligations hereunder and thereunder have been duly authorized by all necessary trust action on the part of the Designated Trust; (v) The Designated Securities have been duly and validly authorized by the Trust Agreement, and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and, subject to the qualifications set forth herein, fully paid and non-assessable undivided beneficial interests in the assets of the Designated Trust; under the Trust Agreement and the Delaware Business Trust Act, the issuance of the Designated Securities is not subject to preemptive or other similar rights; the Designated Securities will have the rights set forth in the Trust Agreement (subject to the terms of the Trust Agreement); the Securityholders, as beneficial owners of the Designated Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; provided that such -27- counsel may note that the Securityholders may be obligated, pursuant to the Trust Agreement, to (a) provide indemnity and/or security in connection with and pay taxes or governmental charges arising from transfers or exchanges of Preferred Securities Certificates (as defined in the Trust Agreement) and the issuance of replacement Preferred Securities Certificates and (b) provide security and indemnity in connection with requests of or directions to the Property Trustee (as defined in the Trust Agreement) to exercise its rights and remedies under the Trust Agreement; (vi) The Common Securities of the Designated Trust and the Expense Agreement have been duly and validly authorized by the Trust Agreement; under the Trust Agreement and the Delaware Business Trust Act, the issuance of the Common Securities is not subject to preemptive or other similar rights; (vii) The issue and sale of the Designated Securities and the Common Securities by the Designated Trust, the execution and delivery of this Agreement by the Designated Trust, the compliance by the Designated Trust with all of the provisions of the Designated Securities, the Trust Agreement, this Agreement and the Pricing Agreement, the purchase by the Designated Trust of the Subordinated Debentures and the consummation of the transactions herein and therein contemplated do not violate (a) the Trust Agreement or the Certificate of Trust of the Designated Trust or (b) any applicable Delaware law, rule or regulation; (viii) No authorization, approval, consent or order of any Delaware court or Delaware governmental authority or Delaware agency is required to be obtained by the Designated Trust solely in connection with the issuance and sale of the Designated Securities and the Common Securities; and (ix) Assuming that the Designated Trust derives no income from or connected with sources -28- within the State of Delaware and has no assets, activities (other than having a Delaware trustee as required by the Delaware Business Trust Act and filing documents with the Delaware Secretary of State) or employees in the State of Delaware and that the Designated Trust is treated as a grantor trust for United States federal income tax purposes, the Securityholders (other than those holders of the Designated Securities who reside or are domiciled in the State of Delaware) will have no liability for income taxes imposed by the State of Delaware solely as a result of their participation in the Designated Trust, and the Designated Trust will not be liable for any income tax imposed by the State of Delaware. In giving such opinion, Richards, Layton & Finger may rely, as to all matters governed by the laws of jurisdictions in which such counsel is not qualified, upon opinions of other counsel, who shall be counsel satisfactory to counsel for the Representatives, in which case the opinion shall state that they believe you and they are entitled to rely on such opinions. (f) Schiff Hardin & Waite, tax counsel for the Designated Trust and the Guarantor, shall have furnished to you their written opinion, dated the respective Time of Delivery, in form and substance satisfactory to you, to the effect that such firm confirms its opinion set forth in the Prospectus under the caption "Certain Federal Income Tax Consequences"; (g) At the respective Time of Delivery for such Designated Securities, and, if so specified in the Pricing Agreement, on the date of the Pricing Agreement, Arthur Andersen LLP, the independent accountants of the Guarantor who have certified the financial statements of the Guarantor and its subsidiaries included or incorporated by reference in the Initial Registration Statement and any Rule 462(b) Registration Statement, shall have furnished to the Representatives a letter, dated such Time of Delivery and, if applicable, such date of the Pricing Agreement, respectively, to the effect set forth in Annex II hereto, and with respect to such letter dated such Time of Delivery, as to such other matters as the -29- Representatives may reasonably request and in form and substance satisfactory to the Representatives; (h) Since the respective dates as of which information is given in the Prospectus, as amended or supplemented, there shall not have been (i) any change in the capital stock (other than the Guarantor's purchase of treasury stock in connection with its buy back program and the issuance of stock upon the exercise of employee stock options, director stock awards, bonus stock awards and earn-outs of performance shares) or long-term debt in excess of $10 million of the Guarantor or any of its subsidiaries or (ii) any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Guarantor and its subsidiaries, in each case, otherwise than as set forth or contemplated in the Prospectus, as amended or supplemented, the effect of which, in any such case described in Clause (i) or (ii), is in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the offering or the delivery of the Designated Securities on the terms and in the manner contemplated in the Prospectus, as amended or supplemented; (i) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Guarantor's or the Bank's debt securities or preferred stock by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Guarantor's or the Bank's debt securities or preferred stock; (j) On or after the date hereof, there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or the Nasdaq Stock Market; (ii) a suspension or material limitation in trading in the Guarantor's securities on the Nasdaq Stock Market; (iii) a general moratorium on commercial banking activities in Illinois or New York declared by -30- federal, Illinois or New York State authorities; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this clause (iv) in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the offering or the delivery of the Designated Securities on the terms and in the manner contemplated by the Prospectus, as amended and supplemented; (k) If provided in the applicable Pricing Agreement, the Designated Securities to be sold by the Designated Trust at the respective Time of Delivery shall have been duly listed, subject to notice of issuance, on the Nasdaq Stock Market; and (l) The Designated Trust and the Guarantor shall have furnished or caused to be furnished to the Representatives at the respective Time of Delivery for the Designated Securities certificates of officers of the Designated Trust and the Guarantor satisfactory to the Representatives as to the accuracy of the representations and warranties of the Designated Trust and the Guarantor herein at and as of such Time of Delivery, as to the performance by the Designated Trust and the Guarantor of all of their obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a) and (h) of this Section and as to such other matters as the Representatives may reasonably request. 7. (a) The Designated Trust and the Guarantor jointly and severally will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, any preliminary prospectus supplement, any Registration Statement, the Prospectus, as amended or supplemented, and any other prospectus relating to any Designated Securities, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein -31- a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that neither the Designated Trust nor the Guarantor shall be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, any preliminary prospectus supplement, any Registration Statement, the Prospectus, as amended or supplemented, and any other prospectus relating to the Designated Securities, or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Designated Trust or the Guarantor by any Underwriter of Designated Securities through the Representatives expressly for use in the Prospectus, as amended or supplemented, relating to such Securities. (b) Each Underwriter will indemnify and hold harmless the Designated Trust and the Guarantor against any losses, claims, damages or liabilities to which the Designated Trust or the Guarantor may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, any preliminary prospectus supplement, any Registration Statement, the Prospectus, as amended or supplemented, and any other prospectus relating to the Securities, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, any preliminary prospectus supplement, any Registration Statement, the Prospectus, as amended or supplemented, and any other prospectus relating to the Securities, or any such amendment or supplement in reliance upon and in conformity with -32- written information furnished to the Designated Trust or the Guarantor by such Underwriter through the Representatives expressly for use therein; and will reimburse the Designated Trust or the Guarantor for any legal or other expenses reasonably incurred by the Designated Trust or the Guarantor in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such firm shall be designated in writing by the Representatives in the case of parties indemnified pursuant to subsection (a) above and by the Guarantor in the case of parties indemnified pursuant to subsection (b) above. (d) If the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party -33- as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Designated Trust and the Guarantor on the one hand and the Underwriters of the Designated Securities on the other from the offering of the Designated Securities to which such loss, claim, damage or liability (or action in respect thereof) relates. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Designated Trust and the Guarantor on the one hand and the Underwriters of the Designated Securities on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Designated Trust and the Guarantor on the one hand and such Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from such offering (before deducting expenses) received by the Designated Trust bear to the total compensation (before deducting expenses) received or realized by the Underwriters from the underwriting of the Designated Securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Designated Trust and the Guarantor on the one hand or such Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Designated Trust, the Guarantor and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or by any other method of allocation (even if the Underwriters were treated as one entity for such purpose) which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an -34- indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the applicable Designated Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Underwriters of Designated Securities in this subsection (d) to contribute are several in proportion to their respective underwriting obligations with respect to such Securities and not joint. For purposes of this Section 7, each person who controls an Underwriter within the meaning of the Act shall have the same rights to contribution as such Underwriter, and each person who controls the Guarantor or the Designated Trust within the meaning of the Act, and each director of the Guarantor and each administrative trustee of the Designated Trust, shall have the same rights to contribution as the Guarantor and the Designated Trust, subject in each case to the limitation described in the preceding sentence. (e) The obligations of the Designated Trust and the Guarantor under this Section 7 shall be in addition to any liability which the Designated Trust and the Guarantor may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 7 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Guarantor, to each administrative trustee of the Designated Trust and to -35- each person, if any, who controls the Designated Trust or the Guarantor within the meaning of the Act. 8.(a) If any Underwriter shall default in its obligation to purchase the Firm Designated Securities or the Optional Designated Securities which it has agreed to purchase under the Pricing Agreement relating to such Designated Securities, the Representatives may in their discretion arrange for themselves or another party or other parties to purchase such Designated Securities on the terms contained herein and in such Pricing Agreement. If within thirty-six hours after such default by any Underwriter the Representatives do not arrange for the purchase of such Firm Designated Securities or such Optional Designated Securities, as the case may be, then the Designated Trust and the Guarantor shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to the Representatives to purchase such Designated Securities on such terms. In the event that, within the respective prescribed period, the Representatives notify the Designated Trust and the Guarantor that they have so arranged for the purchase of such Designated Securities, or the Designated Trust and the Guarantor notifies the Representatives that they have so arranged for the purchase of such Designated Securities, the Representatives or the Designated Trust and the Guarantor shall have the right to postpone the Time of Delivery for such Designated Securities for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in any Registration Statement or the Prospectus, as amended or supplemented, or in any other documents or arrangements, and the Designated Trust and the Guarantor agree to file promptly any amendments or supplements to any Registration Statement or the Prospectus which in the opinion of the Representatives may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to the Pricing Agreement with respect to such Designated Securities. (b) If, after giving effect to any arrangements for the purchase of the Firm Designated Securities or Optional Designated Securities, as the case may be, of -36- a defaulting Underwriter or Underwriters by the Representatives and the Designated Trust and the Guarantor as provided in subsection (a) above, the aggregate number of such Designated Securities which remains unpurchased does not exceed one-eleventh of the aggregate number of the Firm Designated Securities or Optional Designated Securities, as the case may be, to be purchased at the respective Time of Delivery, then the Designated Trust and the Guarantor shall have the right to require each non-defaulting Underwriter to purchase the number of Firm Designated Securities or Optional Designated Securities, as the case may be, which such Underwriter agreed to purchase under the Pricing Agreement relating to such Designated Securities and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Firm Designated Securities or Optional Designated Securities, as the case may be, which such Underwriter agreed to purchase under such Pricing Agreement) of the Firm Designated Securities or Optional Designated Securities, as the case may be, of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Firm Designated Securities or Optional Designated Securities, as the case may be, of a defaulting Underwriter or Underwriters by the Representatives and the Designated Trust and the Guarantor as provided in subsection (a) above, the aggregate number of Firm Designated Securities or Optional Designated Securities, as the case may be, which remains unpurchased exceeds one-eleventh of the aggregate number of the Firm Designated Securities or Optional Designated Securities, as the case may be, to be purchased at the respective Time of Delivery, as referred to in subsection (b) above, or if the Designated Trust and the Guarantor shall not exercise the right described in subsection (b) above to require non- defaulting Underwriters to purchase Firm Designated Securities or Optional Designated Securities, as the case may be, of a defaulting Underwriter or Underwriters, then the Pricing Agreement relating to such Firm Designated Securities or Optional Designated Securities, as the case may be, shall thereupon -37- terminate, without liability on the part of any non-defaulting Underwriter, the Designated Trust or the Guarantor, except for the expenses to be borne by the Designated Trust, the Guarantor and the Underwriters as provided in Section 5 hereof and the indemnity and contribution agreements in Section 7 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 9. The respective indemnities, agreements, representations, warranties and other statements of the Designated Trust, the Guarantor and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Designated Trust, the Guarantor, or any officer or director or controlling person of the Designated Trust or the Guarantor, and shall survive delivery of and payment for the Designated Securities. 10. If any Pricing Agreement or Over-allotment Option shall be terminated pursuant to Section 8 hereof, neither the Designated Trust nor the Guarantor shall then be under any liability to any Underwriter with respect to the Firm Designated Securities or Optional Designated Securities covered by such Pricing Agreement except as provided in Section 5 and Section 7 hereof; but, if for any other reason, Designated Securities are not delivered by or on behalf of the Designated Trust as provided herein, the Designated Trust and the Guarantor will reimburse the Underwriters through the Representatives for all out-of- pocket expenses approved in writing by the Representatives, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of such Designated Securities, but the Designated Trust and the Guarantor shall then be under no further liability to any Underwriter with respect to such Designated Securities except as provided in Section 5 and Section 7 hereof. 11. In all dealings hereunder, the Representatives of the Underwriters of Designated Securities shall act on behalf of each of such Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter -38- made or given by such Representatives jointly or by such of the Representatives, if any, as may be designated for such purpose in the Pricing Agreement. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to the address of the Representatives as set forth in the Pricing Agreement; and if to the Designated Trust or the Guarantor shall be delivered or sent by mail, telex or facsimile transmission to the address of the Designated Trust or the Guarantor set forth in the Initial Registration Statement: Attention: Corporate Secretary, with a copy to Northern Trust Corporation, Fifty South LaSalle Street, Chicago, Illinois 60675, Attention: General Counsel, Facsimile Transmission No. (312) 630-1596; provided, however, that any notice to an Underwriter pursuant to Section 7(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Designated Trust and the Guarantor by the Representatives upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 12. This Agreement and each Pricing Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Designated Trust and the Guarantor and, to the extent provided in Section 7 and Section 9 hereof, the officers and directors of the Designated Trust or the Guarantor and each person who controls the Designated Trust, the Guarantor or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement or any such Pricing Agreement. No purchaser of any of the Designated Securities from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 13. Time shall be of the essence of each Pricing Agreement. As used herein, "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. -39- 14. This Agreement and each Pricing Agreement shall be governed by and construed in accordance with the laws of the State of New York. 15. This Agreement and each Pricing Agreement may be executed by any one or more of the parties hereto and thereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. -40- If the foregoing is in accordance with your understanding, please sign and return to us six counterparts hereof. Very truly yours, NORTHERN TRUST CORPORATION By: ----------------------------------- Name: Perry R. Pero Title: Senior Executive Vice President and Chief Financial Officer NTC CAPITAL I By: Northern Trust Corporation, as Depositor By: ----------------------------------- Name: Perry R. Pero Title: Senior Executive Vice President and Chief Financial Officer NTC CAPITAL II By: Northern Trust Corporation, as Depositor By: ----------------------------------- Name: Perry R. Pero Title: Senior Executive Vice President and Chief Financial Officer NTC CAPITAL III By: Northern Trust Corporation, as Depositor By: ----------------------------------- Name: Perry R. Pero Title: Senior Executive Vice President and Chief Financial Officer -41- Accepted on behalf of ourselves and the other Underwriters listed in Schedule I to the Pricing Agreement: Salomon Brothers Inc Merrill Lynch, Pierce, Fenner & Smith Incorporated By: Salomon Brothers Inc By: -------------------------------- Name: Title: On behalf of each of the Underwriters -42- ANNEX I Pricing Agreement ----------------- Salomon Brothers Inc, Merrill Lynch, Pierce, Fenner & Smith Incorporated, [As Representatives of the several Underwriters named in Schedule I hereto,] c/o Salomon Brothers Inc, Seven World Trade Center, New York, New York 10048. _________ __, ____ Dear Sirs: NTC Capital ___, a statutory business trust created under the laws of the State of Delaware (the "Designated Trust"), and Northern Trust Corporation, a Delaware corporation (the "Guarantor"), propose, subject to the terms and conditions stated herein and in the Underwriting Agreement, dated April 22, 1997 (the "Underwriting Agreement"), among the Guarantor and the Designated Trust on the one hand and the Underwriters named in Schedule I to the Underwriting Agreement, on the other hand, to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") the Securities specified in Schedule II hereto (the "Designated Securities", consisting of Firm Designated Securities and any Optional Designated Securities the Underwriters may elect to purchase). Each of the provisions of the Underwriting Agreement is incorporated herein by reference in its entirety, and shall be deemed to be a part of this Agreement to the same extent as if such provisions had been set forth in full herein; and each of the representations and warranties set forth therein shall be deemed to have been made at and as of the date of this Pricing Agreement, except that each representation and warranty which refers to the Prospectus in Section 2 of the Underwriting Agreement shall be deemed to be a representation or warranty as of the date of the Underwriting Agreement in relation to the Prospectus (as therein defined), and also a representation and warranty as of the date of this Pricing Agreement in relation to the Prospectus, as amended or supplemented, -43- relating to the Designated Securities which are the subject of this Pricing Agreement. Each reference to the Representatives herein and in the provisions of the Underwriting Agreement so incorporated by reference shall be deemed to refer to you. Unless otherwise defined herein, terms defined in the Underwriting Agreement are used herein as therein defined. Any Representatives designated to act on behalf of the Representatives and on behalf of each of the Underwriters of the Designated Securities pursuant to Section 11 of the Underwriting Agreement and the address of the Representatives referred to in such Section 11, if any, are set forth at the end of Schedule II hereto. An amendment to the Initial Registration Statement, a Rule 462(b) Registration Statement or a supplement to the Prospectus, as the case may be, relating to the Designated Securities, in the form heretofore delivered to you is now proposed to be filed with the Commission. Subject to the terms and conditions set forth herein and in the Underwriting Agreement incorporated herein by reference, (a) the Designated Trust agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Designated Trust, at the time and place and at the purchase price to the Underwriters set forth in Schedule II hereto, the number of Firm Designated Securities set forth opposite the name of such Underwriter in Schedule I hereto, and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Designated Securities, as provided below, the Designated Trust agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Designated Trust at the purchase price to the Underwriters set out in Schedule II hereto that portion of the number of Optional Designated Securities as to which such election shall have been exercised. The Designated Trust hereby grants to each of the Underwriters the right to purchase at their election up to the number of Optional Designated Securities set forth opposite the name of such Underwriter in Schedule I hereto on the terms referred to in the paragraph above for the sole purpose of covering over- allotments in the sale of the Firm Designated Securities. Any such election to purchase Optional Designated Securities may be exercised by written -44- notice from the Representatives to the Designated Trust and the Guarantor given within a period of 30 calendar days after the date of this Pricing Agreement, setting forth the aggregate number of Optional Designated Securities to be purchased and the date on which such Optional Designated Securities are to be delivered, as determined by the Underwriters, but in no event earlier than the First Time of Delivery or, unless the Underwriters, the Guarantor and the Designated Trust otherwise agree in writing, no earlier than two or later than ten business days after the date of such notice. If the foregoing is in accordance with your understanding, please sign and return to us six counterparts hereof, and upon acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof, including the provisions of the Underwriting Agreement incorporated herein by reference, shall constitute a binding agreement between each of the Underwriters, the Designated Trust and the Guarantor. It is understood that your acceptance of this letter on behalf of each of the Underwriters is or will be pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Guarantor for examination upon request, but without warranty on the part of the Underwriters as to the authority of the signers thereof. Very truly yours, NORTHERN TRUST CORPORATION By: ------------------------- Name: Title: NTC CAPITAL _____ By: Northern Trust Corporation, as Depositor By: ------------------------- Name: Title: -45- Accepted as of the date hereof: Salomon Brothers Inc Merrill Lynch, Pierce, Fenner & Smith Incorporated [As Representatives of the Underwriters named in Schedule I hereto] By: Salomon Brothers Inc By: ------------------------ Name: Title: On behalf of each of the Underwriters named on Schedule I hereto -46- SCHEDULE I
Number of Maximum Number of Firm Optional Designated Designated Securities to be Securities to Underwriter Purchased be Purchased - ----------- ---------------- -------------- [Names of Underwriters] ... Total ---------------- -------------- ================ ==============
-47- SCHEDULE II Designated Trust: NTC Capital __ Title of Designated Securities: ___% Preferred Securities, Series ___ Aggregate principal amount: Aggregate principal amount of Firm Designated Securities: $_________________________ Maximum aggregate principal amount of Optional Designated Securities: $_________________________ Price to Public ______% of the principal amount of the Designated Securities Purchase Price by Underwriters: ______% of the principal amount of the Designated Securities Underwriters' Compensation: $_____ per Designated Security Specified funds for payment of purchase price: New York Clearing House same-day funds Accountants' Letter to be delivered on date of Pricing Agreement: Yes. Trust Agreement: Amended and Restated Trust Agreement dated __________________, among the Guarantor, the Trustees named therein and the holders from time to time of undivided beneficial interests of the Designated Trust. -48- Indenture: Junior Subordinated Indenture dated as of January 1, 1997, between the Guarantor and The First National Bank of Chicago, as Debenture Trustee (the "Indenture") Guarantee: Guarantee Agreement, dated as of _________________, between Guarantor and Guarantee Trustee Maturity: Interest Rate: _____% Interest Payment Dates: Extension Period: [20 quarters] Redemption Provisions: [The redemption provisions set forth in Section 4.2 of the Trust Agreement shall apply to the Designated Securities.] Sinking Fund Provisions: No sinking fund provisions. [First] Time of Delivery: 10:00 a.m., New York City time _______ ___, ____ Closing Location: Sullivan & Cromwell 125 Broad Street New York, New York 10004 -49- [Names and addresses of Representatives:] -50- ANNEX II Accountants' Letter ------------------- Pursuant to Section 6(g) of the Underwriting Agreement, the Guarantor's independent certified public accountants shall furnish letters to the effect that: (i) they are independent certified public accountants with respect to the Guarantor and its subsidiaries within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) in their opinion, the financial statements and any supplementary financial information and schedules (and, if applicable, prospective financial statements and/or pro forma financial information) examined by them and included or incorporated by reference in any Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; and, if reasonably requested by the Representatives, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited consolidated interim financial statements, selected financial data, pro forma financial information, prospective financial statements and/or condensed financial statements derived from audited financial statements of the Guarantor for the periods specified in such letter, as indicated in their reports thereon, copies of which have been furnished to the representatives of the Underwriters (the "Representatives"); (iii) they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included in the Guarantor's quarterly reports on Form 10-Q incorporated by reference into the Prospectus as indicated in their reports thereon copies of which have been separately -51- furnished to the Representatives; and on the basis of specified procedures including inquiries of officials of the Guarantor who have responsibility for financial and accounting matters regarding whether the unaudited condensed consolidated financial statements referred to in paragraph (v)(A) below comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (iv) the unaudited selected financial information with respect to the consolidated results of operations and financial position of the Guarantor for the five most recent fiscal years included in the Prospectus and included or incorporated by reference in Item 2 of the Guarantor's Registration Statement on Form 10 or Item 6 of the Guarantor's Annual Report on Form 10-K for the most recent fiscal year, as applicable, agrees with the corresponding amounts (after restatement where applicable) in the audited consolidated financial statements for the five such fiscal years which were included or incorporated by reference in the Guarantor's Registration Statement on Form 10 or the Guarantor's Annual Reports on Form 10-K for such fiscal years, as applicable; (v) on the basis of limited procedures, not constituting an examination in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Guarantor and its subsidiaries, inspection of the minute books of the Guarantor and its subsidiaries since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, inquiries of officials of the Guarantor and its subsidiaries responsible for financial accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: -52- (A) the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included or incorporated by reference in the Guarantor's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus (if any) do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act as it applies to Form 10-Q and the related published rules and regulations thereunder or are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with the basis for the audited consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included or incorporated by reference in the Guarantor's Registration Statement on Form 10 or the Guarantor's Annual Report on Form 10-K for the most recent fiscal year, as applicable; (B) any other unaudited income statement data and balance sheet items included in the Prospectus do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included or incorporated by reference in the Guarantor's Registration Statement on Form 10 or the Guarantor's Annual Report on Form 10-K for the most recent fiscal year, as applicable; (C) the unaudited financial statements which were not included in the Prospectus but from which were derived the unaudited condensed financial statements referred to in Clause (A) and any unaudited income statement data and balance sheet items included in the Prospectus and referred to in Clause (B) were not determined on a basis substantially consistent with the basis for the audited financial statements included or incorporated by reference in the Guarantor's Registration Statement on Form 10 or the -53- Guarantor's Annual Report on Form 10-K for the most recent fiscal year, as applicable; (D) any unaudited pro forma consolidated condensed financial statements included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than the Guarantor's purchase of treasury stock in connection with its buy back program and the issuance of stock upon the exercise of employee stock options, director stock awards, bonus stock awards and earn-outs of performance shares) or any increase in the consolidated long-term debt of the Guarantor and its subsidiaries or any decreases in total assets, in each case as compared with amounts shown in the latest balance sheet included or incorporated by reference in the Prospectus, except in each case for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included or incorporated by reference in the Prospectus to the specified date referred to in Clause (E) there were any decreases in consolidated net interest income, non-interest income or the total or per share amounts of consolidated net income, in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by the Representatives, except in each case for increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and -54- (vi) in addition to the examination referred to in their report(s) included or incorporated by reference in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (v) above, they have carried out certain specified procedures, not constituting an examination in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Representatives which are derived from the general accounting records of the Guarantor and its subsidiaries, which appear in the Prospectus (excluding documents incorporated by reference), or in Part II of, or in exhibits and schedules to, any Registration Statement specified by the Representatives or in documents incorporated by reference in the Prospectus specified by the Representatives, and have compared certain of such amounts, percentages and financial information with the accounting records of the Guarantor and its subsidiaries and have found them to be in agreement. All references in this Annex II to the Prospectus shall be deemed to refer to the Prospectus (including the documents incorporated by reference therein) as defined in the Underwriting Agreement as of the date of the letter delivered on the date of the Pricing Agreement, if so delivered, for purposes of such letter and to the Prospectus, as amended or supplemented, (including the documents incorporated by reference therein) in relation to the applicable Designated Securities for purposes of the letter delivered at the Time of Delivery for such Designated Securities. -55- EX-3.(I) 3 AMENDMENT TO RESTATED CERT. OF INCORPORATION EXHIBIT NUMBER (3)(i) TO 3/31/97 FORM 10-Q CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF NORTHERN TRUST CORPORATION NORTHERN TRUST CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation") does hereby certify: (1) The Corporation is regulated under the Bank Holding Company Act of 1956, 12 U.S.C., Section 1841, et seq., as that Act shall from time to time be amended. (2) At a meeting of the Board of Directors of the Corporation held on February 18, 1997, resolutions were adopted setting forth a proposed amendment of the Restated Certificate of Incorporation, declaring the amendment to be advisable and directing that the amendment be considered at a meeting of stockholders of the Corporation. The resolutions setting forth the proposed amendment are as follows: BE IT RESOLVED that the Board of Directors of Northern Trust Corporation declares it advisable that the first sentence of Article Fourth of the Restated Certificate of Incorporation be amended by (1) increasing the total number of shares which the Corporation has the authority to issue, referred to in the second line of Article Fourth, by 140,000,000 shares, and (2) revising the fourth line of Article Fourth to read in its entirety as follows: "280,000,000 shares of Common Stock (Common Stock), $1.66-2/3 par value per share." FURTHER RESOLVED that the foregoing proposed amendment be submitted to the stockholders of the Corporation for their consideration and approval at the 1997 annual meeting of stockholders of the Corporation. (3) Thereafter, pursuant to such resolutions of its Board of Directors, the stockholders of the Corporation, at a meeting held on April 15, 1997, adopted the proposed amendment by voting the number of shares required by the statute in favor of the proposed amendment. (4) The amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. (5) Accordingly, there has now been given all corporate authorization necessary to cause the first sentence of Article Fourth of the Restated Certificate of Incorporation to provide as follows: "The total number of shares of all classes of capital stock which the Corporation has the authority to issue is 290,000,000 shares, which are divided into two classes as follows: 10,000,000 shares of Preferred Stock (Preferred Stock) without par value, and 280,000,000 shares of Common Stock (Common Stock), $1.66-2/3 par value per share." (6) The Capital of the Corporation will not be reduced under or by reason of the amendment. IN WITNESS WHEREOF, NORTHERN TRUST CORPORATION has caused this Certificate to be signed and attested by its duly authorized officers, this 21st day of April, 1997. NORTHERN TRUST CORPORATION By: /s/ William A. Osborn _________________________________________ William A. Osborn Chairman and Chief Executive Officer Attest: /s/ Peter L. Rossiter - ------------------------------- Peter L. Rossiter Executive Vice President, General Counsel and Secretary EX-3.(II) 4 RESTATED CERTIFICATE OF INCORPORATION EXHIBIT NUMBER (3)(ii) TO 1997 FORM 10-Q RESTATED CERTIFICATE OF INCORPORATION OF NORTHERN TRUST CORPORATION NORTHERN TRUST CORPORATION, a Corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the Corporation is Northern Trust Corporation. The date of filing its original Certificate of Incorporation, under the name Nortrust Corporation, with the Secretary of State was August 23, 1971. 2. This Restated Certificate of Incorporation restates and integrates and does not further amend the provisions of the Certificate of Incorporation as heretofore amended of this Corporation, and there is no discrepancy between this Restated Certificate of Incorporation and the Certificate of Incorporation as heretofore amended of this Corporation. 3. The text of the Certificate of Incorporation is restated hereby to read as herein set forth in full: RESTATED CERTIFICATE OF INCORPORATION OF NORTHERN TRUST CORPORATION ARTICLE FIRST Name The name of the Corporation is Northern Trust Corporation. ARTICLE SECOND Registered Office The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE THIRD Purposes The nature of the business to be conducted or promoted and the purposes of the Corporation are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE FOURTH Capital Stock Classes The total number of shares of all classes of capital stock which the Corporation has the authority to issue is 71,000,000 shares, which are divided into two classes as follows: 1,000,000 shares of Preferred Stock (Preferred Stock) without par value, and 70,000,000 shares of Common Stock (Common Stock) $1.66-2/3 par value per share. The designations, voting powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of the above classes of stock are as follows: I Preferred Stock 1. Issuance in Series. Shares of Preferred Stock may be issued in one or more series at such time or times, and for such consideration or considerations as the Board of Directors may determine. All shares of any one series of Preferred Stock will be identical with each other in all respects, except that shares of any one series issued at different times may differ as to dates from which dividends thereon may be cumulative. All series will rank equally and be identical in all respects, except as permitted by the following provisions of paragraph 2 of this Division I. 2. Authority of the Board with respect to Series. The Board of Directors is authorized, at any time and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series with such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as are stated and expressed in the resolution or resolutions providing for the issue thereof adopted by the Board of Directors, and as are not stated and expressed in this Restated Certificate of Incorporation or any amendment thereto including, but not limited to, determination of any of the following: (a) the distinctive serial designation and the number of shares constituting a series; -2- (b) the dividend rate or rates, whether dividends are cumulative and, if so, from which date, the payment date or dates for dividends, and the participating or other special rights, if any, with respect to dividends; (c) the voting powers, full or limited, if any, of the shares of the series; (d) whether the shares are redeemable and, if so, the price or prices at which, and the terms and conditions on which, the shares may be redeemed; (e) the amount or amounts payable upon the shares in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation prior to any payment or distribution of the assets of the Corporation to any class or classes of stock of the Corporation ranking junior to the Preferred Stock; (f) whether the shares are entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of shares of a series and, if so entitled, the amount of the fund and the manner of its application, including the price or prices at which the shares may be redeemed or purchased through the application of the fund; (g) whether the shares are convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation and, if so convertible or exchangeable, the conversion price or prices, or the rates of exchange, and the adjustments thereof, if any, at which the conversion or exchange may be made, and any other terms and conditions of the conversion or exchange; and (h) any other preferences, privileges and powers, and relative participating, optional or other special rights, and qualifications, limitations or restrictions of a series, as the Board of Directors may deem advisable and as are not inconsistent with the provisions of this Restated Certificate of Incorporation. 3. Dividends. Before any dividends on any class or classes of stock of the Corporation ranking junior to the Preferred stock (other than dividends payable in shares of any class or classes of stock of the Corporation ranking junior to the Preferred Stock) may be declared or paid or set apart for payment, the holders of shares of Preferred Stock of each series are entitled to such cash dividends, but only when and as declared by the Board of Directors out of funds legally available therefor, as they may be entitled to in accordance with the resolution or resolutions adopted by the Board of Directors providing for the issue of the series, payable on such dates in each year as may be fixed in the resolution or resolutions. The term "class or classes of stock of the Corporation ranking junior to the Preferred Stock" means the Common Stock and any other class or classes of stock of the Corporation hereafter authorized which rank junior to the Preferred Stock as to dividends or upon liquidation. -3- 4. Reacquired Shares. Shares of Preferred Stock which have been issued and reacquired in any manner by the Corporation (excluding, until the Corporation elects to retire them, shares which are held as treasury shares but including shares redeemed, shares purchased and retired and shares which have been converted into shares of Common Stock) will have the status of authorized and unissued shares of Preferred Stock and may be reissued. 5. Voting Rights. Unless and except to the extent otherwise required by law or provided in the resolution or resolutions of the Board of Directors creating any series of Preferred Stock pursuant to this Division I, the holders of the Preferred Stock shall have no voting power with respect to any matter whatsoever. In no event shall the Preferred Stock be entitled to more than one vote in respect of each share of stock except as may be required by law or by this Restated Certificate of Incorporation. 6. Outstanding or Reserved for Issuance Preferred Stock. (a) Series A Junior Participating Preferred Stock 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 350,000. Such number of shares may be increased or decreased by resolution of the Board; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $1.66-2/3 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $31.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash -4- dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $31.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividends Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. -5- 3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series A preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; -6- (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time in such manner. 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth in this Restated Certificate of Incorporation or in any Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (A) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $25,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (B) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay -7- any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred stock were entitled immediately prior to such event under the proviso in clause (A) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable. 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock, unless the terms of any such series shall provide otherwise. 10. Amendment. This Restated Certificate of Incorporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. -8- (b) Auction Preferred Stock, Series C PART I 1. Designation. The designation of said series of Preferred Stock shall be Auction Preferred Stock, Series C (the "Series C Stock"). The number of shares of Series C Stock shall be 600. The stated value of the Series C Stock shall be $100,000 per share. 2. Dividends. (a) The Holders (as defined in Section 8 of this Part I) shall be entitled to receive; when and as declared by the Board of Directors (as defined in Section 8 of this Part I) out of funds legally available therefor, cumulative cash dividends, at the Applicable Rate (as defined in subparagraph (c)(i) of this Section 2) per annum, determined as set forth below, and no more, payable on the respective dates set forth below. (b)(i) Dividends on shares of Series C Stock at the Applicable Rate per annum shall accrue from the Date of Original Issue (as defined in Section 8 of this Part I). Accrued dividends shall be payable, when and as declared by the Board of Directors, commencing on September 2, 1987, and on October 28, 1987 and on each succeeding seventh Wednesday thereafter, except that if: (A)(l) the Securities Depository (as defined in Section 1 of Part II of this paragraph 6(b) of Article Fourth) shall not have advised the Trust Company (as defined in Section 8 of this Part I) at least five Business Days prior to such Wednesday that it will make available to its participants and members on Dividend Payment Dates, in funds immediately available in New York City, the amount due as dividends on such Dividend Payment Dates, and (2)(X) such Wednesday is not a Business Day (as defined in Section 8 of this Part I), (Y) the Thursday following such Wednesday is not a Business Day or (Z) both the Tuesday and the Monday preceding such Wednesday are not Business Days, then on the first Business Day that (i) is preceded by a Business Day that is, or falls after, such preceding Monday and (ii) is immediately followed by a Business day; or (B)(l) the Securities Depository shall have advised the Trust Company at least five Business Days prior to such Wednesday that it will make available to its participants and members on Dividend Payment Dates, in funds immediately available in New York City, the amount due as dividends on such Dividend Payment Dates and (2)(X) such Wednesday is not a Business Day or (Y) both the Tuesday and the Monday preceding such Wednesday are not Business Days, then on the first Business Day after such Wednesday that is preceded by a Business Day that is, or falls after, such preceding Monday; provided, however, that the Board of Directors, in the event of a change in law lengthening the minimum holding period (currently found in Section 246(c) of the Code (as defined in Section 8 of this Part I)) required for taxpayer's to be entitled to the dividends received deduction on -9- preferred stock held by nonaffiliated corporations (currently found in Section 243(a) of the Code), shall adjust the period of time between Dividend Payment Dates (as hereinafter defined) so as, subject to clauses (A) and (B) of this subparagraph (b)(i), to adjust uniformly the number of days (such number of days without giving effect to such clauses (A) and (B) being hereinafter referred to as "Dividend Period Days") in Dividend Periods (as defined in subparagraph (c)(i) of this Section 2) commencing after the date of such change in law to exceed the then current minimum holding period, provided that the number of Dividend Period Days shall not exceed by more than nine days the length of such then current minimum period and in no event shall exceed 98 days and that dividends shall continue to be payable, subject to clauses (A) and (B), on Wednesdays (each date of payment of dividends being herein referred to as a "Dividend Payment Date" and the first Dividend Payment Date being herein referred to as the "Initial Dividend Payment Date"). Upon any such change in the number of Dividend Period Days as a result of a change in law, the Corporation shall publish notice of such change in a newspaper of general circulation to the financial community in The City of New York, New York, which carries financial news and is customarily published on each Business Day and shall mail notice of such change by first class mail, postage prepaid, to each Holder at such Holder's address as the same appears on the stock register of the Corporation. (ii) As long as the Applicable Rate is based on the results of an Auction (as defined in Section 8 of this Part I), the Corporation shall pay to the Paying Agent (as defined in Section 8 of this Part I) not later than 12:00 noon, New York City time, on the Business Day next preceding each Dividend Payment Date, an aggregate amount of funds available on the next Business Day in The City of New York, New York, equal to the dividends to be paid to all Holders on such Dividend Payment Date. All such moneys shall be held in trust for the payment of such dividends by the Paying Agent for the benefit of the Holders specified in subparagraph (iii) of this paragraph (b). (iii) Each dividend shall be payable to the Holders as their names appear on the stock register of the Corporation on the Business Day next preceding the Dividend Payment Date thereof; provided, however, that if a Rate Adjustment Event (as defined in Section 8 of this Part I) shall have occurred and shall not have been cured by paying all dividends accrued and unpaid and unpaid redemption payments, such dividend shall be paid to such Holders as their names appear on the stock register of the Corporation on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holders as their names appear on the stock register of the Corporation on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors. (c)(i) The dividend rate of shares of Series C Stock shall be 4.85% per annum during the period from and after the Date of Original Issue to and including the Initial Dividend Payment Date (the "Initial Dividend Period"). Commencing on the Initial Dividend Payment Date, the dividend rate on shares of Series C Stock for each subsequent dividend period (hereinafter referred to as a "Subsequent Dividend Period" and collectively as "Subsequent Dividend Periods"; and the Initial Dividend Period or any Subsequent Dividend Period being hereinafter referred to as a "Dividend Period" and collectively as "Dividend Periods") thereafter, which Subsequent Dividend Periods shall commence on the day that is the last day of the preceding Dividend Period and shall end on and include the next succeeding Dividend Payment date, shall be equal to the rate per -10- annum that results from implementation of the Auction Procedures (as defined in Section 8 of this Part I); provided, however, that if a Rate Adjustment Event shall have occurred and shall not have been cured by paying all accrued and unpaid dividends and unpaid redemption payments prior to the first day of such Subsequent Dividend Period, the dividend rate for such Subsequent Dividend Period shall be a rate per annum equal to 175% of the 60-day "AA" Composite Commercial Paper Rate (the rate per annum at which dividends are payable on shares of Series C Stock for any Dividend Period being herein referred to as the "Applicable Rate"). Any amount of such dividend or redemption price not paid when due but paid within three business days after such due date shall incur a late charge to be paid therewith and calculated for such period of nonpayment at an annualized rate of 175% of the 60-day "AA" Composite Commercial Paper Rate applied to the amount of such non-payment. (ii) The amount of dividends per share accrued and payable on shares of Series C Stock for each Dividend Period shall be computed by multiplying the Applicable Rate for such Dividend Period by a fraction, the numerator of which shall be the number of days in such Dividend Period (calculated by counting the first day thereof but excluding the last day thereof) and the denominator of which shall be 360 and applying the rate obtained against $100,000; and the amount of dividends per share accrued for any part of any Dividend Period shall be computed by multiplying the Applicable Rate for such Dividend Period by a fraction the numerator of which shall be the number of days in such part of such Dividend Period (calculated by counting the first day thereof but excluding the last day thereof) and the denominator of which shall be 360 and applying the rate obtained against $100,000. (iii) The Applicable Rate for each Subsequent Dividend Period shall be published not later than the fifth Business Day next succeeding the first day of such Subsequent Dividend Period in a newspaper of general circulation to the financial community in The City of New York, New York, which carries financial news and is customarily published on each Business Day. (d)(i) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to the Series C Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series C Stock for all Dividend Periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the Series C Stock and any other Preferred Stock ranking on a parity as to dividends with the Series C Stock, all dividends declared upon the Series C Stock and any other Preferred Stock ranking on a parity as to dividends with the Series C Stock shall be declared pro rata so that the amount of dividends declared per share on the Series C Stock and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series C Stock and such other Preferred Stock bear to each other. Holders of Series C Stock shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of the full cumulative dividends, as herein provided, on the Series C Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payments on the Series C Stock which may be in arrears. (ii) So long as any shares of Series C Stock are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to Series C stock as to dividends and upon liquidation and other than as provided in subparagraph (i) of this paragraph (d)) shall be declared or paid or set aside for payment or other distribution declared or made upon the -11- Common Stock or upon any other stock ranking junior to or on a parity with the Series C Stock as to dividends or upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with the Series C Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Series C Stock as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of Series C Stock shall have been paid for all past Dividend Periods. 3. Voting The Series C Stock shall not have any voting powers, either full or limited, except that: (a) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of Preferred Stock shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of this Restated Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designations or any similar document relating to any series of Preferred Stock) which would adversely affect the powers, preferences, rights or privileges of the Preferred Stock; provided, however, that if any such amendment, alteration or repeal would adversely affect the powers, preferences, rights or privileges of one or more series of the Preferred Stock, but shall not so affect the entire class, then only the shares of the one or more series so affected shall be considered to be a separate class entitled to vote upon or consent to such amendment, alteration or repeal; (b) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the Series C Stock and all other series of Preferred Stock ranking on a parity with the Series C Stock, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of Series C Stock and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the Series C Stock as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; and (c) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends on the Preferred Stock shall exist, the number of directors constituting the Board of Directors shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for -12- which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for that purpose. So long as a default in preference dividends on the Preferred Stock shall exist, (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed ny the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to have occurred whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends (which, with respect to the Series C Stock, shall be deemed to be dividends in respect of a number of Dividend Periods containing not less than 540 days) or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. 4. Redemption. (a)(i) The Series C Stock may be redeemed, at the option of the Corporation, as a whole or from time to time in part, on any Dividend Payment Date at a redemption price of $100,000 per share plus an amount equal to accrued and unpaid dividends thereon (whether or not earned or declared) to the date fixed for redemption. (ii) If fewer than all of the outstanding shares of Series C Stock are to be redeemed pursuant to subparagraph (i) of this paragraph (a), the number of shares to be redeemed shall be determined by the Board of Directors, and such shares shall be redeemed pro rata from the Holders in proportion to the number of such shares held by such Holders (with adjustments to avoid redemption of fractional shares). (b) If the Corporation shall redeem shares of Series C Stock pursuant to paragraph (a) of this Section 4, notice of such redemption shall be given by publication at least once in a newspaper printed in the English language and customarily published on each Business Day and, whenever published, of general circulation in Chicago, Illinois, such publication to be not less than 15 nor more than 45 days prior to the date fixed for such redemption. Notice of such redemption shall also be given by mailing the same by first class mail, postage prepaid, not less than 15 nor more than 45 days prior to the date fixed for redemption thereof, to each Holder of the shares to be redeemed, at such Holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of Series C Stock to be redeemed; (iii) the redemption price plus the amount of accrued and unpaid dividends to the redemption date; (iv) the place or places where certificates for such shares of Series C Stock are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be -13- redeemed will cease to accrue on such redemption date. If fewer than all shares held by any Holder are to be redeemed, the notice mailed to such Holder shall also specify the number of shares to be redeemed from such Holder. (c) Notwithstanding the provisions of paragraph (a) of this Section 4, if any dividends on the Series C Stock are in arrears, no shares of Series C Stock shall be redeemed unless all outstanding shares of Series C Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of Series C Stock; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of Series C Stock pursuant to a purchase or exchange offer made on the same terms to Holders of all outstanding shares of Series C Stock. (d) If notice of redemption has been published under paragraph (b) of this Section 4 or the Corporation has irrevocably authorized and directed the Redemption Agent to begin promptly and complete such publication of notice, and the Corporation has deposited in trust with the Redemption Agent funds necessary for such redemption, from and after the later of the date of such notice or the date such deposit is made the shares of Series C Stock called for redemption shall no longer be deemed to be outstanding, and all rights of the Holders thereof as stockholders of the Corporation (except the right to receive the redemption price plus an amount equal to the accrued and unpaid dividends thereon to the date fixed for redemption) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), the redemption price set forth above plus an amount equal to such accrued and unpaid dividends shall be paid by the Redemption Agent to the Holders of the shares of Series C Stock subject to redemption as set forth in paragraph (e) of this Section 4. In case fewer than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the Holder thereof. (e) As long as the Applicable Rate is based on the results of an Auction, the Corporation shall pay the applicable Redemption Deposit Amount (as defined in Section 8 of this Part I) to the Redemption Agent, in funds available on the next Business Day in The City of New York, New York, on the Business Day next preceding the redemption date for disbursement to Holders as appropriate. All such moneys shall be held in trust by the Redemption Agent for the benefit of Holders of shares so to be redeemed. 5. Liquidation Rights. (a) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the Series C Stock shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $100,000 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of the final distribution. (b) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section 5. -14- (c) After the payment to the holders of the Series C Stock of the full preferential amounts provided for in this Section 5, the holders of Series C Stock as such shall have no right or claim to any of the remaining assets of the Corporation. (d) In the event the assets of the Corporation available for distribution to the holders of Series C Stock upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (a) of this Section 5, no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the Series C Stock upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the Series C Stock, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Series C Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (a) of this Section 5 before any payment shall be made to the holders of any class or series of capital stock of the Corporation ranking junior upon liquidation to the Series C Stock. 6. Sinking or Retirement Fund. The Series C Stock shall not be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such stock. 7. Rank For purposes of this paragraph 6(b) of Article Fourth, any stock of any class or classes of the Corporation shall be deemed to rank: (a) prior to the Series C Stock, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of Series C Stock; (b) on a parity with the Series C Stock, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payments dates or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of the Series C Stock, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of Series C Stock; and (c) junior to the Series C Stock, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of Series C Stock shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. -15- 8. As used in Parts I and II of this paragraph 6(b) of Article Fourth, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: (a) "'AA' Composite Commercial Paper Rate," on any date, shall mean (i) the interest equivalent of the 60-day rate on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by Standard & Poor's Corporation or its successor, or the equivalent of such rating by another rating agency, as such 60-day rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the immediately preceding Business Day prior to such date; or (ii) in the event that the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the interest equivalent of the 60-day rate on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Trust Company for the close of business on the immediately preceding Business Day prior to such date. If any Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Corporation does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. If the Board of Directors shall make the adjustment referred to in the proviso of the second sentence of subparagraph (b)(i) of Section 2 of this Part I, then (i) if the Dividend Period Days shall be 70 or more days but fewer than 85 days, such rate shall be the arithmetic average of the interest equivalent of the 60-day and 90-day rates on such commercial paper, and (ii) if the Dividend Period Days shall be 85 or more days but 98 or fewer days, such rate shall be the interest equivalent of the 90-day rate on such commercial paper. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis (a "discount rate") for commercial paper of a given day's maturity shall be equal to the quotient (rounded to the nearest one-thousandth (.001) of 1%) of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. (b) "Applicable Rate" shall have the meaning specified in subparagraph (c)(i) of Section 2 of this Part I. (c) "Auction" shall mean each periodic implementation of the Auction Procedures. (d) "Auction Procedures" shall mean the procedures for conducting Auctions set forth in Part II hereof. (e) "Board of Directors" shall mean the Board of Directors of the Corporation or (except with respect to paragraph (c) of Section 3 of this Part I) a duly authorized committee thereof. (f) "Business Day" shall mean a day on which the New York Stock Exchange, Inc. is open for trading and on which banks in The City of New York, New York or in Chicago, Illinois, are not authorized by law to close. -16- (g) "Code" shall mean the Internal Revenue Code of 1986. (h) "Commercial Paper Dealers" shall mean Goldman, Sachs & Co., and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc. and Lehman Commercial Paper Incorporated or, in lieu of any thereof, their respective affiliates or successors. (i) "Date of Original Issue" shall mean the date on which the Corporation originally issues shares of Series C Stock. (j) "Dividend Payment Date" shall have the meaning specified in subparagraph (b)(i) of Section 2 of this Part I. (k) "Dividend Period" and "Dividend Periods" shall have the respective meanings specified in subparagraph (c)(i) of Section 2 of this Part I. (l) "Dividend Period Days" shall have the meaning specified in subparagraph (b)(i) of Section 2 of this Part I. (m) "Holder" shall mean a holder of shares of Series C Stock as such holder's name appears on the stock register of the Corporation. (n) "Initial Dividend Payment Date" shall have the meaning specified in subparagraph (b)(i) of Section 2 of this Part I. (o) "Initial Dividend Period" shall have the meaning specified in subparagraph (c)(i) of Section 2 of this Part I. (p) "Paying Agent" shall mean a bank or trust company appointed as such by a resolution of the Board of Directors. (q) "Rate Adjustment Event" shall mean any failure by the Corporation to pay (i) to the Paying Agent on or within three Business Days after any Dividend Payment Date the full amount of any dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on any share of Series C Stock or (ii) to the Redemption Agent on or within three Business Days after any redemption date the redemption price to be paid on such redemption date, plus an amount equal to the accrued and unpaid dividends thereon (whether or not earned or declared) to such redemption date, of any share of Series C Stock. (r) "Redemption Agent" shall mean a bank or trust company appointed as such by a resolution of the Board of Directors. (s) "Redemption Deposit Amount" shall mean the product of (i) the number of outstanding shares of Series C Stock to be redeemed times (ii) an amount equal to the applicable redemption price plus an amount equal to accrued and unpaid dividends (whether or not earned or declared) to the date fixed for redemption. (t) "Subsequent Dividend Period" and "Subsequent Dividend Periods" shall have the respective meanings specified in subparagraph (c)(i) of Section 2 of this Part I. -17- (u) "Substitute Commercial Paper Dealer" shall mean The First Boston Corporation or Morgan Stanley & Co. Incorporated, or their respective affiliates or successors; provided that neither such dealer nor any of its affiliates shall be a Commercial Paper Dealer. (v) "Trust Company" shall mean a bank or trust company appointed as such by a resolution of the Board of Directors. PART II 1. Certain Definitions. Capitalized terms not defined in this Section I shall have the respective meanings specified in Part I of this paragraph 6(b) of Article Fourth. As used in this Part II, the following terms shall have the following meanings, unless the context otherwise requires: (a) "'AA' Rate Multiple," on any Auction Date, shall mean the percentage determined as set forth below based on the prevailing rating of the Series C Stock in effect at the close of business on the Business Day immediately preceding such Auction Date: Prevailing Rating Percentage ----------------- ---------- AA/aa or Above 110% A/a 120% BBB/baa 130% Below BBB/Baa 175% For purposes of this definition, the "prevailing rating" of the Series C Stock shall be (i) AA/aa or Above, if the Series C Stock has a rating of AA- or better by Standard & Poor's Corporation or its successor ("S&P") or aa3 or better by Moody's Investors Service, Inc. or its successor ("Moody's"), or the equivalent of either or both of such ratings by a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not AA/aa or Above, then A/a, if the Series C Stock has a rating of A- or better and lower than AA- by S&P or a3 or better and lower than aa3 by Moody's or the equivalent of either or both of such ratings by a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not AA/aa or Above or A/a, then BBB/baa, if the Series C Stock has a rating of BBB- or better and lower than A- by S&P or baa3 or better and lower than a3 by Moody's or the equivalent of either or both of such ratings by a substitute rating agency or substitute rating agencies selected as provided below and (iv) if not AA/aa or Above, A/a or BBB/baa, then Below BBB/baa. The Corporation shall take all reasonable action necessary to enable S&P and Moody's to provide a rating for the Series C Stock. If S&P or Moody's or both shall not make such a rating available, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated or their successors shall select a nationally recognized securities rating agency or two nationally recognized securities rating agencies to act as substitute rating agency or substitute rating agencies, as the case may be. (b) "Affiliate" shall mean any Person known to the Trust Company to be controlled by, in control of or under common control with the Corporation. -18- (c) "Agent Member" shall mean the member of the Securities Depository that will act on behalf of a Bidder and is identified as such in such Bidder's Purchaser's Letter. (d) "Auction" shall mean the periodic implementation of the procedures set forth in this Part II. (e) "Auction Date" shall mean the Business Day next preceding a Dividend Payment Date. (f) "Available Series C Stock" shall have the meaning specified in paragraph (a) of Section 4 of this Part II. (g) "Bid" and "Bids" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (h) "Bidder" and "Bidders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (i) "Broker-Dealer" shall mean any broker-dealer, or other entity permitted by law to perform the function required of a Broker-Dealer in this Part II, that is a member of, or a participant in, the Securities Depository, and that has been selected by the Corporation and has entered into a Broker-Dealer Agreement with the Trust Company that remains effective. (j) "Broker-Dealer Agreement" shall mean an agreement between the Trust Company and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in this Part II. (k) "Existing Holder," when used with respect to shares of Series C Stock, shall mean a Person who has signed a Purchaser's Letter and is listed as the beneficial owner of such shares of Series C Stock in the records of the Trust Company. (l) "Hold Order" and "Hold Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (m) "Maximum Rate," on any Auction Date, shall mean the product of the "AA" Composite Commercial Paper Rate times the "AA" Rate Multiple. (n) "Order" and "Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (o) "Outstanding" shall mean, as of any date, shares of Series C Stock theretofore issued by the Corporation except, without duplication, (i) any shares of Series C Stock theretofore canceled or delivered to the Trust Company for cancellation or redeemed by the Corporation or as to which the Corporation shall have published a notice of redemption or irrevocably authorized and directed the Redemption Agent to begin and promptly complete such publication of notice, and deposited in trust with the Redemption Agent funds necessary for such redemption in accordance with this Restated Certificate of Incorporation, (ii) any shares of Series C Stock as to which the Corporation or any Affiliate thereof (other than a Broker-Dealer Affiliate) shall be an Existing Holder and (iii) -19- any shares of Series C Stock represented by any certificate in lieu of which a new certificate has been executed and delivered by the Corporation. (p) "Person" shall mean and include an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. (q) "Potential Holder" shall mean any Person, including any Existing Holder, (i) who shall have executed a Purchaser's Letter and (ii) who may be interested in acquiring shares of Series C Stock (or, in the case of an Existing Holder, additional shares of Series C Stock). (r) "Purchaser's Letter" shall mean a Master Purchaser's Letter, the form of which is attached hereto, addressed to the Corporation, the Trust Company and an Agent Member in which a Person agrees, among other things, to offer to purchase, to purchase, to offer to sell and/or to sell shares of Series C Stock as set forth in this Part II, or a similar letter containing substantially the same information and representations, or such other letter as the Board of Directors shall approve. (s) "Securities Depository" shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Corporation which agrees to follow the procedures required to be followed by such securities depository in connection with shares of Series C Stock. (t) "Sell Order" and "Sell Orders" shall have the respective meanings specified in paragraph (a) of Section (2) of this Part II. (u) "Submission Deadline" shall mean 12:30 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Trust Company as specified by the Trust Company from time to time. (v) "Submitted Bid" and "Submitted Bids" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (w) "Submitted Hold Order" and "Submitted Hold Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (x) "Submitted Order" and "Submitted Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (y) "Submitted Sell Order" and "Submitted Sell Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (z) "Sufficient Clearing Bids" shall have the meaning specified in paragraph (a) of Section 4 of this Part II. (aa) "Winning Bid Rate" shall have the meaning specified in paragraph (a) of Section 4 of this Part II. -20- 2. Orders by Existing Holders and Potential Holders. (a) On or prior to the Submission Deadline on each Auction Date: (i) each Existing Holder may submit to a Broker-Dealer information as to: (A) the number of Outstanding shares, if any, of Series C Stock held by such Existing Holder with such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period; (B) the number of Outstanding shares, if any, of Series C Stock that such Existing Holder desires to continue to hold if the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Existing Holder; and/or (C) the number of Outstanding shares, if any, of Series C Stock held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and (ii) one or more Broker-Dealers, using lists of Potential Holders, shall in good faith for the purpose of conducting a competitive Auction in a commercially reasonable manner, contact Potential Holders, including Persons that are not Existing Holders, on such lists to determine the number of shares, if any, of Series C Stock which each such Potential Holder offers to purchase, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Potential Holder. For the purposes hereof, the communication to a Broker-Dealer of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this paragraph (a) is hereinafter referred to as an "Order" and collectively as "Orders" and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a "Bidder" and collectively as "Bidders"; an Order containing the information referred to in clause (i)(A) of this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively as "Hold Orders"; an Order containing the information referred to in clause (i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and collectively as "Bids"; and an Order containing the information referred to in clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell Order" and collectively as "Sell Orders." (b)(i) A Bid by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of Series C Stock specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than such specified rate; or (B) such number or a lesser number of Outstanding shares of Series C Stock to be determined as set forth in subparagraph (a)(iv) of Section 5 of this Part II if the Applicable Rate determined on such Auction Date shall be equal to such specified rate; or -21- (C) a lesser number of Outstanding shares of Series C Stock to be determined as set forth in paragraph (b)(iii) of Section 5 of this Part II if such specified rate shall be higher than the Maximum Rate and Sufficient Clearing Bids do not exist. (ii) A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of Series C Stock specified in such Sell Order; or (B) such number or a lesser number of Outstanding shares of Series C Stock as set forth in subparagraph (b)(iii) of Section 5 of this Part II if Sufficient Clearing Bids do not exist. (iii) A Bid by a Potential Holder shall constitute an irrevocable offer to purchase: (A) the number of Outstanding shares of Series C Stock specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than such specified rate; or (B) such number or a lesser number of Outstanding shares of Series C Stock as set forth in subparagraph (a)(v) of Section 5 of this Part II if the Applicable Rate determined on such Auction Date shall be equal to such specified rate. 3. Submission of Orders by Broker-Dealers to Trust Company. (a) Each Broker-Dealer shall submit in writing to the Trust Company prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specifying with respect to each Order: (i) the name of the Bidder placing such Order; (ii) the aggregate number of shares of Series C Stock that are the subject of such Order; (iii) to the extent that such Bidder is an Existing Holder: (A) the number of shares, if any, of Series C Stock subject to any Hold Order placed by such Existing Holder; (B) the number of shares, if any, of Series C Stock subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and (C) the number of shares, if any, of Series C Stock subject to any sell Order placed by such Existing Holder; and (iv) to the extent such Bidder is a Potential Holder, the rate specified in such Potential Holder's Bid. -22- (b) If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Trust Company shall round such rate up to the next highest one thousandth (.001) of 1%. (c) If an Order or Orders covering all of the Outstanding shares of Series C Stock held by any Existing Holder is not submitted to the Trust Company prior to the Submission Deadline, the Trust Company shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding shares of Series C Stock held by such Existing Holder and not subject to Orders submitted to the Trust Company. (d) If one or more Orders covering in the aggregate more than the number of Outstanding shares of Series C Stock held by any Existing Holder are submitted to the Trust Company, such Orders shall be considered valid as follows and in the following order of priority: (i) all Hold Orders shall be considered valid, but only up to and including in the aggregate the number of shares of Series C Stock held by such Existing Holder, and, solely for purposes of allocating compensation among the Broker-Dealers submitting Hold Orders, if the number of shares of Series C Stock subject to such Hold Orders exceeds the number of shares of Series C Stock held by such Existing Holder, the number of shares subject to each Hold Order shall be reduced pro rata to cover the number of shares of Series C Stock held by such Existing Holder; (ii)(A) any Bid shall be considered valid up to and including the excess of the number of Outstanding shares of Series C Stock held by such Existing Holder over the number of shares of Series C Stock subject to any Hold Order referred to in subparagraph (i) above; (B) subject to clause (A), if more than one Bid with the same rate is submitted on behalf of such Existing Holder and the number of shares of Series C Stock subject to such Bids is greater than such excess, such Bids shall be considered valid up to the amount of such excess, and, solely for purposes of allocating compensation among the Broker- Dealers submitting Bids with the same rate, the number of shares of Series C Stock subject to each Bid with the same rate shall be reduced pro rata to cover the number of shares of Series C Stock equal to such excess; (C) subject to clause (A), if more than one Bid with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in the ascending order of their respective rates up to the amount of such excess; and (D) in any such event the number, if any, of such shares subject to Bids not valid under this subparagraph (ii) shall be treated as the subject of a Bid by a Potential Holder; and (iii) all Sell Orders shall be considered valid but only up to and including in the aggregate the excess of the number of Outstanding shares of Series C Stock held by such Existing Holder over the sum of the shares of Series C Stock subject to Hold Orders referred to in subparagraph (i) and valid Bids by Existing Holders referred to in subparagraph (ii) above. -23- (e) If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate bid with the rate therein specified. 4. Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. (a) Not earlier than the Submission Deadline on each Auction Date, the Trust Company shall assemble all Orders submitted or deemed submitted to it by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders") and shall determine: (i) the excess of the total number of Outstanding shares of Series C Stock over the number of Outstanding shares of Series C Stock that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available Series C Stock"); (ii) from the Submitted Orders whether: (A) the number of Outstanding shares of Series C Stock that are the subject of Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the Maximum Rate exceeds or is equal to the sum of: (I) the number of Outstanding shares of Series C Stock that are the subject of Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Rate, and (II) the number of Outstanding shares of Series C Stock that are subject to Submitted Sell Orders (in the event of such excess or such equality (other than because the sum of the number of shares of Series C Stock in clauses (I) and (II) above is zero because all of the Outstanding shares of Series C Stock are the subject of Submitted Hold Orders), such Submitted Bids in clause (A) above being hereinafter referred to collectively as "Sufficient Clearing Bids"); and (iii) if Sufficient Clearing Bids exist, the lowest rate specified in the Submitted Bids (the "Winning Bid Rate") which if: (A)(I) each Submitted Bid from Existing Holders specifying such lowest rate and (II) all other Submitted Bids from Existing Holders specifying lower rates were accepted, thus entitling such Existing Holders to continue to hold the shares of Series C Stock that are the subject of such Submitted Bids; and (B)(I) each Submitted Bid from Potential Holders specifying such lowest rate and (II) all other Submitted Bids from Potential Holders specifying lower rates were accepted, thus entitling the Potential Holders to purchase the shares of Series C Stock that are the subject of those Submitted Bids, -24- would result in such Existing Holders described in clause (A) continuing to hold an aggregate number of Outstanding shares of Series C Stock which, when added to the number of Outstanding shares of Series C Stock to be purchased by such Potential Holders described in clause (B), would equal not less than the Available Series C Stock. (b) Promptly after the Trust Company has made the determinations pursuant to paragraph (a) of this Section 4, the Trust Company shall advise the Corporation of the "AA" Composite Commercial Paper Rate and the Maximum Rate and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows: (i) if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate so determined; (ii) if Sufficient Clearing Bids do not exist (other than because all of the Outstanding shares of Series C Stock are the subject of Submitted Hold Orders), that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Maximum Rate; or (iii) if all the Outstanding shares of Series C Stock are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall be equal to 59% of the "AA" Composite Commercial Paper Rate. 5. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. Based on the determinations made pursuant to paragraph (a) of Section 4 of this Part II, the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Trust Company shall take such other action as set forth below: (a) If Sufficient Clearing Bids have been made, subject to the provisions of paragraphs (c), (d) and (e) of this Section 5, Submitted Bids and Submitted Sell Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected: (i) the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate that is higher than the Winning Bid Rate shall be rejected, thus requiring each such Existing Holder to sell the shares of Series C Stock that are the subject of such Submitted Bid; (ii) the Submitted Bid of each of the Existing Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted, thus entitling each such Existing Holder to continue to hold the shares of Series C Stock that are the subject of each Submitted Bid; (iii) the Submitted Bid of each of the Potential Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted; (iv) the Submitted Bid of each of the Existing Holders specifying a rate that is equal to the Winning Bid Rate shall be accepted, thus entitling each such Existing Holder -25- to continue to hold the shares of Series C Stock that are the subject of such Submitted Bid, unless the number of Outstanding shares of Series C Stock subject to all such Submitted Bids shall be greater than the number of shares of Series C Stock ("remaining shares") equal to the excess of the Available Series C Stock over the number of shares of Series C Stock subject to Submitted Bids described in subparagraphs (ii) and (iii) of this paragraph (a), in which event the Submitted Bids of each such Existing Holder shall be rejected, and each such Existing Holder shall be required to sell shares of Series C Stock, but only in an amount equal to the difference between (A) the number of Outstanding shares of Series C Stock then held by such Existing Holder subject to such Submitted Bid and (B) the number of shares of Series C Stock obtained by multiplying the number of remaining shares by a fraction the numerator of which shall be the number of Outstanding shares of Series C Stock held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of Series C Stock subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate; and (v) the Submitted Bid of each of the Potential Holders specifying a rate that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of shares of Series C Stock obtained by multiplying the difference between the Available Series C Stock and the number of shares of Series C Stock subject to Submitted Bids described in subparagraphs (ii), (iii) and (iv) of this paragraph (a) by a fraction the numerator of which shall be the number of Outstanding shares of Series C Stock subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of Series C Stock subject to such Submitted Bids made by all such Potential Holders that specified a rate equal to the Winning Bid Rate. (b) If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of Series C Stock are subject to Submitted Hold Orders), subject to the provisions of paragraphs (c), (d) and (e) of this Section 5, Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected: (i) the Submitted Bid of each Existing Holder specifying any rate that is equal to or lower than the Maximum Rate shall be accepted, thus entitling such Existing Holder to continue to hold the shares of Series C Stock that are the subject of such Submitted Bid; (ii) the Submitted Bid of each Potential Holder specifying any rate that is equal to or lower than the Maximum Rate shall be accepted; and (iii) the Submitted Bids of each Existing Holder specifying any rate that is higher than the Maximum Rate shall be rejected and the Submitted Sell Orders of each Existing Holder shall be accepted, in both cases only in an amount equal to the difference between (A) the number of Outstanding shares of Series C Stock then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (B) the number of shares of Series C Stock obtained by multiplying the difference between the Available Series C Stock and the aggregate number of shares -26- of Series C Stock subject to Submitted Bids described in subparagraphs (i) and (ii) of this paragraph (b) by a fraction the numerator of which shall be the number of Outstanding shares of Series C Stock held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the number of Outstanding shares of Series C Stock subject to all such Submitted Bids and Submitted Sell Orders. (c) If all of the Outstanding shares of Series C Stock are the subject of Submitted Hold Orders, all Submitted Bids shall be rejected. (d) If, as a result of the procedures described in paragraph (a) or (b) of this Section 5, any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a share of Series C Stock on any Auction Date, the Trust Company, in such manner as it shall determine in its sole discretion, shall round up or down the number of shares of Series C Stock to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that the number of shares purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole shares of Series C Stock. (e) If, as a result of the procedures described in paragraph (a) of this Section 5, any Potential Holder would be entitled or required to purchase less than a whole share of Series C Stock on any Auction Date, the Trust Company, in such manner as it shall determine in its sole discretion, shall allocate shares for purchase among Potential Holders so that only whole shares of Series C Stock are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing shares of Series C Stock on such Auction Date. (f) Based on the results of each Auction, the Trust Company shall determine the aggregate number of shares of Series C Stock to be purchased and the aggregate number of shares of Series C Stock to be sold by Potential Holders and Existing Holders on whose behalf each Broker-Dealer submitted Bids or Sell Orders and, with respect to each Broker-Dealer, to the extent that such aggregate number of shares to be purchased and such aggregate number of shares to be sold differ, determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, shares of Series C Stock. 6. Miscellaneous. (a) The Board of Directors may interpret the provisions of this Part II to resolve any inconsistency or ambiguity which may arise or be revealed in connection with the Auction Procedures provided for herein, and if such inconsistency or ambiguity reflects an inaccurate provision hereof, the Board of Directors may, in appropriate circumstances, authorize the filing of a Certificate of Correction or Certificate of Amendment. (b) So long as the Applicable Rate is based on the results of an Auction, an Existing Holder (i) may sell, transfer or otherwise dispose of shares of Series C Stock only pursuant to a Bid or Sell Order in accordance with the procedures described in this Part II or to or through a Broker-Dealer or to a Person that has delivered a signed copy of a Purchaser's Letter to the Trust Company, provided that in the case of all transfers other than pursuant to Auctions such Existing Holder or -27- its Broker-Dealer advises the Trust Company of such transfer, and (ii) shall have the ownership of the shares of Series C Stock held by it maintained in book entry form by the Securities Depository in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. (c) Neither the Corporation nor any affiliate thereof may submit an Order in any Auction. Any Broker-Dealer that is an affiliate of the Corporation may not submit Bids to purchase shares of Series C Stock in Auctions for its own account, and if such affiliated Broker-Dealer has otherwise acquired shares for its own account, it must submit a Sell Order in the next Auction with respect to such shares. (d) The Trust Company shall reject any Submitted Order of the Corporation or an Affiliate, except for Sell Orders of affiliated Broker-Dealers. (e) From and after the occurrence of a Rate Adjustment Event, shares of Series C Stock shall be registered for transfer or exchange and new certificates issued upon surrender of the old certificates deemed by the Trust Company (or any other transfer agent or registrar appointed by the Corporation) properly endorsed for transfer with all necessary endorsers' signatures guaranteed in such manner and form as the Trust Company (or such other transfer agent or registrar) may require by a guarantor reasonably believed by the Trust Company (or such other transfer agent or registrar) to be responsible, accompanied by such assurances as the Trust Company (or such other transfer agent or registrar) shall deem necessary or appropriate to evidence the genuineness and effectiveness of each necessary endorsement and satisfactory evidence of compliance with all applicable laws relating to the collection of taxes or funds necessary for the payment of such taxes. -28- TO BE SUBMITTED TO YOUR BROKER-DEALER WHO WILL THEN DELIVER COPIES ON YOUR BEHALF TO THE RESPECTIVE TRUST COMPANIES. Master Purchaser's Letter Relating to Securities Involving Rate Settings through Auctions To: The Corporation The Trust Company A Broker-Dealer An Agent Member Other Persons 1. This letter is designed to apply to auctions for publicly or privately offered debt or equity securities ("Securities") of any issuer ("Corporation") which are described in any final prospectus or other offering materials relating to such Securities as the same may be amended or supplemented (collectively, with respect to the particular Securities concerned, the "Prospectus") and which involve periodic rate settings through auctions ("Auctions"). This letter shall be for the benefit of any Corporation and of any trust company or auction agent (collectively, "trust company"), broker-dealer, agent member, securities depository or other interested person in connection with any Securities and related Auctions (it being understood that such persons may be required to execute specified agreements and nothing herein shall alter such requirements). The terminology used herein is intended to be general in its application and not to exclude any Securities in respect of which (in the Prospectus or otherwise) alternative terminology is used. 2. We may from time to time offer to purchase, purchase, offer to sell and/or sell Securities of any Corporation as described in the Prospectus relating thereto. We agree that this letter shall apply to all such purchases, sales and offers and to Securities owned by us. We understand that the dividend/interest rate on Securities may be based from time to time on the results of Auctions as set forth in the Prospectus. 3. We agree that any bid or sell order, placed by us shall constitute an irrevocable offer by us to purchase or sell the Securities subject to such bid or sell order, or such lesser amount of Securities as we shall be required to sell or purchase as a result of such Auction, at the applicable price, all as set forth in the Prospectus, and that if we fail to place a bid or sell order with respect to Securities owned by us with a broker-dealer on any auction date, or a broker-dealer to which we communicate a bid or sell order fails to submit such bid or sell order to the trust company concerned, we shall be deemed to have placed a hold order with respect to such Securities as described in the Prospectus. We authorize any broker-dealer that submits a bid or sell order as our agent in Auctions to execute contracts for the sale of Securities covered by such bid or sell order. We recognize that the payment by such broker-dealer for Securities purchased on our behalf shall not relieve us of any liability to such broker-dealer for payment for such Securities. 4. We agree that, during the applicable period as described in the Prospectus, dispositions of Securities can be made only in the denominations set forth in the Prospectus and we will sell, transfer or otherwise dispose of any Securities held by us from time to time only pursuant to a bid or sell order placed in an Auction, to or through a broker-dealer or, when permitted in the Prospectus, to a person that has signed and delivered, or caused to be delivered on its behalf, to the applicable trust company a letter substantially in the form of this letter (or -29- other applicable purchaser's letter), provided that in the case of all transfers other than pursuant to Auctions we or our broker-dealer or our agent member shall advise such trust company of such transfer. We understand that a restrictive legend will be placed on certificates representing the Securities and stop-transfer instructions will be issued to the transfer agent and/or registrar, all as set forth in the Prospectus. We agree to comply with any other transfer restrictions or other related procedures as described in the Prospectus. 5. We agree that, during the applicable period as described in the Prospectus, ownership of Securities shall be represented by a global certificate registered in the name of the applicable securities depository or its nominee, that we will not be entitled to receive any certificate representing the Securities and that our ownership of any Securities will be maintained in book entry form by the securities depository for the account of our agent member, which in turn will maintain records of our beneficial ownership. We authorize and instruct our agent member to disclose to the applicable trust company such information concerning our beneficial ownership of Securities as such trust company shall request. 6. We acknowledge that partial deliveries of Securities purchased in Auctions may be made to us and such deliveries shall constitute good delivery as set forth in the Prospectus. 7. This letter is not a commitment by us to purchase any Securities. 8. This letter supersedes any prior-dated version of this master purchaser's letter, and supplements any prior- or post-dated purchaser's letter specific to particular Securities; any recipient of this letter may rely upon it until such recipient has received a signed writing amending or revoking this letter. 9. The descriptions of Auction procedures set forth in each applicable Prospectus are incorporated by reference herein and, in case of any conflict between this letter and any such description, such description shall control. 10. Any xerographic or other copy of this letter shall be deemed of equal effect as a signed original. 11. Our agent member of the securities depository currently is ______________. 12. Our personnel authorized to place orders with broker-dealers for the purposes set forth in the Prospectus in Auctions currently is/are ______________ _________________ telephone number (____) ____________. 13. Our taxpayer identification number is _________________________. -30- 14. This letter is continued on the reverse hereof and the provisions there set forth pertaining to privately offered Securities shall have the same effect as if set forth at this place. Dated:_________________________________ _____________________________________ Mailing Address of Purchaser: (Name of Purchasers) _______________________________________ By:__________________________________ _______________________________________ Printed Name:________________________ _______________________________________ Title:_______________________________ 15. In the case of each offer to purchase, purchase, offer to sell or sale by us of Securities not registered under the Securities Act of 1933, as amended (the "Act"), we represent and agree as follows: A. We understand and expressly acknowledge that the Securities have not been and will not be registered under the Act and, accordingly, that the Securities may not be reoffered, resold or otherwise pledged, hypothecated or transferred unless an applicable exemption from the registration requirements of the Act is available. B. We hereby confirm that any purchase of Securities made by us will be for our own account, or for the account of one or more parties for which we are acting as trustee or agent with complete investment discretion and with authority to bind such parties, and not with a view to any public resale or distribution thereof. We and each other party for which we are acting which will acquire Securities will be "accredited investors" within the meaning of Regulation D under the Act with respect to the Securities to be purchased by us or such party, as the case may be, will have previously invested in similar types of instruments and will be able and prepared to bear the economic risks of investing in and holding such Securities. C. We acknowledge that prior to purchasing any Securities we shall have received a Prospectus (private placement memorandum) with respect thereto and acknowledge that we will have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Corporation and receive answers thereto, as we deem necessary in connection with our decision to purchase Securities. D. We recognize that the Corporation and broker-dealers will rely upon the truth and accuracy of the foregoing investment representations and agreements, and we agree that each of our purchases of Securities now or in the future shall be deemed to constitute our concurrence in all of the foregoing which shall be binding on us and each party for which we are acting as set forth in Subparagraph B above. (c) Flexible Auction Preferred Stock, Series D -31- PART I 1. Designation. The designation of said series of Preferred Stock shall be Flexible Auction Preferred Stock, Series D (the "Series D Stock"). The number of shares of Series D Stock shall be 600. The stated value of the Series D Stock shall be $100,000 per share. 2. Dividends. (a) The Holders (as defined in Section 9 of this Part I) shall be entitled to receive, when, as and if declared by the Board of Directors (as defined in Section 9 of this Part I) out of funds legally available therefor, cumulative cash dividends, at the Applicable Rate (as defined in clause (c)(i)(A) of this Section 2) per annum, determined as set forth below, and no more, payable on the respective dates set forth below. (b)(i) Dividends on shares of Series D Stock shall accrue at the Applicable Rate from the Date of Original Issue (as defined in Section 9 of this Part I). (b)(ii) Accrued dividends on the shares of the Series D Stock shall be payable commencing on August 15, 1990. Thereafter, dividends on the Series D Stock for a Short-Term Dividend Period (as defined in subparagraph (b)(vi) of this Section 2) shall be payable on the last day of such Short-Term Dividend Period. Dividends on the shares of Series D Stock for a Long-Term Dividend Period (as defined in subparagraph (b)(vi) of this Section 2) shall be payable on the last day of such Long-Term Dividend Period and, if occurring prior to the last day of such Long-Term Dividend Period, on the first day of the fourth month after the commencement of such Long-Term Dividend Period and quarterly thereafter on the first day of each succeeding third month. Each day on which dividends would be payable as determined as set forth in this subparagraph (ii) but for the provisions set forth in subparagraph (b)(iii) of this paragraph 2 is referred to herein as a "Normal Dividend Payment Date." (b)(iii) Notwithstanding the preceding subparagraph (ii) of this paragraph (b), if: (A)(1) the Securities Depository (as defined in Section 9 of this Part I) shall not have advised the Trust Company (as defined in Section 9 of this Part I) at least five Business Days prior to a Dividend Payment Date that it will make available to its participants and members on Dividend Payment Dates, in funds immediately available in New York City, the amount due as dividends on such Dividend Payment Dates, and (2)(X) a Normal Dividend Payment Date is not a Business Day (as defined in Section 9 of this Part I) or (Y) the day next succeeding such Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day preceding such Normal Dividend Payment Date that is next succeeded by a Business Day; or (B)(1) the Securities Depository shall have advised the Trust Company at least five Business Days prior to such Dividend Payment Date that it will make available to its participants and members on Dividend Payment Dates, in funds immediately available in New York City, the amount due as dividends on such -32- Dividend Payment Dates and (2) a Normal Dividend Payment Date is not a Business Day, then Dividends shall be payable on the first Business Day after such Normal Dividend Payment Date; (b)(iv) Notwithstanding the foregoing, if the date on which dividends on the shares of the Series D Stock would be payable as determined as set forth in subparagraphs (ii) and (iii) of this paragraph (b) is a day that would result in the number of days between successive Auction Dates (as defined in Section 9 of this Part I) for the Series D Stock (determined by including the first Auction Date and excluding the second Auction Date) not being at least equal to the then current Minimum Holding Period (as defined below), then dividends on such shares shall be payable, if clause (iii) (A) above would be applicable to the Series D Stock, on the first Business Day following such date on which dividends would be so payable that is next succeeded by a Business Day or, if clause (iii)(B) above would be applicable to the Series D Stock, on the first Business Day following such day on which dividends would be so payable, that in either case results in the number of days between such successive Auction Dates for the Series D Stock (determined as set forth above) being at least equal to the then current Minimum Holding Period. In addition, notwithstanding the foregoing, the Board of Directors, in the event of a change in law lengthening the minimum holding period (the "Minimum Holding Period") (currently found in Section 246(c) of the Code (as defined in Section 9 of this Part I) required for taxpayers to be entitled to the dividends-received deduction on Preferred Stock held by nonaffiliated corporations (currently found in Section 243(a) of the Code), shall adjust the period of time between Dividend Payment Dates (as hereinafter defined) so as, subject to clauses (A) and (B) of subparagraph (b)(iii), to adjust uniformly the number of Dividend Period Days (as defined in Section 9 of this Part I) in Short-Term Dividend Periods (as defined in subparagraph (b)(vi) of this Section 2) commencing after the date of such change in law to exceed the new Minimum Holding Period, provided that the number of Dividend Period Days shall not exceed by more than nine days the length of such new Minimum Holding Period and in no event shall exceed 98 days and shall consist of a whole number of weeks. (b)(v) Each date on which dividends on the shares of the Series D Stock shall be payable as determined as set forth above shall be referred to herein as a "Dividend Payment Date" and the first Dividend Payment Date shall be referred to herein as the "Initial Dividend Payment Date." If applicable, the period from the preceding Dividend Payment Date to and including the next Dividend Payment Date for the Series D Stock during a Long-Term Dividend Period is herein referred to as a "Dividend Quarter." Although any particular Dividend Payment Date for the Series D Stock may not occur on the originally scheduled Normal Dividend Payment Date for the Series D Stock because of the foregoing provisions, each succeeding Dividend Payment Date for the Series D Stock shall be, subject to such provision, the date determined as set forth in subparagraph (ii) above as if each preceding Dividend Payment Date had occurred on the respective originally scheduled Normal Dividend Payment Date. (b)(vi) The period from and after the Date of Original Issue to and including the Initial Dividend Payment Date (the "Initial Dividend Period") for the shares of Series D Stock shall contain 48 Dividend Period Days. After the Initial Dividend Period for the Series D Stock, each subsequent Dividend Period for the Series D Stock (except for the adjustments for non-Business Days provided in subparagraph (iii) above) shall contain 49 Dividend Period Days (each such period, subject to any adjustment as a result of a change in law lengthening the Minimum Holding -33- Period as provided in subparagraph (iv) above, being referred to herein as a "Short-Term Dividend Period"), unless as provided in subparagraph (vii) below, the Term Selection Agent specifies that any such subsequent Dividend Period shall be a Dividend Period containing any specified number of Dividend Period Days greater than the number of Dividend Period Days in a Short-Term Dividend Period and containing a number of Dividend Period Days evenly divisible by seven (each such period being referred to herein as a "Long-Term Dividend Period," and each such Short-Term Dividend Period and Long-Term Dividend Period, together with the Initial Dividend Period (as defined in clause (c)(i)(A)), being referred to herein as a "Dividend Period"). After the Initial Dividend Period for the Series D Stock, each successive Dividend Period for the Series D Stock shall commence on the Dividend Payment Date ending the preceding Dividend Period and shall end (i) during a Short-Term Dividend Period, on the next Dividend Payment Date for the Series D Stock and (ii) during a Long-Term Dividend Period, on the last day of the Long-Term Dividend Period specified by the Term Selection Agent in the related notice of Long-Term Dividend Period. (b)(vii) Not less than 10 and not more than 20 days prior to the date of an Auction (as defined in Section 9 of this Part I) for the Series D Stock and based on the criteria set forth below, the Term Selection Agent may give telephonic and written notice to the Corporation, the Trust Company, the Paying Agent and the Securities Depository that the next succeeding Dividend Period for the Series D Stock will be longer than a Short-Term Dividend Period (a "Notice of Long-Term Dividend Period"). Such notice will specify the next succeeding Dividend Period for the Series D Stock as a Long-Term Dividend Period, which may be any period designated by the Term Selection Agent greater than the Short-Term Dividend Period and containing a number of Dividend Period Days evenly divisible by seven, provided that for any Auction occurring after the initial Auction for the Series D Stock, the Term Selection Agent may not give a Notice of Long-Term Dividend Period for the Series D Stock (and any such notice shall be null and void) unless Sufficient Clearing Bids were made in the last occurring Auction for the Series D Stock and full cumulative dividends for the Series D Stock payable prior to the date of Notice of Long-Term Dividend Period have been paid in full. The Term Selection Agent shall state in each Notice of Long-Term Dividend Period (i) that the next succeeding Dividend Period for the Series D Stock shall be a Long-Term Dividend Period, (ii) the term thereof and (iii) the redemption provisions applicable for such Long-Term Dividend Period. The Term Selection Agent may establish a Long-Term Dividend Period, and, subject to the provisions of Section 4 of this paragraph 6(c) of Article Fourth, the applicable redemption provisions therefor, for the shares of the Series D Stock if the Term Selection Agent determines that such Long-Term Dividend Period and such redemption provisions, in its sole opinion, provide the Corporation with the most favorable financing alternative based upon the following: (i) short-term and long-term market rates and indices of such short-term and long-term rates, (ii) the amounts, maturities and interest or dividend rates on the then outstanding securities of the Corporation or its subsidiaries, (iii) market supply and demand for short-term and long-term securities, (iv) yield curves for short-term and long-term securities comparable to the shares of the Series D Stock, (v) industry and financial conditions which may affect the shares of the Series D Stock including the Term Selection Agent's expectations with respect thereto, (vi) current tax laws and administrative interpretations with respect thereto, (vii) the number of shares of the Series D Stock Outstanding on the next Auction Date and (viii) the number of potential purchasers. Any Notice of Long-Term Dividend Period may be revoked by the Term Selection Agent on or prior to the second Business Day prior to the related Auction by telephonic and written notice (a "Notice of Revocation") to the Corporation, the Trust Company, the Paying Agent and the Securities Depository, specifying that the Term Selection Agent has determined that because of subsequent changes in any of the foregoing factors, such Long-Term Dividend Period would not result in the -34- most favorable financing alternative for the Corporation, and shall be deemed to have been revoked if on or prior to the second Business Day prior to the related Auction, the Term Selection Agent shall have been removed and the Corporation shall have given written and telephonic notice of such removal ("Notice of Removal") to the Trust Company, the Paying Agent and the Securities Depository. Except with respect to a Notice of Long-Term Dividend Period that is deemed to be revoked, any Long-Term Dividend Period specified by the Term Selection Agent for the Series D Stock and any revocation thereof shall be conclusive and binding on the Corporation and the Holders. The Corporation may remove the Term Selection Agent for the Series D Stock upon 5 days' written notice. If there is no Term Selection Agent with respect to any Dividend Period, then such Dividend Period shall be a Short-Term Dividend Period. If the Term Selection Agent does not give a Notice of Long-Term Dividend Period with respect to the next succeeding Dividend Period for the Series D Stock or gives a Notice of Revocation with respect thereto or such Notice of Long-Term Dividend Period shall be deemed to have been revoked, such next succeeding Dividend Period shall be a Short-Term Dividend Period. In addition, in the event the Term Selection Agent has given a Notice of Long-Term Dividend Period with respect to the next succeeding Dividend Period for the Series D Stock and has not given a Notice of Revocation with respect thereto and such Notice of Long-Term Dividend Period shall not have been deemed revoked, but Sufficient Clearing Bids are not made in the related Auction for the Series D Stock or such Auction is not held for any reason, such next succeeding Dividend Period shall, notwithstanding such Notice of Long-Term Dividend Period, be a Short-Term Dividend Period and the Term Selection Agent may not again give a Notice of Long-Term Dividend Period (and any such notice shall be null and void) for the Series D Stock until sufficient Clearing Bids have been made in an Auction with respect to a Short-Term Dividend Period for the Series D Stock. (b)(viii) As long as the Applicable Rate is based on the results of an Auction, the Corporation shall pay to the Paying Agent (as defined in Section 9 of this Part I) not later than 12:00 noon, New York City time, on the Business Day next preceding each Dividend Payment Date, an aggregate amount of funds available on the next Business Day in the City of New York, New York, equal to the dividends to be paid to all Holders on such Dividend Payment Date. All such moneys shall be held in trust for the payment of such dividends by the Paying Agent for the benefit of the Holders specified in subparagraph (ix) or this paragraph (b). (b)(ix) Each dividend shall be payable to the Holders as their names appear on the stock register of the Corporation on the Business Day next preceding the Dividend Payment Date thereof; provided, however, that if a Rate Adjustment Event (as defined in Section 9 of this Part I) shall have occurred and shall not have been cured by paying all accrued and unpaid dividends and unpaid redemption payments as provided in clause (c)(i)(B), such dividend shall be paid to such Holders as their names appear on the stock register of the Corporation on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holders as their names appear on the stock register of the Corporation on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors. -35- (c)(i)(A) The dividend rate of shares of Series D Stock shall be 6.55% per annum during the Initial Dividend Period. Commencing on the Initial Dividend Payment Date, the dividend rate on shares of Series D Stock for each subsequent dividend period (hereinafter referred to as a "Subsequent Dividend Period" and collectively as "Subsequent Dividend Periods") thereafter, which Subsequent Dividend Periods shall commence on the day that is the last day of the preceding Dividend Period and shall end on and include the next succeeding Dividend Payment Date, shall be equal to the rate per annum that results from implementation of the Auction Procedures (as defined in Section 9 of this Part I); provided, however, that in the event that an Auction for any Dividend Period is not held for any reason (other than as a result of the existence of a Rate Adjustment Event on the Auction Date for such Dividend Period), the dividend rate for such Dividend Period shall be the Non-Auction Rate on the Auction Date with respect to such Dividend Period. The "Non-Auction Rate" on an Auction Date shall be the greater of (x) the Applicable Rate in effect immediately prior to such Auction Date or (y) the Maximum Rate in effect on such Auction Date for a Short-Term Dividend Period, regardless of whether an Auction is held. The dividend rate for any Dividend Period or part thereof determined as set forth in this paragraph (c) is referred to herein as the "Applicable Rate" for such Dividend Period or part thereof. (c)(i)(B) In the event a Rate Adjustment Event occurs on a Dividend Payment Date and is not cured in accordance with the next succeeding sentence. Auctions will be suspended until such time as set forth below, and the Applicable Rate for each Dividend Period thereafter (until Auctions are resumed), including the Dividend Period commencing on the date of such Rate Adjustment Event, shall be equal to the Maximum Rate with respect to such Dividend Period (but, for purposes of determining such Maximum Rate, with the prevailing rating for the Series D Stock being deemed to be "Below ba3"/BB-" and the first day of such Dividend Period being deemed to be the Auction Date) and each such Dividend Period shall be a Short-Term Dividend Period. Any such Rate Adjustment Event shall be deemed cured if by 12:00 noon, New York City time, on the third Business Day next succeeding any such Rate Adjustment Event, the Corporation shall have deposited with the Trust Company all accumulated and unpaid dividends and any unpaid redemption payments, including the full amount of any dividends to be paid with respect to the Dividend Period with respect to which such Rate Adjustment Event occurred, plus an amount computed by multiplying (i) 250% of the 60-Day "AA" Composite Commercial Paper Rate on the date on which such Rate Adjustment Event occurred by (ii) a fraction, the numerator of which shall be the number of days for which such Rate Adjustment Event is not cured in accordance with this sentence (including the day such Rate Adjustment Event occurs and excluding the day such Rate Adjustment Event is cured) and the denominator of which shall be 360, and applying the rate obtained against the aggregate amount not paid when due. 9(c)(ii) In the event a Rate Adjustment Event occurs during a Long- Term Dividend Period, the Applicable Rate for such Dividend Period shall remain unchanged, and an additional amount computed by multiplying (i) the Maximum Rate with respect to such Dividend Period (but, for purposes of determining such Maximum Rate, with the prevailing rating for the Series D Stock being deemed to be "Below "ba3"/BB-" and the date of such Rate Adjustment Event being deemed to be the Auction Date) by (ii) a fraction, the numerator of which shall be the number of days for which such Rate Adjustment Event is not cured (including the day such Rate Adjustment Event occurs and excluding the day such Rate Adjustment Event is cured) and the denominator of which shall be 360, and applying the rate obtained against accumulated dividends and redemption payments not paid when due, shall accumulate as additional dividends on the shares of the Series D Stock. In the event that such Rate Adjustment Event is not cured prior to the next succeeding -36- Auction Date for shares of the Series D Stock, Auctions for the Series D Stock shall be suspended, the next succeeding Dividend Period shall be a Short-Term Dividend Period and the Applicable Rate shall be equal to the Maximum Rate with respect to such Dividend Period (but, for purposes of determining such Maximum Rate, with the prevailing rating for the Series D Stock being deemed to be "Below "ba3"/BB-" and the first day of such Dividend Period being deemed to be the Auction Date). Thereafter until such Rate Adjustment Event shall have been cured and full and cumulative dividends on the shares of the Series D Stock shall have been paid in full or the Board of Directors of the Corporation shall have declared a dividend in such amount and funds sufficient for the payment thereof shall have been irrevocably deposited with the Paying Agent, each subsequent Dividend Period and Applicable Rate for the Series D Stock will be determined pursuant to the next preceding paragraph. (c)(iii) If prior to an Auction Date for shares of the Series D Stock, full and cumulative dividends shall have been paid in full or the Board of Directors of the Corporation shall have declared a dividend in such amount and funds sufficient for the payment thereof shall have been irrevocably deposited with the Paying Agent, and any unpaid redemption payments shall have been made, Auctions for the Series D Stock will resume. (c)(iv) The amount of dividends per share accrued and payable on shares of Series D Stock for each Dividend Period or Dividend Quarter shall be computed by multiplying the Applicable Rate for such Dividend Period or Dividend Quarter by a fraction, the numerator of which shall be the number of Dividend Period Days in such Dividend Period or Dividend Quarter (calculated by counting the first day of such Dividend Period or Dividend Quarter but excluding the last day thereof), and the denominator of which shall be 360 and applying the rate obtained against $100,000; and the amount of dividends per share accrued for any part of any Dividend Period shall be computed by multiplying the Applicable Rate for such Dividend Period by a fraction the numerator of which shall be the number of days in such part of such Dividend Period (calculated by counting the first day thereof but excluding the last day thereof) and the denominator of which shall be 360 and applying the rate obtained against $100,000. (d)(i) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to the Series D Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series D Stock for all Dividend Periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the Series D Stock and any other Preferred Stock ranking on a parity as to dividends with the Series D Stock, all dividends declared upon the Series D Stock and any other Preferred Stock ranking on a parity as to dividends with the Series D Stock shall be declared pro rata so that the amount of dividends declared per share on the Series D Stock and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series D Stock and such other Preferred Stock bear to each other. Holders of Series D Stock shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of the full cumulative dividends, as herein provided, on the Series D Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payments on the Series D Stock which may be in arrears. (d)(ii) So long as any shares of Series D Stock are outstanding, no dividend (other than a dividend in Common Stock or in any other stock-ranking junior to Series D Stock as to -37- dividends and upon liquidation and other than as provided in subparagraph (i) of this paragraph (d)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with the Series D Stock as to dividends or upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with the Series D Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Series D Stock as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of Series D Stock shall have been paid for all past Dividend Periods. 3. Voting. (a) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of the Series D Stock and all other series of Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, at the time outstanding given in person or by proxy either in writing or by a vote at a meeting called for the purpose at which the holders of shares of Series D Stock and shares of Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of this Restated Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designations or any similar document relating to the Series D Stock or any series of Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation) which would adversely affect the powers, preferences, rights or privileges of the Series D Stock or the Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation; provided, however, that if any such amendment, alteration or repeal would adversely affect the powers, preferences, rights or privileges of the Series D Stock or one or more series of the Preferred Stock or ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, but shall not so affect the entire class, then only the shares of the one or more series so affected shall be considered to be a separate class entitled to vote upon or consent to such amendment, alteration or repeal; (b) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of the Series D Stock and all other series of Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Series D Stock and such other series of Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any class of stock of the Corporation ranking prior to the shares of the Series D Stock and such other series of Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; and -38- (c) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends on the Series D Stock or the Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, shall exist, the number of directors constituting the Board of Directors shall be increased by two, and the holders of the Series D Stock and the Preferred Stock of all series ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Series D Stock and the Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation. Each director elected by the holders of shares of Series D Stock and Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed without cause by, and shall not be removed without cause except by, the vote of the holders of record of the outstanding shares of Series D stock and Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Series D Stock and Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, called for that purpose. So long as a default in preference dividends on the Series D Stock or the Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation shall exist, (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Series D Stock and Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Series D Stock or the Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, shall be deemed to have occurred whenever the amount of accrued dividends upon the Series D Stock or any series of the Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, shall be equivalent to six full quarterly dividends (which, with respect to any Series D Stock providing for other than quarterly dividend periods, shall be deemed to be dividends in respect of a number of dividend periods containing not less than 540 days) or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Series D Stock and Preferred Stock ranking on a parity with the Series D Stock, either as to dividends or upon liquidation, of each and every series then outstanding shall have been paid to the end of the last preceding dividend period. 4. Redemption. (a)(i) The Series D Stock may be redeemed, at the option of the Corporation, as a whole or from time to time in part, (A) in the case of a Short-Term Dividend Period, on the -39- Dividend Payment Date for such period and (B) in the case of a Long-Term Dividend Period, on such Dividend Payment Dates as may be established by the Term Selection Agent as redemption dates, and on such other terms as may be established by the Term Selection Agent, such dates and other terms have been determined by the Term Selection Agent as the dates and terms which provide the Corporation with the most favorable financing alternatives, such determination to be based upon the factors listed in clauses (i)-(viii) of subparagraph 2(b) (vii) hereof at a redemption price of $100,000 per shares plus an amount equal to accrued and unpaid dividends thereon (whether or not earned or declared) to the date fixed for redemption. (a) (ii) If fewer than all of the outstanding shares of Series D Stock are to be redeemed pursuant to subparagraph (i) of this paragraph (a), the number of shares to be redeemed shall be determined by the Board of Directors, and such shares shall be redeemed pro rata from the Holders in proportion to the number of such shares held by such Holders (with adjustments to avoid redemption of fractional shares). (b) If the Corporation shall redeem shares of Series D Stock pursuant to paragraph (a) of this Section 4, notice of such redemption shall be given by mailing the same by first class mail, postage prepaid, not less than 30 nor more than 45 days prior to the date fixed for redemption thereof, to each Holder of the shares to be redeemed, at such Holder's address as the same appears on the stock register of the Corporation. Such notice shall state: (i) the redemption date; (ii) the number of shares of Series D Stock to be redeemed; (iii) the redemption price plus the amount of accrued and unpaid dividends to the redemption date; (iv) the place or places where certificates for such shares of Series D Stock are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. If fewer than all shares held by any Holder are to be redeemed, the notice mailed to such Holder shall also specify the number of shares to be redeemed from such Holder. (c) Notwithstanding the provisions of paragraph (a) of this Section 4, if any dividends on the Series D Stock are in arrears, no shares of Series D Stock shall be redeemed unless all outstanding shares of Series D Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of Series D Stock; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of Series D Stock pursuant to a purchase or exchange offer made on the same terms to Holders of all outstanding shares of Series D Stock. (d) If notice of redemption has been given under paragraph (b) of this Section 4 or the Corporation has irrevocably authorized and directed the Redemption Agent to begin promptly and complete such giving of notice, and the Corporation has deposited in trust with the Redemption Agent funds necessary for such redemption, from and after the later of the date of such notice or the date such deposit is made, the shares of Series D Stock called for redemption shall no longer be deemed to be outstanding, and all rights of the Holders thereof as stockholders of the Corporation (except the right to receive the redemption price plus an amount equal to the accrued and unpaid dividends thereon to the date fixed for redemption) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), the redemption price set forth above plus an amount equal to such accrued and unpaid dividends shall be paid by the Redemption Agent to the Holders of the shares of Series D Stock subject to redemption as set forth in paragraph (c) of this Section 4. In case fewer than all of the -40- shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the Holder thereof. (e) As long as the Applicable Rate is based on the results of an Auction, on the Business Day immediately preceding the date fixed for redemption, the Corporation shall pay the applicable Redemption Deposit Amount (as defined in Section 9 of this Part I) to the Redemption Agent, in funds available on the redemption date for disbursement to Holders as appropriate. All such moneys shall be held in trust by the Redemption Agent for the benefit of Holders of shares so to be redeemed. 5. Liquidation Rights. (a) Upon the dissolution, liquidation or winding up of the Corporation, the Holders of the Series D Stock shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Series D Stock upon liquidation, the amount of $100,000 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of the final distribution. (b) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section 5. (c) After the payment to the holders of the Series D Stock of the full preferential amounts provided for in this Section 5, the holders of Series D Stock as such shall have no right or claim to any of the remaining assets of the Corporation. (d) In the event the assets of the Corporation available for distribution to the holders of Series D Stock upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (a) of this Section 5, no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the Series D Stock upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the Series D Stock, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Series D Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (a) of this Section 5 before any payment shall be made to the holders of any class or series of capital stock of the Corporation ranking junior upon liquidation to the Series D Stock. 6. Sinking or Retirement Fund. -41- The Series D Stock shall not be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such stock. 7. Rank. For purposes of this paragraph 6(c) of Article Fourth, any stock of any class or classes of the Corporation shall be deemed to rank: (a) prior to the Series D Stock, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of Series D Stock; (b) on a parity with the Series D Stock, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of the Series D Stock, or if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of Series D Stock; and (c) junior to the Series D Stock, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of Series D Stock shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. 8. Additional Agreements. (a) Term Selection Agent. The Corporation shall use its best efforts to maintain a Term Selection Agent with respect to the Series D Stock to act in accordance with the provisions set forth herein. (b) Trust Company. The Corporation shall use its best efforts to maintain a Trust Company with respect to the Series D Stock to act in accordance with the provisions set forth herein. 9. As used in Parts I and II of this paragraph 6(c) of Article Fourth, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: (a) "60-day 'AA' Composite Commercial Paper Rate," on any date, shall mean (i) the interest equivalent of the 60-day rate on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by Standard & Poor's or its successor, or the equivalent of such rating by another rating agency, as such 60-day rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the immediately preceding Business Day prior to such date; or (ii) in the event that the Federal Reserve Bank of New York does not make available -42- such a rate, then the arithmetic average of the interest equivalent of the 60-day rate on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Trust Company for the close of business on the immediately preceding Business Day prior to such date. If any Commercial Paper Dealer does not quote a rate required to determine the 60-day "AA" Composite Commercial Paper Rate, the 60-day "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Corporation does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. If the Board of Directors shall adjust the number of Dividend Period Days pursuant to the second sentence of subparagraph (b)(iv) of Section 2 of this Part I, then (i) if the Dividend Period Days shall be 70 or more days but fewer than 85 days, such rate shall be the arithmetic average of the interest equivalent of the 60-day and 90-day rates on such commercial Paper, and (ii) if the Dividend Period Days shall be 85 or more days but 98 or fewer days, such rate shall be the interest equivalent of the 90-day rate on such commercial paper. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis (a "discount rate") for commercial paper maturing in a given number of days shall be equal to the quotient (rounded to the nearest one-thousandth (.001) of 1%) of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. (b) "Applicable 'AA' Composite Commercial Paper Rate" for any Long- Term Dividend Period on any date, shall mean (A) in the case of any Long- Term Dividend Period of less than 70 Dividend Period Days, the interest equivalent of the 60-day rate, (B) in the case of any Long-Term Dividend Period of 70 Dividend Period Days or more but less than 85 Dividend Period Days, the arithmetic average of the interest equivalent of the 60-day and 90-day rates, (C) in the case of any Long-Term Dividend Period of 85 Dividend Period Days or more but less than 120 Dividend Period Days, the interest equivalent of the 90-day rate, (D) in the case of any Long-Term Dividend Period of 120 Dividend Period Days or more but less than 148 Dividend Period Days, the arithmetic average of the interest equivalent of the 90-day and 180-day rates, (E) in the case of any Long-Term Dividend Period of 148 Dividend Period Days or more but less than 210 Dividend Period Days, the interest equivalent of the 180-day rate, (F) in the case of any Long-Term Dividend Period of 210 Dividend Period Days or more but less than 238 Dividend Period Days, the arithmetic average of the interest equivalent of the 180-day and 270-day rates and (G) in the case of any Long-Term Dividend Period of 238 or more Dividend Period Days, the interest equivalent of the 270-day rate, on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by Standard & Poor's or its successor, or the equivalent of such rating by another rating agency as made available on a discount basis or otherwise by the Federal Reserve Bank of New York -43- for the Business Day immediately preceding such date or in the event that the Federal Reserve Bank of New York does not make available any such rate, then the arithmetic average of such rates, as quoted on a discount basis or otherwise, by the Commercial Paper Dealers, to the Trust Company for the close of business on the Business Day next preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Corporation does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. For purposes of this definition, the "interest equivalent" means the equivalent yield on a 360-day basis of a discount-basis security to an interest- bearing security. (c) "Applicable Rate" shall mean the rate per annum at which dividends are payable for any Dividend Period established pursuant to clause (c)(i)(A) of Section 2 of this Part I. (d) "Applicable Treasury Rate" on any date, which respect to the Series D Stock with a Long-Term Dividend Period of one year or more, shall mean the interest equivalent of the rate for direct obligations of the United States Treasury having an original maturity which is equal to, or next lower than, the length of such Long-Term Dividend Period, as published weekly by the Federal Reserve Board in "Federal Reserve Statistical Release H.15 (519)--Selected Interest Rates," or any successor publication by the Federal Reserve Board within five Business days preceding such date. In the event that the Federal Reserve Board does not publish such weekly per annum interest rate, or if such release is not yet available, the applicable Treasury Rate will be the arithmetic average of the secondary market bid rates as of approximately 3:30 p.m., New York City time, on the Business Day next preceding such date of the U.S. Government Securities Dealers obtained by the Trust Company (in the case of a determination of the Applicable Treasury Rate on any Auction Date) or the Corporation (in the case of a determination of such rate on any other day) for the issue of direct obligations of the United States Treasury, in an aggregate principal amount of at least $1,000,000, with a remaining maturity equal to, or next lower than, the number of Dividend Period Days in such Long-Term Dividend Period. If any U.S. Government Securities Dealer does not quote a rate required to determine the Applicable Treasury Rate, the Applicable Treasury Rate shall be determined on the basis of the quotation or quotations furnished by the remaining U.S. Government Securities Dealer or Dealers or any Substitute U.S. Government Securities Dealer or Dealers selected by the Corporation to provide such rate or rates not being supplied by any U.S. Government Securities Dealer or Dealers, as the case may be, or, if the Corporation does not select any such Substitute U.S. Government Securities Dealer or Dealers, by the remaining U.S. Government Securities Dealer or Dealers: provided that, in the event the Corporation is unable to cause such quotations to be furnished to the Trust -44- Company (or, if applicable, to the Corporation) by such sources, the Corporation may cause such rates to be furnished to the Trust Company (or, if applicable, to the Corporation) by such alternative source as the Corporation in good faith deems to be reliable. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis shall be equal to the quotient of (A) the discount rate divided by (B) the difference between 1.00 and the discount rate. (e) "Auction" shall mean each periodic implementation of the Auction procedures. (f) "Auction Date" shall mean the Business Day next preceding the first day of each Dividend Period after the Initial Dividend Period. (g) "Auction Procedures" shall mean the procedures for conducting Auctions set forth in Part II hereof. (h) "Board of Directors" shall mean the Board of Directors of the Corporation or (except in the context of the voting rights provisions relating to the Series D Stock as provided for in Section 3 of this Part I) a duly authorized committee thereof. (i) "Business Day" shall mean a day on which the New York Stock Exchange, Inc. is open for trading and on which banks in neither The City of New York, New York, nor Chicago, Illinois, are authorized by law to close. (j) "Code" shall mean the Internal Revenue Code of 1986. (k) "Commercial Paper Dealers" shall mean Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc. and Shearson Lehman Hutton Inc. or, in lieu of any thereof, their respective affiliates or successors. (l) "Common Stock" shall mean all shares now or hereafter issued of any class of common stock of the Corporation presently authorized and any other shares of stock into which such stock may hereinafter be changed from time to time. (m) "Date of Original Issue" shall mean the date on which the Corporation originally issues shares of Series D Stock. (n) "Dividend Payment Date" shall have the meaning specified in subparagraph (b)(v) of Section 2 of this Part I. (o) "Dividend Period" and "Dividend Periods" shall have the meaning specified in subparagraph (b)(vi) of Section 2 of this Part I. (p) "Dividend Period Days" shall mean the number of days, without giving effect to clauses A and B of subparagraph 2(b)(iii), between successive Dividend -45- Payment Dates, and shall be calculated by including the first Dividend Payment Date and excluding the last Dividend Payment Date. (q) "Dividend Quarter" shall have the meaning specified in subparagraph (b)(v) of Section 2 of this Part I. (r) "Holder" shall mean a holder of shares of Series D Stock as such holder's name appears on the stock register of the Corporation. (s) "Initial Dividend Payment Date" shall have the meaning specified in subparagraph (b)(v) of Section 2 of this Part I. (t) "Initial Dividend Period" shall have the meaning specified in subparagraph (b)(vi) of Section 2 of this Part I. (u) "Long-Term Dividend Period" shall have the meaning specified in subparagraph (b)(vi) of Section 2 of this Part I. (v) "Maximum Rate," with respect to a Short-Term Dividend Period, on any Auction Date will be the rate obtained by multiplying the 60-day "AA" Composite Commercial Paper Rate on such Auction Date, and with respect to a Long-Term Dividend Period, the Maximum Rate on any Auction Date will be the rate obtained by multiplying the Reference Rate on such Auction Date, by a percentage determined as set forth below based on the credit ratings assigned to the Series D Stock by Moody's and Standard & Poor's (or by one of them and a Substitute Rating Agency if Moody's or Standard & Poor's shall not make such rating available, or by two Substitute Rating Agencies if neither Moody's nor Standard & Poor's shall make such rating available; in the event that only one such rating shall be available, the percentage will be based on such rating).
Credit Rating - ----------------------------------------- Applicable Percentage of 60-day "AA" Composite Moody's Standard & Poor's Commercial Paper Rate or Reference Rate - ----------------------------------------- -------------------------- "aa3" or Above AA- or Above 110% "a3" to "al" A- to A+ 125% "baa3" to "baal" BBB- to BBB+ 150% "ba3" to "bal" BB- to BB+ 200% Below "ba3" Below BB- 250%
If the ratings are split between two of the foregoing categories, the lower rating will determine the prevailing rating. The Corporation shall take all reasonable action necessary to enable Moody's and Standard & Poor's to provide a rating for the Series D Stock. If either Moody's or Standard & Poor's shall not make such rating available or neither Moody's nor Standard & Poor's shall make -46- such a rating available, Goldman, Sachs & Co. or its affiliates and successors, after consultation with the Corporation, shall select a Substitute Rating Agency or two Substitute Rating Agencies, as the case may be. (w) "Minimum Holding Period" shall have the meaning specified in subparagraph (b)(iv) of Section 2 of this Part I. (x) "Moody's" shall mean Moody's Investors Service, Inc., or its successor, so long as such agency (or successor) is in the business of rating securities of the type of the Series D Stock and, if such agency is not in such business, then a Substitute Rating Agency. (y) "Non-Auction Rate" shall have the meaning specified in clause (c)(i)(A) of Section 2 of this Part I. (z) "Notice of Long-Term Dividend Period" shall have the meaning specified in subparagraph (b)(vii) of Section 2 of this Part I. (aa) "Notice of Revocation" shall have the meaning specified in subparagraph (b)(vii) of Section 2 of this Part I. (bb) "Notice of Removal" shall have the meaning specified in subparagraph (b)(vii) of Section 2 of this Part I. (cc) "Outstanding" shall mean, as of any date, shares of Series D Stock theretofore issued by the Corporation except, without duplication, (i) any shares of Series D Stock theretofore canceled or delivered to the Trust Company for cancellation or redeemed by the Corporation or as to which the Corporation shall have published a notice of redemption or irrevocably authorized and directed the Redemption Agent to begin and promptly complete such publication of notice, and deposited in trust with the Redemption Agent funds necessary for such redemption in accordance with this Restated Certificate of Incorporation, (ii) any shares of Series D Stock as to which the Corporation or any Affiliate thereof (other than a Broker-Dealer affiliate) shall be an Existing Holder and (iii) any shares of Series D Stock represented by any certificate in lieu of which a new certificate has been executed and delivered by the Corporation. (dd) "Paying Agent" shall mean a bank or trust company appointed as such by a resolution of the Board of Directors. (ee) "Preferred Director" shall have the meaning specified in paragraph (c) of Section 3 of this Part I. (ff) "Rate Adjustment Event" shall mean any failure by the Corporation to pay (i) to the Paying Agent funds available on any Dividend Payment Date in the full amount of any dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on any share of Series D Stock or (ii) to the Redemption Agent funds available on any redemption date in the full amount of the redemption -47- price to be paid on such redemption date, plus an amount equal to the accrued and unpaid dividends thereon (whether or not earned or declared) to such redemption date, of any share of Series D Stock after a notice of redemption has been given. (gg) "Redemption Agent" shall mean a bank or trust company appointed as such by a resolution of the Board of Directors. (hh) "Redemption Deposit Amount" shall mean the product of (i) the number of outstanding shares of Series D Stock to be redeemed times (ii) an amount equal to the applicable redemption price plus an amount equal to accrued and unpaid dividends (whether or not earned or declared) to the date fixed for redemption. (ii) "Reference Rate" shall, mean for Long-Term Dividend Periods (i) from 50 days to 270 days, the Applicable "AA" Composite Commercial Paper Rate, (ii) from 270 days to one year, the higher of the 270-day Applicable "AA" Composite Commercial Paper Rate and the one-year Applicable Treasury Rate and (iii) from one year to 10 years, the Applicable Treasury Rate. (jj) "Securities Depository" shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Corporation which agrees to follow the procedures required to be followed by such securities depository in connection with shares of Series D Stock. (kk) "Short-Term Dividend Period" shall have the meaning specified in subparagraph (b)(vi) of Section 2 of this Part I. (ll) "Standard & Poor's" shall mean Standard & Poor's Corporation, or its successor, so long as such agency (or successor) is in the business of rating securities of the type of the Series D Stock and, if such agency is not in such business, then a Substitute Rating Agency. (mm) "Subsequent Dividend Period" and "Subsequent Dividend Periods" shall have the respective meanings specified in clause (c)(i)(A) of Section 2 of this Part I. (nn) "Substitute Commercial Paper Dealer" shall mean The First Boston Corporation or Morgan Stanley & Co. Incorporated, or their respective affiliates or successors; provided that neither such dealer nor any of its affiliates shall be a Commercial Paper Dealer. (oo) "Substitute Rating Agency" shall mean a nationally recognized statistical rating organization (as that term is used in the rules and regulations of the Securities Exchange Act of 1934) selected by Goldman, Sachs & Co., or its successors or affiliates, after consultation with the Corporation. -48- (pp) "Substitute U.S. Government Securities Dealer" shall mean Morgan Stanley & Co. Incorporated or Salomon Brothers Inc., or their respective affiliates or successors. (qq) "Sufficient Clearing Bids" shall have the meaning specified in paragraph (a) of Section 4 of Part II hereof. (rr) "Term Selection Agent" shall mean Goldman, Sachs & Co., unless or until another investment banking firm has been appointed as such by a resolution of the Board of Directors of the Corporation. (ss) "Trust Company" shall mean a bank or trust company appointed as such by a resolution of the Board of Directors. (tt) "U.S. Government Securities Dealer" shall mean Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and The First Boston Corporation or, in lieu of any thereof, their respective affiliates or successors. PART II 1. Certain Definitions. Capitalized terms not defined in the Section 1 shall have the respective meanings specified in Part I of this paragraph 6(c) of Article Fourth. As used in this Part II, the following terms shall have the following meanings, unless the context otherwise requires: (a) "Affiliate" shall mean any Person known to the Trust Company to be controlled by, in control of or under common control with the Corporation. (b) "Agent Member" shall mean the member of the Securities Depository that will act on behalf of a Bidder and is identified as such in such Bidder's Purchaser's Letter. (c) "Available Series D Stock" shall have the meaning specified in paragraph (a) of Section 4 of this Part II. (d) "Bid" and "Bids" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (e) "Bidder" and Bidders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (f) "Broker-Dealer" shall mean any broker-dealer, or other entity permitted by law to perform the function required of a broker-dealer in this Part II, that is a member of, or a participant in, the Securities Depository, and that has been selected -49- by the Corporation and has entered into a Broker-Dealer Agreement with the Trust Company that remains effective. (g) "Broker-Dealer Agreement" shall mean an agreement between the Trust Company and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in this Part II. (h) "Existing Holder," when used with respect to shares of Series D Stock, shall mean a Person who signed a Purchaser's Letter and is listed as the beneficial owner of such shares of Series D Stock in the records of the Trust Company. (i) "Hold Order" and "Hold Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (j) "Order" and "Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (k) "Person" shall mean and include an individual, a partnership, a corporation, a trust, an incorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. (l) "Potential Holder" shall mean any Person, including any Existing Holder, (i) who shall have executed a Purchaser's Letter and (ii) who may be interested in acquiring shares of Series D Stock (or, in the case of an Existing Holder, additional shares of Series D Stock). (m) "Purchaser's Letter" shall mean a Master Purchaser's Letter, the form of which is attached hereto, addressed to the Corporation, the Trust Company and an Agent Member in which a Person agrees, among other things, to offer to purchase, to offer to sell and/or to sell shares of Series D Stock as set forth in this Part II, or a similar letter containing substantially the same information and representations, or such other letter as the Board of Directors shall approve. (n) "Sell Order" and "Sell Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (o) "Submission Deadline" shall mean 12:30 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Trust Company as specified by the Trust Company from time to time. (p) "Submitted Bid" and "Submitted Bids" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (q) "Submitted Hold Order" and "Submitted Hold Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. -50- (r) "Submitted Order" and "Submitted Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (s) "Submitted Sell Order" and "Submitted Sell Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (t) "Winning Bid Rate" shall have the meaning specified in paragraph (a) of Section 4 of this Part II. 2. Orders by Existing Holders and Potential Holders. (a) On or prior to the Submission Deadline on each Auction Date: (i) each Existing Holder may submit to a Broker-Dealer information as to: (A) the number of Outstanding shares, if any, of Series D Stock held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period; (B) the number of Outstanding shares, if any, of Series D Stock that such Existing Holder desires to continue to hold if the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Existing Holder; and/or (C) the number of Outstanding shares, if any, of Series D Stock held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and (ii) one or more Broker-Dealers, using lists of Potential Holders, shall in good faith for the purpose of conducting a competitive Auction in a commercially reasonable manner, contact Potential Holders, including Persons that are not Existing Holders, on such lists to determine the number of shares, if any, of Series D Stock which each such Potential Holder offers to purchase, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Potential Holder. For the purposes hereof, the communication to a Broker-Dealer of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this paragraph (a) is hereinafter referred to as an "Order" and collectively as "Orders" and each Existing Holder and each Potential Holder placing -51- an Order is hereinafter referred to as a "Bidder" and collectively as "Bidders"; an Order containing the information referred to in clause (i)(A) of this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively as "Hold Orders"; an Order containing the information referred to in clause (i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and collectively as "Bids"; and an Order containing the information referred to in clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell Order" and collectively as "Sell Orders." (b)(i) A Bid by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of Series D Stock specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than such specified rate; or (B) such number or a lesser number of Outstanding shares of Series D Stock to be determined as set forth in subparagraph (a)(iv) of Section 5 of this Part II if the Applicable Rate determined on such Auction Date shall be equal to such specified rate; or (C) a lesser number of Outstanding shares of Series D Stock to be determined as set forth in subparagraph (b)(iii) of Section 5 of this Part II if such specified rate shall be higher than the Maximum Rate and Sufficient Clearing Bids do not exist. (b)(ii) A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of Series D Stock specified in such Sell Order; or (B) such number or a lesser number of Outstanding shares of Series D Stock as set forth in subparagraph (b)(iii) of Section 5 of this Part II if Sufficient Clearing Bids do not exist. (b)(iii) A Bid by a Potential Holder shall constitute an irrevocable offer to purchase: (A) the number of Outstanding shares of Series D Stock specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than such specified rate; or -52- (B) such number or a lesser number of Outstanding shares of Series D Stock as set forth in subparagraph (a)(v) of Section 5 of this Part II if the Applicable Rate determined on such Auction Date shall be equal to such specified rate. 3. Submission of Orders by Broker-Dealers to Trust Company. (a) Each Broker-Dealer shall submit in writing to the Trust Company prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specifying with respect to each Order: (i) the name of the Bidder placing such Order; (ii) the aggregate number of shares of Series D Stock that are the subject of such Order; (iii) to the extent that such Bidder is an Existing Holder: (A) the number of shares, if any, of Series D Stock subject to any Hold Order placed by such Existing Holder; (B) the number of shares, if any, of Series D Stock subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and (C) the number of shares, if any, of Series D Stock subject to any Sell Order placed by such Existing Holder; and (iv) to the extent such Bidder is a Potential Holder, the rate specified in such Potential Holder's Bid. (b) If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Trust Company shall round such rate up to the next highest one thousandth (.001) of 1%. (c) If an Order or Orders covering all of the outstanding shares of Series D Stock held by any Existing Holder is not submitted to the Trust Company prior to the Submission Deadline, the Trust Company shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding shares of Series D Stock held by such Existing Holder and not subject to Orders submitted to the Trust Company. (d) If one or more Orders covering in the aggregate more than the number of Outstanding shares of Series D Stock held by any Existing Holder are submitted -53- to the Trust Company, such Orders shall be considered valid as follows and in the following order of priority: (i) all Hold Orders shall be considered valid, but only up to and including in the aggregate the number of shares of Series D Stock held by such Existing Holder, and, solely for purposes of allocating compensation among the Broker-Dealers submitting Hold Orders, if the number of shares of Series D Stock held by such Existing Holder is less than the aggregate number of shares that are the subject of such Existing Holder's Hold Orders, the number of shares subject to each Hold Order shall be reduced pro rata to cover the number of shares of Series D Stock held by such Existing Holder; (ii)(A) any Bid shall be considered valid up to and including the excess of the number of outstanding shares of Series D Stock held by such Existing Holder over the number of shares of Series D Stock subject to any Hold Order referred to in subparagraph (i) above; (ii)(B) subject to clause (A), if more than one Bid with the same rate is submitted on behalf of such Existing Holder and the number of shares of Series D Stock subject to such Bids is greater than such excess, such Bids shall be considered valid up to the amount of such excess, and, solely for purposes of allocating compensation among the Broker-Dealers submitting Bids with the same rate, the number of shares of Series D Stock subject to each Bid with the same rate shall be reduced pro rata to cover the number of shares of Series D Stock equal to such excess; (ii)(C) subject to clause (A), if more than one Bid with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in the ascending order of their respective rates up to the amount of such excess; and (ii)(D) in any such event the number, if any, of such shares subject to Bids not valid under this subparagraph (ii) shall be treated as the subject of a Bid by a Potential Holder; and (iii) all Sell Orders shall be considered valid but only up to and including in the aggregate the excess of the number of Outstanding shares of Series D Stock held by such Existing Holder over the sum of the shares of Series D Stock subject to Hold Orders referred to in subparagraph (i) and valid Bids by Existing Holders referred to in subparagraph (ii) above. (e) If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate therein specified. -54- 4. Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. (a) Not earlier than the Submission Deadline on each Auction Date, the Trust Company shall assemble all Orders submitted or deemed submitted to it by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders" and shall determine: (i) the excess of the total number of Series D Stock over the number of Outstanding shares of Series D Stock that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available Series D Stock"); (ii) from the Submitted Orders whether: (A) the number of Outstanding shares of Series D Stock that are the subject of Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the Maximum Rate exceeds or is equal to the sum of: (I) the number of Outstanding shares of Series D Stock that are the subject of Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Rate, and (II) the number of Outstanding shares of Series D Stock that are subject to Submitted Sell Orders (in the event of such excess or such equality (other than because the sum of the number of shares of Series D Stock in clauses (I) and (II) above is zero because all of the outstanding shares of Series D Stock are the subject of Submitted Hold Orders), such Submitted Bids in clause (A) above being hereinafter referred to collectively as "Sufficient Clearing Bids"); and (iii) if Sufficient Clearing Bids exist, the lowest rate specified in the Submitted Bids (the "Winning Bid Rate") which if: (A)(I) each Submitted Bid from Existing Holders specifying such lowest rate and (II) all other Submitted Bids from Existing Holders specifying lower rates were accepted, thus entitling such Existing Holders to continue to hold the shares of Series D -55- Stock that are the subject of such Submitted Bids; and (B)(I) each Submitted Bid from Potential Holders specifying such lowest rate and (II) all other Submitted Bids from Potential Holders specifying lower rates were accepted, thus entitling the Potential Holders to purchase the shares of Series D Stock that are the subject of those Submitted Bids, would result in such Existing Holders described in clause (A) continuing to hold an aggregate number of Outstanding shares of Series D Stock which, when added to the number of Outstanding shares of Series D Stock to be purchased by such Potential Holders described in clause (B), would equal not less than the Available Series D Stock. (b) Promptly after the Trust Company has made the determinations pursuant to paragraph (a) of this Section 4, the Trust Company shall advise the Corporation of the Maximum Rate and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows: (i) if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate so determined; (ii) if Sufficient Clearing Bids do not exist (other than because all of the Outstanding shares of Series D Stock are the subject of Submitted Hold Orders), then (a) if the Term Selection Agent has not given a Notice of Long-Term Dividend Period with respect to the next succeeding Dividend Period or has given a Notice of Revocation with respect thereto or such Notice of Long- Term Dividend Period shall be deemed to have been revoked, the Applicable Rate for such next succeeding Dividend Period shall be the Maximum Rate on the Auction Date for a Short-Term Dividend Period and (b) if the Term Selection Agent has given a Notice of Long-Term Dividend Period with respect to the next succeeding Dividend Period and has not given a Notice of Revocation with respect thereto and such Notice of Long-Term Dividend Period shall not have been deemed revoked, such next succeeding Dividend Period shall, notwithstanding such Notice of Long-Term Dividend Period, be a Short-Term Dividend Period, and the Applicable Rate for such next succeeding Dividend Period shall be the greatest of (i) the Applicable Rate in effect immediately prior to the applicable Auction, (ii) the Maximum Rate on the Auction Date for a Short-Term Dividend Period or (iii) the Maximum Rate on the Auction Date for the specified Long-Term Dividend Period, or -56- (iii) if all the Outstanding shares of Series D Stock are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall (1) in the case of a Short-Term Dividend Period, be equal to 59% of the 60-day "AA" Composite Commercial Paper Rate in effect on the date of such Auction; and (2) in the case of a Long-Term Dividend Period, 59% of the Reference Rate in effect on the date of such Auction. 5. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. Based on the determinations made pursuant to paragraph (a) of Section 4 of this Part II, the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Trust Company shall take such other action as set forth below: (a) If Sufficient Clearing Bids have been made, subject to the provisions of paragraphs (c), (d) and (e) of this Section 5, Submitted Bids and Submitted Sell Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected: (i) the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate that is higher than the Winning Bid Rate shall be rejected, thus requiring each such Existing Holder to sell the shares of Series D Stock that are the subject of such Submitted Bid; (ii) the Submitted Bid of each of the Existing Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted, thus entitling each such Existing Holder to continue to hold the shares of Series D Stock that are the subject of each Submitted Bid; (iii) the Submitted Bid of each of the Potential Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted; (iv) the Submitted Bid of each of the Existing Holders specifying a rate that is equal to the Winning Bid Rate shall be accepted, thus entitling each such Existing Holder to continue to hold the shares of Series D Stock that are the subject of such Submitted Bid, unless the number of outstanding shares of Series D Stock subject to all such Submitted Bids shall be greater than the number of shares of Series D Stock ("remaining shares") equal to the excess of the Available Series D Stock over the number of shares of Series D Stock subject to Submitted Bids described in subparagraphs (ii) and (iii) of this paragraph (a), in which event the Submitted Bids of each such Existing Holder shall be rejected, and each such Existing Holder shall be required to sell shares of Series D Stock but only in -57- an amount equal to the difference between (A) the number of outstanding shares of Series D Stock then held by such Existing Holder subject to such Submitted Bid and (B) the number of shares of Series D Stock obtained by multiplying the number of remaining shares by a fraction the numerator of which shall be the number of Outstanding shares of Series D Stock held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of Series D Stock subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate; and (v) the Submitted Bid of each of the Potential Holders specifying a rate that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of shares of Series D Stock obtained by multiplying the difference between the Available Series D Stock and the number of shares of Series D Stock subject to Submitted Bids described in subparagraphs (ii), (iii) and (iv) of this paragraph (a) by a fraction the numerator of which shall be the number of Outstanding shares of Series D Stock subject to such Submitted Bid and the denominator of which shall be the sum of the number of outstanding shares of Series D Stock subject to such Submitted Bids made by all such Potential Holders that specified a rate equal to the Winning Bid Rate. (b) If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of Series D Stock are subject to Submitted Hold Orders), subject to the provisions of paragraphs (c), (d) and (e) of this Section 5, Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected: (i) the Submitted Bid of each Existing Holder specifying any rate that is equal to or lower than the Maximum Rate shall be accepted, thus entitling such Existing Holder to continue to hold the shares of Series D Stock that are the subject of such Submitted Bid; (ii) the Submitted Bid of each Potential Holder specifying any rate that is equal to or lower than the Maximum Rate shall be accepted; and (iii) the Submitted Bids of each Existing Holder specifying any rate that is higher than the Maximum Rate shall be rejected and the Submitted Sell Orders of each Existing Holder shall be accepted, in both cases only in an amount equal to the difference between (A) the number of Outstanding shares of Series D Stock then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (B) the number of shares of Series D Stock obtained by multiplying the difference between the Available Series D Stock and the aggregate number of shares of Series D Stock subject to -58- Submitted Bids described in subparagraphs (i) and (ii) of this paragraph (b) by a fraction the numerator of which shall be the number of Outstanding shares of Series D Stock held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the number of Outstanding shares of Series D Stock subject to all such Submitted Bids and Submitted Sell Orders. (c) If all of the Outstanding shares of Series D Stock are the subject of Submitted Hold Orders, all Submitted Bids shall be rejected. (d) If, as a result of the procedures described in paragraph (a) or (b) of this Section 5, any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a share of Series D Stock on any Auction Date, the Trust Company, in such manner as it shall determine in its sole discretion, shall round up or down the number of shares of Series D Stock to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that the number of shares purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole shares of Series D Stock. (e) If, as a result of the procedures described in paragraph (a) of this Section 5, any Potential Holder would be entitled or required to purchase less than a whole share of Series D Stock on any Auction Date, the Trust Company, in such manner as it shall determine in its sole discretion, shall allocate shares for purchase among Potential Holders so that only whole shares of Series D Stock are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing shares of Series D Stock on such Auction Date. (f) Based on the results of each Auction, the Trust Company shall determine the aggregate number of shares of Series D Stock to be purchased and the aggregate number of shares of Series D Stock to be sold by Potential Holders and Existing Holders on whose behalf each Broker-Dealer submitted Bids or Sell Orders and, with respect to each Broker-Dealer, to the extent that such aggregated number of shares to be purchased and such aggregate number of shares to be sold differ, determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, shares of Series D Stock. 6. Miscellaneous. (a) The Board of Directors may interpret the provisions of this Part II to resolve any inconsistency or ambiguity which may arise or be revealed in connection which the Auction Procedures provided for herein, and if such inconsistency or ambiguity reflects an inaccurate provision hereof, the Board of Directors may, in -59- appropriate circumstances, authorize the filing of a Certificate of Correction or Certificate of Amendment. (b) So long as the Applicable Rate is based on the results of an Auction, an Existing Holder (i) may sell, transfer or otherwise dispose of shares of Series D Stock only pursuant to a Bid or Sell Order in accordance with the procedures described in this Part II or to or through a Broker- Dealer or to a Person that has delivered a signed copy of a Purchaser's Letter to the Trust Company, provided that in the case of all transfers other than pursuant to Auctions such Existing Holder or its Broker-Dealer advises the Trust Company of such transfer, and (ii) shall have the ownership of the shares of Series D Stock held by it maintained in book entry form by the Securities Depository in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. (c) Neither the Corporation nor any Affiliate thereof may submit an Order in any Auction. Any Broker-Dealer that is an Affiliate of the Corporation may not submit Bids to purchase shares of Series D Stock in Auctions for its own account, and if such affiliated Broker-Dealer has otherwise acquired shares for its own account, it must submit a Sell Order in the next Auction with respect to such shares. (d) The Trust Company shall reject any Submitted Order of the Corporation or an Affiliate, except for Sell Orders of affiliated Broker- Dealers. (e) From and after the occurrence of a Rate Adjustment Event, shares of Series D Stock shall be registered for transfer or exchange and new certificates issued upon surrender of the old certificates deemed by the Trust Company (or any other transfer agent or registrar appointed by the Corporation) properly endorsed for transfer with all necessary endorsers' signatures guaranteed in such manner and form as the Trust Company (or such other transfer agent or registrar) may require by a guarantor reasonably believed by the Trust Company (or such other transfer agent or registrar) to be responsible, accompanied by such assurances as the Trust Company (or such other transfer agent or registrar) shall deem necessary or appropriate to evidence the genuineness and effectiveness of each necessary endorsement and satisfactory evidence of compliance with all applicable laws relating to the collection of taxes or funds necessary for the payment of such taxes. (d) 6.25% Cumulative Convertible Preferred Stock, Series E 1. Designation. -60- The designation of said series of Preferred Stock shall be 6.25% Cumulative Convertible Preferred Stock, Series E (the "Series E Stock"). The maximum number of shares of Series E Stock shall be 50,000. The Series E Stock shall be without par value (stated value of $1,000.00 per share). 2. Dividends. (a) The Series E Stock shall be entitled to receive dividends at an annual rate of $62.50 per share. Such dividends shall accrue and be cumulative from the date of original issuance of the Series E Stock and shall be payable, when and as declared by the Board, on the 15th day of February, May, August and November of each year commencing the 15th day of May 1992. Each such dividend shall be paid to the holders of record of the Series E Stock as they appear on the stock register of the Corporation at the close of business on the applicable record date, which shall be the last day of the month preceding the month in which the dividend payment date of such dividend occurs, provided that no dividend shall be paid on shares of Series E Stock redeemed on a redemption date which is between a dividend payment record date and the corresponding dividend payment date (an amount equal to such dividend being payable with the redemption price pursuant to Section 4(a)). Dividends on account of arrears or any past dividend periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (b) No full dividends shall be declared or paid or set aside for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to the Series E Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series E Stock for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the Series E Stock and any other Preferred Stock ranking on a parity as to dividends with the Series E Stock, all dividends declared upon the Series E Stock and any other Preferred Stock ranking on a parity as to dividends with the Series E Stock shall be declared pro rata so that the amount of dividends declared per share on the Series E Stock and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Series E Stock and such other Preferred Stock bear to each other. Holders of Series E Stock shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of the full cumulative dividends, as herein provided, on the Series E Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on the Series E Stock which may be in arrears. (c) So long as any shares of Series E Stock are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to the Series E Stock as to dividends and upon liquidation and other than as provided in paragraph (b) of this Section 2) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with the Series E Stock as to dividends or -61- upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with the Series E Stock as to dividends or upon liquidation, or any depositary shares representing such stock, be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund or for the redemption of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Series E Stock as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of the Series E Stock shall have been paid for all past dividend payment periods. (d) Dividends payable on the Series E Stock for any period less than a full quarterly dividend period, and for the dividend period beginning on the date of issuance of the Series E Stock, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. 3. Voting. (a) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of a least 66-2/3% of all of the shares of the Series E Stock and all other series of Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of Series E Stock and shares of Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of this Restated Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designations or any similar document relating to the Series E Stock or any series of Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation) which would adversely affect the powers, preferences, rights or privileges of the Series E Stock or the Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation; provided, however, that if any such amendment, alteration or repeal would adversely affect the powers, preferences, rights or privileges of the Series E Stock or one or more series of the Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, but shall not so affect the entire class, then only the shares of the one or more series so affected shall be considered to be a separate class entitled to vote upon or consent to such amendment, alteration or repeal; (b) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the shares of the Series E Stock and all other series of Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Series E Stock and such -62- other series of Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of the Series E Stock and such other series of Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; and (c) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends on the Series E Stock or the Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, shall exist, the number of directors constituting the Board of Directors shall be increased by two, and the holders of the Series E Stock and the Preferred Stock of all series ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Series E Stock and the Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation. Each director elected by the holders of shares of Series E Stock and Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed without cause by, and shall not be removed without cause except by, the vote of the holders of record of the outstanding shares of Series E Stock and Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Series E Stock and Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, called for that purpose. So long as a default in preference dividends on the Series E stock or the Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, shall exist, (A) any vacancy in the office of Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Series E Stock and Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of Directors shall be reduced by two. -63- For the purposes hereof, a "default in preference dividends" on the Series E Stock or the Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, shall be deemed to have occurred whenever the amount of accrued dividends upon the Series E Stock or any series of the Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, shall be equivalent to six full quarterly dividends (which, with respect to any Series E Stock or any Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, providing for other than quarterly dividend periods, shall be deemed to be dividends in respect of a number of dividend periods containing not less than 540 days) or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Series E Stock and Preferred Stock ranking on a parity with the Series E Stock, either as to dividends or upon liquidation, of each and every series then outstanding shall have been paid to the end of the last preceding dividend period. (d) Whenever the holders of the Series E stock shall be entitled to vote pursuant to this resolution, such holders shall have one vote for each whole share of Series E Stock. 4. Redemption. (a) The Corporation may, at its option, but only with prior approval of the Board of Governors of the Federal Reserve System, redeem the Series E Stock, as a whole or in part, at any time or from time to time prior to the conversion thereof pursuant to Section 5, at the redemption price indicated below if such redemption is during the periods indicated plus, in each case, accrued and unpaid dividends thereon through the day preceding the date fixed for redemption, whether or not earned or declared:
Redemption Price (as a Percentage of Year liquidation preference) ---- ---------------------- February 15, 1995 through February 14, 1996 104.375% February 15, 1996 through February 14, 1997 103.750% February 15, 1997 through February 14, 1998 103.125% February 15, 1998 through February 14, 1999 102.500% February 15, 1999 through February 14, 2000 101.875% February 15, 2000 through February 14, 2001 101.250% February 15, 2001 through February 14, 2002 100.625% February 15, 2002 and thereafter 100.000%
provided, however, that the Series E Stock may not be so redeemed prior to February 15, 1995. (b) In the event that fewer than all the outstanding shares of Series E Stock are to be redeemed, the number of shares of Series E Stock to be redeemed shall be -64- determined by the Board and the shares of Series E Stock to be redeemed shall be selected by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. (c) In the event the Corporation shall redeem the Series E Stock, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 20 nor more than 60 days prior to the redemption date, to each holder of record of the Series E Stock to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of Series E Stock to be redeemed and, if fewer than all the shares of Series E Stock held by such holder are to be redeemed, the number of shares of Series E Stock to be redeemed from such holder; (iii) the redemption price; (iv) the Conversion Price then in effect; (v) the place or places where certificates for such shares of Series E Stock are to be surrendered for payment of the redemption price; and (vi) that dividends on the shares of Series E Stock to be redeemed will cease to accrue on such redemption date. (d) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of Series E Stock so called for redemption shall cease to accrue, and said shares of Series E Stock shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares of Series E Stock so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares of Series E Stock shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares of Series E Stock represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares of Series E Stock without cost to the holder thereof. (e) Notwithstanding the foregoing provisions of this Section 4, if any dividends on Series E Stock are in arrears, no Series E Stock shall be redeemed unless all outstanding shares of Series E Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any Series E Stock or any depositary shares representing Series E Stock; provided, however, that the foregoing shall not prevent the purchase or acquisition of Series E Stock or any depositary shares representing Series E Stock (i) upon the conversion of Series E Stock into shares of Common Stock pursuant to Section 5, (ii) in exchange for shares of Common Stock or any other class of stock ranking junior to the Series E Stock as to dividends or upon liquidation or (iii) pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series E Stock (treating holders of any depositary shares representing Series E Stock as holders of a proportionate number of shares of Series E Stock for these purposes). 5. Conversion. -65- (a) Subject to the provisions for adjustment hereinafter set forth, each share of Series E Stock shall be convertible at the option of the holder thereof, in the manner hereinafter set forth, into fully paid and nonassessable shares of Common Stock at the conversion price, determined as hereinafter provided, in effect on the date of conversion, each share of Series E Stock being credited at its stated value; provided that if any of the Series E Stock is called for redemption, the conversion rights pertaining thereto will terminate at the close of business on the redemption date. The price at which shares of Common Stock shall be delivered upon conversion of shares of Series E Stock (hereinafter referred to as the "Conversion Price") shall be initially $62.25 per share of Common Stock. The Conversion Price shall be adjusted in certain instances as provided in paragraph (b) of this Section 5. Any holder of Series E Stock desiring to convert such stock into shares of Common Stock shall surrender the certificate or certificates for the shares of Series E Stock being converted, duly endorsed or assigned to the Corporation or in blank, at the principal office of the Corporation or at a bank or trust company appointed by the Corporation for that purpose, accompanied by a written notice of conversion specifying the number of shares of Series E Stock to be converted and the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued; in case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issue of shares of Common Stock in such name or names. In case less than all of the shares of Series E Stock represented by a certificate are to be converted by a holder, upon such conversion the Corporation shall issue and deliver or cause to be issued and delivered to such holder a certificate or certificates for the shares of Series E Stock not so converted. The holders of shares of Series E Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares of Series E Stock (except shares of Series E Stock redeemed on a redemption date between such record date and the dividend payment date) on the corresponding dividend payment date notwithstanding the subsequent conversion thereof or the Corporation's default in payment of the dividend due on such dividend payment date. However, shares of Series E Stock surrendered for conversion during the period from the close of business on any dividend payment record date for the Series E Stock to the opening of business on the corresponding dividend payment date (except shares of Series E Stock called for redemption on a redemption date during such period) must be accompanied by payment of an amount equal to the dividend payable on such shares of Series E Stock on such dividend payment date. A holder of shares of Series E Stock on a dividend payment record date who (or whose transferee) converts shares of Series E Stock on a dividend payment date will receive the dividend payable on such shares of Series E Stock by the Corporation on such date, and the converting holder need not include payment in the amount of such dividend upon surrender of shares of Series E Stock for conversion. Except as provided above, no payment or adjustment will be made on account of accrued or unpaid dividends upon the conversion of Series E Stock. As promptly as practicable after the surrender of certificates for shares of Series E Stock as aforesaid, the Corporation shall issue and shall deliver at such office to -66- such holder, or on his or her written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this Section (5), and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be promptly settled as provided in paragraph (k) of this Section (5). Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Series E Stock shall have been surrendered and such notice received by the Corporation as aforesaid; the shares of Series E Stock so surrendered for conversion shall no longer be deemed to be outstanding and all rights with respect to such shares of Series E Stock shall cease, except the right of the holders thereof to receive full shares of Common Stock in exchange therefor and payment for any fractional shares; and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date. All shares of Common Stock delivered upon conversions of the Series E Stock will upon delivery be duly and validly issued and fully paid and nonassessable. (b) The Conversion Price shall be adjusted from time to time as follows: (i) In case the Corporation shall pay or make a dividend or other distribution on any class of capital stock of the Corporation in shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. (ii) In case the Corporation shall issue rights or warrants to all holders of its shares of Common Stock entitling them to subscribe for or purchase Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (c)) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase would -67- purchase at such current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. (iii) In case the Corporation shall, by dividend or otherwise, distribute to all holders of shares of Common Stock evidences of indebtedness or assets (including securities, but excluding any rights or warrants referred to in paragraph (b)(ii), any dividend or distribution paid in cash out of the surplus of the Corporation and any dividend or distribution referred to in paragraph (b)(i)), the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (c)) of the Common Stock on the date fixed for such determination, less the then fair market value (as determined by the Board, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed allocable to one share of Common Stock, and the denominator shall be such current market price per share of Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. Notwithstanding the foregoing, in the event that the Corporation shall distribute or shall have distributed any rights or warrants to acquire capital stock ("Rights") pursuant to this subparagraph (iii), the distribution of separate certificates representing the Rights subsequent to their initial distribution (whether or not the initial distribution of the Rights shall have occurred prior to the date of the issuance of the Series E Stock) shall be deemed to be the distribution of the Rights for purposes of this subparagraph (iii); provided that the Corporation may, in lieu of making any adjustment pursuant to this subparagraph (iii) upon a distribution of separate certificates representing the Rights, make proper provision so that each holder of Series E Stock who converts such Series E Stock (or any portion thereof) (A) before the record date for such distribution of separate certificates shall be entitled to receive upon conversion shares of Common Stock issued with Rights and (B) after such record date and prior to the expiration, redemption or termination of the Rights shall be entitled to receive upon conversion, in addition to the shares of Common Stock issuable upon conversion, the same number of Rights as would a holder of the number of shares of Common Stock that such Series E Stock so converted would have entitled the holder thereof to purchase in accordance with the terms and provisions applicable to the Rights if such Series E Stock were converted immediately prior to the record date for such distribution. Common Stock owned by or held for the account of the Corporation or any -68- majority owned subsidiary shall not be deemed outstanding for the purpose of any adjustment required under this subparagraph (iii). (iv) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (v) The reclassification of Common Stock into securities other than Common Stock (other than any reclassification upon a consolidation or merger to which paragraph (f) applies) shall be deemed to involve (i) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and the "date fixed for such determination" within the meaning of paragraph (b)(iii)), and (ii) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective," or "the day upon which such combination becomes effective," as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of paragraph (b)(iv) of this Section 5. (c) For the purpose of any computation under paragraphs (b)(ii) and (b)(iii), the current market price per share of Common Stock on any day shall be deemed to be the average of the daily Closing Prices for any 15 consecutive Trading Days selected by the Board commencing not less than 20 nor more than 30 Trading Days before the day in question. (d) Notwithstanding the provisions of paragraphs (b) above, no adjustment in the Conversion Price shall be required unless such adjustment (plus any adjustments not previously made by reason of this paragraph (d)) would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this paragraph (d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent. (e) The Corporation may make such reductions in the Conversion Price, in addition to those required by this Section 5, as it considers to be advisable in order -69- to avoid or diminish any income tax to any holder of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reasons. The Corporation shall have the power to resolve any ambiguity or correct any error in this Section 5 and its actions in so doing shall be final and conclusive. (f) In case the Corporation shall effect any capital reorganization of the Common Stock (other than a subdivision, combination, capital reorganization or reclassification provided for in paragraph (b)) or shall consolidate, merge or engage in a statutory share exchange with or into any other corporation (other than a consolidation, merger or share exchange in which the Corporation is the surviving corporation and each share of Common Stock outstanding immediately prior to such consolidation or merger is to remain outstanding immediately after such consolidation or merger) or shall sell or transfer all or substantially all its assets to any other corporation, lawful provision shall be made as a part of the terms of such transaction whereby the holders of Series E Stock shall receive upon conversion thereof, in lieu of each share of Common Stock which would have been issuable upon conversion of such stock if converted immediately prior to the consummation of such transaction, the same kind and amount of stock (or other securities, cash or property, if any) as may be issuable or distributable in connection with such transaction with respect to each share of Common Stock outstanding at the effective time of such transaction, subject to subsequent adjustments for subsequent stock dividends and distributions, subdivisions or combinations of shares, capital reorganizations, reclassifications, consolidations, mergers or share exchanges, as nearly equivalent as possible to the adjustments provided for in this Section 5. (g) Whenever the Conversion Price is adjusted as herein provided: (i) the Corporation shall compute the adjusted Conversion Price and shall cause to be prepared a certificate signed by the chief financial or accounting officer of the Corporation setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based and the computation thereof and such certificate shall forthwith be filed with each transfer agent for the Series E Stock; and (ii) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall, as soon as practicable, be mailed to the holders of record of outstanding shares of Series E Stock. (h) In case: (i) the Corporation shall declare a dividend or other distribution on the Common Stock otherwise than in cash out of its surplus; (ii) the Corporation shall authorize the granting to the holders of the Common Stock of rights or warrants entitling them to subscribe for or purchase any shares of capital stock of any class or of any other rights; -70- (iii) of any reclassification of the Common Stock (other than a subdivision or combination of outstanding shares of Common Stock), or of any consolidation, merger or share exchange to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all the assets of the Corporation; or (iv) of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; then the Corporation shall cause to be mailed to each transfer agent for the Series E Stock and to the holders of record of the outstanding shares of Series E Stock, at least 20 days (or 10 days in any case specified in paragraphs (i) or (ii) above) prior to the applicable record or effective date hereinafter specified, a notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to such dividend, distribution, rights or warrants are be determined, or (ii) the date on which such reclassification, consolidation, merger, share exchange, sale, transfer, liquidation, dissolution or winding up is expected to become effective and the date as of which it is expected that holders of record of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, share exchange, sale, transfer, liquidation, dissolution or winding up. Such notice shall also state whether such transaction will result in any adjustment in the Conversion Price applicable to the Series E Stock and, if so, shall state what the adjusted Conversion Price will be and when it will become effective. Neither the failure to give the notice required by this paragraph (h), nor any defect therein, to any particular holder shall affect the sufficiency of the notice or the legality or validity of the proceedings described in paragraphs (h)(i) through (h)(iv). (i) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, for the purpose of issuance upon conversion of Series E Stock, the full number of shares of Common Stock then issuable upon the conversion of all shares of Series E Stock then outstanding and shall take all action necessary so that shares of Common Stock so issued will be validly issued, fully paid and nonassessable. (j) The Corporation will pay any and all stamp or similar taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of Series E Stock. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the Series E Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (k) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of Series E Stock. If any such conversion would -71- otherwise require the issuance of such a fractional share an amount equal to such fraction multiplied by the Closing Price per share of Common Stock on the day of conversion shall be paid to the holder in cash by the Corporation. (l) The certificate of any independent firm of public accountants of recognized standing selected by the Board shall be presumptive evidence of the correctness of any computation made under this Section 5. 6. Liquidation Rights. (a) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the Series E Stock shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $1,000.00 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of the final distribution. (b) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section 6. (c) After the payment to the holders of the Series E Stock of the full preferential amounts provided for in this Section 6, the holders of Series E Stock as such shall have no right or claim to any of the remaining assets of the Corporation. (d) In the event the assets of the Corporation available for distribution to the holders of Series E Stock upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (a) of this Section 6, no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the Series E Stock upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the Series E Stock, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Series E Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (a) of this Section 6 before any payment shall be made to the holders of any class or series of capital stock of the Corporation ranking junior upon liquidation to the Series E Stock. 7. Sinking or Retirement Fund. 72 The Series E Stock shall not be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such stock. 8. Rank. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (a) prior to the Series E Stock, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of Series E Stock; (b) on a parity with the Series E Stock, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of the Series E Stock, if such stock is the Corporation's Auction Preferred Stock, Series C, or Flexible Auction Preferred Stock, Series D, or if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of Series E Stock; and (c) junior to the Series E Stock, either as to dividends or upon liquidation, if such class shall be the Corporation's Series A Junior Participating Preferred Stock, Common Stock or if the holders of Series E Stock shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. -73- II Common Stock 1. Dividends. Subject to the preferential rights of the Preferred Stock, the holders of the Common Stock are entitled to receive, to the extent permitted by law, such dividends as may be declared from time to time by the Board of Directors. 2. Liquidation. In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of Preferred Stock, holders of Common Stock shall be entitled to receive all of the remaining assets of the Corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. The Board of Directors may distribute in kind to the holders of Common Stock such remaining assets of the Corporation or may sell, transfer or otherwise dispose of all or any part of such remaining assets to any other corporation, trust or other entity and receive payment therefor in cash, stock or obligations of such other corporation, trust or other entity, or any combination thereof, and may sell all or any part of the consideration so received and distribute any balance thereof in kind to holders of Common Stock. The merger or consolidation of the Corporation into or with any other corporation, or the merger of any other corporation into it, or any purchase or redemption of shares of stock of the Corporation of any class, shall not be deemed to be a dissolution, liquidation or winding up of the Corporation for the purposes of this paragraph. 3. Voting Rights. Except as may be otherwise required by law or this Restated Certificate of Incorporation, each holder of Common Stock has one vote in respect of each share of stock held by him of record on the books of the Corporation on all matters voted upon by the Stockholders. III Other Provisions 1. Preemptive Rights. No stockholder shall have any preemptive right to subscribe to an additional issue of stock of any class or series or to any securities of the Corporation convertible into such stock. 2. Changes in Authorized Capital Stock. Subject to the protective conditions and restrictions of any outstanding Preferred Stock, any amendment to this Restated Certificate of Incorporation which increases or decreases the authorized capital stock of any class or classes may be adopted by the affirmative vote of the holders of a majority of the outstanding shares of the voting stock of the Corporation. -74- ARTICLE FIFTH Board of Directors 1. Powers of the Board. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: (a) To make, alter or repeal the by-laws of the Corporation. (b) To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation. (c) To set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any reserve in the manner in which it was created. (d) By a majority of the whole board, to designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The by-laws may provide that in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in the by- laws of the Corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Restated Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the by-laws of the Corporation; and, unless the resolution or by-laws expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. (e) When and as authorized by the stockholders in accordance with statute, to sell, lease or exchange all or substantially all of the property and assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property including shares of stock in, and/or other securities of, any other corporation or corporations, as the Board of Directors shall deem expedient and for the best interests of the Corporation. 2. Terms and Number of Board Members. -75- The number of members of the Board of Directors will be fixed from time to time by the Board of Directors, but (subject to vacancies) in no event may there be less than three directors. Each director shall serve until the next annual meeting of stockholders or until his successor is elected. If any vacancy occurs in the Board of Directors during a term, the remaining directors, by affirmative vote of a majority thereof, may elect a director to fill the vacancy until the next annual meeting of stockholders. 3. Cumulative Voting. At all elections of directors of the Corporation, each stockholder entitled generally to vote for the election of directors shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them as he may see fit. ARTICLE SIXTH Records The books of the Corporation may be kept (subject to any provisions contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the Corporation. Elections of directors need not be by written ballot unless the by-laws of the Corporation shall so provide. ARTICLE SEVENTH Certain Contracts No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: 1. The material facts as to his interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by a vote sufficient for such purpose without counting the vote of the interested director or directors: or 2. The material facts as to his interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders: or -76- 3. The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE EIGHTH Indemnification 1. Claim Brought by Third Parties. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted by such person in such capacity, against costs, charges and other expenses (including attorneys' fees) ("Expenses"), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. 2. Claim By or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgement in its favor by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted by such person in such capacity, against Expenses actually and reasonably incurred by him in connection with the investigation, defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability -77- but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such Expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. 3. Additional Indemnification. In addition to the indemnification provided for in paragraphs 1 and 2 of this Article Eighth, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of another corporation, partnership, joint venture, trust or other enterprise by reason of the fact that he is or was serving or has agreed to serve at the request of the Corporation as a director of such other corporation, partnership, joint venture, trust or other enterprise against Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding for breach of fiduciary duty as such director, except for liability: (i) for breach of the duty of loyalty to such other corporation, partnership, joint venture, trust or other enterprise; (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law; (iii) for unlawful payment of a dividend or unlawful purchase or redemption of stock; or (iv) for any transaction from which the director derived an improper personal benefit. 4. Successful Defense. To the extent that any person referred to in paragraphs 1, 2 or 3 of this Article Eighth has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to therein or in defense of any claim, issue or matter therein, he shall be indemnified against Expenses actually and reasonably incurred by him in connection therewith. 5. Determination of Conduct. Any indemnification under paragraphs 1, 2 or 3 of this Article Eighth (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in said paragraphs 1, 2 or 3 of this Article Eighth. Such determination shall be made (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such quorum is not obtainable, or, even if obtainable and a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. 6. Advance Payment. Expenses incurred by any person referred to in paragraphs 1, 2 or 3 of this Article Eighth in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as provided in this Article Eighth. 7. Certificate of Incorporation Article Not Exclusive; Change in Law. -78- The indemnification and advancement of Expenses provided by, or granted pursuant to, this Article Eighth shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of Expenses may be entitled under any law (common or statutory), by-law, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding the provisions of this Article Eighth, the Corporation shall indemnify and make advancement of Expenses to any person referred to in paragraphs 1, 2 or 3 of this Article Eighth to the fullest extent permitted under the laws of the State of Delaware and any other applicable laws, as they now exist or as they may be amended in the future. 8. Contract Rights. All rights to indemnification and advancement of Expenses provided by this Article Eighth shall be deemed to be a contract between the Corporation and each person referred to in paragraphs 1, 2 or 3 of this Article Eighth. Any repeal or modification of this Article Eighth or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable law shall not in any way diminish any rights to indemnification or advancement of Expenses with respect to any state of facts then or previously existing or any action, suit or proceeding previously or thereafter brought or threatened based in whole or in part on such state of facts. 9. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person referred to in paragraphs 1, 2 or 3 of this Article Eighth against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article Eighth or of Section 145 of the Delaware General Corporation Law. 10. Indemnification of Employees or Agents. The Board of Directors may, by resolution, extend the indemnification and advancement of Expenses provisions of this Article Eighth to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise. 11. Definition of Corporation. For purposes of this Article Eighth, references to the "Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was or has agreed to become a director, officer, employee or agent of such constituent corporation, or is or was serving or has agreed to serve at the request of such constituent -79- corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article Eighth with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. 12. Employee Benefit Plans. For purposes of this Article Eighth, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director or officer of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the Corporation" as referred to in this Article Eighth. ARTICLE NINTH Stockholder Action by Consent Any corporate action upon which a vote of stockholders is required or permitted may be taken without a meeting or vote of stockholders with the written consent of stockholders having not less than a majority of all of the stock entitled to vote upon the action if a meeting were held; provided, that in no case shall the written consent be by holders having less than the minimum percent of the vote required by statute for the proposed corporate action and provided that prompt notice be given to all stockholders of the taking of corporate action without a meeting and by less than unanimous written consent. ARTICLE TENTH Amendment The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE ELEVENTH Limited Liability of Directors No person who was or is a director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for breach of the duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit. For purposes hereof, "fiduciary duty as a director" shall include fiduciary duties arising in serving at the request of the Corporation as -80- a director of another corporation, partnership, joint venture, trust or other enterprise, and "personally liable to the Corporation" shall include liabilities to such other corporations, partnerships, joint ventures, trusts or other enterprises, and liabilities to the Corporation in its capacity as a security holder, joint venturer, partner, beneficiary, creditor or investor of or in any such other corporation, partnership, joint venture, trust or other enterprise. _____________ 4. This Restated Certificate of Incorporation was duly adopted in accordance with provisions of Section 245 of the General Corporation Law of the State of Delaware. 5. The capital of said Corporation will not be reduced under or by reason of this Restated Certificate of Incorporation. IN WITNESS WHEREOF, Northern Trust Corporation has caused its corporate seal to be hereunto affixed and this Restated Certificate of Incorporation to be signed by John B. Snyder, its Executive Vice President, and the same to be attested by Victoria Antoni, its Assistant Secretary, this 29th day of SEPTEMBER, 1992. /s/ John B. Snyder ------------------------ (SEAL) John B. Snyder Executive Vice President /s/ Victoria Antoni - ------------------------- Victoria Antoni Assistant Secretary -81- TABLE OF CONTENTS
PAGE ---- ARTICLE FIRST................................................................................. 1 ARTICLE SECOND................................................................................ 1 ARTICLE THIRD................................................................................. 2 ARTICLE FOURTH................................................................................ 2 I. Preferred Stock..................................................................... 2 Issuance in Series............................................................. 2 Authority of the Board with respect to Series.................................. 2 Dividends...................................................................... 3 Reacquired Shares.............................................................. 4 Voting Rights.................................................................. 4 Outstanding or Reserved for Issuance Preferred Stock........................... 4 Series A Junior Participating Preferred Stock (subject to Preferred Stock purchase Rights).................................................. 5 Auction Preferred Stock, Series C......................................... 9 Flexible Auction Preferred Stock, Series D................................ 31 6.25% Cumulative Preferred Stock, Series E................................ 60 II. Common Stock........................................................................ 74 Dividends...................................................................... 74 Liquidation.................................................................... 74 Voting Rights.................................................................. 74 III. Other Provisions.................................................................... 74 Preemptive Rights.............................................................. 74 Changes in Authorized Capital Stock............................................ 74 ARTICLE FIFTH................................................................................. 75 Powers of the Board...................................................................... 75 Terms and Number of Board Members........................................................ 75 Cumulative Voting........................................................................ 75 ARTICLE SIXTH................................................................................. 76 ARTICLE SEVENTH............................................................................... 76 ARTICLE EIGHTH................................................................................ 77 Claim Brought by Third Parties........................................................... 77 Claim By or in the Right of the Corporation.............................................. 77 Additional Indemnification............................................................... 78 Successful Defense....................................................................... 78
Determination of Conduct.................................................................. 78 Advance payment........................................................................... 78 Certificate of Incorporation Article Not Exclusive; Change in Law......................... 78 Contract Rights........................................................................... 79 Insurance................................................................................. 79 Indemnification of Employees or Agents.................................................... 79 Definition of Corporation................................................................. 79 Employee.................................................................................. 80 ARTICLE NINTH.................................................................................. 80 ARTICLE TENTH.................................................................................. 80 ARTICLE ELEVENTH............................................................................... 80
CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF NORTHERN TRUST CORPORATION NORTHERN TRUST CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation") does hereby certify: (1) The Corporation is regulated under the Bank Holding Company Act of 1956, 12 U.S.C., Section 1841, et seq., as that Act shall from time to time be amended; (2) At a meeting of the Board of Directors of the Corporation held on February 16, 1993, a resolution was adopted setting forth a proposed amendment of the Restated Certificate of Incorporation, declaring the amendment to be advisable and directing that the amendment be considered at a meeting of stockholders of the Corporation. The resolutions setting forth the proposed amendment are as follows: BE IT RESOLVED that the Board of Directors of Northern Trust Corporation declares it advisable that the first sentence of Article Fourth of the Restated Certificate of Incorporation be amended by (1) increasing the total number of shares which the Corporation has the authority to issue, referred to in the second line of Article Fourth, by 9,000,000 shares, and (2) revising the third line of Article Fourth to read in its entirety as follows: "10,000,000 shares of Preferred Stock (Preferred Stock) without par value, and". BE IT FURTHER RESOLVED that the foregoing proposed amendment be submitted to the stockholders of the Corporation for their consideration and approval at the next annual meeting of stockholders of the Corporation. (3) At a meeting of the Board of Directors of the Corporation held on February 16, 1993, resolutions were adopted setting forth a further proposed amendment of the Restated Certificate of Incorporation, declaring the amendment to be advisable and directing that the amendment be considered at a meeting of stockholders of the Corporation. The resolutions setting forth the proposed amendment are as follows: BE IT RESOLVED that the Board of Directors of Northern Trust Corporation declares it advisable that the first sentence of Article Fourth of the Restated Certificate of Incorporation be amended by (1) increasing the total number of shares which the Corporation has the authority to issue, referred to in the second line of Article Fourth, by 70,000,000 shares, and (2) revising the fourth line of Article Fourth to read in its entirety as follows: "140,000,000 shares of Common Stock (Common Stock), $1.66 2/3 par value per share." BE IT FURTHER RESOLVED that the foregoing proposed amendment be submitted to the stockholders of the Corporation for their consideration and approval at the next annual meeting of stockholders of the Corporation. (4) Thereafter, pursuant to such resolutions of its Board of Directors, the stockholders of the Corporation, at a meeting held on April 20, 1993, adopted both of the proposed amendments by voting the number of shares required by the statute in favor of each of the proposed amendments; (5) Each of the said amendments was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware; and (6) Accordingly, there has now been given all corporate authorization necessary to cause the first sentence of Article Fourth of the Restated Certificate of Incorporation to provide as follows: "The total number of shares of all classes of capital stock which the Corporation has the authority to issue is 150,000,000 shares, which are divided into two classes as follows: 10,000,000 shares of Preferred Stock (Preferred Stock) without par value, and 140,000,000 shares of Common Stock (Common Stock), $1.66 2/3 par value per share." (7) The Capital of the Corporation will not be reduced under or by reason of the aforesaid amendments. --2-- IN WITNESS WHEREOF, NORTHERN TRUST CORPORATION has caused this Certificate to be signed and attested by its duly authorized officers, this 20th day of April, 1993. NORTHERN TRUST CORPORATION By: /s/ David W. Fox ---------------------------- Chairman of the Board Attest: /s/ Peter L. Rossiter - ------------------------------ Secretary --3-- CERTIFICATE OF ELIMINATION OF NORTHERN TRUST CORPORATION I, Peter L. Rossiter, Executive Vice President, General Counsel and Secretary of Northern Trust Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware, do hereby certify as follows: FIRST: That the Board of Directors of Northern Trust Corporation (the "Corporation"), by resolutions adopted at a meeting on February 20, 1996, determined to eliminate all of the 6.25% Cumulative Convertible Preferred Stock, Series E, of the Corporation, said resolutions being as follows: WHEREAS, the Corporation redeemed all of the outstanding shares of its 6.25% Cumulative Convertible Preferred Stock, Series E (the "Series E Preferred Stock"), on January 26, 1996; NOW, THEREFORE, BE IT RESOLVED, that the Series E Preferred Stock be returned to the status of "authorized but not issued," and that the Chairman of the Board, the President or any Executive or Senior Executive Vice President, or any one of them acting alone, be, and each of them hereby is, authorized and directed, in the name and on behalf of the Corporation, to execute and cause to filed with the Secretary of State of Delaware, a Certificate of Elimination, and to execute all other instruments and documents and to do and cause to be done all such further acts and things, as may be necessary or advisable to eliminate the Series E Preferred Stock and that all actions of said officers are hereby ratified, approved and confirmed in all respects; and BE IT FURTHER RESOLVED, that none of the authorized shares of the Series E Preferred Stock are outstanding and none will be issued. SECOND: In accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Restated Certificate of Incorporation is hereby amended to eliminate all reference to the Series E Preferred Stock, and the Series E Preferred Stock shall be returned to the status of "authorized but not issued." IN WITNESS WHEREOF, I have signed this Certificate, this 21st day of February, 1996. NORTHERN TRUST CORPORATION By: /s/ Peter L. Rossiter ---------------------------------- Peter L. Rossiter Executive Vice President, General Counsel and Secretary CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF NORTHERN TRUST CORPORATION NORTHERN TRUST CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation") does hereby certify: (1) The Corporation is regulated under the Bank Holding Company Act of 1956, 12 U.S.C., Section 1841, et seq., as that Act shall from time to time be amended. (2) At a meeting of the Board of Directors of the Corporation held on February 18, 1997, resolutions were adopted setting forth a proposed amendment of the Restated Certificate of Incorporation, declaring the amendment to be advisable and directing that the amendment be considered at a meeting of stockholders of the Corporation. The resolutions setting forth the proposed amendment are as follows: BE IT RESOLVED that the Board of Directors of Northern Trust Corporation declares it advisable that the first sentence of Article Fourth of the Restated Certificate of Incorporation be amended by (1) increasing the total number of shares which the Corporation has the authority to issue, referred to in the second line of Article Fourth, by 140,000,000 shares, and (2) revising the fourth line of Article Fourth to read in its entirety as follows: "280,000,000 shares of Common Stock (Common Stock), $1.66-2/3 par value per share." FURTHER RESOLVED that the foregoing proposed amendment be submitted to the stockholders of the Corporation for their consideration and approval at the 1997 annual meeting of stockholders of the Corporation. (3) Thereafter, pursuant to such resolutions of its Board of Directors, the stockholders of the Corporation, at a meeting held on April 15, 1997, adopted the proposed amendment by voting the number of shares required by the statute in favor of the proposed amendment. (4) The amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. (5) Accordingly, there has now been given all corporate authorization necessary to cause the first sentence of Article Fourth of the Restated Certificate of Incorporation to provide as follows: "The total number of shares of all classes of capital stock which the Corporation has the authority to issue is 290,000,000 shares, which are divided into two classes as follows: 10,000,000 shares of Preferred Stock (Preferred Stock) without par value, and 280,000,000 shares of Common Stock (Common Stock), $1.66-2/3 par value per share." (6) The Capital of the Corporation will not be reduced under or by reason of the amendment. IN WITNESS WHEREOF, NORTHERN TRUST CORPORATION has caused this Certificate to be signed and attested by its duly authorized officers, this 21st day of April, 1997. NORTHERN TRUST CORPORATION By: /s/ William A. Osborn _________________________________________ William A. Osborn Chairman and Chief Executive Officer Attest: /s/ Peter L. Rossiter - ------------------------------- Peter L. Rossiter Executive Vice President, General Counsel and Secretary EX-4.(I) 5 AMENDED AND RESTATED TRUST AGREEMNT ================================================================================ Exhibit Number (4)(i) To 3/31/97 Form 10-Q AMENDED AND RESTATED TRUST AGREEMENT among NORTHERN TRUST CORPORATION as Depositor THE FIRST NATIONAL BANK OF CHICAGO, as Property Trustee FIRST CHICAGO DELAWARE INC., as Delaware Trustee and THE ADMINISTRATIVE TRUSTEES NAMED HEREIN ---------------------- Dated as of April 25, 1997 ---------------------- NTC CAPITAL II ================================================================================ NTC CAPITAL II Certain Sections of this Trust Agreement relating to Sections 310 through 318 of the Trust Indenture Act of 1939: Trust Indenture Trust Agreement Act Section Section - ----------- ------- (SS) 310 (a)(1)................................... 8.7 (a)(2)................................... 8.7 (a)(3)................................... 8.9 (a)(4)................................... 2.7(a)(ii) (b)...................................... 8.8 (SS) 311 (a)...................................... 8.13 (b)...................................... 8.13 (SS) 312 (a)...................................... 5.8 (b)...................................... 5.8 (c)...................................... 5.8 (SS) 313 (a)...................................... 8.15(a) (a)(4)................................... 8.15(b) (b)...................................... 8.15(b) (c)...................................... 10.8 (d)...................................... 8.15(c) (SS) 314 (a)...................................... 8.16 (b)...................................... Not Applicable (c)(1)................................... 8.17 (c)(2)................................... 8.17 (c)(3)................................... Not Applicable (d)...................................... Not Applicable (e)...................................... 1.1, 8.17 (SS) 315 (a)...................................... 8.1(a), 8.3(a) (b)...................................... 8.2, 10.8 (c)...................................... 8.1(a) (d)...................................... 8.1, 8.3 (e)...................................... Not Applicable (SS) 316 (a)...................................... Not Applicable (a)(1)(A)................................ Not Applicable (a)(1)(B)................................ Not Applicable (a)(2)................................... Not Applicable (b)...................................... 5.15 (c)...................................... 6.7 (SS) 317 (a)(1)................................... Not Applicable (a)(2)................................... Not Applicable (b)...................................... 5.10 (SS) 318 (a)...................................... 10.10 -i- - ---------- Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Trust Agreement. -ii- TABLE OF CONTENTS ARTICLE I. Defined Terms
Section 1.1. Definitions......................................................... 1 ARTICLE II. Continuation of the Issuer Trust Section 2.1. Name................................................................ 10 Section 2.2. Office of the Delaware Trustee; Principal Place of Business......... 10 Section 2.3. Initial Contribution of Trust Property; Organizational Expenses..... 10 Section 2.4. Issuance of the Capital Securities.................................. 11 Section 2.5. Issuance of the Common Securities; Subscription and Purchase of Debentures.................................................... 11 Section 2.6. Continuation of Trust............................................... 11 Section 2.7. Authorization to Enter into Certain Transactions.................... 11 Section 2.8. Assets of Trust..................................................... 15 Section 2.9. Title to Trust Property............................................. 15 ARTICLE III. Payment Account Section 3.1. Payment Account..................................................... 15 ARTICLE IV. Distributions; Redemption Section 4.1. Distributions....................................................... 15 Section 4.2. Redemption.......................................................... 17 Section 4.3. Subordination of Common Securities.................................. 18 Section 4.4. Payment Procedures.................................................. 19 Section 4.5. Tax Returns and Reports............................................. 19 Section 4.6. Payment of Taxes, Duties, Etc. of the Issuer Trust.................. 19 Section 4.7. Payments under Indenture or Pursuant to Direct Actions.............. 19
-iii- ARTICLE V. Trust Securities Certificates
Section 5.1. Initial Ownership................................................... 20 Section 5.2. The Trust Securities Certificates................................... 20 Section 5.3. Execution and Delivery of Trust Securities Certificates............. 20 Section 5.4. Book-Entry Capital Securities....................................... 20 Section 5.5. Registration of Transfer and Exchange of Capital Securities Certificates..................................................... 22 Section 5.6. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates.. 23 Section 5.7. Persons Deemed Holders.............................................. 24 Section 5.8. Access to List of Holders' Names and Addresses...................... 24 Section 5.9. Maintenance of Office or Agency..................................... 24 Section 5.10. Appointment of Paying Agent......................................... 24 Section 5.11. Ownership of Common Securities by Depositor......................... 25 Section 5.12. Notices to Clearing Agency.......................................... 25 Section 5.13. Rights of Holders; Waivers of Past Defaults......................... 25 ARTICLE VI. Acts of Holders; Meetings; Voting Section 6.1. Limitations on Voting Rights........................................ 27 Section 6.2. Notice of Meetings.................................................. 28 Section 6.3. Meetings of Holders of the Capital Securities....................... 28 Section 6.4. Voting Rights....................................................... 29 Section 6.5. Proxies, etc........................................................ 29 Section 6.6. Holder Action by Written Consent.................................... 29 Section 6.7. Record Date for Voting and Other Purposes........................... 29 Section 6.8. Acts of Holders..................................................... 29 Section 6.9. Inspection of Records............................................... 30 ARTICLE VII. Representations and Warranties Section 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee............................................. 30 Section 7.2. Representations and Warranties of Depositor......................... 32
-iv- ARTICLE VIII. The Issuer Trustees
Section 8.1. Certain Duties and Responsibilities..................................32 Section 8.2. Certain Notices......................................................34 Section 8.3. Certain Rights of Property Trustee...................................35 Section 8.4. Not Responsible for Recitals or Issuance of Securities...............36 Section 8.5. May Hold Securities..................................................36 Section 8.6. Compensation; Indemnity; Fees........................................37 Section 8.7. Corporate Property Trustee Required; Eligibility of Issuer Trustees..38 Section 8.8. Conflicting Interests................................................38 Section 8.9. Co-Trustees and Separate Trustee.....................................38 Section 8.10. Resignation and Removal; Appointment of Successor....................40 Section 8.11. Acceptance of Appointment by Successor...............................41 Section 8.12. Merger, Conversion, Consolidation or Succession to Business..........41 Section 8.13. Preferential Collection of Claims Against Depositor or Issuer Trust..41 Section 8.14. Property Trustee May File Proofs of Claim............................42 Section 8.15. Reports by Property Trustee..........................................42 Section 8.16. Reports to the Property Trustee......................................43 Section 8.17. Evidence of Compliance with Conditions Precedent.....................43 Section 8.18. Number of Issuer Trustees............................................43 Section 8.19. Delegation of Power..................................................43 Section 8.20. Appointment of Administrative Trustees...............................44 ARTICLE IX. Termination, Liquidation and Merger Section 9.1. Termination Upon Expiration Date.....................................44 Section 9.2. Early Termination....................................................44 Section 9.3. Termination..........................................................45 Section 9.4. Liquidation..........................................................45 Section 9.5. Mergers, Consolidations, Amalgamations or Replacements of Issuer Trust.......................................................46
-v- ARTICLE X. Miscellaneous Provisions
Section 10.1. Limitation of Rights of Holders..................................... 47 Section 10.2. Amendment........................................................... 47 Section 10.3. Separability........................................................ 48 Section 10.4. Governing Law....................................................... 48 Section 10.5. Payments Due on Non-Business Day.................................... 49 Section 10.6. Successors.......................................................... 49 Section 10.7. Headings............................................................ 49 Section 10.8. Reports, Notices and Demands........................................ 49 Section 10.9. Agreement Not to Petition........................................... 50 Section 10.10. Trust Indenture Act; Conflict with Trust Indenture Act.............. 50 Section 10.11. Acceptance of Terms of Trust Agreement, Guarantee Agreement and Indenture..................................................... 50 Exhibit A Certificate of Trust Exhibit B Form of Certificate Depository Agreement Exhibit C Form of Common Securities Certificate Exhibit D Form of Expense Agreement Exhibit E Form of Capital Securities Certificate
-vi- AMENDED AND RESTATED TRUST AGREEMENT, dated as of April 25, 1997, among (i) Northern Trust Corporation, a Delaware corporation (including any successors or assigns, the "Depositor"), (ii) The First National Bank of Chicago, a national banking association, as property trustee (in such capacity, the "Property Trustee" and, in its separate corporate capacity and not in its capacity as Property Trustee, the "Bank"), (iii) First Chicago Delaware Inc., a Delaware corporation, as Delaware trustee (in such capacity, the "Delaware Trustee"), (iv) J. David Brock, an individual, and Duane S. Rocheleau, an individual, each of whose address is c/o Northern Trust Corporation, Fifty South LaSalle Street, Chicago, Illinois 60675 (each an "Administrative Trustee" and collectively the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees being referred to collectively as the "Issuer Trustees"), and (v) the several Holders, as hereinafter defined. Witnesseth Whereas, the Depositor, the Delaware Trustee and the Administrative Trustee named therein have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act by entering into the Trust Agreement, dated as of December 27, 1996 (the "Original Trust Agreement"), and by the execution and filing by the Delaware Trustee with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on December 27, 1996, attached as Exhibit A; and Whereas, the parties hereto desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities by the Issuer Trust to the Depositor, (ii) the issuance and sale of the Capital Securities by the Issuer Trust pursuant to the Underwriting Agreement, and (iii) the acquisition by the Issuer Trust from the Depositor of all of the right, title and interest in the Debentures; Now Therefore, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Holders, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I. Defined Terms Section 1.1. Definitions. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) All other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) All accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles; (e) Unless the context otherwise requires, any reference to an "Article", a "Section" or an "Exhibit" refers to an Article, a Section or an Exhibit, as the case may be, of or to this Trust Agreement; and (f) The words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.8. "Additional Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of Additional Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of Debentures for such period. "Additional Sums" has the meaning specified in Section 10.6 of the Indenture. "Administrative Trustee" means each of the Persons appointed in accordance with Section 8.20 solely in such Person's capacity as Administrative Trustee of the Issuer Trust heretofore created and continued hereunder and not in such Person's individual capacity, or any successor trustee appointed as herein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Procedures" means, with respect to any transfer or transaction involving a Book-Entry Capital Security, the rules and procedures of the Clearing Agency for such Book-Entry Capital Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Bank" has the meaning specified in the preamble to this Trust Agreement. "Bankruptcy Event" means, with respect to any Person: (a) the entry of a decree or order by a court having jurisdiction in the premises judging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Person or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the -2- continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (b) the institution by such Person of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of such Person or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by such Person in furtherance of any such action. "Bankruptcy Laws" has the meaning specified in Section 10.9. "Board of Directors" means the board of directors of the Depositor or the Executive Committee of the board of directors of the Depositor (or any other committee of the board of directors of the Depositor performing similar functions) or a committee designated by the board of directors of the Depositor (or any such committee), comprised of two or more members of the board of directors of the Depositor or officers of the Depositor, or both. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors, or officers of the Depositor to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Issuer Trustees. "Book-Entry Capital Securities Certificate" means a Capital Securities Certificate evidencing ownership of Book-Entry Capital Securities. "Book-Entry Capital Security" means a Capital Security, the ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 5.4. "Business Day" means a day other than (a) a Saturday or Sunday, (b) a day on which banking institutions in the City of New York or the City of Chicago, Illinois are authorized or required by law or executive order to remain closed, or (c) a day on which the Property Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture Trustee is closed for business. "Capital Securities Certificate" means a certificate evidencing ownership of Capital Securities, substantially in the form attached as Exhibit E. "Capital Security" means an undivided beneficial interest in the assets of the Issuer Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution to the extent provided herein. -3- "Certificate Depository Agreement" means the agreement among the Issuer Trust, the Depositor and DTC, as the initial Clearing Agency, dated as of the Closing Date, substantially in the form attached as Exhibit B, as the same may be amended and supplemented from time to time. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. DTC will be the initial Clearing Agency. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means the Time of Delivery, which date is also the date of execution and delivery of this Trust Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. "Common Security" means an undivided beneficial interest in the assets of the Issuer Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution to the extent provided herein. "Corporate Trust Office" means (i) when used with respect to the Property Trustee, the principal office of the Property Trustee located in Chicago, Illinois, and (ii) when used with respect to the Debenture Trustee, the principal office of the Debenture Trustee located in Chicago, Illinois. "Debenture Event of Default" means any "Event of Default" specified in Section 5.1 of the Indenture. "Debenture Redemption Date" means, with respect to any Debentures to be redeemed under the Indenture, the date fixed for redemption of such Debentures under the Indenture. "Debenture Tax Event" means a "Tax Event" as defined in the Indenture. "Debenture Trustee" means the Person identified as the "Trustee" in the Indenture, solely in its capacity as Trustee pursuant to the Indenture and not in its individual capacity, or its successor in interest in such capacity, or any successor Trustee appointed as provided in the Indenture. "Debentures" means the Depositor's Floating Rate Junior Subordinated Deferrable Interest Debentures, Series B, issued pursuant to the Indenture. -4- "Definitive Capital Securities Certificates" means either or both (as the context requires) of (i) Capital Securities Certificates issued as Book-Entry Capital Securities Certificates as provided in Section 5.2 or 5.4, and (ii) Capital Securities Certificates issued in certificated, fully registered form as provided in Section 5.2, 5.4 or 5.5. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code (S) 3801 et seq., as it may be amended from time to time. "Delaware Trustee" means the Person identified as the "Delaware Trustee" in the preamble to this Trust Agreement, solely in its capacity as Delaware Trustee of the trust heretofore created and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as herein provided. "Depositor" has the meaning specified in the preamble to this Trust Agreement. "Determination Date" means, in respect of each Distribution Period, the second day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London prior to the commencement of such Distribution Period. "Direct Action" has the meaning specified in Section 5.13(c). "Distribution Amount" means, with respect to any Capital Security and any Distribution Period, the amount of Distributions payable in respect of such Distribution Period, which amount shall be calculated by applying the Distribution Rate to the Liquidation Amount of each Trust Security Outstanding at the commencement of the Distribution Period, by multiplying each such amount by the actual number of days in the Distribution Period concerned (which actual number of days shall include the first day but exclude the last day of such Distribution Period) divided by 360 and rounding the resultant figure upwards to the nearest cent (half a cent being rounded upwards). The determination of the Distribution Rate and the Distribution Amount by or on behalf of the Issuer Trust shall (in the absence of manifest error) be final and binding on all parties. "Distribution Date" has the meaning specified in Section 4.1(a). "Distribution Period" means each period beginning on, and including, April 25, 1997, and ending on, but excluding, the first Distribution Date, and each successive period beginning on, and including, a Distribution Date and ending on, but excluding, the next succeeding Distribution Date. "Distribution Rate" means, with respect to any Distribution Period, a rate per annum equal to the Interest Rate (as defined in the Debentures) with respect to the Interest Period under (and as defined in) the Debentures that begins on the same date as such Distribution Period begins and ends on the same date as such Distribution Period ends. "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1. "DTC" means The Depository Trust Company. -5- "Early Termination Event" has the meaning specified in Section 9.2. "Event of Default" means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) the occurrence of a Debenture Event of Default; or (b) default by the Issuer Trust in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (c) default by the Issuer Trust in the payment of any Redemption Price of any Trust Security when it becomes due and payable; or (d) default in the performance, or breach, in any material respect, of any covenant or warranty of the Issuer Trustees in this Trust Agreement (other than those specified in clause (b) or (c) above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Issuer Trustees and to the Depositor by the Holders of at least 25% in aggregate Liquidation Amount of the Outstanding Capital Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) the occurrence of a Bankruptcy Event with respect to the Property Trustee if a successor Property Trustee has not been appointed within 90 days thereof. "Exchange Act" means the Securities Exchange Act of 1934, and any successor statute thereto, in each case as amended from time to time. "Expense Agreement" means the Agreement as to Expenses and Liabilities, dated as of the Closing Date, between the Depositor and the Issuer Trust, substantially in the form attached as Exhibit D, as amended from time to time. "Expiration Date" has the meaning specified in Section 9.1. "Guarantee Agreement" means the Guarantee Agreement executed and delivered by the Depositor and The First National Bank of Chicago, as guarantee trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the Holders of the Capital Securities, as amended from time to time. "Holder" means a Person in whose name a Trust Security or Trust Securities are registered in the Securities Register; any such Person shall be a beneficial owner within the meaning of the Delaware Business Trust Act. "Indemnified Person" has the meaning specified in Section 8.6(c). -6- "Indenture" means the Junior Subordinated Indenture, dated as of January 1, 1997, between the Depositor and the Debenture Trustee, as trustee, as amended or supplemented from time to time. "Issuer Trust" means the Delaware business trust known as "NTC Capital II" which was created on December 27, 1996 under the Delaware Business Trust Act pursuant to the Original Trust Agreement and the filing of the Certificate of Trust, and continued pursuant to this Trust Agreement. "Issuer Trustees" has the meaning specified in the preamble to this Trust Agreement. "Investment Company Act" means the Investment Company Act of 1940, or any successor statute thereto, in each case as amended from time to time. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption of any Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Debentures to be contemporaneously redeemed in accordance with the Indenture, the proceeds of which will be used to pay the Redemption Price of such Trust Securities, (b) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a dissolution or liquidation of the Issuer Trust, Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Debentures are distributed, and (c) with respect to any distribution of "Additional Amounts to Holders of Trust Securities, Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities in respect of which such distribution is made. "Liquidation Amount" means the stated amount of $1,000 per Trust Security. "Liquidation Date" means the date of the dissolution, winding-up or termination of the Issuer Trust pursuant to Section 9.4. "Liquidation Distribution" has the meaning specified in Section 9.4(d). "Majority in Liquidation Amount of the Capital Securities" or "Majority in Liquidation Amount of the Common Securities" means, except as provided by the Trust Indenture Act, Capital Securities or Common Securities, as the case may be, representing more than 50% of the aggregate Liquidation Amount of all then Outstanding Capital Securities or Common Securities, as the case may be. "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Depositor, and delivered to the Issuer Trustees. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: (a) a statement by each officer signing the Officers' Certificate that such officer has read the covenant or condition and the definitions relating thereto; -7- (b) a brief statement of the nature and scope of the examination or investigation undertaken by such officer in rendering the Officers' Certificate; (c) a statement that such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Depositor or any Affiliate of the Depositor. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding", when used with respect to Trust Securities, means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Trust Agreement, except: (a) Trust Securities theretofore cancelled by the Property Trustee or delivered to the Property Trustee for cancellation; (b) Trust Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent; provided that, if such Trust Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and (c) Trust Securities that have been paid or in exchange for or in lieu of which other Trust Securities have been executed and delivered pursuant to Sections 5.4, 5.5, 5.6 and 5.11; provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Capital Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Capital Securities owned by the Depositor, any Issuer Trustee or any Affiliate of the Depositor or of any Issuer Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Issuer Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Capital Securities that such Issuer Trustee knows to be so owned shall be so disregarded, and (b) the foregoing shall not apply at any time when all of the outstanding Capital Securities are owned by the Depositor, one or more of the Issuer Trustees and/or any such Affiliate. Capital Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to act with respect to such Capital Securities and that the pledgee is not the Depositor or any Affiliate of the Depositor. "Owner" means each Person who is the beneficial owner of Book-Entry Capital Securities as reflected in the records of the Clearing Agency or, if a Clearing Agency Participant is not the Owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency (directly or indirectly, in accordance with the rules of such Clearing Agency). -8- "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.10 and shall initially be the Bank. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee in its corporate trust department for the benefit of the Holders in which all amounts paid in respect of the Debentures will be held and from which the Property Trustee, through the Paying Agent, shall make payments to the Holders in accordance with Sections 4.1 and 4.2. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Property Trustee" means the Person identified as the "Property Trustee" in the preamble to this Trust Agreement, solely in its capacity as Property Trustee of the trust heretofore created and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the stated maturity of the Debentures shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, paid by the Depositor upon the concurrent redemption of a Like Amount of Debentures. "Relevant Trustee" has the meaning specified in Section 8.10. "Securities Act" means the Securities Act of 1933, and any successor statute thereto, in each case as amended from time to time. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.5. "Successor Capital Securities" of any particular Capital Securities Certificate means every Capital Securities Certificate issued after, and evidencing all or a portion of the same beneficial interest in the Issuer Trust as that evidenced by, such particular Capital Securities Certificate; and, for the purposes of this definition, any Capital Securities Certificate executed and delivered under Section 5.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Capital Securities Certificate shall be deemed to evidence the same beneficial interest in the Issuer Trust as the mutilated, destroyed, lost or stolen Capital Securities Certificate. "Time of Delivery" has the meaning specified in the Underwriting Agreement. -9- "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including (i) all exhibits, and (ii) for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Payment Account, and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to the trusts of this Trust Agreement. "Trust Security" means any one of the Common Securities or the Capital Securities. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Capital Securities Certificates. "Underwriting Agreement" means the Pricing Agreement, dated as of April 22, 1997, among the Issuer Trust, the Depositor and the Underwriters named therein, as the same may be amended from time to time. "Vice President", when used with respect to the Depositor, means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president." ARTICLE II. Continuation of the Issuer Trust Section 2.1. Name. The trust continued hereby shall be known as "NTC Capital II", as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Issuer Trustees, in which name the Issuer Trustees may conduct the business of the Issuer Trust, make and execute contracts and other instruments on behalf of the Issuer Trust and sue and be sued. Section 2.2. Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is 300 King Street, Wilmington, Delaware 19801, Attention: Michael J. Majchrzak, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Holders, the Depositor, the Property Trustee and the Administrative Trustees. The principal executive office of the Issuer Trust is Fifty South LaSalle Street, Chicago, Illinois 60675, Attention: Secretary. -10- Section 2.3. Initial Contribution of Trust Property; Organizational Expenses. The Property Trustee acknowledges receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $10, which constituted the initial Trust Property. The Depositor shall pay organizational expenses of the Issuer Trust as they arise or shall, upon request of any Issuer Trustee, promptly reimburse such Issuer Trustee for any such expenses paid by such Issuer Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses. Section 2.4. Issuance of the Capital Securities. The Depositor, both on its own behalf and on behalf of the Issuer Trust pursuant to the Original Trust Agreement, has executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Issuer Trust, shall manually execute in accordance with Sections 5.2, 5.3 and 8.9(a) and the Property Trustee shall deliver to the Underwriters, Capital Securities Certificates, registered in the names requested by the Underwriters, evidencing an aggregate of 120,000 Capital Securities having an aggregate Liquidation Amount of $120,000,000, against the aggregate purchase price of such Capital Securities of $118,800,000. Section 2.5. Issuance of the Common Securities; Subscription and Purchase of Debentures. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Issuer Trust, shall execute in accordance with Sections 5.2, 5.3 and 8.9(a) and the Property Trustee shall deliver to the Depositor Common Securities Certificates, registered in the name of the Depositor, evidencing an aggregate of 3,712 Common Securities having an aggregate Liquidation Amount of $3,712,000, against the aggregate purchase price of such Common Securities of $3,674,880. Contemporaneously therewith, an Administrative Trustee, on behalf of the Issuer Trust, shall subscribe for and purchase from the Depositor the Debentures, registered in the name of the Property Trustee on behalf of the Issuer Trust and having an aggregate principal amount equal to $123,712,000, and, in satisfaction of the purchase price for such Debentures, the Property Trustee, on behalf of the Issuer Trust, shall deliver to the Depositor the sum of $122,474,880 (being the sum of the amounts paid pursuant to (i) the second sentence of Section 2.4 and (ii) the first sentence of this Section 2.5). Section 2.6. Continuation of Trust. The exclusive purposes and functions of the Issuer Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures, and (b) to engage in those activities necessary or incidental thereto. The Depositor hereby reaffirms the appointment of the Property Trustee and the Delaware Trustee and appoints the Administrative Trustees as trustees of the Issuer Trust, to have all the rights, powers and duties to the extent set forth herein, and the respective Issuer Trustees hereby accept such appointment. The Property Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Issuer Trust and the Holders. The Administrative Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Issuer Trust. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Property Trustee or the Administrative Trustees set forth herein. The Delaware Trustee shall be one of the trustees of the Issuer Trust for the sole and limited purpose of fulfilling the -11- requirements of Section 3807 of the Delaware Business Trust Act and for taking such actions as are required to be taken by a Delaware trustee under the Delaware Business Trust Act. Section 2.7. Authorization to Enter into Certain Transactions. (a) The Issuer Trustees shall conduct the affairs of the Issuer Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Issuer Trustees shall have the authority to enter into all transactions and agreements determined by the Issuer Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Issuer Trustees, as the case may be, under this Trust Agreement, and to perform all acts in furtherance thereof, including, without limitation, the following: (i) As among the Issuer Trustees, each Administrative Trustee shall have the power and authority to act on behalf of the Issuer Trust with respect to the following matters: (A) the issuance and sale of the Trust Securities; (B) to cause the Issuer Trust to enter into, and to execute, deliver and perform on behalf of the Issuer Trust, the Expense Agreement and the Certificate Depository Agreement and such other agreements as may be necessary or desirable in connection with the purposes and function of the Issuer Trust; (C) assisting in the registration of the Capital Securities under the Securities Act and under applicable state securities or blue sky laws and the qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act; (D) assisting in the listing of the Capital Securities upon such securities exchange or exchanges as shall be determined by the Depositor, with the registration of the Capital Securities under the Exchange Act and with the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (E) assisting in the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Debentures to the Holders in accordance with this Trust Agreement; (F) the consent to the appointment of a Paying Agent, authenticating agent and Securities Registrar in accordance with this Trust Agreement (which consent shall not be unreasonably withheld); (G) execution of the Trust Securities on behalf of the Issuer Trust in accordance with this Trust Agreement; (H) execution and delivery of closing certificates, if any, pursuant to the Underwriting Agreement and application for a taxpayer identification number for the Issuer Trust; -12- (I) unless otherwise determined by the Property Trustee or Holders of at least a Majority in Liquidation Amount of the Capital Securities or as otherwise required by the Delaware Business Trust Act or the Trust Indenture Act, to execute on behalf of the Issuer Trust (either acting alone or together with any or all of the Administrative Trustees) any documents that the Administrative Trustees have the power to execute pursuant to this Trust Agreement; and (J) the taking of any action incidental to the foregoing as the Issuer Trustees may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement. (ii) As among the Issuer Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Issuer Trust with respect to the following matters: (A) the establishment of the Payment Account; (B) the receipt of the Debentures; (C) the collection of interest, principal and any other payments made in respect of the Debentures and the holding of such amounts in the Payment Account; (D) the distribution through the Paying Agent of amounts distributable to the Holders in respect of the Trust Securities; (E) the exercise of all of the rights, powers and privileges of a holder of the Debentures; (F) the sending of notices of default and other information regarding the Trust Securities and the Debentures to the Holders in accordance with this Trust Agreement; (G) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; (H) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Issuer Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (I) after an Event of Default (other than under paragraph (b), (c), (d) or (e) of the definition of such term if such Event of Default is by or with respect to the Property Trustee) the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); and (J) any of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 2.7(a)(i)(E) and (I) herein; and in the event of a conflict -13- between the action of the Administrative Trustees and the action of the Property Trustee, the action of the Property Trustee shall prevail. (b) So long as this Trust Agreement remains in effect, the Issuer Trust (or the Issuer Trustees acting on behalf of the Issuer Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Issuer Trustees shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) take any action that would reasonably be expected to cause the Issuer Trust to become taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes, (iv) incur any indebtedness for borrowed money or issue any other debt, or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Administrative Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Issuer Trust or the Holders in their capacity as Holders. (c) In connection with the issue and sale of the Capital Securities, the Depositor shall have the right and responsibility to assist the Issuer Trust with respect to, or effect on behalf of the Issuer Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the preparation and filing by the Issuer Trust with the Commission and the execution on behalf of the Issuer Trust of a registration statement on the appropriate form in relation to the Capital Securities, including any amendments thereto and the taking of any action necessary or desirable to sell the Capital Securities in a transaction or a series of transactions pursuant thereto; (ii) the determination of the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and the taking of any and all such acts, other than actions that must be taken by or on behalf of the Issuer Trust, and advice to the Issuer Trust of actions that must be taken by or on behalf of the Issuer Trust, and the preparation for execution and filing of any documents to be executed and filed by the Issuer Trust or on behalf of the Issuer Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such States in connection with the sale of the Capital Securities; (iii) the preparation for filing by the Issuer Trust and execution on behalf of the Issuer Trust of an application to the Nasdaq Stock Market or any national stock exchange or other interdealer quotation system for listing upon notice of issuance of any Capital Securities; (iv) the preparation for filing by the Issuer Trust with the Commission and the execution on behalf of the Issuer Trust of a registration statement on Form 8-A relating to the registration of the Capital Securities under Section 12(b) or 12(g) of the Exchange Act, including any amendments thereto; (v) the negotiation of the terms of, and the execution and delivery of, the Underwriting Agreement providing for the sale of the Capital Securities; and -14- (vi) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (d) Notwithstanding anything herein to the contrary, the Issuer Trustees are authorized and directed to conduct the affairs of the Issuer Trust and to operate the Issuer Trust so that the Issuer Trust will not be deemed to be an "investment company" required to be registered under the Investment Company Act, and will not be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes and so that the Debentures will be treated as indebtedness of the Depositor for United States federal income tax purposes. In this connection, each Administrative Trustee, the Property Trustee and the Holders of at least a Majority in Liquidation Amount of the Common Securities are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Trust Agreement, that such Administrative Trustee, the Property Trustee or Holders of Common Securities determine in their discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect in any material respect the interests of the Holders of the Outstanding Capital Securities. In no event shall the Issuer Trustees be liable to the Issuer Trust or the Holders for any failure to comply with this section that results from a change in law or regulation or in the interpretation thereof. Section 2.8. Assets of Trust. The assets of the Issuer Trust shall consist of the Trust Property. Section 2.9. Title to Trust Property. Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee in trust for the benefit of the Issuer Trust and the Holders in accordance with this Trust Agreement. ARTICLE III. Payment Account Section 3.1. Payment Account. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and its agents shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Holders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. -15- ARTICLE IV. Distributions; Redemption Section 4.1. Distributions. (a) The Trust Securities represent undivided beneficial interests in the Trust Property, and Distributions (including of Additional Amounts) will be made on the Trust Securities at the rate and on the dates that payments of interest (including of Additional Interest, as defined in the Indenture) are made on the Debentures. Accordingly: (i) Distributions on the Trust Securities shall be cumulative, and will accumulate whether or not there are funds of the Issuer Trust available for the payment of Distributions. Distributions shall accumulate from April 25, 1997, and, except in the event (and to the extent) that the Depositor exercises its right to defer the payment of interest on the Debentures pursuant to the Indenture, shall be payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing on July 15, 1997. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar month, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date on which such payment was originally payable (each date on which Distributions are payable in accordance with this Section 4.1(a), a "Distribution Date"). (ii) The Trust Securities shall be entitled to Distributions payable at the Distribution Rate as in effect from time to time. The amount of Distributions payable for any period shall include any Additional Amounts in respect of such period. (iii) Distributions on the Trust Securities shall be made by the Property Trustee from the Payment Account and shall be payable on each Distribution Date only to the extent that the Issuer Trust has funds then on hand and available in the Payment Account for the payment of such Distributions. (b) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities at the close of business on the relevant record date, which shall be at the close of business on the fifteenth day (whether or not a Business Day) next preceding the relevant Distribution Date. (c) (i) The Issuer Trust shall cause the Distribution Rate, the Distribution Amount in respect of each Trust Security and the Distribution Date for each Distribution Period to be notified to the Property Trustee, each Paying Agent appointed by the Issuer Trust and any securities exchange or automated quotation system on which the Trust Securities are listed or quoted and also to be notified to the Holders of the Trust Securities in accordance with the provisions of Section 10.8, in each case as soon as practicable after the determination thereof but in no event later than the second Business Day after the Determination Date in respect of such Distribution Period. -16- (ii) All calculations of the Distribution Rate and the Distribution Amount by or on behalf of the Issuer Trust shall (in the absence of manifest error) be final and binding on all parties, and all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Section 4.1(c) or the provisions of the Indenture relating to the calculation of the Interest Rate (as defined in the Indenture), whether by the Reference Banks (or any of them) or the Debenture Trustee (in each case as defined in the Indenture), shall (in the absence of willful default, bad faith or manifest error) be binding on the Issuer Trust, the Depositor, the Debenture Trustee and all of the Holders of the Trust Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Debenture Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions. Section 4.2. Redemption. (a) On each Debenture Redemption Date and on the stated maturity of the Debentures, the Issuer Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. (b) Notice of redemption shall be given by the Property Trustee by first- class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price or if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, the estimate of the Redemption Price together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the third Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated); (iii) the CUSIP number or CUSIP numbers of the Capital Securities affected; (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the aggregate Liquidation Amount of the particular Trust Securities to be redeemed; (v) that on the Redemption Date the Redemption Price will become due and payable upon each such Trust Security to be redeemed and that Distributions thereon will cease to accumulate on and after said date, except as provided in Section 4.2(d) below; and (vi) the place or places where the Trust Securities are to be surrendered for the payment of the Redemption Price. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Issuer Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price. -17- (d) If the Property Trustee gives a notice of redemption in respect of any Capital Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 4.2(c), the Property Trustee will, with respect to Book-Entry Capital Securities, irrevocably deposit with the Clearing Agency for such Book-Entry Capital Securities, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give such Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the Holders of the Capital Securities. With respect to Capital Securities that are not Book-Entry Capital Securities, the Property Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying Agent, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders of the Capital Securities upon surrender of their Capital Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Holders holding Trust Securities so called for redemption will cease, except the right of such Holders to receive the Redemption Price and any Distribution payable in respect of the Trust Securities on or prior to the Redemption Date, but without interest, and such Securities will cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar month, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Issuer Trust or by the Depositor pursuant to the Guarantee Agreement, Distributions on such Trust Securities will continue to accumulate, as set forth in Section 4.1, from the Redemption Date originally established by the Issuer Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. (e) Subject to Section 4.3(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated pro rata to the Common Securities and the Capital Securities based upon the relative Liquidation Amounts of such classes. The particular Capital Securities to be redeemed shall be selected on a pro rata basis based upon their respective Liquidation Amounts not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Capital Securities not previously called for redemption, provided that so long as the Capital Securities are in book- entry-only form, such selection shall be made in accordance with the customary procedures for the Clearing Agency for the Capital Securities. The Property Trustee shall promptly notify the Securities Registrar in writing of the Capital Securities selected for redemption and, in the case of any Capital Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Capital Securities shall relate, in the case of any Capital Securities redeemed or to be redeemed only in part, to the portion of the aggregate Liquidation Amount of Capital Securities that has been or is to be redeemed. -18- Section 4.3. Subordination of Common Securities. (a) Payment of Distributions (including any Additional Amounts) on, the Redemption Price of, and the Liquidation Distribution in respect of the Trust Securities, as applicable, shall be made, subject to Section 4.2(e), pro rata among the Common Securities and the Capital Securities based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date, Redemption Date or Liquidation Date any Event of Default resulting from a Debenture Event of Default specified in Section 5.1(1) or 5.1(2) of the Indenture shall have occurred and be continuing, no payment of any Distribution (including any Additional Amounts) on, Redemption Price of, or Liquidation Distribution in respect of any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including any Additional Amounts) on all Outstanding Capital Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Capital Securities then called for redemption, or in the case of payment of the Liquidation Distribution the full amount of such Liquidation Distribution on all Outstanding Capital Securities, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including any Additional Amounts) on, or the Redemption Price of, the Capital Securities then due and payable. (b) In the case of the occurrence of any Event of Default resulting from any Debenture Event of Default, the Holders of the Common Securities shall have no right to act with respect to any such Event of Default under this Trust Agreement until the effect of all such Events of Default with respect to the Capital Securities have been cured, waived or otherwise eliminated. Until all such Events of Default under this Trust Agreement with respect to the Capital Securities have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Capital Securities and not on behalf of the Holders of the Common Securities, and only the Holders of the Capital Securities will have the right to direct the Property Trustee to act on their behalf. Section 4.4. Payment Procedures. Payments of Distributions (including any Additional Amounts) or of the Redemption Price, Liquidation Amount or any other amounts in respect of the Capital Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Capital Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency in immediately available funds. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Holders of the Common Securities. Section 4.5. Tax Returns and Reports. The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense, and file all United States federal, state and local tax and information returns and reports required to be filed by or in respect of the Issuer Trust. In this regard, the Administrative Trustees shall (a) prepare and file (or cause to be prepared and filed) all Internal Revenue Service forms required to be filed in respect of the Issuer Trust in each taxable year of the Issuer Trust, and (b) prepare and furnish (or cause to be prepared and furnished) to each Holder all Internal Revenue Service forms required to be provided by the Issuer Trust. The Administrative Trustees shall provide the Depositor and the Property Trustee with a copy of all such -19- returns and reports promptly after such filing or furnishing. The Issuer Trustees shall comply with United States federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Holders under the Trust Securities. Section 4.6. Payment of Taxes, Duties, Etc. of the Issuer Trust. Upon receipt under the Debentures of Additional Sums, the Property Trustee shall promptly pay any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Issuer Trust by the United States or any other taxing authority. Section 4.7. Payments under Indenture or Pursuant to Direct Actions. Any amount payable hereunder to any Holder of Capital Securities shall be reduced by the amount of any corresponding payment such Holder (or Owner with respect to a Holder's Capital Securities) has directly received pursuant to Section 5.8 of the Indenture or Section 5.13 of this Trust Agreement. ARTICLE V. Trust Securities Certificates Section 5.1. Initial Ownership. Upon the creation of the Issuer Trust and the contribution by the Depositor pursuant to Section 2.3 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are Outstanding, the Depositor shall be the sole beneficial owner of the Issuer Trust. Section 5.2. The Trust Securities Certificates. (a) The Capital Securities Certificates shall be issued in minimum denominations of $1,000 Liquidation Amount and integral multiples of $1,000 in excess thereof, and the Common Securities Certificates shall be issued in denominations of $1,000 Liquidation Amount and integral multiples thereof. The Trust Securities Certificates shall be executed on behalf of the Issuer Trust by manual signature of at least one Administrative Trustee. Trust Securities Certificates bearing the manual signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Issuer Trust, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Holder, and shall be entitled to the rights and subject to the obligations of a Holder hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Section 5.5. (b) Upon their original issuance, Capital Securities Certificates shall be issued in the form of one or more Book-Entry Capital Securities Certificates registered in the name of DTC, as Clearing Agency, or its nominee and deposited with DTC or a custodian for DTC for credit by DTC to the respective accounts of the Owners thereof (or such other accounts as they may direct). -20- (c) A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate. Section 5.3. Execution and Delivery of Trust Securities Certificates. At each Time of Delivery, the Administrative Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4 and 2.5, to be executed on behalf of the Issuer Trust and delivered to or upon the written order of the Depositor, executed by one authorized officer thereof, without further corporate action by the Depositor, in authorized denominations. Section 5.4. Book-Entry Capital Securities. (a) Each Book-Entry Capital Securities Certificate issued under this Trust Agreement shall be registered in the name of the Clearing Agency or a nominee thereof and delivered to such Clearing Agency or a nominee thereof or custodian therefor, and each such Book-Entry Capital Securities Certificate shall constitute a single Capital Securities Certificate for all purposes of this Trust Agreement. (b) Notwithstanding any other provision in this Trust Agreement, no Book- Entry Capital Securities Certificate may be exchanged in whole or in part for Capital Securities Certificates registered, and no transfer of a Book-Entry Capital Securities Certificate in whole or in part may be registered, in the name of any Person other than the Clearing Agency for such Book-Entry Capital Securities Certificates or a nominee thereof unless (i) the Clearing Agency advises the Property Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Book-Entry Capital Securities Certificates, and the Property Trustee is unable to locate a qualified successor, (ii) the Issuer Trust at its option advises the Depositary in writing that it elects to terminate the book-entry system through the Clearing Agency, or (iii) a Debenture Event of Default has occurred and is continuing. Upon the occurrence of any event specified in clause (i), (ii) or (iii) above, the Administrative Trustees shall notify the Clearing Agency and instruct the Clearing Agency to notify all Owners of Book-Entry Capital Securities, the Delaware Trustee and the Administrative Trustees of the occurrence of such event and of the availability of the Definitive Capital Securities Certificates to Owners of such class or classes, as applicable, requesting the same. (c) If any Book-Entry Capital Securities Certificate is to be exchanged for other Capital Securities Certificates or cancelled in part, or if any other Capital Securities Certificate is to be exchanged in whole or in part for Book- Entry Capital Securities represented by a Book-Entry Capital Securities Certificate, then either (i) such Book-Entry Capital Securities Certificate shall be so surrendered for exchange or cancellation as provided in this Article V or (ii) the aggregate Liquidation Amount represented by such Book-Entry Capital Securities Certificate shall be reduced, subject to Section 5.2, or increased by an amount equal to the Liquidation Amount represented by that portion of the Book-Entry Capital Securities Certificate to be so exchanged or cancelled, or equal to the Liquidation Amount represented by such other Capital Securities Certificates to be so exchanged for Book-Entry Capital Securities represented thereby, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Property Trustee, in accordance with the Applicable Procedures, shall instruct the Clearing Agency or its authorized representative to make a corresponding adjustment to its records. Upon surrender to the Administrative Trustees or the Securities Registrar of the Book-Entry Capital Securities Certificate or Certificates by the Clearing Agency, accompanied by registration instructions, the Administrative Trustees, -21- or any one of them, shall execute the Definitive Capital Securities Certificates in accordance with the instructions of the Clearing Agency. None of the Securities Registrar or the Issuer Trustees shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Capital Securities Certificates, the Issuer Trustees shall recognize the Holders of the Definitive Capital Securities Certificates as Holders. The Definitive Capital Securities Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees, as evidenced by the execution thereof by the Administrative Trustees or any one of them. (d) Every Capital Securities Certificate executed and delivered upon registration of transfer of, or in exchange for or in lieu of, a Book-Entry Capital Securities Certificate or any portion thereof, whether pursuant to this Article V or Article IV or otherwise, shall be executed and delivered in the form of, and shall be, a Book-Entry Capital Securities Certificate, unless such Capital Securities Certificate is registered in the name of a Person other than the Clearing Agency for such Book-Entry Capital Securities Certificate or a nominee thereof. (e) The Clearing Agency or its nominee, as registered owner of a Book-Entry Capital Securities Certificate, shall be the Holder of such Book-Entry Capital Securities Certificate for all purposes under this Trust Agreement and the Book- Entry Capital Securities Certificate, and Owners with respect to a Book-Entry Capital Securities Certificate shall hold such interests pursuant to the Applicable Procedures. The Securities Registrar and the Issuer Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Trust Agreement relating to the Book-Entry Capital Securities Certificates (including the payment of the Liquidation Amount of and Distributions on the Book-Entry Capital Securities represented thereby and the giving of instructions or directions by Owners of Book-Entry Capital Securities represented thereby) as the sole Holder of the Book-Entry Capital Securities represented thereby and shall have no obligations to the Owners thereof. None of the Property Trustee, the Administrative Trustees nor the Securities Registrar shall have any liability in respect of any transfers effected by the Clearing Agency. The rights of the Owners of the Book-Entry Capital Securities shall be exercised only through the Clearing Agency and shall be limited to those established by law, the Applicable Procedures and agreements between such Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Certificate Depository Agreement, unless and until Definitive Capital Securities Certificates are issued pursuant to Section 5.4(b), the Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments on the Capital Securities to such Clearing Agency Participants, and none of the Depositor, the Administrative Trustees or the Issuer Trustees shall have any responsibility or obligation with respect thereto. Section 5.5. Registration of Transfer and Exchange of Capital Securities Certificates. (a) The Property Trustee shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.9, a register or registers for the purpose of registering Trust Securities Certificates and transfers and exchanges of Trust Securities Certificates (the "Securities Register") in which the registrar and transfer agent with respect to the Trust Securities (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Capital Securities Certificates and Common Securities Certificates (subject to Section 5.11 in the case of the Common Securities Certificates) and -22- registration of transfers and exchanges of Capital Securities Certificates as herein provided. The Person acting as the Property Trustee shall at all times also be the Securities Registrar. Upon surrender for registration of transfer of any Capital Securities Certificate at the office or agency maintained pursuant to Section 5.9, the Administrative Trustees or any one of them shall execute and deliver to the Property Trustee, and the Property Trustee shall deliver, in the name of the designated transferee or transferees, one or more new Capital Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by such Administrative Trustee or Trustees. The Securities Registrar shall not be required, (i) to issue, register the transfer of or exchange any Capital Security during a period beginning at the opening of business fifteen days before the day of selection for redemption of such Capital Securities pursuant to Article IV and ending at the close of business on the day of mailing of the notice of redemption, or (ii) to register the transfer of or exchange any Capital Security so selected for redemption in whole or in part, except, in the case of any such Capital Security to be redeemed in part, any portion thereof not to be redeemed. Every Capital Securities Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to an Administrative Trustee and the Securities Registrar duly executed by the Holder or its attorney duly authorized in writing. Each Capital Securities Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by the Property Trustee in accordance with such Person's customary practice. No service charge shall be made for any registration of transfer or exchange of Capital Securities Certificates, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Capital Securities Certificates. (b) Notwithstanding any other provision of this Trust Agreement, transfers and exchanges of Capital Securities Certificates and beneficial interests in a Book-Entry Capital Securities Certificate of the kinds specified in this Section 5.5(b) shall be made only in accordance with this Section 5.5(b). (i) Non-Book-Entry Capital Securities Certificate to Book-Entry Capital Securities Certificate. If the Holder of a Capital Securities Certificate (other than a Book-Entry Capital Securities Certificate) wishes at any time to transfer all or any portion of such Capital Securities Certificate to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Book-Entry Capital Securities Certificate, such transfer may be effected only in accordance with the provisions of this Clause (b)(i) and subject to the Applicable Procedures. Upon receipt by the Securities Registrar of (A) such Capital Securities Certificate as provided in Section 5.5(a) and instructions satisfactory to the Securities Registrar directing that a beneficial interest in the Book-Entry Capital Securities Certificate of a specified number of Capital Securities not greater than the number of Capital Securities represented by such Capital Securities Certificate be credited to a specified Clearing Agency Participant's account, then the Securities Registrar shall cancel such Capital Securities Certificate (and issue a new Capital Securities Certificate in respect of any untransferred portion thereof) as provided in Section 5.5(a) and increase the aggregate Liquidation Amount of the Book-Entry Capital Securities Certificate by the Liquidation Amount represented by such Capital Securities so transferred as provided in Section 5.4(c). -23- (ii) Non-Book-Entry Capital Securities Certificate to Non-Book-Entry Capital Securities Certificate. A Capital Securities Certificate that is not a Book-Entry Capital Securities Certificate may be transferred, in whole or in part, to a Person who takes delivery in the form of another Capital Securities Certificate that is not a Book-Entry Capital Securities Certificate as provided in Section 5.5(a). (iii) Exchanges between Book-Entry Capital Securities Certificate and Non-Book-Entry Capital Securities Certificate. A beneficial interest in a Book-Entry Capital Securities Certificate may be exchanged for a Capital Securities Certificate that is not a Book-Entry Capital Securities Certificate as provided in Section 5.4. Section 5.6. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate, and (b) there shall be delivered to the Securities Registrar and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees, or any one of them, on behalf of the Issuer Trust shall execute and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section 5.6, the Administrative Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Issuer Trust corresponding to that evidenced by the lost, stolen or destroyed Trust Securities Certificate, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. Section 5.7. Persons Deemed Holders. The Issuer Trustees and the Securities Registrar shall each treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and none of the Issuer Trustees and the Securities Registrar shall be bound by any notice to the contrary. Section 5.8. Access to List of Holders' Names and Addresses. Each Holder and each Owner shall be deemed to have agreed not to hold the Depositor, the Property Trustee, the Delaware Trustee or the Administrative Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. -24- Section 5.9. Maintenance of Office or Agency. The Property Trustee shall designate, with the consent of the Administrative Trustees, which consent shall not be unreasonably withheld, an office or offices or agency or agencies where Capital Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuer Trustees in respect of the Trust Securities Certificates may be served. The Administrative Trustees initially designate The First National Bank of Chicago, One First National Plaza, Suite 0126, Chicago, Illinois 60670, Attention: Corporate Trust Administration, as its office and agency for such purposes. The Property Trustee shall give prompt written notice to the Depositor, the Administrative Trustees and to the Holders of any change in the location of the Securities Register or any such office or agency. Section 5.10. Appointment of Paying Agent. The Paying Agent shall make Distributions to Holders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account solely for the purpose of making the Distributions referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent in their sole discretion. The Paying Agent shall initially be the Bank. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustees and the Property Trustee. If the Bank shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor (which shall be a bank or trust company) to act as Paying Agent. Such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustees shall execute and deliver to the Issuer Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Issuer Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Holders in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders. The Paying Agent shall return all unclaimed funds to the Property Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in its role as Paying Agent, for so long as the Bank shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Trust Agreement to the Paying Agent shall include any co- paying agent unless the context requires otherwise. Section 5.11. Ownership of Common Securities by Depositor. At each Time of Delivery, the Depositor shall acquire, and thereafter shall retain, beneficial and record ownership of the Common Securities. The Depositor may not transfer the Common Securities except (i) in connection with a consolidation or merger of the Depositor into another Person, or any conveyance, transfer or lease by the Depositor of its properties and assets substantially as an entirety to any Person, pursuant to Section 8.1 of the Indenture, or (ii) to the Depositor or an Affiliate thereof in compliance with applicable law (including the Securities Act and applicable state securities and blue sky laws). To the fullest extent permitted by law, any attempted transfer of the Common Securities other than as set forth in the next proceeding sentence shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating substantially "THIS CERTIFICATE IS NOT -25- TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT." Section 5.12. Notices to Clearing Agency. To the extent that a notice or other communication to the Holders is required under this Trust Agreement, for so long as Capital Securities are represented by a Book-Entry Capital Securities Certificate, the Issuer Trustees shall give all such notices and communications specified herein to be given to the Clearing Agency, and shall have no obligations to the Owners. Section 5.13. Rights of Holders; Waivers of Past Defaults. (a) The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 2.9, and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Issuer Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Issuer Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Holders against payment of the purchase price therefor will be fully paid and nonassessable by the Issuer Trust. Subject to the provisions of Section 4.8, the Holders of the Trust Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. (b) For so long as any Capital Securities remain Outstanding, if, upon a Debenture Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of at least 25% in Liquidation Amount of the Capital Securities then Outstanding shall have the right to make such declaration by a notice in writing to the Property Trustee, the Depositor and the Debenture Trustee. At any time after a declaration of acceleration with respect to the Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as in the Indenture provided, if the Property Trustee fails to annul any such declaration and waive such default, the Holders of at least a Majority in Liquidation Amount of the Capital Securities, by written notice to the Property Trustee, the Depositor and the Debenture Trustee, may rescind and annul such declaration and its consequences if: (i) the Depositor has paid or deposited with the Debenture Trustee a sum sufficient to pay (A) all overdue installments of interest on all of the Debentures, (B) any accrued Additional Interest on all of the Debentures, -26- (C) the principal of (and premium, if any, on) any Debentures that have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Debentures, and (D) all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Property Trustee, their agents and counsel; and (ii) all Events of Default with respect to the Debentures, other than the non-payment of the principal of the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13 of the Indenture. The Holders of at least a Majority in Liquidation Amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default under the Indenture, except a default in the payment of principal or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Property Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of any part of the Capital Securities a record date shall be established for determining Holders of Outstanding Capital Securities entitled to join in such notice, which record date shall be at the close of business on the day the Property Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.13(b). (c) For so long as any Capital Securities remain Outstanding, to the fullest extent permitted by law and subject to the terms of this Trust Agreement and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1) or 5.1(2) of the Indenture, any Holder of Capital Securities shall have the right to institute a proceeding directly against the Depositor, pursuant to Section 5.8 of the Indenture, for enforcement of payment to such Holder of any amounts payable in respect of Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such Holder (a "Direct Action"). Except as set forth in Section 5.13(b) and this Section 5.13(c), the Holders of Capital Securities shall have no right to exercise directly any right or remedy available to the holders of, or in respect of, the Debentures. -27- (d) Except as otherwise provided in paragraphs (a), (b) and (c) of this Section 5.13, the Holders of at least a Majority in Liquidation Amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default or Event of Default and its consequences. Upon such waiver, any such default or Event of Default shall cease to exist, and any default or Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Trust Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. ARTICLE VI. Acts of Holders; Meetings; Voting Section 6.1. Limitations on Voting Rights. (a) Except as expressly provided in this Trust Agreement and in the Indenture and as otherwise required by law, no Holder of Capital Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Issuer Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Holders from time to time as partners or members of an association. (b) So long as any Debentures are held by the Property Trustee on behalf of the Issuer Trust, the Property Trustee shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or execute any trust or power conferred on the Property Trustee with respect to the Debentures, (ii) waive any past default that may be waived under Section 5.13 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least a Majority in Liquidation Amount of the Capital Securities, provided, however, that where a consent under the Indenture would require the consent of each Holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Capital Securities. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Capital Securities, except by a subsequent vote of the Holders of the Capital Securities. The Property Trustee shall notify all Holders of the Capital Securities of any notice of default received with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Capital Securities, prior to taking any of the foregoing actions, the Property Trustee shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that such action shall not cause the Issuer Trust to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes. (c) If any proposed amendment to this Trust Agreement provides for, or the Issuer Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Capital Securities, whether by way of amendment to the Trust Agreement or otherwise, or (ii) the dissolution, winding-up or termination of the Issuer Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Capital Securities as a class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in Liquidation Amount of the Capital Securities. -28- Notwithstanding any other provision of this Trust Agreement, no amendment to this Trust Agreement may be made if, as a result of such amendment, it would cause the Issuer Trust to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes. Section 6.2. Notice of Meetings. Notice of all meetings of the Holders of the Capital Securities, stating the time, place and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 10.8 to each Holder of Capital Securities, at such Holder's registered address, at least fifteen days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. Section 6.3. Meetings of Holders of the Capital Securities. No annual meeting of Holders is required to be held. The Administrative Trustees, however, shall call a meeting of the Holders of the Capital Securities to vote on any matter upon the written request of the Holders of at least 25% in aggregate Liquidation Amount of the Outstanding Capital Securities and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of the Holders of the Capital Securities to vote on any matters as to which such Holders are entitled to vote. The Holders of at least a Majority in Liquidation Amount of the Capital Securities, present in person or by proxy, shall constitute a quorum at any meeting of the Holders of the Capital Securities. If a quorum is present at a meeting, an affirmative vote by the Holders present, in person or by proxy, holding Capital Securities representing at least a Majority in aggregate Liquidation Amount of the Capital Securities held by the Holders present, either in person or by proxy, at such meeting shall constitute the action of the Holders of the Capital Securities, unless this Trust Agreement requires a greater number of affirmative votes. Section 6.4. Voting Rights. Holders shall be entitled to one vote for each $1,000 of Liquidation Amount represented by their Outstanding Trust Securities in respect of any matter as to which such Holders are entitled to vote. Section 6.5. Proxies, etc. At any meeting of Holders, any Holder entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Issuer Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Property Trustee, proxies may be solicited in the name of the Property Trustee or one or more officers of the Property Trustee. Only Holders of record shall be entitled to vote. When Trust Securities are held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such -29- Trust Securities. A proxy purporting to be executed by or on behalf of a Holder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. Section 6.6. Holder Action by Written Consent. Any action that may be taken by Holders at a meeting may be taken without a meeting if Holders holding at least a Majority in Liquidation Amount of all Capital Securities entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any other provision of this Trust Agreement) shall consent to the action in writing. Section 6.7. Record Date for Voting and Other Purposes. For the purposes of determining the Holders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees or Property Trustee may from time to time fix a date, not more than 90 days prior to the date of any meeting of Holders or the payment of a distribution or other action, as the case may be, as a record date for the determination of the identity of the Holders of record for such purposes. Section 6.8. Acts of Holders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor of the Issuer Trustees, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that any Issuer Trustee receiving the same deems sufficient. The ownership of Trust Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Trust Security shall bind every future Holder of the same Trust Security and the Holder of every Trust -30- Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Issuer Trustees or the Issuer Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. If any dispute shall arise among the Holders or the Issuer Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Holder or Issuer Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. Section 6.9. Inspection of Records. Upon reasonable notice to the Administrative Trustees and the Property Trustee, the records of the Issuer Trust shall be open to inspection by Holders during normal business hours for any purpose reasonably related to such Holder's interest as a Holder. ARTICLE VII. Representations And Warranties Section 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee. The Property Trustee and the Delaware Trustee, each severally on behalf of and as to itself, hereby represents and warrants for the benefit of the Depositor and the Holders that: (a) the Property Trustee is a national banking association, duly organized, validly existing and in good standing under the laws of the United States; (b) the Property Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) the Delaware Trustee is a Delaware corporation that satisfies for the Trust the requirements of Section 3807 of the Delaware Business Trust Act; (d) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; -31- (e) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and the Delaware Trustee and constitutes the valid and legally binding agreement of each of the Property Trustee and the Delaware Trustee enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (f) the execution, delivery and performance of this Trust Agreement has been duly authorized by all necessary corporate or other action on the part of the Property Trustee and the Delaware Trustee and does not require any approval of stockholders of the Property Trustee or the Delaware Trustee and such execution, delivery and performance will not (i) violate the Charter or By-laws of the Property Trustee or the Delaware Trustee, (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Property Trustee or the Delaware Trustee is a party or by which it is bound, or (iii) violate any law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee (as appropriate in context) or any order, judgment or decree applicable to the Property Trustee or the Delaware Trustee; (g) neither the authorization, execution or delivery by the Property Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee or the Delaware Trustee (as appropriate in context) contemplated herein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing law of the United States or the State of Delaware governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee, as the case may be; and (h) there are no proceedings pending or, to the best of each of the Property Trustee's and the Delaware Trustee's knowledge, threatened against or affecting the Property Trustee or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal that, individually or in the aggregate, would materially and adversely affect the Issuer Trust or would question the right, power and authority of the Property Trustee or the Delaware Trustee, as the case may be, to enter into or perform its obligations as one of the Issuer Trustees under this Trust Agreement. Section 7.2. Representations and Warranties of Depositor. The Depositor hereby represents and warrants for the benefit of the Holders that: (a) the Trust Securities Certificates issued at each Time of Delivery on behalf of the Issuer Trust have been duly authorized and will have been duly and validly executed, issued and delivered by the Issuer Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Holders will be, as of each such date, entitled to the benefits of this Trust Agreement; and (b) there are no taxes, fees or other governmental charges payable by the Issuer Trust (or the Issuer Trustees on behalf of the Issuer Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by the Property Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement. -32- ARTICLE VIII. The Issuer Trustees Section 8.1. Certain Duties and Responsibilities. (a) The duties and responsibilities of the Issuer Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Trust Agreement shall require any of the Issuer Trustees to expend or risk its or their own funds or otherwise incur any financial liability in the performance of any of its or their duties hereunder, or in the exercise of any of its or their rights or powers, if it or they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Issuer Trustees shall be subject to the provisions of this Section 8.1. Nothing in this Trust Agreement shall be construed to release an Administrative Trustee from liability for such Person's own negligent action, such Person's own negligent failure to act, or such Person's own willful misconduct. To the extent that, at law or in equity, an Issuer Trustee has duties and liabilities relating to the Issuer Trust or to the Holders, such Issuer Trustee shall not be liable to the Issuer Trust or to any Holder for such Issuer Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Issuer Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Holders to replace such other duties and liabilities of the Issuer Trustees. (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its acceptance of a Trust Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Issuer Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.1(b) does not limit the liability of the Issuer Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. (c) The Property Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Trust Agreement (including pursuant to Section 10.10), and no implied covenants shall be read into this Trust Agreement against the Property Trustee. If an Event of Default has occurred (that has not been cured or waived pursuant to Section 5.13), the Property Trustee shall exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of such Person's own affairs. (d) No provision of this Trust Agreement shall be construed to relieve the Property Trustee or the Delaware Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: -33- (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Trust Agreement (including pursuant to Section 10.10), and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Trust Agreement (including pursuant to Section 10.10); and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Trust Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement. (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of at least a Majority in Liquidation Amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; (iv) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Payment Account shall be to deal with such Property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement and the Trust Indenture Act; (v) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor; and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; (vi) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the default or misconduct of any other Issuer Trustee or the Depositor; and (vii) no provision of this Trust Agreement shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its -34- duties or in the exercise of any of its rights or powers, if the Property Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Trust Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. (e) The Administrative Trustees shall not be responsible for monitoring the compliance by the other Issuer Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall any Administrative Trustee be liable for the default or misconduct of any other Administrative Trustee, the other Issuer Trustees or the Depositor. Section 8.2. Certain Notices. Within five Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.8, notice of such Event of Default to the Holders and the Administrative Trustees, unless such Event of Default shall have been cured or waived. Within five Business Days after the receipt of notice of the Depositor's exercise of its right to defer the payment of interest on the Debentures pursuant to the Indenture, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.8, notice of such exercise to the Holders and the Administrative Trustees, unless such exercise shall have been revoked. The Property Trustee shall not be deemed to have knowledge of any Event of Default unless the Property Trustee shall have received written notice or a Responsible Officer of the Property Trustee charged with the administration of this Trust Agreement shall have obtained actual knowledge of such Event of Default. Section 8.3. Certain Rights of Property Trustee. Subject to the provisions of Section 8.1: (a) the Property Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Trust Agreement the Property Trustee finds the same ambiguous or inconsistent with any other provisions contained herein, or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Holders of the Capital Securities are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting the Depositor's opinion as to the course of action to be taken, and the Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor; provided, however, that if the Property Trustee does not receive such -35- instructions of the Depositor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than two Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Holders, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; (c) any direction or act of the Depositor contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate; (d) any direction or act of an Administrative Trustee contemplated by this Trust Agreement shall be sufficiently evidenced by a certificate executed by such Administrative Trustee and setting forth such direction or act; (e) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or re-registration thereof; (f) the Property Trustee may consult with counsel (which counsel may be counsel to the Depositor or any of its Affiliates, and may include any of its employees) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice; the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Holders pursuant to this Trust Agreement, unless such Holders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; provided that, nothing contained in this Section 8.3(g) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Trust Agreement; (h) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Property Trustee may make such further inquiry or investigation into such facts or matters as it may see fit; (i) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, provided that the Property Trustee shall be responsible for its own negligence or misconduct with respect to selection of any agent or attorney appointed by it hereunder; (j) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (i) may request instructions from the Holders (which instructions may only -36- be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust Securities in respect of such remedy, right or action), (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (k) except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement. No provision of this Trust Agreement shall be deemed to impose any duty or obligation on any Issuer Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which such Person shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to any Issuer Trustee shall be construed to be a duty. Section 8.4. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Issuer Trust and the Depositor, and the Issuer Trustees do not assume any responsibility for their correctness. The Issuer Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. Section 8.5. May Hold Securities. Any Issuer Trustee or any other agent of any Issuer Trustee or the Issuer Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13, and except as provided in the definition of the term "Outstanding" in Article I, may otherwise deal with the Issuer Trust with the same rights it would have if it were not an Issuer Trustee or such other agent. Section 8.6. Compensation; Indemnity; Fees. The Depositor agrees: (a) to pay to the Issuer Trustees from time to time such reasonable compensation for all services rendered by them hereunder as may be agreed by the Depositor and the Issuer Trustees from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Issuer Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Issuer Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of their agents and counsel), except any such expense, disbursement or advance as may be attributable to their negligence, bad faith or willful misconduct; and (c) to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Issuer Trustee, (ii) any Affiliate of any Issuer Trustee, (iii) any officer, director, shareholder, employee, -37- representative or agent of any Issuer Trustee, and (iv) any employee or agent of the Issuer Trust (referred to herein as an "Indemnified Person") from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Issuer Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Issuer Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Trust Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence, bad faith or willful misconduct with respect to such acts or omissions. The provisions of this Section 8.6 shall survive the termination of this Trust Agreement and the removal or resignation of any Issuer Trustee. No Issuer Trustee may claim any Lien on any Trust Property as a result of any amount due pursuant to this Section 8.6. The Depositor and any Issuer Trustee (subject to Section 8.8) may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Issuer Trust, and the Issuer Trust and the Holders of Trust Securities shall have no rights by virtue of this Trust Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Issuer Trust, shall not be deemed wrongful or improper. Neither the Depositor nor any Issuer Trustee shall be obligated to present any particular investment or other opportunity to the Issuer Trust even if such opportunity is of a character that, if presented to the Issuer Trust, could be taken by the Issuer Trust, and the Depositor or any Issuer Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Issuer Trustee may engage or be interested in any financial or other transaction with the Depositor or any Affiliate of the Depositor, or may act as depository for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Depositor or its Affiliates. Section 8.7. Corporate Property Trustee Required; Eligibility of Issuer Trustees. (a) There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a Person that is a national or state chartered bank and eligible pursuant to the Trust Indenture Act to act as such and that has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. At the time of appointment, the Property Trustee must have securities rated in one of the three highest rating categories by a nationally recognized statistical rating organization. -38- (b) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. (c) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware, or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law and that shall act through one or more persons authorized to bind such entity. Section 8.8. Conflicting Interests. (a) If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement. (b) The Guarantee Agreement and the Indenture shall be deemed to be specifically described in this Trust Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. Section 8.9. Co-Trustees and Separate Trustee. Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Depositor and the Administrative Trustees, by agreed action of the majority of such Trustees, shall have power to appoint, and upon the written request of the Administrative Trustees, the Depositor shall for such purpose join with the Administrative Trustees in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co- trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. Any co-trustee or separate trustee appointed pursuant to this Section shall either be (i) a natural person who is at least 21 years of age and a resident of the United States, or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. In case an Event of Default under the Indenture shall have occurred and be continuing, the Property Trustee alone shall have the power to make such appointment. Should any written instrument from the Depositor be required by any co- trustee or separate trustee so appointed for more fully confirming to such co- trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Depositor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: -39- (a) The Trust Securities shall be executed by one or more Administrative Trustees, and the Trust Securities shall be delivered by the Property Trustee, and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Property Trustee specified hereunder shall be exercised solely by the Property Trustee and not by such co-trustee or separate trustee. (b) The rights, powers, duties and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co- trustee or separate trustee. (c) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case a Debenture Event of Default has occurred and is continuing, the Property Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigning or removed may be appointed in the manner provided in this Section. (d) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee or any other trustee hereunder. (e) The Property Trustee shall not be liable by reason of any act of a co- trustee or separate trustee. (f) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. Section 8.10. Resignation and Removal; Appointment of Successor. No resignation or removal of any Issuer Trustee (the "Relevant Trustee") and no appointment of a successor Issuer Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Issuer Trustee in accordance with the applicable requirements of Section 8.11. Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time by giving written notice thereof to the Holders. If the instrument of acceptance by the successor Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Trust, any court of competent jurisdiction for the appointment of a successor Relevant Trustee. Unless a Debenture Event of Default shall have occurred and be continuing, any Issuer Trustee may be removed at any time by Act of the Holders of Common Securities. If a Debenture Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be -40- removed at such time by Act of the Holders of a majority in Liquidation Amount of the Capital Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). An Administrative Trustee may be removed by the Holders of Common Securities at any time. If any Issuer Trustee shall resign, be removed or become incapable of acting as Issuer Trustee, or if a vacancy shall occur in the office of any Issuer Trustee for any cause, at a time when no Debenture Event of Default shall have occurred and be continuing, the Holders of Common Securities, by Act of the Holders of Common Securities delivered to the retiring Issuer Trustee, shall promptly appoint a successor Issuer Trustee or Issuer Trustees, and the retiring Issuer Trustee shall comply with the applicable requirements of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when a Debenture Event of Default shall have occurred and be continuing, the Holders of Capital Securities, by Act of the Holders of a majority in Liquidation Amount of the Capital Securities then Outstanding delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of Section 8.11. If an Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee, at a time when a Debenture Event of Default shall have occurred and be continuing, the Holders of Common Securities by Act of the Holders of Common Securities delivered to the Administrative Trustee shall promptly appoint a successor Administrative Trustee or Administrative Trustees and such successor Administrative Trustee or Trustees shall comply with the applicable requirements of Section 8.11. If no successor Relevant Trustee shall have been so appointed by the Holders of Common Securities or the Holders of Capital Securities and accepted appointment in the manner required by Section 8.11, any Holder who has been a Holder of Trust Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Relevant Trustee. The Property Trustee shall give notice of each resignation and each removal of an Issuer Trustee and each appointment of a successor Issuer Trustee to all Holders in the manner provided in Section 10.8 and shall give notice to the Depositor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Property Trustee. Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of the remaining Administrative Trustees if there were at least two of them prior to such vacancy or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees or Delaware Trustee, as the case may be, set forth in Section 8.7). Section 8.11. Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Issuer Trust, and (b) shall add to or change any of the provisions of -41- this Trust Agreement as shall be necessary to provide for or facilitate the administration of the Issuer Trust by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Issuer Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Issuer Trust. Upon request of any such successor Relevant Trustee, the Issuer Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the preceding paragraph, as the case may be. No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article. Section 8.12. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee, the Delaware Trustee or any Administrative Trustee that is not a natural Person may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided that such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. Section 8.13. Preferential Collection of Claims Against Depositor or Issuer Trust. If and when the Property Trustee shall be or become a creditor of the Depositor or the Issuer Trust (or any other obligor upon the Capital Securities), the Property Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or the Issuer Trust (or any such other obligor). Section 8.14. Property Trustee May File Proofs of Claim. In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other similar judicial proceeding relative to the Issuer Trust or any other obligor upon the Trust Securities or the property of the Issuer Trust or of such other obligor or their creditors, the Property Trustee (irrespective of whether any Distributions on the Trust Securities shall then be due and payable and irrespective of whether the Property Trustee shall have made any demand on the Issuer Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Trust Securities and to file such other papers or documents as may be necessary or advisable in order -42- to have the claims of the Property Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Property Trustee and, in the event the Property Trustee shall consent to the making of such payments directly to the Holders, to pay to the Property Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel, and any other amounts due the Property Trustee. Nothing herein contained shall be deemed to authorize the Property Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or compensation affecting the Trust Securities or the rights of any Holder thereof or to authorize the Property Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 8.15. Reports by Property Trustee. (a) Not later than July 15 of each year commencing with July 15, 1997, the Property Trustee shall transmit to all Holders in accordance with Section 10.8, and to the Depositor, a brief report dated as of the immediately preceding May 15 with respect to: (i) its eligibility under Section 8.7 or, in lieu thereof, if to the best of its knowledge it has continued to be eligible under said Section, a written statement to such effect; (ii) a statement that the Property Trustee has complied with all of its obligations under this Trust Agreement during the twelve-month period (or, in the case of the initial report, the period since the Closing Date) ending with such May 15 or, if the Property Trustee has not complied in any material respect with such obligations, a description of such noncompliance; and (iii) any change in the property and funds in its possession as Property Trustee since the date of its last report and any action taken by the Property Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Trust Securities. (b) In addition, the Property Trustee shall transmit to Holders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with each national stock exchange, the Nasdaq Stock Market or such other interdealer quotation system or self- regulatory organization upon which the Trust Securities are listed or traded, with the Commission and with the Depositor. -43- Section 8.16. Reports to the Property Trustee. Each of the Depositor and the Administrative Trustees shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. The Depositor and the Administrative Trustees shall annually file with the Property Trustee a certificate specifying whether such Person is in compliance with all of the terms and covenants applicable to such Person hereunder. Section 8.17. Evidence of Compliance with Conditions Precedent. Each of the Depositor and the Administrative Trustees shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Trust Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. Section 8.18. Number of Issuer Trustees. (a) The number of Issuer Trustees shall be four, provided that the Property Trustee and the Delaware Trustee may be the same Person. (b) If an Issuer Trustee ceases to hold office for any reason, a vacancy shall occur. The vacancy shall be filled with an Issuer Trustee appointed in accordance with Section 8.10. (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of an Issuer Trustee shall not operate to annul, dissolve or terminate the Issuer Trust. Section 8.19. Delegation of Power. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 such Person's power for the purpose of executing any documents contemplated in Section 2.7(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Issuer Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Trust Agreement. Section 8.20. Appointment of Administrative Trustees. (a) Donald L. Raiff has ceased to be a trustee under the Issuer Trust. The Administrative Trustees shall initially be J. David Brock, an individual, and Duane S. Rocheleau, an individual. Their successors shall be appointed by the Holders of a Majority in Liquidation Amount of the Common Securities and they -44- may resign or be removed by the Holders of a Majority in Liquidation Amount of the Common Securities at any time. (b) Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with this Section 8.20, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Trust Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. ARTICLE IX. Termination, Liquidation and Merger Section 9.1. Termination Upon Expiration Date. Unless earlier terminated, the Issuer Trust shall automatically terminate on April 30, 2052 (the "Expiration Date"), following the distribution of the Trust Property in accordance with Section 9.4. Section 9.2. Early Termination. The first to occur of any of the following events is an "Early Termination Event": (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor; (b) the written direction to the Property Trustee from all of the Holders of the Common Securities at any time to terminate the Issuer Trust and to distribute the Debentures to Holders in exchange for the Capital Securities (which direction is optional and wholly within the discretion of the Holders of the Common Securities); (c) the redemption of all of the Capital Securities in connection with the redemption of all the Debentures; and (d) the entry of an order for dissolution of the Issuer Trust by a court of competent jurisdiction. Section 9.3. Termination. The respective obligations and responsibilities of the Issuer Trustees and the Issuer Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Holders of all amounts required to be distributed hereunder upon the liquidation of the Issuer Trust pursuant to Section 9.4, or upon the redemption of all of the Trust Securities pursuant to Section 4.2; (b) the payment of any expenses owed by the Issuer Trust; and (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Issuer Trust or the Holders. -45- Section 9.4. Liquidation. (a) If an Early Termination Event specified in clause (a), (b) or (d) of Section 9.2 occurs or upon the Expiration Date, the Issuer Trust shall be liquidated by the Issuer Trustees as expeditiously as the Issuer Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Issuer Trust as provided by applicable law, to each Holder a Like Amount of Debentures, subject to Section 9.4(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid mailed not less than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All such notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Debentures; and (iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Debentures, or if Section 9.4(d) applies receive a Liquidation Distribution, as the Administrative Trustees or the Property Trustee shall deem appropriate. (b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the liquidation of the Issuer Trust and distribution of the Debentures to Holders, the Property Trustee, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish a record date for such distribution (which shall be not more than 30 days prior to the Liquidation Date) and establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Debentures will be issued to Holders of Trust Securities Certificates, upon surrender of such Certificates to the exchange agent for exchange, (iii) the Depositor shall use its best efforts to have the Debentures listed on the Nasdaq Stock Market or on such exchange, other interdealer quotation system or self-regulatory organization as the Capital Securities are then listed, (iv) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Debentures bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on such Trust Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal will be made to Holders of Trust Securities Certificates with respect to such Debentures) and (v) all rights of Holders holding Trust Securities will cease, except the right of such Holders to receive Debentures upon surrender of Trust Securities Certificates. (d) If, notwithstanding the other provisions of this Section 9.4, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practical, the Trust Property shall be liquidated, and the Issuer Trust shall be dissolved, wound-up or terminated by the Property Trustee in such manner as the Property Trustee determines. In such event, on the date of the dissolution, winding-up -46- or other termination of the Issuer Trust, Holders will be entitled to receive out of the assets of the Issuer Trust available for distribution to Holders, after satisfaction of liabilities to creditors of the Issuer Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such dissolution, winding up or termination, the Liquidation Distribution can be paid only in part because the Issuer Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Issuer Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holders of the Common Securities will be entitled to receive Liquidation Distributions upon any such dissolution, winding-up or termination pro rata (determined as aforesaid) with Holders of Capital Securities, except that, if a Debenture Event of Default specified in Section 5.1(1) or 5.1(2) of the Indenture has occurred and is continuing, the Capital Securities shall have a priority over the Common Securities as provided in Section 4.3. Section 9.5. Mergers, Consolidations, Amalgamations or Replacements of Issuer Trust. The Issuer Trust may not merge, consolidate or amalgamate with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except pursuant to this Section 9.5 or as otherwise set forth in this Trust Agreement. At the request of the Holders of the Common Securities, with the consent of the Holders of at least a Majority in Liquidation Amount of the Capital Securities, the Issuer Trust may merge, consolidate or amalgamate with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Issuer Trust with respect to the Capital Securities, or (b) substitutes for the Capital Securities other securities having substantially the same terms as the Capital Securities (the "Successor Securities") so long as the Successor Securities have the same priority as the Capital Securities with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) a trustee of such successor entity possessing the same powers and duties as the Property Trustee is appointed to hold the Debentures, (iii) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Capital Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization which assigns ratings to the Capital Securities, (iv) the Successor Securities are listed, or any Successor Securities will be listed upon notice of issuance, on any national securities exchange, automated quotation system or other organization on which the Capital Securities are then listed, if any, (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Capital Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially identical to that of the Issuer Trust, (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Depositor has received an Opinion of Counsel to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Capital Securities (including any Successor Securities) in any material respect, and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Issuer Trust nor such successor entity will be required to register as an "investment company" under the Investment Company Act, and (viii) the Depositor or its permitted transferee owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee Agreement. Notwithstanding the foregoing, the Issuer Trust shall not, except with the consent of -47- holders of all of the Capital Securities, consolidate, amalgamate or merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate or merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Issuer Trust or the successor entity to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes. ARTICLE X. Miscellaneous Provisions Section 10.2. Limitation of Rights of Holders. Except as set forth in Section 9.2, the death, incapacity, bankruptcy, dissolution or termination of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, nor entitle the legal representatives or heirs of such Person or any Holder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. Section 10.2. Amendment. (a) This Trust Agreement may be amended from time to time by the Property Trustee, the Administrative Trustees and the Holders of all of the Common Securities, without the consent of any Holder of the Capital Securities, (i) to cure any ambiguity, correct or supplement any provision herein that may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Trust Agreement, which shall not be inconsistent with the other provisions of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Issuer Trust will not be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes at all times that any Trust Securities are Outstanding or to ensure that the Issuer Trust will not be required to register as an "investment company" under the Investment Company Act; provided, however, that in the case of either clause (i) or clause (ii), such action shall not adversely affect in any material respect the interests of any Holder. (b) Except as provided in Section 10.2(c) hereof, any provision of this Trust Agreement may be amended by the Issuer Trustees and the Holders of all of the Common Securities and with (i) the consent of Holders of at least a Majority in Liquidation Amount of the Capital Securities, and (ii) receipt by the Issuer Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Issuer Trustees in accordance with such amendment will not cause the Issuer Trust to be taxable as a corporation or as other than a grantor trust for United States federal income tax purposes or affect the Issuer Trust's exemption from status as an "investment company" under the Investment Company Act. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Holder (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the -48- Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date, or (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date; and notwithstanding any other provision herein, without the unanimous consent of the Holders (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this paragraph (c) of this Section 10.2 may not be amended. (d) Notwithstanding any other provisions of this Trust Agreement, no Issuer Trustee shall enter into or consent to any amendment to this Trust Agreement that would cause the Issuer Trust to fail or cease to qualify for the exemption from status as an "investment company" under the Investment Company Act or to be taxable as a corporation or to be classified as other than a grantor trust for United States federal income tax purposes. (e) Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor and the Administrative Trustees, this Trust Agreement may not be amended in a manner that imposes any additional obligation on the Depositor or the Administrative Trustees. (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustees or the Property Trustee shall promptly provide to the Depositor a copy of such amendment. (g) Neither the Property Trustee nor the Delaware Trustee shall be required to enter into any amendment to this Trust Agreement that affects its own rights, duties or immunities under this Trust Agreement. The Property Trustee shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Trust Agreement is in compliance with this Trust Agreement. Section 10.3. Separability. In case any provision in this Trust Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 10.4. Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE ISSUER TRUST, THE DEPOSITOR AND THE ISSUER TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS PROVISIONS. Section 10.5. Payments Due on Non-Business Day. If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day that is a Business Day (except as otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as though made on the date fixed for such payment, and no Distributions shall accumulate on such unpaid amount for the period after such date. -49- Section 10.6. Successors. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Issuer Trust and any Issuer Trustee, including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article VIII of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. Section 10.7. Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. Section 10.8. Reports, Notices and Demands. Any report, notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Holder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Holder of Capital Securities, to such Holder as such Holder's name and address may appear on the Securities Register; and (b) in the case of the Holder of the Common Securities or the Depositor, to Northern Trust Corporation, Fifty South LaSalle Street, Chicago, Illinois 60675, Attention: Secretary, facsimile no.: (312) 630-1596, or to such other address as may be specified in a written notice by the Holder of the Common Securities or the Depositor, as the case may be, to the Property Trustee. Such notice, demand or other communication to or upon a Holder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Such notice, demand or other communication to or upon the Depositor shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Depositor. Any notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Property Trustee, the Delaware Trustee, the Administrative Trustees or the Issuer Trust shall be given in writing addressed to such Person as follows: (a) with respect to the Property Trustee to The First National Bank of Chicago, One First National Plaza, Suite 0126, Chicago, Illinois 60670, Attention: Corporate Trust Administration; (b) with respect to the Delaware Trustee, to First Chicago Delaware Inc., 300 King Street, Wilmington, Delaware 19801, Attention: Michael J. Majchrzak; (c) with respect to the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention: Administrative Trustees of NTC Capital II"; and (d) with respect to the Issuer Trust, to its principal office specified in Section 2.2, with a copy to the Property Trustee. Such notice, demand or other communication to or upon the Issuer Trust, the Property Trustee or the Administrative Trustees shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Issuer Trust, the Property Trustee or such Administrative Trustee. Section 10.9. Agreement Not to Petition. Each of the Issuer Trustees and the Depositor agree for the benefit of the Holders that, until at least one year and one day after the Issuer Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Issuer Trust under any bankruptcy, insolvency, -50- reorganization or other similar law (including the United States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Issuer Trust under any Bankruptcy Law. If the Depositor takes action in violation of this Section 10.9, the Property Trustee agrees, for the benefit of Holders, that at the expense of the Depositor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Issuer Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Issuer Trustee or the Issuer Trust may assert. Section 10.10. Trust Indenture Act; Conflict with Trust Indenture Act. (a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Issuer Trustee that is a trustee for the purposes of the Trust Indenture Act. (c) If any provision hereof limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act through operation of Section 318(c) thereof, such imposed duties shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Trust Agreement as so modified or excluded, as the case may be. (d) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Trust Securities as equity securities representing undivided beneficial interests in the assets of the Issuer Trust. Section 10.11. Acceptance of Terms of Trust Agreement, Guarantee Agreement and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A HOLDER OR ANY OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE HOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT, THE GUARANTEE AGREEMENT AND THE INDENTURE, AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AGREEMENT AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE ISSUER TRUST, SUCH HOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE ISSUER TRUST AND SUCH HOLDER AND SUCH OTHERS. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -51- IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Trust Agreement. Northern Trust Corporation, as Depositor By: ---------------------------------- Name: Perry R. Pero Title: Senior Executive Vice President and Chief Financial Officer The First National Bank of Chicago, as Property Trustee By: ---------------------------------- Name: Julianne J. Tynski Title: Trust Officer First Chicago Delaware Inc., as Delaware Trustee By: ---------------------------------- Name: John R. Prendiville Title: Vice President By: ---------------------------------- Name: J. David Brock as Administrative Trustee By: ---------------------------------- Name: Duane S. Rocheleau as Administrative Trustee State of ) ) ss.: County of ) On the 25th day of April, 1997, before me personally came Perry R. Pero, to me known, who, being by me duly sworn, did depose and say that he is Senior Executive Vice President and Chief Financial Officer of Northern Trust Corporation, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. ----------------------------- State of ) ) ss.: County of ) On the 25th day of April, 1997, before me personally came Julianne J. Tynski, to me known, who, being by me duly sworn, did depose and say that she is a Trust Officer of The First National Bank of Chicago, one of the corporations described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that she signed her name thereto by like authority. ----------------------------- State of ) ) ss.: County of ) On the 25th day of April, 1997, before me personally came John R. Prendiville, to me known, who, being by me duly sworn, did depose and say that he is a Vice President of First Chicago Delaware Inc., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. ----------------------------- Exhibit A CERTIFICATE OF TRUST OF NTC CAPITAL II This Certificate of Trust of NTC Capital II (the "Trust"), dated as of December 27, 1996, is being duly executed and filed by the undersigned, as trustees, to create a business trust under the Delaware Business Trust Act (12 Del. C. (S) 3801 et seq.) 1. Name. The name of the business trust being created hereby is NTC Capital II. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware are First Chicago Delaware Inc., 300 King Street, Wilmington, Delaware 19801. 3. Effective Date. This Certificate of Trust shall be effective upon filing. IN WITNESS WHEREOF, the undersigned, being the only trustees of the Trust, have executed this Certificate of Trust as of the date first-above written. FIRST CHICAGO DELAWARE INC., as trustee By: /s/ Richard D. Manella -------------------------- Name: Richard D. Manella Title: Vice President /s/ Donald L. Raiff ---------------------------------- Name: Donald L. Raiff, as trustee A-1 Exhibit B [FORM OF LETTER OF REPRESENTATIONS] April 25, 1997 The Depository Trust Company, 55 Water Street, 49th Floor, New York, New York 10041-0099. Attention: General Counsel's Office Re: NTC Capital II Floating Rate Capital Securities, Series B CUSIP 629398 AA 6 ------------------------------------------ Ladies and Gentlemen: The purpose of this letter is to set forth certain matters relating to the issuance and deposit with The Depository Trust Company ("DTC") of the book- entry-only portion of the Floating Rate Capital Securities, Series B (the "Capital Securities"), of NTC Capital II, a statutory business trust created under the laws of the State of Delaware (the "Issuer"), governed by the Amended and Restated Trust Agreement, dated as of April 25, 1997, among Northern Trust Corporation (the "Corporation"), as Depositor, The First National Bank of Chicago, as Property Trustee, First Chicago Delaware Inc., as Delaware Trustee, the Administrative Trustees named therein and the holders, from time to time, of undivided beneficial interests in the assets of the Issuer. The payment of distributions on the Capital Securities and payments due upon liquidation of the Issuer or redemption of the Capital Securities, to the extent the Issuer has funds available for the payment thereof, are guaranteed by the Corporation to the extent set forth in a Guarantee Agreement, dated as of April 25, 1997, between the Corporation and The First National Bank of Chicago, as Guarantee Trustee with respect to the Capital Securities. The Corporation and the Issuer propose to sell the Capital Securities to the Underwriters (the "Underwriters") pursuant to a Pricing Agreement, dated as of April 22, 1997, by and among the Underwriters, the Issuer and the Corporation, which incorporates the provisions of the Underwriting Agreement Standard Provisions (April 1997), and the Underwriters wish to take delivery of the Capital Securities through DTC. The First National Bank of Chicago is acting as transfer agent and registrar with respect to the Capital Securities (the "Transfer Agent and Registrar"). To induce DTC to accept the Capital Securities as eligible for deposit at DTC, and to act in accordance with DTC's rules with respect to the Capital Securities, the Issuer and the Transfer Agent and Registrar make the following representations to DTC: B-1 1. Prior to the closing of the sale of the Capital Securities to the Underwriters on April 25, 1997, there shall be deposited with, or held by the Transfer Agent and Registrar as custodian for, DTC one or more global certificates (individually and collectively, the "Global Certificate") registered in the name of DTC's nominee, Cede & Co., representing an aggregate of 120,000 Capital Securities and bearing the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 2. The Amended and Restated Trust Agreement of the Issuer provides for the voting by holders (with no provision for revocation of consents or votes by subsequent holders) of the Capital Securities under certain limited circumstances. The Issuer shall establish a record date for such purposes and shall, to the extent possible, give DTC notice of such record date not less than 15 calendar days in advance of such record date. 3. In the event of a stock split, conversion, recapitalization, reorganization or any other similar transaction resulting in the cancellation of all or any part of the Capital Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice of such event as soon as possible but, at least 5 business days prior to the effective date of such event. 4. In the event of any distribution on, or an offering or issuance of rights with respect to, the Capital Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount of and conditions, if any, applicable to the payment of any such distribution or any such offering or issuance of rights; (b) any applicable expiration or deadline date, or any date by which any action on the part of the holders of Capital Securities is required; and (c) the date any required notice is to be mailed by or on behalf of the Issuer to holders of Capital Securities or published by or on behalf of the Issuer (whether by mail or publication, the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before the Publication Date. The Issuer or the Transfer Agent and Registrar will forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission of multiple CUSIP numbers (if applicable) that includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be not less than 30 calendar days nor more than 60 calendar days prior to the payment of any such distribution or any such offering or issuance of rights with respect to the Capital Securities. After establishing the amount of payment to be made on the Capital Securities, the Issuer or the Transfer Agent and Registrar will notify DTC's Dividend Department of such payment 5 business days prior to payment date. Notices to DTC's Dividend Department by telecopy shall be sent to (212) 709- 1723. Such notices by mail or by any other means shall be sent to: B-2 Manager, Announcements Dividend Department The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004-2695 The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt of such telecopy by telephoning the Dividend Department at (212) 709-1270. 5. In the event of a redemption by the Issuer of the Capital Securities, notice specifying the terms of the redemption and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC not less than 30 calendar days prior to such event by a secure means in the manner set forth in paragraph 4. Such redemption notice shall be sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190, and receipt of such notice shall be confirmed by telephoning (516) 227-4070. Notice by mail or by any other means shall be sent to: Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530-4719 6. In the event of any invitation to tender the Capital Securities, notice specifying the terms of the tender and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC by a secure means and in a timely manner as described in paragraph 4. Notices to DTC pursuant to this paragraph and notices of other corporate actions (including mandatory tenders, exchanges and capital changes), shall be sent, unless notification to another department is expressly provided for herein, by telecopy to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094 and receipt of such notice shall be confirmed by telephoning (212) 709-6884, or by mail or any other means to: Manager, Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004-2695 7. All notices and payment advices sent to DTC shall contain the CUSIP number or numbers of the Capital Securities and the accompanying designation of the Capital Securities, which, as of the date of this letter, is "NTC Capital II, Floating Rate Capital Securities, Series B". B-3 8. Distribution payments or other cash payments with respect to the Capital Securities shall be governed by DTC's current Principal and Income Payments Rider, a copy of which is attached hereto as Annex I. For purposes of this letter, the term "Agent" used in Annex I shall be deemed to refer to The First National Bank of Chicago or any successor Property Trustee under the Amended and Restated Trust Agreement. 9. DTC may direct the Issuer and the Transfer Agent and Registrar to use any other telecopy number or address of DTC as the number or address to which notices or payments may be sent. 10. In the event of a conversion, redemption, or any other similar transaction (e.g., tender made and accepted in response to the Issuer's or the Transfer Agent and Registrar's invitation) necessitating a reduction in the aggregate number of Capital Securities outstanding evidenced by the Global Certificate, DTC, in its discretion: (a) may request the Issuer or the Transfer Agent and Registrar to issue and countersign a new Global Certificate; or (b) may make an appropriate notation on the Global Certificate indicating the date and amount of such reduction. 11. DTC may discontinue its services as a securities depositary with respect to the Capital Securities at any time by giving reasonable prior written notice to the Issuer and the Transfer Agent and Registrar (at which time DTC will confirm with the Issuer or the Transfer Agent and Registrar the aggregate number of Capital Securities deposited with it) and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Issuer may determine to make alternative arrangements for book-entry settlement for the Capital Securities, make available one or more separate global certificates evidencing Capital Securities to any Participant having Capital Securities credited to its DTC account, or issue definitive Capital Securities to the beneficial holders thereof, and in any such case, DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the Global Certificate, duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. 12. In the event that the Issuer determines that beneficial owners of Capital Securities shall be able to obtain definitive Capital Securities, the Issuer or the Transfer Agent and Registrar shall notify DTC of the availability of certificates. In such event, the Issuer or the Transfer Agent and Registrar shall issue, transfer and exchange certificates in appropriate amounts, as required by DTC and others, and DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the Global Certificate, duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. 13. This letter may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. B-4 Nothing herein shall be deemed to require the Transfer Agent and Registrar to advance funds on behalf of NTC Capital II. Very truly yours, NTC CAPITAL II (As Issuer) By: ------------------------------ Duane S. Rocheleau Administrative Trustee THE FIRST NATIONAL BANK OF CHICAGO (As Transfer Agent and Registrar) By: ------------------------------ Name: Title: RECEIVED AND ACCEPTED: THE DEPOSITORY TRUST COMPANY By: ------------------------ Authorized Officer B-5 Exhibit C [FORM OF COMMON SECURITIES CERTIFICATE] THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT Certificate Number Number of Common Securities CII- Certificate Evidencing Common Securities of NTC Capital II Floating Rate Common Securities (liquidation amount $1,000 per Common Security) NTC Capital II, a statutory business trust created under the laws of the State of Delaware (the "Issuer Trust"), hereby certifies that [NAME OF HOLDER] (the "Holder") is the registered owner of common securities of the Issuer Trust representing undivided beneficial interests in the assets of the Issuer Trust and designated the Floating Rate Common Securities (liquidation amount $1,000 per Common Security) (the "Common Securities"). Except in accordance with Section 5.11 of the Trust Agreement (as defined below) the Common Securities are not transferable and any attempted transfer hereof other than in accordance therewith shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Issuer Trust, dated as of April 25, 1997, as the same may be amended from time to time (the "Trust Agreement"), among Northern Trust Corporation, as Depositor, The First National Bank of Chicago, as Property Trustee, First Chicago Delaware Inc., as Delaware Trustee, the Administrative Trustees named therein and the holders, from time to time, of undivided beneficial interests in the assets of the Issuer Trust, including the designation of the terms of the Common Securities as set forth therein. The Issuer Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Issuer Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. Terms used but not defined herein have the meanings set forth in the Trust Agreement. C-1 In Witness Whereof, one of the Administrative Trustees of the Issuer Trust has executed this certificate this 25th day of April, 1997. NTC Capital II By: ------------------------------ Name: Duane S. Rocheleau Title: Administrative Trustee C-2 Exhibit D [FORM OF EXPENSE AGREEMENT] AGREEMENT AS TO EXPENSES AND LIABILITIES Agreement as to Expenses and Liabilities, dated as of April 25, 1997, between Northern Trust Corporation, a Delaware corporation (the "Corporation"), and NTC Capital II, a Delaware business trust (the "Issuer Trust"). Whereas, the Issuer Trust intends to issue its Common Securities (the "Common Securities") to and acquire Debentures from the Corporation and to issue and sell Floating Rate Capital Securities, Series B (the "Capital Securities") with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Trust Agreement of the Issuer Trust, dated as of April 25, 1997, among the Corporation, as Depositor, The First National Bank of Chicago, as Property Trustee, First Chicago Delaware Inc., as Delaware Trustee, the Administrative Trustees named therein and the holders, from time to time, of undivided beneficial interests in the assets of the Issuer, as the same may be amended from time to time (the "Trust Agreement"); Whereas, the Corporation will own all of the Common Securities of the Trust and will issue the Debentures; Whereas, terms used but not defined herein have the meanings set forth in the Trust Agreement; Now, Therefore, for good and valid consideration, the receipt and sufficiency of which are hereby acknowledged: ARTICLE I Section 1.1. Guarantee by the Corporation. Subject to the terms and conditions hereof, the Corporation hereby irrevocably and unconditionally guarantees to each person or entity to whom the Issuer Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means any costs, expenses or liabilities of the Issuer Trust, other than obligations of the Issuer Trust to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. Section 1.2. Subordination of Guarantee. The guarantee and other liabilities and obligations of the Corporation under this Agreement shall constitute unsecured obligations of the Corporation and shall rank subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Indenture) of the Corporation to the extent and in the manner set forth in the Indenture with respect to the Debentures, and the provisions of Article XIII of the Indenture will apply, mutatis mutandis, to the obligations of the Corporation hereunder. The obligations of the Corporation hereunder do not constitute Senior Indebtedness (as defined in the Indenture) of the Corporation. D-1 Section 1.3. Term of Agreement. This Agreement shall terminate and be of no further force and effect upon the dissolution of the Issuer Trust, provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any holder of Capital Securities or any Beneficiary must restore payment of any sums paid under the Capital Securities, under any Obligation, under the Guarantee Agreement dated the date hereof by the Depositor and The First National Bank of Chicago as guarantee trustee, or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. Section 1.4. Waiver of Notice. The Corporation hereby waives notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and the Corporation hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 1.5. No Impairment. The obligations, covenants, agreements and duties of the Corporation under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Issuer Trust of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Issuer Trust granting indulgence or extension of any kind; or (c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer Trust or any of the assets of the Issuer Trust (other than the liquidation of the Issuer Trust in accordance with the terms thereof). There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Corporation with respect to the happening of any of the foregoing. Section 1.6. Enforcement. A Beneficiary may enforce this Agreement directly against the Corporation and the Corporation waives any right or remedy to require that any action be brought against the Issuer Trust or any other person or entity before proceeding against the Corporation. Section 1.7. Subrogation. The Corporation shall be subrogated to all rights (if any) of the Issuer Trust in respect of any amounts paid to the Beneficiaries by the Corporation under this Agreement; provided, however, that the Corporation shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Agreement. D-2 ARTICLE II Section 2.1. Assignment. This Agreement may not be assigned by either party hereto without the consent of the other, and any purported assignment without such consent shall be void. Section 2.2. Binding Effect. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Corporation and shall inure to the benefit of the Beneficiaries. Section 2.3. Amendment. So long as there remains any Beneficiary or any Capital Securities are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the holders of the Capital Securities without the consent of such Beneficiary or the holders of the Capital Securities, as the case may be. Section 2.4. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail), telex or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer-back, if sent by telex): NTC Capital II c/o The First National Bank of Chicago One First National Plaza, Suite 0126 Chicago, Illinois 60670 Facsimile No.: (312) 407-1708 Attention: Corporate Trust Administration With a copy to: Northern Trust Corporation Fifty South LaSalle Street Chicago, Illinois 60675 Facsimile No.: (312) 630-1596 Attention: Secretary Section 2.4. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. D-3 This Agreement is executed as of the day and year first above written. Northern Trust Corporation By: -------------------------------------- Name: Perry R. Pero Title: Senior Executive Vice President and Chief Financial Officer NTC Capital II By: -------------------------------------- Name: Duane S. Rocheleau Administrative Trustee D-4 Exhibit E [FORM OF CAPITAL SECURITIES CERTIFICATE] [If the Capital Securities Certificate is to be Evidenced By a Book-Entry Capital Securities Certificate, insert--This Capital Securities Certificate is a Book-Entry Capital Securities Certificate within the meaning of the Trust Agreement hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Capital Securities Certificate is exchangeable for Capital Securities Certificates registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Trust Agreement and may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary, except in the limited circumstances described in the Trust Agreement. Unless this Capital Securities Certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to NTC Capital II or its agent for registration of transfer, exchange or payment, and any Capital Securities Certificate issued is registered in the name of Cede & Co. or such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] E-1 Certificate Number Number of Capital Securities CBII- CUSIP NO. 629398 AA 6 Certificate Evidencing Capital Securities of NTC Capital II Floating Rate Capital Securities, Series B (liquidation amount $1,000 per Capital Security) NTC Capital II, a statutory business trust created under the laws of the State of Delaware (the "Issuer Trust"), hereby certifies that _________________ (the "Holder") is the registered owner of ___________________ ( ) Capital Securities of the Issuer Trust representing an undivided beneficial interest in the assets of the Issuer Trust and designated the NTC Capital II Floating Rate Capital Securities, Series B (liquidation amount $1,000 per Capital Security) (the "Capital Securities"). The Capital Securities are transferable on the books and records of the Issuer Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.5 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities are set forth in, and this certificate and the Capital Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Issuer Trust, dated as of April 25, 1997, as the same may be amended from time to time (the "Trust Agreement"), among Northern Trust Corporation, as Depositor, The First National Bank of Chicago, as Property Trustee, First Chicago Delaware Inc., as Delaware Trustee, the Administrative Trustees named therein and the holders, from time to time, of undivided beneficial interests in the assets of the Issuer Trust, including the designation of the terms of the Capital Securities as set forth therein. The Holder is entitled to the benefits of the Guarantee Agreement entered into by Northern Trust Corporation, a Delaware corporation, and The First National Bank of Chicago, as guarantee trustee, dated as of April 25, 1997 (the "Guarantee Agreement"), to the extent provided therein. The Issuer Trust will furnish a copy of the Issuer Trust Agreement and the Guarantee Agreement to the Holder without charge upon written request to the Issuer Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. E-2 In Witness Whereof, one of the Administrative Trustees of the Issuer Trust has executed this certificate this 25th day of April, 1997. NTC Capital II By: ------------------------- Name: Duane S. Rocheleau Administrative Trustee E-3 ASSIGNMENT For Value Received, the undersigned assigns and transfers this Capital Security to: - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints -------------------------------------------------------- - -------------------------------------------------------------------------------- agent to transfer this Capital Securities Certificate on the books of the Issuer Trust. The agent may substitute another to act for him or her. Date: ------------------ Signature: --------------------------------------------------------------- (Sign exactly as your name appears on the other side of this Capital Securities Certificate) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. E-4 EX-4.(II) 6 GUARANTEE AGREEMENT ================================================================================ Exhibit Number (4)(ii) To 3/31/97 Form 10-Q GUARANTEE AGREEMENT by and between NORTHERN TRUST CORPORATION, as Guarantor and THE FIRST NATIONAL BANK OF CHICAGO, as Guarantee Trustee relating to NTC CAPITAL II ------------------------ Dated as of April 25, 1997 ------------------------ ================================================================================ CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Guarantee Agreement - ------------------- ------------------- 310(a)...............................................4.1(a) 310(b)...............................................4.1(c), 2.8 310(c)...............................................Inapplicable 311(a)...............................................2.2(b) 311(b)...............................................2.2(b) 311(c)...............................................Inapplicable 312(a)...............................................2.2(a) 312(b)...............................................2.2(b) 313..................................................2.3 314(a)...............................................2.4 314(b)...............................................Inapplicable 314(c)...............................................2.5 314(d)...............................................Inapplicable 314(e)...............................................1.1, 2.5, 3.2 314(f)...............................................2.1, 3.2 315(a)...............................................3.1(d) 315(b)...............................................2.7 315(c)...............................................3.1 315(d)...............................................3.1(d) 316(a)...............................................1.1, 2.6, 5.4 316(b)...............................................5.3 316(c)...............................................8.2 317(a)...............................................Inapplicable 317(b)...............................................Inapplicable 318(a)...............................................2.1 318(b)...............................................2.1 318(c)...............................................2.1 - ---------- * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. -i- TABLE OF CONTENTS Page ARTICLE I Definitions
Section 1.1. Definitions...................................................... 1 ARTICLE II Trust Indenture Act Section 2.1. Trust Indenture Act; Application................................. 5 Section 2.2. List of Holders.................................................. 5 Section 2.3. Reports by the Guarantee Trustee................................. 5 Section 2.4. Periodic Reports to the Guarantee Trustee........................ 5 Section 2.5. Evidence of Compliance with Conditions Precedent................. 6 Section 2.6. Events of Default; Waiver........................................ 6 Section 2.7. Event of Default; Notice......................................... 6 Section 2.8. Conflicting Interests............................................ 6 ARTICLE III Powers, Duties and Rights of the Guarantee Trustee Section 3.1. Powers and Duties of the Guarantee Trustee....................... 7 Section 3.2. Certain Rights of Guarantee Trustee.............................. 8 Section 3.3. Compensation; Indemnity; Fees....................................10 ARTICLE IV Guarantee Trustee Section 4.1. Guarantee Trustee; Eligibility...................................10 Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee....11 ARTICLE V Guarantee
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Section 5.1. Guarantee....................................................... 12 Section 5.2. Waiver of Notice and Demand..................................... 12 Section 5.3. Obligations Not Affected........................................ 13 Section 5.4. Rights of Holders............................................... 13 Section 5.5. Guarantee of Payment............................................ 13 Section 5.6. Subrogation..................................................... 13 Section 5.7. Independent Obligations......................................... 13 ARTICLE VI Covenants and Subordination Section 6.1. Subordination................................................... 14 Section 6.2. Pari Passu Guarantees........................................... 14 ARTICLE VII Termination Section 7.1. Termination..................................................... 14 ARTICLE VIII Miscellaneous Section 8.1. Successors and Assigns.......................................... 15 Section 8.2. Amendments...................................................... 15 Section 8.3. Notices......................................................... 15 Section 8.4. Benefit......................................................... 16 Section 8.5. Governing Law................................................... 16 Section 8.6. Counterparts.................................................... 16
-iii- GUARANTEE AGREEMENT, dated as of April 25, 1997, between NORTHERN TRUST CORPORATION, a Delaware corporation (the "Guarantor"), having its principal office at Fifty South LaSalle Street, Chicago, Illinois 60675, and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of NTC CAPITAL II, a Delaware statutory business trust (the "Issuer Trust"). Recitals of the Corporation Whereas, pursuant to an Amended and Restated Trust Agreement, dated as of April 25, 1997 (the "Trust Agreement"), among Northern Trust Corporation, as Depositor, the Property Trustee, the Delaware Trustee and the Administrative Trustees named therein, the Issuer Trust is issuing $120,000,000 aggregate Liquidation Amount (as defined in the Trust Agreement) of its Floating Rate Capital Securities, Series B (liquidation amount $1,000 per Capital Security) (the "Capital Securities"), representing preferred undivided beneficial interests in the assets of the Issuer Trust and having the terms set forth in the Trust Agreement; and Whereas, the Capital Securities will be issued by the Issuer Trust and the proceeds thereof, together with the proceeds from the issuance of the Issuer Trust's Common Securities (as defined herein), will be used to purchase the Debentures (as defined in the Trust Agreement) of the Guarantor, which Debentures will be deposited with The First National Bank of Chicago, as Property Trustee under the Trust Agreement, as trust assets; and Whereas, as an incentive for the Holders to purchase Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders of the Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. Now, Therefore, in consideration of the purchase of Capital Securities by each Holder, which purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time. ARTICLE I Definitions Section 1.1. Definitions. For all purposes of this Guarantee Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) All other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) All accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles; (e) Unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Guarantee Agreement; and (f) The words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Guarantee Agreement as a whole and not to any particular Article, Section or other subdivision. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Board of Directors" means the board of directors of the Guarantor or the Executive Committee of the board of directors of the Guarantor (or any other committee of the board of directors of the Guarantor performing similar functions) or a committee designated by the board of directors of the Guarantor (or such committee), comprised of two or more members of the board of directors of the Guarantor or officers of the Guarantor, or both. "Capital Securities" has the meaning specified in the recitals to this Guarantee Agreement. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer Trust. "Event of Default" means (i) a default by the Guarantor in any of its payment obligations under this Guarantee Agreement or (ii) a default by the Guarantor in any other obligation hereunder that remains unremedied for 30 days. "Guarantee Agreement" means this Guarantee Agreement, as modified, amended or supplemented from time to time. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by or on behalf of the Issuer Trust: (i) any accumulated and unpaid Distributions (as defined in the Trust Agreement) required to be paid on the Capital Securities, to the extent the Issuer Trust shall have -2- funds on hand available therefor at such time; (ii) the Redemption Price (as defined in the Trust Agreement) with respect to any Capital Securities called for redemption by the Issuer Trust, to the extent the Issuer Trust shall have funds on hand available therefor at such time; and (iii) upon a voluntary or involuntary termination, winding-up or liquidation of the Issuer Trust, unless Debentures are distributed to the Holders, the lesser of (a) the Liquidation Distribution (as defined in the Trust Agreement) with respect to the Capital Securities, to the extent that the Issuer Trust shall have funds on hand available therefor at such time, and (b) the amount of assets of the Issuer Trust remaining available for distribution to Holders on liquidation of the Issuer. "Guarantee Trustee" means The First National Bank of Chicago, solely in its capacity as Guarantee Trustee and not in its individual capacity, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee. "Guarantor" has the meaning specified in the first paragraph of this Guarantee Agreement. "Holder" means any Holder (as defined in the Trust Agreement) of any Capital Securities; provided, however, that in determining whether the holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee Trustee. "Indenture" means the Junior Subordinated Indenture, dated as of January 1, 1997 between Northern Trust Corporation and The First National Bank of Chicago, as trustee, as the same may be modified, amended or supplemented from time to time. "Issuer Trust" has the meaning specified in the first paragraph of this Guarantee Agreement. "List of Holders" has the meaning specified in Section 2.2(a). "Majority in Liquidation Amount of the Capital Securities" means, except as provided by the Trust Indenture Act, Capital Securities representing more than 50% of the aggregate Liquidation Amount (as defined in the Trust Agreement) of all Capital Securities then Outstanding (as defined in the Trust Agreement). "Officers' Certificate" means, with respect to the Guarantor, a certificate signed by the Chairman or a Vice Chairman of the Board of Directors of the Guarantor or the President or a Vice President of the Guarantor, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Guarantor, and delivered to the Guarantee Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: -3- (a) a statement by each officer signing the Officers' Certificate that such officer has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by such officer in rendering the Officers' Certificate; (c) a statement that such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, company, limited liability company, trust, business trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" means, with respect to the Guarantee Trustee, any Senior Vice President, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer or Assistant Trust Officer or any other officer of the Corporate Trust Department of the Guarantee Trustee and also means, with respect to a particular matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust Agreement" means the Amended and Restated Trust Agreement of the Issuer Trust referred to in the recitals to this Guarantee Agreement, as modified, amended or supplemented from time to time. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this Guarantee Agreement was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Vice President", when used with respect to the Corporation, means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president." -4- ARTICLE II Trust Indenture Act Section 2.1. Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act through operation of Section 318(c) thereof, such imposed duties shall control. If any provision of this Guarantee Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Guarantee Agreement as so modified or to be excluded, as the case may be. Section 2.2. List of Holders. (a) The Guarantor shall furnish or cause to be furnished to the Guarantee Trustee (a) semiannually, on or before June 30 and December 31 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders (a "List of Holders") as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantor and has not otherwise been received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with the requirements of Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act. Section 2.3. Reports by the Guarantee Trustee. Not later than July 15 of each year, commencing July 15, 1997, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. Section 2.4. Periodic Reports to the Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314 of -5- the Trust Indenture Act, in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Section 2.5. Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer of the Guarantor pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. Section 2.6. Events of Default; Waiver. The Holders of at least a Majority in Liquidation Amount of the Capital Securities may, by vote, on behalf of the Holders of all the Capital Securities, waive any past default or Event of Default and its consequences. Upon such waiver, any such default or Event of Default shall cease to exist, and any default or Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Section 2.7. Event of Default; Notice. (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notice of any such Event of Default known to the Guarantee Trustee, unless such Event of Default has been cured before the giving of such notice, provided that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of this Guarantee Agreement shall have obtained actual knowledge, of such Event of Default. Section 2.8. Conflicting Interests. The Trust Agreement and the Indenture shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. -6- ARTICLE III Powers, Duties and Rights of the Guarantee Trustee Section 3.1. Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Guarantee Trustee hereunder. The right, title and interest of the Guarantee Trustee, as such, hereunder shall automatically vest in any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders. (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. If an Event of Default has occurred and is continuing, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) Prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement (including pursuant to Section 2.1), and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions -7- that by any provision hereof or of the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement. (ii) The Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made. (iii) The Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement. (iv) No provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. Section 3.2. Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor. -8- (iv) The Guarantee Trustee may consult with legal counsel, and the written advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction. (v) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder unless such Holder shall have provided to the Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that nothing contained in this Section 3.2(a)(v) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement. (vi) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (vii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care hereunder. (viii) Whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions. (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty to act in accordance with such power and authority. -9- Section 3.3. Compensation; Indemnity; Fees. The Guarantor agrees: (a) to pay to the Guarantee Trustee from time to time such reasonable compensation for all services rendered by it hereunder as may be agreed by the Guarantor and the Guarantee Trustee from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Guarantee Trustee in accordance with any provision of this Guarantee Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Guarantee Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence, wilful misconduct or bad faith on the part of the Guarantee Trustee, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee Agreement. ARTICLE IV Guarantee Trustee Section 4.1. Guarantee Trustee; Eligibility. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000, and shall be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then, for the purposes of this Section 4.1 and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. -10- (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2. (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed hereunder shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. ARTICLE V Guarantee Section 5.1. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer Trust), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer Trust may have or assert, except the defense of payment. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer Trust to pay such amounts to the Holders. -11- Section 5.2. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, the Issuer Trust or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 5.3. Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer Trust of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer Trust; (b) the extension of time for the payment by the Issuer Trust of all or any portion of the Distributions (other than an extension of time for payment of Distributions that results from the extension of any interest payment period on the Debentures as provided in the Indenture), Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Capital Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer Trust or any of the assets of the Issuer Trust; (e) any invalidity of, or defect or deficiency in, the Capital Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor (other than payment of the underlying obligation), it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. -12- There shall be no obligation of the Holders to give notice to, or obtain the consent of, the Guarantor with respect to the happening of any of the foregoing. Section 5.4. Rights of Holders. The Guarantor expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in Liquidation Amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement without first instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust or any other Person. Section 5.5. Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer Trust) or upon the distribution of Debentures to Holders as provided in the Trust Agreement. Section 5.6. Subrogation. The Guarantor shall be subrogated to all rights (if any) of the Holders against the Issuer Trust in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. Section 5.7. Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer Trust with respect to the Capital Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. -13- ARTICLE VI COVENANTS AND SUBORDINATION Section 6.1. Subordination. The obligations of the Guarantor under this Guarantee Agreement will constitute unsecured obligations of the Guarantor and will rank subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Indenture) of the Guarantor to the extent and in the manner set forth in the Indenture with respect to the Debentures, and the provisions of Article XIII of the Indenture will apply, mutatis mutandis, to the obligations of the Guarantor hereunder. The obligations of the Guarantor hereunder do not constitute Senior Indebtedness (as defined in the Indenture) of the Guarantor. Section 6.2. Pari Passu Guarantees. The obligations of the Guarantor under this Guarantee Agreement shall rank pari passu with the obligations of the Guarantor under (i) any similar guarantee agreements issued by the Guarantor on behalf of the holders of preferred or capital securities issued by any Issuer Trust (as defined in the Indenture), (ii) the Indenture and the Securities (as defined therein) issued thereunder; (iii) the Expense Agreement (as defined in the Trust Agreement) and any similar expense agreements entered into by the Guarantor in connection with the offering of Capital Securities (as defined in the Indenture) by any Issuer Trust (as defined in the Indenture), and (iv) any other security, guarantee or other agreement or obligation that is expressly stated to rank pari passu with the obligations of the Guarantor under this Guarantee Agreement or with any obligation that ranks pari passu with the obligations of the Guarantor under this Guarantee Agreement. ARTICLE VII TERMINATION Section 7.1. Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price (as defined in the Trust Agreement) of all Capital Securities, (ii) the distribution of Debentures to the Holders in exchange for all of the Capital Securities or (iii) full payment of the amounts payable in accordance with Article IX of the Trust Agreement upon liquidation of the Issuer Trust. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder is required to repay any sums paid with respect to Capital Securities or this Guarantee Agreement. -14- ARTICLE VIII MISCELLANEOUS Section 8.1. Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor or a conveyance, transfer or lease of the Guarantor's properties that is permitted under Article VIII of the Indenture and pursuant to which the successor or assignee agrees in writing to perform the Guarantor's obligations hereunder, the Guarantor shall not assign its obligations hereunder, and any purported assignment other than in accordance with this provision shall be void. Section 8.2. Amendments. Except with respect to any changes that do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a Majority in Liquidation Amount of the Capital Securities. The provisions of Article VI of the Trust Agreement concerning meetings of the Holders shall apply to the giving of such approval. Section 8.3. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address or telecopy number set forth below or such other address or telecopy number as the Guarantor may give notice to the Guarantee Trustee and the Holders: Northern Trust Corporation Fifty South LaSalle Street Chicago, Illinois 60675 Attention: Secretary Telecopy: 312-630-1596 (b) if given to the Guarantee Trustee, at the address or telecopy number set forth below or such other address or telecopy number as the Guarantee Trustee may give notice to the Guarantor and Holders: The First National Bank of Chicago One First National Bank Plaza, Suite 0126 Chicago, Illinois 60670 -15- Attention: Corporate Trust Administration Telecopy: 312-407-1708 with a copy to: NTC Capital II c/o Northern Trust Corporation Fifty South LaSalle Street Chicago, Illinois 60675 Attention: Secretary Telecopy: 312-630-1596 (c) if given to any Holder, at the address set forth on the books and records of the Issuer Trust. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. Section 8.4. Benefit. This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Capital Securities. Section 8.5. Governing Law. This Guarantee Agreement shall be governed by and construed in accordance with the laws of the State of Illinois. Section 8.6. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -16- IN WITNESS WHEREOF, the parties hereto have executed this Guarantee Agreement as of the day and year first above written. Northern Trust Corporation By: ---------------------------- Name: Perry R. Pero Title: Senior Executive Vice President and Chief Financial Officer The First National Bank of Chicago, as Guarantee Trustee By: ---------------------------- Name: Julianne J. Tynski Title: Trust Officer -17- State of ) ) ss.: County of ) On the 25th day of April, 1997, before me personally came Perry R. Pero, to me known, who, being by me duly sworn, did depose and say that he is Senior Executive Vice President and Chief Financial Officer of Northern Trust Corporation, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. -------------------------------- State of ) ) ss.: County of ) On the 25th day of April, 1997, before me personally came Julianne J. Tynski, to me known, who, being by me duly sworn, did depose and say that she is a Trust Officer of The First National Bank of Chicago, one of the corporations described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that she signed her name thereto by like authority. -------------------------------- -18- EX-10.(I) 7 ANNUAL PERFORMANCE PLAN Exhibit Number (10)(i) To 3/31/97 Form 10-Q NORTHERN TRUST CORPORATION ANNUAL PERFORMANCE PLAN 1997 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, 1997 to December 31, 1997. 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. 2 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. 3 (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. 4 EX-10.(II) 8 MANAGEMENT PERFORMANCE PLAN Exhibit Number (10)(ii) To 3/31/97 Form 10-Q NORTHERN TRUST CORPORATION MANAGEMENT PERFORMANCE PLAN 1997 I. Purpose of Plan --------------- The purpose of the Management 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, 1997 to December 31, 1997. III. Eligibility and Participation ----------------------------- Eligibility to participate in the Plan is restricted to selected executive officers and subject to approval by the Compensation and Benefits Committee of the Board of Directors (the "Committee"). IV. Participant Target Awards ------------------------- At the beginning of the Plan year, the Committee shall determine individual target awards. The target award will be described as a percent of the annual base salary earned during the Plan year. V. Award Determination ------------------- The Committee establishes a Corporate Earnings Target for the Plan at the beginning of the Plan year. The available funding for participant awards will be based on (a) the aggregate of participants' target award amounts and (b) the Corporation's financial achievement versus the Corporate Earnings Target. The amount of the award funding will either increase or decrease as calculated by the formula detailed in Attachment I. VI. Payment of Awards ----------------- Awards will be paid in cash as soon as practicable following the completion of the Plan year. VII. Administration -------------- The Plan shall be administered by 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. Miscellaneous Provisions ------------------------ The following miscellaneous provisions are applicable to the Plan: (a) In the event of a participant's death, disability or retirement, awards shall be prorated to the date of the event, and paid as described in Section VI. (b) Termination of employment by a participant during the Plan year, for reasons other than death, disability, or retirement shall result in immediate exclusion from the Plan unless the Compensation and Benefits Committee decides otherwise in its sole discretion. (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. (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. EX-10.(III) 9 AMENDED 1992 INCENTIVE STOCK PLAN Exhibit Number (10)(iii) To 3/31/97 Form 10-Q NORTHERN TRUST CORPORATION AMENDED 1992 INCENTIVE STOCK PLAN 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 based on the value or increase in the value of such shares as described herein, and to allow the Corporation to compensate directors under the Plan for their services in a manner that aligns their interests with those of stockholders. Benefits granted under the Plan are referred to as "Awards." 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 "non-employee director" definition in Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the "outside director" definition under Section 162(m) of the Internal Revenue Code (the "Code") and the regulations thereunder. 3. Participants. Participants will consist of (a) directors of the Corporation, and (b) 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 Issuable Under the Plan. An aggregate of 16,000,000 shares of Common Stock, $1.66-2/3 par value per share, consisting of authorized but unissued shares or treasury shares, may be issued under the Plan from and after the date of its initial adoption. 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 during the term of the Plan is 1,200,000, as such number may be adjusted in accordance with the provisions of Section 11 hereof. The maximum number of Performance Shares that may be granted to any participant in any year after 1997 is 75,000, as such number may be adjusted in accordance with 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 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 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. -2- (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 Exchange Act, indicating that any entity, person, or group has acquired beneficial ownership, as that term is defined in Rule 13d-3 under the Exchange Act, of more than 30% of the outstanding capital stock of the Corporation entitled to vote for the election of directors ("voting stock"); (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 60% 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. -3- 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 Right 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. (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. -4- (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 one or more of the following: (i) return-on-equity, (ii) earnings per share and (iii) Common Stock price. Corporate performance goals may be absolute in their terms or measured against or in relationship to the performance of other companies or indices selected by the Committee. In addition, corporate performance goals may be adjusted for any events or occurrences (including extraordinary charges, losses from discontinued operations, restatements and accounting charges and other unplanned special charges such as restructuring expenses, acquisition expenses and strategic loan loss provisions) as may be determined by the Committee. Corporate performance goals may be particular to one or more business units, lines of business or subsidiaries or may be based on the performance of the Corporation as a whole. The corporate performance goals and the performance targets established thereunder by the Committee may be identical for all participants for a given performance period or, at the discretion of the Committee, may differ among such participants. (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 -5- 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 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. -6- (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 noncompetition 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 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. -7- (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. -8- (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 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. -9- 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, 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. -10- 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, 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. 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 16,000,000, as such number may be adjusted in accordance with the provisions of 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 1934 Act. All benefits in effect at the time of termination of the Plan shall remain in effect according to their original terms. 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 was adopted by the Board of Directors of the Corporation as of May 1, 1992, and approved by the stockholders of the Corporation. Amendments to the Plan have been adopted, including amendments approved by the stockholders at the 1995 annual meeting of stockholders. The Plan was further amended on February 18, 1997, with certain amendments adopted subject to approval by the stockholders of the Corporation at the 1997 annual meeting of stockholders. 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. -11- 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. -12- EX-10.(IV) 10 AMENDMENTS TO EMPLOYEE STOCK PLAN Exhibit Number (10)(iv) To 3/31/97 Form 10-Q Resolution 12/19/95 - -------------------------------------------------------------------------------- The Northern Trust Company EMPLOYEE BENEFIT PLANS FOR FORMER EMPLOYEES OF TANGLEWOOD BANK, N.A. - -------------------------------------------------------------------- WHEREAS, Tanglewood Bank, N.A. became affiliated with Northern Trust Corporation effective July 31, 1995, and merged into Northern Trust Bank of Texas, N.A., effective August 31, 1995; WHEREAS, Tanglewood Bank, N.A. sponsored a 401(k) plan known as the Tanglewood Bank, N.A. Employee's Salary Deferral Plan (the "Tanglewood Plan"); and WHEREAS, it is now deemed desirable to merge the Tanglewood Plan into The Northern Trust Company Thrift-Incentive Plan ("TIP"), and to amend the retirement plans maintained by The Northern Trust Company to add provisions relating to the participation by the former employees of Tanglewood Bank, N.A. in such plans; NOW, THEREFORE, BE IT RESOLVED, that the merger of the Tanglewood Plan and TIP is hereby authorized and approved effective as of midnight on December 31, l995. TIP shall be the surviving plan, and it shall receive all of the assets and assume all of the liabilities of the Tanglewood Plan. FURTHER RESOLVED, that each individual who was eligible to participate in the Tanglewood Plan immediately prior to the merger shall be eligible to participate in TIP effective January 1, 1996; provided however, that such individuals shall not have the ability to direct the investment of account assets attributable to the Tanglewood Plan as would otherwise be permitted under Article VI of TIP until such assets are transferred to the TIP Trust. FURTHER RESOLVED, that TIP and the Northern Trust Employee Stock Ownership Plan are hereby amended, effective January 1, 1996, to provide that an employee's service with Tanglewood (before and after the July 31, l995 acquisition date) shall be considered service with The Northern Trust Company for purposes of determining eligibility and Vesting Service. FURTHER RESOLVED, that The Northern Trust Company Pension Plan is hereby amended to provide that an employee's service with Tanglewood, N.A. from July 31, l995 (or the employee's date of hire, if later) shall be considered service with The Northern Trust Company for purposes of determining eligibility, years of Vesting Service and years of Credited Service. FURTHER RESOLVED, that in connection with the merger of the Tanglewood Plan into TIP, TIP is further amended as follows, effective January 1, 1996: Resolution 12/19/95 - -------------------------------------------------------------------------------- The Northern Trust Company (1) The vesting schedule applicable under the Tanglewood Plan will serve as the minimum vesting schedule for individuals who were eligible to participate in the Tanglewood Plan immediately prior to the merger ("Tanglewood Participants") with respect to their entire account balances (both Tanglewood and Northern Trust) until the TIP vesting schedule provides the same or greater vesting percentage. (2) Optional forms of distribution and other protected benefits under the Tanglewood Plan shall be preserved for Tanglewood Participants with respect to their entire account balances pursuant to section 411(d)(6) of the Internal Revenue Code and the regulations thereunder. FURTHER RESOLVED, that consistent with the terms of TIP, Tanglewood Participants with outstanding loan balances will not be charged a quarterly loan fee for periods after December 31, 1995 in connection with such outstanding loans. FURTHER RESOLVED, that these resolutions apply only to former employees of Tanglewood in the service of Northern Trust Bank of Texas, N.A. (or an affiliate) on or after December 31, 1995, and do not entitle such employees to receive benefits for periods prior to January l, l996 under any welfare or retirement plan maintained by The Northern Trust Company, except as expressly provided herein. FURTHER RESOLVED, that the Chairman, the President, any Vice Chairman, any Executive Vice President, or any Senior Vice President of The Northern Trust Company, or his or her delegate, is authorized to prepare and execute amendments to the affected plans and take any actions which are necessary or advisable to implement these resolutions, including any action which may be required in connection with the merger of the Tanglewood Plan to ensure that the tax- qualified status of The Northern Trust Company Pension Plan is maintained. EX-10.(V) 11 AMENDMENT TO EMPLOYEE STOCK OWNERSHIP PLAN Exhibit Number (10)(v) To 3/31/97 Form 10-Q AMENDMENT NUMBER THREE TO NORTHERN TRUST EMPLOYEE STOCK OWNERSHIP PLAN WHEREAS, The Northern Trust Company (the "Company") maintains the Northern Trust Employee Stock Ownership Plan, as amended and restated effective January 1, 1989 (the "Plan"); and WHEREAS, by virtue and in exercise of the amending power reserved to the Company under Section 13.1 of the Plan, the Board of Directors amended the Plan by resolution dated October 15, 1996, and authorized the undersigned officer to prepare and execute an amendment implementing such resolutions; and WHEREAS, pursuant to a resolution of the Board of Directors dated July 18, 1995, the undersigned officer has the authority to modify the language of the plan in order to clarify its meaning, Now, therefore, the plan is amended in the following particulars: 1. Effective September 30, 1996, Schedule A is amended by adding "First Chicago NBD ('FCNBD') Agreement Dated 10/3/96" to the end of the Affiliate Name column, and by adding "Service Date w/FCNBD" to the end of the ESOP Earliest Vesting Date column. 2. Effective September 30, 1996, section 3.4(d) is amended in its entirety to read as follows: "(d) A Participant's Vesting Service shall not include periods of service with an entity that is not an Affiliate, or service prior to the date an entity becomes an Affiliate, except as provided in Schedule A hereto." 3. Effective January 1, 1989, section 7.4(c) is restated in its entirety to read as follows: "(c) For each Anniversary Date after December 31, 1989, with respect to Employer Contributions which have not been made to make payments on a Loan, Company Stock released from the Suspense Account according to section 6.1(c), and Forfeitures incurred since the prior Anniversary Date, in the proportion that such Participant's Compensation for the Plan Year (considering for this purpose only Compensation paid while a Participant is in the Plan) bears to the total Compensation of all such Participants; provided, however, that a special allocation may be made pursuant to section 4.5." IN WITNESS WHEREOF, the Company has caused this amendment to be executed on its behalf by the undersigned officer as of the 15th day of October, 1996. /s/ Martin J. Joyce, Jr. - ------------------------------- Martin J. Joyce, Jr. Senior Vice President EX-10.(VI) 12 AMENDMENTS TO EMPLOYEE STOCK OWNERSHIP PLAN Exhibit Number (10)(vi) To 3/31/97 Form 10-Q Resolution 11/19/96 - -------------------------------------------------------------------------------- The Northern Trust Company ADOPTION OF ALL EMPLOYEE BENEFIT PLANS BY BENT TREE NATIONAL BANK - ----------------------------------------------------------------- WHEREAS, in connection with the November 15, 1996 acquisition of Bent Tree National Bank ("Bent Tree") by Northern Trust Corporation, Bent Tree and The Northern Trust Company are now members of the same controlled group of corporations, as defined in the Internal Revenue Code; and WHEREAS, Bent Tree sponsored a 401(k) plan known as the Metroplex Employees Savings Account (the "Bent Tree Plan"); and WHEREAS, it is now deemed desirable to extend the employee benefit plans maintained by The Northern Trust Company to employees of Bent Tree, to merge the Bent Tree Plan into The Northern Trust Company Thrift-Incentive Plan ("TIP"), and to amend the retirement plans maintained by The Northern Trust Company to add provisions relating to the participation by the former employees of Bent Tree in such plans; NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby consents to the adoption by Bent Tree of all of the employee benefit plans of The Northern Trust Company, effective January 1, 1997. FURTHER RESOLVED, that the merger of the Bent Tree Plan and TIP is hereby authorized and approved effective as of midnight on December 31, 1996. TIP shall be the surviving plan, and it shall receive all of the assets and assume all of the liabilities of the Bent Tree Plan. FURTHER RESOLVED, that each individual who was eligible to participate in the Bent Tree Plan immediately prior to the merger shall be eligible to participate in TIP effective January 1, 1997, provided however, that such individuals shall not have the ability to direct the investment of account assets attributable to the Bent Tree Plan as would otherwise be permitted under Article VI of TIP until such assets are transferred to the TIP Trust. FURTHER RESOLVED, that TIP and the Northern Trust Employee Stock Ownership Plan are hereby amended, effective January 1, 1997, to provide that an employee's service with Bent Tree (before and after the November 15, 1996 acquisition date) shall be considered service with The Northern Trust Company for purposes of determining eligibility and Vesting Service. Resolution 11/19/96 - -------------------------------------------------------------------------------- The Northern Trust Company FURTHER RESOLVED, that The Northern Trust Company Pension Plan is hereby amended, effective January 1, 1997, to provide that an employee's service with Bent Tree National Bank from November 15, 1996 (or the employee's date of hire, if later) shall be considered service with The Northern Trust Company for purposes of determining eligibility, years of Vesting Service and years of Credited Service. FURTHER RESOLVED, that in connection with the merger of the Bent Tree Plan into TIP, TIP is further amended as follows, effective January 1, 1997. (1) The vesting schedule applicable under the Bent Tree Plan will serve as the minimum vesting schedule with respect to account balances that are attributable to participation in the Bent Tree Plan for individuals who were eligible to participate in the Bent Tree Plan immediately prior to the merger, or who had an account balance under the Bent Tree Plan that was transferred to TIP ("Bent Tree Participants"). The TIP vesting schedule shall apply with respect to account balances that are attributable to participation in TIP. (2) Bent Tree Participants shall be 100% vested at age 59 1/2, regardless of years of service, with respect to account balances that are attributable to participation in the Bent Tree Plan. (3) Optional forms of distributions and other protected benefits under the Bent Tree Plan shall be preserved for Bent Tree Participants with respect to their entire account balances in accordance with section 411(d)(6) of the Internal Revenue Code and the regulations thereunder. FURTHER RESOLVED, that these resolutions do not entitle the affected employees to receive benefits for periods prior to January 1, 1997 under any welfare or retirement plan maintained by The Northern Trust Company, except as expressly provided herein. FURTHER RESOLVED, that the Chairman, the President, any Executive or Senior Executive Vice President, or any Senior Vice President of The Northern Trust Company, or his or her delegate, is authorized to prepare and execute amendments to the affected plans and take any actions which are necessary or advisable to implement these resolutions, including any action which may be required in connection with the merger of the Bent Tree Plan to ensure that the tax-qualified status of The Northern Trust Company Pension Plan is maintained. EX-11 13 COMPUTATION OF PER SHARE EARNINGS EXHIBIT NUMBER (11) TO 3/31/97 FORM 10-Q NORTHERN TRUST CORPORATION COMPUTATION OF PER SHARE EARNINGS
First Quarter Ended March 31 ------------------------------ 1997 1996 ------------ ------------ Computations Required by - ------------------------ Regulation S-K - -------------- Primary Earnings Per Share - -------------------------- Net Income Applicable to Common Shares $ 70,567,918 $ 60,245,569 ============ ============ Weighted Average Number of Common and Common Equivalent Shares Outstanding Common Shares 110,929,710 112,516,366 Dilutive Effect of Common Equivalent Shares (A) Stock Options 2,851,558 1,848,546 Long Term Performance Stock Plan 622,522 527,396 Other 245,703 89,566 ------------ ------------ 114,649,493 114,981,874 ============ ============ Net Income Per Common and Common Equivalent Share $0.62 $0.52 ============ ============
(A) Determined by application of the treasury stock method. EXHIBIT NUMBER (11) TO 3/31/97 FORM 10-Q NORTHERN TRUST CORPORATION COMPUTATION OF PER SHARE EARNINGS
First Quarter Ended March 31 ------------------------------ 1996 1995 ------------ ------------ Computations Required by - ------------------------ Regulation S-K - -------------- Fully Diluted Earnings Per Share - -------------------------------- Net Income Applicable to Common Shares $ 70,567,918 $ 60,245,569 Add Back: Dividend on Series E Convertible Preferred Stock 14,756 ------------ ------------ $ 70,567,918 $ 60,260,325 ============ ============ Weighted Average Number of Common and Common Equivalent Shares Outstanding Common Shares 110,929,710 112,516,366 Dilutive Effect of Common Equivalent Shares (A) Stock Options 2,853,513 1,924,386 Long Term Performance Stock Plan 622,522 540,440 Other 245,703 95,720 Other Potentially Dilutive Securities Equivalent Shares Assuming Conversion of Series E Convertible Preferred Stock 767,908 ------------ ------------ 114,651,448 115,844,820 ============ ============ Net Income Per Common and Common Equivalent Share $0.62 $0.52 ============ ============
(A) Determined by application of the treasury stock method. EX-27 14 FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the Consolidated Balance Sheet and the Consolidated Statement of Income and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 948,597 2,354,886 1,219,513 13,677 5,328,737 481,744 499,274 11,417,312 148,361 23,231,751 15,213,809 5,168,260 672,021 584,429 189,935 0 120,000 1,283,297 23,231,751 183,576 79,974 36,447 299,997 114,168 193,918 106,079 500 581 205,940 108,385 71,748 0 0 71,748 .62 .62 2.33 19,061 28,144 2,567 0 148,327 2,153 1,687 148,361 97,439 2,095 48,827
EX-99 15 REMARKS DELIVERED BY BARRY G. HASTINGS Exhibit Number (99) To 3/31/97 Form 10-Q Barry G. Hastings Annual Meeting Remarks April 15, 1997 Thanks Bill and Good Morning. Through 107 years of providing outstanding service to clients worldwide, Northern Trust has built leading market positions in two core businesses. We enjoy a diverse and profitable business mix that we believe is unmatched in the industry. This morning I'll share with you how we have strengthened our market positioning over the past year in these core businesses and also how we are poised to seize growth opportunities going forward. But first I'll take a few minutes to review our 1996 and first quarter 1997 financial performance. 1996 was our ninth consecutive year of record earnings and a year unmatched for new business wins in both our corporate and personal businesses. The corporation earned net income of almost $259 million - an 18% increase from a year ago. Trust fees, which constitute half of our revenue base of $1.3 billion, grew 17% during the year. Trust assets increased 27% to $779 billion at year end. Strong revenue growth coupled with well-managed expenses and excellent credit quality drove this exceptional performance. We achieved a 4% spread between revenue growth of 12% and expense growth of 8% which allowed our revenue growth to have a direct and significant impact on bottom line profitability. As we go forward, our success in expense management continues to be an integral component of our strategic business planning. But we also remain firmly committed to funding those areas with strong revenue growth opportunities. Growth in all of Northern's revenue sources contributed to our success in exceeding our strategic financial targets. Earnings per share increased 19%, well above our minimum target of 10%. Return on equity was 18.6%, solidly within our 18%-20% target range, and we achieved $1.56 of revenue for each $1.00 of noninterest expense - well above the $1.50 objective we have had for many years. I am pleased to announce that today we are raising our sights. Going forward, our goal will be to earn $1.60 for each $1.00 of noninterest expense. As Bill indicated, the momentum of 1996 has carried into 1997 with excellent first quarter results. Net income rose 17% to a record $71.7 million. Trust fees, which account for almost half of total revenues, grew 10%, and foreign exchange had an exceptional quarter with 64% growth from the same period last year. In addition, solid loan growth, of $1.4 billion, fueled net interest income which grew 12%. This strong performance on the revenue side resulted in total revenue growth of 11%. We made excellent progress against all our financial targets in the first quarter. Earnings per share were up 19%, well ahead of our minimum of 10%. Return on Common Equity of 19.9% reached the high end of our target range. And our 1st quarter productivity ratio of 157% exceeded our prior goal and is progressing toward our newly revised goal of 160%. Now for the next 20 minutes or so, I want to share a few comments with you on the condition of our businesses and opportunities for our continued growth. It's a good story and one that you, as shareholders, should genuinely enjoy. As most of you are aware, we compete as a top-tier provider in both our personal and our corporate & institutional markets. Our focused commitment to these businesses has been critical as the importance of technology continues to escalate. On the corporate and institutional side, substantial investments in leading-edge technology have built a strong platform that allows rapid development in key areas of client interest such as risk management and consulting. Our Passport system, now being actively used by almost 300 clients, provides access to decision support tools and worldwide financial information from a single on-line desktop tool. Our large outlay in technology, which exceeds $600 million over the last five years, is now being leveraged by our personal businesses through the development of the Northern Relationship Network. This national network will streamline our client servicing and informational capabilities and improve operational effectiveness in all of our locations. From our goal to meet client expectations for wide ranging investment strategies and rapid information needs, we have evolved into a complex and expansive operations and systems organization. Using large computer databases, processing huge transaction volumes and controlling the flow of enormous dollar movements, our operations team, which today totals over 2,800 people, provides accurate and timely account information to clients all over the globe. From time to time when we attempt to put in perspective the breadth and depth of our operations worldwide, the numbers become so stunning that they are nearly beyond comprehension. However, if we convert the macro numbers to other comparisons, the true enormity of our daily accomplishments is much clearer. For example, we set up on our system each minute of each working day of the year one totally new asset, adding to our collective asset base which currently totals just under 500,000 marketable and non-marketable assets. We produce reports in enormous numbers today. If all of the reports that were produced in 1996 were stacked one on top of the other, they would be more than twice as high as Mount Everest, and 44 times as high as the Sears Tower. Last year, we produced and mailed to our clients 17,000,000 statements, reports, benefit checks, and letters - roughly 1% of the total amount of mail handled by the Chicago Post Office in all of 1996. And finally, while we are a $22 billion bank, because of this large processing and custody component, more than $90 billion of cash and securities pass through the Northern each business day... over 4 times the size of our bank. Northern's investment management business benefited significantly in 1996 from strong equity markets around the world. Northern's consultative approach to investment management complements industry trends such as the globalization of the financial markets, greater focus on risk evaluation and management, and the increasing preference of investors to use fewer managers. Assets under management for personal and institutional clients rose $25 billion in 1996 to over $130 billion. This places Northern among the largest, and fastest growing, investment managers worldwide. Northern's 2 mutual funds have also made good progress. Through our Benchmark Funds, for our institutional clients, and our Northern Funds, for our personal clients, we now offer a total of 35 no-load funds which are priced daily and meet a wide range of investment objectives. We offer domestic and international equity and fixed income funds, tax-exempt funds, and money market funds. Over the past three years, our mutual funds have grown to almost $13 billion in assets and make up the 12th largest bank mutual funds complex in the country. And some of the country's top performing funds were in our complex during 1996. In particular, our Technology Fund which was organized last April became the number one ranked Science and Technology fund for the 3rd quarter of 1996. Also, our Growth Income Equity fund ranked in the top 15% of all such comparable funds for 1996. Our fixed income performance remains among the nation's best in the 3, 5, 7, and 10 year timeframes. And our active management of cash continues to grow dramatically. We are currently managing on average approximately $75 billion daily which makes us one of the country's largest cash managers. Our team of cash managers has consistently produced top-tier results. As a result of our highly focused business strategy and investment in our core businesses, Northern is capturing a significant share of the growth in these markets. Overall annualized new business fees for 1996 exceeded $100 million, a record year by over $25 million. For example, to give you an idea of the new business momentum in our personal business, in 1996, excluding any new business booked in our Wealth Management group, which focuses on families with assets in excess of $100 million, we acquired 41 new pieces of recurring fee business from around the country, each involving assets of over $50 million. Never in our history have we booked so many large accounts. And while our major focus continues to be on the fee side of our businesses, net interest income derived from loans is extraordinarily important to our success. Through a client focused approach, we provide financial and credit products to our targeted market segments. Thousands of fee-based clients from both our personal and corporate business units use these credit products. And while our loan growth has been impressive, growing 13% in 1996, we continue to maintain exceptional credit quality. At the end of 1996, nonperforming assets to total loans were two-tenths of 1% on loans outstanding of $11 billion which placed us #1 in our peer group of the largest 35 U.S. banks. It is this combination of net interest income from quality loans and fee revenues that drives our total relationship strategy, and ultimately, our superior corporate return on equity. In our Corporate & Institutional business, we administer and manage global investment asset pools for corporate and institutional clients worldwide. In September, we introduced a new positioning of our products and services for the corporate and institutional market. MasterSource positions Northern as a premier provider of "integrated solutions from one trusted source." As clients increasingly look to fewer providers to do more, Northern is able to offer a comprehensive array of retirement plan, global, investment, treasury management, credit, and risk management products and services. Recent mergers and acquisitions in the financial services industry have changed the landscape for the Corporate and Institutional Services business. Likewise, a number of players have exited the business for reasons such as lack of scale, costs associated with technology investment, and strategic focus. All of these changes have presented increased opportunities for Northern and contributed to our record new business results. 3 In the third quarter, First Chicago NBD announced its intention to exit the master trust and institutional custody business, joining Harris Bank and Continental/BOA who had exited this business earlier, and First Chicago named Northern the preferred provider for its clients. We have been very successful in meeting new business goals from targeted First Chicago NBD clients. To date, clients with over $30 billion in assets and representing approximately $8 million in annualized recurring fees have selected Northern as their custodian. We have also been successful in winning business from other providers who have exited the business. Among our largest new clients in 1996 were some very recognizable names: State of Maine, AT&T, United Airlines, Whirlpool, IBM Netherlands and Bank of Botswana. In the Corporate & Institutional unit, we are focused on the growth opportunities in three inter-related areas of business - Retirement Services, Investment Services, and International. Northern Trust and our subsidiary Northern Trust Retirement Consulting, formerly known as Hazlehurst & Associates, provide consulting and administration services for both defined contribution and defined benefit plans. Demographic trends in the United States point to strong growth in retirement assets. Plan sponsors from both the private and public sectors can look to Northern to provide a broad range of retirement services including plan consulting, design, communication, actuarial, trust and custody, recordkeeping, benefit payment and participant services. Central to our success is technology, and Northern has built a comprehensive servicing platform which we have named RetirementSource and which is delivered through Passport. With RetirementSource, both the plan sponsor and Northern can readily access recordkeeping and benefit payment information. Northern Trust's broad range of investment service capabilities provides products and services for every phase in the management of investment programs - plan design, implementation, monitoring and evaluation. Rather than focusing on promoting specific investment products, Northern takes a consultative approach to assessing client needs and implementing solutions. As investment products become more complex, the need for investment monitoring tools is increasing. In response to clients' needs, Northern has developed on-line risk management capabilities such as Alerts, which was the first of its kind in the industry. Securities Lending is another significant fee-generating capability for Northern's investment services group. Northern now has traders in Chicago, London, and Hong Kong lending in excess of $40 billion in securities daily. Many Corporate & Institutional clients are now taking advantage of the wide range of investment management services Northern Trust offers both through internally developed capabilities and through high quality manager-of-manager programs structured by Northern Trust Global Advisors, formerly known as RCB International, which we acquired in 1995. Internationally, we have an attractive and expanding client base in 20 countries across Asia, Africa, Europe, the Middle East and Canada. This global client base represents a diverse population including pension funds, fund managers, insurance companies, central banks and governments. Northern's strong credit ratings and long-standing reputation for risk management position us favorably for growth in our key markets, perhaps most of all internationally. In 1996, we expanded our global presence by opening an office in Singapore, enabling us to offer our clients 24 hour foreign exchange coverage. 4 Perhaps surprising to you, we are currently the eighth largest U.S. bank in foreign exchange trading revenues. Over the past five years, this revenue source has experienced average annual growth of 28% and has become a very important component of our revenue mix. One of the keys to Northern's success in this area has been our ability to leverage off the growth of our global custody assets which increased 27% in 1996 to $108 billion. We are servicing these global clients through our strong and growing subcustodian network in 70 countries throughout the world and have plans to add another 13 countries in 1997. Personal Financial Services is our other core business. We believe we have a one-of-a-kind strategy of marketing trust, investment management and private banking services to individuals in targeted high growth, affluent markets. This strategy brings together the key elements of people, product range, delivery, marketing and focus. Within each of these Northern enjoys competitive advantages. Our reputation is outstanding in this business, and enables us to attract and, most importantly, retain professionals of the highest caliber. Our people have many years of professional experience and they are actively involved and well- known in their communities. We continue to strongly encourage all of our vice- presidents & above who have client relationship responsibilities to become actively involved in at least one philanthropic, cultural, social, or educational organization of their choosing. Over the years, this has returned wonderful dividends for our employees, the charitable organizations involved, and our company. The quality and range of products that we offer stand out in the industry. Northern has the capability to manage and administer non-traditional investments such as closely-held businesses, complex partnerships, and structured investments. And, as today is April 15, we are filing over 36,000 fiduciary, partnership, and income tax returns for individuals and trust beneficiaries. We believe we prepare more fiduciary and income tax returns than any other bank in the country. These special skills, along with a full range of more traditional banking, investment and fiduciary products, enable us to service clients throughout their lives. We are strategically located where the demographics are very favorable and the demand is strong for our distinguishing "high touch" service style. Our full range of expertise is available on site in each of our locations and that is unique in our industry. Our trust administrators, private bankers, new business officers, tax experts, and portfolio managers work as a team to ensure total client satisfaction. Unrivaled service delivery is imperative and is enhanced by facilities which are truly superior, quite nontraditional, and consistent with our image as the bank of choice for our targeted market. We are effective in building professional referral networks of estate planning attorneys, accountants and financial planners, but our best source of referrals for new business always has been and continues to be our satisfied clients. We blend this more traditional avenue of new business development with a unique style of marketing. For example, we host hundreds of targeted events each year throughout the country where we invite clients and prospects to meet and listen to well-known authors, philosophers, 5 entertainers, and political commentators and frankly, to just get another good "booster shot" of our unique banking/personal trust relationship approach. These varied events have proven to be highly effective in building client loyalty as well as attracting new business. With almost $35 million in new recurring fee business, 1996 turned out to be PFS's most successful year and our leverage of new business vs. business distributed or terminated reached 4 to 1 in 1996 - for the first time ever; that is $4.00 of new business for every $1.00 of lost business. This puts us at the very top of our peer group. And because this core business generates more than half of total corporate revenues, it receives significant senior management attention. For example, the members of our management committee with client responsibilities spend a disproportionate amount of time with both clients and prospects of this business - with each of us having specific objectives for 350 active calls each year. Our franchise today spans five states, each of which is profitable. In fact, in 1996, and listen carefully, the net income generated from our banks outside of Illinois was over $58 million. That is substantially more than the net income for the entire corporation just 10 years ago. We now have a total of 60 office locations, and currently administer over $85 billion of trust assets for individuals, with $50 billion of that under our investment direction. In 1996, these assets under management grew by 21%. This past year saw our franchise expand with six new office locations. Among these was our acquisition in November of Bent Tree National Bank in Texas. This acquisition filled a critical need for us in the rapidly growing North Dallas area. And while on Texas, I should add that we earned over $4 million there last year. This state has far surpassed the financial models we used when deciding to enter Texas in 1989; it continues to have excellent momentum. We plan to continue our expansion program by further penetrating our existing markets and by expanding our network of locations. In 1997, we have already opened new offices in Montecito and LaJolla, California and Tampa, Florida. We have also scheduled office openings for later this year in NW Tucson, Arizona and the Doral section in Miami, Florida. The following slides show some of our newer offices added since our last annual meeting: 1. Sun City West, AZ (opened 4/96) 2. East Valley (Mesa), AZ (opened 11/96) 3. Winnetka, Illinois (new facility 11/96) 4. Chicago South, Illinois (new facility 11/96) 5. Montecito, CA - new in 1/1997 6. Tampa (opened 1997) Wealth Management, which I referred to earlier, is another important Personal Financial Services business. Headquartered in Chicago, it addresses the complex financial needs of families who utilize multiple money managers and have assets exceeding $100 million. This group had an exceptional year in 1996 with assets under administration growing 42% from $15 billion in 1995 to more than $22 billion. Total revenues grew 27% and there was a comparable growth in the number of families served. We now have 140 families from all over the nation and several foreign countries who benefit from the sophisticated technology of Northern's master trust and global custody businesses as well as the 6 fiduciary, banking, investment management, and tax expertise of the Personal Financial Services business. Northern remains firmly committed to meeting the diverse needs of the communities it serves. This commitment to our overall community development program was further strengthened in December when our Illinois bank became the first bank in the country to receive regulatory approval of its Community Reinvestment Act (CRA) Strategic Plan. Effective January 1, this three year plan outlines goals for affordable and conventional mortgages in low- and moderate- income census tracts, lending to small businesses, and community development loans. We know we will have help in accomplishing these goals, since we have developed relationships over the years with over 50 neighborhood-based community development organizations in Chicago and its suburbs. Northern's nationwide bank network also takes part in a variety of community development initiatives ranging from participating in lending consortia for housing and small businesses in Florida and California to taking a leadership role in the revitalization of a historic district in downtown Phoenix. We are truly committed to helping build stronger communities through involvement by the corporation and our employees. Our core businesses are growing rapidly and require significant investment of capital, but the strength of our earnings generates equity capital in excess of projected needs. We are currently repurchasing common shares to manage our capital position and to enhance shareholder return. In 1996, the stock buyback continued with 4.1 million shares being repurchased. In November, 1996, your Board of Directors increased the stock buyback authorization by another 4.2 million shares, and in the first quarter of 1997, we repurchased 445 thousand of those shares. Northern also marked 100 consecutive years of dividends paid to investors in 1996 and increased the annual dividend 16% to $0.72 per share. This record of consistent performance has been achieved by only a few of America's strongest businesses. 1996 was the ninth straight year that the dividend has been increased to keep pace with earnings growth. This dividend increase combined with the 2 for 1 stock split in December demonstrates our continued confidence and positive outlook for the future. Reflecting the strong earnings growth, the stock price rose 30% during 1996, on top of a 60% rise in 1995 and well ahead of the overall market. Northern Trust's consistent performance over the years is evident in the stock price which has had an average annual growth rate of 24% during this decade. This is in line with the Keefe 50 bank index and well ahead of the S&P 500 which grew an average of 14% annually over the same period. In summary, 1996 marked the ninth consecutive year of record earnings for the corporation and 1997 is off to an excellent start. Our confidence in Northern's strategic opportunities continues to be high and our business development momentum has never been stronger. We are optimistic that we can continue to deliver a consistently strong operating performance to you, our shareholders. Finally, on behalf of Bill and our senior management team, I thank you and our Board of Directors for your continued confidence in us. And now, I'll turn the podium back to Bill. 7 -----END PRIVACY-ENHANCED MESSAGE-----