<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CITY NATIONAL BANK
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
PRELIMINARY COPIES
CITY NATIONAL CORPORATION
400 NORTH ROXBURY DRIVE
BEVERLY HILLS, CALIFORNIA 90210
TELEPHONE (310) 888-6000
Russell Goldsmith
Chief Executive Officer
March 14, 1996
Dear Stockholder:
Your Company cordially invites you to attend its 1996 Annual Meeting of
Stockholders, which will be held at 4:00 P.M., on Tuesday, April 16, 1996, at
the offices of City National Bank, 400 North Roxbury Drive, Beverly Hills,
California.
The Notice of Annual Meeting and Proxy Statement accompanying this letter
describe the business to be transacted at the meeting.
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, WE URGE YOU TO SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED, IN ORDER
THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE MEETING. THE VOTE OF
EVERY STOCKHOLDER IS IMPORTANT AND YOUR COOPERATION IN RETURNING YOUR EXECUTED
PROXY PROMPTLY WILL BE APPRECIATED. EACH PROXY IS REVOCABLE AND WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU ATTEND THE MEETING.
Sincerely,
/s/ Russell Goldsmith
<PAGE>
CITY NATIONAL CORPORATION
400 NORTH ROXBURY DRIVE
BEVERLY HILLS, CALIFORNIA 90210
TELEPHONE (310) 888-6000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To The Stockholders:
NOTICE IS HEREBY GIVEN that, pursuant to call of its Board of Directors, the
Annual Meeting of Stockholders of CITY NATIONAL CORPORATION will be held on
Tuesday, the 16th day of April, 1996, at 4:00 P.M., at the offices of City
National Bank, 400 N. Roxbury Drive, Beverly Hills, California, for the
purpose of considering and voting upon the following matters:
1. Election of Directors. The election of the 11 persons listed in the
enclosed Proxy Statement to serve as directors for terms of from one to
three years (if proposal 2, below, is adopted) or one year (if proposal 2,
below, is not adopted);
2. Amendment to Certificate of Incorporation: Board of Directors. The
amendment and restatement of the City National Corporation Certificate of
Incorporation to add Article NINTH providing for a classified Board of
Directors, with staggered terms, consisting of a maximum of 14 and a
minimum of 5 directors.
3. Amendment to Certificate of Incorporation: Director
Indemnification. The amendment and restatement of the City National
Corporation Certificate of Incorporation to revise Article SEVENTH relating
to the indemnification of directors and officers by City National
Corporation.
4. Other Business. The transaction of such other business as may properly
come before such meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 1, 1996, as
the record date for the determination of stockholders entitled to notice of
the Annual Meeting and to vote at the meeting or any adjournments thereof.
By Order of the Board of Directors
RICHARD H. SHEEHAN, JR.
Secretary
March 14, 1996
<PAGE>
PRELIMINARY COPIES
CITY NATIONAL CORPORATION
400 NORTH ROXBURY DRIVE
BEVERLY HILLS, CALIFORNIA 90210
TELEPHONE (310) 888-6000
ANNUAL MEETING OF STOCKHOLDERS ON APRIL 16, 1996
----------------
PROXY STATEMENT
To the Stockholders:
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of CITY NATIONAL CORPORATION
(herein called the "Corporation") to be voted at the Annual Meeting of
Stockholders of the Corporation to be held on Tuesday, April 16, 1996, at 4:00
P.M. as set forth in the foregoing Notice of Annual Meeting. This Proxy
Statement and proxy are first being mailed to stockholders on approximately
March 14, 1996.
All proxies on the enclosed form which are properly executed and returned to
the Corporation will be voted as provided therein at the Annual Meeting or any
adjournments thereof. A stockholder executing and returning a proxy may revoke
it at any time before it has been exercised by filing with the Secretary of
the Corporation a written revocation or a duly executed proxy bearing a later
date, or by voting in person at the Annual Meeting.
The Corporation's management does not know of any matters to be brought
before the meeting other than the election of directors and the proposed
amendments to, and restatement of, the Corporation's Certificate of
Incorporation. If any other matters are properly presented to the meeting for
action, it is intended that the persons named in the enclosed form of proxy
and acting thereunder will vote in accordance with their judgment on such
matters.
Officers and employees of the Corporation may request the return of proxies
by mail, telephone, telegraph or in person, for which they will receive no
special compensation. The Corporation will bear all expenses of the
preparation, printing and use of proxy soliciting materials. Banks, brokerage
houses and other institutions, nominees or fiduciaries will be requested to
forward the soliciting material to beneficial owners and to obtain
authorizations for the execution of proxies. The Corporation will, upon
request, reimburse banks, brokerage houses and other institutions, nominees
and fiduciaries for their reasonable expenses in forwarding proxy materials to
beneficial owners. The Corporation may, in its discretion, retain the services
of Georgeson & Company, Inc., to assist in soliciting proxies from
stockholders and brokers, banks and other institutions, nominees and
fiduciaries for a fee estimated to be $12,000, in addition to out-of-pocket
expenses.
The Corporation's Annual Report for its fiscal year ended December 31, 1995,
is being distributed to stockholders concurrently herewith but is not to be
deemed any part of the materials for the solicitation of proxies.
1
<PAGE>
RECORD DATE, NUMBER OF SHARES OUTSTANDING AND VOTING RIGHTS;
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The securities of the Corporation entitled to be voted at the meeting
consist of common stock, $1.00 par value, of which shares were
outstanding as of March 1, 1996. Only holders of common stock of record at the
close of business on that date will be entitled to vote at the meeting. Each
stockholder is entitled to one vote for each share held, and stockholders may
not cumulate their votes. Stockholders holding a majority of the outstanding
shares of the Corporation's common stock must be present at the Annual Meeting
of Stockholders, either in person or by proxy, in order to establish a quorum
for the transaction of business at the meeting. The 11 nominees receiving the
greatest number of votes cast in person or by proxy will be elected to serve
as directors. All other matters must be approved by the vote of a majority of
the shares present at the meeting in person or by proxy. Abstentions will be
treated as votes present at the meeting but voting against such matters.
Broker non-votes (ballots cast by brokers who, with respect to the particular
matter, have received no voting instructions from the beneficial holder of the
shares and do not have discretion to vote in the absence of such instructions)
will be treated as votes not present at the meeting with respect to such
matters and will have no effect.
The following table sets forth information as of March 1, 1996, concerning
the only beneficial owners of record or known to management of more than 5% of
the Corporation's outstanding shares of common stock, $1.00 par value:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF
BENEFICIAL
OWNERSHIP
-------------------------
NAME AND ADDRESS OF AMOUNT NATURE OF PERCENT
BENEFICIAL OWNER HELD HOLDINGS OF CLASS
------------------- --------- --------- --------
<S> <C> <C> <C>
Bram Goldsmith Group 6,943,749 15%
400 North Roxbury Drive
Beverly Hills, CA 90210
Goldsmith Family Partnership, 4,654,408 BD
also known as Lido-Soud
Partnership, Ltd.
Bram and Elaine Goldsmith, Trustees of 1,511,030 BD
the Bram and Elaine Goldsmith Family Trust
Elaine and Bram Goldsmith, Trustees of 567,989 BD
the Elaine Goldsmith Revocable Trust
Bram Goldsmith 40,602(1) BDE
Goldsmith Family Foundation 169,720(2) BDE
</TABLE>
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(A) Possesses sole voting power.
(B) Possesses shared voting power.
(C) Possesses sole investment power.
(D) Possesses shared investment power.
(E) Disclaims beneficial ownership.
(F) Shares as to which the listed beneficial owner has the right to acquire
beneficial ownership, as specified in Rule 13d-3(d)(1)(i) of the
Securities and Exchange Commission.
(1) Represents Mr. Goldsmith's proportionate interest, according to his
account balance, in shares held in the City National Corporation Stock
Fund under the City National Corporation Profit Sharing Plan at the most
recent valuation date, December 31, 1995. Fund investments are not
allocated to individual participant accounts, and Mr. Goldsmith disclaims
beneficial ownership thereof.
(2) Mr. Goldsmith disclaims beneficial ownership of the shares held by the
Goldsmith Family Foundation, a tax-exempt charitable foundation of which
Mr. Goldsmith is a director.
2
<PAGE>
ELECTION OF DIRECTORS
Each member of the present Board of 11 directors is also a director of City
National Bank (the "Bank"), a wholly owned subsidiary of City National
Corporation. The bylaws presently provide that the Board shall be composed of
not less than 5 nor more than 25 directors (the exact number to be determined
by resolution of the Board of Directors or by the stockholders as provided in
Article III, Section 1(b) of the bylaws, which Section is discussed below),
and the Board by its resolution has fixed the number of directors to be
elected at this Annual Meeting at 11. If the Classified Board Amendment is
adopted by the stockholders, the Corporation's Certificate of Incorporation
will provide for a Board composed of not less than 5 nor more than 14
directors, the exact number to be determined by resolution of the Board of
Directors. See "AMENDMENT AND RESTATEMENT OF THE CERTIFICATE OF
INCORPORATION--Classification and Number of Directors," below.
Article III, Section 1(b) of the Corporation's bylaws states that
nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Nominations other than by the Board of Directors must be made by
notice in writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than 60 days
prior to the first anniversary of the date of the last meeting of stockholders
of the Corporation called for the election of directors. The notice must set
forth (i) the name, age, business address and, if known, the residence address
of each nominee proposed in such notice; (ii) the principal occupation or
employment of each such nominee; (iii) the number of shares of stock of the
Corporation that are beneficially owned by such nominee; and (iv) such other
information as would be required by the federal securities law and regulations
with respect to an individual nominated by the Board of Directors.
To comply with the above by-law provision, nominations for the 1996 Annual
Stockholders Meeting by persons other than the Board of Directors should have
been received on or before February 19, 1996. The Corporation did not receive
any such nominations and deems such nominations to be closed.
The persons named below will be nominated for election to serve as directors
of the Corporation, and management does not intend to nominate any other
persons as directors at this Annual Meeting. Accordingly, the proxies
solicited hereby cannot be voted for a greater number of persons than the
number of nominees named below. If one or more of such nominees should
unexpectedly become unavailable for election, votes will be cast pursuant to
the accompanying proxy for the election of one or more substitutes to be named
by the present Board of Directors. If the Classified Board Amendment is
adopted by the stockholders, Messrs. Benter and Buchalter and Mrs. Van De Kamp
will be elected as Class I directors to serve until the 1997 Annual Meeting,
Messrs. Bowers, Russell Goldsmith, Horwitch and Sanders will be elected as
Class II directors to serve until the 1998 Annual Meeting, and Messrs. Bloch,
Bram Goldsmith, Rickershauser and Ziffren will be elected as Class III
directors to serve until the 1999 Annual Meeting, and, in each case, until
their respective successors are elected and qualified. See "AMENDMENT AND
RESTATEMENT OF THE CERTIFICATE OF INCORPORATION--Classification and Number of
Directors," below. If the Classified Board Amendment is not adopted, all
directors will serve until the 1997 Annual Meeting and until their respective
successors are elected and qualified.
It is the intention of the persons named in the proxy to vote for the
election of the following nominees:
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION AND DIRECTOR DIRECTOR OF
PRINCIPAL OCCUPATION OF BANK CORPORATION
NAME AGE DURING THE PAST FIVE YEARS SINCE SINCE
---- --- -------------------------- -------- -----------
<C> <C> <S> <C> <C>
GEORGE H. BENTER, JR. 54 President, City National 1992 1993
Corporation, 1993 to
present; President and
Chief Operating Officer,
City National Bank, 1992
to present; Vice
Chairman and Chief
Credit Officer, Security
Pacific National Bank,
commercial bank, until
1992; Director, The Wet
Seal, Inc.; Director,
Whittaker Corporation.
RICHARD L. BLOCH 66 President, Pinon Farm, 1974 1979
Inc., equestrian
training facility;
Chairman of the Board,
Columbus Realty Trust,
real estate investment
trust, 1993 to present;
Director, Cantel
Industries.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION AND DIRECTOR DIRECTOR OF
PRINCIPAL OCCUPATION OF BANK CORPORATION
NAME AGE DURING THE PAST FIVE YEARS SINCE SINCE
---- --- -------------------------- -------- -----------
<C> <C> <S> <C> <C>
MIRION P. BOWERS, M.D. 60 President and Chief 1994 1994
Executive Officer,
Hospital of the Good
Samaritan, acute care
hospital, 1992 to
present; President, MPB
MD, Inc., practicing
physician.
STUART D. BUCHALTER(1) 58 Of counsel, Buchalter, 1981 1981
Nemer, Fields & Younger,
a Professional
Corporation, law firm;
Chief Executive Officer
(until January 1995),
Chairman of the Board
(until June 1995), The
Art Stores, art
materials retailer;
Chairman of the Board
and Chief Executive
Officer, Standard Brands
Paint Company,
manufacturer and
retailer of paint, until
June 1993; Director,
Authentic Fitness Corp.
BRAM GOLDSMITH(2) 73 Chief Executive Officer 1964 1969
(until October 1995) and
Chairman of the Board,
City National
Corporation; Chairman of
the Board and Chief
Executive Officer, City
National Bank, until
October 1995.
RUSSELL GOLDSMITH(2) 46 Vice Chairman and Chief 1978 1979
Executive Officer, City
National Corporation,
October 1995 to present;
Chairman of the Board
and Chief Executive
Officer, City National
Bank, October 1995 to
present; President,
Goldsmith Entertainment
Company, production and
media company, 1994 to
present; Consultant,
Spelling Entertainment
Group, Inc., television
and home video company,
1994 to present;
Chairman of the Board
and Chief Executive
Officer, Republic
Pictures Corporation,
television and video
production and
distribution, until
1994.
BURTON S. HORWITCH 70 Chairman (January 1996 1978 1979
to present), President
and Chief Executive
Officer (until January
1996), Deena, Inc.,
manufacturer of women's
apparel.
CHARLES E.
RICKERSHAUSER, JR. 67 Attorney; Chairman of 1982 1982
the Board, PS Group,
Inc.; Director, Vons
Companies, Inc.;
Director, Lee
Enterprises, Inc.
EDWARD SANDERS(1) 73 Principal, Sanders, 1985 1985
Barnet, Goldman, Simons
& Mosk, a Professional
Corporation, law firm;
Director, Wyle
Electronics.
ANDREA L. VAN DE KAMP 52 Senior Vice President 1994 1994
and Managing Director of
West Coast Operations,
Sotheby's, appraisals
and auctions; Director,
Jenny Craig, Inc.
KENNETH ZIFFREN(1) 55 Senior partner, Ziffren, 1989 1989
Brittenham, Branca &
Fischer, law firm;
Director, Spectra
Vision, Inc.; Director,
Marvel Entertainment
Group, Inc.
</TABLE>
- -------
(1) Member of, or of counsel to, law firm (i) retained by the Corporation or
its subsidiaries during the last two full fiscal years, or (ii) which may
be retained in the current fiscal year. During the Corporation's 1995
fiscal year, no payments were made by the Corporation and its subsidiaries
for legal services rendered by any such law firm.
(2) Mr. Russell Goldsmith is the son of Mr. Bram Goldsmith.
4
<PAGE>
On February 11, 1992, Standard Brands Paint Company ("Standard Brands
Paint") and certain direct and indirect subsidiaries filed petitions in the
United States District Court for the Central District of California for
protection from creditors pursuant to Chapter 11 of the United States
Bankruptcy Code. The plan of reorganization for Standard Brands Paint was
confirmed by the Bankruptcy Court on May 14, 1993, and became effective June
15, 1993. Mr. Stuart D. Buchalter, a director of the Corporation, was Chief
Executive Officer and a director of Standard Brands Paint prior to June 15,
1993. In addition, the Bank serves as trustee of certain benefit plans for the
employees of Standard Brands Paint and its subsidiaries.
The Boards of Directors of the Corporation and the Bank each have a
Compensation and Directors Nominating Committee, each of which is composed of
Messrs. Stuart D. Buchalter and Charles E. Rickershauser, Jr. The Committees,
which met jointly 8 times in 1995, act upon matters of compensation and select
and nominate candidates for positions on the Corporation's and Bank's Boards
of Directors.
The Audit Committee of the Corporation and the Audit and Examining Committee
of the Bank are each composed of Messrs. Stuart D. Buchalter, Richard L. Bloch
and Kenneth Ziffren, all of whom are directors of the Bank and the
Corporation. The Audit Committee of the Corporation monitors significant
accounting policies, approves services rendered by the auditors, reviews audit
and management reports and makes recommendations regarding the appointment of
independent auditors and the fees payable for their services. The Audit and
Examining Committee of the Bank periodically reviews asset quality, credit
loss reserves, regulatory compliance and internal audit functions of the Bank.
These committees met jointly 15 times in 1995.
During 1995, the Corporation's Board of Directors held 13 meetings. With the
exception of Mr. Richard L. Bloch, none of the directors was present at fewer
than 75% of the aggregate of the total number of meetings of the Board of
Directors and the total number of meetings held by all committees of the Board
on which he or she served (during the periods he or she served).
5
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
No direct compensation was paid by the Corporation to any of its executive
officers in 1995, except pursuant to the Profit Sharing Plan and the 1985
Stock Option Plan. Instead, the executive officers of the Corporation, all of
whom are employees of the Bank, were compensated by the Bank and receive
benefits under various employee benefit plans of the Bank.
The following information is furnished with respect to (i) Messrs. Bram
Goldsmith and Russell Goldsmith, each of whom served as chief executive
officer of the Corporation during 1995, (ii) each of the other four most
highly compensated executive officers of the Corporation (including officers
of the Bank who may be deemed to be executive officers of the Corporation), in
each case at December 31, 1995, and (iii) Mr. Steven D. Broidy, who resigned
as an executive officer of the Corporation effective November 14, 1995 (the
"Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(1)
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------------- ---------------
SECURITIES
OTHER UNDERLYING
NAME AND ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMP. SARS(2) COMP.
------------------ ------- -------- -------- ------ --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Russell Goldsmith 1995(3) $112,500(4) $ (5) 350,324 -0-
Vice Chairman and Chief 1994(3) N/A N/A N/A N/A N/A
Executive Officer, 1993(3) N/A N/A N/A N/A N/A
City National
Corporation; Chairman of
the Board and Chief
Executive Officer,
City National Bank
Bram Goldsmith 1995(6) $540,000 $ (5) -0- $ (7)
Chairman of the Board, 1994 $540,000 $270,000 (5) -0- $14,176(7)
City National 1993 $540,000 -0- (5) -0- $ 899(7)
Corporation
George H. Benter, Jr. 1995 $300,000 $ (5) 50,000 $ (7)
President, City National 1994 $300,000 $150,000 (5) -0- $14,003(7)
Corporation; 1993 $300,000 -0- (5) 75,000 $ 600(7)
President & Chief
Operating Officer,
City National Bank
Frank P. Pekny 1995 $250,000 $ (5) 50,000 $ (7)
Executive Vice 1994 $240,000 $120,000 (5) -0- $13,543(7)
President, 1993 $240,000 -0- (5) 56,393 $ 240(7)
Chief Financial Officer
& Treasurer, City
National Corporation;
Vice Chairman, Chief
Financial Officer and
Treasurer, City National
Bank
Robert A. Moore 1995 $160,000 $ (5) 10,000 $
Executive Vice 1994 $160,000 $ 48,000 (5) -0- $13,477(7)
President, 1993 $160,000 -0- (5) 45,902 $ 320(7)
Credit Services, City
National Bank
Richard H. Sheehan, Jr. 1995 $180,000 $ (5) 5,500 $
Senior Vice President, 1994(8) $134,423 $ 36,000 (5) 8,000 -0-
General Counsel & 1993(8) N/A N/A N/A N/A N/A
Secretary,
City National
Corporation & City
National Bank
Steven D. Broidy(9) 1995(9) $236,346 $ (5) 50,000 $ (10)
1994 $300,000 $150,000 (5) -0- $14,003(7)
1993 $300,000 -0- (5) 75,000 $ 600(7)
</TABLE>
- --------
(1) The Corporation did not award restricted stock or pay out amounts pursuant
to any long-term incentive plan, as defined in the federal proxy rules,
during the period shown.
(2) As adjusted pursuant to anti-dilution provisions of the Corporation's 1985
Stock Option Plan for the Corporation's rights offering in May 1993, where
applicable.
(3) Employment commenced on October 16, 1995. Not employed by the Corporation,
the Bank or any other subsidiary of the Corporation at any time during
1993 or 1994.
(4) Includes $25,000 accrued as fees for attendance of meetings of the Bank's
Board of Directors and committees before October 16, 1995.
6
<PAGE>
(5) Aggregate amount of perquisites and other personal benefits did not exceed
the lesser of $50,000 or 10% of total salary and bonus reported in
preceding columns.
(6) Resigned as Chief Executive Officer of the Corporation and Chairman of the
Board and Chief Executive Officer of the Bank, effective October 16, 1995.
(7) Bank contribution to Profit Sharing Plan allocable to the Named Officer,
including any matching contribution to deferred compensation feature of
the Plan under Section 401(k) of the Internal Revenue Code.
(8) Employment commenced on April 4, 1994. Not employed by the Corporation,
the Bank or any other subsidiary of the Corporation at any time during
1993.
(9) Resigned as Vice Chairman of City National Corporation and Vice Chairman
and Chief Administrative Officer of City National Bank, effective November
14, 1995.
(10) Includes $312,000 accrued and payable pursuant to the Separation
Agreement between Mr. Broidy and the Bank (see "Employment Contracts and
Termination of Employment and Change-In-Control Arrangements--Steven D.
Broidy Agreement," below), and $ contributed by the Bank to the
Profit Sharing Plan, as set forth in note (6), above.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Bram Goldsmith Agreement In March 1995, the Bank entered into an Employment
Agreement (the "Bram Goldsmith Agreement") with Mr. Bram Goldsmith pursuant to
which he has served and will continue to serve as an officer of the Bank from
May 15, 1995, to May 14, 1998. Mr. Goldsmith served as Chairman of the Board
and Chief Executive Officer of the Bank and the Corporation until October 16,
1995, when he resigned as Chief Executive Officer of the Corporation and
Chairman of the Board and Chief Executive Officer of the Bank. Mr. Goldsmith
had previously been employed by the Bank as its Chairman of the Board and
Chief Executive Officer for consecutive five-year periods which commenced in
1975. The Bram Goldsmith Agreement provides for an annual salary of $590,000,
as well as an annual incentive bonus, which bonus shall be no less a
percentage of Mr. Goldsmith's annual salary than the percentage used to
calculate the bonus to any other member of executive management of the Bank. A
bonus of $ was paid to Mr. Goldsmith in 1996 with respect to 1995. The
Bram Goldsmith Agreement provides for split dollar life insurance on the joint
lives of Mr. Goldsmith and Mrs. Elaine Goldsmith in the amount of $7,000,000,
the premium for which was fully paid in 1990. There is no arrangement or
understanding, whether formal or informal, that Mr. Goldsmith has or will
receive or be allocated an interest in the cash surrender value of the
insurance policy.
The Bram Goldsmith Agreement also provides that if a "change of control"
takes place with respect to the Bank, Mr. Goldsmith may terminate such
Agreement but remain entitled to receive all compensation payable for the
balance of the term as if it had not been terminated, subject to certain
limitations. For this purpose, a "change of control" is deemed to have
occurred if any person other than Mr. Goldsmith or the Corporation's Profit
Sharing Plan acquires beneficial ownership of more than 20% of the outstanding
voting securities of the Corporation, excluding securities purchased directly
from Mr. Goldsmith. The Bram Goldsmith Agreement also provides that in the
event CNB terminates Mr. Goldsmith's employment without good cause, Mr.
Goldsmith will be entitled to receive all compensation payable for the balance
of the term as if it had not been terminated. For this purpose, "good cause"
consists of only a conviction of a crime directly related to Mr. Goldsmith's
employment, a conviction of a felony involving moral turpitude, willful and
gross mismanagement of the Bank's business and affairs, or breach of any
material provision of the Bram Goldsmith Agreement. If Mr. Goldsmith's
employment is terminated because of injury, physical or mental illness, he
will receive all compensation payable for the balance of the term as if it had
not been terminated, less any amount paid in lieu of salary under any private
or governmental insurance program, and if he dies, the lesser of his annual
salary for the balance of the term or two years annual salary will be paid to
his wife, if she is living, or his Revocable Living Trust, if she is not. At
the request of either Mr. Goldsmith or the Bank, any dispute relating to the
Bram Goldsmith Agreement will be resolved through binding arbitration.
7
<PAGE>
Russell Goldsmith Agreement On October 16, 1996, the Bank entered into an
Employment Agreement (the "Russell Goldsmith Agreement") with Mr. Russell
Goldsmith, pursuant to which he became Chairman of the Board and Chief
Executive Officer of the Bank and Vice Chairman and Chief Executive Officer of
the Corporation. The Russell Goldsmith Agreement will remain in effect until
October 15, 1998. The Russell Goldsmith Agreement provides for an annual
salary of $420,000 for the first year, $450,000 for the second year and
$480,000 for the third year, as well as an annual incentive bonus, which bonus
shall be no less a percentage of Mr. Goldsmith's annual salary than the
percentage used to calculate the bonus to any other member of executive
management of the Bank. A pro-rated bonus of $ was paid to Mr.
Goldsmith in 1996 with respect to the portion of 1995 during which he served
as an officer of the Bank.
The Russell Goldsmith Agreement further provides for the grant of a stock
option (which is not an Incentive Stock Option) for 350,000 shares of the
Corporation's common stock at an exercise price of $13.375 per share (the fair
market value on October 16, 1996). The option was immediately exercisable as
to 116,667 shares, will become exercisable as to an additional 116,667 shares
on October 16, 1997, and as to the remaining 116,666 shares on October 16,
1998, and will expire on October 15, 2006. Although issued under the 1985
Stock Option Plan, the option contains provisions relating to adjustment in
the event of certain corporate transactions and vesting upon the occurrence of
a Change in Control Event that are materially identical to the 1995 Omnibus
Plan. See "1995 Omnibus Plan," below.
The Russell Goldsmith Agreement also provides that if a "change of control"
takes place with respect to the Bank, Mr. Goldsmith may terminate such
Agreement for "good reason" and remain entitled to receive all compensation
payable for the balance of the term, subject to certain limitations. For this
purpose, a "change of control" is deemed to have occurred if any person other
than Mr. Goldsmith, members of his family or the Corporation's Profit Sharing
Plan acquires beneficial ownership of more than 20% of the outstanding voting
securities of the Corporation, and Mr. Goldsmith is deemed to have "good
reason" for resignation if he is no longer chief executive officer of the
Corporation and the Bank or if more than 50% of the combined voting power of
the Corporation's outstanding securities is beneficially owned, directly or
indirectly, by a bank or corporation that also beneficially owns, directly or
indirectly, more than 50% of the combined voting power of the outstanding
securities of a bank other than the Bank.
The Russell Goldsmith Agreement further provides that in the event CNB
terminates Mr. Goldsmith's employment without good cause, Mr. Goldsmith will
be entitled to receive his then base compensation and reimbursement for
medical and health insurance premiums for a period of 18 months after the
effective date of termination and his stock options will become immediately
exercisable in full. For this purpose, "good cause" consists only of a
conviction of a crime directly related to Mr. Goldsmith's employment, a
conviction of a felony involving moral turpitude, willful and gross
mismanagement of the Bank's business and affairs, or breach of any material
provision of the Russell Goldsmith Agreement. If Mr. Goldsmith's employment is
terminated because of injury, physical or mental illness, he will receive his
then base compensation and reimbursement for medical and health insurance
premiums for a period of 18 months after the effective date of termination,
less any amount paid in lieu of salary under any private or governmental
insurance program, and if he dies, an amount equal to his then base
compensation for a period of 18 months after his death will be paid to his
wife, if she is living, or his appointee or estate, if she is not. At the end
of the original term of the Russell Goldsmith Agreement, if it has not been
extended, Mr. Goldsmith will be entitled to receive his then base compensation
and reimbursement for medical and health insurance premiums for a period of 12
months after the expiration date. At the request of either Mr. Goldsmith or
the Bank, any dispute relating to the Russell Goldsmith Agreement will be
resolved through binding arbitration.
Steven D. Broidy Agreement On November 3, 1995, the Bank entered into an
Agreement for Separation From Employment and Release (the "Separation
Agreement") with Mr. Steven D. Broidy in connection with Mr. Broidy's
resignation from the Bank effective November 14, 1995, pursuant to which the
Bank agreed to pay Mr. Broidy an amount equal to his salary for one year,
$300,000, in equal semimonthly installments. In addition, the Bank agreed to
pay Mr. Broidy $ and to reimburse his health insurance premiums for one
year. The Corporation further agreed to amend Mr. Broidy's stock options to
provide that they would continue to vest
8
<PAGE>
according to their terms until May 14, 1996, and the time within which such
options could be exercised was extended to the earlier of the date on which
such options would otherwise have expired or November 14, 1996.
Separation Pay Plan The Bank has a Separation Pay Plan with respect to all
employees, including the Named Officers, who are regularly scheduled to work
at least 30 hours per week and have completed at least three months of
continuous service at the time they are laid off. The Separation Pay Plan
provides continuing pay based on the employee's wage or salary rate in the
event of layoff, provided the employee is not offered a position with the Bank
at a comparable salary or a position with an employer that acquires from the
Bank the line of business that the employee formerly worked in. The basic
period during which the employee is entitled to receive separation pay is
determined by position, and ranges up to six weeks for Vice Presidents or
above. However, if the employee executes a General Release and Separation
Agreement, the separation pay period is extended, based on position and years
of service, up to a maximum of 26 weeks of salary (including the six week
basic period) for Vice Presidents or above with 16 or more years of service.
Stock Options Outstanding options issued under the City National Corporation
1983 and 1985 Stock Option Plans, which have expired, contain provisions
applicable to all option holders, including the Named Officers, relating to
exercisability of options upon termination of the option holder's employment
and certain other events that may occur in connection with a change in control
of the Corporation. Depending upon the value of the Corporation's common stock
at the time any such event occurred, the value of options affected by such
provisions might exceed $100,000 with respect to a Named Person.
If an option holder's employment is terminated for any reason other than for
cause, death, disability or retirement, any options under the 1983 or 1985
Stock Option Plans held by the employee expire 3 months after the termination
date, and until that time can only be exercised to the extent vested on the
date of termination. If an employee dies or terminates employment by reason of
disability or retirement, all options vest in full on the termination date,
regardless of any vesting schedule otherwise applicable. In the event of the
optionee's death, options must be exercised by the employee's estate within
one year. If employment terminates because of retirement or disability,
options may be exercised until 3 years after the termination date. The
provisions relating to vesting and expiration after termination of employment
may be altered by the Compensation and Directors Nominating Committee of the
Corporation's Board of Directors (the "Committee") in its discretion, but only
with respect to stock options that are not qualified as Incentive Stock
Options for tax purposes ("NSOs"). In no event may the expiration of options
be extended to later than 10 years after the date of grant.
In the event (a) more than 70% of the Corporation's common stock is acquired
by a person or entity other than the Corporation; or (b) the Corporation is
liquidated or dissolved following the sale of all or substantially all of its
assets; or (c) the Corporation is merged or consolidated into another entity,
then all outstanding stock options held by employees become exercisable unless
the Board of Directors unanimously votes to the contrary. If the Corporation
is merged or consolidated into another entity and the Board votes against the
immediate maturity of outstanding options, the Board will make arrangements
with the successor entity to assume outstanding options issued under the 1983
and 1985 Stock Option Plans or substitute a new Plan in their place with
appropriate adjustments.
In the event of a tender offer or exchange offer for the Corporation's
common stock by a person or entity other than the Corporation which results in
the acquisition of stock by the person or entity making the offer, the
Committee may, in its discretion, permit employees who hold NSOs under the
1983 and 1985 Stock Option Plans to surrender the options and receive the
difference between (i) the higher of the highest price offered by such person
or entity for the Corporation's common stock during the 60-day period before
surrender of the NSOs or the highest market price of the Corporation's common
stock during such 60-day period, and (ii) the exercise price of the NSOs
surrendered.
1995 Omnibus Plan The 1995 Omnibus Plan provides that if the Corporation's
common stock is changed into or exchanged for cash, other property or a
different kind or number of shares or securities of the Corporation, or if
additional shares or other securities are distributed with respect to the
common stock through a merger or
9
<PAGE>
reorganization in which the Corporation is the surviving entity, or through a
combination, consolidation, recapitalization, reclassification, stock
dividend, stock split, consolidation, reverse stock split or distribution of
cash or property to the Corporation's stockholders, or if there is any other
extraordinary corporate transaction or event or a sale of substantially all
the Corporation's assets which the Committee determines materially affects the
common stock, then the Committee may, in such manner and to such extent as it
deems appropriate and equitable, proportionately adjust the 1995 Omnibus Plan
and outstanding awards as to the number or kind of shares to which they
relate, the price payable upon the exercise or paid in connection with
restricted stock or the applicable performance standards or criteria. In the
case of an extraordinary dividend or other distribution, merger,
reorganization, consolidation, combination, sale of assets, split up, exchange
or spinoff, the Committee may also provide for cash payment or for the
substitution or exchange of outstanding awards or the shares, cash or other
property for which they may be exercised based upon the amount or property
payable or distributable to stockholders because of such event.
Under the 1995 Omnibus Plan, if a Change in Control Event takes place, then
all outstanding options, SARs and Tax Offset Bonus Rights become exercisable,
all restricted stock vests free of restrictions and all performance shares
become immediately issuable, unless the Committee determines otherwise, in
which event the Committee will make provision for continuation and, if
required, assumption of the 1995 Omnibus Plan and outstanding awards or for
the substitution of new awards therefor. A "Change in Control Event" occurs if
(a) more than 20% of the Corporation's common stock or combined voting power
is acquired by a person or entity other than Mr. Bram Goldsmith, the
Corporation or any employee benefit plan of the Corporation, but not including
any acquisition directly from the Corporation; or (b) a majority of the
Corporation's Board of Directors ceases to consist of the present directors or
persons whose election or nomination was approved by a majority of the then
incumbent Board (excluding any director who assumes his or her position as a
result of an actual or threatened proxy contest); or (c) the Corporation is
reorganized, merged or consolidated into another entity; or (d) the
stockholders approve the liquidation or dissolution of the Corporation or the
sale of all or substantially all of its assets; unless, with respect to (a),
(c) or (d), after the event more than 80% of the common stock and combined
voting power of the Corporation, the surviving company or the company that
purchases the Corporation's assets is still held by persons who were formerly
the stockholders of the Corporation, and no person or entity other than Mr.
Goldsmith, the Corporation, any employee benefit plan of the Corporation or
the resulting company, or 20% stockholder prior to the transaction holds more
than 20% of such company's common stock or combined voting power.
In the event of a tender offer or exchange offer for the Corporation's
common stock by a person or entity other than the Corporation which results in
the acquisition of stock by the person or entity making the offer, the
Committee may, in its discretion, permit the holders of options under the 1995
Omnibus Plan to surrender unexercised options and any rights in tandem
therewith and receive the difference between (i) the higher of the highest
price offered by such person or entity for the Corporation's common stock
during the 60-day period before surrender of the NSOs or the highest market
price of the Corporation's common stock during such 60-day period, and (ii)
the exercise price of the options surrendered.
10
<PAGE>
OPTION GRANTS, EXERCISES AND HOLDINGS
The following information is furnished with respect to stock options granted
to the named Officers during 1995. No SARs were granted in 1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
------------------------------------------------------------ ----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE MARKET
UNDERLYING GRANTED TO OR BASE PRICE ON GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE GRANT DATE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR ($/SH) ($/SH)(2) DATE VALUE(3)
- ---- ------------ ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Russell Goldsmith....... 324(4) 0% $ 1.00 $10.25 4/18/05 $ 2,546
350,000(5) 35% $13.375 $13.375 10/15/05 $1,872,972
Bram Goldsmith.......... 0 -- -- -- -- --
George H. Benter, Jr.... 50,000(6) 5% $11.375 $11.375 2/21/05 $ 227,557
Frank P. Pekny.......... 50,000(6) 5% $11.375 $11.375 2/21/05 $ 227,557
Robert Moore............ 10,000(6) 1% $11.375 $11.375 2/21/05 $ 45,511
Richard H. Sheehan, Jr.. 5,500(6) 1% $11.375 $11.375 2/21/05 $ 25,031
Steven D. Broidy........ 50,000(6)(7) 5% $11.375 $11.375 2/21/05(7) $ 227,557
</TABLE>
- --------
(1) All options were granted under the 1985 Stock Option Plan.
(2) Closing price reported on the New York Stock Exchange.
(3) Value estimated by the Black-Scholes option pricing model, based on the
following assumptions:
a. The volatility of the Corporation's stock (a measure in the variability
in the stock price) is assumed to be .3548, based on changes in the
price of the stock over the past ten years, measured monthly.
b. The risk-free rates of return for options expiring on February 21, April
18 and October 16, 2005, are assumed to be 7.4%, 7.4% and 6.0%,
respectively, based on the yield on the ten-year U.S. Treasury Notes on
the respective dates of grant.
c. The average annual dividend yield over the term of the option is assumed
to be 3.16%. Actual dividend payments will depend on a number of
factors, including financial results, and may differ substantially from
the assumption.
d. The time of exercise is assumed to be the term of the option at the time
of grant, ten years.
The actual value, if any, a Named Officer will realize will depend on the
excess of the stock price over the option exercise price on the date of
exercise, and such value may differ significantly from the amount shown.
(4) Director Stock Options granted before Mr. Goldsmith became an executive
officer of the Corporation, exercisable in full on October 19, 1995.
(5) Exercisable as follows: 116,667 shares on October 16, 1995; 116,667 shares
on October 16, 1996; and 116,666 shares on October 16, 1997.
(6) Exercisable as follows: 25% on February 22, 1996; 25% on February 22,
1997; 25% on February 22, 1998; and 25% on February 22, 1999.
(7) The terms shown in the table reflect the terms of the option as originally
granted. The option was amended on November 3, 1995, to provide that it
would vest according to its terms only until May 14, 1996, and would be
exercisable until November 14, 1996. See "Employment Contracts and
Termination of Employment and Change-In-Control Arrangements--Steven D.
Broidy Agreement," above.
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<PAGE>
The following information is furnished with respect to stock options and
SARs held by the Named Officers at December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBERS OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS
ACQUIRED FY-END AT FY-END(1)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- -------- -------- --------------- ----------------
<S> <C> <C> <C> <C>
Russell Goldsmith....... 393 $5,109 116,991/233,333 $ 77,129/145,833
Bram Goldsmith.......... 0 -- 0/0 $0/0
George H. Benter, Jr. .. 0 -- 105,637/101,128(2) $630,032/473,476
Frank P. Pekny.......... 0 -- 43,438/ 78,177(3) $326,968/321,631
Robert A. Moore......... 0 -- 33,853/ 32,951(4) $174,849/179,731
Richard H. Sheehan,
Jr. ................... 0 -- 2,000/ 11,500(5) $ 11,000/ 47,438
Steven D. Broidy........ 0 -- 105,637/101,128(2)(6) $630,032/473,476(6)
</TABLE>
- --------
(1) Based upon fair market value of $14.00 per share, the closing price on the
New York Stock Exchange of the Corporation's common stock on December 29,
1995.
(2) Stock options under 1985 Stock Option Plan with exercise prices ranging
form $6.43 to $11.38 per share.
(3) Stock options under 1985 Stock Option Plan with exercise prices ranging
from $5.05 to $11.38 per share.
(4) Stock options under 1985 Stock Option Plan with exercise prices ranging
from $6.31 to $12.04 per share.
(5) Stock options under 1985 Stock Option Plan with exercise prices ranging
from $8.50 to $11.38 per share.
(6) Under the terms of Mr. Broidy's options, as amended, vesting will occur
only until May 14, 1996. The number and value of options shown in the
table as being unexercisable at December 31, 1995, that will expire
without becoming exercisable, unless Mr. Broidy dies or is disabled on or
before May 14, 1996, are 88,628 and $331,288, respectively.
COMPENSATION OF DIRECTORS
The Corporation does not pay cash fees to its directors for attendance at
Board meetings. However, the Bank, whose Board of Directors is the same as the
Corporation's and generally meets jointly with the Corporation's Board, pays a
fee of $1,000 to each non-employee director for attendance at each meeting of
the Bank's Board of Directors. The Bank also pays directors an annual cash
retainer in the amount of $3,000. Non-employee directors serving on committees
appointed by the Bank's Board of Directors receive a fee of $1,000 for each
committee meeting attended. Bank Board committee chairs also receive a $3,000
annual cash retainer.
In addition to the above, the Corporation's 1995 Omnibus Plan provides for
the automatic annual grant of discounted stock options (which are not
Incentive Stock Options) to non-employee directors, including members of the
Compensation and Directors Nominating Committee ("Director Stock Options").
The exercise price of Director Stock Options is $1.00 per share, and each non-
employee director receives Director Stock Options each year having a net value
of $3,000, based on the fair market value of the Corporation's common stock on
the date of the Annual Meeting of Stockholders. Director Stock Options vest 6
months after the date of issuance or upon the termination of the holder's
directorship (other than for cause), whichever is earlier, and expire 10 years
after the date of grant.
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Directors Nominating Committees of the Corporation's
and Bank's Boards of Directors are each composed of Messrs. Charles E.
Rickerhauser, Jr., Chairman, and Stuart D. Buchalter. Mr. Kenneth Ziffren
served as an ad hoc member of the Committees in 1995 in connection with the
negotiation and approval of the Russell Goldsmith Agreement. Mr. Russell
Goldsmith served as a member of the committees until August 1995. Neither the
present committee members nor Mr. Ziffren has ever been an officer or employee
of the Corporation, the Bank or any subsidiary of the Bank. Mr. Buchalter is
of counsel to the law firm of Buchalter, Nemer, Fields & Younger, a
Professional Corporation, which was retained by the Bank during 1994. In 1995,
the Corporation and its subsidiaries made no payments to the firm. Subsequent
to his resignation from the committees, Mr. Goldsmith became Vice Chairman and
Chief Executive Officer of the Corporation and Chairman of the Board and Chief
Executive Officer of the Bank.
BOARD COMPENSATION AND DIRECTORS NOMINATING COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Decisions regarding compensation of the Corporation's executive officers,
all of whom are employees of the Bank, are made by the Compensation and
Directors Nominating Committees of the Corporation and the Bank, which meet
jointly (collectively the "Compensation Committee"). As noted elsewhere, the
Corporation does not pay any direct compensation to its executive officers,
except pursuant to the Corporation's Profit Sharing Plan and 1995 Omnibus
Plan. The Compensation Committee administers the 1995 Omnibus Plan and grants
options and other stock-based awards thereunder, as well as administering
outstanding options issued under the 1983 and 1985 Stock Option Plans, which
expired in 1993 and 1995, respectively. The executive officers of the
Corporation are compensated by the Bank and receive benefits under various
Bank employee benefit plans. The Compensation Committee oversees the
compensation programs for officers of the Bank, and specifically the
compensation of members of the Bank's Executive Committee, some of whom may be
deemed to be executive officers of the Corporation.
The following report is presented by the Compensation Committee.
OVERALL PHILOSOPHY
The Bank's executive compensation programs are designed to:
1. Provide levels of compensation that integrate pay with the Bank's
annual and long-term performance goals, so as to align the interests of
executive management with the long-term interests of stockholders;
2. Motivate executive management to achieve the business goals of the
Bank and to recognize their individual contributions; and
3. Provide compensation opportunities which are approximately at the
median of those offered by competitive financial institutions, in order to
assist the Bank in attracting and retaining qualified executives. Although
the exact identity of the competitive institutions surveyed to establish
comparability varies from time to time, based on the availability of
compensation data from third-party surveys concerning comparable positions,
these generally include banks of a size comparable to, or larger than, the
Bank, both within and outside of Southern California. Some, but not all, of
these banks are included within the Montgomery Securities Western Bank
Monitor California Independent Bank Proxy index utilized in "STOCKHOLDER
RETURN GRAPH," below. Banks not included in the index are selected
primarily on the basis of asset size and secondarily on the basis of
location.
13
<PAGE>
The Compensation Committee has instituted a policy that emphasis be placed
on incentive compensation for executive officers, tied to annual financial
performance goals for the Bank, such as the Executive Management Bonus Plan
discussed below, rather than on base salary. This approach serves to further
align the interests of the executive officers with those of the stockholders.
For 1995, the key elements of the compensation program for executive
management were base salary, annual cash bonus, stock option grants and
benefits typically offered to executive officers by competitive financial
institutions. The Corporation has not adopted any policy with respect to
qualifying compensation paid to executive officers under Section 162(m) of the
Internal Revenue Code.
BASE SALARY
The Compensation Committee considers Bank management proposals concerning
base salaries for executive officers, with the exception of Messrs. Bram
Goldsmith and Russell Goldsmith, whose compensation was established by the
Bram Goldsmith and Russell Goldsmith Agreements, respectively, with the
approval of the Board of Directors (see "Employment Contracts and Termination
of Employment and Change-in-Control Arrangements," above), and has made
recommendations to the Bank's Board of Directors for approval. Such
adjustments are usually effective beginning March 1.
Executive officer base salaries for 1995 were established by the
Compensation Committee under the terms of a revised corporate salary
administration program that became effective in 1994. For the majority of Bank
officers, the program establishes ranges for base salaries by salary grade,
based on median salary levels for similar positions at competitive financial
institutions. However, members of the Bank's Executive Committee, some of whom
may be deemed to be executive officers of the Corporation, are not assigned a
salary grade under the program. Based on a survey of the salary levels for
similar positions at competitive financial institutions, both in Southern
California and nationally, using data provided by Towers Perrin and other
independent sources, executive officers received salary increases in 1995.
Mr. Bram Goldsmith's base salary for 1995 was set by the terms of his then-
existing contract, which expired May 14, 1995. The Bank entered into the Bram
Goldsmith Agreement with Mr. Goldsmith, which will remain in effect until May
14, 1998. See "Employment Contracts and Termination of Employment and Change-
in-Control Arrangements--Bram Goldsmith Agreement," above. In line with the
Compensation Committee's goal of de-emphasizing base salary as a component of
the compensation package, Mr. Goldsmith's base salary under the Bram Goldsmith
Agreement was continued at the 1994 level, $540,000 per year (which base
salary had been reduced in 1992 from the level originally provided for in the
previous contract), with no increases during the term of the Agreement. This
base salary level is not based upon the Bank's financial performance.
Mr. Russell Goldsmith's base salary for 1995 was set under the terms of the
Russell Goldsmith Agreement, which was entered into on October 16, 1995. See
"Employment Contracts and Termination of Employment and Change-In-Control
Arrangements--Russell Goldsmith Agreement," above. Mr. Goldsmith's base salary
was established by negotiation between Mr. Goldsmith and the Compensation
Committee, and their respective legal counsel. In addition to the two
Compensation Committee members named in this report, Mr. Kenneth Ziffren
served as an ad hoc member of the Compensation Committee for this purpose. In
determining the level of base salary, the Compensation Committee took into
account Mr. Goldsmith's qualifications and past experience, as well as data
regarding base salary levels at other financial institutions provided by
Towers Perrin. The base salary level is not based upon the Bank's financial
performance.
ANNUAL CASH BONUSES
Executive officers of the Bank are eligible to participate, depending on
position, in either the Executive Management Bonus Plan or the Key Officer
Bonus Plan discussed below.
14
<PAGE>
Executive Management Bonus Plan The Executive Management Bonus Plan governs
annual cash bonuses payable to members of the Bank's Executive Committee, some
of whom may be deemed to be executive officers of the Corporation. Under this
Plan, the Bank's Strategy and Planning Committee each year recommends to the
Compensation Committee for its review and adoption (i) a financial performance
goal for the Bank, measured in terms of net income, and (ii) the upper limit
for bonuses, expressed as a percentage of annual base salary, based primarily
on bonus levels for similar positions at competitive financial institutions.
If the goal is not achieved to the extent designated by the Compensation
Committee, no cash bonuses are paid. If the goal is achieved, bonuses may be
paid, but only out of net income in excess of the goal or designated bonus
threshold. After the end of the year, the determination of which executive
officers will receive bonuses and in what amounts is made by the Compensation
Committee following discussion of the recommendations of the Bank's Strategy
and Planning Committee, based on a discretionary evaluation of the officers'
contribution to the accomplishment of the Bank's goal and department or
division goals.
In December 1994, the Compensation Committee established the net income goal
for 1995, and the maximum percentages of annual base salary that could be paid
as bonuses if the target were achieved. The maximum percentages were a sliding
scale, according to the degree to which the net income goal was achieved, with
different percentages set if the Corporation achieved 95%, 100%, 110% or 120%
of its goal. For members of the Strategy and Planning Committee, the maximum
bonus percentages ranged from up to 25% of base salary if the Corporation
achieved 95% of its goal, to up to 60% of base salary if it achieved up to
120% of its goal. For other members of the Executive Committee, the
corresponding percentages ranged from up to 17.5%, to up to 42%, respectively.
The Corporation exceeded its 1995 net income goal, and bonuses were paid in
February 1996. See "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS," above.
The Bram Goldsmith and Russell Goldsmith Agreements provide that their
respective bonuses will be a percentage of their respective base salaries that
is no less than the percentage used to calculate the bonus of any other member
of executive management pursuant to the Executive Management Bonus Plan. As
described above, for 1995 these bonuses were based on the degree to which the
Corporation achieved the net income goal established by the Compensation
Committee in 1995, and Mr. Russell Goldsmith's bonus was pro-rated.
Key Officer Bonus Plan The Key Officer Bonus Plan governs annual cash
bonuses payable to officers considered to be key members of management who are
not members of the Bank's Executive Committee. One such officer may be deemed
to be an executive officer of the Corporation.
Early each year, upon consideration of the recommendations of the Strategy
and Planning Committee, the Compensation Committee establishes the maximum
sizes of bonuses under the Key Officer Bonus Plan, expressed as a percentage
of annual base salary, based primarily on bonus levels for similar positions
at competitive financial institutions. Unlike the Executive Management Bonus
Plan, maximum bonus percentages are classified into three categories, based on
the extent to which the officer achieves individual performance goals and, in
some cases, department or division goals: "minimum" (the officer achieves most
goals), "target" (the officer achieves or slightly exceeds all goals) or
"maximum" (the officer significantly surpasses his or her goals). After the
end of the year, the determination of which officers will receive bonuses, and
in what amounts, is made by the Compensation Committee following discussion of
the recommendations of the Bank's Strategy and Planning Committee, based on a
discretionary evaluation of the officers' achievement of their goals. In
general, bonuses may be paid if the Corporation's net income is within 20% of
the net income goal established for the Executive Management Bonus Plan.
However, if the Corporation's net income is less than 80% of the net income
goal for the year, bonuses may still be paid in reduced percentages in the
discretion of the Bank's Strategy and Planning Committee; likewise, if the net
income is more than 120% of the goal, bonus percentages may be increased.
For 1995, the Compensation Committee approved a matrix of maximum bonus
percentages, based on both the level of achievement of the officer's goals, as
described above, and the Compensation Committee's assessment of the officer's
ability to contribute to the Corporation's attainment of its net income goal.
These ranged from up to 5%, to up to 40% of annual base salary. Since the
Corporation's net income goal was achieved, bonuses were paid based on these
percentages in February 1996.
15
<PAGE>
STOCK OPTION GRANTS
Recommendations of the Bank's Strategy and Planning Committee for the grant
of stock options to executive officers under the Corporation's 1995 Omnibus
Plan are generally submitted to the Compensation Committee after the end of
each fiscal year. After full discussion of the recommendations presented, the
Committee decides whether to award stock options.
The 1995 Omnibus Plan is designed to align the interests of the executive
officers with the long-term interest of the Corporation's stockholders in
increasing the market value of the Corporation's stock. The option exercise
price is the fair market value of the Corporation's common stock on the date
of the grant, and the options generally have a vesting schedule of 25% per
year beginning one year after the grant date in order to encourage retention
of executive officers and the creation of stockholder value over the long
term, since the option holder receives the full benefit of the option only
after a number of years. In determining whether to grant an option and the
size of the grant to be awarded, the Compensation Committee considers
executive officers' salary levels, their expected contribution toward the
growth and profitability of the Bank based upon performance of their
individual job responsibilities, and option grant levels at competitive
financial institutions (in order of decreasing importance). Past financial
performance of the Bank and the Corporation is given less weight in the
decision, because the value of the option is based upon future appreciation in
the stock price.
Utilizing these guidelines, the Compensation Committee granted stock option
awards to executive officers under the 1995 Omnibus Plan in February 1996,
based on their job performance in 1995.
Mr. Russell Goldsmith received a grant of stock options under the terms of
the Russell Goldsmith Agreement. See "Employment Contracts and Termination of
Employment and Change-In-Control Arrangements--Russell Goldsmith Agreement,"
above. The option grant was established by negotiation between Mr. Goldsmith
and the Compensation Committee, including ad hoc member Mr. Kenneth Ziffren.
In determining the size of the option grant to Mr. Goldsmith, the Compensation
Committee took into account data provided by Towers Perrin regarding options
granted by other financial institutions to their chief executives. The option
grant was not based upon any measure of the Corporation's financial
performance.
NEWLY HIRED EXECUTIVE OFFICERS
It is the policy of the Bank to present to the Compensation Committee, prior
to extending an offer of employment to a candidate for an executive officer
position, the total compensation package proposed to be offered, including
annual base salary, eligibility for an annual cash bonus, the maximum
percentage of annual base salary on which the bonus, if any, would be
calculated, and any stock option grant proposed to be awarded at the time of
hire. The Compensation Committee then recommends the proposed annual base
salary and eligibility for an annual cash bonus to the Bank's Board of
Directors for approval, and decides whether to grant any proposed stock
options. All elements of compensation for newly hired executive officers are
based primarily on the responsibilities of the position, the experience of the
individual and the incentive compensation practices of other competitive
financial institutions (in order of decreasing importance), rather than the
Corporation's financial performance.
CHARLES E. RICKERSHAUSER, JR., Chairman
STUART D. BUCHALTER
16
<PAGE>
STOCKHOLDER RETURN GRAPH
The following line graph compares the total cumulative stockholder return on
the Corporation's common stock, based upon quarterly reinvestment of all
dividends, to the cumulative total returns of the Standard & Poor's S&P
Composite 500 Stock Index and the Montgomery Securities Western Bank Monitor
California Independent Bank Proxy index of selected bank stocks. The graph
assumes $100 invested on December 31, 1990, in the Corporation's common stock
and each of the indices.
CITY NATIONAL CORPORATION
TOTAL CUMULATIVE STOCKHOLDER RETURN FOR
PERIOD ENDING DECEMBER 31, 1995
[THE FOLLOWING TABLE SETS FORTH THE DATA POINTS FOR THE PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
City National Corporation....... $100.00 $100.12 $ 55.88 $ 63.21 $90.01 $121.09
S&P 500......................... 100.00 126.31 131.95 141.25 139.08 186.52
Montgomery Securities Western
Bank Monitor California
Independent Bank Proxy......... 100.00
</TABLE>
17
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table presents the amount and nature of beneficial ownership
of the Corporation's common stock, $1.00 par value, by all directors of the
Corporation, each Named Officer (see "COMPENSATION OF DIRECTORS AND OFFICERS,"
above) and the Corporation's directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------------------
NAME OF BENEFICIAL
OWNER AMOUNT HELD NATURE OF HOLDINGS PERCENT OF CLASS
- ------------------ ----------------------- ------------------------ ----------------
<S> <C> <C> <C>
GEORGE H. BENTER, JR. 10,000(1) BD *
2,686(2) BDE
118,137(3) F
RICHARD L. BLOCH 219,979(4) BD *
1,858(3) F
MIRION P. BOWERS, M.D. 120 AC *
717(3) F
STEVEN D. BROIDY 120,036 AC *
11,533(5) E
77,255(3) F
STUART D. BUCHALTER 9,905 AC *
2,000(6) AC
375(6) E
BRAM GOLDSMITH 6,733,427(7) BD 15%
40,602(2) BDE
169,720(8) BDE
RUSSELL GOLDSMITH 6,177 AC 2%
790,107(9) AC
169,720(8) BDE
73,495(9) BDE
116,667(3) F
BURTON S. HORWITCH 115,537(10) AC *
600(10) BDE
ROBERT A. MOORE 36,353(3) F *
FRANK P. PEKNY 8,000 AC *
2,367(2) BDE
60,026(3) F
CHARLES E.
RICKERSHAUSER, JR. 12,262 AC *
324(3)
EDWARD SANDERS 14,563 AC *
1,137(11) BD
717(3) F
RICHARD H. SHEEHAN, JR. 2,000(12) AC *
5,375(3) F
ANDREA L. VAN DE KAMP 1,000 AC *
717(3) F
KENNETH ZIFFREN 3,024 AC *
15,786(13) BD
ALL EXECUTIVE OFFICERS
and
DIRECTORS as a Group 8,883,144(14) 19%
</TABLE>
- --------
* Does not exceed 1% of class.
A Possesses sole voting power.
B Possesses shared voting power.
18
<PAGE>
C Possesses sole investment power.
D Possesses shared investment power.
E Disclaims beneficial ownership.
F Shares as to which listed beneficial owner has right to acquire beneficial
ownership, as specified in Rule 13d-3(d)(1)(i) of the Securities and
Exchange Commission.
(1) Shares owned by the Benter Living Trust, of which Mr. Benter is a co-
trustee and beneficiary.
(2) Represents the officer's proportionate interest, according to his account
balance, in shares held in the City National Corporation Stock Fund under
the City National Bank Profit Sharing Plan at the most recent valuation
date, December 31, 1995. Fund investments are not allocated to individual
participant accounts, and the participants disclaim beneficial ownership
thereof.
(3) Unexercised stock options granted under the Corporation's 1983 or 1985
Stock Option Plan which are vested or will vest within 60 days.
(4) Shares owned by the Richard and Nancy Bloch Family Trust, of which Mr.
Bloch is a co-trustee and beneficiary.
(5) 11,133 shares are owned by Mr. Broidy's wife, individually and as
trustee, and 400 shares are owned by Mr. Broidy's son. Mr. Broidy
disclaims beneficial ownership of shares held by his wife and his son.
(6) 2,000 shares are held by City National Bank as custodian of Mr.
Buchalter's rollover IRA. 375 shares are owned by Mr. Buchalter's wife,
individually and for the benefit of her IRA. Mr. Buchalter disclaims
beneficial ownership of shares held by or for the benefit of his wife.
(7) 4,654,408 shares are owned by the Goldsmith Family Partnership, also
known as Lido-Soud Partnership, Ltd., 1,511,030 shares are owned by the
Bram and Elaine Goldsmith Family Trust, and 567,989 shares are owned by
the Elaine Goldsmith Revocable Trust. Mr. Goldsmith is a co-trustee of
both trusts, and the Bram and Elaine Goldsmith Family Trust is the
majority general partner of the Goldsmith Family Partnership. Mr.
Goldsmith may be deemed a "control person" of the Corporation.
(8) Shares owned by Goldsmith Family Foundation, a tax-exempt charitable
foundation. Mr. Bram Goldsmith and Mr. Russell Goldsmith each disclaim
beneficial ownership of shares held by the Foundation, of which both are
directors.
(9) 790,107 shares are owned by trusts of which Mr. Goldsmith is sole
trustee. 73,495 shares are owned by B. N. Maltz Foundation, a tax-exempt
charitable foundation of which Mr. Goldsmith is a director. Mr. Goldsmith
disclaims beneficial ownership of shares held by the Foundation.
(10) 87,875 shares are owned by the Burton Horwitch Living Trust, of which Mr.
Horwitch is sole trustee; 27,662 shares are held by Kemper Clearing
Corporation as custodian for the benefit of Mr. Horwitch's contributory
IRA; and 600 shares are held by the Horwitch Bros. Charitable Foundation,
a tax-exempt charitable foundation of which Mr. Horwitch is a co-trustee.
Mr. Horwitch disclaims beneficial ownership of shares held by the
Foundation.
(11) Shares held by City National Bank as custodian for Mr. Sanders' Keogh
plan.
(12) Shares held by Prudential Securities as custodian of Mr. Sheehan's IRA.
(13) Shares held jointly by Mr. Ziffren and his wife.
(14) Includes shares held by officers of the Bank who may be deemed to be
executive officers of the Corporation. Of the amount shown, 484,347
shares represent unexercised stock options granted under the
Corporation's 1983 and 1985 Stock Option Plans, as to which directors and
officers have the right to acquire beneficial ownership, as specified in
Rule 13d-3(d)(1)(i) of the Securities and Exchange Commission. Also
includes 6,457 shares held by the City National Corporation Stock Fund
under the City National Corporation Profit Sharing Plan, representing the
proportionate interests therein of Bank officers who may be deemed to be
executive officers of the Corporation, according to their account
balances at the most recent valuation date, December 31, 1995. Fund
investments are not allocated to individual participant accounts, and the
participants disclaim beneficial ownership of such shares.
19
<PAGE>
The directors of the Bank do not hold director-qualifying stock of the Bank.
Rather, they have satisfied this qualification requirement by holding a
requisite number of shares of the Corporation in accordance with an
interpretive ruling issued by the Comptroller of the Currency.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
Since 1967, the Bank's Pershing Square Regional Office and a number of Bank
departments have occupied leased space in the office building located at 600
South Olive Street in downtown Los Angeles. The building was originally
developed and built by a partnership between a wholly-owned subsidiary of the
Bank, Citinational Bancorporation, and Buckeye Construction Co. and Buckeye
Realty and Management Corporation (two corporations then affiliated with Mr.
Bram Goldsmith, now Chairman of the Board and Chief Executive Officer of the
Corporation and the Bank); since its completion, the building has been owned
by Citinational-Buckeye Building Co., a limited partnership of which
Citinational Bancorporation and Olive-Sixth Buckeye Co. are the only general
partners, each with a 29% partnership interest. Citinational Bancorporation
has an additional 3% interest as a limited partner of Citinational-Buckeye
Building Co.; the remainder is held by other, unaffiliated limited partners.
Olive-Sixth Buckeye Co. is a limited partnership of which Mr. Goldsmith is a
49% general partner; therefore, Mr. Goldsmith has an indirect 14% ownership
interest in Citinational-Buckeye Building Co. The remaining general partner
and all limited partners of Olive-Sixth Buckeye Co. are not affiliated with
the Corporation.
The Bank occupies space in the building under leases signed in 1966, 1985
and 1991, all of which expire in 1996. Prior to 1991, rental and other
payments were made to an unaffiliated ground lessee, Tishman Speyer South
Olive Street. This ground lease was terminated in December 1990, and the Bank
now pays rent and operating expense pass-throughs to Citinational-Buckeye
Building Co. Rental rates and other lease terms were negotiated at arms'
length without Mr. Goldsmith's involvement, and are comparable to, or better
than, rentals and lease terms for unaffiliated tenants in the building. In
1995, the Bank paid Citinational-Buckeye Building Co. a total of $762,442 for
rent under all leases in the building and $37,397 for operating expense pass-
throughs. Based on existing lease terms, rentals payable by the Bank to
Citinational-Buckeye Building Co. total $69,470 per month for all leases in
the building, not including operating expense pass-throughs.
Certain indebtedness of Citinational-Buckeye Building Co. to the Bank is
described below. In addition, since 1991, Mr. Goldsmith and the other general
partner of Olive-Sixth Buckeye Co. have made unsecured advances to
Citinational-Buckeye Building Co. to cover operating expenses and common area
and tenant improvements. Mr. Goldsmith has advanced a total of $5,437,500 (of
which $300,000 was advanced in 1995), which bears interest at the Bank's prime
rate plus 1% per annum, interest payable quarterly, with principal and
accrued, unpaid interest being due and payable on December 31, 1998.
In the ordinary course of its business, and subject to the limitations set
forth in applicable laws and regulations, the Bank makes loans to directors
and executive officers of the Corporation and/or to businesses in which they
have interests as officers, directors, partners, trustees and/or stockholders.
In the opinion of management, all such loans were made on substantially the
same terms, including interest rates and collateral (if any required), as
those prevailing at the time for comparable transactions with other persons,
and such loans did not involve more than normal risk of collectibility or
present other unfavorable features. However, as a result of deteriorating
economic conditions, certain loans discussed below may involve more than the
normal risk of collectibility.
The Bank has an outstanding loan to Citinational-Buckeye Building Co., with
which Mr. Bram Goldsmith, Chairman of the Board and Chief Executive Officer of
the Corporation, is affiliated, as described above. The loan is secured by the
office building described above and is non-recourse to the general partners of
the borrower. The loan bears interest at the Bank's prime rate plus 1/2%, with
a maximum of 12.5% and a minimum of 8.5%. The rate in effect at March 1, 1996
was 8.75%. At March 1, 1996, the outstanding balance of the loan was
$ ; the largest amount outstanding since January 1, 1995, was
$16,418,910. The loan matures in
20
<PAGE>
1998, and is, and from its inception has been, current as to required payments
of principal and interest, in part because certain partners have voluntarily
made advances to the partnership, as described above.
The Bank has an outstanding unsecured loan to Horwitch Brothers 3, a general
partnership of which Mr. Burton Horwitch, a director of the Corporation, is a
partner. At March 1, 1996, the outstanding balance on this loan was $ ;
the largest amount outstanding since January 1, 1995, was $281,115. The loan
bears interest at the Bank's prime rate plus 1 1/2%, and matures on January 4,
1999. At March 1, 1996, the interest rate on the loan was 9.75%. This loan may
involve more than the normal risk of collectibility.
SECTION 16(a) REPORTING DELINQUENCIES
Under federal securities laws and rules of the Securities and Exchange
Commission, directors and executive officers of the Corporation, as well as
persons holding more than 10% of the Corporation's outstanding shares of
common stock, are required to file reports showing their initial ownership of
the Corporation's common stock and any subsequent changes in that ownership
with the Securities and Exchange Commission and the New York Stock Exchange by
certain specified due dates. Based solely on the Corporation's review of
copies of such reports furnished to the Corporation and written
representations that no other reports were required to be filed, during 1994,
all such reports that were required were filed on a timely basis.
AMENDMENT AND RESTATEMENT OF THE CERTIFICATE OF INCORPORATION
The Board of Directors has approved a restatement of the Corporation's
Certificate of Incorporation (the "Certificate") to integrate into a single
instrument all of the provisions currently in effect. In addition, the Board
has approved, subject to stockholder approval, two amendments to be
incorporated into the restated Certificate, dealing with (a) the creation of a
classified board of directors consisting of not less than five nor more than
fourteen directors, and (b) the indemnification of directors and officers by
the Corporation. Stockholders will have the opportunity to vote separately on
each amendment. The Restated Certificate is set forth in its entirety in
Exhibit A to this proxy statement, showing the proposed amendments, and the
following discussion is qualified in its entirety by reference to Exhibit A.
CLASSIFICATION AND NUMBER OF DIRECTORS
The Board of Directors has approved an amendment adding Article NINTH to the
Certificate (the "Classified Board Amendment"), set forth in Exhibit A on
pages 31 and 32, that would create three classes of directors, each with as
nearly the same number of directors as possible, and with one of the three
classes to be elected at each Annual Meeting of Stockholders for a term of
three years. The Certificate would further provide that the number of
directors is not less than five nor more than fourteen persons, with the exact
number being established by the Board within these limits. Currently, the
bylaws permit a maximum of twenty-five directors. One effect of the Classified
Board Amendment would be to ensure that a majority of the Board of Directors
could not be changed at one time.
Purpose of the Classified Board Amendment The Classified Board Amendment is
the product of the Board's ongoing review of the current business environment
and the Corporation's corporate governance practices in light of the Board's
primary goal of maximizing stockholder value.
As a general matter, the Board has concluded that a classified Board would
be beneficial, since the continuity and stability it provides are conducive to
the careful, long term planning the Corporation requires to ensure continued
creation of stockholder value.
In particular, the Board was concerned that its goal of maximizing
stockholder value could be imperiled by the recent tactic of soliciting
proxies for the removal of directors in hostile takeovers. A hostile bidder
could make an offer with a modest premium, but below the directors' assessment
of true value, and simultaneously seek the removal of the entire Board. The
Board believes it is difficult to act effectively under such circumstances,
and the resulting disruption can be inimical to maximizing stockholder value.
21
<PAGE>
The Board of Directors believes that to maximize value in the event of such
a proposal, the Board of Directors must have:
. a reasonable period of time to consider alternatives;
. the ability to negotiate effectively as the representative of the
stockholders; and
. the ability to say "no" to a proposal that does not fairly reflect
the full value of the corporation or would expose stockholders to
unwarranted risk.
As described above, the Board's ability to do so can be seriously impaired
when all of the directors are subject to being replaced at any time, as is the
case under the Corporation's existing Certificate and bylaws.
The adoption of the Classified Board Amendment will not, and is not intended
to, insulate the Corporation's directors from the desires of stockholders or
from the directors' fiduciary duties to maximize stockholder value. A majority
of the Board will remain subject to change if stockholders so desire. It will,
however, assure that such a change cannot be effected at once by removal of
incumbent directors, or at a single stockholders' meeting.
Classified boards of directors have been adopted by more than 70% of the 100
largest bank holding companies (by assets) in the United States.
Antitakeover Effects Upon approval of the Classified Board Amendment, the
classification of directors and the reduction of the maximum allowable size of
the Board of Directors could have the effect of making it more difficult for a
takeover bidder to obtain control of the Corporation without the cooperation
of the Board of Directors, even if the bidder were to acquire a majority of
the Corporation's outstanding stock, because at least two Annual Meetings of
Stockholders would be required to effect a change in a majority of the Board.
Such a delay could discourage tender offers which stockholders might feel to
be in their best interests and could also discourage open market purchases by
a potential takeover bidder that might increase the market price of the
Corporation's stock. In addition, the Classified Board Amendment could make
the Corporation's common stock less attractive to persons who invest in
securities in anticipation of an increase in price if a takeover develops.
Since these provisions will make the removal of the directors more difficult,
they could also have the effect of increasing the directors' security in their
positions and, since the Board has the power to retain and discharge
management, could perpetuate incumbent management.
Nevertheless, the Board of Directors, comprised of the holders of 18% of the
Corporation's outstanding common stock, believes that the above-described
benefits of a classified board in a takeover situation, including the
provision of adequate time to review alternatives, the ability to reject an
unfairly low price and the continuity and stability of the Corporation,
outweigh the possible disadvantage of making it more difficult for
stockholders to change the composition of the Board in a relatively short
period of time. In addition, the Board believes that a range of five to
fourteen directors provides sufficient flexibility in setting the appropriate
size of the Board. Comparing the size and complexity of the Corporation's
operations to those of its competitors, the Board of Directors believes it is
unlikely that more than fourteen directors will be necessary to oversee the
Corporation's management properly in the foreseeable future.
Other than the proposed Classified Board Amendment, the Certificate and
bylaws of the Corporation do not contain any provision that management
considers to be an "antitakeover" provision, except for Article TWELFTH
(renumbered as Article ELEVENTH in the Restated Certificate attached as
Exhibit A hereto), which requires the affirmative vote of 70% of the
stockholders to approve a "Business Combination" with a "Restricted Person",
an affiliate of a Restricted Person or any member of a group of which a
Restricted Person is also a member. The 70% vote is not required for a
Business Combination approved by the Board of Directors prior to the time the
relevant party became a Restricted Person. A Restricted Person is defined as a
person, partnership or other entity (other than an employee benefit trust), or
a group of persons acting together, which acquires more than 5% of the
outstanding voting securities of the Corporation in any twelve month period. A
Restricted Person ceases to be such 24 months following any such acquisition.
Shares acquired in a transaction approved in advance by two-thirds of the
directors are not counted for the purposes of determining if a person is
22
<PAGE>
a Restricted Person. "Business Combination" is defined to include, among other
things: (i) a sale of any substantial part of the assets or business of the
Corporation, (ii) an acquisition by the Corporation of any substantial part of
the assets or business of another person, (iii) a merger or consolidation
involving the Corporation, (iv) a reclassification of securities and certain
similar transactions, and (v) the issuance of voting securities by the
Corporation to a Restricted Person. A transaction is not a "Business
Combination" if it is approved in advance by at least all but one of the
authorized directors of the Corporation.
Implementation of the Amendment If the Classified Board Amendment is
approved, Class I directors elected at the 1996 Annual Meeting of Stockholders
will hold office until the 1997 Annual Meeting of Stockholders; Class II
directors elected at the meeting will hold office until the 1998 Annual
Meeting of Stockholders; and Class III directors elected at the meeting will
hold office until the 1999 Annual Meeting of Stockholders. Commencing with the
1997 Annual Meeting of Stockholders, directors elected to succeed those in the
class whose terms then expire will be elected for a three-year term, so that
the term of one class of directors will expire each year. Each director will
serve until his or her successor is duly elected and qualified or until his or
her earlier death, resignation or removal. Information concerning the current
eleven nominees for election as directors at the 1996 Annual Meeting of
Stockholders, and the terms for which they will serve if the Classified Board
Amendment is adopted, is contained under the caption "ELECTION OF DIRECTORS,"
above. If the Classified Board Amendment is not adopted, all directors will be
elected to serve until the 1997 Annual Meeting of Stockholders and, in each
case, until their respective successors are duly elected and qualified. The
Board of Directors presently has no arrangements, commitments, or
understandings with respect to increasing or decreasing the size of the Board
or any class of directors.
Under both the existing Certificate and bylaws and the Classified Board
Amendment, any vacancies in the Board of Directors, as well as any
directorship to be filled by reason of an increase in the number of directors,
may be filled by the affirmative vote of a majority of the remaining
directors. Under the Classified Board Amendment, any director elected to fill
a vacancy created other than by reason of an increase in the number of
directors would continue in office until the expiration of the term of his or
her predecessor in office. Any director elected to fill a directorship created
by an increase in the number of directors would be assigned to a class,
consistent with the requirement that the classes be of as nearly equal size as
possible, and would continue in office until the expiration of the term of
such class.
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE CLASSIFIED BOARD AMENDMENT.
DIRECTOR AND OFFICER INDEMNIFICATION
The Board of Directors has approved an amendment to, and complete
restatement of, Article SEVENTH of the Certificate (the "Indemnification
Amendment") to provide that directors and officers of the Corporation "shall
be indemnified and held harmless by the Corporation to the fullest extent
permissible under the Delaware General Corporation Law," including the right
to have the Corporation pay or reimburse their expenses incurred in defending
any proceeding against them by reason of their service on behalf of the
Corporation in advance of the final disposition of such proceeding. The
existing Article SEVENTH: (i) requires indemnification of directors and
officers of the Corporation only as authorized in the specific case upon a
determination by the Board of Directors that indemnification is proper in the
circumstances, and (ii) provides that expenses incurred by an officer or
director in defending an action may be paid by the Corporation in advance, but
are not required to be so paid. Both the existing Article SEVENTH and the
Indemnification Amendment are set forth in Exhibit A on pages 29-30 and 30-31,
respectively.
In 1988, the stockholders of the Corporation approved a form of
Indemnification Agreement that contains certain provisions in addition to
those contained in the existing Article SEVENTH, and the Corporation has
entered into such Indemnification Agreements with each of its directors. The
Indemnification Agreements, among other things, make advancement of expenses
to directors mandatory subject to receipt of an undertaking to repay
23
<PAGE>
such amounts if it is ultimately determined that the director is not entitled
to indemnification. In addition, the Indemnification Agreements provide that in
the event the Corporation determines that an individual is not entitled to
indemnification, such person may petition a court for a determination of his or
her indemnification rights, and that such person shall not be prejudiced by the
Corporation's prior adverse determination in the matter. If the Indemnification
Amendment is adopted, Article SEVENTH would provide that in the event of such a
dispute, the burden of proving that an indemnified person failed to meet the
standard of conduct required for indemnification shall be on the Corporation.
The Board of Directors has approved amendments to the Indemnification
Agreements referred to above in order to conform their provisions to those of
Article SEVENTH, as amended and restated by the Indemnification Amendment.
The Indemnification Amendment is intended to complement the indemnity and
other protection available under applicable law, and to provide for
indemnification of directors and officers to the fullest extent permitted by
the Delaware General Corporation Law (the "Delaware Law"). Section 145 of the
Delaware Law provides a detailed statutory framework covering indemnification
of any person who has been, or is threatened to be, made a party to a legal
proceeding by reason of his or her service on behalf of the Corporation. The
Delaware Law mandates that indemnification shall be made to any such person who
has been successful "on the merits" or "otherwise" with respect to the defense
of such proceeding, but does not require indemnification in other
circumstances. The Delaware Law further provides that a person shall not be
indemnified by the Corporation in derivative suits for any loss or damage
suffered by the Corporation on account of any action taken by the person as a
director or officer of the Corporation, unless he or she acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of the Corporation or, with respect to a criminal matter, had no
reasonable cause to believe that his or her conduct was unlawful. Furthermore,
indemnification is not available in derivative actions if the indemnitee has
been adjudged to be liable to the Corporation, unless the court in which such
action is pending determines that, in view of all of the circumstances of the
case, such person is fairly and reasonably entitled to indemnification for
expenses that such court determines to be proper. Indemnification for expenses
incurred in settling a derivative action is permitted. The Corporation may
advance the expenses incurred in defending such a proceeding upon receipt from
the indemnitee of an undertaking, or promise, to repay such sums in the event
it is later determined that such indemnitee is not entitled to be indemnified.
Section 145 of the Delaware Law provides that its provisions are not
considered exclusive of any other rights to which persons seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or otherwise.
The Board of Directors believes that the Indemnification Amendment serves the
best interests of the Corporation and its stockholders by strengthening the
Corporation's ability to attract and retain over time the services of
knowledgeable and experienced persons to serve as directors, officers and key
employees, who, through their efforts and expertise, can make a significant
contribution to the success of the Corporation.
At present, there is no litigation or proceeding, pending or threatened,
involving an officer, director or employee of the Corporation, for which
indemnification might be required or permitted under either the existing
Article SEVENTH of the Certificate, any Indemnification Agreement or the
proposed Indemnification Amendment.
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE INDEMNIFICATION AMENDMENT.
PROPOSALS OF STOCKHOLDERS
All proposals of stockholders intended to be presented at the Corporation's
1997 Annual Meeting of Stockholders must be directed to the attention of the
Secretary of the Corporation, at the address of the
24
<PAGE>
Corporation set forth on the first page of this Proxy Statement, before
November 17, 1996, if they are to be considered for possible inclusion in the
Proxy Statement and form of proxy, in accordance with rules and regulations of
the Securities and Exchange Commission.
INDEPENDENT ACCOUNTANTS
On August 23, 1995, the Audit Committee of the Board of Directors of the
Corporation selected KPMG Peat Marwick LLP to serve as independent accountants
of the Corporation for its fiscal year which ended December 31, 1995. The
Audit Committee has not yet selected independent accountants for the current
fiscal year, which ends on December 31, 1996. The Audit Committee, according
to its normal procedures, will make its recommendations to the Corporation's
Board of Directors as to independent accountants later in the year, at which
time the independent accountants for the current fiscal year will be selected.
A representative of KPMG Peat Marwick LLP is expected to attend the 1996
Annual Meeting of Stockholders, with the opportunity to make a statement and
respond to appropriate questions.
By Order of the Board of Directors
RICHARD H. SHEEHAN, JR.
Secretary
March 14, 1996
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EXHIBIT A
RESTATED
CERTIFICATE OF INCORPORATION
OF
CITY NATIONAL CORPORATION
----------------
FIRST. The name of the Corporation is
CITY NATIONAL CORPORATION
This Restated Certificate of Incorporation has been duly adopted in
accordance with Section 245 of the Delaware General Corporation Law, and
restates and further amends the Certificate of Incorporation filed by the
Corporation with the Secretary of State of the State of Delaware on October 3,
1968, as heretofore amended.
SECOND. The address of its registered office in the State of Delaware is No.
100 West Tenth Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware. Without limiting in any manner the scope and generality of
the foregoing, the Corporation shall have the following purposes and powers.
(1) To acquire by purchase, subscription, or otherwise, and to receive,
hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge,
or otherwise dispose of or deal in and with any and all securities, as such
term is hereinafter defined, issued or created by any corporation, firm,
organization, association or other entity, public or private, whether
formed under the laws of the United States of America or of any state,
commonwealth, territory, dependency or possession thereof, or of any
foreign country or of any political subdivision, territory, dependency,
possession or municipality thereof, or issued or created by the United
States of America or any state or commonwealth thereof or any foreign
country, or by any agency, subdivision, territory, dependency, possession
or municipality of any of the foregoing, and as owner thereof to possess
and exercise all the rights, powers and privileges of ownership, including
the right to execute consents and vote thereon.
The term "securities" as used in this Certificate of Incorporation shall
mean any and all notes, stocks, treasury stocks, bonds, debentures,
evidences of indebtedness, certificates of interest or participation in any
profit-sharing agreement, collateral-trust certificates, preorganization
certificates or subscriptions, transferable shares, investment contracts,
voting trust certificates, certificate of deposit for a security,
fractional undivided interests in oil, gas, or other mineral rights, or, in
general, any interests or instruments commonly known as "securities," or
any and all certificates of interest or participation in, temporary or
interim certificates for, receipts for, guaranties of, or warrants or
rights to subscribe to or purchase, any of the foregoing.
(2) To make, establish and maintain investments in securities, and to
supervise and manage such investments.
(3) To cause to be organized under the laws of the United States of
America or of any state, commonwealth, territory, dependency or possession
thereof, or of any foreign country or of any political subdivision,
territory, dependency, possession or municipality thereof, one or more
corporations, firms, organizations, associations or other entities and to
cause the same to be dissolved, wound up, liquidated, merged or
consolidated.
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(4) To acquire by purchase or exchange, or by transfer to or by merger or
consolidation with the Corporation or any corporation, firm, organization,
association or other entity owned or controlled, directly or indirectly, by
the Corporation, or to otherwise acquire, the whole or any part of the
business, good will, rights, or other assets of any corporation, firm,
organization, association or other entity, and to undertake or assume in
connection therewith the whole or any part of the liabilities and
obligations thereof, to effect any such acquisition in whole or in part by
delivery of cash or other property, including securities issued by the
Corporation, or by any other lawful means.
(5) To make loans and give other forms of credit, with or without
security, and to negotiate and make contracts and agreements in connection
therewith.
(6) To aid by loan, subsidy, guaranty or in any other lawful manner any
corporation, firm, organization, association or other entity of which any
securities are in any manner directly or indirectly held by the Corporation
or in which the Corporation or any such corporation, firm, organization,
association or entity may be or become otherwise interested; to guarantee
the payment of dividends on any stock issued by any such corporation, firm,
organization, association or entity; to guarantee or, with or without
recourse against any such corporation, firm, organization, association or
entity, to assume the payment of the principal of, or the interest on, any
obligations issued or incurred by such corporation, firm, organization,
association or entity; to do any and all other acts and things for the
enhancement, protection or preservation of any securities which are in any
manner, directly or indirectly, held, guaranteed or assumed by the
Corporation, and to do any and all acts and things designed to accomplish
any such purpose.
(7) To borrow money for any business, object or purpose of the
Corporation from time to time, without limit as to amount; to incur
indebtedness and to issue any kind of evidence of indebtedness, whether or
not in connection with borrowing money, including evidences of indebtedness
convertible into stock of the Corporation, to secure the payment of any
evidence of indebtedness by the creation of any security interest in any of
the property or rights of the Corporation, whether at that time owned or
thereafter acquired.
(8) To render service, assistance, counsel and advice to, and to act as
representative or agent in any capacity (whether managing, operating,
financial, purchasing, selling, advertising or otherwise) of, any
corporation, firm, organization, association, or other entity.
(9) To engage in any commercial, financial, mercantile, industrial,
manufacturing, marine, exploration, mining, agricultural, research,
licensing, servicing, or agency business not prohibited by law, and any,
some or all of the foregoing.
(10) To become a joint venturer, or a partner, general or limited, in the
exercise of any power, or for any corporate purpose.
The purposes and powers specified in the foregoing paragraphs shall, except
where otherwise expressed, be in nowise limited or restricted by reference to,
or inference from, the terms of any other paragraph in this Certificate of
Incorporation, but the purposes and powers specified in each of the foregoing
paragraphs of this Article shall be regarded as independent purposes and
powers.
The Corporation shall possess and may exercise all powers and privileges
necessary or convenient to effect any or all of the foregoing purposes, or to
further any or all of the foregoing powers, and the enumeration herein of any
specific purposes or powers shall not be held to limit or restrict in any
manner the exercise by the Corporation of the general powers now or hereafter
conferred by the laws of the State of Delaware upon corporations formed under
the General Corporation Law of Delaware.
FOURTH. The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is Eighty Million (80,000,000)
shares, of which Five Million (5,000,000) shares shall be shares of Preferred
Stock of the par value of One Dollar ($1.00) per share (hereinafter called
"Preferred Stock") and Seventy Five Million (75,000,000) shares shall be
shares of Common Stock of the par value of One Dollar ($1.00) per share
(hereinafter called "Common Stock"). Any amendment to the Certificate of
Incorporation
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which shall increase or decrease the authorized capital stock of the
Corporation may be adopted by the affirmative vote of the holders of a
majority of the outstanding shares of the voting stock of the Corporation.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the Preferred Stock
shall be as follows:
(1) The Board of Directors is expressly 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 voting powers, full or limited but not to
exceed one vote per share, or without voting powers and with such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be 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 Certificate of Incorporation, or any amendment
thereto, including (but without limiting the generality of the foregoing)
the following:
(a) The designation of such series.
(b) The dividend rate of such series, the conditions and dates upon
which such dividends shall be payable, the preferences or relation
which such dividends shall bear to the dividends payable on any other
class or classes or of any other series of capital stock, and whether
such dividends shall be cumulative or non-cumulative.
(c) Whether the shares of such series shall be subject to redemption
by the Corporation, and, if made subject to such redemption, the time,
prices and other terms and conditions of such redemption.
(d) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series.
(e) Whether or not the shares of such series shall be convertible
into or exchangeable for shares of any other class or classes or of any
other series of any class or classes of capital stock of the
Corporation, and, if provision be made for conversion or exchange, the
times, prices, rates adjustment, and other terms and conditions of such
conversion or exchange.
(f) The extent, if any, to which the holders of the shares of such
series shall be entitled to vote as a class or otherwise; provided,
however, that in no event shall any holder of any series of Preferred
Stock be entitled to more than one vote for each share of such
Preferred Stock held by him or her.
(g) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock.
(h) The rights of the holders of the shares of such series upon the
dissolution of, or upon the distribution of assets of, the Corporation.
(2) Except as otherwise required by law and except for such voting powers
with respect to the election of directors or other matters as may be stated
in the resolutions of the Board of Directors creating any series of
Preferred Stock, the holders of any such series shall have no voting power
whatsoever.
FIFTH. The by-laws may be made, altered, amended or repealed by the Board of
Directors. The books of the Corporation (subject to the provisions of the laws
of the State of Delaware) may be kept outside of the State of Delaware at such
places as from time to time may be designated by the Board of Directors.
SIXTH. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as
the case may be, to be summoned in such manner as the said
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court directs. If a majority in number representing three-fourths in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise
or arrangement and to any reorganization of this Corporation as a consequence
of such compromise or arrangement, the said compromise or arrangement and the
said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
[THE FOLLOWING IS THE EXISTING TEXT OF ARTICLE SEVENTH, WHICH WILL BE
REPLACED IF MEASURE 3, CAPTIONED ON THE PROXY CARD "AMENDMENT TO
CERTIFICATE OF INCORPORATION: DIRECTOR INDEMNIFICATION," IS APPROVED BY
THE STOCKHOLDERS. THE REPLACEMENT TEXT OF ARTICLE SEVENTH IS SET FORTH
IMMEDIATELY AFTER THE FOLLOWING.]
SEVENTH.
(1) 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 a director or officer of the Corporation, against
expenses (including attorney's fees), 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) 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 judgment in its
favor by reason of the fact that he is or was a director or officer of the
Corporation, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the 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 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) The Corporation may indemnify any person who is or was an employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise to the extent and under
the circumstances provided by paragraphs 1 and 2 of this Article SEVENTH with
respect to a person who is or was a director or officer of the Corporation.
(4) Any indemnification under paragraphs 1, 2 and 3 of this Article SEVENTH
(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 therein. Such determination shall be
made (a) by the Board of Directors by a majority vote of a quorum (as defined
in the by-laws of the Corporation) 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 a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
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(5) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may 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 director or officer to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by the Corporation as authorized in this Article SEVENTH. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(6) The indemnification and advancement of expenses provided, or granted
pursuant to, the other paragraphs of this Article SEVENTH shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, 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.
(7) By action of its Board of Directors, notwithstanding any interest of the
directors in the action, the Corporation may purchase and maintain insurance,
in such amounts as the Board of Directors deems appropriate, on behalf of any
person who is or was a director, officer, employee or agent of the
Corporation, or of any corporation a majority of the voting stock of which is
owned by the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, 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 or
would be required to indemnify him against such liability under the provisions
of this Article SEVENTH or of the General Corporation Law of the State of
Delaware.
(8) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article SEVENTH shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
[THE FOLLOWING ARTICLE SEVENTH WILL REPLACE EXISTING ARTICLE SEVENTH IF
MEASURE 3, CAPTIONED ON THE PROXY CARD "AMENDMENT TO CERTIFICATE OF
INCORPORATION: DIRECTOR INDEMNIFICATION," IS APPROVED BY THE
STOCKHOLDERS.]
SEVENTH. Each person who was or is a party, or is threatened to be made 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 (hereinafter a "proceeding"), by reason of the fact that such
person, or person of whom such person is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation or in any
capacity with respect to an employee benefit plan maintained or sponsored by
the Corporation, shall be indemnified and held harmless by the Corporation to
the fullest extent permissible under the Delaware General Corporation Law, as
the same exists or may hereafter be amended, against all expenses, liabilities
and losses (including attorneys' fees, judgments, fines, excise taxes pursuant
to the Employee Retirement Income Security Act of 1974 or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and administrators;
provided, however, that, except as provided in the following paragraph, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors
of the Corporation. The right to indemnification conferred in this Section
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance
of its final disposition; provided however, that, if the Delaware General
Corporation Law so requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not
in any other capacity in which service was or is rendered by such person while
a director or officer, including, without limitation, service to any employee
benefit plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced
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if it shall ultimately be determined that such director or officer is not
entitled to be indemnified under this Section or otherwise. The Corporation
may, by action of its Board of Directors, provide indemnification to employees
and agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
If a claim under the preceding paragraph of this Section is not paid in full
by the Corporation within thirty days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful
in whole or in part, the claimant shall be entitled to be paid also the
expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standard of conduct required
under the Delaware General Corporation Law for the Corporation to indemnify
the claimant for the amount claimed, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under
the Delaware General Corporation law.
EIGHTH. Whenever the vote of stockholders at a meeting thereof is required
or permitted to be taken for or in connection with any corporate action by any
provision of the General Corporation Law of the State of Delaware the meeting
and vote of stockholders may be dispensed with if such action is taken with
the written consent of the holders of not less than a majority of all the
stock entitled to be voted upon such action if a meeting were held; provided
that in no case shall the written consent be by the holders of stock having
less than the minimum percentage of the vote required by statute for such
action, and provided that prompt notice is given to all stockholders of the
taking of corporate action without a meeting and by less than unanimous
written consent. Election of directors need not be by ballot unless the by-
laws so provide.
[THE FOLLOWING ARTICLE NINTH WILL BE INSERTED INTO THE RESTATED
CERTIFICATE OF INCORPORATION IF MEASURE 2, CAPTIONED ON THE PROXY CARD
"AMENDMENT TO CERTIFICATE OF INCORPORATION: BOARD OF DIRECTORS," IS
APPROVED BY THE STOCKHOLDERS.]
NINTH. The number of directors which shall constitute the whole Board of
Directors shall be not less than five nor more than fourteen, and the specific
number of directors shall be determined by resolution of the Board of
Directors. The Board is divided into three classes, Class I, Class II and
Class III. Such classes shall be as nearly equal in number of directors as
possible. Each director shall serve for a term ending on the third annual
meeting following the annual meeting at which such director was elected;
provided, however, that the directors first elected to Class I shall serve for
a term ending at the annual meeting to be held in 1997, the directors first
elected to Class II shall serve for a term ending at the annual meeting to be
held in 1998, and the directors first elected to Class III shall serve for a
term ending at the annual meeting to be held in 1999. The foregoing
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notwithstanding, each director shall serve until his successor shall have been
duly elected and qualified, unless he shall resign, become disqualified,
disabled or shall otherwise be removed.
At each annual election, the directors chosen to succeed those whose terms
then expire shall be of the same class as the director they succeed, unless,
by reason of any intervening changes in the authorized number of directors the
Board shall designate one or more directorships whose term then expires as
directorships of another class in order more nearly to achieve equality of
number of directors among the classes.
Notwithstanding the rule that the three classes shall be as nearly equal in
number of directors as possible, in the event of any change in the authorized
number of directors each director then continuing to serve as such shall
nevertheless continue as a director of the class of which he is a member until
the expiration of his current term, or his prior death, resignation or
removal.
Any vacancy on the Board of Directors (whether by reason of an increase in
the number of authorized directors or due to the death, resignation or removal
of a director) may be filled by a majority of the directors then in office,
although less than a quorum, or by the sole remaining director. Any director
chosen to fill a vacancy shall hold office until the next election of the
class of directors for which he shall have been chosen, and until his
successor shall have been duly elected or qualified.
TENTH. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this 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.
ELEVENTH. Without the prior affirmative vote or written consent of the
holders of 70% of the outstanding shares of the common stock of the
corporation, voting separately as a class, and whether or not a vote of the
stockholders is otherwise required in connection with the transaction, neither
the corporation nor any of its majority-owned subsidiaries shall become party
to any "Business Combination" to which any "Restricted Person," any
"Affiliate" of a Restricted Person or any member of a group which is a
Restricted Person is also a party. The provisions of this Article ELEVENTH
shall not, however, apply to any Business Combination approved by the Board of
Directors of the Corporation at any time which the person involved who
theretofore was or thereafter became a Restricted Person was not such a
Restricted Person.
The affirmative vote required by this Article ELEVENTH is in addition to the
vote of the holders of any class or series of stock of the Corporation
otherwise required by law, this Certificate of Incorporation, any resolution
which has been adopted by the Board of Directors providing for the issuance of
a class or series of stock, or any agreement between the Corporation and any
national securities exchange.
No amendment, alteration or repeal of any provision of this Article ELEVENTH
may be effected unless it is approved at a meeting of the Corporation's
stockholders called for that purpose. Notwithstanding any other provision of
this Certificate of Incorporation, there shall be required to amend, alter or
repeal, directly or indirectly, any provision of this Article ELEVENTH the
affirmative vote of the holders of 70% of the issued and outstanding shares of
common stock of the Corporation, excluding all voting securities owned,
directly or indirectly, by any Restricted Person or any Affiliate of a
Restricted Person.
As used in this Article ELEVENTH, the following terms have the following
meanings:
(a) A "Restricted Person" means any person, partnership, corporation or
other entity (other than a trustee holding stock for the benefit of
employees of the Corporation or its subsidiaries, or any one or more of
them, pursuant to an employee benefit plan), or any group of persons,
partnerships, corporations or other entities (other than such a trustee)
who act together for the purpose of acquiring, holding or voting securities
of the Corporation, which has (or, in the case of a group, the members of
which in the aggregate have), during any period of 12 consecutive calendar
months, directly or indirectly acquired shares of any class of the voting
securities of the Corporation which aggregate more than 5% of the
outstanding securities of such class. Any Restricted Person shall cease to
be a Restricted Person for the purposes of this Article
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ELEVENTH at the end of the 24th calendar month following the most recent
month in which such Restricted Person (or all members of a group which is a
Restricted Person) directly or indirectly acquired any shares of any class
of the voting securities of the Corporation which, together with all other
shares of such class acquired by such person (or any member of such group)
within such month and the immediately preceding 11 calendar months,
aggregate more than 5% of the outstanding voting securities of such class.
Any Restricted Person who so ceases to be a Restricted Person shall not
thereafter again be deemed to be a Restricted Person unless such person,
firm, corporation, other entity or group once again comes within the
definition set forth in this Article ELEVENTH as a result of subsequent
acquisitions of voting securities of the Corporation. In making the
calculations provided for in this definition, shares shall not be counted
as owned or acquired by any person, partnership, corporation, other entity
or group if the transaction in which such shares were acquired was approved
in advance by the affirmative vote of 66 2/3% of the directors of the
Corporation then in office.
(b) An "Affiliate" of a Restricted Person means any person, firm,
corporation or other entity directly or indirectly controlling, controlled
by, or under common control with such Restricted Person (or any member of a
group which constitutes a Restricted Person).
(c) A "Business Combination" means (i) the sale, exchange, lease,
transfer or other disposition by the Corporation or any of its subsidiaries
of all, substantially all, or any substantial part of its or their assets
or businesses; (ii) the purchase, exchange, lease or other acquisition by
the Corporation or any of its subsidiaries of all, substantially all, or
any substantial part of the assets or business of any other person; (iii) a
merger or consolidation to which the Corporation or any subsidiary is a
party; (iv) any reclassification of securities, recapitalization or other
transaction (other than a redemption in accordance with the terms of the
security redeemed) designed to decrease the number of holders of voting
securities of the Corporation, if immediately thereafter any Restricted
Person will be the owner of more than 35% of the outstanding voting
securities of the Corporation of any class the number of holders of which
is so decreased; or (v) the issuance to any Restricted Person, any member
of a group which constitutes a Restricted Person or any Affiliate of a
Restricted Person of voting securities of the Corporation or any subsidiary
of the Corporation, any rights, warrants or options to acquire any of the
foregoing or any combination of the foregoing. No such transaction shall
constitute a Business Combination, however, if it is approved in advance by
the Board of Directors of the Corporation at a meeting called for the
purpose by the affirmative votes of at least the number of directors which
is one less than the entire authorized number of directors of the
Corporation.
TWELFTH. To the fullest extent permitted by the General Corporation Law of
the State of Delaware as the same exists or may hereafter be amended, a
director of this Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
33
<PAGE>
PRELIMINARY COPIES
CITY NATIONAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- APRIL 16, 1996
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION
The undersigned hereby appoints RICHARD H. SHEEHAN, JR., with power of
substitution, as proxy of the undersigned, to attend the Annual Meeting of
Stockholders of CITY NATIONAL CORPORATION to be held at the offices of City
National Bank, 400 N. Roxbury Drive, Beverly Hills, California, on April 16,
1996, at 4:00 P.M., and any adjournments thereof, and to vote the number of
shares the undersigned would be entitled to vote if personally present on the
following:
(1) ELECTION OF DIRECTORS
[_] FOR all the nominees [_] WITHHOLD AUTHORITY to
listed below (except vote for all nominees
as marked to the listed below
contrary below)
George H. Benter, Jr., Richard L. Bloch, Mirion P. Bowers, M.D., Stuart D.
Buchalter, Bram Goldsmith, Russell Goldsmith, Burton S. Horwitch, Charles
E. Rickershauser, Jr., Edward Sanders, Andrea L. Van De Kamp, Kenneth
Ziffren.
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.
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(2) AMENDMENT TO CERTIFICATE OF INCORPORATION: BOARD OF DIRECTORS
[_] FOR [_] AGAINST [_] ABSTAIN FROM
Approval of the amendment and restatement of the City National Corporation
Certificate of Incorporation to add Article NINTH providing for a
classified Board of Directors, with staggered terms, consisting of a
maximum of 14 and minimum of 5 directors.
(3) AMENDMENT TO CERTIFICATE OF INCORPORATION: DIRECTOR INDEMNIFICATION
[_] FOR [_] AGAINST [_] ABSTAIN FROM
Approval of the amendment and restatement of the City National Corporation
Certificate of Incorporation to revise Article SEVENTH relating to the
indemnification of directors and officers by City National Corporation.
(4) In their discretion, upon all other matters as may properly be brought
before the meeting or any adjournments thereof.
(CONTINUED, AND TO BE SIGNED, ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CHOICE IS INDICATED, THIS PROXY
WILL BE VOTED FOR ITEMS (1), (2) AND (3).
Date _________________________, 1996
____________________________________
Signature(s)
____________________________________
Signature(s)
Please sign as name(s) appear on
stock certificate (as indicated
hereon). Joint owners should both
sign. If signed by an attorney,
executor, guardian or in some other
capacity or as officer of a
corporation, please add title as
such.
STOCKHOLDERS ARE URGED TO SIGN,
DATE AND RETURN THIS PROXY PROMPTLY
TO CITY NATIONAL CORPORATION
IN THE ENVELOPE PROVIDED
