Exhibit 10.1

 

TERMS AND CONDITIONS

EXECUTIVE STOCK OPTION

NORTHERN TRUST CORPORATION 2002 STOCK PLAN

GRANT DATE:                 , 200    

 

1. Governing Documents. Your stock option grant is subject to the provisions of
the Northern Trust Corporation 2002 Stock Plan (the “Plan”) and the stock option
notice (the “Option Notice”). Your stock option grant is also subject to the
“Addendum to Award Agreements under the Plan,” which Addendum shall be deemed to
be an integral part of these Terms and Conditions. The Option Notice and these
Terms and Conditions constitute the “Stock Option Agreement” as defined in the
Plan. If there is any conflict between the information in the Stock Option
Agreement and the Plan, the Plan will govern. These Terms and Conditions apply
to non-qualified stock options and incentive stock options issued under the
Plan.

 

2. Amendments. The Compensation and Benefits Committee of the Board of Directors
(the “Committee”) may amend the terms of the Plan or the Stock Option Agreement
at any time, except that any amendment that adversely affects your rights in any
material way requires your written consent.

 

3. Exercise Limitations. Your stock option is exercisable from and after the
vesting date(s) set forth on the Option Notice until the ten (10)-year
anniversary of the date the option was granted (the “Expiration Date”), except
as provided below:

 

  •   Change in Control. Your stock option (whether vested or unvested) becomes
vested and exercisable from and after the date of a “Change in Control” of the
Corporation as defined in the Plan. Please see “Other Termination of Employment”
below for additional provisions relating to a “Change in Control.”

 

  •   Death. If you die while employed, your stock option (whether vested or
unvested) becomes vested and exercisable as of the date of your death and may be
exercised by your beneficiary at any time until the earlier of (a) five (5)
years following your death and (b) the Expiration Date. If you do not name a
beneficiary (or your beneficiary dies before you), your stock option will pass
to the following persons in the order indicated:

 

  •   Your spouse; if none, then,

 

  •   Your children (in equal amounts); if none, then,

 

  •   Your parents (in equal amounts); if none, then,

 

  •   Your brothers and sisters (in equal amounts); if none, then,

 

  •   Your estate.

 

  •  

Retirement. If you retire, your stock option continues to vest in accordance
with its terms, and, once vested, it may be exercised at any time until the
earlier of (a)

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five (5) years following the effective date of your retirement and (b) the
Expiration Date. You should be aware that an unexercised incentive stock option
automatically converts into a non-qualified stock option three (3) months after
termination of employment due to retirement. The terms “retire” and “retirement”
mean retirement occurring by reason of your having qualified for a Normal,
Early, or Postponed Retirement Pension under The Northern Trust Company Pension
Plan.

 

  •   Disability. If you become disabled while employed, your stock option
(whether vested or unvested) becomes vested and exercisable upon your disability
and may be exercised at any time until the earlier of (a) five (5) years
following your disability, and (b) the Expiration Date. The terms “disabled” and
“disability” mean that you have been receiving short-term and long-term
disability benefits under Northern Trust’s Managed Disability Program for twelve
(12) consecutive months, at which date you are terminated from the Plan. You
should be aware that an unexercised incentive stock option may automatically
convert into a non-qualified stock option three months after termination from
the Plan due to disability pursuant to the applicable provisions of the Internal
Revenue Code relating to incentive stock options.

 

  •   Severance. If your employment is terminated under circumstances that
entitle you to severance benefits under the Northern Trust Corporation Severance
Plan (the “Severance Plan”), and you have executed and not revoked a settlement
agreement, waiver and release under the Severance Plan (a “Release”), your stock
option (whether vested or unvested) becomes vested and exercisable as of the
date of your termination of employment and may be exercised at any time until
the earlier of (a) one-hundred and eighty (180) days following your termination
of employment under the Severance Plan and (b) the Expiration Date. If you are
eligible for a Normal, Early, or Postponed Pension Retirement Pension upon
termination of employment under the Severance Plan, your stock option (whether
vested or unvested) becomes vested and exercisable as of the date of your
termination of employment and may be exercised at any time until the earlier of
(a) five (5) years following the effective date of your retirement and (b) the
Expiration Date. You should be aware that an unexercised incentive stock option
automatically converts into a non-qualified stock option three (3) months after
termination of employment.

 

  •   Special Circumstances. If (a) on the date of grant, you are a Management
Committee member, and (b) on the date of your termination of employment, you are
age 55 or older and have a minimum of 10 years of employment with the
Corporation or its subsidiaries, then your stock option continues to vest in
accordance with its terms, and, once vested, it may be exercised at any time
until the earlier of (i) five (5) years following the date of your termination
of employment and (ii) the Expiration Date.

 

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  •   Other Termination of Other Termination of Employment. Except as set forth
below, if (a) your employment terminates for any reason other than death,
retirement or a severance under the Severance Plan for which you have executed
and not revoked a Release, and (b) you are not terminated from the Plan due to
disability pursuant to the “Disability” provisions described above, your stock
option, if vested as of the date of your termination of employment, may be
exercised at any time until the earlier of (i) three (3) months following the
date of your termination of employment and (ii) the Expiration Date. Your stock
option, if unvested as of the date of your termination of employment, expires as
of the date of your termination of employment. A termination of employment shall
not be deemed to occur by reason of your transfer between the Corporation and a
subsidiary of the Corporation or between two subsidiaries of the Corporation.
The post-termination exercise provision of this sub-paragraph shall apply to you
if you become a consultant to the Corporation or a subsidiary of the Corporation
upon termination of your employment from the Corporation or a Subsidiary of the
Corporation. Notwithstanding the foregoing, if, within the two-year period
following a Change in Control, (A) your employment by the Corporation or a
subsidiary of the Corporation is terminated for any reason other than death,
retirement or a severance under the Severance Plan for which you have executed
and not revoked a Release, and (B) you are not terminated from the Plan due to
disability pursuant to the “Disability” provisions described above, then (except
as may otherwise be specified in an Employment Security Agreement between you
and the Corporation), your stock option may be exercised at any time until the
earlier of (I) six (6) months following the date of your termination of
employment, and (II) the Expiration Date.

 

4. Re-Employment. If, after your termination of employment, you are re-employed
by the Corporation or one of its subsidiaries, upon your return you will be
considered a new hire. Options that previously expired upon your termination of
employment remain expired and are not reinstated.

 

5. Exercise of Options.

 

  •   How to Exercise. You may exercise your stock option by contacting
Retirement Passport through the H.R. Service Center at (800) 807-0302. For
inquiry or modeling, you can use Your Benefits Resources online. You may access
Your Benefits Resources online through the People Place on nside northern by
selecting My Place followed by the Retirement and Stock Option Plans link.

 

  •   Black-out Period. Due to federal securities law concerns, the Corporation
has a “black-out” policy which restricts any exercise of your stock option
around quarterly corporate earnings announcements. Please refer to the
“Statement of Confidential Information and Securities Trading” for further
information about the Corporation’s black-out policy. You may access this
document online through nside northern. From the homepage click on Corporate,
and then Corporate Policies.

 

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6. Nontransferability. Your stock option is not transferable other than as
provided in these Terms and Conditions, except that you, with the prior approval
of the Committee, may transfer a non-qualified stock option (but not an
incentive stock option) under certain circumstances and subject to the terms and
conditions of the Plan and such limits as the Committee may establish, and the
transferee shall remain subject to all the terms and conditions applicable to
the non-qualified stock option prior to the transfer. Your stock option (whether
a non-qualified stock option or an incentive stock option) is exercisable,
during your lifetime, only by you or your personal representative. Additional
written information regarding the mechanics and consequences of transferring a
non-qualified stock option is available from the Corporate Secretary. You should
request and review this information prior to making a request to transfer a
non-qualified stock option.

 

7. Delivery of Shares. Delivery of shares of common stock upon exercise of your
stock option is subject to the withholding of all applicable taxes. At your
election, any withholding tax obligation shall be satisfied by the Corporation’s
withholding of a portion of the shares otherwise distributable to you at a rate
acceptable to the Corporation or by your delivery of previously acquired shares
that are “mature” (meaning that the shares have been held by you for more than
six months) to the Corporation, up to the maximum federal rate. Payment of
federal income taxes may be accomplished through a combination of withholding of
shares and delivery of previously acquired shares that are “mature.” If at any
time the Corporation shall be advised by its counsel that the shares deliverable
upon an exercise of the option must be accompanied or preceded by a prospectus
meeting the requirements of the Securities Act of 1933 or any State securities
law, or that the Corporation must comply with the rules of any securities
exchange on which its common stock is traded, the Corporation will use its
reasonable best efforts to deliver such prospectus and to comply with the rules
of such securities exchange not later than a reasonable time following the
exercise of the option, but the delivery of shares by the Corporation may be
deferred until such prospectus is available or the Corporation complies with the
rules of such securities exchange. As an option holder, you have no interest in
the shares covered by the option until the shares are actually issued.

 

8. No Contract of Employment. The option grant shall not be deemed to obligate
the Corporation or any of its subsidiaries to continue your employment for any
particular period, nor is employment guaranteed for the length of the vesting
schedule set forth in the Option Notice.

 

9. Taxes. Please refer to the “Summary Description of the Northern Trust
Corporation 2002 Stock Plan” for a description of the U.S. federal income tax
consequences affecting non-qualified stock options and incentive stock options.

 

10. Applicable Law. All questions pertaining to the validity, construction and
administration of the Plan and the stock option grants to which the Option
Notice and these Terms and Conditions apply shall be determined in conformity
with the laws of the State of Illinois, without regard to the conflict of law
provisions of any state.

 

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